Mixed Fortunes for Irish Meat and Dairy Sectors09 August 2013
While the Irish beef prices have seen an upward trend in the first half of the year, lamb prices are still behind 2012 and the pig sector is still fighting high feed prices according to the Mid Year Outlook for Irish Agriculture from Teagasc.
Finished cattle prices in the first half of 2013 are ahead of prices in the first half of 2012 by over six per cent.
With prime cattle throughput up at the factories by close to 10 per cent thus far in 2013, this means that the value of beef output at a national level will be up significantly in 2013, compared to 2012.
The increase in the volume of cattle available for slaughter in 2013 was expected on the basis of lower live exports in recent years. Additional disposals of cows have also taken place in 2013.
Whether the overall change in the national output value of beef is reflected at the individual farm level will depend on the volume changes that have occurred on individual farms.
Calf prices have been depressed across the EU and even more so in Ireland, as demand has fallen in response to the fodder crisis in Ireland. Calf prices in Ireland fell by 33 per cent in the first half of 2013 relative to the corresponding period in 2012, while on average prices across the EU fell by 12 per cent.
This development has led to increased live exports of calves from Ireland to the Netherlands, Spain and Belgium. Irish calf exports in 2013 will be over 150 per cent higher than in 2012.
Total Irish cattle exports to date in 2013 are over 70 per cent higher than in 2012.
Given that almost half of all cattle throughput occurs in the first six months of the year and considering the relatively buoyant beef prices over the first half of 2013, it looks like 2013 will be a reasonably good year for finished cattle prices overall.
It is estimated that the 2013 R3 price will average seven per cent above the 2012 price.
Given that younger animals sales fall largely in the first half of the year the negative impact of substantially lower calf and weanling prices observed for the year to date are likely to be reflected in the annual average price levels.
On both cattle finishing and cattle rearing farms increased concentrate feed and pasture and forage costs will be incurred due to the fodder crisis of 2012/2013.
Although lamb prices have followed an upward path in the first half of 2013, on average Irish lamb prices are four per cent lower than in 2012 on a year to date basis. EU production of lamb should increase slightly in 2013, due to expansion in Ireland and the UK and increasing imports of lamb from outside the EU.
As a result, Irish and European lamb prices for 2013 are likely to average below 2012 levels.
The continuing weakness in EU lamb demand due to the ongoing macroeconomics difficulties, mean that annual average Irish lamb prices for 2013 are forecast to be 4 per cent lower than in 2012.
With increased volumes of lamb production (due to ewe flock expansion in 2011 and 2012) the decline in Irish lamb prices in 2013 will be offset in aggregate at the national level by an increase in output volume.
At a farm level, any growth in output value on a per hectare basis will be contingent on whether or not farmers held additional breeding numbers in 2013 compared to 2012.
It is probable that the increase in sheep slaughtered in 2013 relates to an increase in the numbers of sheep on existing farms rather than an increase in the number of farms with a sheep enterprise.
As a result some increase in the volume of output at the farm level is forecast.
This increase is likely to be sufficient to offset the impact of decreased lamb prices on the value of sheep output. Increased feed and pasture and forage costs are likely to erode the positive impact of increased output volume on margins.
There was a one per cent reduction in total EU pig slaughter in the period January to April 2013 in comparison with the same period in 2012.
Total pig meat production in that period in 2013 was virtually unchanged on the same period in 2012 due to a slight rise in slaughter weights.
By mid 2013, pig slaughtering in Ireland was running behind the corresponding figure for 2012 by about one per cent.
The June 2012 and December 2012, CSO pig numbers showed a decline in the pig breeding herd, indicative of a likely contraction in Irish pig production in 2013, so this observed decline in Irish throughput in 2013 was anticipated.
Pig feed prices rose through 2012 and have remained elevated in 2013.
By mid 2013 pig feed prices were about €60 to €70 per tonne (circa 20 per cent) higher than in the corresponding period in 2012.
To improve the economic performance of Irish pig production, sustained high pig prices were required in 2013 to offset the impact of high feed prices. Irish pig prices rose through the latter half of 2012 and at the outset of 2013 were about 25 cents per kg ahead of prices at the beginning of 2012.
However, Irish pig prices have moved into decline as 2013 has progressed and by July were only slightly higher than at the mid point of 2012.
Having been well below the EU average pig price throughout 2012, the Irish pig price converged on the EU average price in April 2013.
However, since then the EU average price has risen by eight cent per kg while the Irish price has fallen by 8 cent, opening up a 16 cent price gap between EU and Irish prices by the end of June 2013.
The rise in Irish pig prices in 2013 will be sufficient to ensure that the total value of Irish pig output will increase in 2013 relative to 2012.
However, the end result is that Irish pig producers will remain in financial difficulties, due to high feed prices, which will only be alleviated via a reduction in feed costs or an increase in pig prices.
A decline in feed costs in the second half of 2013 does seem plausible, given forecast cereal harvest prices, but it remains to be seen whether the Irish pig price can recover to closer to the EU average level in the coming weeks and months.
Given that milk production in the 2012 quota year was running behind the quota profile, there was an opportunity for high early season production in the 2013 calendar year.
However the late spring of 2013 meant that this never transpired and Ireland ended the 2012/13 quota year more than three per cent below quota.
Production remained depressed in April of 2013 due to poor grass growth and difficulties with access to fodder. Monthly deliveries in May and June of 2013 have recovered to normal levels, but milk production in the first half of the 2013 calendar year is still almost two per cent behind the corresponding period in 2012.
Given the further one per cent increase in milk quota available in the 2013/14 quota year and the slow start to quota year production, there is considerable scope for higher than normal deliveries in the coming months.
Milk prices, production costs and weather conditions currently look like they will favour a recovery in production which will allow the quota to be filled.
The annual average milk price in 2012 was about 32.4 cent per litre (actual fat basis vat incl.). International dairy product prices rose through the second half of 2012 and that price rally continued into the early months of 2013.
As Q2 of 2013 has progressed international dairy commodity prices have begun to fall but remain close to the historical highs recorded in 2008.
As a result of the buoyant market, Irish farm-gate milk prices have averaged about nine per cent higher in the first half of 2013 compared to the corresponding period in 2012. This price rise has been stronger than expected and was aided by the lower than normal level of deliveries in much of Europe in the first half of 2013.
On the back of strong milk prices and a return to more normal weather, milk deliveries across Europe are expected to return to normal levels or even increase in Q3 of 2013. Monthly dairy product prices may have already peaked by mid 2013 and are forecast to gradually decline as the rest of 2013 plays out.
However, milk prices are expected to remain relatively high and given the seasonal supply profile it is likely that the annual average farm-gate milk price for 2013 should be about eight or nine per cent higher than the average for 2012, resulting in an annual average milk price of approximately 35.2 cent per litre.