Overview. Background. Beef and Sheep Outlook Situation and Outlook for Cattle. Cattle Sheep. Inputs Outputs Margins Take Home Messages

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1 Beef and Sheep Outlook 212 James Breen 1, Kevin Hanrahan 2 & Anne Kinsella 2 1 School of Agriculture and Food Science, UCD 2 Agricultural Economics & Farm Surveys Dept. Teagasc Outlook th January 212 Overview Cattle Sheep Inputs Outputs Margins Take Home Messages Situation and Outlook for Cattle Background Wide variety of production systems All margins exclude decoupled payments Suckler Cow Welfare Payment is included in margins as its coupled to production Presentation concentrates on and Finish Details for other systems in the paper Total Production Costs 21, 211 and 212 1

2 Costs of Production 21 vs. 211 Concentrates expenditure up 12.5% Feed Price up 16% Feed Volume down 3% Fertilizer expenditure up 19% Fertilizer Prices up 25% Applications down by 5% Contracting Charges Up approximately 5% Fuel up by approximately 18% Other direct and fixed costs to have increased by 1% europer ha Costs of Production by System Finish 21 Finish 211 Finish 212 Concentrate Feeds Pasture and Forage Other Direct Costs Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast Costs of Production by System Finish 21 Finish 211 Finish 212 Concentrate Feeds Pasture and Forage Other Direct Costs Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast Costs of Production 212 vs. 211 Concentrates expenditure down 5% Feed Price down 8% Feed Volume up 3% Fertilizer expenditure up 7% Fertilizer Prices up 7% Use unchanged Fuel expenditure unchanged Contracting Charges unchanged Labour up 1% Other direct and fixed costs are assumed to be largely unchanged also Costs of Production by System europer ha Gross Output 21, 211 and Finish 21 Finish 211 Finish 212 Concentrate Feeds Pasture and Forage Other Direct Costs Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast 2

3 Cattle Prices 211 and 212 Cattle Prices 211 has seen a considerable increase in Irish cattle prices /1kg carcas s w eig ht /1kg l ive w ei gh t R3 Steer Weanling Source: DG Agri Cattle Prices Finished Animal Price up 18% Cattle Prices /1 kg carcass w ei gh t /1 kg live w eig ht /1 kg carcass w ei gh t Price Weanlings up 36% Price of Stores up 2% /1 kg live w eig ht R3 Steer Weanling R3 Steer Weanling Source: DG Agri Source: DG Agri Cattle Prices 211 and 212 Irish Live Cattle Exports 211 has seen a considerable increase in Irish cattle prices Supply Factors Tightening cattle supplies within Ireland Declining cow numbers within the EU ' H ead Calves Weanlings Stores Finished Source: Bord Bia 3

4 ' Head Dairy Source: Eurostat EU Cow Numbers Dairy Cows Suckler Cows ' Head Suckler Cattle Prices 211 and has seen a considerable increase in Irish cattle prices Supply Factors Tightening cattle supplies within Ireland Declining cow numbers within the EU Demand Factors Strong demand for beef globally in 211 Increased EU exports to third countries Irish Beef Exports to the EU 211 Cattle Prices 211 and % 1% 9% 11% Source: Eurostat 51% UK France Italy Netherlands Other EU 211 has seen a considerable increase in Irish cattle prices Supply Factors Tightening cattle supplies within Ireland Declining cow numbers within the EU Demand Factors Strong demand for beef globally in 211 Increased EU exports to third countries 212 a modest decline in cattle prices forecast Weakening EU demand in 212 However this is dependent on the EU macroeconomic outlook Composition of Gross Output by System in 21 Gross Output by System Cattle Sales ha-1 Cattle Purchases ha-1 Other ha-1 SCWS ha-1 Total ha Finish 2,153 1, e uro per ha Finish 21 Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast Finish 211 Finish 212 4

5 Gross Output by System Finish 21 Finish 211 Finish 212 Gross & Net Margins 21, 211 and 212 Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast Gross Margin by System Gross Margin by System Finish 21 Finish 211 Finish Finish 21 Finish 211 Finish 212 Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast Financial Performance of All Cattle Farms 212 Net Margin All Cattle Farms Least Profitable Average Profitability Most Profitable Gross Output Direct Costs Gross Margin Overhead Costs Net Margin Source: 212 Forecast All euro per hectare Least Profitable Average Profitability Most Profitable Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast All 5

6 Take Home Messages - Cattle 211 Substantial increase in cattle prices Partially offset by higher direct costs of production 212 Cattle prices expected to remain strong but some modest decline expected Concentrate prices expected to fall, but fertiliser prices likely to increase No significant change in total costs Leading to a likely dis-improvement in net margins in 212 relative to 211 but remaining ahead of 21 Higher Prices won t guarantee economic viability J. McCarthy, Irish Farmers Journal (211) Situation and Outlook for Sheep Costs of Production Concentrate Feed and Pasture and Winter Forage Costs are dominant direct costs Account for 7% of direct costs Large degree of variation in level of direct costs per hectare Higher expenditure per hectare not always matched by higher output 4 1 Mid-season Lamb Costs of Production 21 least profitable Source: 21 Teagasc NFS average profitability most profitable Average Concentrates Pasture Winter Forage Other Direct Costs Costs of Production in 211 & 212 Feed expenditure up 3.5% in 211 but forecast to decrease by 5% in 212. Increase in prices with a reduced volume fed in 211 Lower prices in 212 and a modest increase in use forecast Pasture and Winter Forage expenditure increased by 12% in 211 and is forecast to increase in 212 by a further 6%. Higher fertiliser prices in 211 are the main factor here Fertiliser prices forecast to increase further in 212 Other direct costs of production are estimated to remain largely unchanged in 211 and 212 Mid-season Lamb Costs of Production 21, 211 & Concentrates Pasture Winter Forage Other Direct Costs Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast 6

7 Sheep Meat Markets 211 & 212 Volume of Irish Lamb Exports 21 Irish sheep and flock numbers stabilised in 21 Increases in sheep numbers forecast for 211 and 212 Lamb slaughtering in 211 up 5% in Ireland 21% Ewe slaughter down 8% Declining EU lamb production and NZ imports below TRQ in 211 Led to strong growth in prices (+9% in Ireland) Total NZ lamb production & exports forecast to increase in 211/12 NZ will fill its EU TRQ in % 53% France UK Other EU Supply stabilising in EU in 212 with growth in some markets, recovery in Imports from NZ and weakening demand in EU Prices forecast to be 5% lower in 212 Source: Eurostat Irish Lamb Price, euro per 1kg Irish Lamb price 9% higher than in 21 Output and Gross Margins 21, 211 and Source: DG AGRI & Bord Bia Mid-season Lamb 21 Mid-season Lamb Gross Margins 21, 211 & 212 euro/ ha least profitable average profitability most profitable Average euro/ ha GM up 12% GM down 8% Source: 21 Teagasc NFS Gross Output Total Direct Costs Gross Margin Gross Output Direct Costs Gross Margin Source: 21 Teagasc NFS, 211 Estimate, 212 Forecast 7

8 Take Home Message - Sheep Higher intensity and tight control of costs per ewe key to dramatic differences in profit 212 prices are forecasted to be 5% lower than 211 A slight increase in direct costs of production forecast for 212 Lower prices and higher costs combine to give a 8% forecast reduction in 212 gross margins Despite the forecast decline in 212 Gross Margin higher than in 21 Thank You Content available from 8