Teagasc colleagues have produced their mid-year assessment of the likely outturn for output and incomes in Irish agriculture in 2010. The main message is that there is a solid recovery in gross margins in dairy and cereals from the awful year in 2009 and also a positive outlook for sheep (helped by the recent announcement of support under the new Grassland Sheep Scheme), but no change is expected on cattle farms where low or negative profitability will continue. Overall, the Teagasc assessment is that both total agricultural output and incomes should increase by around €300 million this year, which will be an increase of 18% on the operating surplus in agriculture in 2009.
The improvement in the agricultural economy is largely driven by the recovery in dairy prices. Monthly producer prices for milk taken from the Teagasc report are shown in the diagram since January 2006. The chart highlights the volatility experienced by dairy farmers over the past four years, with the highs of the second half of 2007 and the first half of 2008 followed by the lows of most of 2009. How to address volatility in agricultural markets in general, and the milk market in particular, has emerged as one of the key questions in the debate on the shape of the CAP post-2013 given the gradual dismantling of market management instruments. My own contribution to this debate emphasised that risk management is primarily the responsibility of individual farmers. Public policy has a limited role to play, not least because public safety nets tend to simply displace what farmers themselves should be doing to avoid and manage price risks.
The improving agricultural economy also provides a good platform to achieve the ambitious growth targets set out in the recent Food Harvest 2020 report [Disclaimer: I was a member of the committee which produced this report]. The purpose of this report was to highlight the role that the agri-food sector could play in Ireland’s economic recovery and to identify the constraints to fulfilling this potential. The target set was an increase of €1.5 billion in the value of output from the agriculture, fisheries and forestry sector by 2020, which would be a 33% increase on the 2007-2009 average. The report contains useful suggestions on how to improve the competitiveness and efficiency of farm production, although the vulnerability of the sector to changes in CAP support policies and the low or negative profitability of beef production which is the single largest commodity sector remain huge sources of concern.