Record farm product prices are here to stay – economists

Record prices for the country’s main agricultural products are expected to become “more normalised” in the medium term as export demand for Irish beef, milk, sheep meat and cereals is set to surge this year, top agricultural economists have predicted.

et the financial experts also warned that farm-gate margins are “not at record levels” as dramatically increased prices for fertiliser, fuel, and feed have eroded the real upsides of the lift.

In the longer term, however, it is also projected that increased environmental obligations on food production may “shift the balance of bargaining power” in favour of primary producers.

Asked if farmers can expect beef prices to remain at over €5/kg alongside milk prices at 50c/L, Michael Wallace, Professor of Agriculture and Food Economics at UCD, said: “It’s really the million-dollar question as to whether this is a temporary phenomenon or whether it’s going to become much more entrenched and longer lasting.

“But I think after the Russian invasion of Ukraine, and we now have this major geo-political uncertainty, it’s clear that inflationary pressures, cost prices have become much more entrenched across a plethora of inputs — not just energy, it’s also fertiliser prices, and feed.

“Those pressures are being experienced at a global scale and there is this push back on reduced supply hitting very healthy demand, which is causing further upward movement in prices.

“So certainly, in the medium term, I would be quite bullish that we’re going to see this become more normalised and that we are looking at a higher plateau for prices.

“It is probably going to start to level off, but we’re certainly seeing some upward pressure still on our main commodity price, particularly with milk and beef, and it’s just reflecting the very, very tight global supply situation.

“But what’s important is real context because inflation and costs have increased very dramatically, and they have absorbed a lot of the high output prices that we’ve already seen.

“If output prices start to moderate or even slip back even slightly, we’re going to see an intensifying squeeze on margins, just as we have seen in the pigs and poultry sector, so that is obviously a major concern for farmers because it is one thing to see prices picking up, but costs have also been ticking up very rapidly.”

Dr Kevin Hanrahan, Head of Teagasc’s Rural Economy Division, also expects input inflation prices to persist in 2022 and into 2023.

“The stocks-to-use ratio for most feed grains is going to be much tighter as we enter 2023. This will keep global prices for grains and oil seeds high and support meat prices,” he said.

“On the dairy side, most forecasters are struggling to see where the extra supply to meet still growing global demand for dairy is going to come from this year and next.

“This will mean that, in addition to costs driving increased dairy commodity prices, demand forces are also going to contribute to strong dairy prices through 2022 and probably into 2023.”