Over the past couple of years farmers have had to try to negotiate a period of extreme price volatility, both for what they have paid for inputs and what they are receiving for their produce.

In 2022, the incredibly fast rise in costs was balanced by an increase in the market price for many agricultural outputs. However, those market prices plunged last year and that plunge was not met with a sufficiently large move lower in costs to maintain farm incomes.

In fact, data published recently showed that 2023 equalled 2009 as the worst year since at least 1990 for farm margins, even when income supports from CAP and other payments are included.The overall level of income earned, at just over €2bn, was the same level as was seen in 2015. But farmers produced 50% more output in 2023 than in 2015 in order to generate that €2bn of income.

Couple this with the uncertainty the industry faces over regulatory changes and the difficulties in attracting younger people to a career in farming, and it would be no surprise to think that the mood in agriculture is not great at the moment.

However, rather than looking back, if we look forward there are certainly reasons to be optimistic about the future.

Crucially, the volatility in prices seems to have settled down. The everything-inflation that existed in 2022 and 2023 has mostly dissipated, with readings for Ireland and Europe holding below 3% in recent months. While the prices for agricultural output are nowhere near the highs of 2022, they have been generally stable at a level that allows farmers to make some money.

The latest numbers from the Central Statistic Office show that output prices have been rising this year while input costs have fallen (see Figure 1).

This is a welcome trend for farmers, and the longer it can continue the more the financial health of the industry will improve. While the outlook is not without risk, there are plenty of reasons to think that agriculture in Ireland is well placed to take advantage of the opportunities in a world with an ever-growing and longer-lived population.

The dairy sector has experienced the highs and lows of global markets more than any, and falling milk output means that there may be more trouble to come on the processing side.

However, the outlook for milk prices, as well as other dairy commodities remains strong. While there has been significant coverage of the difficulties with the Chinese market recently, the demand from customers closer to home, and increasingly in the US, remains very robust.

As Ornua’s success in the US with Kerrygold shows, there is a strong market for the kind of high-quality product that this country’s grass-fed system is famed for. While the system can be strained by adverse weather conditions, the low cost of production means that it generally is more resilient during lean times.

This year has seen a small decline in global milk production. While EU output has increased, production in the US, New Zealand and Argentina is lower.

Significantly, there is growing global demand for cheese and butter products, a demand which Ireland is very well placed to meet with established brands and routes to market.

Finally, while the market for infant powders has seen a significant adjustment in the last five years, the growing global elderly population has increasingly turned to high-protein dairy products as part of their later-life care regime.

Livestock sector

For those in the livestock sector, there is also plenty of reason to be hopeful. The UK market is the key driver of demand for Irish factories and despite fears of cheap Southern Hemisphere beef and lamb flooding the market, there is little sign of any meaningful price pressures coming into play. Irish product also has the luxury of being seen as equivalent to domestic produce by UK consumers.

Most recent data from Defra, the UK agriculture ministry, showed that the number of cattle and calves in the country fell below 5m head for the first time since 2005, while sheep numbers declined to the lowest level since 2011.

Opportunites

This fall-off in UK domestic production potential is an opportunity for Irish exporters to further their share of the huge market right on our doorstep.

There are even signs of some green shoots in the tillage sector. The costs of key inputs such as fertiliser and seeds are well below their highs, while grain prices are recovering from their recent wobble.

Looking over the longer term, the sector has been a target for expansion under Government policy. The failure of that expansion to materialise means that Government has little choice but to increase supports for the sector – and the Irish Farmers Journal understands that talks on this are on-going ahead of the budget in October.

Looking at the global picture, the warming climate means that traditional grain-growing regions are increasingly facing unsuitable and drought conditions which are pushing yields lower.

While Irish tillage farmers are also subject to changing weather conditions, the risk of desertification here remains vanishingly small.

This year feels like one where the farming sector has had a moment to catch its breath after an incredibly volatile 2022 and 2023. Much as there are many challenges remaining for agricultural output over the coming years, with the derogation decision still hanging over us all, there are plenty of reasons to be optimistic about the future for farming in Ireland.

The global population is forecast to grow by 1 billion over the next 14 years. All those mouths will need to be fed, so there is an ever-growing market for food. Ireland is incredibly well placed to produce the highest quality food in the world. Both of these facts are going to be the fundamental drivers of the future of agriculture here.

There will always be pressure on farmers to cut costs, increase efficiency and produce a higher quality product. Farmers here have always risen to this challenge, and there is no reason to think that they won’t continue to do that in the years ahead.