Summary of 2017 Gross & Net Margins for Crops Remember back output value story • Yield & price translates to a slight upward movement in 2017 • We saw that costs do not change that much in 2017 • Slightly positive story for gross and net margins in 2017 • The average cereal farmer continues to make a negative • market based net margin Top one third of farmers to have a market based net margin of • approx. € 270 per hectare
Summary of Crops Forecast • Forecast 2017 Prices Probability that price will increase in 2015 by about 8% Reversion to trend yields – mixed across crops Direct costs decrease but increase on fixed costs Overall increase in gross margins from 2016 But still in negative market based net margin territory
Michael McKeon Teagasc Pig Development Dept. Outlook for Pigs
Irish Pig Industry Stats • 146,000 sows in ROI • 8,000 employed either directly & indirectly • Largest average pig unit size in Europe (600 sows) • Export value per sow unit € 2.1m
Pig Feed Market 2016
Wheat & Maize Production - MILLION TONNES Global Wheat 900 800 745 736 725 715 700 600 500 400 300 249 241 212 194 200 100 2013-14 2014-15 2015-16 2016-17 Production C Stock USDA 2015
Wheat & Maize Production - MILLION TONNES Global Wheat Global Maize 900 1200 1031 1009 800 991 745 736 960 1000 725 715 700 800 600 500 600 400 400 300 249 218 241 208 209 175 212 194 200 200 100 0 2013-14 2014-15 2015-16 2016-17 2013-14 2014-15 2015-16 2016-17 Production C. Stock Production C Stock USDA 2015
Soyabean Production - MILLION TONNES 400 336 350 317 313 283 300 250 200 150 82 100 78 76 63 50 0 2013-14 2014-15 2015-16 2016-17 Production C.Stock USDA 2015
Irish Feed Cost (Cent / Kg Dwt) 2016 Feed Price 110 108 106 106 104 102 100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave * Nov-Dec Est.
Irish Feed Cost (Cent / Kg Dwt) 2016 Feed Price 2006 – 2016 Feed Price 110 135 132 130 125 108 120 115 106 106 110 105 104 100 95 90 102 84 85 80 100 75 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave 2006 2008 2010 2012 2014 2016 * 2016 Est. * Nov-Dec Est.
Pigmeat 2016
2016 Pig Price (c/kg dwt) 170 160 149 150 140 130 120 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave
2016 Pig Price (c/kg dwt) 170 163 160 149 150 140 134 130 120 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave
Irish Pig Slaughterings (million head) 3.7 3.65 3.63 3.6 3.5 3.5 3.4 3.4 3.3 3.2 3.1 3 2.9 2013 2014 2015 2016* Teagasc Pig Dept. * 2016 Est.
EU Pig Slaughterings (million head) 2015 * 2016 * % Change Netherlands 12.3 12.1 -1.1 Spain 30.1 31.7 5.5 UK 7.8 8.1 3.2 41.6 41.1 -1.3 Germany France 15.5 15.7 1.0 Denmark 14.8 14.3 -3.5 T otal 122.1 123.0 0.8 * Jan-Oct MPB 2016
Global Pigmeat Exports Country 2015 2016* Change % IRELAND (TMT) 230 257 12 EU (MMT) 2.07 2.75 33 USA (MMT) 1.41 1.48 5 Canada (MMT) 0.751 0.810 8 Brazil (MMT) 0.33 0.47 42 MPB 2016
Margin 2016
Production Cost* & Pig Price (cent / Kg Dwt) 195 185 175 165 156 155 145 135 125 115 105 95 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 * T otal Cost = Feed cost + 50 cent Teagasc Pig Dept.
Production Cost* & Pig Price (cent / Kg Dwt) 195 185 Total Cost Pig Price 175 165 Cent per kg dead wt. 156 155 145 149 135 125 115 105 95 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 * T otal Cost = Feed cost + 50 cent Teagasc Pig Dept .
Margin Over Feed (c/kg dwt.) Margin Over % Diff. Feed 2016* 43 - 43.2 5Yr (2012-16) - 10Yr (2007-16) 43.4 - 46.3 +8 15Yr (2002-16) 20Yr (1997-2016) 46.1 +7 Teagasc Pig Development Department *estimated
Pig Outlook 2017
Feed Ingredient Outlook CBOT Ingredient Outlook Wheat Corn Soya Dec '16 391 Dec '16 347 Jan '17 1055 Mar '17 415 Mar '17 356 Mar '17 1064 May '17 430 May '17 363 May '17 1074 Jul '17 446 Jul '17 371 Jul '17 1070 Sep '17 461 Sep '17 378 Sep '17 1052 Dec '17 479 Dec '17 386 Nov '17 1035 + 11 % -2 % + 23 %
Feed Ingredient Outlook • Global supplies will ensure relatively stable (low) ingredient prices until Autumn 2017 – With the possible of soyabeans • Soyabeans open to significant hedge fund speculation if crop forecasts become mildly negative
Pigmeat Price - The Chinese Effect MPB 2014
Pigmeat Price - The Chinese Effect • Contraction in China • Since 2013 it has slaughtered 12.4 million sows – Equivalent in size of total EU sow herd • Scarcity of pigmeat has led to significant increase in Chinese domestic pork price & EU exports/prices • Recovery slower than expected in China • May be cooling of EU exports in 2 nd half of year – due to US & Canadian competition – ‘Paylean free’
Price Forecasts
Irish Pig Price 2017 Year 2012 2013 2014 2015 2016 2017 Cent / kg 166 176 167 148 149 146 dwt Teagasc Pig Dept. • On the expectation of export volumes to China cooling in 2 nd half of 2017 • No A.S.F. outbreak in Germany or Denmark .
Price Forecasts • Compound Feed : – High global stocks – Result in prices unchanged – provided S.A. soyabean harvest meets expectations • Margin Over Feed : – To continue at 43c/kg – which is below the required 50c/kg.
Thank you for your attention
John Casey Forestry Development Unit,Teagasc. Outlook for Forestry
Forestry Sector 2016 Total value to the Irish economy € 2.2 billion Aggregate employment figure 12,000 Total forest area in Republic of Ireland 750,000 ha (11% of total land area) 47% of forests are privately owned 85% of private forest owners are classified as farmers Govt. forestry programme funding in 2016 € 113.8 million Sources: Forest Service, 2015; Phillips et al ., 2016
Annual planting from 2011, with 2016 forecast (f) & 2017 target (t) 6900 6700 6500 6300 hectares 6100 5900 5700 5500 2011 3013 2013 2014 2015 2016 (f) 2017 (t) Source: Forest Service (Various years)
Timber assortments
Timber prices ( € /m 3 ) Private quarterly roundwood prices ( € /m 3 ), General reduction in log prices post • June 2013 to June 2016 Storm Darwin in February 2014. 80 Both Coillte & private timber prices • 70 ( € /m 3 ) fell throughout 2015. 60 Recovered by 10% & 2 % respectively, • until the 2 nd quarter of 2016. € /m 3 50 Wide variation in timber prices 40 • according to geographical and site 30 factors . 20 Currency fluctuations negatively • affecting the price per m 3 offered in 10 the 2 nd half of 2016. 0 This situation is likely to continue into • 2017. Pulpwood Palletwood Sawlog Source: www.itga.ie
Wood product markets- Domestic & Export Key export markets (%) for panel products Sawn timber production (000 m 3 ) manufactured in the Republic of Ireland (2011-2015) Construction- Domestic 21% 100 Export 79% 376 Others Norway 13% Pallet Domestic 24% 50 3% Export 76% 159 Germany 4% SE Fencing Domestic 18% 37 Belgium Export 82% 166 5% Northern UK Other markets Domestic 100% 16 Ireland 58% Export 0% - 7% Panelboard production Netherlands 10% Domestic 21% 159 Export 79% 610 Source: EUROSTAT 2016 &. Drima Market Research Source: COFORD, 2016
Timber supply & demand in Ireland Forecast of Total Net Realisable Volume • The net demand to increase by Production to 2035 (000m 3 ) 6% to 5.48 million m 3 by 2017. 9,000 Private Sector ROI Private Sector NI 8,000 • The total net realisable volume Coillte DARD FS (NRV) production in 2017 is 7,000 Total Volume forecasted to be 3.96 million m 3 . 6,000 Volume (000 m3 overbark) 5,000 • Forecasts indicate that the 4,000 private sector NRV will fall slightly (-6%) to 914,000 m 3 in 3,000 2,000 2017. 1,000 • By 2025, 48% of the forecasted - 6million m3 NRV production will be from private forests. Source: All-Ireland Roundwood Production Forecast 2016-2035 (COFORD, 2016)
Mobilising the private timber resource • The number of GFLs issued Area (ha) of felling licences issued for private forests, 2010-2016 to Sept. 2016 is 42% higher 25000 than the corresponding period in 2015. 20000 • The area (ha) licensed for hectares 15000 thinning and clearfell by Sept. 2016 is already 11% higher 10000 than the 2015 total. 5000 • Higher proportion of thinning licences issued. 0 2010 2011 2012 2013 2014 2015 2016 • Certification will become an (Sept.) Thin Clearfell Total issue for private forest owners and for mills. Source: Forest Service (Various years)
Conclusions It is critical that that 6,640 ha afforestation target is achieved/ • exceeded in 2017 to meet both medium & long term national strategic goals. The mobilisation of the private timber resource is crucial to • meeting the forecasted 3.5% increase in domestic sawmilling demand, and the overall 6% net demand increase, in 2017. The on-going development of forest owner groups/ clusters will • continue to facilitate thinning, increase harvesting capacity & promote certification. Investment in semi-mature, productive forests likely to increase. • Irish wood products markets will remain export- orientated, • vulnerable to adverse currency fluctuations. These will have immediate consequences for timber prices at the mill gate.
Kevin Hanrahan Ag Econ and Farm Surveys Dept. Outlook for Beef
Summary of 2016 • Lower direct and largely stable overhead costs • Beef output value down due to lower cattle prices – Extra EU beef supply and weak demand growth – BDGP on single suckling farms an upside • Declining margins for Cattle Finishers – Stable margin for Single Suckling – Increased negative net margin for Cattle Finishing
On-going Stability in Costs of Production 2016 & 2017 1200 1000 euro per ha 800 600 400 200 0 Single Suckling 2015 Single Suckling 2016 Single Suckling 2017 Concentrate Feeds Pasture and Forage Other Direct Costs Energy and Fuel Other Fixed Costs Source: 2015 Teagasc NFS, 2016 Estimate, 2017 Forecast
On-going Stability in Costs of Production 2016 & 2017 1200 1000 euro per ha 800 600 400 200 0 Cattle Finishers 2014 Cattle Finishers 2015 Cattle Finishers 2016 Concentrate Feeds Pasture and Forage Other Direct Costs Energy and Fuel Other Fixed Costs Source: 2015 Teagasc NFS, 2016 Estimate, 2017 Forecast
Cattle Enterprise Gross and Net Margins 2015 Margins slightly lower in 2016 2016 500 400 euro per ha 300 200 100 0 -100 Single Suckling Single Suckling Cattle Finishers Cattle Finishers 2015 2016 2015 2016 Source: 2015 Teagasc NFS, 2016 Estimate, 2017 Forecast
2017 Forecast • Impact of weakened sterling on Irish prices • Weak growth in EU demand for beef • 3 year expansion in EU dairy herd has ended • But continued growth in EU beef production – Higher cow slaughter in 2016 will be followed by higher prime cattle slaughter in 2017 • Increased cow numbers in Ireland – Will be reflected in increased availability of cattle for slaughter in 2017
euro/100kg cwe 100 150 200 250 300 350 400 450 500 550 25 years of UK and Irish R3 Steer Prices 1991/01 1992/02 1993/03 1994/04 1995/05 1996/06 1997/07 1998/08 1999/09 2000/10 2001/11 Strong negative correction 2002/12 in UK prices (in euro) 2004/01 2005/02 2006/03 2007/04 2008/05 2009/06 2010/07 2011/08 2012/09 2013/10 2014/11 2015/12 Ireland UK
EU28 Dairy Cows Trend break in dairy cow numbers – circa 2 + million dairy additional cows 26 25.5 25 24.5 million dairy cows 24 23.5 23 22.5 22 21.5 21 20.5 2002 2004 2006 2008 2010 2012 2014 2016
EU28 Suckler Cows Recent contraction in EU suckler cows reversed with growth in ES & FR Aggregate cow inventories higher => higher beef supply 14.0 13.0 million suckler cows 12.0 11.0 10.0 9.0 8.0 2002 2004 2006 2008 2010 2012 2014 2016
Irish Cow Inventories Monthly Total cows 3.6% higher in September 2016 Dairy +6% and Suckler +0.2% 2.500 2.400 2.300 Million head 2014 2.200 2015 2016 2.100 2.000 1.900 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: DAFM AIMS data
2017 Forecast • EU demand for beef growing – supply growth forecast to be ahead of demand • UK market to remain important to Ireland – But weaker pound reflected in lower € price • Weaker world beef market in 2017 • 3 years of expansion in EU dairy herd ended in 2016 – Extra prime cattle now coming on-stream – Reflected in growing EU beef supply • Irish cattle prices forecast to decline strongly in 2017
Cattle Prices 2017 Forecast 450 300 400 250 350 euro per 100kg lw euro/100 kg cw 300 200 250 150 200 150 100 R3 Steer Weanling 100 50 50 0 0 2016e 2017f 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: DG Agri, CSO and Author’s estimate and forecast
Cattle Enterprise Net & Gross Margins 2015 Margin improvements in 2015 erased by 2017 2016 2017 500 400 euro per ha 300 200 100 0 -100 -200 Single Single Single Cattle Cattle Cattle Suckling Suckling Suckling Finishers Finishers Finishers 2015 2016 2017 2015 2016 2017 Source: 2015 Teagasc NFS, 2016 Estimate, 2017 Forecast
Cattle Conclusions • Dairy based beef supply growth in EU & Ireland – Stabilisation in EU & Irish suckler numbers? • Demand growth in EU weak & not sufficient to absorb extra supply without price decline • World markets also set to weaken in 2017 • Negative outlook on cattle prices and margins – 2017 Cattle Finishing gross margin 10% lower than 2011-2015 – 2017 Single Suckling margin supported by BDGP down 2% • Irish prices also down due to weaker sterling
Kevin Hanrahan Ag Econ and Farm Surveys Dept. Outlook for Sheep
Kevin Hanrahan Ag Econ and Farm Surveys Dept. Outlook for Sheep
Summary of Sheep Situation 2016 • Declining direct costs offset by higher overhead costs • EU demand and supply largely in balance • Stable EU prices and Irish prices • Exchange rate movements disadvantaged Irish sheep farmers in 2016 – Increased competitiveness of UK exports in France • Gross and net margins per hectare both higher in 2016 – Higher carcass weights and lower costs
Lowland Lamb Enterprise Costs of Production 1000 800 euro per ha 600 400 200 0 Lowland Lamb 2015 Lowland Lamb 2016 Lowland Lamb 2017 Concentrate Feeds Pasture and Forage Other Direct Costs Energy and Fuel Other Fixed Costs Source: 2015 Teagasc NFS, 2016 Estimate, 2017 Forecast
Sheep Forecast 2017 • Stable costs of production forecast • EU sheep meat supply & demand forecast to be stable – AUS & NZ exports to decline in 2017 – World prices for lamb to increase • Decline in EU and Irish lamb prices – Due to lower prices for other meats (in particular beef) – Impact of weaker GBP • Contraction in Irish output value in 2017
Irish Lamb Price 2017 Forecast 500 450 euro per 100kg 400 350 300 250 200 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016e Source: DG AGRI, Author Estimate 2016 and Forecast 2017
Gross & Net Margins Mid-season Lowland Lamb Stability in margins not due to output prices or costs Policy matters – without Sheep Welfare Scheme large decline in margins in 2017 600 500 euro per hectare 400 300 200 100 0 2015 2016e 2017f Source: 2015 NFS, 2016 Estimate, 2017 Forecast
Sheep Conclusions • Negative outlook for Irish sheep prices – Despite tightening world market – Balanced EU demand and supply – Weaker beef prices & Brexit effect pull down prices • Stabilisation in Irish and EU lamb production • Margins in lowland lamb production – Forecast to be stable in 2017 – Dependent on new Sheep Welfare Scheme – Without new policy marginally zero net margin
Trevor Donnellan Ag Econ and Farm Surveys Dept. Outlook for Dairy
Finding the bottom • Protracted weakness in dairy markets – Production growth running ahead of demand growth – Prices falling to balance market – Higher cost producers in loss making territory – Major exporters in a game of who blinks first – Gradual slow down in milk production growth • Only in mid year did signs of recovery emerge – But product prices reached lowest level since 2009
EU Dairy Product Prices 6,000 5,000 4,000 Euro per tonne 3,000 2,000 1,000 Butter SMP Emmenthal - Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Source: USDA
Milk Production Growth (year to date) 2016 European Union Production growth has • slowed considerably Stocks building up • United States Growth predominantly • in Mid West Stocks building up • New Zealand Low prices, weather and cow • culling has constrained production Source: European Commission
Annual Change in Milk Production among key exporters 12 2012 2013 2014 2015 2016e 10 8 M tonnes Million tonnes 6 EU28 0.8 1.5 6.8 3.3 1.4 4 NZ 1.6 -0.4 1.7 -0.3 0.0 2 US 1.8 0.4 2.2 1.2 1.5 0 2012 2013 2014 2015 2016e Total 4.2 1.6 10.7 4.2 2.9 EU28 NZ US Source: Eurostat, DCANZ USDA and author estimates
% Change Monthly EU Milk Production (versus same month previous year) 10.0% 2015 v 2014 2016 v 2015 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Source: Eurostat
Monthly Irish producer milk prices 2007 to 2016 2016 average of 27 cent Decline of >3c Continual price drop in H1 of 2016 50 Recovery begins in H2 of 2016 45 Cent per litre 40 35 30 25 Estimated 11% decrease in 2016 20 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 (Actual fat incl vat ) Source: CSO Actual fat and protein
Dairy Compound Feed Usage 2009 to 2016 1,100 1,000 (kg/dairy cow) 900 800 700 600 500 400 2009 2010 2011 2012 2013 2014 2015 2016e Source: FAPRI-Ireland (adapted from DAFM and CSO data) 2016 figure is an estimate
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