Weaker Euro Gives Competitiveness Boost To Food Exports, But Economic Uncertainty Remains A Concern – IFA Outlook

IFA Chief Economist Rowena Dwyer has said the weakening of the euro in early 2012 is providing a welcome competitiveness boost for agri-food products, but the underlying uncertainties in the eurozone, and weakness in the UK market, remain a concern for product prices and incomes for the year ahead.

Ms Dwyer was speaking at the release of the IFA Farm Income Review 2011, which provides economic and statistical analysis on farm incomes for 2011 and recent years. In addition, there is a look ahead to the main issues for the agriculture sector in 2012.

Ms Dwyer said, “2011 saw a continuing recovery in farm incomes, with price and volume increases in almost all commodities, partially offset by rising input costs. Overall, farm incomes are estimated to have increased by 27% in 2011, with Average Farm Incomes of €21,500.”

She continued, “While the outlook for 2012 remains fairly positive, indications for international commodity prices suggest a slight easing back from the peaks of 2011, but this should be moderate.”

However, any price projections must be framed in the context of the major uncertainty created by the Eurozone crisis. “The turmoil in the financial markets is having an erratic impact on commodity markets, with no clear price pattern linked to supply-demand balances. In addition, the lower revised growth forecast for the UK market in late 2011 is a cause for concern as over 40% of agri-food exports go there.”

The IFA Chief Economist said negotiations on the CAP post-2013 will intensify this year. “The key issues of concern to Irish farming are flexibility for Member States on the payment model for the Single Farm Payment; adjustments to the proposed greening measures; the criteria to determine our Rural Development allocation and the strengthening of the trigger mechanism for Market Support Measures and provision of a dedicated funding stream within the CAP.”

Other indicators of note from 2011 were:

  • The continuing importance of the SFP and other direct payments for Farm Incomes, representing over 70% of National Farm Income;
  • The increase in recipients of Farm Assist, with 11,300 by end 2011, up from 7,700 in 2008. This ties in with the loss of off-farm employment captured in the Teagasc National Farm Survey, which shows that only 51% of farm households had an off-farm job in 2010, down from 58% in 2007;
  • Delays in payments continued to be an issue in 2011, particularly for the agri-environment schemes, REPS and AEOS;
  • A slight increase in borrowing and deposits for agriculture in 2011, indicating a return to confidence for the sector, through increased investment; and
  • Increases in the dairy herd and sheep flock, increased productivity in pig breeding, recovery in cereals planted to 2009 levels, a slight decline in the beef breeding herd and a significant decline in potato sowings.

For full report please see www.ifa.ie

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