Supply backlog expected to affect beef market for first quarter

Sterling weakness since the UK Brexit referendum had dramatically reduced the euro value of Irish beef exports to the UK market, which takes about half of our production.

A further strengthening of sterling in 2020 could lead to a more optimistic outcome for Irish cattle prices, said Teagasc experts in their Outlook 2020 Economic Prospects for Agriculture report.

They forecasted a moderate 2020 increase in Irish cattle prices, in the form of the Irish beef sector agreement bonuses announced in September.

But they assumed the euro-sterling exchange rate remaining at the mid-November 2019 level.

Now, sterling's strongest rally in over a decade means the moderate increase expected in Irish cattle prices may be exceeded in 2020,  and cattle farmers can take heart from currency experts who suggest further gains for sterling are likely.

However, Teagasc experts see over-supply depressing cattle prices in the early months of the year, due to the current backlog of cattle persisting for the first quarter of 2020, adding to the large supply for slaughter.

And the higher average price predicted by Teagasc for finished cattle across 2020 is unlikely to have a major impact on calf, weanling and store cattle prices.

The Teagasc prediction is that prices for weanling and store cattle will pick up by 2% in 2020. Calf prices are expected to continue on their downward trajectory.

For the year as a whole, no change in overall Irish beef production is forecast, despite the small reduction in stocking rate on suckler farms in the BEAM scheme.

Teagasc experts predict a 6% decrease in overall feed expenditure on cattle farms in 2020.

Cheaper fertilisers, but slightly higher contracting charges, are predicted to reduce total expenditure on pasture and forage 3-4% for Irish cattle farmers in 2020.

While the top one-third of suckling and finishing cattle farms often earn positive net profits, most persistently fail to cover their costs of production with the value of output sold.

The Outlook 2020 forecast is for net profit to improve slightly on suckler farms but, on average, to remain negative.

Net margins in cattle finishing are forecast to decline to a negative average of €60 per hectare. However, these predictions may prove pessimistic if, along with further sterling strengthening, growth in beef exports to China could contribute positively to beef prices and incomes.

In the longer term, with milkers now approximately two-thirds of the cows in the EU, dairy beef will increasingly dictate trends in the industry, noted Teagasc experts.