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Increase in Key Input Prices in 2012

30 January 2012

IRELAND - For 2012, the forecast for cereal producers is for another increase inkey input prices, such as fertiliser, land rent and seed costs. However fuel prices in 2012 are likely to be unchanged.

According to Teagasc's Outlook 2012 report, following extremely poor margins in 2008 and 2009, profitability in Irish cereal farming improved significantly in 2010. Lower costs of production, a substantial increase in harvest prices and favourable weather conditions at harvest, gave rise to a very substantial increase in cereal crop margins in 2010 relative to 2009.

In 2011 the Irish cereals sector benefited from an increase in both cereal prices and yields. However, the increase in the value of cereal output was accompanied by an increase in the costs of production.

However, the increase in the value of cereal output on a per hectare basis was significantly more than the rise in input expenditure. Hence, net margins improved in 2011 relative to the 2010 level, by approximately €130 per hectare for the average producer and by approximately €165 per hectare for the more efficient producers.

Nationally, cereal production in 2011 increased by about 22 percent. This increase in production is based on an estimated increase in area sown to cereals in addition to above average yields obtained at harvest 2011.

Futures market prices in December/January for harvest 2012 are less promising than they have been at the same time of the year for the past two seasons.

The average futures quoted prices in December 2011 and January 2012 for harvest 2012 would translate into a green price for feed wheat of about €145 per tonne, which is about 12 percent lower than the average price paid at harvest 2011.

While volatility remains ever present in the international cereals market, at the beginning of 2012 the outlook for Irish cereal farmers is less positive than it was a year ago. The average Irish cereal price and yields per tonne at farm level for 2012 are likely to be lower than the 2011 levels.

Total costs are likely to increase, leaving the average net margin for the average cereal producer lower than that achieved in 2011 and 2010. However, the average cereal farmer should retain the majority of the Single Farm Payment in 2012 whereby market based output will be sufficient to cover the majority of production costs.

Further Reading

- You can view the report by clicking here.

TheCropSite News Desk

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