According to Ulster Bank’s head of agriculture in Northern Ireland, Cormac McKervey, farm margins are now under a degree of pressure.
“The term ‘agflation’ measures the specific differential between output prices and all the costs incurred by a farm business,” he explained.
“And there is ample evidence to confirm that margins across most sectors are being squeezed at the present time. Inputs costs are continuing to rise at a faster pace than output prices,” he told Agriland.
The views expressed by the Ulster Bank representative, echo analysis published recently by the Andersons Centre.
Food costs and farm margins
There is now a growing concern across the UK as a whole that many consumers are now unwilling to pay more for specific food items in the shops.
McKervey continued: “Currently, cash flows within most farming businesses are in a healthy position. This is especially so where dairy, beef, sheep and arable are concerned.
“Meanwhile, the situation facing pig farmers continues to improve. Prices are fast approaching £2/kg. This compares very favourably with the £1.36 that was available a number of months ago.
“One concern, where farm incomes are concerned, would be for those egg producers who are not on a feed tracker-based payment system.
“While cash flows are relatively good, it’s clear that capital investment on farms has eased.
“This is likely due to higher cost of materials, lack of labour and concern that farm output prices could level out or reduce,” he added.
Farm payments
McKervey also indicated that 2022 Single Payments should be reaching bank accounts during the first week of September.
“Based on the evidence of last year, the vast majority of farmers received their money within very few days of the agreed payment date,” he said.
The Ulster bank representative confirmed that the arrival of the Single Payment monies in bank accounts will further boost cash flows across the farming sectors.
But looking ahead, he sees further pressure coming on farm cash flows.
“Feed prices will continue increase over the coming months. And who knows where fertiliser prices will be once we get into the January/February period of next year.
“And, of course, all energy prices will continue to strengthen,” he said.
Significantly, McKervey believes that the threat of a fodder crisis next winter is receding.
“There have been excellent crops of second and third-cut silage made in many parts of the country,” he confirmed.
“However, the drought did impact negatively on grass growth for most of the summer in places like Co. Down.”
And finally a word on land prices: “Demand for agricultural land continues to outstrip the supply available,” he explained.
“And this factor alone is pushing the market in only one direction – upwards.”
