Sector trends

Business outlook: what farmers in Northern Ireland need to know now

With input costs like fertiliser and feedstock sky high, Ulster Bank’s Head of Agriculture, Cormac McKervey, offers his take on the current business environment for farmers.

As the UK recovers from the pandemic and adapts to Brexit, in a new regular series, Cormac McKervey looks at the current challenges and opportunities for the sector.

Key challenges for farmers

The single biggest challenge is the increase in input costs, which are significant. The price of feedstock for animals, fertiliser, and fuel has rocketed. As well as high prices, there is also uncertainty around supply because of the situation in Ukraine. We’ve also observed:

  • Fertiliser prices today are three times what they were a year ago – a huge increase at a time when farmers are applying fertiliser to crops and grassland.
  • Fuel prices have probably doubled for red diesel, which is what farmers use.
  • Feedstuff for animals is roughly up over £100/tonne.
  • The pig sector is caught between very low output prices, and input costs such as feed racketing up.

This situation is very challenging right now, but it will turn because it’s cyclical. And, on the flipside, the price farmers are getting for their milk, beef and lamb has improved.

Support through the uncertainty

Most farmers don’t necessarily need additional support, apart from pig farmers. Pig farmers are exceptionally resilient – and they had a very good 2019/20 when prices were good – but they will now be reliant on their feed supplier for support. They probably have three or four months of feed credit built up, so the merchant supports them in the short term.

We’ve moved some farmers to interest-only payments rather than the full capital. Some farmers have sought additional money and received it. The positive news is the market has turned recently. For instance:

  • For the first time prices have increased – they’re up by 9p.
  • Pig prices for farmers are currently around £1.41 – £1.45/kg.
  • Break-even is at least £2, so there’s still a long way to go.

The nature of the sector is that there aren’t poor pig farmers, they’re all at the top of their game. But they’re finding it exceptionally difficult at the minute.

We know those farmers with the lowest carbon footprint are the most efficient and more profitable

Cormac McKervey
Head of Agriculture, Ulster Bank

Preparing for future challenges

In the long term, the single biggest issue is the transition to lower carbon and reduce the carbon footprint.

The government has set its net-zero policy, and most food processors that farmers sell product to have already done quite a bit of work on reducing their carbon footprint.

However, many farmers are only just starting the transition and it can be quite hard for them to focus on carbon amid current external pressures.

It’s a big step change for farmers, and the issue is often fear of the unknown. How do I know what my current carbon footprint is? How do I reduce it? How much do I need to spend or invest to adapt my farming practices?

We know those farmers with the lowest carbon footprint are the most efficient and more profitable. We’re here to support farmers on that journey.

Notable innovations in agriculture

Some innovations are driven by necessity. High energy costs in intensive sectors like pigs and poultry mean farmers are looking at solar panels and biogas to lower their carbon footprint as well as lower their energy costs.

There is hope in Northern Ireland that a sustainability body will be set up that encompasses everything across the agri-food chain to drive significant change and innovation.

It will generate data so Northern Ireland food processors, for example, can say: “This is the carbon footprint associated with this particular product. We are a grass-based, not-very-intensive-type of farming system, so we will produce this at a lower a carbon emission rate or lower carbon footprint than our competitors.”

We see that as a game changer for Northern Ireland plc.

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