Sector trends

NI Agriculture outlook: sector remains resilient in face of costs crisis

Cormac McKervey, our Senior Agriculture Manager/Climate Lead, reviews the conditions for farmers in Northern Ireland as costs continue to soar.

The Andersons Centre analyses the latest Office for National Statistics and Defra data to provide up-to-date information on issues likely to impact farmers’ decision-making. Its July estimates put ‘agflation’ – the rate of inflation of agricultural input costs – at 23.5% annually, more than double that of agricultural outputs (10.1%).

According to Andersons, when agflation is plotted against output prices, food inflation and general economic inflation (based on the consumer prices index) – which according to July data stand at 12.8% and 10.1% respectively – it becomes apparent there is a cost-of-farming squeeze taking place.

In the months preceding June 2022, agricultural output prices generally rose in parallel with agflation, albeit at a slightly lower rate. However, since then, these indices have diverged considerably. While recent falls in commodity grain prices have been the main driver, it also suggests that consumers are struggling to afford rising food prices.

Inflationary pressures on agricultural inputs

Until recently, milk, beef and lamb price increases have generally been passed on to consumers. Now, retailers and food service providers are seemingly reluctant to pass on further increases, which could have an impact on farmers, depending on how long this situation continues.

If the grain market, which has been affected by the situation in Ukraine, starts easing back now that ships are leaving ports via a safe corridor, that will certainly help farmers lower the costs of production. The big issue is Russian gas, which is needed for fertiliser. If Russia continues to turn off the tap, a cost of farming squeeze is very likely.

There is not a significant problem now, we’re not seeing any great stress, but there’s a risk that it’s coming. It’s the calm before the storm.

Impact on farming of the recent heatwave

The heat and lack of rain haven’t impacted farmers here as much as in other parts of the UK. The weather in Northern Ireland has been great for most farmers. Grain farmers in the west have had a very good harvest. In the east, there has been a bit of drought, with farmers feeding extra meal, so their costs have gone up. But in general, it has been good for silage and grain.

There is not a significant problem now, we’re not seeing any great stress, but there’s a risk that it’s coming. It’s the calm before the storm

Not weather-related but another important update is that after 18 months of horrendous losses and very poor prices, our pig farmers are thankfully getting back towards breaking even. There’s some way to go yet, but at least they’re seeing improvements.

An innovative climate incentive for dairy farmers

Carbery is a leading dairy co-operative of 1,200 farmer suppliers in Ireland, and it is showing great leadership in terms of incentivising farmers to reduce greenhouse gas emissions and improve farming sustainability.

In partnership with Bandon, Barryroe, Drinagh and Lisavaird Co-ops, Carbery has announced a new phase of its sustainability programme offering a €6m annual bonus fund for suppliers who meet four sustainability criteria under its FutureProof initiative.

In 2023, Carbery suppliers will receive 1c per litre (cpl) bonus in exchange for

  • the implementation of milk recording
  • meeting certain EBI (Economic Breeding Index) thresholds
  • commitment to an ASSAP (Agricultural Sustainability Support and Advisory Programme)
  • assessment and using protected urea.

Every supplier who opts into the scheme will receive a 0.5cpl bonus by the end of 2022. In exchange, farmers will commit to a sustainability pledge, and all farms will agree to undergo an ASSAP assessment for water quality.

Agricultural shows: it’s great to be back

We’ve now come to the end of our summer of agricultural shows, which welcomed back exhibitors, competitors and visitors at 14 events across the province.

We are proud sponsors of six shows including the largest agricultural show in Northern Ireland – Balmoral – and it was fantastic to see the machinery displays and local food producers, agricultural colleges and farmers back out again with their agricultural and livestock displays.

Two years of Covid caused many challenges for the agri sector but it also highlighted the resilience and positivity of the industry. It was fantastic to see the shows so well attended, especially for the committees that volunteer their time, and to celebrate and appreciate what farmers achieve in Northern Ireland.

For more information and insights on agriculture, visit Ulster Bank.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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