Bank of Ireland Agri Pulse highlights muted mood among farmers

  • Mixed picture in August
  • Farm output down on a year ago
  • Expectations for market prices improve

The Bank of Ireland Agri Pulse for August 2020 found farming sentiment to be relatively subdued. Market disturbance related to COVID-19 along with drought and storm conditions have impacted production and profitability is an issue for many.

Compared with April – when the survey was last carried out – farmers were more optimistic about the outlook for market prices however. Investment plans and growth ambitions ticked up a notch in August too, albeit the UK’s departure from the EU and climate change mitigation actions will pose structural challenges for the sector going forward

Discussing the Bank of Ireland Agri Pulse, Dr. Loretta O’Sullivan, Group Chief Economist, Bank of Ireland said: “The virus and weather-related disruption of recent months contributed to the muted farming mood in August. While more farmers said that they expect to increase production over the coming year compared to when we surveyed them last April, Brexit remains a significant concern for the sector. The improvement in the outlook for market prices was a bright spot in the data this time and another interesting finding is that grants and funding to support new ways of farming are seen as a potential upside to climate change policies.”

Farm Output

The picture for production was mixed in August. Farmers downgraded their assessment of the current situation – which pushed the balance of positive and negative responses into the red – but were a little more positive about prospects for the period ahead. Almost a quarter of those surveyed said that they expect to increase production over the coming year, up from 18% in April.

Brexit remains a headwind for the agricultural sector though, with seven in ten farmers expecting it to negatively impact their business model.

Market Prices

The outlook for market prices was brighter in the August survey, with the share of farmers expecting higher prices in the next 12 months edging up to 23% (from 9% in April) and the share anticipating lower prices falling sharply (to 31% from 75%).

Eoin Lowry, Head of Agri, Bank of Ireland commented: “Bank of Ireland is committed to supporting the farming community as it deals with the present economic uncertainty caused by Covid-19 and Brexit. While the sector has been resilient through Covid, the threat of a hard Brexit has the potential to present a big shock. We are acutely conscious of the issues facing farmers and have a number of initiatives already in place to support our customers. Our term loans have an AgriFlex Interest-only option that allows farmers’ periods of interest only on their borrowings when product prices are relatively low, input costs are relatively high or when other exceptional unplanned events occur such as weather events.”

Investment Plans

The latest results indicate that 20% are planning on upping investment in the farm in the coming year (led by dairy farmers, tillage farmers were more cautious than previously), while two in three expect to spend the same.

Replacing and maintaining worn-out buildings, equipment & vehicles; purchasing livestock; and investing in new farm buildings, land and equipment & vehicles are all on the cards, with most cattle, tillage and sheep farmers factoring in outlays of up to €20,000, whereas over half of dairy farmers are looking at sums above this.

Business Ambitions

As for intentions further out, 36% of farming businesses plan to expand in the next 1 to 3 years, with dairy and younger farmers the most go-getting. Another two in five expect the farm to stay the same size, while 22% (typically older farmers and those in the cattle and sheep trades) mean to scale down.

Climate change is firmly on farmers’ medium-term radar and the August survey finds that 29% think that policies in this area will benefit them. But 55% expect an adverse impact on foot of factors such as reductions in livestock, restrictions on the use of fertilisers/pesticides and increased compliance costs/red tape.