Bank of Ireland April 2020 Agri Pulse Paints Subdued Picture for Farmers
- Closure of food service industry globally and at home takes a toll
- Cattle and sheep farmers especially downbeat
- 30% of farmers plan to expand in the next 1 to 3 years
The latest Bank of Ireland Agri Pulse painted a subdued picture in April 2020, as the COVID-19 pandemic imparted a huge shock to the economy. Even though farming has been classed as an essential business, reduced demand from overseas customers and the closure of the food service industry globally and at home is taking a toll on the sector.
Production sentiment was at a low ebb in April 2020 and compared with August 2019 – when the survey was last carried out – farmers were increasingly negative about the outlook for market prices. Investment plans and growth ambitions held steady though as a no deal Brexit was avoided at the start of this year and the transition period took effect.
Discussing the Bank of Ireland Agri Pulse, Dr. Loretta O’Sullivan, Group Chief Economist, Bank of Ireland said: “The COVID-19 shock is being keenly felt by farmers, with seven in ten reporting a negative impact on their business. The Agri sector has weathered a number of storms in recent years, and the current crisis is yet another challenge for farmers to try and overcome. The latest Agri Pulse findings do however reveal some softening in non-labour cost pressures and a growing cohort who thinks more environmentally friendly farming will benefit them, so despite the latest findings being framed in a COVID-19 context there is still cause for cautious optimism in the sector.”
Farm Output
The mood was subdued again in April, continuing the negative theme established in the last Agri Pulse in August 2019, with farmers taking a gloomier view of the current situation. Those involved in the cattle and sheep trade were especially downbeat amid volatile prices in these sectors and COVID-19-related disruption to marts and livestock markets, while land and labour shortages were among the factors hampering dairy and tillage production. Looking ahead, 18% of those surveyed said that they expect to increase farm output in the next 12 months but with three in ten signalling a reduction, the balance of positive and negative responses remained in the red.
Input Costs and Market Prices
The April Agri Pulse data points to some softening in cost pressures. Excluding labour but including the likes of feed, fertiliser, fuel, veterinary and land rental, 42% of farmers indicated that input costs have risen in the past year. This is a reduction from 67% in the August 2019 survey and contributed to a slightly less negative assessment of farm profitability over the past 12 months. The outlook for market prices was decidedly muted however, with three in four expecting the prices they receive to fall in the next year.
Eoin Lowry, Head of Agri, Bank of Ireland added: “Bank of Ireland is committed to supporting the farming community as it deals with the present economic uncertainty caused by Covid-19. We are acutely conscious of the issues facing farmers and have a number of initiatives already in place to support our customers including loan repayment moratoriums. 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 and Business Ambitions
On the investment front, the share expecting to increase farm spending in the next 12 months was unchanged in April at 18%. Tillage farmers were more positive in their investment outlook than recorded previously, while dairy farmers were somewhat less so.
Replacing and maintaining worn-out buildings, equipment & vehicles; purchasing livestock; and investing in new farm buildings, land and equipment & vehicles are all on the radar, with investment for environmental purposes ticking up in the latest survey too.
As for future business intentions, three in ten farmers plan to expand in the next 1 to 3 years, while just over half would prefer to remain the same size. The survey also revealed that 15% are considering scaling down, which is less than the August figure of 23% and is due in part to the reduction in Brexit uncertainty since the beginning of 2020. Dairy and younger farmers are still shown to be the more ambitious – though tillage is catching up – whereas those likely to call it a day are mostly older and concentrated in cattle and sheep.
Commenting on farmers’ investment plans Dr Loretta O’Sullivan added that “It was a case of steady as she goes for farm investment and business growth plans in this survey wave.”
Structural Issues
The United Kingdom left the European Union on January 31st on the basis of Prime Minister Boris Johnson’s revised Withdrawal Agreement, as opposed to a crash out departure. The ‘status quo’ transition period that applies until the end of 2020 has provided some breathing space, so while Brexit still hangs over the agriculture sector, the share of farmers expecting a significantly negative impact on their business in the next 12 months has eased to one in four, a sizeable reduction from almost half of those surveyed last August who feared a no deal Brexit.
With the Green Party potentially participating in the next coalition government, the climate change agenda also remains relevant for farming businesses, with 46% expecting policies in this area to negatively affect them over the coming 1 to 3 years. Concerns raised in the April survey included reductions in livestock numbers, restrictions on the use of fertilisers and pesticides, increased compliance costs and red tape, carbon taxes and changes to working methods. At the same time, 28% think that the impact will be positive, citing benefits such as a better environment, more efficient and sustainable farming and the potential for grants and funding supports.
About the Bank of Ireland Agri Pulse:
The Bank of Ireland Agri Pulse provides an insight into what is happening in the sector, the issues and the trends. 250 farmers in Ireland are asked for their views on a wide range of topics including farm output, input costs, market prices, their investment plans and business ambitions. Dairy, cattle (suckler cow and other), tillage, sheep and other farming activities are covered, with the fieldwork for the surveys undertaken by Ipsos MRBI on behalf of Bank of Ireland.