Favourable spring weather conditions with excellent grazing conditions have positioned the Agri Sector for a strong performance in 2019
Global supplies of Dairy & Pigmeat product have tightened and we are expecting to see increases in prices across each of these key sectors. Despite the potential threat of Brexit to our Beef sector there is also some short term positivity on price.
The euro/sterling exchange rate, averaging 87.5 pence to the euro for the period since the Brexit referendum, has contributed to an erosion of competitiveness on our main beef export market. This compares to an average rate of 81.4 pence in the three years prior to that. This exchange rate issue together with high slaughter numbers has contributed to an unprecedented flat lining of producer prices from October 2018 to the present. Supplies are beginning to tighten and recently there has been some increase in price as a result.
Better weather, more cows and higher yields are driving volumes and Irish dairy farmers are on track to produce over 1bn litres of milk in May as processors reach peak processing capacity. Up to Mid May, Global Dairy Trade (GDT) auctions have seen eleven consecutive increases. The most recent sale on June 4th saw a fall in prices with butter down 10.3%. This is the second consecutive sale where this scenario occurs.
While demand for dairy may be subdued in Europe, China’s appetite for dairy is showing no signs of waning. Chinese buyers are showing particularly strong appetite for infant formula, whole milk powder (WMP) and skimmed milk powder (SMP). Market signals are pointing towards a shift upwards on milk price. Global Supply is very weak, dairy stocks in storage are low and this is expected to bring higher milk prices.
An outbreak of African Swine Fever in China/Asia in August 2018 is creating a major supply deficit on Global markets. The sheer scale of the problem for pigmeat production in China and across Asia will affect the global meat industry, not just pigmeat. While ASF doesn’t present any consumer risk, there is evidence that Chinese consumers are switching to other meats therefore driving demand for beef and poultry as well as pigmeat. A major supply deficit in global markets is welcome news to a major exporting country such as Ireland. With China being our second most important export market for pigmeat, there is clear opportunity in this market for the foreseeable future.
Future Growth Loan Scheme
Bank of Ireland will participate in the Future Growth Loan Scheme recently launched by Ministers Creed & Humphrey’s. The scheme will have a €60 million allocation to the Agri Sector and Bank of Ireland is expecting strong demand for loans under the scheme with particular emphasis on future farm infrastructural projects. For more information or to apply for eligibility farmers can log on to https://sbci.gov.ie/schemes/future-growth-loan-scheme1
Bank of Ireland is regulated by the Central Bank of Ireland.