THE BSE crisis will reduce farm incomes this year by £100 million, with cattle farmers facing an income cut of 10 per cent and dairy farmers a 5 per cent cut, according to Goodbody Stockbrokers.
In a detailed analysis of the impact of BSE on the economy and the farming sector, Goodbody analyst Mr Liam Igoe warns the losses to farmers this year could rise to £130 million if EU intervention is used on a wide scale next year. He adds that these declines are equivalent to a reduction in GNP growth of between 0.7 per cent and 1 per cent.
Noting that agricultural incomes last year amounted to £2.25 billion with £1.7 billion of this coming from EU supports, the Goodbody analyst emphasises that the BSE crisis coincides with a cyclical downturn in dairy product prices which could cut milk prices to farmers by between 8p-10p a gallon.
The BSE crisis alone will cut cattle farmers' incomes by 10 per cent this year while dairy farmers will face a 5 per cent cut in income as a result of BSE.
Between 1995 and 1997, farm incomes will fall by £215 million, says Mr Igoe. This represents a fall in incomes of 9.5 per cent, just over half of which is due to lower dairy prices and just under half due to BSE.
Mr Igoe says that the timing of these declines in income will be uneven, with most of the BSE related impact occurring in 1996-97 and the dairy impact in 1997.
The total reduction in farm incomes over the two-year period is equivalent to 0.6 per cent of GNP, says Mr Igoe, with economic growth falling by 1.4 per cent as a consequence, of which 0.7 per cent is directly attributable to BSE.
While this reduction may appear modest given current GNP forecasts, Mr Igoe warns that the impact may be felt when the economy has come off its peak
On a sectoral basis and based on Teagasc figures, Mr Igoe believes that dairying incomes will fall from a 1995 average of £24,379 to £18,495 in 1997 a fall of 24 per cent of which 5 per cent is BSE-related.
Cattle farm incomes may fall from a 1995 average of £8,341 to £7,512 in 1997, a fall of 10 per cent - all of which is BSE related. The only agricultural sector which will experience only a small decline in income is tillage where 1995 average income of £15,603 is likely to fall to £15,260 in 1997.
The fall in farm incomes will have a severe impact on sales of farm inputs, says Mr lgoe, stating that animal feed sales may fall by as much as 15 per cent while fertiliser sales may fall by 10 per cent. Capital projects such as farm building and machinery purchases are likely to see the biggest declines in 1996/97 "as these, more than any other item, are discretionary and deferrable items", says Mr Igoe.
As a result of the relative stability in tillage incomes, the demand for seed and crop protection products is likely to be little affected. In the broader economy, Mr lgoe believes the lower farm incomes will result in lower discretionary spending in market towns around the country.
