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Rising costs put horticulture sector under pressure

Increases will in many cases exceed grower margins, Teagasc report says

Irish horticulture producers are facing into a very difficult 2022 due to sharply rising costs across almost every area of their operations. A new report on the sector's input costs prepared by the Teagasc Horticulture Development Department has found that input cost increases will in many cases exceed grower margins and they will be unable to absorb the increases without a rise in the price they are paid for their produce.

Across all enterprises, there has been a sharp increase in the cost of labour, packaging materials, fertiliser, energy, peat-based growing media and other inputs that are key components of production. Total input costs have increased by between 10.5 per cent and 17.7 per cent depending on enterprise type.

Valued at €477 million in terms of farm gate value, horticulture is the fourth largest sector after dairy, beef and pigs in gross commodity output value. The sector is diverse and covers plant and food horticulture. Horticulture food includes mushrooms, potatoes, field vegetables, soft fruit, protected crops and outdoor fruit. Amenity horticulture consists of nursery stock, protected crops, cut foliage and outdoor flowers and bulbs.

"Given that growers' costs have increased substantially during 2021, producers are potentially facing significant decreases in margins," says Dermot Callaghan, head of the Teagasc Horticulture Development. "In some cases, input cost increases will exceed grower margins. Some growers are considering cutting back on production for 2022 in order to manage their cash flow, or to minimise their exposure to high costs. Where energy is required for early and late season production in glasshouses, where a three-fold increase in energy costs persists for 2022, it is likely to lead to a significant reduction and/or cessation of both early and late production."


According to Callaghan, labour is a key input for the sector and represents approximately 40 per cent of total input costs for most sectors. While the minimum wage rate increases annually, the labour supply situation to the sector has been particularly difficult of late and led to significant upward pressure on wages surpassing the actual increase in the minimum wage. Some of the sub-sectors have reported to Teagasc that rates have increased more than 9 per cent for general operatives and over 13 per cent for skilled workers in 2021.

Packaging has also seen significant increases, some types by as much as 70 per cent. However, the average increases range from 20 per cent to 40 per cent depending on the mix and type of packaging required. While cardboard products are up about 20 per cent, plastic-based products in general are up significantly more as transport and energy prices have a more significant impact there.

Fertiliser prices are influenced by supply and demand in the market, but also reflect production costs, which are closely related to energy prices. The report finds that fertiliser prices increased by more than 200 per cent during the second half of 2021 and that there some spot prices have almost tripled since 2020.

Energy prices

Soaring energy prices have had an impact, but the exposure varies according to crop type, whether contracts for electricity supply are used and whether biomass systems have been adopted or are possible. Glasshouse production is dependent on gas for heat and carbon dioxide supplementation and is particularly impacted.

“You now have Irish strawberries from February to December grown under glass,” says Callaghan. “Rising energy costs mean that it may not be viable to heat them anymore. Tomatoes, cucumbers and peppers also require heat, and the profitability of those crops will definitely be tested. The mushroom sector uses biomass heating systems so is not as exposed. However, tomato growers pump the CO2 produced by the gas boilers into the greenhouses to increase yield by up to 20 per cent. They are actively fixing the carbon with the CO2 coming from gas pumped directly into food. The cost of CO2 supplementation is also impacted by energy price rises.”

The other area where costs have risen quite strongly is growing media. Reduced peat extraction is one factor while haulage price increases is another. The report further notes that while stocks of professional grade peat based growing media served to supply a portion of the 2021 growing season requirements, these stocks do not exist for 2022 as there has been no peat harvest. Depending on sector and product, there are more increases expected for 2022.

The immediate strain will be experienced during the winter and spring. “If a grower harvests crops in June and July all the input costs are incurred between now and then,” Callaghan points out. “The increases will place a severe strain on cash flow during that period and growers could be out of business before the harvest. If prices don’t go up, the only way to deal with cash flow issues is to reduce acreage to control the input costs and that’s not really a solution.

“Demand for Irish fresh produce has never been higher,” he adds. “There is a bit of an irony there. We are just trying to spell out the facts in terms of input costs. However, it would be reasonable for the sector to expect that if demand is so high there would be some shift in pricing.”

Barry McCall

Barry McCall is a contributor to The Irish Times