Growing trend of farm businesses being no longer viable, unless subsidised by off-farm income

Growing trend of farm businesses being no longer viable, unless subsidised by off-farm income
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A new survey of more than 2,000 farmers shows less than 300 with a clear succession plan in place, and about 860 of them not planning for succession because of their farm viability concerns.

The 2019 Irish Farm Report for ifac followed a survey last March and April, around the time the UK was nearing a ‘no deal’ Brexit on March 29.

That potential disaster for Irish farming has been put off until Halloween, but huge new challenges have replaced it, led by the Government’s climate plan, and the strong possibility of an EU-Mercosur trade deal.

Philip O’Connor of ifac said the survey results reinforced a growing trend of farm businesses being no longer viable, unless subsidised by off-farm income.

It also revealed that many farmers do not have a pension plan or life assurance, leaving themselves with no option but to continue to work on the farm past the age of 65 in order to maintain a household income.

Low viability makes pensions or life assurance less affordable, even though they are a vital part of the urgent job of succession planning — urgent because a farm is a valuable asset, regardless of its viability, and if you don’t plan for succession, it can have substantial tax consequences for farmers and their successors.

But succession was understandably put on the long finger after a difficult 2018 of pressures on farm gate prices, fodder shortages in a late spring, and a drought in the summer, with the Brexit threat overhanging.

Unfortunately, for those putting off succession planning until 2019, the Brexit threat still looms, and farmers will still have to wait and see if an EU-Mercosur trade deal happens, and they must digest how quickly the climate plan starts to squeeze their already precarious viability.

Arguably, planning is impossible for such a threatened sector.

The survey showed how important EU subsidies are for the viability of many Irish farms.

Farmers fear these subsidies will be cut when the UK leaves the EU, removing a net financial contributor to the EU budget.

That’s just part of the Brexit threat.

What happens to the 40% of our food exports destined for the UK is the other big question.

Irish farmers are uniquely exposed to Brexit, on top of the threats they share with other EU farmers, such as a free trade agreement with the Mercosur countries, cuts to the EU budget, the CAP reform, and trade wars.

Climate mitigation is the long-term challenge, and farmers could be forgiven for conspiracy theories like the EU (which bankrolls farmers) weakening them ahead of a Brussels master plan to plant most of their farms with trees, and import food instead from South America.

Such theories are inevitable, with IFA President Joe Healy saying it’s astounding to see EU leaders referring to health, environmental and labour standards, while at the same time calling on the EU to do a deal that would result in sub-standard beef coming from Brazil at the expense of that country’s rain forests.

Such are the puzzles facing the barely profitable business of farming in Ireland (beef is our most widespread farming enterprise, but it depends on EU subsidies to make a profit on the average beef farm, and the total Irish beef farm output increased only 3% since 2011).

However, it’s not as bad as it looks, because 85% of beef farm households have an off-farm income source (58% have a PAYE income; 50% of beef farm spouses have a PAYE income; 12% have a second trade or business).

Few sectors depend more on Ireland’s strong employment situation than beef  farming.

Hopefully, many of those beef farmer jobs are in the public sector, with its 100% pension coverage.

For the others, what happens when off-farm income stops? According to ifac, the likelihood is they will have to keep on farming because they will not be able to afford to retire, with the state pension no more than €248.30 per week (depending on your PRSI contributions).

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