Incomes were down in four of the five main farming systems

The effect of the weather was highlighted in the detailed National Farm Survey report on farm incomes in 2018, published last week by Teagasc economists.

Family farm incomes were down in four of the five main farming systems.

Only people engaged in tillage showed an increase in incomes in 2018, according to the survey.

Family farm income is the return from farming for farm family labour, land and capital, and the survey shows it fell 31% for dairy farmers, compared to 2017; 21% for cattle rearers; 11% for other cattle farmers; and 21% for sheep farmers.

For tillage farmers, family farm income in the survey increased 18% from 2017 to 2018.

The increased tillage income arose despite a decline in their output volume (again, weather-related), and was due to a substantial increase in prices for their output.

While average incomes were down substantially, they were comparable with income levels in other years of the past decade, except for 2011 and 2017.

Incomes on tillage farms, however, were at their highest level for many years.

In the survey, 44% of farms were found to earn less than €10,000, while 4% provided an income greater than €100,000 (mostly dairy farms, and mostly farms with considerably more than one family labour unit).

Increased feed costs

The main reason for the decline in incomes was increased expenditure on concentrate feeds, purchased in order to counteract the impact of reduced grass and fodder supplies, arising from a very late spring and a prolonged midsummer drought.

On the average dairy farm, concentrate feed expenditure rose by 42%, to €41,984.

Feed expenditure on sheep farms rose by 30% to €8,433, while on “other cattle” farms, the increase was 32%, to €7,976.

Higher fertiliser expenditure also pushed up the costs of farming.

The fertiliser spend rose by between 11% and 16% on most farms. Contracting costs rose by 20%.

Low cattle and sheep incomes

The income earned in cattle rearing (suckler) farms was the lowest of all systems, at only €8,300.

But these farms received subsidies of €13,100, on average, meaning that the farming operation lost €4,800 on average.

This is a well-established pattern.

Losses from farming (before subsidies) of €2,500 and €1,700 were incurred in 2017 and 2016, on suckler farms.

While the total income earned in other cattle systems was higher, a similar pattern occurred of losses in farming, if subsidies are excluded.

The average income in 2018 was €14,408, with subsidies received coming to €16,300, indicating an average loss of €1,900 on the farming operation, before the subsidy lifted the average farm into profitability.

In 2016 and 2017, the average income and subsidy received were almost equal.

Sheep provide in general a higher income than either of the cattle systems, but the dependence on subsidies is similar.

The average incomes in 2018, 2017 and 2016, were €13,800, €17,400 and €15,600, respectively.

The subsidies in each of those years averaged €18,800, €18,600, and €17,100. The result: farming operations lost €5,000 last year, and €1,200 and €1,500 in the two previous years, before including subsidies.

The low incomes earned in these sectors are partly an issue of scale.

Cattle and sheep farms are smaller than dairy or tillage farms.

Across Munster and South Leinster, the average size of farm is 49.3 hectares.

The average sizes of dairy and tillage farms are respectively 57.9 and 68.9 hectares.

Suckler farms average 32.7 hectares, while “other cattle” farms average 39.8ha.

Sheep farms are large, at an average of 62.7 hectares, but presumably not equal in productive capacity to dairy or tillage farms. The smaller scale of cattle and sheep farms implies a lower demand for labour. And there is a much larger participation by cattle and sheep farmers in off-farm employment.

The proportion of all farms where the spouse has an off-farm job is 34%, while 33% of farmers have an off-farm job.

However, 39% of “other cattle” farmers, and 41% of suckler farmers, had an off-farm job.

Only 12% of dairy farmers had off-farm employment.

Beef sector challenges

The beef sector, in economic terms, is hardly viable.

It has been at the bottom of these tables for nearly 50 years. It does not provide, of itself, an adequate income.

Systems which would increase output and productivity, using its relatively elderly labour force, have not had the required success.

And now the beef sector faces a series of severe extra challenges.

The greatest of these is Brexit, or a no-deal Brexit, more particularly. In such an eventuality, the high proportion of Irish beef exported to Great Britain may incur import tariffs. These tariffs would likely mean a further reduction in the price of beef cattle.

The possibility of finding alternative, high-paying markets, is small in the short term.

In addition, the implications of climate change mitigation are serious.

In Ireland, one of the larger contributors to greenhouse gas emissions is methane from cattle.

So we have a beef sector which is not economically viable, which is responsible for much of our greenhouse gas emissions.

The dairy sector, while equally responsible for greenhouse gases, is at least economically viable, even thriving.

A further but minor challenge, (compared with the other two) is that consumers, even Irish consumers, are cutting meat consumption.

The prospects of ending the continual low financial returns in beef farming seem remote.

The sheep sector is not so severely challenged.

It might even benefit from a no-deal Brexit, with opportunities to replace British lamb in continental markets.

While sheep emit greenhouse gasses, the volumes are considerably lower than for cattle.

Sustainability and vulnerability

Economists divide businesses into three categories, those which are viable, sustainable, and vulnerable.

In the case of Irish farms, the Teagasc economists define a farm as “viable” if the family farm income is sufficient to remunerate labour at the minimum wage rate (equivalent in 2018 to €19,616 per annum) and provide a 5% return on investment in non-land assets, such as machinery and livestock.

One third of Irish farms were classified as economically viable in 2018, compared with 40% in 2017. The proportion of economically viable farms varied from 73% in dairying and 65% in tillage to only 11% in suckler farming and 26% on other cattle farms and 20% on sheep farms.

Farms which are not viable but which have access to an off-farm income source, such as an employment or a pension, earned by the farmer or spouse, are considered “sustainable”. The proportion of Irish farms falling into this category in 2018 was 34%.

The third category consists of farms which are not viable and do not have an off-farm income source.

These are defined as “vulnerable” and come to 34% of the total in 2018, an increase of 3% from 2017. Vulnerable farms account for 13% of dairy farms, 18% of tillage farms, 38% of “other cattle” farms, 43% of suckler farms, and 44% of sheep farms.

The full report can be accessed online at the www.teagasc.ie/publications web page.

(eamonnpitts@gmail.com)

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