Next Generation
The Department of Agriculture, Food and the Marine (DAFM) and Teagasc are shortly to roll out a promotional drive to highlight the economic benefits of farm partnership, such as increased economies of scale, shared capital investment, removal of duplicate costs, and risk sharing. The big push will take place during the growing season early next year.
Some farmers are already there. They have already seen how sharing equipment, labour and responsibilities with a family member or neighbour can help them to reduce costs, improve succession and even enjoy a better social life.
However, the numbers are still relatively small. For instance, while around 35% of farms in New Zealand are in partnership, only around 3.8% of Irish applications for the Single Farm Payment in 2010 were submitted by joint applicants.
Nonetheless, Mr Coveney believes farmers are ready to adopt a partnership model in keeping with Ireland’s predominantly family-based farm profile. The expectation among farmers is that the forthcoming budget will incorporate tax reliefs to encourage this generational transition.
Mr Coveney said: “Farmers are smart people. They are already going ahead with this on their own. It makes sense for neighbours to bring out vets for collective visits. It doesn’t surprise me that they are already going down this road and making other similar cost savings.
“Irish agriculture is now on the cusp of a huge expansion, and now is the ideal opportunity to put in place the legal structures and the tax policies to encourage the setting up of farm partnerships.
“There is no direct funding available due to the limited budget constraints we are working within, but we are looking at possible taxation measures within the current budgetary context.”
There’s no doubt that Ireland needs to rejuvenate agriculture to sustain its ambitions for the sector. The average age profile of Irish farm owners has risen from 51 in 2000 to 55 in 2007, and is very probably still rising. In the same time period, farmers under 35 decreased from 13% to 6.5%.
In late 2008, the Early Retirement Scheme and the Installation Aid Scheme were both closed to new applicants. Now, at a time of severe fiscal pressures, farmers are hoping that the December budget will at the very least maintain the Capital Gains Tax (CGT) in relation to the transfer of family farms.
Donncha Murphy, a young farmer in Coachford, Co Cork, said: “At present there is a 100% tax relief on the transfer of farms. That must be maintained. Even if that were lowered to 95% relief for instance, it would mean a huge tax bill in the transfer of the farm. People won’t transfer if it means facing a tax bill.”
Stamp duty and inheritance or gift tax are also considerations for any farm transfer. Nonetheless, given the right financial framework, farmers have already proven their willingness to buy into partnerships. Ten years ago, the Department of Agriculture and Teagasc jointly launched a dairy partnership initiative.
Today, there are approximately 540 Milk Production Partnerships (MPPs) in existence in Ireland, and of this, 390 are new partnerships.
Mr Coveney said: “The figures for MMPs are still small. There is a strong attachment to land ownership in Ireland. People may be concerned that by buying into partnerships, they are somehow losing control over their land. I am adamant that I want to protect the family farm with this partnership model.
“We are trying to put structures in place to have three, four or five farmers come together to work collectively, to save costs via shared storage facilities, slurry storage, shared energy schemes, and by working on joint anaerobic digestion plants and other shared projects where scaling up can save costs. People who are in Teagasc discussion groups are already part of this debate.”
Young farmer group Macra na Feirme believes that a special stock relief provision would encourage older farmers to form partnerships with younger entrants. Macra is proposing a 100% stock relief for four years for registered partnerships if one of the partners is under 35.
Macra president Alan Jagoe said: “This would make more land available and improve the competitiveness and the adoption of new technologies on farm. We believe that partnerships need to be incentivised and further promoted.
“As things currently stand there are obstacles that need to be removed for partnerships to be able to develop further, eg, for Disadvantaged Area Payments and modulation under the Single Farm Payment.
“Farm partnerships are a great business model. We see the farm partnership as a tool that can be used to address the generational imbalance that exists where 7% of farmers are under 35 and 25% are over 65. The family farm model is highly efficient but needs to be facilitated by collaborative arrangements such as partnerships.”
FARM partnership has been a great success for dairy farmers Eddie O’Donnell and his parents Denis and Nora, who have gone from farming 150 acres in 2004 to 310 acres today.
“We’re currently milking the herd on two different milking blocks since 2006 as we were tight for land on the home farm back then to be able to grow the business to where it is now,” recalls Eddie O’Donnell, the 2006 FBD Young Farmer of the Year.
“One of the big benefits of the partnership was that it gave us an opportunity to get more quota through Dairygold Co-op and Kerry Group.
“I was 21 going on 22 when we started. My parents gave me the go-ahead because they were young when they began and they could see the value of giving me an early start. One of the major benefits of entering partnership was to suit the growing needs of our family. Having spent a few years working with the farm relief services through ag college, I then gained valuable practical experience on different farm settings,” Eddie said.
“It’s a joint bank account, meaning that all decisions are made on a 50/50 basis, which means that either of us can sign the cheques. I believe it is great for young people to have the opportunity and the responsibility of dealing with the financial side of the business as some young people aren’t afforded this opportunity and it’s of vital importance.”
Having travelled to New Zealand twice, Eddie points out that some farmers there start out as equity shareholders in the farm business. He would not like to see Ireland’s partnership model evolve into a national “factory farm” model, but would like to see some young non-land owners being able to enter the sector as part of the likely growth in partnering. He suggests the partners should put everything in the contract right from the outset.
In 2004 the O’Donnells had 70 cows producing 360,000 litres of milk and rearing all calves to beef on 150 acres. In 2011 they have 210 cows producing 1,075,000 litres of milk and carrying all young dairy stock on 310 acres.
“I think the model has to be adopted,” said Eddie. “The age structure is wrong, with so few young farmers in Ireland. Change has to come. I would like to see a ladder of opportunity, both for those who want to start and those who want to retire.
“Without partnership, I would probably have had to work somewhere else. We needed two incomes from our farm, so we had to keep growing. The labour benefits have been huge and we are making far better use of the land. Partnership definitely works.”
FATHER and son Con and Donncha Murphy will have to make a decision on transferring the farm sometime in the next few years.
Their farm activities are split three ways, with two thirds of the value coming from dairy and the rest from contracting work and beef.
Donncha was 25 and Con 53 when they began their farm partnership in 2004. The big incentive for them in the first few years was an increase in milk quota. In 2004, the Murphys had 50 cows producing 250,000 litres. They now have 90 cows producing 450,000 litres. They own 100 acres and rent another 35.
“My father is a very active, progressive man,” says Donncha Murphy. “He takes huge enjoyment out of his work and he never saw the partnership as an opportunity to draw back from the farm. We have nearly doubled our output in seven years. We have really seen the benefits of shared ownership. The next natural step would be the transfer of the land.”
Donncha cautions the Government against introducing any obstacles to transfer in forthcoming budgets, saying any attempt to harness revenue from Capital Gains Tax or Inheritance Tax could stop future farm successions in their tracks, undermining the expansion goals detailed in the Food Harvest 2020 strategy.
“Partnerships can enable farmers to grow and thrive in the years ahead,” said Donncha. “Using the partnership model, the family farm is the ideal model for rural communities across Europe.”
Lawrence Sexton and John Hallissey, Kilbrittain, Co Cork
NEIGHBOURS Lawrence Sexton and John Hallissey are about to renew their farm partnership contract in December, having jointly farmed around 200 cows on 200 acres on two entirely separate farms for the past five years.
Both have increased their outputs and returns on their individual family farms, and both have been able to relax while away on holidays, sure in the knowledge that everything back home was going to plan.
Lawrence Sexton said: “The most important bit of advice I got was to build five-year terms into the contract. You should build in an exit clause, but the most important exit clause is to set a term.
“It didn’t take too long to put the contract together. It is even easier to do it now, but back then we started with the department officials. We got help from John Coombes of FDC Accountants in Skibbereen, from Ann Malone of Teagasc, and from Ben Roche in Moorepark.
“Then you go to your solicitor to sign the contract. When things don’t work out, you can change to reflect that. After five years, we are now about to look at any options for changes. We started out as friends, and we have maintained that friendship.
“It is important to understand that you are two different people and that you don’t do things the same way. It takes a while to get used to, but you quickly realise that when something is bothering you the best thing to do is to just say it out straight.”
Lawrence and John have also found having a partner useful in terms of having a sounding board before launching any new ideas. They have to pitch any new idea to one another, and make sure the figures stack up rather than losing money by driving on based on gut instinct alone.
They have also found labour costs easier to control as they work with each other when it comes to dosing animals, bringing in bales, etc. They have also both found the partnership invaluable in terms of the peace of mind each has enjoyed while away on family holidays.
“We each milk week-on, week-off. Family life is much better. We’ve both been away on holidays, and you don’t tend to worry about the farm so much when you’re away,” said Lawrence Sexton.
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