Farm incomes likely to fall €13k

Farmers are in urgent need of a new agri environmental options scheme (AEOS) scheme to narrow the gap between good 2011 average incomes and 2012 figures which are likely to be down €13,000 for the year, warns the IFA.

CSO figures for 2011 show a 30.1% average rise in farm incomes compared with 2010, equivalent to a salary of over €21,500. In fact, farmer incomes have grown two years in a row, with the 2011 rise following a 27% jump in 2010 compared with 2009.

These figures, released yesterday, are in line earlier with estimates published in February. The CSO attributes the gains primarily to an increase of 16.8% in goods output, with most sectors of farming enjoying a boost in output.

However, IFA analysis suggests farmers’ incomes have plummeted in the first half of 2012. This has been caused by a combination of price drops, reduced output due to poor weather, and rapidly rising input costs.

IFA president John Bryan said: “The contrast between the 2011 figures and the likely outturn for 2012 is a stark illustration of the impact of volatility on farm families. For example, the combined price cuts of the last few months for milk producers total up to a massive 6c/l. This represents a loss of up to €13,000 in the income of the average 300,000-litre supplier over their 2012 supplies.”

The prolonged wet weather of recent weeks will have a negative impact on output, and will add to feed costs next winter. “Silage harvesting has fallen far behind where it should be at the end of June. Inevitably, the quality will suffer and additional feed will be needed later in the year.”

Mr Bryan re-iterated the importance of farm schemes to counteract the negative effect of volatility on income.

“Low-income farmers, in particular, have suffered severe cuts across a range of schemes and cannot afford any further drop in income. In this context, a new AEOS scheme must be a priority for all farmers leaving Reps.”

The CSO figures for agri output have been very strong for two successive years. The CSO estimates that the value of the goods produced by the agriculture sector increased by by €907.7m, or 16.8%, in 2011.

The value of cattle output increased by 19.5%, or €292.5m, primarily due to higher prices in 2011. Pig output was up by 19.5%, or €64m; milk was up 18.8%, or €289.9m; while total intermediate consumption increased by 13.7%, or €588.1m, during 2011.

However, the IFA is not alone in focusing on the contrast between the growth in farm output and the challenges faced by farmers.

Grant Thornton’s head of food and beverage Ciara Jackson said: “Even with the publication of latest CSO figures showing that agriculture incomes are up 30.1%, there has also been a huge jump in input costs. This is the achilles heel of the Irish food market.”

Ms Jackson also said that it was not surprising to see Ireland ranked among the more costly countries in the latest Eurostat report for European consumer price levels, noting that food producers were facing higher input and wage costs than those in neighbouring EU states.

Ms Jackson said: “Despite being a world leader in terms of food production, food safety and product quality, there are a number of factors working against Ireland in terms of being an affordable food producer. Our input costs are high when compared with many of our European counterparts. Ireland has one of the highest minimum wage costs in Europe.

“Energy costs are on the rise, and all indications are that this trend will continue. Commodity prices are volatile, and prone to fluctuation. High input costs are a significant challenge for Irish food producers — in many instances, it’s cheaper for Irish consumers to buy imported foreign foods.”

The Grant Thornton analyst welcomed efforts to market Ireland as a quality producer, including this week’s launch of the “Origin Green” label by Bord Bia, highlighting the environmental positives of Ireland’s sustainable approach to food production. She also said that, while the 30.1% increase in income for 2011 is positive for the sector, Irish farmers can further increase their profits through better financial planning.

Ms Jackson said: “Such a significant income increase in the agri sector has to be welcome, but we must be clear that the sector, despite its growth in recent times, is still in recovery mode. Average income in 2008 and 2009 were truly disastrous for the sector.

“Anecdotal evidence suggests that only 10% of small farmers prepare business plans. Given that this basic fundamental is not being observed it would suggest that strategic planning is not high on their priorities and they aren’t as prepared as the larger, more industry focused operator. If farmers and producers adapt a sound financial business plan then the 30.1% figure could be significantly higher in 2012.”