Making sense of the mixed messages in farm income survey

Farm incomes rose 6% during 2015, but farmers argue that the real story is how far they lag behind other sectors.

Making sense of the mixed messages in farm income survey

Last week, Teagasc published estimates of the incomes earned by farmers in 2015.

At one level it was a good news story. Average incomes were up by 6% on the previous year.

There had been estimates, as recently as last October, that farming incomes in 2015 would have declined by as much as 9%.

However a substantial increase in milk supply (13% compared with an expected 10%), combined with favourable weather conditions and reduced feed costs, led to a happier result.

The essential figures from the survey were that average income on dairy farms was €63,020, on tillage farms was €33,731, on sheep farms was €15,791, on cattle finishing farms was €16,215, while on suckler farms it was €12,904.

The national average income in all five systems was €26,526.

Income per hectare varied from €1140 on dairy farms, to €556 on tillage farms down to €317 on sheep farms.

Approximately 19% of farms had income of less than €5,000 while 17% (about 14,000 farms) had incomes over €50,000.

The regional differences in farm income per hectare are shown on the map (see graphic, right).

Incomes a political issue

However, we should set these figures in the context of the wider economy.

I will firstly sketch out levels of incomes earned in the wider economy, both at the top and bottom of the scale.

I will then explain the Teagasc data on farm incomes and see how they compare with others.

Relativities in incomes earned have become a hot political topic.

There is concerned debate across the world about the increasing proportion of wealth held by a few, following the publication of a book by a French economist, Thomas Piketty.

This debate has been extended recently to incomes, with some evidence of a widening gap between top earners (irrespective of wealth) and the ordinary working man.

Many political parties campaigned for change in the recent election on the basis of “fairness”.

It is claimed to be “scandalous” that a Garda recruit earns only €23,000 per annum in his first year (not including overtime or shift allowances).

Let us suppose for the moment that his/her father ran a suckler beef herd. The average income from farming suckler beef in 2015 was €12,904 and this represented a 34% increase on 2014.

The minimum wage for an adult is now €9.15 per hour. If we look at someone working full-time on the minimum wage for 39 hours per week (say in a local supermarket) their gross annual pay will be €17,542.

Many argue this rate is not sufficient to achieve an “acceptable” standard of living and are campaigning for a “living wage”, which would provide this.

The estimated level of the “living wage” for 2015 was €11.50 per hour. This is equivalent to €23,322 on the basis of a 39-hour week.

Another issue that became a hot political topic was the earnings of the top officials serving the farming community.

It was revealed that Pat Smith, former Irish Farmers’ Association general secretary was being paid up to €400,000 per annum, more than twice what the Taoiseach earns.

This revelation and the controversy that surrounded it led not only to his resignation but also to that of IFA president Eddie Downey.

The earnings of top executives at Glanbia and Kerry Group, have also been in the spotlight. Siobhan Talbot, managing director of Glanbia saw her total pay packet rise to nearly €1.9 million in 2015.

This included a basic salary of €750,000, a bonus of €563,000 and a pension contribution of €199,000, and an award of shares in the company worth €351,000.

Her counterpart at the Kerry group, Stan McCarthy, received a total package of €4m — over 20 times that of the Taoiseach.

The Data in the National Farm Survey

With this background let us look at the data on farm incomes provided by Teagasc.

They carry out a survey on 1,000 farms (in practice, they maintain the accounts of these farmers).

They have now published estimates of incomes earned by farming system and by region based on 800 of these farms.

They claim the inclusion of the full 1,000 would improve the accuracy of estimates by only 1.5% at most.

Some sectors are not covered — pigs, poultry, horses and horticulture. Also not included are very small farms — of which there are about 50,000.

A very small farm is one which does not have annual sales exceeding €8,000, the equivalent of six dairy cows, 6 hectares of wheat or 14 suckler cows.

The survey therefore covers 61% of landholdings but 95% of agricultural output and represents activity on 84,000 farms.

The data on incomes are not therefore biased by the inclusion of hobby farms or ones with very low agricultural activity.

Intensive farming activities (with presumably high turnover, such as pigs and poultry) are however omitted.

What is family farm income?

The value of total sales is calculated, all farm costs are deducted, and the value of any income subsidies is added. Family labour is not included as a cost.

So the published figures are the return to the family (more than one family member will have contributed their labour, particularly on dairy farms) for their labour, management and capital (some return should be expected from earlier investment).

It is not therefore strictly comparable to an annual wage or salary, since it can include labour payments to more than one person, as well as a capital payment. The income per labour unit on dairy farms is about €45,000

Note also, the family farm income is not the sole source of income. Over two-thirds of farmers are over 50 years of age. Many will be over 66 and entitled to the old age pension.

Half of farm households have a member with off farm employment. In some areas, eg the Western region, over 40% of farm holders have off farm employment.

This means that the farming activity on many farms is part time and not strictly comparable with a full-time wage earner.

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