Options if sufficient profit cannot be made from full-time farming

These are the results from the Teagasc National Farm Survey published last week.
Options if sufficient profit cannot be made from full-time farming
Many younger farmers want to continue to have off-farm income.
Many younger farmers want to continue to have off-farm income.

For 2019, the average suckler farmer made €116 per acre.

Other beef rearing farms made €156 per acre.

Dairy farmers made €456 per acre; tillage farmers made €228 per acre; and sheep farmers made €125 per acre.

These are the results from the Teagasc National Farm Survey published last week.

You might forgive my conversion of the results published from hectare rates to acre rates.

The vast majority of farmers still deal in acres rather than hectares.

I don’t think I will ever start calculating how many bales of first cut silage was made per hectare, nor how much land rent costs are per hectare, albeit the transition to litres rather than gallons of milk was somewhat easier, especially when you get paid by the litre.

With land rental, if we chose to stick with hectares, given the heady land rent prices paid in certain spots of late, you’d be talking about rents north of €1,000 per hectare.

That would make land rental seem incredibly expensive.

While on the subject of land rent, based on these figures from the national farm survey, it’s hard to see how renting land can pay.

A survey of land rent prices carried out earlier this year showed that tillage land commands an average rental of just over €200 per acre.

Grazing land commands prices in the region of €170 per acre.

Given that the National Farm Survey shows returns of €228 per acre for tillage farmers and €116-€156 for beef farmers, the question arises of whether renting land is making your business any more profitable.

Tease this out a bit more.

Even if renting land makes you more profitable, does it leave you with more surplus cash?

The key point here is that profit does not directly translate into extra funds in the bank account.

Many farmers are left perplexed, when their accountant tells them they owe tax based on a profit which the farmer cannot comprehend.

A farmer might even have cause to question where has all this profit disappeared to?

From experience, land rent can often come at a much higher cost that you think. Increasing your farming platform can result in knock-on cash flow outgoings.

Renting 45 acres more to carry 30 extra milking cows, can entail a cost of hundreds of thousands.

Not alone do you need to buy or rear 30 cows and their followers, but you’ll also probably expand the milking parlour, increase the bulk tank size, extend the cubicle house, and invest in a bit more slurry storage.

Milking those extra cows has increased income and perhaps profits too, but the farm may be financially less cash flow buoyant, because capital expenditure and associated loans eat into cash flow.

So too the parable can be applied to renting an extra 100 acres of tillage.

You might be tempted to upgrade to a four-metre drill, a six furrow plough, along with 200 horsepower up front.

A person recently reminded me that all the country was farmed 50 years ago with Ford 4000s, three-furrow ploughs, and 10-foot combines, those being the state of the art at the time.

That’s not to say that progress should be halted and we should revert to those times.

It is a most worthy aspect of human nature that drives us to improve our lot.

But, when the returns from farming are so low, we need to answer a few questions honestly.

Is there anything I can do to make my farm more profitable?

Can I identify and park parts of my business which are not profitable?

Is there something else I can spend spare cash flow on, that will either give me greater enjoyment or more profits than expanding my existing operations?

Are there scheme or grants that I can avail of?

These are the questions facing every business owner regardless of sector, county or country.

The National Farm Survey is useful in reminding us that farming is a low margin business.

That doesn’t mean that we should turn our back on it or not invest in it.

Quite the contrary, we should instead look for the opportunities, and be focused on maximising income and reducing costs.

Farming must be more that just some form of physical therapy, the farm must work for you as much as you work for the farm.

Many younger farmers are willing to invest in improving facilities, such that they can continue to have off-farm income, knowing that the better-equipped farm can operate with substantially reduced labour input. When the hours spent farming become smaller, then the profit per hour worked can rise to a very decent level, and can be a nice top-up to a full-time off-farm income.

Average industrial wages climbed again in 2019, to a full-time equivalent of over €47,000.

This equates to about €23 per hour.

So, having a full-time job plus an enjoyable, profitable, farming operation sideline, might be the way forward for this and future generations, if sufficient profits cannot be made from full-time farming.

More in this section

Farming
Newsletter

Keep up-to-date with all the latest developments in Farming with our weekly newsletter

Sign up
Revoiced
Newsletter

Our Covid-free newsletter brings together some of the best bits from irishexaminer.com, as chosen by our editor, direct to your inbox every Monday.

Sign up