Kieran Coughlan: Must use available tools to cope with uncertainties

For many farmers, 2016 will be remembered as a year of uncertainty.

Unfortunately, at the close out of 2016, the uncertainty remains on many fronts.

It has been exasperating on some fronts — from the prospect of recovery in milk prices to the volatility of currency movements amongst our major trading partners, the resurgence of international protectionism, the unforeseen election of Donald Trump, and the Brexit vote.

Farmers are used to uncertainty, whether uncertain weather and growing conditions, uncertainty of livestock or crop diseases, or uncertainty of demand for their produce.

Farmers are a resilient bunch, and have developed their own strategies for coping with uncertainty, from carrying spare fodder stocks to overcome fodder shortages, to adjusting their farming systems to adapt for changed demand.

For nearly a generation, mainstream farmers have benefited from tools of stability employed by the EU such as import tariffs, export refunds, and intervention storage.

Despite the lifting of milk quotas in 2015, dairy farmers have also benefited from the European Commission’s re-opening of Private Storage Aid for cheese, butter and skim milk powder, which is currently extended to February, 2017.

Although the EU has stepped in, and has provided a back stop, being part of an EU28 (soon to be an EU27) has some disadvantages.

We don’t have the capacity to design our own market stability tools such as tariffs or intervention policy.

As our biggest trading partner looks to drop out of the EU, how will Irish farmers fare in our new relationship with the UK?

Constrained in our ability to design our own trade deal, we must use what tools we have. Collectively, we have the capacity as producers and processors to protect our positions with forward contracts, hedging, and keeping farmers informed, with market data (such as processors giving details of forward bookings and orders).

We must also build on our relationships with our customers.

As a country, we can design our tax systems to support farmers through volatility, and to encourage investment in efficiency. Using these tools that are available to use will help us through these troubled times.

Nonetheless, we too must take actions within our farms, reducing our exposure to risk.

Chance for conacre owners

On a separate note, it’s the last chance for conacre owners to get their house in order. Land owners who were previously farmers and who now switch away from conacre toward leasing, by December 31, 2016, can extend their capacity to benefit from capital gains tax retirement relief.

Auctioneers tell me there has been no great uplift in leasing over the last few months, leading to my view that many would-be beneficiaries simply are unaware of the conacre changes.

The measure will only benefit those land owners who previously farmed their own holdings for ten years or more, in the past 25 years. The relief is of particular relevance to land owners who may be contemplating a sale or a lifetime transfer to a niece, nephew, or other person other than a child.

The benefit of converting to a lease is that such a land owner can avoid capital gains tax on the disposal of land to a third party, where the proceeds are less than €750,000 in the case of a person aged 55-66, reducing to €500,000 in the case of persons over 66.

The pressure to convert to leasing isn’t applicable to those intending on transferring or selling to a child.

However, converting to a lease can be beneficial on a number of fronts — from keeping options open for partial sale, such as the sale of a site, to potentially benefiting from the income tax exemption on leased land.

The new rules are complex, and those affected would be well advised to obtain professional advice in advance of the December 31 deadline, in order to evaluate their options.

Meanwhile, I wish a peaceful and happy Christmas to all readers of this column.


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