CAP is the real bellwether

Things are not as bad as farmers thought, according to the National Farm Survey 2012. But they were never great, and this statistical exercise illustrates, year after year, that a huge number of farmers are kept going by direct payments from the EU.

That’s why — whatever the weather — farmers are most interested in the CAP reform forecast.

This survey, by Teagasc experts, of 1,000 farms, shows that the financial reward to the families that work on the average farm fell by 15% in 2012, to €25,483. That was 10% ahead of the 2010 figure.

Incomes in 2012 are the second highest on record since 2005, and high relative to the previous seven years, despite being 15% lower than 2011.

The income decrease was due to more spending on the inputs for farm production, and that was due to the bad weather of 2012 — which was worst for farmers in the south and south-east.

Dairy farms were adversely impacted by the weather, resulting in a 24% income cut, on average. On tillage farms, the value of the winter wheat harvest was down 19%.

IFA says farm income fell by one fifth in 2012, but the Teagasc verdict is in line with the Central Statistics Office estimate that agricultural income fell 12.3%.

So, things are not as bad as farmers thought.

But that is small consolation. There are other frightening figures in the National Farm Survey 2012.

For example, the off-farm income top-up for farm earnings is declining. The number of farms where the farmer or spouse was employed off-the-farm peaked at 59% in 2006, and has declined since. Now, it’s at 49.4%, down from 51% in 2011.

Every year, the most daunting figure in this survey is the market income — what a farmer earns from farming, before he includes his direct payments from the EU. In 2012, on average, across all Irish farms, market income was €4,949. Cattle and sheep farms, on average, failed to earn a positive market income in 2012 — their costs of production exceeded the price received for their products in the market. Without direct payments, these farms would be operating at a loss.

It doesn’t take much to knock these unprofitable operations off course. The bad weather has reduced the proportion of what Teagasc calls ‘economically viable’ farms to 37% in 2012, down from 41% in 2011.

About one farm in three is classed by Teagasc as ‘economically vulnerable (meaning it is not economically viable, plus neither the farmer nor spouse has off-farm income).

Tillage and dairy farms are the most viable, but only 16% of dry-stock farms are economically viable.

In 2012, only 16% of farms had income, from farming and direct payments, over €50,000 (compared to 19% the previous year).

Almost 3% earned over €100,000. The income-per-labour-unit was estimated at over €50,000 on 12% of farms.

Just 17% of cattle-rearing farms achieved an income-per-labour unit of €20,000 or more. Of cattle-fattening farms, one third produced a 2012 farm income of €20,000 or greater.

Per unit of unpaid labour, just over one third of all farms earn €20,000 or more. However, the lower labour-input supply on tillage farms enables about 22% of them to produce an income-per-labour-unit of €70,000 or more.

The survey reveals a weak foundation for our farms to produce the raw material for €8bn of exports.

Considering their low earnings, it’s a great tribute to our farmers that they invested €657m on their farms last year. Their average output was €81,971. But €20,534 of that was EU direct payments. And when you take out production costs, the direct payments are 81% of income, on the average farm.

That’s why the CAP-reform talks in Brussels are so important. How direct payments are re-organised will be crucial for every farmer.

The survey shows why Agriculture Minister Simon Coveney must avoid a dramatic redistribution of direct payments, which he says would fundamentally undermine the productivity of many farmers in Ireland.

He says farmers on low payments per hectare argue for a larger share of the available funding because that’s fairer, but those on high payments per hectare have invested single-payment funds in improving the productive capacity of their farms and do not want these efforts to be undermined.

Minister Coveney says both sets of demands are understandable and reasonable, but are difficult to reconcile, for obvious reasons.

As in all negotiations, the key will be to reach a fair compromise that will level the playing field without putting productive farmers out of business.

In a country where the average farms makes less than €5,000 per year, and depend on the EU direct payments to manage an average income of €25,483, it’s a huge challenge.


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