Saturday 1 October 2016

Beef: hobby farming in disguise?

The hard evidence suggests that the majority of beef farmers are in it purely for the love of cattle and the love of the land

Mike Brady

Published 16/03/2016 | 02:30

Beef farming has a value that goes beyond financial rewards.
Beef farming has a value that goes beyond financial rewards.

There is no money in beef is a refrain we have been listening to from farmers, advisors, academics and industry commentators for the last 30 years. Long gone are the legendary tales from the 1960s and 70s of beef farmers buying farms of land from profits made after a few years trading and fattening cattle.

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Today we see images of beef farmers on our TV news warming their hands on fires in barrels while picketing outside meat factories, protesting about the price of cattle.

However, we rarely see lots of beef farms advertised for sale or beef farmers forced off their land due to non-payment of bank debts, so what is the reality? Are beef farmers really losing money or is it just the 'poor mouth'?

Evidence

There are a number of places to look for evidence of beef farm profitability starting with the National Farm Survey, eProfit monitor - both produced by Teagasc - and, of course, the hard evidence in beef farmers' financial accounts.

The most reliable source is possibly the Teagasc National Farm Survey where the full farm financial accounts of approximately 350 beef farmers are analysed annually to arrive at a net profit figure.

The beef farmers are divided into Cattle Rearing, ie. the suckler farmers and the Cattle Other which captures all the trading and fattening enterprises.

In the table below, a 40-hectare beef farmer made on average an annual net profit, including direct payments, of €13,840 between 2011 and 2014.

The CSO calculates that in 2015 the national average income was €35,600, over 2.5 times greater than the average of a beef farmer.

Therefore the answer to the question is that beef farmers are making money - it's just a lot less than the average worker in Ireland today.

However the story does not end here. The beef farmer's net profit of €13,840 includes direct payments ie Basic (Single) Payment Scheme Entitlements, Areas of Natural Constraint payments (Headage), Agri- Environmental schemes such as GLAS, AEOS & REPS and the various beef schemes.

It is interesting to re-examine the figures excluding the direct payments or subsidies and premia, especially since the majority of these payments are decoupled or independent of whether the farmer has the cattle or not.

When we exclude the direct payments, the 40ha beef farmer makes a net loss of €4,120 per annum.

All that work running and racing managing a 40ha (100ac) beef farm for 12 months to lose over four thousand euro!

To the urban dweller or average business person this is complete and utter madness, especially when one could lease out the land and convert that -€4,120 annual loss into a positive income of €20,000 per annum if one achieved a lease price in the region of €200/acre (€500/ha).

If the farmer leases the land for a longer term this income could even be exempt of income tax.

So why do they continue to do it, year after year after year?

The answer is simple - the love of cattle and the love of the land.

When the urban PAYE worker comes home from work at 6pm every evening he may play golf, train the local GAA, rugby or soccer team, take the dog for a walk or go to the cinema. When the beef farmer comes home from work everyday - yes, he has a day job too, it's essential to pay the bills - he goes out to feed the cattle.

True it costs him - €4,120 every year or €79 per week, but you know what?

It's not much more expensive than the combined cost of a golf club membership and a cable TV subscription.

The return on investment in farming in general is less than 3pc per annum regardless of whether it's a beef, sheep, arable or dairying enterprise.

The returns from processing and retailing can be as high as 25pc per annum which explains why supermarket owners and beef processors feature on the rich lists.

It is unlikely in the present environment to see beef farmers on the annual rich list, but as a tax efficient, subsidised hobby, beef farming has qualities way beyond financial reward.

Michael Brady is an agricultural consultant based in Co Cork email: mike@bradygroup.ie

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