independent

Sunday 20 April 2014

Forestry a viable option for farmers in difficult times

At clearfell an acre of quality timber is making €6,000 - €8,000 at current prices.

THE devastating weather conditions of the winter and spring and the ensuing fodder crisis has resulted in an increase of a 31% in animal losses during the first four months of the year. Farmers working on holdings on very heavy land in North Cork, North Kerry and West Limerick, have been particularly badly affected. Even though almost 15,000 tonnes of hay and maize have been imported from Britain and France, feed has been extremely scarce on many farms, putting extreme stress and strain on thousands of farmers and their families.

Forestry, as an alternative land use, is a valuable source of income for landowners. The government targets an annual 10,000 Ha planting programme in the coming years and aims to achieve 17% of forest cover by 2030. At present the percentage of the country planted is 10.82%. In Kerry alone the total planted is 55,400 Ha, or approximately 11.8% of the county. Of this 36,320 is in private ownership with the remaining 19,100 in public ownership.

The government is being pro-active in increasing the amount of land under the afforestation programme, by way of planting grants and hugely attractive tax free premia. The grant is divided into two sections. The establishment phase which is 75% of the total grant is paid after completion of the works and approved by a forest service inspector. The final 25% is paid following a further inspection at year 4 when the crop is deemed as being free growing. A hugely attractive tax free premium is paid from years 1 - 20 as a farmer. In the normal diverse sites, which occur in counties Limerick, Kerry and Cork, the rate of premium is €173 per acre, paid between January and April each year for 20 years.

Let us take an example of a landowner who plants 20 acres.

* All establishment and maintenance costs are grant aided.These are mandated to my company and there is no further cost to the landowner.

* Premia amount to €173 x 20 = €3,460 (tax free p.a.) plus payment of retention of single farm payment on that land. Over the lifetime of the crop that equals €69,200 for 20 acres.

* Assume two thinnings minimum = €12,000 (tax free)

* Clearfell. At current prices an acre of good timber is making in the region €6,000-€8,000 standing. At €8,000 per acre and 20 acres, the value of the crop is €160,000 at year 30.

* The total income is €240,000, all of which is tax free

A management plan has to be prepared at year 10 outlining the operations to be carried out within the following 10 years. A contribution of €300 is paid to the forest owner towards the cost of having a registered forester carry out the plan. In the case of broadleaves, mainly ash, a grant of €750 per Ha is also available towards the thinning of the crop. In relation to harvesting road construction, a grant of €35 per metre and 20 metres per hectare in available for all crops, that are within two years of first thinning. Depending on the quality and growth rate of the crops, a good site should be ready for thinning at 16 years of age. This should result in a payment of €260 - €300 an acre, depending on the various categories of the produce from the thinnings. The crop should be fit for another thinning at year 20. Thus, this crop realises income from two thinnings before the completion of the premia at 20 years of age. Judging by my own plantations, I would expect two further thinnings to take place. One at year 24, and a pre-clearfell thinning at year 28 with clearfell at year 30. At this stage, on this well managed plantation, the returns should be a minimum of €8,000 an acre, at current prices. This money is again tax free.

There is absolutely no doubt that each farmer has to examine his/her own position. Diversification might be the way to go. Forestry and agriculture should no longer be in opposition to one another, but should instead compliment each other in the best interests of the farmer. It behoves everybody to analyse every option and to chose the best option in their particular circumstances.

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