Farm Ireland

Sunday 18 March 2018

Mike Brady: Income figures reflect the inconvenient truths about Irish farming

Auctioneer Jim Bushe in action during a sale. Photo: Patrick Browne
Auctioneer Jim Bushe in action during a sale. Photo: Patrick Browne
Mike Brady

Mike Brady

The recently published National Farm Survey (NFS) for 2016 showed the average Family Farm Income (FFI) for Irish Farmers had fallen by 9pc to €23,848.

By any stretch of the imagination this is a very low annual income for the long hours worked.

According to the Central Statistics Office, the average wage of full-time employees in the state was €45,075 — almost double the annual income of farmers.

The significance of the content in the annual NFS is often lost because of the selective use of the figures by government and farm organisations to champion whatever political cause is in vogue at the time.

The reality is that average FFI has not changed much over the last six years (2011-16). The average figure for the five years is €25,362.

However, it is important to stress that the NFS results are derived from real farm business financial accounts — 861 farmers were analysed for the 2016 survey.

These figures represent the heartbeat of Irish farm businesses when it comes to assessing annual family farm income, and the figures are roughly equivalent to the gross income on a PAYE employee’s P60 statement of annual income.

Therefore, the farmer has to live, feed his or her family, pay tax, repayments on any mortgages and farm loans out of the €25,363.

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In today’s materialistic world this is impossible without an additional source of family income.

Average family farm income of €25,363 is ‘exactly what it says on the tin’.

There is a large variation in individual farmers’ income depending on the type of enterprise and farm size.

Table 1 opposite shows a summary of incomes for the different enterprises over the six-year period (2011-16) from the survey.

Dairying is consistently well ahead of all the other enterprises: it is double the tillage average and between four and five times more profitable than the cattle and sheep enterprises.

It is really not surprising that beef, sheep and tillage farmers are looking at converting to dairying.

The next level of analysis is to look at the influence of subsidies and premia on incomes.

The results are simply startling (see table 2).

The average income, excluding subsidies for all farms in Ireland in the period 2011-16 is €6,642.

To me this is the most important figure in Irish agriculture. After all the years of effort, investment, research and advice, the average farmer only makes this paltry sum of €6,642 from actual farming.

When we drill down into the enterprise figures, the arable, beef and sheep enterprises drag the averages down.

Neither the cattle nor sheep enterprises made a profit in the period, showing losses of up to €3,299 per annum, but dairy again shows a healthy income — excluding subsidies — of €39,199.

This explains the interest in efficient dairy farmers setting up second units on rented beef and sheep farms.

Tillage is also profitable, albeit at a very low €6,322.

Finally, Irish farming has a reputation of having a very low level of bank debt — 65pc of farmers have no bank debt at all. It is understandable that dairy enterprises have the most bank debt, but the level of debt on beef, sheep and tillage farms is astounding given the extremely low levels of profitability.

When debt level is compared to income level, dairying is the least borrowed and sheep is the worst.

Even though Irish farming as a whole has low levels of bank debt, the patterns of borrowing in beef, sheep and tillage simply defy logic.

The National Farm Survey (NFS) is a very valuable record of profitability in Irish farming. It should also be used as a measure of the performance of the industry as a whole.

Mike Brady is a Cork-based agricultural consultant email:

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