Farm Ireland
Independent.ie

Saturday 24 February 2018

Brexit analysis will turn to paralysis if we fail to refocus our agricultural policies

Agricultural consultant, Mike Brady.
Agricultural consultant, Mike Brady.
Mike Brady

Mike Brady

Irish Agriculture has many great attributes: the love of the land, a warm, temperate climate, traceable food, biosecurity as an island nation, and of course natural grass-based livestock production.

However, we cannot get away from the fact that without EU direct payments, most of our beef, sheep, arable and small dairy farmers are losing money. If we get a hard Brexit, it could mean lower prices due to an unfavourable exchange rate with sterling and low or zero tariffs on imports into the UK for non-EU countries.

Combine this with lower EU Basic Payment Scheme entitlements as a result of the UK exit, it will significantly magnify the financial pressure facing these vulnerable low-income farmers. The question to ask is, what are we as a nation going to do, if anything, to protect these farmers?

The options presently available to these farmers are:

* lease out the land

* sell the land

* forestry

* enter a farm partnership

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* get a job and part-time/hobby farm.

Let's examine each option:

1 Lease out the land

Taxation incentives for long-term leasing of land are very attractive for farmers who wish to retire, or exit farming and get an off-farm job, see table 1. Take for example a 100-acre beef farmer who leases out land for €150/acre = €15,000 per annum, a five-year lease will ensure this income is entirely tax free, a very attractive incentive for a landowner earning in the top 40pc income tax bracket. The rates in table 1 are doubled for joint owners.

This is the perfect option for those who have lost the farming bug and do not want to sell land. Government is encouraging such farmers to exit farming with the taxation incentives.

2 Sell the land

The selling of land is always an emotive topic in Ireland, but when viewed in a non-emotive manner, it is the obvious option for many landowners.

People regularly sell houses and move on with their lives and careers so why should this not be the case for farmers, too.

The new generation of millennials certainly have a different view of the land to former generations. It will be interesting to see if this results in more land sales in the coming years. There are tax-free thresholds from capital gains tax (CGT) to sell land for those over 55 years of age - another government incentive to exit farming.

3 Forestry

The demand for land suitable for forestry is strong at present. Pension companies and investors are very active in the market. Clearly, forestry is only an option on poor or marginal land, but the future looks positive for forestry companies as more and more farmers consider planting at least some of their holding. Again, this option is heavily grant driven with the total cost of planting grant-aided and a 15-year premium to compensate for loss of agricultural income, another government incentive to exit farming.

4 Enter a farm partnership

A farm partnership is where two or more farmers join resources and efforts in order to acquire various benefits.

Farm partnerships are becoming more popular in Ireland with approximately 850 formally registered on the Department of Agriculture Food and the Marine Register of Farm Partnerships, a high proportion of these are family partnerships. Government again have incentivised the formation of farm partnerships with taxation incentives, double capita grants/schemes and a collaborative farming grant to cover setting up costs.

However, partnerships are not for the faint-hearted, farm partnerships can look perfect on paper but not work in practice because of the personalities of the individuals involved.

It is important to recognise from the outset that the partnership has a lifespan and it will eventually end. Government is encouraging farm partnerships to resolve the small farm size and fragmentation issue in Irish agriculture, but farm partnerships will always only be a minority sport among Irish farmers, therefore the support must be questioned.

5 Part-time or Hobby farm

Many beef, sheep, arable and small dairy farmers will get an off-farm job and continue to farm the land on a part-time or a hobby basis. The love of farming and the land are the key drivers for these farmers.

They are a very important and often neglected section of Irish farmers. Amazingly, there are no government incentives for such farmers - in fact they are actively excluded from some grants and schemes with off-farm income levels. The Government needs to protect and incentivise these farmers.

The agricultural media and conference circuit is presently saturated with Brexit projections, predictions, static and dynamic economic analyses of how markets, prices and sectors will be affected. Irish people have little faith in economic projections after the Celtic Tiger's spectacular collapse.

The market will find a level and, as in any economic cycle, there will be winners and losers. We already know the farming and food sectors where we are internationally competitive.

Let's use Brexit to refocus government policy to align with these realities rather than pander to political pressure of social welfare-type scheme incentives.

Michael Brady is managing director of Brady Group agricultural consultants and land agents email: mike@bradygroup.ie


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