Farm Ireland

Saturday 16 December 2017

Invest with care in part-time farm enterprises

Oliver O'Connor

Farming is now split into two distinct camps; full-time and part-time. The constant pressure for increased scale forces us to question the viability of being immersed in farming full-time.

This is even in the most profitable sector of dairying, where the promise to abolish quotas will bring the question of scale centre stage.

As a child who was raised on a full-time dairy farm in west Kerry, which has in more recent years become a part-time drystock venture, I have first-hand experience of the issues involved.

While many believe that part-time farming is the easier option, there is a significant time commitment required in order to ensure that either part-time or full-time farming is done properly.

If you are lucky enough to be holding down a full-time job as well as the part-time farming, it obviously means that the time required has to be committed early in the morning, late in the evening or, as is often the case, both. While this can be therapeutic at times, it can also develop into quite a burden at particular times of the year when the farm may require more attention than normal.

If the time commitment grows without an increased financial return, it can lead to the question of whether continuing with the part-time option is viable. We are seeing quite a number now starting to leave farms lying bare as they don't have the necessary enthusiasm to invest the time needed to continue.

This is a worrying trend on the one hand but may lead to farm land becoming cheaper to rent or buy for those who wish to pursue such a venture.

The financial aspect of part-time farming breaks down into the income side and the capital investment dimension. While farm incomes have increased by 50pc from €12,000 in 2009, these figures conceal the fact that full-time and part-time farmers are being included together.

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Given that the upper quartile of full-time farming incomes has a significantly positive effect on the average, it is safe to assume that there are quite a number of part-time farmers who are earning very little for their efforts. Is this little return for such effort sustainable?

While farmers will be willing to deal with having a bad year once in a while, it becomes very difficult to maintain interest and willingness to work on the farm if there is no income of any significance being generated.

While there is no issue with cash-flow being non-regular during a year, a situation where nobody knows when the next profit is going to be turned is very hard to take since costs are still being incurred. If this is coming out of the off-farm income after PAYE and PRSI deductions, it begs the question as to whether it would be better spending this after tax on other matters such as holidays and discretionary spending.

The same issues arise on the capital investment side. Do I continue to invest in the welfare of my farm in the form of new machinery and buildings even if I know it will take a significantly longer time to get a return on my investment than would be the case if I were in full-time farming?

The answer to this question will often give a very good indication as to your commitment to the farm as a way of life. If the answer is negative, then it is very likely that the farm will fall into a state of disrepair over a very short number of years.

On the other hand, if the answer is yes then what are the alternative uses that you could have invested that hard earned cash on and are you now willing to forego those particular items?

For those considering the option of part-time farming, there is no doubt that lifestyle is going to be negatively impacted if the venture is to be successful.

You will need to commit time and resources to being on the farm regularly, and in addition to this you will also be required to spend other time understanding new developments to maximise the efficiency of your farm.

Oliver O'Connor is a director in Grant Thornton Financial Counselling Ltd

Indo Farming