Farmers share hopes and fears for 2023

Ifac, the farm accountancy and financial advisory service published what is now its fifth annual survey this week.

It provides a mood check on Irish farming based on field work completed in the last weeks of 2022 and while it is very much farm business-orientated, the survey – which had 1,160 responses – also shines a light on other issues that impact farmers and their business either directly or indirectly.

The report delves into the issues for the main sectors of Irish agriculture but there are also a number of issues covered that transcend all sectors of Irish agriculture.

Perhaps the most headline-grabbing of these is the Fair Deal scheme not being understood by 90%, the majority of farmers surveyed. This is a means-tested nursing home support scheme and farmers who typically have a large asset value will be subject to an eligibility assessment to consider the capital value of the asset for the first three years.

Succession planning

Succession planning is a sensitive issue for farmers and the 2023 report again highlights the barriers to putting a succession plan in place, as well as identifying that almost two-thirds of farmers across all sectors have no plan in place.

Reasons vary between the categories, though the demanding lifestyle and financial insecurity feature prominently for all.

Energy costs are impacting on all sectors of farming over the past year. The desire to reduce dependency on Russian fossil fuels for energy has meant an ever-increasing focus on solar and wind turbine energy generation.

In the survey, the biggest barrier identified in farmer participation is the capital cost, which is holding back 52% of farmers surveyed, while a further 20% of farmers didn’t know where to start in pursuing renewable energy sources.

On a more positive note, 41% of farmers would be willing to lease land to solar or wind energy production if the opportunity arose.

The report also identifies the well-known trait of farmers focusing on production in growing crops and caring for livestock with the business of farming tending to take a back seat.

Budget

Over half of farmers (52%) don’t actively budget for their business and there is a similar relaxed approach to borrowings with one-third of farmers with loans not actively reviewing these in the past year and a half.

As the report points out, this may not matter so much in a relatively profitable year like 2022, but it would be critical when margins are squeezed tighter.

Given that dairy farming has been the most profitable sector of Irish agriculture in recent years, it is unsurprising that the survey found the positive outlook highest in this category at 80%.

Prices climbed to 59c/l in 2022, keeping ahead of increased costs but feed, fertiliser and energy costs look likely to remain high into 2023.

Aside from input costs, another major issue for dairy farmers are regulatory changes, which are a concern for 71% of farmers according to the report. These are ahead of input costs which are an issue for 68% of farmers, and workload and labour shortages which are an issue for 26% of farmers.

Perhaps the biggest problem is the new banding nitrates rates – 24% of dairy farmers surveyed are not aware how they will affect them.

Additional land will be required by 23% of farmers surveyed, while 22% of dairy farmers intend to reduce their herd in order to comply.

It is also notable that 62% of the farms surveyed are in limited companies or partnerships, while sole trader remains the main ownership structure for other livestock sectors.

Relative to previous years, 2022 was positive for beef farmers but margins continue to be wafer-thin despite the rise in farm gate prices.

This is reflected in the fact that the third biggest concern for 2023 in the survey at 27% is financial pressures in the farming household and just 41%, half the number of dairy respondents, are positive in their outlook for this year.

It is also no surprise to see that the biggest concern is input prices given the volatility of beef prices in 2022, while the bureaucracy of farming was the second biggest for 50% of survey respondents from the beef sector.

Beef producers made up 41% of the 1,160 respondents which reflects the fact that this is the sector with the most numbers overall, many of course which are part-time.

Farmers whose main business is sheep production made up 11% of responses to the survey and with record prices in 2022 after a sluggish start, 51% of farmers surveyed reported a positive outlook for 2023.

The survey was completed in the final weeks of 2022 and given the problems of recent weeks, it is unlikely the mood would be so positive if the survey was conducted this week.

The biggest concerns for sheep farmers are similar to their beef counterparts.

Input prices are the main issue for 75% of respondents, while rules and regulations were the big issue for 55% of those surveyed.

Financial pressure from low profits is an issue for 30% of respondents and, again, this figure would likely be higher today given the price falls of recent weeks.

Concerns

This is also one of the concerns in finding a successor to take the business on and almost one-third are unsure if they will be farming in five years.

While the Russian invasion of Ukraine impacted all sectors through energy and fuel costs, tillage was directly impacted because Ukraine is such a major grain exporter.

Incentive scheme

The Government incentive scheme contributed to a 4.4% increase in land used for tillage production in 2022.

The good prices with good growing and harvesting weather, in general, meant that tillage farmers finished the year in a positive frame of mind, with 62% reporting a positive outlook in the survey. Market prices kept ahead of input costs in 2022 but this is the biggest concern for 2023, with 85% of respondents to the survey reporting this as their biggest concern.

Pesticide use continues to face ever-tightening restrictions and it is no surprise that 44% of tillage farmers surveyed reported this as their biggest concern.

Weather

Tillage farming is probably the most weather-sensitive sector of all and this was reflected in the survey with 33% saying it was one of their top concerns.

Organic farming has accounted for just 2% of Irish land use, but with major incentives in the CAP that is now in effect, combined with the ambition to grow this area to 8%, the ifac survey found that the biggest barrier was farmer belief that sufficient markets aren’t in place, a view held by 30% of respondents.

While lack of support was given by 17% of respondents as a barrier to entry into organic production, this is down from 23% in the previous survey.

Farmer interest in the beef and sheep sector was consistent with the previous year’s survey at 52% for beef producers and 55% for sheep producers.

However, there was a notable drop in interest from dairy farmers, with just 17% of respondents saying they would consider going organic compared with 27% in the previous report.