Teagasc analysis has confirmed that the most productive farmers will be hardest hit by the reform of Pillar I payments under the CAP Strategic Plan 2023-2027.

This outcome had been predicted, but the analysis presented at the Teagasc Outlook 2023 Conference this week is the first time since the CAP reform process started that a detailed sectoral breakdown has been presented.

Farms that gain under the next CAP reform typically produce less output than those who lose and analysis presented shows that the 48% of farmers who will experience an increase in their income (relative to 2019) account for just 27% of farm output.

The analysis undertaken by Fiona Thorne, Trevor Donnellan and Kevin Hanrahan shows that while there is very little difference in the proportion of farmers gaining and losing on average, there are significant differences within sector.

The tillage and dairy sectors will face substantial direct hits, with higher value entitlements and larger farms losing out through convergence and frontloading (CRISS).

However, beef and sheep farmers will also be affected to a great extent, with some smaller cuts amplified due to low income levels.

Sheep

On the sheep side, over 50% of farmers will gain from CAP reform, with close to 38% of farmers gaining more than 10% in Pillar I payments. Farmers losing direct income support account for over 70% of farm output.

Suckler beef

There are differences between suckler and beef farms. Approximately 60% of suckler farms could gain under CAP reform, while this figure reduces to about 45% for beef farms.

When the two systems are combined, farms that will experience a reduction in income account for almost 70% of output.

Just shy of 40% of tillage farmers face a significant loss of more than 10% of their income from Pillar 1 direct payments, while 30% more farmers will lose less than 10% of their income.

These farms are responsible for producing in the region of 80% of tillage output and therefore CAP reform could have significant implications for output from the sector.

Dairy

Almost 60% of dairy farmers will experience a loss of less than 10% of their CAP income and less than 5% of farmers face a loss of greater than 10%.

Just 36% of dairy farmers gain from CAP reform and those who will gain by more than 10% produce just 11% of milk output. The challenges for productive farmers are stark, with these systems generally more reliant on direct payments.

Pillar I payments accounted for 86% of family farm income on suckler farms in 2019, 79% on beef farms, 78% on sheep farms, 59% on tillage farms and 25% on dairy farms.

With the exception of dairying, where increased milk prices have somewhat insulated systems from rising input costs, the most productive farmers in other systems will face huge challenges from cuts in Pillar I payments and the recent escalation in input costs.