Budget 2019 is the most important budget in a decade given the unique set of challenges that farmers face. It is an opportunity for the Government to support the sector through difficult and uncertain times.

A number of proposals, such as the suckler cow support payment of €200 and the Sheep Welfare Scheme, are designed to support the vulnerable farmers highlighted in Figure 1.

Given the difficult year on farms and the prospect of a 75% increase in feed requirement estimated by Teagasc on dairy farms, the Government must also consider access to credit for working capital and the fast-tracking of low-cost loans to farms in anticipation of such demands.

More generally, a number of the IFA’s budget proposals are designed to provide greater flexibility in the tax system, including income averaging and a deposit scheme for farmers. Such measures are cost neutral but would give farmers the tools to manage income volatility.

With an increased emphasis on protecting our environment, the IFA is putting forward a suite of agri-environmental measures which are all aimed at reducing our contribution to climate change.

Irish farm incomes

Incomes on Irish farms are monitored annually through the Teagasc National Farm Survey (NFS). The NFS measures incomes using on-farm invoiced-based information, providing a very accurate indicator of farm incomes. The NFS captures a nationally representative population of farms with over €8,000 of standard output (SO). Small farms with approximately less than six dairy cows, six hectares of wheat or 12 suckler cows are excluded.

Supports for farms need to remain strong and farmers need to be adequately remunerated for goods and services they provide

Farms are classified based on economic performance using three classifications: viable, sustainable or vulnerable. Farms are considered economically viable if their family farm income (FFI) can remunerate family farm labour and provide a 5% return on non-land assets. If a farm cannot meet these criteria but a farmer or their spouse has an off-farm job, they are classified as sustainable. If they fail to meet the labour remuneration and return on assets criteria, and do not have an off-farm job, the farm is classified as vulnerable.

The significant difference between the sectors is highlighted in Figure 1. Almost 40% of livestock farms are economically vulnerable. These farms are particularly reliant on EU direct payments. UCD research suggests that each €1 of direct payment to livestock farms supports €4.28 of output in the wider economy. This is particularly important in achieving more balanced regional development. Supports for farms need to remain strong and farmers need to be adequately remunerated for goods and services they provide.

The Irish agri-food sector, our largest indigenous sector, has strong linkages up and down the supply chain, with 74% of raw material sourced locally, a low import requirement per unit of output and a lower share of international ownership and repatriation of profits when compared to other sectors.

In looking at opportunities for earnings in the wider economy, farm incomes collected by the NFS and industrial average earnings collected by the Central Statistics Office (CSO) indicate a lag in farm incomes behind the national industrial average (Table 1). These figures are not directly comparable, due to methodological differences. However, the CSO figures indicate that earnings opportunities are much greater on average outside of agriculture. The opportunity to earn is 33% higher, on average over the past three years, in the wider economy than in the farming sector.

Challenging year on Irish farms: income volatility

Agriculture’s vulnerability to weather conditions has presented considerable challenges. Teagasc’s Situation and Outlook, published last month, estimates a 75% increase in annual feed requirement per dairy cow in 2018. This estimate is based on normal late-season grass growth. Estimates on beef farms suggest an increase in annual feed requirements to be 20% higher on cattle finishing farms and 10% higher on single suckling farms.

Teagasc figures also indicate all cereal crop yields will be lower than in 2017. With spring crops hard hit with recent drought. The first estimates of total Irish cereal tonnage are down 27% on 2017 levels. These issues put considerable pressures on farm incomes and on their physical and mental health.

Income volatility through product price, input costs, energy and weather events provide ongoing challenges. Increased pressure on competitiveness looms with the possibility of a hard Brexit. Forecast market disturbance from tariff and non-tariff barriers, price shocks and reductions in agricultural income is expected. Further proposed cuts to the EU CAP budget is also a serious concern for farm income.