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Success in the Southwest

The economics of farming

The viability of farms in the Southwest region of Ireland is good when compared to other regions, but volatility in farm income and operating surplus show there are still challenges to address.

Agriculture is a major part of the economy in Ireland’s Southwest region of County Cork and County Kerry, and the region performs well in farm viability when compared to other regions in Ireland. A farm business is defined as being ‘economically viable’ – when the economic benefits exceed its economic costs – if the family farm income (FFI) is enough to pay family labour at the minimum wage and provides a 5% return on the capital invested in non-land assets, i.e. buildings, machinery and livestock.

But there’s still volatility in farm operations, so here we’ve taken a closer look at the economics of farming and the challenges farmers are facing. 

Farm income and viability

Figure 1 (below) shows the level of average FFI and farm viability over time, with farm income represented on the left vertical axis and farm viability on the right vertical axis.

In recent years the proportion of farms classified as viable in this region has consistently surpassed 40%, with a high of 55% in 2017.

Average farm income, however, appears volatile. At its peak, the average FFI exceeded €40,000 in 2017, but fell by almost €10,000 the next year.

Economic value of agriculture

Figure 2 (below) shows the difference between income and what is being spent – otherwise known as operating surplus (OS) – over the last decade, including the extra benefits earned by both farmers and agricultural contractors. This measure is different from the normal definition of farm income as it excludes deductions for interest payments on borrowed capital and the deduction for land rental payments.

In 2010 the OS for the region was €461.5 million, but reached €851 million in 2017, overall showing huge volatility over time. The OS increased greatly between 2016 and 2017, with higher milk prices and production levels. This was followed by significant decline in 2018 as a result of reduced milk prices and a summer drought.

Lower beef prices influenced the small scale of recovery in 2019. Specialist beef farms account for about 45% of farm holdings in this region. Major changes to beef prices and support payments for cattle farmers can therefore play an important role in influencing the economic surplus of agriculture.

Livestock population

Figure 3 (below) shows the trends in the cattle population by age. Overall, it is clear that dairy cow numbers have increased greatly over time between 2010 and 2019.

There are three main milk processors in the region: Carbery Group, Dairygold and Kerry. These account for over 3 billion litres of milk volume annually and close to 40% of total product nationally.

Significant declines in the non-dairy cow population are evident from 2010.

The generational sustainability challenge

The 2016 Farm Structures Survey suggests that ageing in the farming population is less problematic for the Southwest. However, challenges concerning farm succession for farms with less productive land remain. Young farmers are also struggling to gain access to land.

The next generation of farmers are likely to face growing challenges around environmental sustainability. To address biodiversity, farmers will need to take on major actions to mitigate greenhouse gases, and there will need to be more adoption of measures. Teagasc’s greenhouse gas Marginal Abatement Cost Curve (MACC) suggests changes to fertiliser used and the way in which slurry is applied to the land. A significant increase in afforestation (including agroforestry) is also required.

The sooner these actions are put into place, the sooner farmers in this region can become more environmentally sustainable whilst improving economic viability.

Farm income in the Southwest region of Ireland

  • €760 million - In 2017 total farm income in the Southwest region was approximately €760 million.*
  • 60% - In recent years farm income has accounted for 60% of the pre-tax farm household income in the Southwest. This proportion is much higher than other regions.*
  • €107 million - In addition to the economic surplus earned by farmers and contractors, the surplus earned by farm employees has risen steadily in recent years, reaching €107 million in 2020. This indicates the importance of primary agriculture in delivering direct employment for people living in this region. (Source: Central Statistics Office 2021)
  • 2,000 - Approximately 2,000 people in the Southwest are employed in the dairy industry.**
  • 1,400 - Approximately 1,400 people in the Southwest are employed in the meat and meat products industry.**

*Stats have been taken from the Annual Revenue Farm Income Report 2019
**Stats have been taken from the 2016 Census of Population.


Jason Loughrey, Agricultural Economist Teagasc Rural Economy and Development Programme, Athenry, Co. Galway.
Ludovica Destro , Administrative Technician, University of Padua, Italy.
Michele McCormack, Economist Agricultural Catchments Programme, Athenry, Co. Galway.
Trevor Donnellan, Head of Agricultural Economics and Farm Surveys Department Teagasc Rural Economy and Development Programme, Athenry, Co. Galway.