Second year of investment declines on Irish farms

Gross new investment on Irish farms declined overall in 2023, results published in the Teagasc National Farm Survey 2023 have shown.This followed a reduction in 2022 also, after a number of years of substantial growth.

In aggregate, across farm investment totalled over €1.3 billion in 2023 across the farms represented by the National Farm Survey 2023. Investment on dairy farms remained highest, at an average spend of €43,417 per farm in 2023. This was reflective of a 13% reduction in investment on the average dairy farm compared to 2022. Overall, investment on dairy farms accounted for about half of total investment in 2023.

Investment also declined in general on tillage farms in 2023, by 12% year-on-year to €22,966 on average. Investment on average was lower on sheep farms in 2023, at €5,164 on the average farm. On the other hand, investment on cattle farms increased in 2023 compared to 2022 to about €7,300 on average across systems.

Farm debt

In line with the overall reduction in investment, farm related debt also declined in general in 2023 compared to 2022, with a reduction of 5% on average across farm systems. There was a mixed picture across systems, with average debt on dairy farms down 10%, but the figure on tillage farms up 16% in 2023. Likewise average debt on cattle other farms – comprising mainly of cattle finishers - declined with the comparative figure on cattle rearing (suckler) farms up on average following a drop in 2022. On the other hand, the average debt on sheep farms was down significantly in 2023.

Across all farm systems, 62% of farms have no farm business related debt (Table 1). However, this figure varies considerably by farm type. Just over two-thirds of dairy farms had farm related borrowings in 2023, compared to just over one-quarter of cattle rearing farms and one-third of cattle other farms. Similarly, one-quarter of sheep farms had outstanding farm debt in 2023, the figure closer to half for tillage farms, on average.

Table 1: Average farm debt by farm system 2023

Source: Teagasc National Farm Survey

When farms without debt are excluded, the average dairy farm debt in 2023 declined by 8% year-on-year to €136,171. The average debt on cattle rearing farms with loans increased on average to €36,686, with the equivalent figure on cattle other farms declining to €45,821. Average debt on sheep farms also declined in 2023, to €30,590. As did average debt on tillage farms, the average being €77,090 in 2023.

Debt period

Three quarters of farm-related debt across systems was classified as medium to long-term in 2023 with a further 18% relating to hired purchase or leasing and the remaining 6% considered to be short-term e.g. overdrafts. On average, 80% of dairy farm debt was considered medium to long-term, with the comparative figure on cattle rearing and cattle other farms 95% and 75% respectively. The figure was lower on sheep farms at 63%. On the other hand, only 54% of average tillage farm debt was classified as medium to long-term in 2023, with 40% relating to leasing or hired purchase and the remaining 7% considered to be short-term.

Debt to income ratio

Figure 1 presents the debt to income ratio for all farms, by system. The calculation is shown for all farms (inclusive of those with and without debt) and separately for just those farms with outstanding debt in 2023. Dairy farms were more likely to have debt than other farm types, and were also more likely to have substantially higher absolute levels of debt.

The deterioration in farm incomes in 2023 resulted in an increase in the debt to income ratio across farm systems compared to 2022. The average debt to income ratio on dairy farms in 2023, was 2.7. The figure was higher on tillage and cattle rearing farms on average at 2.9 and 3.2 in 2023, and lower on cattle other and sheep farms at 2.4 and 1.6 respectively.

Figure 1: Farm debt to income ratios for all farms and those with debt 2023

Source: Teagasc National Farm Survey

Investment type

Figure 2 illustrates the broad composition of investment across farm systems in 2023. Machinery related investment was proportionately the largest investment category across farm systems in 2023. It accounted for over half of total investment on the average dairy farm (at close to €24,000) and over 80% on the average tillage farm (at close to €19,000). On drystock farms, machinery related investment (of between approx. €2,800 and €4,700) on average, represented between 50 and 60% of total investment on those farms in 2023.

Figure 2: Average composition of farm investment by farm system 2023

Source: Teagasc National Farm Survey

Building investment averaged close to €17,000 on dairy farms in 2023, with lower amounts of under €1,500 to €3,500 across the other farm systems. Expenditure relating to land improvement remained relatively low in 2023, at just over €3,000 on the average dairy farm and between €550 and €700 across the other systems.

The above was first published in the Teagasc National Farm Survey 2023 report. For more details and to access the full report by Emma Dillon, Trevor Donnellan, Brian Moran and John Lennon, click here