Fall in Milk Prices and Crop Yields Lead to Lower Average Farm Income in 2016
A preliminary estimate of the Teagasc National Farm Survey results show that family farm income decreased by 9% in 2016, bringing the average income figure for the farming sector to €24,060. This is the return for the farmers’ labour and for the land and capital employed in the business.
Speaking at the launch of the results in Dublin, today, Wednesday, 31 May, Dr. Emma Dillon, Economist with the Teagasc National Farm Survey said; “despite increased direct payments and a reduction in some of the key input items such as fertiliser, further falls in milk prices and poorer crop yields than in recent years, resulted in a 9 percent decline in average farm income in 2016”.
The continued roll-out of GLAS and the Beef Data Genomics Programme (BDGP) saw direct payments on cattle farms increase by between 5 and 11% in 2016 relative to the previous year. This increase helped offset lower cattle prices and it meant that the average farm income on cattle farms increased by between 2% and 4% in 2016 depending on the production system. Despite this increase, average cattle farm incomes remain quite low, at just €12,908 for cattle rearing farms in 2016; “Cattle farmers are still very reliant on direct payments which comprise a large proportion of their income,” said Brian Moran of the Teagasc National Farm Survey; “The BDGP and GLAS schemes are of particular importance on cattle and sheep farms” he added.
Milk price was down almost 10% in 2016 on the back of a 20% reduction in 2015, despite this, milk production continued to expand in 2016. This resulted in income on dairy farms falling by 17 percent to an average of €51,809. The Teagasc National Farm Survey results show that considerable efficiency gains continue to be achieved on dairy farms in 2016. Analysis of farms over the period since quota removal, shows that 4 out of every 5 dairy farms have increased production; “Increases in milk volume and production efficiency further reduced production costs in 2016, but lower milk price meant that dairy farmers were unable to maintain their incomes”, said Teagasc Economist Trevor Donnellan.
Tillage farms were severely affected by a decline in crop yields in 2016. Coupled with a reduction in the price of cereals, this resulted in a 10% fall in average tillage farm income to €30,816. Lamb prices decreased by 2% in 2016 and with direct payments receipts relatively unchanged the average sheep farm income remained stable at €16,011.
Almost €690 million was invested by farmers in their businesses in 2016, of which over €245 million was invested on dairy farms. As in previous years two-thirds of farms have no business related debt, with many choosing to fund new investment from working capital. On the remaining one-third of farms the average debt level is €63,764 or 1.8 times the income level.
Farming continues to remain highly reliant on direct payments. The average direct payment per farm was nearly €18,000 in 2016, comprising 75 percent of farm income on average and almost 100 percent of income on the average cattle and average sheep farm.
The farming population in Ireland includes a considerable number of part-time farms with almost one in three farmers working elsewhere off-farm. Just over half of all farm households have an off-farm income source from either the farm-holder or spouse.
In spite of the fall income in 2016, average farm income has become less volatile over the last five years. Looking ahead to 2017, prospects for dairy are very positive, with a dramatic recovery in incomes forecast. Average incomes on drystock farms should remain relatively stable.