Small Decline in Farm Incomes for 2004

Dublin, Tuesday, 14.12.04

Farm incomes increased by 2.2% in 2003 based on CSO estimates. The increase resulted from an increase in volume of cattle and milk produced coupled with increased output in the tillage sector. Output from sheep and pigs declined. Subsides paid were down by 2% whilst production costs were virtually static. However farm incomes have been on the decline since 1995 with a decline of 3% in current terms and 23% in real terms when inflation is taken into account.

The forecasted outlook for 2004 is for a small decline in farm incomes due to declining output combined with rising costs, said Liam Connolly, Teagasc Rural Economy Section, Athenry, at the Situation and Outlook Conference today.

In a survey of 1100 farms participating in Teagasc National Farm Survey just completed, farmers gave their views on a whole range of policy issues and investment plans for 2004.

In relation to decoupling as proposed by Fischler 15% of the farmers were very familiar, 57% were familiar and 28% were not familiar with the issues and decisions proposed and taken. Sheep and dairy farmers were more aware than cattle and tillage farmers.

Eighty five per cent of the farmers were in favour of full decoupling spread evenly across the main farming systems.

42 per cent of farmers felt that the Luxembourg Agreement on MTR would have no impact on their incomes with 10% expecting an increase and 40 per cent a decline. Decline in income was expected by almost two thirds of dairy farmers.

The impact of new proposals on purchased farmers inputs was forecast as follows - 54% no change, 3% increase and the remaining 42% of farmers reducing their inputs.

Sixty one per cent of dairy farmers stated that they would expand cow numbers over the next 10 years with 37% stating that they will not expand or may exit. 14% of dairy farmers stated that they would exit within 2 years if milk fell to below 22 cent per/litre with another 32% getting out in 3 to 10 years and 47% remaining in for the long term.

Farmers were also questioned on their investment plans for 2004 year and responses were compared to planned investment intentions this time last year. Total investment planned for 2004 was EUR292m compared to EUR295m this time last year. Planned investment in machinery and buildings was down 9 and 23 per cent respectively. It should be noted that farmer always understate their planned investment and actual investment is always much higher viz. Actual investment in 2003 was EUR493m with actual investment in machinery at EUR187m compared to that planned of EUR70m.

Dairy farmers account for the bulk of planned investment (46%) with cattle responsible for 27% and sheep 19%. Sheep farmers have become more important investors on farms in recent years.