Teagasc National Farm Survey 2000

Survey Highlights

• Introduction
• Summary
• 2000 Overview
• Income Distribution
• Comparison with Previous Years
• Direct Payments
• Gross Output, Costs and Margins
• New Investment
• Other Gainful activity

Introduction

The National Farm Survey (NFS) is designed to

1. determine the financial situation on Irish farms by measuring the level of gross output, costs, income, investment and indebtedness across the spectrum of farming systems and sizes,
2. measure the current levels of, and variation in, farm performance for use as standards for farm management purposes, and
3. provide a database for agricultural economic and rural development research projects.

To this end, a farm accounts book is recorded for each year on a sample of farms throughout the country. For 2000, 1106 farms are included in the analysis.

As for the 1998 and 1999 NFS, farms falling into the Pig/Poultry System were not included in the 2000 sample, due to the inability to obtain a representative sample of this system.

The National Farm Survey is designed to collect and analyse information relating to farming activities as its primary function. Information relating to other activities by the household are considered secondary and as such where this information is presented it should be interpreted with caution.

Summary

• Average Family Farm Income (FFI) in 2000 was £11,502, an increase of 26.9% on 1999. The increase in the value of gross output contributed 37.5 percentage points of the rise in income with higher costs accounting for a reduction of 10.6%.
• FFI from the market place (i.e. FFI less direct payments) showed an increase of 59%.
• Total direct payments per farm increased by 16% between 1999 and 2000 but direct payments, as a percentage of FFI, declined from 74% in 1999 to 68% in 2000.
• The average FFI varied across farming systems ranging from £6,020 in the Cattle Rearing System to £23,700 in the Mainly Tillage System. The average FFIs in the Dairying System and Sheep System were £22,000 and £7,400 respectively.
• Approximately 40% of all farms had an income from farming of less than £5000 showing a large decline on the 1999 figure. On an estimated 45% of these farms the farmer held an off-farm job.
• 9% of farms had an FFI exceeding £30,000; more than 80% of these were in dairying.
• The Dairying System had an income increase of 20% per farm, due in large part to increased output from milk and cattle plus a 19% rise in direct payments.
• Both the cattle systems showed substantial increases in family farm income, 54% in the Cattle Rearing System and 37% in the Cattle Other System.
• Average FFI on Mainly Sheep farms was up by 24%.
• Due mainly to an increase of 28% in market output and 15% in direct payments, average FFI in the Tillage System increased by 43%.
• Average net new investment was estimated at £3,379 per farm in 2000, compared to £2,525 in 1999.
• 14% of farms achieved a gross margin of over £1,000 per hectare in 2000 (£400 per acre) and the majority of these were in the specialist Dairying System.
• On 45% of farms the farmer and/or spouse had an off-farm job. On 33% of farms a job was held by the farmer, with the highest incidence of off-farm employment occurring in the drystock systems. Overall on 71% of farms the farmer and/or spouse had some source of off-farm income be it from employment, pension or social assistance.

Overview of 2000

Family Farm Income (FFI) increased from £9,061 in 1999 to £11,502 in 2000 - an increase of 26.9%. This increase followed a period where farm incomes had declined by 19% over four consecutive years. The Family Farm Income of £11,502 in 2000 therefore resulted in an income similar to the previous high level of £11,212 in 1995. The increase in 2000 farm incomes in 2000 was due mainly to higher output from cattle resulting from higher prices and increased direct payments. The value of cattle output was low in 1999 due to poor market returns and reduced level of direct payments because of an advance payment of 1999 direct payments, made in 1998. The full complement of direct payments was made in 2000, including increases due under Agenda 2000 plus a 20% advance of 2001 cattle premia. Direct and overhead costs increased by 2.0% and 8.3% respectively in 2000.

In relation to off-farm activity, the farmer and/or spouse had an off-farm job on 45% of farms. On 33% of farms a job was held by the farmer with the highest incidence of off-farm employment occurring in the drystock systems. On those farms where the off-farm income was stated, (25% of the population), the average off-farm income was £15,200 and the corresponding FFI was £8,000, giving a combined income of £23,200.

Income Distribution

The variation in incomes within the farm sector is further reflected in the distribution of income as shown in Table 2.

Table 2: Distribution of Family Farm Income 1998-2000

• For 2000, 40% of farms had an income of less than £5,000. This shows a substantial decrease on the 1999 figure of 51%, but is still only a return to the 1998 situation.
• 18% of farms had an income from farming that was greater than £20,000. This represents an increase of 5% from 1999. The average farm size for this group was 65.1 ha compared with the overall average size of 33 ha. The holder was younger than average at 47 years and 84% were married compared with 69% in the overall farming population. The majority of farms in this group (71%) were in dairying systems.
• In the lowest income group, i.e. less than £5000 per farm, 88% of farms were in drystock systems. For this group, on 85% of farms the farmer and/or spouse had some source of other income either from off-farm employment, pension or social assistance. Therefore, there were about 8,000 farms which had a FFI of less than £5,000 and the farmer/spouse had no stated off-farm income from the sources mentioned above.
• Also in the lowest income group the farmer and/or the spouse had an off-farm job on 48% of farms, and on 43% of farms the farmer held an off-farm job.
• In the highest income group - those with an income of over £30,000 - 77% of farms were in dairying, a further 13% were tillage farms and the remaining 10% were in drystock farming

Comparison of Family Farm Income with Previous Years

Direct Payments

The impact on incomes of direct payments to farmers has increased significantly in the aftermath of Agenda 2000. Also new forms of compensatory payments which have been introduced are usually "piggy-backed" on the mechanisms of these CAP reforms, e.g. monetary compensation payments. A further aspect of these annual payments is that their rates and timing can be adjusted so as to have a bearing on farm incomes within any particular year. Thus when payments are made in two moieties and in separate financial years, the size and timing of the first moiety can be adjusted to support farm incomes in the year in which it is paid. This occurred in 1998 when a greater proportion of the premia payments due were paid, 80% in 1998 compared with 60% in 1997 and 1999. As a consequence of this direct payments were lower in 1999 than in 2000. In addition cattle farmers received 20% advance of their 2001 cattle premia payments in late 2000 to compensate for the decline in prices resulting from BSE.

A more detailed presentation of the impact and incidence of direct payments can be seen in the Appendix A tables.

Table 5: Direct Payments as a Percentage of Family Farm Income - 2000

Note: direct payments account for more than 100% of income whenever market based output is not sufficient to cover total costs.

The main elements as summarised in Table 5 are:

Although the total value of direct payments increased by 16% in 2000, direct payments as a percentage of FFI decreased to 68% in 2000 from 74% in 1999 due mainly to higher producer prices.

Direct payments accounted for 120% and 124% of average FFI in the Cattle Rearing and Cattle Other Systems respectively, rising to over 190% in some subgroups.

In the Mainly Sheep System direct payments accounted for 121% of FFI in 2000, showing a decline from 145% in 1999.

The contribution of direct payments to average FFI in the Tillage Systems declined from 91% in 1999 to 74% in 2000.

At present the concept of direct payments as a proportion of income does not have the same relevance for dairying as for the other major systems as these payments are not used as a mechanism under CAP for supporting dairy farm incomes - the combination of supply management and the product pricing system is used instead. As a result, direct payments accounted only for 20% of average FFI on specialist dairy farms, with no change from 1999. In the Dairying/Other System, where there was a substantial cattle and/or tillage enterprise in addition to the dairy herd, direct payments accounted for 50% of average FFI.

An estimated 32% of farms received REPS payments in 2000. The average FFI on those farms receiving REPS was £10,285. Close to 75% of farms which participate in REPS are in the three drystock systems, namely Cattle Rearing, Cattle Other and Mainly Sheep. As can be seen from the tables below there was a considerable difference in FFI in the Cattle Rearing/Cattle Other systems between those farms that participate in REPS and those that do not. The difference is approximately the average amount of the REPS payment. Hence in 2000, as in previous years, the REPS scheme has benefits, both in terms of the environment and in terms of income.

The following tables present the key information in relation to farms participating in REPS (Table 5(a)) and those not participating in REPS (Table 5(b)).

Table 5(a): FFI, Direct Payments and Farm Size for farms in the different farming systems which participated in REPS in 2000

Table 5(b): FFI, Direct Payments and Farm Size for Farms in the different farming systems which did not participate in REPS in 2000

Gross Output, Costs and Margins

New Investment

Net investment on farms declined in 1998, remained static in 1999 but increased from £2525 in 1999 to £3379 in 2000.

Table 7: Average Annual New Investment - All Farms - 2000

(Note: Net new investment is equal to gross new investment in machinery, buildings, quotas and land improvements (including Forestry) minus sales and capital grants received during the year.)

Overall net new investment in 2000 was equivalent to 29% of total income in farming. Dairying farms contributed 64% of the total net new investment, although these farms comprise about 30% of the farming population. Farms in the Tillage System contributed another 11% of the total net new investment.

The drystock systems, while comprising 65% of the farming population, contributed 26% of total net new investment.

52% of farms made some new investment in 2000. Average FFI on these farms which had new investment in 2000 was higher across all systems than for farms where no new investment occurred.

Other Gainful Activity

Data on family farm incomes, as presented in this report, is confined to the income earned from on-farm activity. In recent years off-farm employment has become more prevalent, making the situation quite different from earlier decades where the main sources of off-farm income would have been pensions and social assistance. The incidence of off-farm employment is shown in Table 8, by size and system of farming, while further information is presented in Appendix A.

Table 8: Estimates of Percentage of Farms Where Farmer and/or the Spouse has an Off-Farm Job - 2000

(Figures in brackets refer to the farmer only)

In general the 2000 data reveal that, in relation to the farmer and /or the spouse:

An off-farm job existed on 45% of farms, which was identical to that of 1999.

On 33% of farms the farmer held an off-farm job.

Similar to previous years the incidence of the farmer having an off-farm job is highest in the small farm size groups, while the spouse is most likely to have an off-farm job in the larger size groups.

The cattle and sheep systems have the highest incidence of the farmer and/or the spouse having off-farm employment while the dairy farms have the lowest; the same is true in relation to the farmer. However this distinction is not evident in relation to the spouse where the incidence of off-farm employment is similar across the farming systems, with an overall mean estimate of 23%.

On 71% of farms the farmer and/or the spouse had some source of off-farm income, either from employment, pension or social assistance.

Table 9 presents population estimates of the incidence of off-farm employment, the average off-farm income, Family Farm Income and the corresponding sample numbers for farms where the farmer has an off-farm job and stated the off-farm income. These same farms are also split between part-time farms and full-time farms as defined in the National Farm Survey and the information is presented for 2000. These estimates should be regarded as indicative of relative levels rather than as accurate absolute levels.

The estimates should be interpreted with caution because the underlying data are not always sufficiently robust. This is due to the problem of non-response and the fact that the information is received from respondents without documentary verification.

Table 9: Estimates of Off-Farm Employment For Farmer Only - 2000.

(Figures in brackets are the coefficients of variation - these show that within each group there is considerable variability)

In 2000 there were 207 farm holders with an off-farm job who agreed to disclose their off-farm income of £15,200 (Table 9). The corresponding FFI was £8,000, £3,500 less than the overall population estimate of £11,500. The corresponding data for 1999 was that there were 165 farms in the sample where the farm holders stated that they had an off-farm job. The average off-farm income stated was £10,900. The corresponding FFI was £4,200 £4,900 less than the overall population estimate of £9,100.

In 2000 an estimated 30% of the population were full-time farms and the farm holder had no off-farm job; the average FFI on these farms was £22,600. An estimated 32% of the population were part-time farms where the holder had no off-farm job and the average FFI on these farms was £4,900.

Table 10 gives population estimates of the incidence of the farmer having an off-farm job broken down by FFI. Where FFI was less than £5,000 the farmer had an off-farm job in approximately 45% of farms. This percentage decreased to approximately 6% when FFI was greater than £20,000.

Table 10: Estimates of Off-Farm Jobs (Farmer) by FFI - 2000