The fortunes of most farmers who remain on the land will actually improve according to a survey on the Common Agricultural Policy reforms and the World Trade Organisation talks. Sean MacConnell, Agriculture Correspondent, reports.
The report, drawn up by the Teagasc economists attached to the Food and Agriculture Research Institute (FAPRI) at the University of Missouri, did not predict a mass exodus from the land.
However, if fully implemented the CAP and WTO changes would result in a rapid acceleration in the decline in the number of dairy farmers from today's 26,500 to 15,000 by 2012.
The economists, who compared the differences between continuing with existing policies with the changes being proposed, concluded that a no-change situation would lead to a decline in the prices for the majority of dairy products and a drop of eight per cent in the value of output, increased input costs and a resultant nine per cent drop in the net income generated.
"The combined CAP reform and WTO changes would lead to a decline of two per cent in the overall value of agricultural output by 2012 compared with a continuation of current policy. Under these circumstances, expenditure on inputs by farmers would fall by seven per cent. By 2012, overall agricultural income would remain at the 2000/2002 average.
Due to the 'decoupled' subsidies and the drop in beef production, the proportion of farm income coming from subsidies would rise from 65 per cent in 2002 to 75 per cent in 2012", it concluded.
It also forecast that around 10 per cent of beef farmers were likely to completely destock their farms and allow the land lie fallow as a result of the decoupling of farm subsidies from farm production in the EU CAP reform.
"The number of farmers who will opt to do this and destock completely is much lower than was forecast when the reforms were announced," said Ms Thia Hennessy, one of the team.
"The fact that farmers are likely to be subjected to environmental and other compliance costs to qualify for payments, will be much lower than had originally been expected," she said.
Dealing with the drop in the number of dairy farms, Ms Hennessy, said the analysis found that the average milk output per farm was likely to increase from the current level of 188,000 litres (42,000 gallons) to 320,000 litres (70,000 gallons) while the 15,000 remaining dairy farmers would have incomes 25 per cent higher than if current policies continued.
"Our analysis shows that the exodus from dairying would be significantly faster than if current policies were continued, due to a combination of lower milk prices and the availability of compensatory or 'decoupled' payments," she said.
She said the studies showed that those operating mixed dairy farms, especially those currently operating beef systems as well, would be best placed to take advantage of the changed situation.
The analysis showed that the implementation of the reforms in the beef sector, which involve the transfer of EU payments from an animal-based to an area-based system, would mean that the majority of beef farmers would experience some improvement in income.
Two-thirds of beef farmers would do better, with some of these getting income increases of up to 50 per cent. These were predominantly smaller producers who are already earning very low incomes.
It predicted that about one-third of beef farmers would do worse. These comprise farmers involved in calf production and also the larger producers whose payments would be cut under the modulation element in the new policies which proposed cuts in support payments.