According to the latest Teagasc National Farm Survey, the average income for an Irish farm in 2019 was just €23,934. There was a wide variation between different farm types with dairying coming out on top at €66,570 and cattle rearing being the lowest at €9,182. Average income for tillage farms was €34,437, €14,604 for sheep farms, and €13,893 for other types of cattle farm.
More tellingly, the survey also revealed that a third of Irish farms are vulnerable in terms of future viability. And the reality may be even worse than that as the survey is representative of farms with an income of more than €8,000 a year and doesn’t cover the large number of very small holdings with incomes of less than that – sometimes referred to as the ‘forgotten 55,000’.
Cash flow is one of the biggest financial issues facing many farmers, according to Teagasc financial management specialist James McDonnell. But this varies across the different segments.
For example, dairy farmers have their peak production months behind them and will have got paid for that in recent months. Tillage farmers are facing problems, however. “Drought earlier in the year and low yields for both straw and grain combined with a low price are creating difficulties,” McDonnell explains. “Will their sales cover seed and fertiliser bills?” he asks. “Tillage farmers have a lot of costs coming together and if they had a good year last year, they have to pay the tax on that in November.”
He points out that cattle farmers are under pressure all the time, but they tend not to carry a lot of debt. “They are used to farming with little enough cash,” he adds. “They tend to be good natural cash flow managers.”
Supports
Teagasc offers a number of supports for farmers struggling with cash flow and other financial management aspects of their enterprise. "We have put together some simple tools to help farmers and our advisers are available on the phone," says McDonnell. "The simplest is the five minute cash flow planner which is very easy to use. The Cost Control Monitor runs on Microsoft Excel and a lot of the better organised dairy farmers use it. A Teagasc farm adviser can set it up for a farmer and teach them how to use it."
The Teagasc Profit Monitor is a farm management accounting piece of software which allows in-depth analysis of the farm business and the ability to benchmark performance against neighbours and the national average.
“There are other tools out there which are very good as well,” McDonnell adds. “What’s important is that farmers use one of them. As long as you are doing something, it’s better than doing nothing.”
The self-employed status of farmers adds to their financial planning challenges, according to John Mulholland, an advisor with FBD Life and Pensions. “It’s a different scenario for farmers in comparison to people in a lot of other sectors,” he says. “Those people will have workplace benefits such as death in service insurance and a lot of their personal financial planning is taken care of in the background by the employer. My job is to help farmers figure out what they can do for themselves.”
One example of this is succession planning. While the legal and taxation framework is in place to allow for the tax efficient transfer of holdings to the next generation, the question of what the previous generation will live on tends to remain unanswered in many cases.
“We help farmers hand over a viable farm business to the next generation with dignity,” says McDonnell. “We work with them to provide a second income after the handover.”
This means providing for a pension. “What’s happened since the ending of the quota regime is that a lot of dairy farmers have scaled up,” he continues. “They have more outgoings, but the net result is that they are generating a lot more money. They are able to use some of that additional income to provide for the future.”
Of course, that doesn’t apply to the other segments. “The reality of the beef sector is that most of them are part-time,” he notes. “They are often trying to manage their tax exposure as a result of their two incomes and are using pension contributions for that.”
And then there are niche sectors like poultry. “Ireland is not self-sufficient in poultry,” he points out. “That’s an interesting situation and there is a need to scale up to meet domestic demand. Farmers can have a poultry unit as a separate business on the main farm with different limited companies for the two businesses. This can generate additional income to put into a pension and provide for the future. Most farmers are professional businesspeople now and we work with them to look at the different ways they can go about protecting themselves for the future.”