Seeking a guaranteed return

We have, by Irish standards, many large-scale businesses across all the major enterprises. Statistics, however, confirm the fact that, on average, our farms and farm enterprises, cannot match the output and lower-per-unit production cost and acceptable selling price of large-scale farming operations globally. If that were not the case, we would not have over 40 per cent of Irish farm owners working off farm. That figure continues to rise as off-farm employment opportunities increase and farm enterprise margins tighten. A similar scenario is being experienced across the world as the numbers of farms and farmers contract at an increasingly rapid rate. Holding back this trend through public financial supports can slow the receding tide, but increasing mechanisation and lower labour requirements will inevitably drive scale.
Contrarily, low labour input and mechanisation are also attributes that facilitate efficient part-time farming, often on a limited enterprise or land base. Part-time farming should not be dismissed as a short-term postponement of the inevitable. As the figure approaches half the Irish farming population, part-time farming must be regarded as a critical and permanent component of the three-pronged sustainability requirements for a viable Irish farm and rural sector. With a large proportion of our farming population now committed to part-time farming, while also working off farm, supporting that structure is both positive and necessary. Rural communities gain, as do local supply and service businesses.
By its nature, farming does not offer guaranteed returns for the labour and assets invested. In terms of the traditional enterprises this will not change fundamentally in the years ahead. Cattle prices fluctuate constantly, usually just above or below the cost of production. Dairy, while working on a higher price threshold, has also shown huge price fluctuations as global dairy production yo-yos, depending on margins. The cynical dictum that ‘the cure for lower prices is lower prices’ holds true. Grain prices reflect the continuing ability of a world with a continuously contracting land base to produce more and more grain from less and less land. Novel agronomic technologies allied to astounding genetic advances have allowed grain production to double, with prices halving in real terms over the past 50 years.

What does the future hold? 

Where, then, is the future for the small-scale farm structure in Ireland. Fragmented land holdings and poorer quality soils, in many instances, exacerbate the challenges facing these farms. In purely economic terms, the aspiration of a guaranteed income – at whatever level per hectare or per unit of production – is practically non-existent in most cases. This should be a central determinant in deciding whether to continue to operate a farm or not, leaving aside those farmers who are willing to continue for love of farming alone. Some of the options available towards achieving a guaranteed return from a farm have caused debate and rejection as well as enthusiastic consideration and adoption. Afforestation offers guaranteed returns over a lifetime through premia and ultimate timber sales. Many landowners have recognised and appreciate this fact. Others will not even consider the forestry option. We now have other guaranteed return land-use options, including solar installations, wind turbines and the prospect of guaranteed production-cost-plus-a-margin returns from supplying feedstock to biomethane production plants. All of these have some element of return from the commercial market, with public finance providing a proportion of the return in many cases, either directly or indirectly. There is a risk involved in any venture but the larger the element of long-term guaranteed pricing involved, the greater the prospect of an economic return.