At an average of €24,000, debt on Irish farms is half the European norm, according to a report published this afternoon on the financial status of Irish farms.
Fiona Thorne, Minister for Agriculture, Food and the Marine, Simon Coveney and Mark Cunningham at the launch of the Teagasc – Bank of Ireland Report
Conducted by Teagasc and sponsored by Bank of Ireland, the research examines the current debt level on Irish farms in comparison to other farms in Europe and also assesses the likely investment on dairy farms following the removal of the milk quota this April.
“Irish farms in general have a sound financial structure with debt to asset levels quite low by international standards,” said Dr Fiona Thorne, economist with Teagasc and one of the authors of the report The average debt level on Irish farms is €24,000, which is about half of the European average. Larger dairy farms managed by farmers with higher family farm income and an off- farm income earned by the spouse are the most likely to invest.”
‘This report highlights the very significant investment requirement for the sector over the coming years,” said Mark Cunningham, director of business banking, Bank of Ireland. “We have ambitious growth plans to grow our presence in the sector and have trebled our team of agricultural managers to support this growth agenda. In 2014, we approved a total of €620m for the sector, an increase of 19pc. Of that figure, €135m was for land purchase of some 24,000 acres at an average cost per acre of €9,600.
“We anticipated the significant investment required by the dairy sector post quota abolition and have a €1bn investment fund in place to support dairy expansion. Irish dairy farms have low debt levels relative to our European counterparts and have lower average costs of production, positioning the sector well to grow output and compete on the international export market.”
The study also concluded that investment of around €1.5bn will be required if milk output is to increase by 50pc over the next five years as set out in the Food Harvest 2020 report. According to the report, the bulk of this investment will be undertaken by existing dairy farms and it is imperative that such farmers engage in rigorous financial planning to protect themselves in times of low milk prices.
The Teagasc/Bank of Ireland report also looked at the pig sector and concluded that the Irish pig industry continues to improve its efficiency levels despite tight financial margins. However, further capital investment will be required from financial institutions if the Food Harvest 2020 pig sector targets are to be met.
(Source – Business & Leadership – Grainne Rothery – 15/01/2015)
Teagasc & Bank of Ireland Investment Report 2015
Teagasc National Farm Survey 2013