The View from Teagasc: The major challenge in Irish farming is to mobilise scarce land resources into productive and profitable farm enterprises such as dairy farming. Dairy farming is the stand out enterprise in terms of delivering a profit to the Irish farmer.
One of the major constraints to meeting the Harvest 2020 target in terms of expanding Irish dairy farming is gaining access to additional land on the grazing platform and opportunities to convert beef and tillage operations to more profitable dairy operations.
Farm partnerships will play a very significant role in this mobilisation process. They will do this in three ways. They will continue to function where two or more dairy farmers want to combine resources. The new option afforded to partnerships, is where for example, a beef and dairy farmer can combine their resources through a partnership. In this instance, they will provide an avenue for new entrants to dairy farming.
As they have always done, farm partnerships will provide a stepping stone to succession in the family farm. This facilitates the gradual movement of the family farm from one generation to the next by allowing the successor to have real responsibility for and involvement in, the day to day running of the farm business at a younger age.
Share farming in Ireland, only exists in a tillage context and in a very limited context in livestock enterprises. A review of share farming models from around the globe and the development of a share farming model to suit Irish conditions is currently underway in Teagasc to facilitate a new avenue into dairy farming for young trained operators. Allied to this, is the already developed template for cow leasing to help reduce the initial financial burden on the new entrants to the industry.
Contract rearing is already operating successfully in many parts of Ireland and has further potential as dairy farmers look to manage labour requirements in the future and increase scale in a no quota environment. It allows the farmer to increase the cow stocking rate on the grazing platform by removing the heifers and replacing them with productive milking cows.
Introduction:
A farm partnership is a business arrangement where two or more farmers combine their respective resources in order to achieve mutual benefits. One could describe a partnership as a symbiotic relationship, where all parties benefit from the arrangement. This is absolutely essential to the ultimate success of the arrangement and is established through the early discussions that take place in forming a partnership.
To date, farm partnerships in Ireland have been limited to the dairy sector under the heading Milk Production Partnerships (MPP). Changes
made as part of the 2012 national budget have broadened this out to all farm enterprises. In other words, the term Milk Production Partnership will change to “Registered Partnership” and it will be possible to form a farm partnership between any combination of farm enterprises. In Registered Partnerships, the farmers involved will retain their individual status under EU/Government schemes.
The term “Equity Partnerships” is frequently misused and often causes confusion. Essentially all farm partnerships are equity partnerships, where both parties contribute equity to the arrangement in the form of assets which are given an economic value or equity in the form of capital.
There are essentially two types of Registered Partnership: A family partnership between a parent (or both parents) and a son or daughter (or multiple sons or daughters). A non family partnership is where two or more farmers come together to farm as one entity.
Benefits of Farm Partnerships:
A study by Áine Maken Walsh on milk production partnerships in Ireland has shown that there are many benefits to forming such arrangements between farmers. The benefits can be divided into the following: economic benefits, social benefits and occupational heath and well-being benefits.
Economic Benefits:
Economic benefits are varied but all such benefits impact positively on the economic viability of the parties involved. Many family partnerships were created to gain access to milk quota. In certain instances, this allowed substantial expansion to create a second income from the farm business. However, when milk quota is abolished in 2015, this will no longer be an economic incentive.
What is often understated in this situation is that these family partnerships also allow the younger successor to operate on a very strong and official footing within the partnership. While the milk quota incentive will no longer be there in the future, the pathway to succession will continue to function and provide access for a new generation of Irish dairy farmers. Increased stock relief (50 per centafter first four years) and a doubling of the limits for the dairy investment scheme are two financial incentives that remain.
Partnerships are likely to continue to play a significant role in combining farm family resources to create larger more efficient enterprises. To the dairy farmer there is the potential benefit of increase scale and options to expand. To the non-dairy farmer, there is the option to get involved with an experienced dairy farmer and also to get involved in the most profitable farm enterprise.
Farmers who enter partnership arrangements bring with them varying skill sets that when merged together, can become a greater asset to the farm business. They can also introduce news ways of doing things and business strategies that lead to more profitable farm enterprises.
The availability of good quality farm labour on expanding dairy farms is a much talked about issue. Where two farmers go into partnership, they can overcome this problem as there will now be two highly skilled and highly motivated people running one farm as opposed to two separate operations.
Social benefits:
Lifestyle is a growing concern among many farmers. Having time to pursue other interests and attend family events. Entering into a partnership can lead to many social benefits such as taking time off for weekends away, family events and a much needed family holiday. On a day to day basis a partnership can lead to earlier finishing times to facilitate off farm interests and hobbies.
From a family perspective, it allows for time to do school runs and attend events such as sports events, with the family in the evenings. This is mainly due to the fact that there is at least a second partner to keep an eye on the farm while these events go on. This role is rotated and discussed within the partnership to allow both parties to benefit in this way.
Health and Well-Being:
Dairy farming is time consuming and requires a high level of commitment to be successful. Many farmers today find themselves working alone for long periods of time on a daily and weekly basis. Partnerships can provide a real solution to this where a farmer enters into a partnership with another farmer and there is at least one other person to work with on a daily basis. It does not mean that both parties have to work along side each
other on a full-time basis but with the division of farm tasks, it becomes possible to take a bit of time off during the day to spend with the family or attend a discussion group meeting.
Other Collaborative Initiatives:
There is a broad agreement across the farming sector and certainly within Teagasc that there is a need to make available, as many avenues to a career in farming as is possible. Due to high rent land prices and a very low level of land sales, it is difficult to create opportunities to get into dairy farming. Initiatives such as the new entrant scheme have facilitated a number of new entrants to dairy farming. However, many of the successful applicants already had access to land, the basic requirement to start a new dairy enterprise.
Share Farming:
Share farming is an agreement between two parties to farm on the same area of land. As a concept, it has been operating very successfully in Ireland, mainly in the tillage sector and it is growing in popularity as a way of overcoming the problems associated with the conacre system.
From a dairy perspective, it has great potential to offer a viable avenue of entry to the industry for enthusiastic, trained individuals.
The current age group of dairy farmers and in some cases a lack of successors means that a share farming model may have a significant impact in Ireland. What is essential to its success in a dairy context is the ability of the young person to enter the arrangement at a low level, but have the opportunity to build up equity to progress to a higher level or even farm ownership.
The major stumbling block to date has been the milk quota regulations and the scale of most dairy farms in Ireland where the potential to develop two incomes from the same farm was not there.
With the abolition of quotas in March 2015, it is essential that we have a working share farming model for dairy farming in Ireland. We in Teagasc are currently reviewing share farming models as they exist in other parts of the world and are working on a template for share farming in a dairy context for Ireland. It is hoped to have this available in 2014.
Cow Leasing:
Given that young entrants to dairying may not have large resources in the form of cash or stock or the security to obtain finance, Teagasc have developed a template for cow leasing. It is currently awaiting approval from the Revenue Commissioners. The option of being able to lease cows as opposed to buying cows could be of major benefit to the young share farmers or new entrants in general where resources are very limited.
Contract Rearing:
Contract rearing occurs where a dairy farmer enters into an arrangement with a rearer to take in the replacement animals and rear them to an agreed stage. The stage that the animals are reared to and the point at which they go to the rearer are set out by the two parties at the outset. Many dairy farmers are looking at the option of contract rearing to rear their replacement animals.
Indeed, there are many arrangements successfully in place at this stage. Teagasc have produced template agreements, where the guidelines can be set out by both parties.
The benefits to the dairy farmer can include reduced labour and land rental requirement as well as the option to substitute the replacement stock for productive milking cows on the grazing platform. To the rearer, the benefits include a regular income source when compared with most beef enterprises and an increased profit level.
The guidelines can be set out by both parties but they will often be based around target weights at key stages of development and may even include a weight bonus system. The costs of rearing to the dairy farmer and the income level for the rearer will often depend on which party incurs the various costs to get a replacement animal from birth to calving down.
By Thomas Curran, Teagasc, Bandon, Co Cork, who presented his report at today’s National Dairy Conference in Limerick
Image Shutterstock
