The expected decline in the number of farmers between now and the year 2007 will mean that farm incomes will remain at 1998 levels, an analysis of the recent CAP reforms has shown.
Leading economists with Teagasc, the agriculture and food development authority, made their predictions in a paper published yesterday.
Mr Kieran McQuinn, Mr Trevor Donnellan and Mr Julian Binfield, who work in an analysis unit formed by Teagasc, Irish universities and the University of Missouri, found that overall, national farm income would be similar in nominal terms to that of last year.
"Assuming annual inflation of 1.5 per cent, real national farm income in 2007 would be around 15 per cent less than 1998. However, when the continuing expected decline in farmer numbers is taken into account, average real income per farmer is set to show a small increase," they said.
The paper said that a 20 per cent drop in income would have resulted if the original EU proposals had been implemented. However, if current policies remain unchanged until 2007, farm income would be 10 per cent less than last year.
The analysis showed that the new reforms would lead to a drop of almost 10 per cent in the value of agricultural output by 2007. However, it predicted that this would be more than compensated for by an increase of over 40 per cent in direct payments to farmers while expenditure by farmers on inputs would remain static.
The Teagasc economists said there would be no impact on the dairy sector until 2005, after which EU supports would be reduced by 15 per cent. This would lead to a reduction of 11 per cent in Irish milk prices.
However, the direct payments package would provide almost full compensation for the price fall, and with increased quotas, dairying revenue in 2007 would remain close to 1998 levels. Cow numbers would fall by 150,000 and milk yields would increase.
The analysis showed Irish beef farmers better off in the year 2007 due to an increase in direct payments of £300 million. But there would be pressure on beef prices and the authors predict a drop of 13 per cent on 1998 prices.
They predicted increased environmental pressure on sheep farmers and a 20 per cent decline in output, which would be offset by increased ewe premiums.
An Irish Farmers' Association spokesman said there were too many assumptions in the study, which did not make any allowances for cuts which might be forced under the World Trade Organisation negotiations.