ONLY 4,000 beef farms in the State can be considered full-time commercial businesses and only one-fifth of the 60,000 beef farms are economically viable businesses when the value of farm labour and capital investment in stock and machinery is considered.
These are the conclusions of a major report by Teagasc, the agriculture and food development authority, in a study on the medium-term outlook for beef, dairy and tillage farms.
Teagasc economists James Breen, Thia Hennessy and Fiona Thorne said the most recent national farm survey figures showed the viability of beef production here remained low despite better prices because of the ban on Brazilian beef imports and a new payment for suckler cows.
Mr Breen said the reliance on decoupled payments and other subsidies remained high with many beef farmers operating at a market loss. The profit from production was negative when subsidies were discounted.
"In fact, only one third of the gross output generated by beef farms in 2006 was at a market profit," he continued. "However, when compliance costs for the single farm payment and REPS are considered, the proportion of profitable production increases to 76 per cent."
The report said even though all direct payments were now decoupled from production, for many farmers the most cost-effective means of complying with EU rules was to retain unprofitable animals.
"A quarter of gross output generated by beef farmers is produced at a loss, even when the costs of cross compliance are considered," Mr Breen said. "The analysis revealed that over half of this production is by farmers that are employed off the farm."
The report said the outlook for beef profitability at farm level remained poor and it projected even under no policy change, the percentage of viable businesses would decrease from 21 per cent at present to 10 per cent by 2018, and the proportion of gross output produced at a market profit would decrease from 32 to 20 per cent.
The outlook for dairy farms also was bleak, according to the report.
Ms Hennessy of Teagasc's Rural Economy Research Centre said dairy farmers were having a poor year following the high prices of 2007.
She said the number of economically viable farm businesses declined from 68 per cent in 2007 to 53 per cent in 2008. The current price cost squeeze was expected to continue into the medium term and the number of dairy farms would continue to decline between now and the time of milk quota abolition.
Ms Thorne said the review of the current status of the tillage farming population in Ireland shows that 76 per cent of specialist tillage farm businesses were economically viable businesses in 2008 but it was estimated this figure would reduce to 66 per cent of producers by 2018, assuming no policy change.
The authors used the Teagasc Rural Economy Research Centre's FAPRI-Ireland farm level model to consider the outlook for the main farming sectors and to analyse the impact of a possible World Trade Organisation (WTO) agreement.
The effect of a WTO agreement where beef was not classified as a sensitive product would be particularly severe for the beef farming sector.
By 2018, beef prices were projected to be almost 30 per cent lower due to the agreement. At these prices less than 4 per cent of the gross output generated by the current population of beef farmers would be profitable.