A study by the agricultural research group, Teagasc, indicates that the recent CAP reform agreement will give farmers a small income increase in the coming years. The analysis shows that the expected decline in farm incomes will be averted, and a significant increase in EU direct payments to farmers is on the way.
Before the CAP reforms were agreed earlier this year, it was feared that farm incomes could have dropped by 20%. But Ireland did much better than expected in the negotiations. Now, an analysis carried out for Teagasc shows that overall farm income will not change in nominal terms to the year 2007.
Assuming annual inflation of 1.5%, farm incomes in 2007 will be around 15% less than 1998. But with farm numbers falling by 3% a year, farmers' average real income is set to show a small increase. The study shows that the new reforms will lead to a drop of almost 10% in the value of agricultural output over the next eight years. However, this will be more than compensated by an increase of over 40% in EU-funded cheques-in-the-post to farmers.
The reforms are expected to have little impact on the dairy sector. Beef farmers will be better off due to an increase of about £300m in direct payments. Sheep output will fall by more than 20% largely due to de-stocking of hill sheep. Cereal output will also fall by 6% in value and the price drop to growers will be 7%.
