The levels of debt on Irish farms are only half the European average, according to a new report on the financial status of Irish farms launched today.

According to Dr. Fiona Thorne, economist with Teagasc and one of the authors of the report Irish farms in general have a sound financial structure with debt to asset levels quite low by international standards.

“The average debt level on Irish farms is €24,000, which is about half of the European average,” she said.

Dr Thorne also noted that 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.

The research, which was conducted by Teagasc and sponsored by Bank of Ireland, 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.

Average debt on dairy farms €62,000

The report also showed that debt on tillage and dairy farms is significantly higher than on livestock farms.

The average debt in 2013 on Irish farms was €24,000, but on dairy farms with debt it was €94,000.  Across all dairy farms, with and without debt, the average debt is €62,000.

It shows that dairy farmers in Ireland have invested €2 billion since 2007 in their enterprises and during that time farm output has increased by 32%.

Since 2007 some €140 million has been spent on machinery and land improvements on Irish farms.

Speaking at the launch Mark Cunningham, Director of Business Banking, Bank of Ireland said the report highlights the very significant investment requirement for the sector over the coming years.

“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 19%. Of that figure, €135m was for land purchase of some 24,000 acres at an average cost per acre of €9,600,” he said

According to Cunningham Bank of Ireland have 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,” he said.

Farmers are prudent – Minister

Speaking at the launch of the report Minister Simon Coveney said the report shows that Irish farmers have prudently managed their businesses over recent years.

“This kind of sound management is no surprise and can both mitigate the worst impacts of price volatility and help to position farmers to invest and expand to exploit the opportunities that will arise from the abolition of milk quotas,” he said.

The study also concluded that investment in the order of €1.5 billion would be required if milk output is to increase by 50% over the next 5 years as set out in the Food Harvest 2020 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 in order to protect themselves in times of low milk prices,” the minister said.