In this week’s Dairy Focus, Agriland made the trip to the O’Donnell county to attend a walk on the dairy farm of Billy and Anne McMahon, located just outside Rathmelton, Co. Donegal.
The farm walk was organised by the Land Mobility service and Aurivo Co-Op.
Billy and Anne currently have a dairy farm lease with Chris Digimas, which was organised through the Land Mobility service.
Chris comes from a small family farm which he says was not viable for full-time farming. He attended Ballyhaise Agricultural College where he complete the advanced dairy course.
He then began working on dairy farms, before entering a shared farming agreement in Co. Mayo.
The farm
The dairy farm, located a stone’s throw from Rathmelton, consists of 43ha and had been operated as a dairy farm by Billy prior to him stepping back.
Billy and Anne’s children had no interest in farming, so other options had to be looked at.
Billy had been milking 80 Meuse-Rhine-Issl (MRI) cows on the farm, had cubicles for 100 cows and a 10-unit Dairymaster milking parlour.
Billy, over the years, had improved and maintained the soil fertility of the farm and had continued to invest in the farm up until the day he stepped back.
“It was something that was instilled in me from a very young age, [that] if you are going to do something, do it well,” said Billy.
“When we made the decision that we were going to lease the farm, we decided we were going to continue farming the way we always had.
“We want this to work; if it doesn’t work for Chris, it won’t work for us.”
The agreement
Speaking at the event, Austin Finn from the Land Mobility service described the process of putting together the leasing plan.
The plan ensures that everyone is very clear of their obligations and expectations from the lease.
Austin stated: “There is a standard lease document, but within that there are several pages in which the rules for the individual farm is layid out.
“The lease is the legal document, but within that there are rules to be followed.”
Austin compared it to doing up a rule book for the farm of what is allowed and what is not allowed. This also included land care, hedging, fencing and the basic payment scheme (BPS).
The arrangement for this farm is that Chris will meet the requirement to maintain the current payments. This might change with the new Common Agricultural Policy (CAP), which will mean Billy, Anne and Chris will have to sit down and discuss the payments.
“In this situation Chris is a young, trained farmer, so he qualified for the top up which is his money, with the historical payment going to Anne and Billy.
“Chris has a 10-year lease on the farm, starting in February 2020. This take-over date was selected because it suited the two parties best.
“Another part of the service is ensuring that a fair and sustainable rent for the farm is developed, with a figure of between €180-250ac used for a farm this size.
“How this rent is paid is also agreed between the two parties, with the land mobility recommending a monthly payment so everyone can manage their cash flow.
“Billy has a machinery role on the farm, with him retaining ownership of the majority of the machinery on the farm.
“Stocks on the farm – including meal in the bin, silage and fertiliser – are all recorded and an agreement is made between the two parties.
“Within each farm lease a review mechanisation is built in, so the land owner and tenant can have regular review of the situation.”
Stepping back
On the walk, Billy and Anne gave their opinion and experience of the service and how it has worked on their dairy farm.
Billy stated: “We did not arrive at this decision overnight, it took years of planning and thinking of what the future of the farm will be.
“We made this decision together, when we realised that our children were not interested in farming.
“Chris took over here in February 2020, but there were five years of planning that went into that.”
“I became aware of the Land Mobility through Aurivo co-op, while I was a board member there. The type of arrangement the Land Mobility was setting up interested me.
“We wanted to do other things while we were still fit; I could have kept farming for another ten years, but then I would be looking for the arm chair rather than the bike or kayak.
“Myself and Chris have a very good relationship. One thing that helped me prepare for the transition was having a student on the farm for three years before Chris took over.
“Prior to that I did everything myself with Anne’s help. I was and still am a perfectionist. Having the student was the best thing I could have done to prepare me for the situation.
“I knew that they would not do everything the way I would do it, so I had to show them how to do it and then take a step back. It was a steep learning curve, but a worthwhile one,” he added.
“I sow fertiliser and cut hedges and I am very happy doing that, but I am also very happy having the freedom to do things I couldn’t do when I was farming.
“In my opinion you need to focus more on what you are going to do, rather than what the tenant is going to do,” he added.
Billy continued: “The land mobility service has been invaluable. There are things I thought should have been in the lease that Austin said would not work.”
Billy’s advice for young people looking to get into a similar agreement is to do when he did:
“For me, I need to see a track record, I went to the dairy farm Chris worked on in Mayo.
“I drove into the yard and I could not have spoken to him and made the same decision, because I liked what I saw.
“For a land owner there is a certain amount of risk, so you have to be pretty sure of the agreement you are entering into.
“We are very happy with the arrangement, it is a complete package – water bill, electric and fencing are all agreed in the deal.”
Anne added: “The person is what I believe to be the most important thing – over price and period.
“We get on very well with Chris, which made the whole process a lot easier.
“The fact that Chris was willing to keep our cows and we did not have to see them all leave or be sold at the mart also made it easier.”
Stepping up
Chris spoke about his experience with the agreement and the direction that he is taking the farm.
He stated: “Billy had the farm in very good condition; it is a lot easier to keep a good farm well, rather than trying to drag a farm up.
“That fact that Billy had continued to invest in the farm’s infrastructure meant I could focus more on the stock.
“Billy had a herd of 80 MRI cows, but has started going down the Fleckvieh route. He had shown me the figures for the cows and I was impressed with them.”
Commenting on some of the changes he has implemented on the farm, Chris said: “I bought 20 pedigree Fleckvieh heifers from Austria and I like how they have performed so far.
“I have bought another 15 pedigree Fleckvieh heifers from Germany this year. The aim is to be milking around 110 cows next year.
“All the cows are currently in-calf to Fleckvieh sires, with next year’s calves already sold to local farmers.
“For a spring-calving herd most people will say that the bull calf price does not matter, but if you are getting €200 extra/calf – that will put a dent in some of the bills.
“The Fleckvieh cows are also valuable as culls. I have some high cell count cows that suckler farmers are willing to buy.”
Commenting on the performance of the herd currently, Chris stated: “It is a spring-calving herd. I will be starting to dry cows off in about four weeks.
“It is a fairly compact calving with 80% of the cows to calf in six-weeks. The cows are on the last grazing rotation and are in by night for the last ten days.
“The current production from the cows is 14.5L/cow at 4.8% fat and 4% protein.”
Tax incentives
The tax benefits to farmers were also highlighted at the farm walk by Joe Lambe from Irish Farms Accounts Co-operative (IFAC).
The majority of the partnerships set up by the Land Mobility service are long-term leases, which suits most farmers best, in terms of tax.
Joe explained that since 2015, there have been considerable tax incentives for land owners and young farmers leasing farms.
“Long-term leasing of your farm is a good option for retiring farmers, with tax exemptions for land owners possible.
“The amount of the exemption will depend on the length of the lease – to obtain an exemption the lease must be at least five years.
“If you are willing to go to 15 years, the exemption could be up to €40,000 and if the land is joint ownership, those limits are double.”
Joe did note that when they say ‘tax-free’, it is not 100% tax-free, as you are still liable for PRSI and Universal Social charge (USC).
He also added that anyone considering leasing out the farm should look at the tax implications, including the sale of stock, machinery and/or equipment on the farm.
Joe also noted that for the tax relief you cannot rent the farm to your son or a close relative – a nephew or niece is the closet person possible.
Austin commented on the tax implications, stating: “You will never be able to fully remove all tax but if you plan, you can reduce the amount of tax you will be liable to pay.”