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Farms contractors ‘seen as hidden debt’

While the latest Teagasc National Farm Survey 2019 shows that 62% of farms have no farm debt, the FCI has said that it is concerned that these figures do not take into account the increasing levels of contractor debt.

The association welcomed the report, which highlights the level of debt on farms, as well as the consequential additional depreciation costs due to the increased level of machinery investment which on many farms has been fuelled by the Targeted Agricultural Modernisation Scheme (TAMS) and the Young Farmer Capital Investment Schemes.

“We are seeing increasing levels of debt to farm contractors across the country during this period of dairy expansion and we are concerned that this is not being taken into account in terms of the Teagasc research,” said Richard White, national chairman of FCI.

“All too often, this farm contractor is seen as hidden debt because it is not part of regular banking debt, while it is sizable in our sector,” he added.

FCI has written to Teagasc seeking clarity on whether contractor debt is included in the Teagasc on-farm debt figure.

Investment in machinery

The Teagasc report shows that the Targeted Agricultural Modernisation Scheme (TAMS) and the Young Farmer Capital Investment Scheme continue to assist on-farm investment.

“Much of this investment is in farm machinery that is competing with non-grant supported contractor machinery,” White added.

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“The Teagasc report that 6% of farms participated in these schemes in 2019 receiving an average payment of €12,839 per farm which translates to grant support of over €71 million, much of which is competing with non-grant aided machines provided by contractors,” he added.

One of the consequences of additional machinery investment is increased machinery depreciation costs on farms.

“Teagasc research has shown that machinery depreciation costs as a percentage of overhead costs on Irish farms have increased by 13.5% year on year, a factor that is rarely taken into account when comparing machinery ownership costs with the value of contractor service costs which the Teagasc figures showed had recorded a 2.7% increase, between 2018 and 2019,” concluded White.

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