Category Archives: CAP

1/8/20: Ireland: Agricultural Subsidies and Production

CSO published final data for 2019 'value added' in agriculture. As always, a fun read from the perspective of which constituency in a 'market economy' loves Big State. You've guessed, it Agri business. And no, I can't claim it is farmers, for they get the minority stake in the largesses that are European Common Agricultural Policy subsidies.

Here is a chart:

In 2019, Irish agricultural sector gross output at producer prices was EUR 7,960.9 million. Based on estimated GNI*, this means that the entire sector gross output (not net) amounted to just around 3.73% of the domestic economy in Ireland, just around the average for the decade of the 2000-2009 (3.95%) and below the average for 2010-2018 (4.60%).  In annual terms, gross output was down 3.1 percent y/y and was the lowest since the end of 2016. Subsidies net of taxes paid amounted to EUR 1,837.1 million in 2019, the highest level since 2008 and up 2.63 percent y/y. 

Overall, subsidies in 2019 amounted to 64 percent of the entire Gross Value Added in the sector, and 96 percent of the Net Value Added. CSO reports data for 'entrepreneurial income' in agriculture, which, really, is income accruing to owners of the production units. These include farmers, but also large corporates and coops. Subsidies amounted to 69 percent of the total Entrepreneurial Income in 2019.

Subsidies fell in importance when it comes to the Net Value Added in the sector year on year from 103% in 2018 to 96% in 2019, but remained the same in terms of their importance to the 'Entrepreneurial Income' in the sector.

By decade: subsidies amounted to 39% of the 'Entrepreneurial Income' in the sector in the 1990s on average, rising to 99% in the decade of 2000s, primarily due to a massive jump over 2005-2009, before falling back to 78% for the decade through 2019. Excluding net subsidies, 'Entrepreneurial Income' in agriculture averaged EUR 1,127.6 million per annum in the 1990s, and excluding the Great Recession period, EUR 259.8 million in the 2000s. Again, excluding the period of the Great Recession, the same annual average was EUR 666.12 million in 2010-2019, with 2019 annual figure of EUR 829.6 million. 

To say there is little growth in economic activity in Irish agricultural sector, in terms of sector value added is to make an understatement. Comparing 1995-1999 average to 2017-2019 average, Irish GNI* is now 3.1 times higher than it was in the 1990s. Meanwhile, agricultural output at basic prices rose by just 46 percent, Agricultural sector Gross Value Added is up only 1 percent, Net Value Added is down 15 percent, Entrepreneurial Income is up 45.7 percent, while subsidies (net of taxes) are up 73 percent.

9/10/15: Subsidies and Irish Agriculture: 2014 Data

Per latest data from CSO, Net Subsidies accounted for 59.6% of agricultural income in Ireland in 2014, ranging from 105.3% in the Midlands to 40.6% in South-West.

High as a kite on subsidies, Irish agriculture nonetheless managed to improve, thanks in part to lower euro valuations, its value added relative to subsidies. In 2012 net subsidies counted for 72.1% of total operating surplus (or income) in the sector, falling to 63.4% in 2013.

Key computational definition here are for GVA (Gross Value Added) and Operating Surplus (Income):

GVA at basic prices = Agricultural Output at basic prices – Intermediate consumption
Operating Surplus =    GVA at basic prices – Compensation of employees
                              –  Fixed capital consumption
                              + Other subsidies less taxes on production

Net value added in Irish agriculture in 2014 was EUR1.463 billion, up on EUR1.316 billion in 2013.

For the politicians claiming immense importance of the sector to Ireland, a quick reality check: Gross Value Added (which includes all labour inputs and capital spending in the sector, as well as subsidies net of taxes) stood at EUR2.192 billion in 2014.

And of that, subsidies accounted for 69.4 percent of total Gross Value Added - more than 2/3rds of Irish Agricultural Value Added came via a cheque from Europe, not from customers buying the goods.

In fact, claims about Irish Agricultural Sector contribution to the economy are often wildly off the mark. Per CSO data, the highest metric of this sector activity - Agricultural Output at Basic Prices is EUR7.328 billion for the entire 2014 and of these 20% (one fifth) were net subsidies.