SLIDE 1 The Economic Impact of Formal Agricultural Education
- Prof. Cathal O’Donoghue & Dr. Kevin Heanue
Teagasc Rural Economy and Development Programme
SLIDE 2 Background and Context
- Objective of study
- To understand the return on an investment in Agricultural Education to
- Farmer
- State
- Not however that simple to do
- Provide context in relation to challenges of doing this
- Provide estimates of returns
SLIDE 3 Teagasc National Farm Survey
- Utilise Teagasc National Farm Survey
- Nationally Representative dataset of about 1000 farms collected
annually since 1973
- Irish Component of EU Farm Accountancy Data Network
- Detailed farm activity, costs and income data
- Collected Education Data since 2004 (however panel nature allows us
to incorporate data back to 2001 in analysis)
- Income Definitions
- Family Farm Income = Gross Output + Subsidies – Direct Costs –
Overhead Costs
- Market Gross Margin = Gross Output – Direct Costs
SLIDE 4
Family Farm Income
(Ratio by Agri-Educational Level relative to no Agricultural Education)
2.45 2.50 2.55 2.60 2.65 2.70 2.75 2.80 Agricultural College Agricultural Certificate University Ratio
Average Family Farm income is between 2.55 and 2.75 for those with Agri-Education times that without Agri-Education
SLIDE 5
Average Farm Size by Agri-Education Level
0.0 10.0 20.0 30.0 40.0 50.0 60.0 No Agricultural College Agricultural College Agricultural Certificate University Average Farm Size
However because the return to education is higher for a larger farm, farmers with larger farms have higher participation rate
SLIDE 6
Family Farm Income per hectare
(Ratio by Agri-Educational Level relative to no Agricultural Education)
0.0 0.5 1.0 1.5 2.0 2.5 3.0 Agricultural College Agricultural Certificate University FFI FFI/ha
On a per hectare basis, the premium is about 50%.
SLIDE 7
Market Gross Margin per hectare
(Ratio by Agri-Educational Level relative to no Agricultural Education)
0.0 0.5 1.0 1.5 2.0 2.5 3.0 Agricultural College Agricultural Certificate University FFI FFI/ha mgm/ha
For Market Gross Margin per hectare, the premium is more than double, reflecting higher subsidy share for those without Agri- Education
SLIDE 8
Market Gross Margin per hectare Premium
(Ratio by Agri-Educational Level relative to no Agricultural Education)
100 200 300 400 500 600 700 800 Agricultural College Agricultural Certificate University MGM/ha
Comparing Market GM per ha for those with Agricultural education relative to those without, there is a difference of over €500 per ha However the story is more complicated
SLIDE 9
Participation Rate by Farm System
5 10 15 20 25 30 35 40 45 Agricultural College Agricultural Certificate Dairy Cattle Sheep Tillage All
Dairy and to a lesser extent Tillage farmers have a much higher income than beef or sheep farmers. They also have a higher participation rate in agri-education If it were easily possible to move between sectors to dairy then, the aggregate statistics would reflect actual return
SLIDE 10
Market Gross Margin per hectare Premium
(Premium by Agri-Educational Level relative to no Agricultural Education) (Numbers above bars indicate proportional premium
50 100 150 200 250 Agricultural College Agricultural Certificate Dairy Cattle Rearing Cattle Other Sheep Tillage
At a individual sector level, the premium per hectare varies from as low as €50 per ha for sheep farmers with Agri-Ed to over €200 per ha Return similar for Dairy and Cattle Other Higher for Ag College for Cattle Rearing Lower for Sheep and Tillage
16 59 41 23 17 37 42 47 18 11
SLIDE 11
Market Gross Margin per hectare Premium
(Premium by Agri-Educational Level relative to no Agricultural Education)
100 200 300 400 500 Agricultural College Agricultural Certificate Dairy Mixed Dairy Cattle Rearing Cattle Other Sheep Tillage All All-Adj
Ignoring any movement between system, the more appropriate premium is about €160, with Ag College having a slightly higher average premium It may be that naturally “better” farmers are more likely to pursue education, however we have utilising advanced statistical methods, we find that this effect is not important Thus there is a relatively premium of 35-45% of Market GM per ha on average
SLIDE 12 Demand for Agricultural Education
Factors Influencing Participation in Agricultural Education
- Larger Farms and higher income farms more likely to participate
- Older famers less likely to have participated in formal agricultural education.
- The greater the distance a famer is from an agricultural college the less likely
the farmer would have attended.
- However famers at a greater distance from an agricultural college were more
likely to have participated in a Teagasc ‘local’ Green Cert option.
- The introduction of the Stamp Duty Exemption in 1994 for ‘young trained
farmers’ had a positive influence on formal education participation levels.
- Being a Teagasc client and participating in the REPS scheme was positively and
significantly related to completion of a Teagasc Green Cert.
SLIDE 13 Economic Impact of Agricultural Education Internal Rate of Return
- Internal Rate of Return
- Interest Rates where Up-front Costs and Discounted Returns
are equal
- Private rate of return
- i.e. the benefits to the individual farmer Market Gross
Margin
- Society or ‘social’ rate of return
- Broader society impact of any improved farm productivity.
Output
SLIDE 14 Pathways for Agricultural Education to Achieve Economic Impact
Farm Level
- Higher Yields (gross output per Livestock Unit) – Dairy, Cattle
- Higher Intensity (LU per ha) at farm level – Dairy, Cattle, Sheep
- Implied higher output per land
- Market Premium (No movement between systems; Ignore subsidies due to
decoupling)
- Private Gross Margin (Output – Direct Costs) – c. €160
- Public Gross Output – c. €410
- Costs
- Fees
- Salary and non-pay costs
- Foregone Earnings
SLIDE 15 Pathways for Agricultural Education to Achieve Economic Impact
Industry Level
- Animal based industries (Dairy and meat) dependent upon Farm based output
- Industry Output 4.16 times Farm Output
- Also incorporate multiplier on other sectors
SLIDE 16
Economic Impact of Agricultural Education
IRR (Benefit:Cost) Costs Private Social At Farm Level 0.104 (3.3) 0.148 (6.1) With Supply Chain Impact 0.263 (27.8)
Internal Rate of Return
Private rate of return substantially higher than that for tertiary education rate of 5.8%. Higher rate of return than that calculated for Tertiary education of 5.7%
NB Using a slightly revised methodology, the returns are slightly higher. However we have tried to incorporate the most conservative assumptions in our reported numbers
Very high rates of social return when wider supply chain impact of improved agricultural productivity factored in
SLIDE 17 Take home messages
- Agricultural education is of significant value in the type of rapidly changing
technological and economic environment now facing Irish farmers
- Very high demand for formal agricultural education
- Supply challenges, particularly for modern skills training with high pupil teacher
ratios
- Economic returns, significant private and social returns to formal agricultural
education
- From a human capital perspective (IRR)
- From a farm level production perspective (income, yields and intensity)
SLIDE 18
Thank You
