Contact: Mr Ray Dunne
Introduction
The ICSA is the national association representing the interests and needs of Irish farmers who specialise in the production of beef and sheep. There are approximately 100,000 farmers involved in this sector which makes up the majority of farmers in Ireland today.
While it is expected that Agri-Food 2010 Committee will consider the development of Irish Agriculture and food in general, for the purposes of this submission we will concentrate on the beef and sheep sectors specifically. It is safe to say that these sectors have suffered most in recent years in terms of declining incomes, bureaucracy, Food scares, insufficient marketing and lack of research and development. All of these factors have had a negative impact on Irish Agriculture and food and any strategy put forward to develop this vital sector over the next 10 years can only be seen as a welcome development and a step forward.
In order to put forward a strategy for the development of the Irish Agriculture it is important to firstly look at the current state of the industry.
120% of beef and sheep farmers incomes now comes in the form of direct payments by the EU Put simply, this means that livestock farmers who have made considerable strides in improving on farm efficiency are losing 20p/lb. from their on farm operations. These on farm losses are set to increase following the Agenda 2000 agreement.
The main area where development of the industry can take place on farm is an increase in the production of livestock suitable for higher valued markets. As there are no incentives in the Agenda 2000 agreement to encourage this, it is the processing industry which must become the driving force behind such an initiative.
The real developments in the beef and sheepmeat industry must come from new product research and development, product branding and marketing. No co-ordinated approach has taken place in these important areas by the industry. The only new product to emerge from the beef industry over the last twenty years has been the ‘beef burger’. We have no centralised marketing agency and while we have a green and healthy production system and food safety regulations of the highest standards, Irish beef is still traded at discount prices around the world.
By contrast, the dairy industry has consistently progressed over the past number of decades and is well equipped to progress even further into the 21st century. EU payments are paid directly to the farmer via the milk cheque and this has greatly reduced the level of bureaucracy at farm gate level.
Milk is now manufactured into numerous value added by-products and then effectively marketed by a central marketing agency (Bord Bainne) at prices which leave a realistic return for both producer and processor. The dairy industry has developed household brand names such as ‘Kerrygold’ which is now recognised world-wide as a premium quality Irish product. In doing so the industry has effectively protected itself from potential food scares by promoting the positive healthy aspects of consuming dairy products.
As representatives of the beef and sheep sector, ICSA suggests the committee should promote the positive aspects of the dairy industry as a role model for the development of Irish Agriculture and food in general.
Agenda 2000 and Its Implications
It is clear that the outcome of the Agenda 2000 negotiations will have a serious impact on the future development of Irish Agriculture and Food. As the dairy sector has not been affected by the outcome, it is the beef and sheep sectors where most change will occur.
ICSA has never been in favour of the system of distribution of livestock premia which was established under the 1992 CAP Reforms and again continued under the Agenda 2000 reforms. This headage type system which is based solely on production with no emphasis on quality has served the Irish livestock industry poorly over the last seven years and is set to continue to do so into the new millennium. The current premia payment system which totally distorts normal market supply has excluded a major section of the Irish industry, i.e. heifer producers and beef finishers and has led to an annual deterioration in the quality of Irish beef since its inception.
ICSA has and will continue to promote the concept of an area based payment system for beef producers as a fairer and more equitable system of payment for beef and sheep producers. While many other organisations throughout the EU support such change, EU Agriculture Ministers took the position of hold what we have rather than put forward any new principles which, in their wisdom might rock the boat. Many of the concerns of CAP Reform such as supply management, quality and environmental issues would have come about automatically by such a change. In addition, the upcoming WTO negotiations would prove less difficult if Europe had to some degree moved away from production supports for EU farmers.
It is clear that the main success of Agenda 2000 is that Ireland will continue to benefit from significant amounts of EU money through the various agricultural schemes which are in place. Much of these funds will circulate their way throughout the economy and this will undoubtedly benefit the economy as a whole.
However much of this benefit will be lost through the changes reform will bring in terms of the structure of Irish farming. Firstly, the dependence which Irish sheep and beef producers have on EU supports in terms of overall income is set to increase post 2000. This will have a negative impact in that most of the farmers efforts will be devoted to maximising these payments and complying with an increasingly bureaucratic payment system rather than developing farming practices which will take into consideration real market demands. The new extensification payment will take all stock on farm into account for calculation purposes. The aim of this may have been well intentioned in terms of controlling production and promoting earlier marketing of cattle but this may not be the case in terms of Irish farming practices. If cattle are marketed earlier the likely outlet will be to continental Europe as weanlings. This would reduce the net value of Irish beef to the economy considerably as would early marketing in general. The other possible outcome would be that farmers would forego extensification payments altogether and move towards an intensive production system. This could well lead to overproduction of Irish beef.
It is generally accepted that the sheep meat price is directly linked to the price of beef. While beef producers will be to some degree compensated for the expected reduction in the price of beef, no changes have been made at EU level with regard to sheep. Lamb price at consumer level may become uncompetitive in relation to beef and this would be a negative development for the sheep industry as a whole. As sheep numbers will still be calculated under extensification, the majority of Irish farmers who have traditionally stocked both cattle and sheep will no longer stock sheep on their farms and this will lead to a serious erosion of the industry.
In light of the major implications which Agenda 2000 will have on Irish Agriculture, ICSA proposes that the reforms be reviewed at regular intervals in order to take corrective action on discrepancies which may occur from time to time. The 1992 CAP Reform mid-term review did not take place and as a result, many of the oversights of the reforms were not addressed.
Implications of WTO
The “Millennium Round” of WTO negotiations begins on 30th November 1999 and the European model of agriculture has to be protected. Though ICSA would favour an area aid payment system rather than a direct payment system, the “blue box” category of domestic supports has to be maintained. European agriculture employs 8 million people in the European Union while exports of agricultural products accounts for 8% of total EU exports and 12% of Irish exports. This has to be protected.
Food safety is of paramount importance during this round of negotiations. The use of growth promoters in US beef is a major cause of concern for EU producers. ICSA supports the EU ban on hormone treated beef as the implications would be catastrophic for European beef farmers if they were to compete with hormone treated beef produced by the Americans and the Canadians which has a lower cost base. This could open up a minefield because American hormone treated beef was made legal, European beef producers would also be allowed to produce hormone treated beef.
ICSA would accept that a certain percentage of hormone free beef may have to be imported when it complies with EU regulations on residues. However, the scientific implications set out in the two reports from the EU’s advisory committee on public health further underline the potential risks under the present regime in America and Canada. The labelling of US and Canadian beef in Europe is of concern to Irish producers and consumers. If the present ban was lifted, American and Canadian beef would have to be correctly labelled in the marketplace.
There must be a regulated system for export refund licenses for meat exporters to ensure so that there will be orderly marketing of meat.
The WTO partners must acknowledge that European farmers have to comply with stringent environmental and food safety rules. If other nations do meet the same standards, they should be properly labelled and be subject to tariffs.
Ombudsman for Agriculture and Food
As previously stated, direct payments will account for an estimated 140% of sheep and beef producers’ income in the coming years. ICSA recommends the appointment of an independent Ombudsman for the distribution of EU agricultural schemes which would establish the farmers entitlements and proportionately of penalties. This office could also monitor retail food prices (see below).
Consumer Prices
There is no evidence to suggest that reduction in producer prices have been passed onto EU consumers. The fact that red meat consumption is stable within the EU suggests that retail price is not the main factor in stimulating demand. ICSA suggests that an agreed relationship between producer and consumer prices be established through the EU and that this be followed by the establishment of a national and EU price monitoring body which would police such an agreement. Some EU countries have already taken steps in this direction.
Rural Ireland Today
Today in rural Ireland, we have a complete interdependency of one sector on another and agriculture on other industries e.g. the beef finishers on the weanling producers, the hogget fatteners on the hill sheep producers and farmers on agribusiness. This complex society is dependent on a system that works and all sectors of agriculture need to be viable if the community and country is to work well and flourish. Today, we have a situation where agriculture across all sectors is under pressure financially. This will have a negative impact on rural Ireland as we know it and rural population is declining. The inevitable knock-on effects on rural communities need no further illustration.
More work will have to be done to :
Promote Research and Development Into New Products
All industries invest heavily in Research and Development as new markets are constantly required for products. This has not happened in the meat industry compared to the dairy industry. What is needed is large investment in this area as there have been very few, if any developments in new products over the last twenty years. Both beef and sheep are effectively traded as commodities - there are very poor margins in commodities. New innovative product development strategies are needed to command higher margins for both producers and processors. ICSA is proposing that the Government invests 1% of all EU beef and sheep subsidies into Research and Development and match this with a similar amount from the national exchequer. This would realise approximately £20 million to be invested in Research and Development products only. When you consider that the beef and sheep industries are worth close to £2 billion per annum to Ireland, this is a very small amount of revenue to invest. In addition, farmers would respond positively to having 1% redirected for this purpose. ICSA proposes that this funding be spent in the following ways:
Investment in Teagasc
Irish cattle numbers are at their highest level since 1974 and yet our agricultural land base is at its lowest due to forestry, roads and building, all of which are largely irreversible. This has led to intensification of our farming practice and new advice is needed to help farmers adapt to this. It is also expected that the majority of Irish farmers will be farming part time over the coming years. This will lead to a serious reduction in the amount of time farmers have to spend on their farms. In response to this, Teagasc will need to help farmers develop new farming practices to assist in the transition from full time to part time farming. Additional staff are also needed within Teagasc to assist farmers with the increasing amount of form filling which is taking up a considerable amount of farmers time. While to date this has been dealt with on an ad hoc basis, ICSA proposes that specialised personnel be employed to deal with this area on a full time basis.
Reappraisal and reinvestment in An Bord Bia
At present, An Bord Bia is primarily a promotion agency for meat products. ICSA believes that this role should also include sales and marketing. This role change would allow Bord Bia actually locate, sells and promote our beef and lamb in the various markets across Europe. The Dairy Board’s expertise could be drawn upon in this regard. By coupling this change of role with the new Research & Development body suggested by ICSA, a Meat Board could deliver similar results i.e. real market share in Europe at a premium price. The new version of An Bord Bia should take real responsibility for marketing our red meats and would be self-financed by its own profits. Ideally, ICSA would like to see the meat processors having to sell, say 30% of their output though this body and market the rest themselves at prices not below what the new Board Bia agency realise. This in some way would ensure that our processors sell our red meats rather than trade them away at prices which leave the producer with no profit margin.
Product Labelling
Irish food safety regulations are now among the most stringent in the world. Many of these regulations have come in the wake of the BSE crisis and have been introduced as a mechanism to protect the reputation of Irish food on domestic and International markets. While everybody accepts that this is of vital national importance, ICSA believes that our strict animal health regulations and our fully traceable production system should be seen as a valuable marketing tool for Irish food. In order to capitalise on this, Irish beef and sheep meat products would have to be labelled accordingly. Market research has shown that there is generally a very positive attitude among European consumers towards Irish meat, with many citing Irelands green image as their main reason. As long as Irish processors continue to trade Irish beef and lamb as a commodity on EU supermarket shelves, producer prices will never rise to a level which returns a viable income. ICSA wants to see Irish beef and lamb marketed as Irish, under a brand name which is respected world-wide as a quality product commanding a premium price.
(1) Breeding
As regards the beef and sheep industries, there is a lot farmers can do to improve their current and future income. They must invest wisely in breeding programs to promote quality animals and ensure that processors reward this quality by constructive lobbying through the various farm organisations and breed societies. Farmers need to become sales and market oriented, producing what can be sold at a premium. We are seeing a good example of this today with the live-shipping experience i.e. only the top quality heifers are being exported at top prices. Our breeding programmes should reflect this. For too many years farmers have simply produced livestock without considering what the market actually requires. This type of practice is no longer sustainable in the future.
(2) Producer Groups
On the ground, farmers need to form large purchasing and selling groups just like the agribusiness sector have done in order to improve their sale prices and minimise costs. When it comes to selling to factories on an individual basis, the majority of farmers will get the lowest price available. In contrast to this, farmers who sell through producer groups have found that selling through groups ensures greater selling clout. Farmers participating in groups become more confident when buying or selling and there is also the added benefit of improved efficiency through working together. A number of these groups have been established within ICSA and elsewhere. ICSA is very supportive of these developments and hope that this will become the norm rather the exception over the coming years.
(3) Alternative sources of income
As the economy continues to grow, many new opportunities exist for younger farmers to supplement their on farm income. This can happen either through off farm employment or an alternative enterprise on their own farm. It is important that these opportunities are taken now and not when their income has been eroded to such a degree that they will not have any possibility of investing in a new business. Farming will change and farmers will have to change with it to survive. Education is the most important factor in promoting such developments. ICSA recommends that the existing agricultural training colleges which are currently struggling to remain open should move to fill this gap in the agricultural training system in order to develop more entrepreneurial skills among farmers.
Part-time Farmers
It is a certainty that in the years ahead, the part-time farming sector in Ireland will grow and the amount of acres possessed by the old definition of a part-time farmer e.g. 50 acres or less will be gone. As the efficiency of farming increases, so too will the ability of farmers to farm larger holdings on a part-time basis. As long as part time farming continues to be a viable option on the majority of Irish farms, substantial re-investment on farms will continue and this will ensure the continuation of rural communities in the foreseeable future. It has been suggested that off-farm income should be included in any calculation of direct aid received by farmers. ICSA suggests that this is a very short-sighted proposal; if a farmer is forced to seek off-farm employment to bolster his family income, why should he be penalised? In addition, if these part-time farmers are not making a profit from their farming enterprise, they will exit the sector altogether, either by selling up or by long-term lease.
However ICSA does realise the need to promote as much full-time farming as possible and to this end ICSA proposes a system where by full time farmers would benefit from increased tax relief and access to cheaper loan facilities. This is the most appropriate method to promote full-time farming and also nurture the increased amounts of part-time farmers living in rural Ireland.
The Government should encourage as much full time and part-time farming
as possible in all rural communities by:
(a) Confining farm
investment grants to full-time farmers only
(b) Increased tax relief
for full-time farmers
(c) Provide real investment incentives for
industries to locate in all major county towns in Ireland in order to
promote local farmer employment.
Farmer Retirement - New Young Entrants. How To Promote Both
New relief measures must be introduced to promote agriculture as an attractive career for younger farmers. As the age profile of Irish farmers continues to increase, radical new measures must be introduced to reverse this worrying trend. Many younger farmers wishing to farm on a full time basis no longer consider their holdings large enough to remain viable in the long term. ICSA recommends that the Irish Government should promote a new initiative whereby younger farmers enter a pension pay-out relationship with older farmers based on current market prices for land. e.g. the older farmer owns 50 acres worth £250,000. If the farmer invested in a pension fund aged 65 he would receive £12,500 per annum. The young farmer pay this amount per annum to the farmer in return for his land which becomes his property on the death of the older farmer, obvious provisions of payment to next of kin for a defined period must also be included to account for premature death.
This payment should be made allowable against tax for the young entrant and tax-free for the older farmer and should not exclude him/her from the national pension. This is just one suggestion for an enhanced farm retirement scheme, but the idea should be fostered by the Government to provide new entrants into farming.