Contact: Ms Maria Moynihan, Chief Executive
INTRODUCTION
The primary Agriculture sector contributed 5.2%1 of total Irish GDP in 1998, it contributed 8.7%2 of total employment and 7.2% of total exports in 19973 . Thus despite the recent difficulties in the sector and the diminishing importance of Agriculture to national output, farming is still integral to the future of the Irish economy. It is particularly crucial for the future survival of many rural areas.
Farming has been and is continuing to go through a period of change which has seen a reduction in the number of farms and an increase in the prevalence of Part-time farming.
The latter is a phenomenon which is becoming more common by the day, indeed the Department of Agriculture's Annual Review and Outlook points out that only half of total farm household income in Ireland now derives directly from farming. Thus it is clear that individuals are responding to the decline in farm income by increasing the size of their farms, supplementing their income from other sources or leaving the land altogether. There is nothing to suggest that this trend will not continue for the foreseeable future. From Macra na Feirme's perspective the key issue now facing Irish farming is how to manage this period of change. As an organisation we support policies which will maximise the income or earning capacity of Irish farmers whether they are full time or part time.
We have always looked at issues from a long term perspective and hence we very much welcome the Minister's decision to set up a committee to look at the Future of Irish Agriculture and Food to the year 2010. For too long the agricultural sector has been stumbling from one crisis to another without any integrated and properly focused long term strategy. This report provides an opportunity to put together a proper blueprint for the future of Irish Farming.
This initiative comes at an ideal time as we now know the outcome of the Agenda 2000 negotiations which allows us to focus on longer term issues. However it is unfortunate that the report of the committee will not be completed in time for its conclusions to be taken into account before the finalisation of the National Development Plan for 2000-2006. It would be our view that the committee should forward an interim report to the Department for consideration in advance of the plan being completed.
Rather than indulging in a sectional analysis this submission focuses on a number of matters which effect all Irish farmers and the future viability of the sector as a whole.
AGE STRUCTURE At present, only 12% of Irish farmers are under 35, while 45% are over 55 and a further 24% are between 45 and 55. As the young farmers organisation Macra na Feirme has identified this as a major barrier to the future development of Irish agriculture. It is an accepted fact that young trained farmers are more efficient and innovative than their older counterparts. The indications for the future in relation to tackling this problem are not encouraging. Since 1994 the numbers attending agricultural colleges have been declining each year, from 1065 in 1994 to 900 in 1998. While this is not surprising given the diminishing importance of Agriculture relative to other sectors of the economy it is no less concerning for the future of our sector. It is clear that young people are turning away from farming at a time when the age structure would indicate there is a dire need for new blood.
If we are to address this we must find ways of encouraging more young farmers to enter the industry. At present there are four main schemes in operation to encourage farm transfer:-
While these measures have considerable merit and have had some impact it is our view that even more measures are needed to encourage young people to enter farming.
Recommendations
THE DIRECT PAYMENTS SYSTEM
In 1998 56% of aggregate farm income came from Direct payments from the European Union. The Agenda 2000 reforms which continued the trend of price reductions and compensatory payments are likely to mean a further increase in this percentage. The stark reality is that the future survival of many Irish farms is now in the hands of the European Union and more particularly the Direct Payments system. The fight to maintain reasonable compensation during this round of reforms was an intense one and there is little doubt but that the next round will be even more difficult as the entry of more Central European countries will place greater pressure on the European budget. In short the recent rescue operation by the Minister for Agriculture has all the hallmarks of a stay of execution.
We have between now and the next reform to come up with a pro-active plan as to how our agricultural sector can be sustained with less EU support. At present in Ireland 80% of compensatory payments go to the top 60% of farmers4 this is contrary to the generally held view at European level that 80% of payments are going to 20% of farmers.
In any circumstances, where overall funds are cut it would appear to make sense that these savings are made at the expense of larger farmers. In our view the best mechanism for achieving this is a tiered payment system. While this will be difficult to sell from a political point of view, the reality is that Ireland could be net contributors to the EU budget when the next round of negotiations commence. Thus, it is likely that their attitude to maximising the farm budget may have changed by the time the next negotiations come around.
At present one major flaw in the administration of the system is that payments can be withdrawn from farmers by virtue of a unilateral decision of the Department of Agriculture. It is then up to the farmer to challenge this through the appeals mechanism. This operates contrary to the principle of innocent until proven guilty. No farmer should have his payments withdrawn without having recourse to a hearing where he/she can make their case. In addition, a proper Independent Appeals procedure should be put in place.
One other issue of concern to Macra na Feirme is the way in which the Direct payments system is being used to discredit farmers. It is our view that the Department of Agriculture should be to the fore in explaining the need for the system and where it originated from. At present the Department rarely misses an opportunity to highlight the amounts of money farmers are receiving and this is only serving to damage the image of farming. It is important that one of the conclusions of this report be that there should be cross party agreement not to indulge in farmer knocking for the sake of it.
Recommendations
MILK QUOTAS
Milk production is the key profit making enterprise on Irish farms and is currently the only enterprise where a farmer can make a living off a relatively small holding without any off farm income. While Milk Quotas have served Irish Farmers well in terms of sustaining their incomes they have by their nature prevented expansion and reduced the number of new entrants entering the sector. This will have implications for the milk sector when quotas are eventually abolished and we are left to fend for ourselves on the world market. Many of our farmers will simply not have sufficient scale and will be forced to expand in a climate of falling prices.
Milk Quotas now look certain to continue until 2008, therefore we have eight years to gear our milk sector up for the no quota situation. How we distribute the extra quota which was allocated under Agenda 2000 will be important in this respect but what will be more important is how we manage the quota of those individuals who exit milk production between now and 2008.
At present the exiting farmer has four options when he/she decides to cease milk production:-
From the point of view of the exiting farmer, Private Leasing is the most rewarding route from a financial perspective despite the current 20% Clawback. Leased quota is making between 35 and 40 pence a Gallon whereas Temporary Leasing gives a return of 25p. If the farmer sells his milk into Restructuring he/she will receive a once off payment of £1.55 a Gallon.
Macra na Feirme believes it would be more beneficial to guide all of the milk into restructuring from where it can be allocated to priority categories at a reasonable price. At present the majority of private leasing is going to larger farmers who can afford to pay higher prices. In addition the price of 35 to 40 pence is placing great pressure on the lessee, the reality is that in most cases the person who owns the quota is making more money from it than the person who is actually producing the milk.
Macra na Feirme have been promoting the concept of banning private leasing of quota except in exceptional circumstances. This would mean that the exiting farmer would have to put their milk into restructuring from where it could be offered to priority categories. This would provide a way of controlling the price while at the same time giving the exiting farmer compensation. We have also proposed a way of dealing with existing leases by channelling them through restructuring to the existing lessee when the current lease finishes. This would protect those producers who had expanded on the back of Private Leases.
We firmly believe that the quota system must be biased towards active producers rather than non producing quota holders.
One other point which we feel is important to the future development of farmers relates to the tax system and how it treats the farmers who purchase milk from the Restructuring Scheme. At present these farmers are taxed on the income which they use to purchase quota whereas if they lease the quota it is tax deductible. We believe that this is mitigating against putting quota permanently into the hands of active producers. at the very least quota should be treated like machinery with similar Capital Allowances being permitted over seven years.
With regard to the additional quota allocated under the Agenda 2000 reforms we would be strongly of the view that young farmers should get priority access to this milk. We have proposed that a special unit be set up to distribute this quota with unit taking additional factors besides how much quota the farmer has into account. These factors would include dependency on milk quota, age and the applicants business plan. Macra would be strongly of the view that no farmer should be given additional milk quota without a business plan.
Recommendations
LAND PRICES/ FARM STRUCTURES
Despite the decline in the profitability of Agriculture land prices5 continue to rise. In the third quarter of 1998 average price per hectare of agricultural land was £7,290, this was a record compared with £6,905 in the second quarter and £6,319 in the first6. If one looks back five years ago to the third quarter of 1994 the average price per hectare then was £4,255.
It seems extremely difficult to explain this increase but it must be put down to improvements elsewhere in the economy and indeed the increase in land prices would appear to be following a similar pattern to house prices.
The spiralling of prices clearly has implications for farmers who are trying to develop their business by expanding their holding. At least one problem for young farmers will be removed when the Enlargement Clause of the Early Retirement Scheme is abolished in 2000. This had contributed to the distortion of land prices and its removal should help to free up land.
It is extremely difficult to see how one can have any impact on the current situation without interfering directly with the market. However any plan which looks at the long term future of Irish Agriculture will have to address the issue of restructuring of holdings. At present average farm size in Ireland is just over 29 hectares while approximately 65% of Irish farms are smaller than this average7. With this in mind we believe an incentive programme to encourage restructuring needs to be put in place. This could consist of special loans8 which could be offered to full time trained farmers who increase their holdings from below 30 hectares up to a certain limit possibly 45 hectares. The repayments for these loans would be over a long time period (20-25 years) and low interest rates would apply. It would be a contingent element of the loan that the land would have to remain in agricultural use for the agreed repayment period but for a minimum of 15 years.
One other element of such a scheme could be tax concessions on farm income used to purchase land, this would be way of giving farmers a competitive advantage in the land market.
In the long-term, a proper land use policy is going to have to be put in place to ensure that there is some strategy to how land is used in Ireland. A statutory body should be established to look at land transactions to examine their long term impact. This body should have the power to prohibit certain land transactions if they are not in the national interest. The need for such a body is increasing with the advent of forestry grants which are encouraging companies to purchase farm land for forestry.
Recommendations
LABOUR
One of the biggest problems restricting the future development of Irish Farming is the lack of available labour. Farmers up and down the country are reporting difficulties in finding staff. The cause of the current situation is undoubtedly the economic boom in other sectors which is pushing up wages and attracting farm labourers into other sectors. At the same time farmer's incomes are reducing which means they are unable to afford labour at current wage levels.
This is not however a short term problem. Farm incomes are clearly lagging behind other sectors and this will continue to prohibit farmers from keeping pace with wage levels being paid to employees in other sectors. The figures highlighted earlier in relation to the drop in numbers attending agricultural college further serve to highlight the lack of young people taking a qualification in Agriculture.
While it is difficult to see how this problem can be tackled effectively, Macra na Feirme believe action is needed. A special reduction in employers PRSI for farmers should be introduced to enable them to compete with wage levels in other sectors. This can also be justified on the basis that it would keep the employees living rural areas rather than moving into towns where most other employment opportunities are located.
One other anomaly which Macra has identified relates to the off farm income clauses in certain schemes namely Early Retirement, Installation Aid, Stamp Duty Relief and Stock Relief. Under these schemes a farmer who earns more than 50% of his /her income away from their own farm is ineligible for aid. Once again with farm incomes being low it is quite easy for smaller farmers to exceed this limit.
Macra na Feirme have proposed that income earned while working for another farmer, the Farm Relief Service or an agricultural contractor should be classed as on farm income for the purposes of these schemes. This would encourage smaller farmers to work on commercial farms. There are many smaller farmers who have spare labour capacity and this would allow them to work in the sector where they have expertise.
Recommendations
AGRICULTURAL EDUCATION
The Certificate in Farming award is the basic unit of Ireland's Agricultural education system. Any farmer born after 1968 is required to have completed the "Green Cert" to be eligible for Installation Aid, Stamp Duty and Stock Relief. It is Macra na Feirme's view that the standing of this award needs to be improved significantly. However it will be difficult to achieve this without the allocation of additional resources and an increased emphasis on on-farm training.
With the increased paper work and management expertise required in farming it is crucial that our young farmers are qualified for all aspects of agriculture. Some agricultural colleges have reported literacy problems amongst some of their students, it is extremely important that these problems are addressed by referring the students to adult literacy courses. Teagasc also proposed setting up a foundation course for students before enrolling in the Certificate in Farming, we feel that this would be useful in identifying and helping students with reading difficulties.
We would also regard it as crucial that evening and weekend courses are made available for part-time farmers. A commitment was made to do this but as of yet very little progress seems to have been made.
There are very few courses in Ireland for farmers who wish to gain more advanced agricultural education than the Certificate in Farming. At present a large number of students are attending agricultural college in the United Kingdom because there are no suitable courses in Ireland. The Teagasc 2000 report indicates that Teagasc are introducing more Diploma level courses in Ireland. It is important that this happens and that they are of sufficient quality. It should also be noted that some of the agricultural colleges are in danger of closing down if there is not an increase in the number of agricultural students. These more advanced courses could well provide the increased student numbers which would avert such closures.
We believe that a task force should be established to look at the future of our agricultural education system and indeed our agricultural colleges. It would be important that the Department of Education would be represented on such a group and that it would review the whole system as if from a blank canvass.
Recommendations
Footnotes
1 CSO, preliminary Estimate of Output, Input and Income
in Agriculture (February 1999)
2 CSO, preliminary Estimate
of Output, Input and Income in Agriculture (February 1999)
3
Exact figures for 1998 are not yet available
4 Department
of Agriculture Annual Review and Outlook 1999
5 It should
be noted that these figures do not include any land sold for more £25,000
per Hectare (£10,117 per acre) as this be deemed to be for purposed
other than agriculture
6 CSO release Agricultural Land
Sales January 29th, 1999
7 Department of Agriculture
Annual Review and Outlook 1998
8 The format for these
loans would be similar to that outlined in the recommendations section of
the age profile chapter