Expansion for the livestock sector is a high risk strategy
Expanding production is a highly risky strategy — this is the warning that I gave to Minister for Agriculture Michael Creed at ICSA’s AGM and Annual Conference which took place in Portlaoise last week.
I made this warning in the context of Brexit uncertainty, dismal farm incomes and the looming threat of more trade deals on the heels of CETA. Advising livestock farmers to increase their production is foolhardy in the extreme.
Having met with the UK minister for agriculture Andrea Leadsom in recent weeks to discuss the impact of Brexit on both our agri-economies, I am even more convinced that increased prudence is required rather than increased production.
The UK has always been our single biggest market for food and drink exports and it is under threat. The reality is at least 50% of our beef goes to the UK. In 2016 exports of beef alone amounted to almost €1.2bn. Irish farmers have already taken a hit as a result of Brexit that cannot be sustained and needs to be reversed.
The agriculture ties between ourselves and the UK are so deeply rooted it is blatantly clear that those links need to be recognised as vital and protected as such. This was acknowledged by Ms Leadsom.
My impression was that the UK government is keen for support from Ireland in terms of getting to a tariff free arrangement. Indeed, Ms Leadsom encouraged the ICSA to continue to put pressure on the Government here to fight for this at EU level.
Both Ireland and the UK need to continue to trade with each other with minimum disruption, with no tariffs and through maintaining the equivalent standards that have been commonly developed over many years.
The €1.2bn worth of grass- fed beef we exported to the UK last year is produced to the same exacting standards as UK farmers.
We want to continue to supply British consumers, but with tariffs the economics don’t work for our farmers and don’t work for UK consumers.
We have a lot of reason to be concerned that the UK — post Brexit — will do their own trade deals internationally resulting in South American beef and New Zealand lamb and dairy flooding into the UK decimating our current markets.
With these market conditions and prospects, how could any organisation representing farmers suggest to those farmers that increasing production is a good idea?
This is lunacy and will never result in increased profit. As it is, farmers are simply producing too much beef. Basic economics tells us what happens when supply is too high for demand. Food Wise 2025 could potentially bankrupt farmers if we believe that expansion of production will make us better off.
Essentially farmers will be expected to work 90% harder for nothing if Food Wise 2025 targets of increasing exports from €10bn to €19bn are achieved, and if, at the same time, profit per hour worked shows no improvement because farm-gate price stays flat.
How many cows could a one-person operation handle, while achieving best practice in health and safety? Much of the expansion plans are based on the notion that there is no limit to how many hours a farmer can work whereas sourcing farm hired, in-farm labour is proving a real challenge.
The ICSA has thus devised a proposal to reduce numbers in the suckler cow herd. Unlike others who proposed a now-dismissed €200m scheme, we have proposed to reduce the number of suckler calves born by 20% for one fifth of the cost, at €40m. This incentive should be available on an EU-wide basis at a rate of €200 per cow per annum for up to five years on a voluntary basis.
The scheme would be based on a reference year of 2016 and the payment would be linked to the reduction in calves registered compared to 2016.
Essentially, we need to learn from the strategy applied at EU level to deal with the dairy crisis in 2016 where the strategy was a rational move to reduce production to deal with the supply/demand imbalance.
For too long we have seen cynical efforts by the meat industry to depress price. John Brooks, the ICSA sheep chair, has noticed that British lambs are now being brought into Ireland for direct slaughter here, all to ensure the price paid to farmers remains low.
It is a constant battle to get a fair share of the end price and the reality has always been that the greatest share of it goes to the processors and the retailers.
While we endeavour to get more regulation around who gets what along the food chain, there remains no guarantees. With this in mind, with Brexit in mind and with more international trade deals looming, it time for honest advice for farmers.
We are not simply going to top up Bord Bia’s export percentages so they can give themselves a pat on the back. It’s time to put profit for the primary producer first.
