Icsa submission on 2020 Strategy March 2010 Further Details



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Section A: Policy Framework




  1. CAP Post 2013


Assessing the necessary changes required to take account of what the post 2013 CAP will look like.
The difficulty with devising the 2020 strategy is that we don’t yet know what will happen in the upcoming CAP reform negotiations. It is, of course, axiomatic that Ireland must work to achieve the highest possible CAP budget post 2013. Even though Ireland has moved away from being a net beneficiary of EU funding, a well funded, EU wide Common Agricultural Policy is decisively in our best interests.
If this can be achieved, the likelihood of agreement on a CAP that will suit Irish interests is much higher. However, the current outlook suggests much uncertainty and a risk of radical change that will be challenging in the extreme to the future viability of Irish farming.
Key problems include:

  • Demands from the EU-12 for a bigger share of the CAP.

  • The apparent desire of the Commission to move towards a flat rate payment.

  • Ongoing calls for a greater proportion of the CAP to be used for public goods payments.

  • Challenges to the validity of the historic decoupled payment based on reference years 2000-2002.

ICSA favours stability in CAP payments and is committed to supporting the retention of the Single Payment in its current format, but with additional support to deal with qualified new entrants and to take account of inflation. We also believe that there may be scope to take advantage of Ireland’s substantial grassland area as a part of the solution to climate change mitigation, in the event that public goods payments play a greater part in EU policy. Detailed discussion of these issues is beyond the scope of this submission.


In general, the overall trend at EU level is towards reducing the proportion of the EU budget spent on CAP. As argued in Section 1, we need to reduce dependency on CAP payments and this must be achieved through higher product price. There is no CAP policy that can be designed that will compensate for the ruthless exploitation of family farms by multi-national retailers, and any future CAP must be accompanied by EU led regulation to protect farmers from the worst excesses of price gouging and other abuses by supermarkets.
One key change that is already agreed, following the CAP Health Check, is the phasing out of milk quotas. This has profound implications, which must be taken on board in the 2020 strategy.

  1. The End of Milk Quotas


Putting in place a strategy to take advantage of the very profound change that will arise with the phasing out of milk quotas.
Opportunities for Expansion
Irish agriculture has been characterised by relatively static output over the past 20 years. There is a new sense of opportunity based on a growing gap between supply and demand on EU and international markets. In beef, the prediction is for the beef deficit in Europe to rise to some 600,000 tons by 2015. Sheep meat has seen a serious fall in production levels, with Ireland now below 2.5 million breeding ewes, compared with 4.13 million in 2000.
Dairying has also seen a fall-off in production levels, with failure to fill milk quotas becoming commonplace in Europe. While the milk quota system, which has been in place since 1983, has acted as a regulated barrier to expansion, the sudden fall in dairy commodity prices in 2009 has resulted in carnage in milk production levels, not just in Europe but in key dairy regions such as New Zealand and the USA. Widespread culling of cows in the US has set back the productive capacity there in the short-term, although this could be reversed in the medium term.
In Ireland, the choice of enterprise has also been heavily influenced by the cumulative effect of various policy choices as well as the impact of opportunities elsewhere in the economy. Aside from the aforementioned milk quota, the MacSharry reform led to direct payments which in particular encouraged the expansion of the suckler herd from some 400,000 cows in 1983 to over a million cows in 2000.
On many farms, the decision was taken to exit dairying because of quota limitations and get into suckling, where the skills are readily transferable. The lower labour requirement in suckling facilitated off-farm employment opportunities for many. This rather radical transformation was readily encouraged, manifested by the stark policy decisions but also explicitly encouraged by ministerial comments on a regular basis.
The outcome of all this has been the fall in dairy farms from 68,000 to 19,000 and it is likely that the figure will go down below 15,000 in the light of the difficult dairying environment in 2009/ 2010.
This submission contends that it is now time to reverse this process. Although all enterprises have been doing badly in 2009, the fact is that dairying regularly out-performs other sectors by a factor of up to three times in terms of profitability. This is examined in detail in Section D.


  1. WTO Challenges


Ensuring that every effort is made to prevent a bad WTO deal from undermining the viability of Irish agriculture

At WTO level, Ireland has had to maintain a difficult balancing act between arguing for the interests of its farming sector while simultaneously favouring a so-called “balanced” global trade accord, a position that is heavily influenced by multi-national companies that have located in Ireland. Ultimately, Ireland will go along with whatever the EU position is, and although the mandate is a matter for all the member states at Council level, the EU Commission makes the running both in terms of the detail and in terms of the WTO ministerial negotiations which are led by the EU Trade Commissioner. Although the talks collapsed at the last minute in Geneva in 2008, negotiations continue in the background.


The key risks are that import tariffs will be slashed and that export refunds will be phased out.
Recommendations:

  • Ireland should work with the other 22 member states who are pro-agriculture to withdraw the negotiating mandate given to the Commissioner for Trade in 2008, given that the global economy is a completely different proposition now and in view of the growing realisation that unfettered free trade and unregulated markets are not a panacea but have serious deficiencies.

  • The government should re-assess the importance of the agri-food sector relative to the importance of other sectors in the national context.

  • In the event that export refunds are abolished, the money used should be re-allocated to additional direct supports for farmers.

  • The government should insist that the EU works to get issues such as labour standards, food safety and environmental degradation onto the WTO negotiations.



Section B: It’s Not Easy Being Green- Farmers as Frontline Staff for the Environment


  1. New Challenges for the Environment


Ensuring that agriculture is fit for purpose in dealing with the new challenges of climate change, water and soil quality, biodiversity and energy needs.

ICSA believes that Ireland should concentrate on developing a coherent clean, green island strategy as a tool for marketing our food. It follows that Ireland will have to be to the fore in dealing with the major environmental concerns of the 21st century, particularly climate change, water and soil quality, and biodiversity. Ireland must decide whether the growing of GM crops would be consistent with such a policy.


A key challenge facing Ireland is the target of reducing GHG emissions by 20% by 2020. This target relates to the non-trading sectors of energy, agriculture and transport. While agriculture contributes 26.4% of national emissions, it is the only sector that has actually reduced emissions since 1990.
Recommendations:

  • While accepting that Ireland is committed to a 20% reduction in GHG emissions by 2020 compared with 2005, it is essential that agriculture is recognised as having an equally critical task of food production.

  • Credit must be properly allocated to agriculture for the sequestration available though forestry and soil/ grassland.

  • Being able to demonstrate that Irish farming methods are at the cutting edge of dealing with climate change commitments. This means rejecting the concept of drastically reducing livestock or other agricultural production but rather adopting best technology and capitalising on our strengths such as a high proportion of grassland farming.

  • We need to emphasise that emissions/ kg of food produced are low by comparison with many of our competitors.

  • We need to make better progress on anaerobic digestion as a means of reducing emissions, decreasing use of artificial fertilisers and producing renewable energy.

  • The strategy for AD should be based on measuring and rewarding farmers for the externalities associated with anaerobic digestion separately from the payment for actual energy supplied. Anaerobic digestion is likely to be limited to very large scale farmers or to co-operative ventures but there are potential additional raw materials (e.g food waste) that can be added to agricultural waste provided that the correct protocols are developed in terms of ensuring that pollutant and hazardous waste risks are eliminated.


  1. Sensible Regulation


Ensuring that environmental regulations are workable while delivering real environmental benefits
We need to sort out the inherent contradiction between the REPS/ Agri-environment model, which encourages the development and maintenance of biodiverse wildlife habitats and the SFP model, which penalises farmers for allowing anything other than the growth of productive grasses or crops. The current campaign to exclude scrubland, habitats etc from the SFP area is inherently unfair, moving the goalposts after farmers had been allowed to establish Single Payment entitlements based on an area including scrub etc. Moreover, many farmers have been actively encouraged to allow the emergence of scrub as a habitat in their REPS plans.
This sends a very clear signal to farmers to bring in the bulldozers in order to avoid SFP penalties but at a significant cost to wildlife and biodiversity. Some accommodation between the two contradictory measures must be negotiated.
Under the Nitrates directive, there is widespread frustration at the farming by dates regulation relating to slurry spreading. The last three summers in a row have conclusively highlighted just how absurd and unworkable this is and it is now essential that this is re-negotiated.
Anomalies such as these create widespread resentment and act to create a hostility among farmers to the very notion of environment and this must be avoided.
Recommendations:

  • Re-negotiate the farming by date restrictions under the Nitrates Directive.

  • Resolve the contradiction between habitat maintenance in REPS and recalculation of area under the SFP.



  1. Adequate Funding


Admitting that the REPS decision was a grave error
The decision to close REPS as a consequence of the emergency budgetary situation may have seemed inevitable but the short-sightedness of the decision is already clear-cut. The possibility of an area based payment has been lost while the new agri-environment options scheme will struggle to attract sufficient numbers to draw down the available funding.
Ultimately, over 60,000 farmers will be taken out of REPS over the next five years and much of the progress made is at risk of being lost. Similar problems have been caused by the budget cut on forestry.
Recommendations:

  • That the 2020 strategy should encourage the Department to begin the process of devising a real alternative to the REPS scheme for the post 2013 period, with suitable levels of funding, and in anticipation that the AEOS will not be an adequate replacement. Such a scheme might be linked to climate change and utilising the benefits of permanent pasture from an emissions perspective, farmed in a sustainable way.

  • The 2020 strategy should strongly emphasise the importance of long-term planning in agri-environment policy that cannot be over-turned by emergency measures in response to whatever economic crises may arise.

  • Forestry must be given a stable and adequate funding regime for the long-term. Short term budget cuts are disastrous and must be rectified if confidence is to be restored and targets met. We need critical mass if the timber industry is to be viable. Forestry is also necessary in terms of climate change benefits and can be the best solution on marginal land.



Section C: Selling the Product


7. Low Product Price Problem
By far, the biggest challenge facing Irish agriculture is to overcome the problem of extremely low product prices. It is apparent that the level of support for farm incomes in the CAP is not going to increase significantly; in fact the pressures are in the opposite direction. In relation to costs, farmers have already made huge inroads but there is a limit to cost reduction where the parameters are set by:

  • the realities of operating in a high cost economy,

  • farm structure and size,

  • worsening weather conditions and long wintering periods,

  • huge investment in housing and facilities.

The realities of product price deficiencies in Ireland are well-rehearsed- beef price of €2.94 in 2010 compared with €3.30 in 1988; similar scenarios for milk and tillage. Admittedly the early months of 2010 have seen a boost to sheep price but this must be put in the correct perspective whereby numbers of breeding ewes has fallen from 4.13 million in 2000 to less than 2.5 million now.


Poor product price feeds into the overall family farm income crisis. The National Farm Survey highlights the fact that farm income declined in real terms by 22% from 1995 to 2008, even though, in that period, direct payments more than doubled. While the role of CAP support is vital, the reality is that direct payments are not solving the price crisis.
The problem is well represented in Table 7.1, which shows the extraordinary extent to which farmers are dependent on direct payments whereby most sectors are getting more than 100% of their income from direct payments. This reflects the fact that most farms are losing money on the actual economics of production. Moreover, the dependency ratio is worsening as can be seen from the comparison of 2004 with 2008; and it is certain that the 2009 figures will be even worse.
Table 7.1 Direct payments as a % of Family Farm Income




2004

2008

Dairy

31%

45%

Suckler

139%

183%

Sheep

137%

165%

Tillage

92%

131%
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