Icsa submission on 2020 Strategy March 2010 Further Details

ICSA Submission on 2020 Strategy
March 2010
Further Details:
Eddie Punch (General Secretary)
Gabriel Gilmartin (President)

ICSA

9, Lyster House,

Portlaoise.

Phone:[phone]

www.icsaireland.com

Introduction
The agri-food sector may have become unfashionable during the Celtic Tiger era, but the global economic crisis combined with the severe difficulties in our own economy has highlighted the importance of the sector. Collapse in the construction sector, a huge re-trenchment in the financial sector and the reality that jobs created by foreign direct investment are being lost to lower cost economies means that once more, Ireland must re-examine its strategy for growth and prosperity. It is appropriate at this point to focus on the agri-food sector.
It is important to emphasise the importance of the sector. Agri-sector exports of almost €9 billion accounted for 10% of all exports in 2008, and the sector employed 150,000 people or 7.5% of the total workforce. It has the important attribute of being evenly dispersed throughout all counties and so it plays a critical role in balanced regional development. On these figures alone, it is obvious that agriculture is important; however, it has added importance against a backdrop of increasing international concern about food security, the need for alternatives to non-renewable fossil fuels and the global imperative to combat climate change.
Account should also be taken of the fact that the landscape and rural environment is inextricably linked with farming activity. Farmers shape the rural landscape and are its custodians and this underpins a lot of what our tourism offering is all about. It is for all these reasons that the EU regularly refers to the concept of multi-functional agriculture. While the key traditional role of agriculture continues to be food production, so much more is dependent on its ongoing viability.
It seems obvious then that the strategy for the next 10 years should be of such critical importance. Moreover, it would seem that a successful strategy for agriculture should be a key objective of government policy and that such a strategy would be integrated in a central way into the overall plan for economic recovery.
This is not always so apparent however. The economic downturn saw the government take very hasty and ill-considered decisions to impose severe cut-backs on key supports to farming, most notably the decision to close REPS to new entrants and by definition to begin the process of phasing it out altogether. This does not chime with the stated government strategy to build a smart, green collar economy and it has been disappointing to see the lack of ideas on utilising the agri-sector as a source of economic recovery. Key events, such as the Farmleigh Global Irish Economic Forum, ignored the agricultural sector.
At EU level, considerable uncertainty pertains to the budget for the CAP post 2013, and there are fears regarding potential reforms, which could disadvantage the Irish farming sector. 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. Although the talks collapsed at the last minute in Geneva in 2008, negotiations continue in the background.
EU CAP reform and a possible future WTO deal will impact in a most profound way on any strategy. Despite these potential minefields, and perhaps because of them, it is crucial that Ireland has a strategy for agriculture that is fit for purpose and one which insulates to the best possible degree the sector from negative external shocks or impacts. Regardless of what happens agriculture does have the considerable advantage that food is an essential in a world where food security is lessening and demand is growing.

Strengths

• 
  The huge commitment to farming from Ireland’s 120,000 farm families who typically share a love of the land with a resilience that has seen them survive and adapt in the face of all types of economic, weather related and animal health disasters.
  
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  A tradition of exporting food and animal products as well as live animals to many international markets, with a mix of global food ingredient companies co-existing alongside smaller artisan companies and live exporting businesses, resulting in an €8 billion agri-food export sector, based on doing business with many of the leading retailers across Europe.
  
• 
  While the age structure of land-holders is far from ideal, there is an influx of young enthusiastic farmers to agricultural education and the likelihood that some who were lost to the good wages in the Celtic Tiger construction boon will return to farming.
  
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  Competitive advantage of grass based production.
  
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  High standards of animal welfare and husbandry, traceability, wide-scale participation in environmental schemes, combined with animals grazing outdoors and a general absence of factory farming systems all underpin the positive image that Ireland’s agriculture carries with it the highest ethical, environmental and food quality standards.
  
• 
  Off-farm work has brought in income, which in many cases has underpinned farm investment and improvements, as well as giving financial strength in dealings with banks.
  

Weaknesses

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  Average farm size of 32 hectares, and the propensity towards fragmented holdings makes many farms unviable and almost all farms do not have necessary economies of scale compared to the UK, or further afield.
  
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  Heavy Debt: Extremely poor products prices combined with high investment on farm facilities (€4.5 billion in 3 years) means that many farmers are carrying heavy borrowings. The debt situation has been compounded on some of the bigger farms by investments off-farm, using borrowed money secured on farm assets in some cases, as well as the high cost of agricultural land in a limited number of cases.
  
• 
  Over-dependency on sale of commodities at low prices to processors and by contrast a lack of direct selling to consumers by farmers, notwithstanding the growth in farmers’ markets in recent years.
  
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  Credit crunch in Ireland has led to severe impact on cash flow for farming as well as hindering further development at a time when such development could be done more cost effectively.
  
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  Low farm incomes, which have been endemic for many years in cattle and sheep sectors and which are now also a feature of the dairy and tillage sectors.
  
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  High costs in the Irish economy- energy, electricity, labour, carbon tax on green diesel, regulatory compliance
  
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  Too much tendency by some farmers to over-invest in machinery, buildings etc without adequate assessment of the economic returns from so doing.
  
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  Lack of tradition of machinery sharing, machinery rings etc and consequent under-utilisation of costly equipment.
  
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  Over-dependence on EU subsidies.
  

Opportunities

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  Growing global demand for food.
  
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  New, increasingly affluent markets opening up in China and India characterised by rapidly expanding middle classes.
  
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  Falling supplies of key commodities such as dairy and meat within the EU, leading to increased deficits and failures to fill the milk quota.
  
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  Evidence that the long-run trend towards higher commodity prices is kicking off again after a hiatus due to the global economic downturn. This is manifesting itself in upward spirals beginning to be seen on oil, steel etc and world beef and dairy prices edging upwards despite the fact that EU beef price is still in the doldrums.
  
• 
  While there is still considerable grounds to be concerned about the potential of South America to expand beef production, Russia, Ukraine and Romania to expand cereals and New Zealand/ US/ Canada to expand dairy; this is counterbalanced to some extent by global insecurity on water supply and the difficulties in China with polluted ground.
  
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  Climate change will provide opportunities for the countries which respond most effectively to the demand for carbon foot print measuring and labelling, and who can adapt and demonstrate that their agriculture is part of the solution.
  
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  Global commitments to biofuels which increases the demand for agricultural products.
  
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  Phasing out of milk quotas provides opportunity to expand for existing dairy farmers and the possibility of converting low margin drystock farms into dairying.
  
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  The export of pedigree breeding stock to the UK and other countries should not be discounted; already it is a significant earner for our top breeders and there is tremendous enthusiasm, translating into progress, among the growing numbers of pedigree breeders of the key beef breeds. On the dairy side, the top Holstein herds have achieved high standards also. Of even greater importance is the fact that the evolution in pedigree breeding will determine success and efficiency in the mainstay commercial suckler and dairy herds and close co-operation between ICBF and the pedigree societies will be an important determinant of progress.
  

Threats

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  Dominance of Irish and UK beef sectors by 3 processors is undermining competition for Irish farmers and keeping prices low.
  
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  Failure to develop “Brand Ireland” means that we are still far too dependent on cut price marketing and undercutting our competitors on European markets.
  
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  This has led to an invidious situation where British farmers are increasingly frustrated at the role of Irish beef in undermining their product price and this will lead to further bad press for us and potentially militant action against Irish beef.
  
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  Short-sighted decisions to opt for genetically modified crops could undermine our clean, green image; rule out the development of the organic sector and may have other unforeseen consequences.
  
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  Failure to develop our marketing capabilities means that key Irish products such as beef are sold at low prices.
  
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  Failure on the marketing front has been particularly acute in the Irish meat sector where the three dominant players have a long tradition of reliance on taking advantage of export refunds, intervention and other supports, and have evolved only to the extent that the high volume, low margin model is now adapted to undercutting on price in order to get supermarket contracts.
  
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  While Bord Bia makes valiant efforts on promotional activities, the reality is that overall Irish spend on marketing of beef and lamb is absurdly low and the failure to follow up on the 1960s success of the Kerrygold brand/ Bord Bainne model has hindered our capabilities in meats. Innovation and foresight on marketing of our key commodities is sadly lacking, and it is only comparatively recently that we moved away from our outright opposition to country of origin labelling.
  
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  There is an ongoing risk to the ability to export both live animals and food products from disease problems and food risks. While we have seen the devastation that can be caused by the likes of an FMD outbreak, we also have had close encounters with blue tongue, scrapie etc. TB remains a blight on our capabilities and it is likely that, increasingly, herd health status as measured by diseases such as Johnes, BVD and IBR will dictate our success or otherwise in developing live exports.
  

Key Essentials of an Agri-Food Strategy for 2020
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.
   
2. 
   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.
   
3. 
   WTO Challenges: Ensuring that every effort is made to prevent a bad WTO deal from undermining the viability of Irish agriculture
   

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

4. 
   New Challenges in 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.
   
5. 
   Sensible Regulation: Realising that farming by dates is unworkable and that contradictions between schemes is undermining the original purpose
   
6. 
   Funding: Admitting that the REPS decision was a grave error
   

Section C: Selling the Product

7. 
   Low Product Price Problem: Finding solutions to the low product prices at farm-gate level and the endemic lack of profitability in sectors such as cattle and sheep.
   
8. 
   Consumer Wants: Deciding on what are the consumer concerns of the 21^st century that will determine the success of the sector.
   
9. 
   Marketing: Giving strategic direction to the marketing of Irish agricultural produce.
   

Section D: Commodities and Practical Farming Issues

10. 
    Dairying: Time to expand?
    
11. 
    Can we do better in livestock?
    
12. 
    Animal Health
    
13. 
    Mol an óige
    

Section E: And the Overall Objective is…

14. 
    Viable Farm Incomes: All of the specific components of the agri-food strategy must be designed with the over-riding objective of delivering viable farm incomes to the optimum number of farmers, and the success or otherwise of the strategy and all related actions can only be measured by success under this heading.