‘Direct payments to beef farmers must increase due to Brexit disruption’ – economist

The European Union must look at increasing direct payments to Irish beef farmers to reflect the price impact of Brexit, a leading agri-food economist has stated.

Ciaran Fitzgerald, the former chairman of Meat Industry Ireland (MII), has also suggested that the EU should introduce an early slaughter premium for Irish beef as part of a number of income support measures under a “market transition scheme”.

Speaking on the first episode of FarmLand, Fitzgerald stressed that the UK’s unilateral decision to leave the EU must not result in a situation where Irish beef farmers and the Irish food industry is “worse-off”.

He contends that a transitional arrangement “above and beyond” the current EU/UK exit strategy is needed.

Despite ongoing work by the Government and state bodies to secure new markets for the 50% of Irish beef currently destined for the UK on an annual basis, Fitzgerald has warned that achieving substantial returns from alternative markets could take up to 10 years.

There has to be much more focus at European level on practical ways of ensuring incomes to beef farmers are compensated in terms of this market dislocation.

“There’s a measurable amount every year that comes in direct payments. There are ways in which you can calculate the price impacts, if there are any, and say: ‘right, we’re going to increase those direct payments by a third or whatever’.

“There is even the possibility, if you were to look at it in a bit more detail, of introducing a slaughter premium over a period of time – even for five years – on cattle that are slaughtered here.

“In a situation where there is suddenly World Trade Organisation (WTO) tariffs that come into the UK – which would amount to a catastrophic amount, you are talking about 70% to 80% of the average beef price – in terms of forequarter cuts most of the tariff would be greater than the price.

Also Read: Irish beef exports will require EU supports post-Brexit – agri economist

“In any and all situations, there are ways in which the European Union can deal with the challenge of making sure that the Irish beef farmer, and the Irish goods industry, isn’t worse off because our neighbour decided to leave the European Union.

“This can be achieved by means of increased income supports, or a slaughter premium, or whatever the best transitional supports for the beef industry can be,” he said.

Russia example

The leading agri-food economist also detailed a situation which occurred about five years ago, where the Russian market closed to European products.

“That was a huge knock right across commodity markets, particularly in dairy and pork for instance, and we had some impact on the beef side.

What the European Union did was they introduced a fund – it was under the commissionership of Phil Hogan at the time – that introduced a number of market supports.

“That fund, I think it was €600 million, was based on support for those countries most affected by the impact on trade.

“That’s what’s needed here. We need to see a construct. There are discussions going on between everybody in the UK and the EU and they are sticking to their official policies on what is needed for the UK to leave in an orderly fashion.

Maintaining livelihoods

But, he points out, in the midst of all the negotiations there are farmers with cattle to finish and there are livelihoods to be maintained.

“What is needed is a market transition scheme, very much based I think on the Russian model that says we are going to support the incomes of producers and we are going to support orderly marketing.

“The best way to allow for the Irish beef sector to transition to a weaker UK market, and also facilitate a longer term development of other markets, is to provide income supports.

There is a quantifiable amount that comes to Ireland every year in direct payments – of the €1.3 billion about €850 million goes to the beef sector – that amount needs to be increased as part of this market transition.

“Direct payments need to be increased to reflect the price impact of either WTO tariffs into the UK, or whatever the impact from the negotiations either going slowly or badly or more sterling weakness.

“That is a far better, and more practical way, of dealing with this major dislocation in the markets than trying to pretend that there are markets out there that will take the beef and return the price.

“They just won’t do both. They may take the beef but they won’t return an economic price,” he said.