AgriLand recently caught up with Éamon Ó Cuív, Fianna Fail’s spokesman for agriculture to discuss all things Common Agricultural Policy 2014-2020 and dairy expansion. A TD for Galway West, Ó Cuív was previously a co-op manager.
First things first, Ó Cuív outlined his support for small farmers. “The Agriculture Minister Simon Coveney seems to be driven by the idea that the only farms that count are those who are in high-output, high-input systems, whereas I see that they are very necessary to agriculture but in fact agriculture will always be a much greater mixed bag of farmers, of farm types.”
How you farm is a fundamental issue and key for profitability for any farmers, he noted. “We found in the past seven years that sometimes if someone over pushes the margin or narrows the margin, it shows to concentrate on a huge turnover but that any downturn in price, weather or whatever can bankrupt them. Whereas the person who works on a more steady operation tends to survive the pace and therefore to me all farmers are important and the decision as to how you farm is in my view a fundamental decision to each farmer.”
Ó Cuív recently requested information on the new CAP 2014-2020, in terms of what amount of money would be available for re-distribution under the Single Farm Payment (SFP) scheme if the maximum payment for the single farm payment was set at 400/ha and 450/ha. (Full details of the breakdown reply from the Department of Agriculture is available here.)
“The actual fact is that the livestock unit per hectare doesn’t increase once you get to 350ha, on average it doesn’t increase so the actual reality is that the single payment is no reflection of output,” he outlined.
“It is absolutely illogical to believe that a SFP on its own will encourage production. For example, we are told by farming organisations and I don’t necessarily argue with them, that big farmers are losing money on the actual farming and if I take the single farm payment out they are losing money. To me that is unsustainable in the long term.
“The idea that the single farm payment encourages production is wrong. The only thing that encourages production is that farmers get a fair return for the product on the market that leaves them with a profit from the pure farming activity.
He continued: “So fundamentally the single farm payment, what you are saying is that the single farm payment isn’t applicable to production at all and in actual fact the market prices they dictate production on a farm in terms of liquid milk, beef prices and so on.”
The methodology of CAP is crude, he added, because of its limit on hectares. “But the idea of a basic payment per hectare I agree with. When you look at productivity and the single farm payment, you get a much flatter SFP. That is something we will be analysing over the next couple of weeks.” He said it is irrational to continue beyond 2019 with a system that is based on the grant structure and productivity that existed in 2000/2001 and 2002. It was the grant structure that determined the SFP not your actual farm activity.
Coupling is also an issue that will need to be addressed. “I’m not saying there are problems in at the admin but farmers don’t like extra schemes for a small payment €40 to €50. He suggests that coupling should be done on a year-by-year basis to combat volatility in market prices.
“So in this year for example if there was a drop/collapse in grain prices because there was a bumper harvest in America or the Ukraine, well then you could couple to the grains and beef prices you could couple with suckler cows. If there was a collapse post quotas of milk prices you bail out the milk farmers, dairy farmers.”
Ó Cuív said this was a very useful idea to explore because it would become the hedge against volatility. He also said the fine print needs to be examined if coupling for seven years is set or not.
The power of retailers
The power of retailers in Ireland is an issue Ó Cuív has noted, in particular the meat industry and cattle prices.
“In cattle prices if you are always going to have a price to the primary producer that is below the cost of production, it is not worth producing, its not worth increasing your production. Why loose more money? Market prices determine production.”
Ó Cuív takes milk prices as another example. “In 1995 the primary producers of Irish milk got 43 per cent of the prices of litres of milk in the shop. In 2011 they were getting 32 per cent, that is 11 percentage less. If you want to put it into price, the prices of milk hasn’t changed much, but for Irish producers it is 11 per cent less. So the processors and predicted retailers are getting more money so it is not necessarily true that to say that paying a fair price to the primary producer is going to mean higher prices in the shops.”
Corporate farming is not big in Ireland, Ó Cuív said, in other words farms in Ireland are run mainly by families, which is key for society. “We all know somebody involved in agriculture and we’re very sympathetic to the needs of our agricultural sector. The difference between the response here to foot and mouth and the fodder crisis in the UK is huge.”
Under CAP, the European Commission will not give the money unless all the land is maintained in good ecological condition. “What this means is the taxpayers of Europe are very concerned to support the Burren farm or the Aran Islands farm because of their absolutely incredible ecology. It is achieving that balance of cattle and environment.”
In terms of greening he says this payment should be made available to the amount of greening a farmers is forced to do rather than some historic payment. “I challenge the minister to say on what grounds is he going to bring one farmer, we say €240 per hectares for greening and another farmer €30 per hectares. What is the objective basis? With one farmer it is five times as much. With greening it is very important that we do things on an objective basis.”
In addition, Ó Cuív is calling on the Agriculture Minister to make these adjustments over time. “Farmers need time to adjust, time to work out the price. “I am in favour of sustaining farming right across the island in good areas and bad areas because the price of a litre of milk or a loaf of bread or school books is the same for farms on good land as farms on bad land. And we have to remember that some farmers are ill, some old…so you know farmers as in the real farmers if you go to marts come in all types of makes and shapes as all humanity do and do you know any industry, any office, any civil service, any industry anywhere where everybody is at the same level of productivity. Everyone’s entitled to live and there has to be a social element to this payment.”
He is calling on a transparent CAP debate. “We need a debate, a very easily understood debater so we can see what we spent last time and then say pro rata if we are to keep going with the same schemes and then give pro rata based on the money allocated.”
Farming debt and dairy expansion.
Ó Cuív has observed that financial debt is widespread in farming in Ireland. “I am hugely concerned around debt issue with farming and put down parliamentary question to the agriculture minister on this issue. We talked about banks and so on and how he had arrangements and spoken to the banks and so on but he didn’t address the issue. There is I can absolutely say an absolutely massive issue in relation to farmer credit.”
Ó Cuív explained, in other words farmers have debts to merchants, co-ops, private merchants, private suppliers. “This is everyone and it seems to be much worse in intensive farm areas.”
He said he has seen a growing cash trade, particularly in Connermara. “In other words very few people put things on credit. They pay for everything as it goes.”
In terms of dairy expansion and post Quota, he said Ireland needs to be very cautious. “We have to be very, very, very careful about dairy expansion. When we look at what happened in the Celtic tiger or what happens in a lot of the industries when people get into financial planning as opposed the traditional farmer who knows what to do, knows how to make a profit, may not keep the best of books at times unfortunately but always leaves a big lot of head room and therefore doesn’t borrow a huge amount of money. Then if you do hit the wall you could borrow a bit. But I am very worried that in any business when a business man/women predicts there whole business on a whole load of figures on a piece of paper, it is worrying.”
Ó Cuív acknowledged the benefits of stress tests, but noted the difficulty in weather and price stress tests. “We don’t want farmers to effectively work for bankers, where most of their profits are going back in to service loans. Farming will become unsustainable if that happens.”
“It is very important that advisors, ministers, agri advisors, Teagasc and banks would take a cautious and steady as you go approach to lending and expansion. He called for a gradual growth strategy not a ‘fás ar an oiche’ approach. This is the Jack and the Beanstalk approach where it all grows up in one night, the one-night growth industry. This massive expansion, borrow like crazy, high gearing, working everything to the limit, your land to the limit, weather to the limit, price to the limit, or whatever.
“For the individual is a very high-risk strategy and I think its fair to say when you see those families that have been at it generation after generation, there needs to be a lot of calm heads who realised that you have to keep moving forward but at a steady sustainable pace.
Summer reading for Ó Cuív is an analysis of CAP Reform 2014-2020. “All the fine print needs to be examined in details. That will be my summer reading and after the recess. I’ll take the document away, go through it in detail, there will be more questions and more debate on Ireland’s rollout of CAP.”