Friday 30 September 2016

Analysis: Dispute exposes flaws in IFA's funding model

Declan O'Brien

Published 24/08/2016 | 02:30

IFA members pictured at a protest last February in Bunclody, Co Wexford against the proposed ABP takeover of Slaney Meats
IFA members pictured at a protest last February in Bunclody, Co Wexford against the proposed ABP takeover of Slaney Meats

There has always been a very distinct cultural difference between Ireland's dairy and beef sectors.

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While the former has been dominated by farmer-owned co-ops, hard-nosed businessmen have held sway in the latter since the demise of the farmer-owned Irish Meat Packers in the early 1980s.

However, farmer influence at board level in the dairy processors - and in the marts - could prove crucial over the coming weeks as the battle between the IFA and ABP gathers steam.

Whatever the motivation behind changing the procedures for collecting the European Involvement Fund (EIF) levy, ABP has certainly struck the farm organisations on a weak flank.

Levies by their very nature are disliked by farmers, but the fact that the EIF is collected by the factories on behalf of the farm organisations makes it doubly unpopular.

Even farmers who agree with the concept of levies are uneasy with the reality of meat processors collecting these funds.

And that is because it is difficult to refute the contention that this method of collecting funds weakens the independence of the farm bodies and compromises their ability to fight for higher cattle and sheep prices.

Last year's IFA salary scandal has further complicated the debate, with some farmers associating the income generated by the EIF with the inflated wages and perks paid to Bluebell's top brass.

And yet the EIF is critical for the overall financing of the farm organisations - particularly the IFA.

In 2015 the EIF generated €5.3m in income for the farm organisations, with €4.7m going to the IFA.

Of this total, around €1.5m was collected from the beef factories, with ABP collecting around €400,000.

For the IFA it will be critically important to protect the existing levy collection agreements with the remaining players in the meat processing sector, the marts and the dairies.

And this is where the old co-op ethos will come into play. Marts and dairy processors with farmer board members - many of whom are in IFA - are very unlikely to make changes to the levy collection structures which would undermine the farm body's financial independence.

A quick ring around the dairy processors over the last few days has confirmed that they have no plans to change their EIF collection procedures. Neither have the marts.

Meanwhile, meat processors - apart from ABP obviously - appear to be taking 'a wait and see' approach.

This dispute has already exposed a critical weakness within the IFA's funding model, and has resurrected deep internal tensions about how the organisation should be funded.

However, if the clash with ABP is perceived as a threat to the IFA, it could, paradoxically, rally and unify the association.

How this battle plays out will certainly be interesting and may have long-term implications for the farm organisations and their relations with the food processing sector.

Indo Farming

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