Saturday 1 October 2016

There would be no farmers if we faced what UK counterparts are threatened with

Published 17/08/2016 | 02:30

Agricultural consultant, Mike Brady.
Agricultural consultant, Mike Brady.

British farmers are facing an uncertain future in the wake of the Brexit vote, with some already expressing regret due to fears that farm subsidies will be much lower than those received under the EU Common Agricultural Policy (EU CAP).

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The National Trust, which is the British equivalent of An Taisce, recently demanded an end to direct farm subsidies in the UK after Brexit. It stated: "Farmers should only be rewarded for managing land in a nature-friendly way and direct income supports should be removed altogether in a post-Brexit rural policy", a frightening prospect for all British farmers.

Surely this is a self-serving stance by the National Trust generated in a country where successive governments have followed a cheap food policy and its elected representatives pander to the utopian views of the countryside from a primarily urban electorate, most of whom have never even set foot on a farm. Maybe in Ireland, we in the industry do not appreciate the high level of support our people and Government attribute to our agri-food industry. The current utterings from the UK do, however, cause us to ask the question: what would happen in Ireland if farm subsidies suddenly stopped?

I recently asked a farmer client this very question and he answered as follows: "Sure the price of land should fall to €3,000 per acre and land rents should fall to about €50/acre." Then he paused for a few seconds and added: "But they would not fall at all would they?" He is probably right when it comes to land and farm profitability - Irish farmers are an enigma, they would most likely do the complete opposite of what economic theory would suggest.

Of course, in the medium to long term, there would certainly be an impact on the shape of industry. Teagasc National Farm Survey results from 2011-2015 indicate the nerve of arable, beef and sheep farmers would be severely tested in the no-farm-subsidy world. This is how I project the industry would react.

In the no farm subsidy world, initially, there would be no impact on the price or movement of land as suggested by my farmer client. However, many arable, beef and sheep farmers would eventually get sick of supplementing their farm business with hard earned off-farm income and they would cease farming and look to initially lease out and, possibly, eventually sell their holdings. Good quality land offered for lease in strong dairying areas would still command strong land rental prices in the region of €150-€250/acre, however land in non-dairying areas for lease would struggle to find interested takers if there were no farm subsidies.

In respect of the price of land for sale, presently it is the lack of supply which drives the uneconomic price of land in Ireland, but if significantly more land was offered for sale in all regions of the country, the price would certainly decrease except perhaps for hobby farms and land with development potential in and around cities and large towns. How much it would decrease by is the million dollar question.

Farmers & farm enterprises

There are circa 139,000 farmers making an application for the Basic Payment Scheme each year in Ireland. If farming without subsidies produced the Net Profits or Net Losses, excluding direct payments, per the National Farm Survey 2011-2015 average, there would be an exodus from farming.

If the farm organisations think they have problems now, imagine what the pressure would be in the no-farm-subsidy world. In every crisis there will be those who are innovative and raise their head above the surface to defy the odds, ie. beef & sheep farmers who diversify by selling their own meat etc.

There will also be the hobby farmers who genuinely like part-time farming and are happy to subsidise their hobby with off-farm income. However, the majority would simply exit farming by leasing or selling land, the rest will switch to dairying or plant their land, assuming forestry is still subsidised. It will be down to Darwin's theory of natural selection or survival of the fittest.

Agri-business

The knock-on effect of fewer farmers with fewer beef cattle, sheep and tillage would have a huge effect on agri-business. A lower kill of cattle and sheep would be offset somewhat by an increase in cull cows and beef from the dairy herd, but dairying will not be a land use option for all exiting beef, sheep and tillage farmers, therefore beef processors and all the associated business of hauliers, dealers, marts, merchants, vets etc would experience a big fall off in business. The Department of Agriculture Food & Marine (DAFM), Teagasc/private consultants, agricultural colleges and universities would have fewer customers and students. In fact, the fall-off in staff in DAFM would be huge with no schemes to administer and inspect. I'd expect there would be an expanded legal department in DAFM as the easy option of penalties on Basic Payment Scheme Payments for breaches of legislation would no longer be available to Department inspectors, which many farmers would welcome.

Rural Ireland & countryside

The big question is how different would our countryside and rural towns and villages be in the no-farm-subsidy world. Farmers are spenders, they spend locally, therefore the local shop, petrol station, pub and hardware store would feel the effect of less money in farmers' pockets. This clearly would not be good for rural Ireland. Some might argue that with better broadband, people will migrate back to rural Ireland to work remotely, countering the exodus to the big cities, but the reality of this has yet to happen. The equation is simple - less money in farmers' pockets equals less money spent on farms and in local communities.

Farming is not complicated, it is food production conducted in an environmentally friendly and sustainable manner. In today's first-world society, it is not about feeding the poor, it is about providing choices for consumers whether one chooses to eat fast food or slow food, organic or conventional, GM or Non-GM, vegetarian or carnivorous - it is all food produced by farmers. Farmers should be celebrated not demonised. True farmers sometimes don't help themselves by beating the same old drum when complaining about the weather and low prices or by driving expensive shiny tractors down O'Connell Street, causing traffic chaos when protesting just to get on the 9 O'clock News but farmers need to make a profit to survive. So if today's consumer wants choice in the food they eat, they will have to pay a fair price to allow farmers to survive and prosper.

That can be achieved by subsidising farmers directly or by paying extra for the food we buy. At current food prices, there would be no farmers without farm subsidies.

Mike Brady is Agricultural Consultant and Managing Director at Brady Group.

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