Why do farmers stay with cattle farming at a time when the SFP is decoupled from production?
Published 01/02/2011 | 05:00
If there is so little profit in the business why are people staying in beef?" asked Darragh McCullough in this paper last week. He had just heard Teagasc predicting negative net margins for beef again this year.
Teagasc predicted a 4pc rise in beef prices this year but rising costs would more than swallow this increase. Beef farmers will this year subsidise their production with a slice of cash from the single farm payment (SFP) again.
Think back to the premiums that morphed into the SFP. There was €150 at 10 months, €150 at 18 months plus €80 extensification at each stage; €224 suckler cow plus extensification, and then there was the €80 slaughter premium.
Making a profit in the absence of these premiums was always going to be a challenge. And while there has been a welcome rise in the price of beef since the turn of the year, beef prices to the farmer still lag well behind inflation and behind the increase in purchasing power of the rest of society.
Back in the late 1980s the Irish beef price headed -- in old money -- towards 120p/lb, or the equivalent of the 336c/kg of recent weeks. But in 1989 the average industrial wage was €272 a week. Today, this has increased to €595 a week, a rise of 219pc (TD salaries grew by more than 300pc over the same period).
In 1989, the humble pint cost the equivalent of €1.87. Today, this has risen 236pc to €4.30. To buy the same number of pints as it could 20-odd years back, today's bullock would need to sell at about €7/kg. This is why you will not see many pure cattle farmers driving around in 2011-registered cars.
Back to the original question; why do farmers stay in cattle farming, especially at a time when the SFP is actually decoupled from production?
We can speculate on several reasons: