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Thursday 19 July 2018

Darragh McCullough: CAP reform is just tinkering around the edges of a flawed and broken system

Darragh McCullough eats, sleeps and lives farming. Photo: David Conachy
Darragh McCullough eats, sleeps and lives farming. Photo: David Conachy
EU farm payments
Darragh McCullough

Darragh McCullough

I'm blue in the face giving out about the EU farm subsidy regime. Anybody who has been willing to listen to me in recent years will have heard why I think the payments system is a complete farce.

And despite the hype, I have no faith in the next 'reform' of the Common Agricultural Policy (CAP) to change anything for the better.

We'll hear plenty over the coming months and years about a switch from a compliance-based to performance-based system, but in reality it won't amount to anything more than tinkering at the edges.

Instead, there will be a gradual fall away in supports and subsidies to the point where they become irrelevant to the ability of the farmer to stay in business.

Political 'imperatives' will force that process to be dragged out over years so that it will be inflation that will ultimately eat away at the core value of the payments.

Let's clear up a few things before we go any further. EU payments to farmers are a subsidy. I can't abide all the huffing and puffing (and PR money) that goes into trying to package CAP payments as anything other than a hand-out to help farmers remain profitable.

This notion that they are payments for keeping the environment nice or producing safe food is a load of codswallop.

If that was true it would mean that farming in every country that doesn't have a CAP regime would be wreaking havoc on the countryside and churning out food that was sub-standard. Instead, we know that Kiwi dairy products are up there with the best of Irish, Ukrainian grain comes in by the boatload into Irish ports, and we all guzzle and chomp our way through Brazilian orange juice, Peruvian raspberries and Moroccan salad leaves.

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The next myth to put to bed is the idea that these subsidies help farmers stay competitive. I would argue that they do the opposite.

Keeping unprofitable farms going by feeding them a subsidy from Europe only ties up land in either inherently unprofitable enterprises or with farmers that are unable to run successful businesses.

If you follow this logic through, you will rightly wonder if the biggest beneficiary from farm payments are the likes of the privately owned businesses that are then able to buy what are effectively subsidised produce from the farmers.

These big businesses must be only delighted with the politicians and farm organisations that tog out every five years to bang tables and campaign for CAP payments to be maintained.

Imagine how much extra they would have to pay for their raw materials if farmers actually had to charge them the full cost of production?

Instead, Teagasc figures show year after year that drystock farmers sell their stock at break-even, if not loss-making prices and rely on the farm subsidies for a margin.

But it's not just the beef barons that are the true indirect beneficiaries of Irish and European taxpayers' largesse. Landowners are also regulars in the CAP winners' enclosure.

While most farmers are landowners in their own right, most full-time farmers are very reliant on rented land to achieve the scale required to make a living.

This land is invariably rented from former farmers or the descendants of former farmers.

The bonkers historical links on farm payments that politicians and farmers here lobbied hard for has effectively added another €100 per acre to the rental income on each acre.

For those of you lucky enough to be unfamiliar with how this transfer of taxpayers' money transfers into the pockets of landowners, here's how it works.

Jimmy has 100ac of land to rent out. He has farmed all his life and had an EU farm payment of €10,000.

That payment is linked to those acres. So you rent those acres for your farm operation, you will then fall in line for that EU payment.

But of course Jimmy knows this and says that if the going rate for the land is €100/ac, then you can surely afford to pay him €200/ac when the EU farm payment is included.

When this was pointed out to the mandarins and politicians that were designing this archaic system over a decade ago, they insisted that the farmer renting in the land would be well able to tell the landowner where to go with their demands.

Any economist would have told you differently. Supply and demand is the phrase that springs to mind, so that farmer that needs the land can justify handing over the EU payment since they are just really interested in growing more crops or grazing more stock.

In doing so, however, it builds in another overhead cost that makes Irish agriculture less competitive on the global stage that it is required to trade on.

So a switch from compliance - to performance-based criteria for farmers to access EU subsidies isn't going to tackle any of the systemic flaws in the current system.

In fact, with the proposal to decentralise from much of the decision-making on how the €1.5bn gets divvied up among Irish farmers from Brussels back to Dublin, I dread to think what kind of system will be cooked up here.

Unfortunately, it will most likely pander to the lowest common denominator to keep the current incumbents in their respective political offices.

None of the views outlined here are popular, but that doesn't take away from the harsh truth they contain - the CAP is broken and the proposed 'reform' will do nothing to change that.

Darragh McCullough farms in Meath and presents RTÉ's Ear to the Ground programme


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