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Thursday 15 November 2018

Darragh McCullough: Why throw more subsidies at a sector that struggles to make a profit?

Darragh McCullough on his farm in Stamullen, Co Meath. Photo: Gerry Mooney
Darragh McCullough on his farm in Stamullen, Co Meath. Photo: Gerry Mooney

Despite outraging half of Ireland's beef farmers with my last piece, Farming Independent editors have let me off the leash again.

However, I stand by all my previous assertions that it doesn't make any sense to throw any more subsidies at a sector that always struggles to clear a profit, while at the same time adding to Ireland's growing greenhouse gas emissions problem.

Some of the reaction to my last column pulled no punches. "Sick of reading this dairy-biased s**t about suckler farming in Ireland written by a guy that grows lettuce. Any practical experience?" was one tweet.

But even the more considered responses were guilty of peddling a line that I believe will serve beef farmers poorly in the long run.

For example, the IFA's Derek Deane said the Budget only provided €20m for sucklers, while forestry got €100m.

But what about the hundreds of millions of taxpayers' money already channelled annually into suckling via the Basic Payment (which forestry doesn't get) and the Beef Data Genomics Programme, along with ANC payments, TAMS and too many others to mention here.

Equally misleading is the idea that it's the dairy sector's fault that there's no profit in beef.

Beef men can't rely on dairy farmers to produce exactly the kind of stock they want (or, more precisely, what the beef processors want). Dairy men don't rely on the beef sector for help to fill their milk tanks and they don't need to apologise to anyone for focusing on what's paying the bills - milk solids.

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The real issue is, why can't the beef barons pay suckler men enough to cover the production of specialised beef stock?

But Mr Deane inadvertently provided the answer in his letter in this paper criticising me and the dairy sector: "[Irish] dairying has a great competitive advantage in terms of global competition. In contrast, suckler farming here cannot compete with Brazilian ranches or American feedlots."

The former IFA beef chairman added: "This is why we must target support to the sector."

How can it make sense to keep throwing ever increasing amounts of subsidies at the loss-making beef sector?

The usual response is that the rural economy will be at a loss without it.

This is the central thesis of the IFA commissioned report on the suckler sector published earlier this summer.

It claims that a 10pc fall in suckler numbers would result in a €145m drop in farm output, and a further drop of €150m downstream from the processing of beef.

What the report completely ignores, however, is the economic activity that would most likely fill the void created by any fall in suckler numbers.

Approximately half of the suckler herd lives east of the Shannon. So if the suckler herd shrank by 50pc from its current level of 900,000 cows, the fall could conceivably be all concentrated in Munster and Leinster.

Abandoned

That land is highly unlikely to be abandoned. It goes without saying that the dairy sector doesn't have a right to expand at the expense of the suckler sector.

But unless Ireland suddenly becomes a communist state, market forces will prevail and at this point of our economic development, that means that dairy enterprises will likely expand to fill the gap.

Regardless of what enterprise employs the land, be it dairy, tillage, forestry or something else, it will be almost guaranteed to generate more economic activity than the beef it replaces.

The average dairy cow generates about €2,000 of turnover annually. That's more than your average suckler cow generates, and that's before you double (at least) the value of the output when the milk and meat is processed downstream.

So the idea that the national economy would be €305m worse off with every 10pc drop in the suckler herd is just plain wrong.

The organisation is doing farmers a great disservice stating this as fact.

The simple reality is that any profitable farm enterprise that replaces a loss-making one will always return more for society as a whole.

In fact, I'd wager that even replacing sucklers east of the Shannon with half the number of dairy cows would still leave the economy better off.

Unfortunately, we don't have any published detailed analysis of what the economics would be if various changes to the beef sector played out.

That's an indictment of not just the leadership in Teagasc, but the whole agriculture sector.

Isn't it appalling that nobody has the guts to put the full picture in front of the farming community?

I suspect that if there was a big fall in suckler numbers in Leinster and Munster, the resulting scarcity of top-quality cattle would make the remaining suckler farmers in the West more profitable.

But again we've no economic analysis to guide us on that.

Contrary to other comments on my previous analysis, I don't think the beef sector is "doomed".

Challenges

In the same way that beef farmers still have a role in the dairy-dominated farm sector of New Zealand, there will always be a demand for specialist Irish beef producers, regardless of the challenges posed by veganism, dairying or climate change.

That's because our suckler farmers produce some of the most environmentally friendly beef in the world.

Their animals produce a meat that cannot be substituted by anything from the dairy herd or a test tube.

I also know how important beef farming is to some farmers.

It's not just part of their farm - it's part of who they are, and their culture.

Nobody wants to take that away from anybody. But that doesn't mean that beef farmer has a right to subsidies to stay in business.

A far better scenario is one where a farmer can choose to run a beef enterprise if they want to because they can make a profit from it.

Throwing more subsidies at it will only push that goal further away.

Blaming dairying for the lack of profitability in beef is a bogus ploy.

Churning out reports that offer only half of the economic story is disingenuous.

If these facts could be accepted, I'll happily grow lettuce all day long.

The real issue is why can't the beef barons pay suckler men enough to cover the production of specialised beef stock?

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