Darragh McCullough: 'Welcome to 'Treasure Island' where retailers, not farmers, are the ones on the pig's back'

Darragh McCullough pictured on his farm in Stamullen, Co. Meath. Picture credit; Damien Eagers / INM
Darragh McCullough pictured on his farm in Stamullen, Co. Meath. Picture credit; Damien Eagers / INM
Profits: Tesco analysts referred to Ireland as ‘Treasure Island’ such were the profits to be milked here
Darragh McCullough

Darragh McCullough

Figures showing that food costs 20pc more in Ireland compared to the rest of Europe are further proof that Irish consumers are still being ripped off for their food. But who's to blame? The easy target for some are the food producers, aka farmers.

And with potato prices up this year at least 50pc up on recent averages, and pig prices up by at least 25pc, the non-farmer could be forgiven for thinking that at least some farmers are on the pig's back, so to speak.

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But a closer reading of the numbers explodes the notion that farmers are coining it compared to their EU counterparts.

Take dairy products as an example. The data shows that Irish consumers pay 21pc more than the European average for milk, cheese and eggs, and a full 25pc more than the British consumer.

Even allowing for the fact that Irish eggs might be more expensive than British eggs because of the scale of layer units there and the cost of feed, there is still no logical explanation for the huge gap between Irish and UK dairy prices.

Anyone could tell you that Irish milk at farm-gate is among the cheapest in the world simply because we can produce it at less than anyone else bar the Kiwis.

And the dairy product that is processed here has to be competitive when it's exported all over the world, so it is sold as low-priced as any other, and certainly no pricier than any UK product.

So where is the 20-25pc extra margin in Irish supermarkets going? The clue is in the question.

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Tesco analysts used to refer to Ireland as 'Treasure Island', such were the profits to be milked from the poor Paddies and Bridies pushing trolleys up and down their supermarket aisles.

The same reason explains why Ireland's meat prices are 10pc higher than the UK, even though we supply them with more meat than we consume ourselves.

Of course the retailers will trot out guff about the higher cost of doing business in Ireland, due to compo-hunters driving up premiums and the fact that we are still the most westerly island off the coast of Europe.

But from my experience trucking fresh product the opposite way into Britain and Europe, the cost of freight is tiny relative to the overall value of the product.

Unfortunately, there is nothing that I or anyone else can say or do to force the retailers to charge less. There have been reams of studies and committees at a national and EU level set up to try to put manners on the retailers.

But this is capitalism folks. No rules short of introducing Communism are going to reduce the profits involved. Even the arrival of the famed 'discounters' of Lidl and Aldi have done nothing to take the shine off Treasure Island's profits.

There is a sub-plot in the data that may give readers more pause for thought. It is clear from the numbers that big is better when cost and value are at play.

Even though Germany and Britain are arguably two of the richest economies in the world, they have cheaper food for their citizens than the EU average.

That's a remarkable statistic when you consider that they are being compared to economies such as Romania, Macedonia and Turkey (yes, they were included in the data, too).

The power of bulk buying and selling is what keeps food prices in those countries at rock bottom. When you compare Ireland to the likes of Finland, Iceland and Denmark, we fit right in.

The same forces are played out at every step of the food chain. Back at the level of the individual farmer, the 2,500-acre cereal farm in Lincolnshire can produce wheat or spuds for far less than their Irish equivalent.

In a normal year, their surpluses keep Irish prices depressed. The only reason that retail-grade potato prices are at €500/t this year compared to the normal €300-350/t is the drought that slashed yields across Europe last summer.

Let's call a spade a spade: it's a great time to be one of the remaining 200 Irish potato farmers, with returns this year sure to keep them in the gig for years to come.

The same is happening in the pig business, with the sheer scale of the remaining 350 operations meaning this year's price increase has increased sales for each farmer by an average of €4,000 per week. That's a lot of money, but chat with your nearest pig farmer before you look to buy the next piggery for sale. It's not for the faint-hearted, with serious nerve required to tough out the downturns.

I wonder if pigs and spuds are a window into the future for most farm commodities? It's already happened in the veg game over the last decade, where there's now only a handful of producers of any line, be it carrots or cabbage.

The political talk suggests beef fattening is next for consolidation. And is it that far-fetched to think that Ireland's 1.5 million dairy cows will be milked by as few as 1,500 farmers with one, two or three units each?

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