Farm Ireland

Tuesday 12 December 2017

Why the ewes got €10 each in the Budget while pensioners only got €5

A ewe on the popular Kerry Way walking trail near Farraniaragh, just off the Ring of Kerry, overlooking Derrynane Harbour, Abbey Island, Lamb's Head across the Kenmare River to the Beara Peninsula. Ann Talbot
A ewe on the popular Kerry Way walking trail near Farraniaragh, just off the Ring of Kerry, overlooking Derrynane Harbour, Abbey Island, Lamb's Head across the Kenmare River to the Beara Peninsula. Ann Talbot

Thia Hennessy

Last week saw a special emphasis on the sheep sector, not just within the national Budget but also at European level, with the launch of Commissioner Hogan's Sheepmeat Forum report. So why are sheep currently under the spotlight?

Since the 1980s, sheep numbers in Europe have fallen by 25 million head. The UK, Spain, Romania and Greece are the main sheepmeat-producing countries in Europe, with Ireland coming in seventh place. Since 1990, sheep numbers have fallen by over 30pc in the UK and a staggering 45pc in Ireland.

It is no surprise sheep numbers are in decline given the poor profitability at farm level. According to Teagasc's National Farm Survey, sheep farm incomes averaged about €15,000 over the last five years but, crucially, direct payments typically comprised over 100pc of income.

In other words, the cost of keeping a sheep exceeds the market price. The sustainability of this situation has to be questioned, especially considering that direct payments are fully decoupled. Clearly there is a supply side problem, but the demand side is also problematic.

Why don't more young people eat lamb?

Lamb is in a losing battle against cheaper meats. Expenditure on lamb in the EU has declined by over 20pc in the last 15 years, while poultry expenditure increased by 70pc. The average age of European lamb consumers is increasing, with younger consumers turning away from a product that is often perceived as being fatty, difficult to cook and the subject of recent anti-meat eating campaigns.

Contracting supply, albeit along with contracting demand, has resulted in some recent increases in producer prices, but price remains volatile and typically input costs are increasing as fast, if not faster, than output prices.

It was in this context that Commissioner Hogan asked the Sheepmeat Forum, an EU level committee chaired by John Bryan (former IFA President), to put forward a positive roadmap for the sector.

Also Read

One of the main recommendations arising from the forum and presented in Brussels last week was the need for a promotion programme for lamb, aimed at reversing declining consumption trends and tackling consumers' often negative perception of lamb. The report also called for improved market transparency around pricing, as well as a newly-designed environmental payment for sheep in recognition of the important role sheep farmers play in delivering public goods.

Sheep and the public good

Public goods are those provided by the State rather than private industry as they suffer from a free rider problem. For example, you can ask people to pay for a beautiful countryside as they would for any other good, but those that refuse to pay can't be excluded from enjoying it. For this reason, private industry will not supply public goods and the State must ensure provision. It is argued that of all the farming types, sheep farmers punch above their weight in terms of public good provision.

Over 90pc of sheep production in Europe occurs in less favoured and upland areas. Appropriately managed grazing of sheep prevents the return of scrub; ensures that natural flora and fauna can prosper, hence improving biodiversity; the carbon stored in peatland remains intact, hence contributing to the fight against climate change and, in Mediterranean Europe, plays a role in the prevention of fires.

All of these things combined contribute to the aesthetics of the countryside and collectively are known as ecosystem services. It is increasingly recognised in Europe that farmers should be rewarded for their provision of ecosystem services and sheep farming, because of its extensive nature and where it's located, means it is one of the greatest providers of such services.

The Sheepmeat Forum highlighted the important role sheep farmers play in providing pubic goods for society and highlighted that these goods are under threat due to the contraction of sheep numbers and the associated abandonment of land. The forum sent a clear message to the commissioner that these non-market goods are important and farmers need to be rewarded for their provision with a new environmental payment. As the commissioner faces into a potential redesign of the Common Agricultural Policy, public goods and ecosystem services are likely to be high on his agenda.

Thia Hennessy, Professor of Agri-food Business, University College Cork

Indo Farming