Check against Delivery
Introduction
I would like to thank the Farmer’s Journal for inviting me to speak to you today. I look forward to engaging with you on ways to protect the economic, social and environmental sustainability of Irish beef farming.
I am very much aware of the role played by the beef sector in sustaining the rural economy and rural communities across Ireland. It provides a very significant source of income and employment in rural Ireland, with a high multiplier effect into the wider rural economy. This is often in areas where there are limited alternative sources of economic activity or employment.
CHALLENGES
I know that beef farmers are facing significant challenges at the moment.
2018 weather
The unusual weather events in 2018, particularly the prolonged drought over the summer months, significantly increased input costs at farm level. Teagasc estimated the decline in gross margin for suckler enterprises in 2018 over 2017 at 19%, and 11% for finishers, mainly arising from increased input costs.
Brexit
The entire economy has faced on going uncertainty around the possibility of a no-deal Brexit. The impact would be felt across many sectors, but all of the analysis shows that agriculture, food and fisheries would be most acutely affected. High tariff costs could have a disastrous impact on our beef sector in particular, given that half of total beef exports, valued at €1.2 billion, go to the UK market.
The euro/sterling exchange rate, averaging 87.5 pence to the euro for the period since the Brexit referendum in June 2016, has also contributed to an erosion of competitiveness on our main beef export market. This compares to an average rate of 81.4 pence in the three years prior to that.
A no-deal Brexit, coupled with high tariff barriers, would have catastrophic implications for the beef sector in Ireland, Avoiding such a scenario continues to be the Government’s overriding policy priority.
Market disturbance
Looking in detail at market developments over the last number of months, there has been an unprecedented flat lining of producer prices from October 2018 to the present. The factors I have already described have been accompanied by high slaughter numbers. Supplies are beginning to tighten now and recently there has been some increase in price as a result.
In discussions with Commissioner Hogan and my European counterparts, I have called for the deployment of exceptional measures, to provide targeted aid to farm families who have suffered a sustained reduction in returns from the market. Discussions with the Commission are ongoing in this regard.
Structural problems
If we are to have an honest conversation about the beef sector, it must involve a discussion about its structure. Our roughly 75,000 specialist beef farms are small in scale relative to international competitors.
Beef farm incomes are low on average, with an ongoing dependence on CAP direct payments, but there are enormous differences in profitability between the least efficient and the most efficient.
One of the consequences of relatively small scale, and low levels of profitability in Irish beef farming is that the potential of the sector to absorb shocks is limited. Furthermore, the supply cycle associated with suckler beef means that there is no short-term mechanism to adjust supply in response to shocks.
Added to this is the complex range of production systems involved - from suckler to beef, suckler to store, suckler to finish. Each farmer along that supply chain is trying to make a margin.
And while there are many full time suckler farmers, part time farmers are also a critically important part of the story. 80% of beef farm households have income coming in from another source, and I do not see this changing any time soon. These people are farmers, and make a really important contribution to the industry and to rural communities.
For all of these reasons, direct payments will continue to be critically important for the beef sector, providing a measure of stability independent of the market price.
And this is why I have fought so hard at EU level for the restoration of the CAP Budget post 2020, and why I have resisted attempts from some member states to transfer funding from pillar I direct payments to pillar II. We have to protect EU funding that supports farm incomes.
It is also why we worked so hard to ensure that we had a good result from the review of the Areas of Natural Constraint Scheme and restored the value of the scheme to €250 million per annum.
Strengths
It is also critically important that we do not let the challenges facing the sector overwhelm us. If we look at the beef sector in Ireland there are undoubtedly a number of really key strengths.
Beef farming systems, but especially those involving sucklers, are natural, welfare friendly and relatively carbon efficient, based on a low cost grass-based model.
Built on this we have developed specialist suckler beef production, extensive cattle rearing systems, a beef traceability system that is as good as any in the world, and a credible and sustainable quality assurance scheme.
Our regulatory system verifies that the high standards of food safety and animal health and welfare are applied at every stage of the production chain. We know that these systems have credibility with competent authorities and with customers world-wide.
It is these strengths that have gained us the strong reputation of Irish grass fed beef production in the UK and EU markets, and has allowed us to open up new opportunities in important new markets, including China and Japan.
And when it comes to market trends, especially in Ireland, the EU or the UK, it is unquestionably the case that future demand for livestock based products will be will be affected by public sentiment in relation to climate change, in relation to biodiversity, in relation to diet and health.
I think it is time for the beef sector to fight back on these issues.
This fight back won’t be effective if it is about denial or retribution. Rather we need to tell the very positive story of Irish suckler beef. That is a story of a very natural way of producing beef, on temperate grasslands punctuated by trees and hedgerows and peatlands. It is also a story about farm families, caring for the land in a way that takes account of mother nature.
We also need to talk about the important dietary benefits of beef as source of the protein that is critically important for a healthy body and mind, and the fact that it tastes good.
We won’t win this battle by alienating those who associate their concerns about climate change or health with livestock farming or meat consumption. The vast majority of people enjoy beef as part of a healthy, balanced diet, and that is what we have to encourage.
SUPPORTS
And if all of these factors are important in how we tell our story, then we have to use the tools available to us to develop an infrastructure that can capitalise on these assets and help us to improve efficiency at the same time.
Beef farmers benefit from the full range of direct payments and Rural Development Programme schemes, with the average beef farmer receiving around €15,000 in direct payments per year, according to Teagasc’s National Farm Survey.
The Beef Data and Genomics Programme (BDGP) is part of that story. It is a significant measure targeted specifically at the suckler sector.
It provides Irish beef farmers with some €300 million in funding over the current Rural Development Programme (RDP) period, but critically, it can improve the environmental sustainability of the national suckler herd by increasing genetic merit.
So to those who have been critical of the scheme, I say that it may not be perfect, but we would be in a very much worse place without it. It was the right scheme at the right time, and we need it.
In addition, earlier this year I launched the Beef Environmental Efficiecny Programme (BEEP), a targeted support of €20 million euro for suckler farmers, specifically aimed at further improving the economic and environmental efficiency of beef production.
The pilot has been designed to be as straightforward as possible. As well as clear environmental and climate benefits, the Beef Environmental Efficiency Pilot will also help farmers to invest in their herds at a time of market uncertainty.
And of course over the lifetime of the current Rural Development Programme we will spend more than €1.5billion on our agri-environment schemes, primarily GLAS. Beef farmers make up the majority of the participants in GLAS.
Beef farmers will also be significant beneficaries of the €23 million in additional funding provided to the ANC scheme this year, which restores funding for that scheme to pre-recession levels.
LIVE EXPORTS
I want to talk briefly about live exports.
I have put significant effort into facilitating and developing live exports as an important alternative outlet for beef animals. Live exports are up 36% year to date compared to last year. My Department has worked hard to open new markets and opportunities for live exports, while ensuring adherence to the highest standards of animal welfare.
Already this year the French authorities approved additional lairage capacity in Cherbourg, we have negotiated enhanced access to Algeria following a technical mission there last week, and I led a trade missions to Turkey focussed on the live trade.
But it is also important that I sound a note of caution here. I am certain that many of those in the room saw the recent footage of Irish dairy calves being ill-treated in Cherbourg.
I know that every farmer in the room will have been appalled at that footage and will condemn it unconditionally. The future of this trade depends on our applying the very highest welfare standards.
I want to make it crystal clear that I am not, under any circumstances, prepared to sacrifice the future of this trade for short term gains.
It is just too important, and the reputation, not just of our live trade, but of our food sector, depends on our conducting our business in a way that meets the highest welfare standards.
Future Direction/Policy
This year is a significant one for a variety of reasons. Proposals on a new post 2020 Common Agriculture Policy have navigated the Agriculture Committee of the European Parliament. These proposals cannot now be considered by the Parliament in plenary session until after the European elections.
If the current proposals are agreed by the newly constituted Parliament, discussions will begin between the Council, the Commission and the Parliament on the agreement of a common position.
The policy instruments available in the Common Agricultural Policy will be crucial to the future of the beef sector, and I have already indicated that the Government has argued very strongly for a fully funded CAP Budget in the next round of EU Budget negotiations.
I am committed to ensuring that beef famers continue to receive strong support in the next CAP. My view is that such payments should support and encourage farmers to make the best decisions possible to improve the profitability, and the economic and environmental efficiency of their farms.
A number of key policy choices are coming up over the remainder of this year. We want to listen to what citizens have to say about these choices, and it is important, in that context, that the voices of beef farmers should be heard.
In this context we will be initiating consultation processes on
- The shape of the new National Plan for CAP post-2020;
- a consultation on the successor to Food Wise, an agri-food strategy for the decade to 2030.
What I would like to see is that the beef farm enterprise on each farm is as efficient and profitable as possible.
That really means that each farm family looks in detail at their own situation, with appropriate advisory supports:
Is the beef farm enterprise covering its cash costs? Are there means of making it more efficient – measuring grass growth; using information available for example from BDGP and BEEP to select the most efficient animals; ensuring herd health; focusing on efficient practices to save time and money.
I know that farming is a way of life, and for many older farmers, retirement is the last thing on their minds. However, it is also physically demanding, and tragically, farm safety data shows that older farmers have a higher risk of farm accidents.
Elderly farmers should consider long-term leasing for some or all of their farm land, with generous tax credits available. There are also significant supports to provide for the transfer or sale of all or part of the farm to a younger generation.
For younger people, there is a need to make farming an attractive option in terms of lifestyle, which can be balanced and managed along with off-farm employment. There is a significant danger that if we continue to talk down beef farming, it becomes a self-fulfilling prophecy.
Farm families should consider whether there is scope for an alternative farm enterprise to co-exist with the beef enterprise, whether that is agro-forestry, dairy calf rearing, or a tourist enterprise?
There are also wider questions which we need to address with along with the other stakeholders in the sector:
- Are processors and retailers prepared to pay a premium for Suckler beef?
- How can such a premium be shared with primary producers in a structured and transparent manner?
I conclude by stressing that one of the unique strengths of the agri-food sector has been the shared vision for the sustainable development of the sector in Food Wise 2025. Now more than ever it is crucial that we all continue to work together to face the challenges I have outlined.
Fundamental questions need to be considered about the future of the sector. My department can supply the policy tools to support the sector. These include income supports, support for advice and technology, supports for investment on farms, and supports for market development. The big challenge, however, is for the industry itself to decide on the value it places on the unique characteristics of Irish suckler beef, and how it wishes to reward farmers for producing that special product. And I ask this, not in an adversarial way, but in an honest effort to prompt the industry to reflect itself, on how it can contribute to making beef farming more economically sustainable.
There will be a number of opportunities over the next few months to have your voice heard on the future of the sector, and I hope that you do that.