Dec 062012

Address by Mr. John Comer, President of ICMSA, to the Association’s AGM, 30 November 2012, Limerick Racecourse, Patrickswell, Limerick.

Ladies and gentlemen, I would firstly like to welcome you all here today and our two guest speakers, the Minister for Agriculture, Food & Marine, Mr. Simon Coveney and Mr. Kevin Lane, Chief Executive of the Irish Dairy Board to our AGM and indeed my first AGM as President.   Both their organisations have a key role in the development of our Agri-Food sector and to our own futures and I hope they will give you a clear picture of their plans and priorities today.   I hope today, Minister, you will hear the concerns of our members at first hand and ICMSA, as an organisation will work with you to bring about change to address these very valid concerns.

In my address, I intend to focus on a number of issues which I believe are key to farmers at this time.    At our last AGM, there was an air of confidence amongst farmers regarding their futures but unfortunately, this has been largely eroded in 2012 in what has and continues to be an extremely difficult year for farmers, a year when atrocious weather conditions has been compounded by reduced output prices and increased input costs.   Farmers have seen over the past number of years huge variations in weather conditions and it is quite clearly an issue that farmers will have to factor into their future business plans going forward.   Farmers are living on a day to day basis and the period until next Spring is going to be extremely difficult for farmers and the people in positions of authority should not forget this.   ICMSA is concerned that the Government is not taking seriously enough the problems facing some farmers and the Government at this stage need to examine every initiative possible to support farmers.   There are unprecedented cashflow and other pressures at farm level and people at all levels of dairy processors, meat plants, credit institutions and Government need to take their heads out of the sand and recognise this fact and assist farmers during this very difficult period.    Minister, we are clearly saying today that we will be looking to you to introduce measures to alleviate the pressures on farmers.   These includes getting payments to farmers on time, nitrates rules, amendments to scheme rules including inspections to take account of the weather and special assistance where required by individual farmers.

Over the next year and indeed, next week in the Budget, major decisions will be taken at EU and national level in relation to agriculture and we are dependent on our Minister to fight our cause at all levels because the outcome of these negotiations will decide our very future in farming and the role of the Agri-Food sector in the Irish economy.   ICMSA, is the family farm organisation, and Minister, I am firmly stating to you here today, that the family farm structure as we know it in Ireland is under major threat and policy decisions taken over the next twelve months will decide its very future.   Decisions taken must be based on protecting our family farm structure and not simply to provide our dairy and beef processors with the maximum amount of produce at the least possible cost.   Food Harvest 2020 has laudable objectives but these will not happen unless our members can earn a reasonable and fair income from farming.   Family farms will play their role in economic recovery but we cannot continue to produce at little or no return and we are not going to expand production with no financial reward for our family.    Farmers are not going to become busy fools for the benefit of processors and retailers and EU policy must ensure that farmers get their fair share of the return in the supply chain.   It is not happening at present.

Quite clearly, the Budget next week is a key issue for farmers.   In Budget 2012, ICMSA welcomed the initiatives to support land restructuring in particular in relation to stamp duty but on farm schemes, lets be clear, farmers took a severe hit.   Farmers today are asking, where is our “Croke Park Agreement”, why aren’t our schemes protected like the wage levels of public servants.   Farmers for example in REPS 4 signed up to a five year contract in good faith, met the conditions and with a stroke of a pen, their payments have been cut on two occasions.   Minister, ICMSA is clearly stating that farmers have had enough and there must be no further cuts to farm schemes.   If cuts are to be made in the Department budget, you must look elsewhere as farmers have given enough.   The farm schemes must be maintained.   If civil servants are entitled to a Croke Park, then so should we and farmers will judge this on the basis of funding of farm schemes.   Farm incomes have taken a severe hit this year and the Government must acknowledge this by maintaining funding levels for farm schemes.

In our Pre-Budget Submission, ICMSA made a number of clear and constructive proposals regarding the need for farm restructuring and I would hope that the Government implement these proposals to allow farm families to develop a long-term sustainable land structure.   The stamp duty and capital tax regime needs to be reformed to allow sensible restructuring of farms.

Quite clearly, the future of the CAP is a key issue for Irish farmers.   I was in Brussels on Friday last to monitor developments on the MFF negotiations.   It is quite clear to me that those Member States advocating cuts to the EU budget and in turn CAP have got the upper hand and I am very concerned at this stage that the overall CAP budget and Ireland’s share is facing a substantial cut.   Lets be very clear, Irish farmers cannot afford a cut.   We’ve taken serious hits at national level, we can’t afford further hits at EU level.  Since the introduction of the Single Farm Payment, the payment has already been cut by 13 percent and farmers have suffered another 0.9% cut this year.   In a year like 2012, farmers are acutely conscious of the importance of the Single Farm Payment in terms of sustaining their business and if the proposed budget cuts of last Friday come to fruition, it will have major negative implications for Irish farmers, in particular active farmers.

Quite clearly at this stage, the pro CAP lobby need to press harder for no further cuts to the Budget beyond those proposed by the EU Commission.   A national effort is required in this regard and the debate regarding its distribution should take place after we know our allocation.   Once the budget is known, Minister, there clearly are issues that need to be addressed.    The proposal to flatten the Single Farm Payment on a hectare basis leading to a single uniform payment in 2019 must not be implemented.  It would cause major financial problems for large numbers of farmers and farm families particularly those with repayment commitments and who developed their farm on the basis of the Single Farm Payment.   The Single Farm Payment system already contains many anomalies but we believe that the Minister’s approach on maximum gains/losses is the correct approach to take.   However, we are concerned regarding two aspects at present.   ICMSA position is that payments must be targeted at active farmers and we are very concerned that the current proposals being discussed will not allow Ireland to target payments to active farmers.   This needs to be addressed.   In relation to coupling, dairy farmers will not pay for a coupled payment for the beef sector.   Dairy farmers have paid heavily on the beef price grid and we will not pay again.   There can be no justification for cutting the Single Farm Payment of farmers in one sector to pay for a coupled payment for another sector and we will not accept it.

“Greening” is a word that is causing great concern to Irish farmers.   What does “Greening” actually mean for Irish farmers?   Go to any farmers meeting and a key concern is the bureauracy and fear associated with the Single Farm Payment.   We need to know the exact details of what greening means as for far too long, the EU Commission have proposed so called simple initiatives that bring about enormous amounts of bureaucracy and cost for farmers.   We must ensure that this does not happen on this occasion.

On the base year of 2014, we said it last year and we’ll say it again, a future base year is madness and a recipe for disaster.   If the bureaucrats cannot see this, you would simply have to question their knowledge of agriculture and in particular Irish agriculture.    Some people appear dismissive on this matter but it is a massive issue for active farmers and farmers are finding themselves no longer being able to lease land that they have farmed for years.   It will increase the cost of land to active farmers and it will also lead to an increased proportion of the Single Farm Payment going to non-active farmers.  It is, in short, a recipe for disaster.     The current proposed base year must be changed or at least Ireland should get sufficient flexibility so that we can introduce a different base year to protect those farmers relying on rented land to earn their income.  If we’re serious about getting a sound set of policies for Irish farming, we must get a base year which will suit Irish conditions.

A key issue which I believe is not getting the attention it deserves in these negotiations is price volatility.   Dairy farmers will never forget 2009 and the damage is still there today on many farms.   Politicians have decided that we, as farmers, will be better off in an unregulated market.   Lets be clear, an unregulated market did not work in the banking industry and it won’t work in the dairy industry.   In agriculture, we only have to look at the pig and poultry sectors in Ireland to see the outcome of unregulated markets and the decline in the numbers of farmers in these sectors.   Unless, Minister, you and your colleagues put in place appropriate policies to deal with volatility, our members will remain extremely exposed and remember, our retailers, our processors will all survive by passing all the negative impacts back to the primary producer.   ICMSA certainly agrees that we can expand output at farm level.  Whether that can be done profitably is not so certain.

I attended the EMB protest in Brussels earlier this week and all our European counterparts have the same problem of an ever tightening price cost squeeze.   ICMSA supports the EMB call for a EU Market Monitoring Agency that would track the margins in the food supply chain.   The EU needs to analyse the marketplace, better predict potential crisis and take action in advance of the crisis to bring the market back into balance.   The EU cannot leave the regulation of the food sector to profit hungry retailers and multinational processors.  It is about time that the truth regarding margins and profits came out and I would pose the questions, is it healthy the continuing growth in the power of a small number of multiple retailers in controlling our global food supply chain.   Politicians have talked long enough on this matter and have done little to address the problem, it is about time action was taken with clear regulation of the market from farm to fork.   In Brussels earlier this week, the anger was there for all to see and this genuine anger is also in Ireland and our concerns must be addressed.

On the dairy side, the reduction in milk price this year has put enormous pressure on farm incomes.   The current strong prices for dairy products must translate into milk price increases and I believe that we can look forward with optimism regarding milk price in 2013.   Supply contracts are now a major concern for our members in particular in Dairygold, Kerry and Glanbia.   Co-ops wanted quotas abolished, they got that and we now see them trying to introduce their own quotas and their own rules regarding the supply of milk.   Contracts must be fair to both suppliers and processors and Minister, you and your Department have a role to play in this regard.   At the moment, we have contracts for processor needs, not farmer needs.   This needs to be addressed and the rights of farmers protected in full.    In relation to the proposed dairy quality assurance scheme, farmers need to be convinced regarding the merits of this proposal and the clear question farmers have is what benefits is there for me as a dairy farmer?

Current beef prices are at a historic high level and are likely to continue because there is a reasonable balance regarding supply and demand for beef in Europe.   However, it is important to realise that the market balance and therefore, high prices, have been achieved by a substantial reduction in supply internationally and Europe has moved from being net importer to a net exporter.   Farmers need to be conscious of these factors in assessing likely future cattle and beef prices.     We also need to be conscious of the role played by our processors.   We all know the price gap currently between Irish and UK beef prices and this can only be explained by the higher margin being taken by our processors and is again another example in the imbalance in the beef supply chain.   Live exports are hugely important to farmers and in 2013, a renewed emphasis is needed to develop alternative markets and competition for our meat processors to force them to pay a fair market price for cattle.

Net profit is the key issue for farmer.  Milk and beef prices are one element of this but the other, input costs is becoming a bigger issue year after year.   We must control the costs of farming in Ireland and ensure that they do not rise faster than our competitors – and by competitors, I mean not just farmers in other EU Member States but on the world stage.  This is a formidable challenge given the very high environmental and other constraints in Europe.    Government action is required on this issue and ICMSA, for example, in the past highlighted the glaring gap between the cost of veterinary medicines in Ireland relative to Northern Ireland and unfortunately, no action has been taken.   These cost differentials cannot be allowed to continue and we must take action and influence costs where we have a direct influence through excessive regulation.

With regard to credit, I am very concerned, not just with the availability of credit to fund required farm development, but the actual cost of credit relative to what is available in other countries.  There are signs that the gap between Irish interest rates for the farming and SME sector is widening, relative to other competitor states, as Irish banks seek to rebuild their balance sheets.  There is need for long-term capital at competitive rates and ICMSA has been working on this for some time.  However, I feel it is time that the Government address this as an essential aspect of developing our sector.  It would be a major mistake to plan for long-term investment based on a continuation of the current historically low interest rates as interest rates are likely to increase in the medium term when hopefully there will be an economic upturn.    On some farms, restructuring of debt is required and the Government need to act to ensure that such restructuring will be facilitated by our banks at a fair and reasonable cost.

Like all families, farmers place a high value in ensuring that their children get the best possible education and thus, the best start possible to life.   Thus, the proposal for a capital asset test for Higher Education Grants is of major concern to farmers.   Assessment for grants should at all times be based on your income and not on the value of your assets.   The assets are the means by which farmers earn their income and only that and should under no circumstances be included in a means test.   ICMSA has led the campaign on this issue and Minister, I hope that your Government rejects a capital asset test which would be totally unfair on farmers whose income is derived from their farm.

We constantly listen to politicians regarding the cost of doing business in Ireland, and the sheltered sectors such as the legal profession.   The decision of the Law Society of Ireland, who have been given the power to introduce regulations, to compel people to employ two solicitors in property conveyancing is a case in point.   This is an issue that our Government need to take action on.   We cannot allow solicitors to introduce regulations that will ultimately benefit their own members at the expense of people who wish to transfer their property to the next generation.  The Government must intervene and say stop and protect the productive sectors of the Irish economy.   Farming like other industries operate in a competitive environment and our Government cannot allow vested interests to introduce additional costs that will undermine our competitiveness.

In terms of the wider rural economy, the decisions by Government, banks and others over the past number of years in terms of closures of banks, post offices, schools, school transport, hospitals, and garda stations to name a few smacks of decisions being taken by Dublin based officials with absolutely no appreciation of the impact on rural areas, villages and towns.   Rural people pay their taxes like everyone else and we are entitled to the same levels of services.   Rural TD’s should take note that rural people are fed up at being treated as second class citizens and going forward, we will not tolerate the diminution of our services.

Minister, ladies and gentlemen, I have just touched on a number of issues facing us today, there are many others.   The Budget next week will provide a strong indicator to farmers regarding the commitment of this Government to farm families and rural areas.   I hope, Minister, I will be in a position to complement you and your colleagues next week but I will only do so on the basis that farmers are treated fairly in the Budget and over the next year, it is absolutely essential that a good deal is achieved under the CAP negotiations.

Farmers are in very difficult times but thankfully, the outlook for product prices are good and with the help of all stakeholders in the industry, hopefully, we can work our way through our current problems and look forward to an improved 2013.