Nov 262013

Address by Mr. John Comer, President of ICMSA, to the Association’s Annual General Meeting, 22 November 2013, Castletroy Park Hotel, Limerick.

 Ladies and gentlemen, I would firstly like to welcome you all here today and particularly our two guest speakers, the Minister for Agriculture, Food & Marine, Mr. Simon Coveney and Mr. Aidan Cotter, Chief Executive of Bord Bia. Both their organisations play 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, which have a direct impact on your own future and that of your family.

I hope today, Minister, you will hear the concerns of our members at first hand and before continuing I’d like to assure you that ICMSA, as an organisation, will work with you to bring about the changes necessary to address these very valid concerns and allow farmers – and our whole sector – to achieve their future ambitions. There are decisions you will have to take over the coming weeks – on CAP, in particular – and these decisions have to be the correct ones.

In my address today, I intend to focus on a number of issues that I believe are important to farm families at this time.   Thankfully, farmers are in a better place today than they were at the start of this year.  At our last AGM, there was serious and genuine concern amongst farmers regarding their futures due to desperate weather conditions, poor product prices and unfortunately, we saw more than a few farmers leave the sector as a result. We all need to learn lessons and draw the correct conclusions about what happened and why less than eight months ago.

One of the lessons is for Government: In the face of this dire situation, the actions of Government were late and insufficient and we need to plan better for situations like this.  I’d like to compliment Teagasc in organising a conference shortly on the issue of weather and farming.  This is a serious issue that cannot be ignored and dealt with on an ‘if it happens, it happens’ basis. It’s time to ‘build in’ seriously adverse weather events into our farming and agriculture policymaking

While the turnaround has been dramatic in the last six months, we are all well aware that it can turn again just as quickly. The EU Crisis Reserve Fund established under the recent CAP reform must play a role in this regard in the event of another weather crisis.

Waterford delegates at the ICMSA AGM in Limerick last week, John Skehan, Pat Fitzgerald, John  Dowley, Tom Ahearne

Waterford delegates at the ICMSA AGM in Limerick last week, John Skehan, Pat Fitzgerald, John Dowley, Tom Ahearne

Over the last year, dairy farmers have thankfully seen an improved milk price and indeed we would contend that a further milk price increase was, and is, justified based on market returns. Given that it has not been forthcoming to date, I am sure all dairy farmers here will join me in calling for an end-of-year bonus to now be on the agenda of all milk processors that would properly reflect the market situation during the year.  While dairy farmers have seen improved returns over the past six months, the bills from the previous year are still being paid and strong prices will be needed going forward if the sector is to achieve its objectives.   On milk price outlook, it is clear that the first quarter of 2014 should be positive for milk price but given the vagaries of dairy markets, predicting beyond that is extremely challenging and dependent on the global supply situation that we are monitoring closely at this time. We all earnestly hope that markets will remain strong into 2014.

With quota abolition looming in 2015 and given the price volatility we have experienced since 2009, it’s certain that price volatility is going to be a serious threat to dairy farming.

We have seen the damage that poor prices and poor weather conditions did to individual farm families in 2012. The EU has responsibilities on this matter that it cannot ignore.

Minister, dairy farmers will play their role in addressing volatility but you and your colleagues at national and EU level need to step up and address this issue. Ignoring it won’t make it go away and the damage it can do is usually fatal. 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 we see appropriate policies to deal with volatility, our milk suppliers will remain extremely exposed and remember, our retailers, our processors will all survive by passing all the price squeeze back to the last link in the chain – and the one that does all the work, all the time and made all the investment – the farmer.

ICMSA certainly agrees that we can expand output at farm level. Whether that can be done profitably is the issue and the lack of any meaningful attempt at EU level to deal with extreme price volatility places a huge question mark after all the plans contained in Food Harvest

ICMSA certainly welcomes Commissioner Ciolos announcement in September that he intends to establish a Market Monitoring Centre within DG Agriculture to monitor the market situation for dairy products but that can’t be just another ‘cop-out’. We have seen the shambles the multiple retailers in Ireland have made of the liquid milk market and this problem is being replicated right across Europe in the dairy and other sectors. Politicians across the EU, including our own, have talked tough on this for years but the reality is that the power of the multiples and larger food companies globally continues to grow and the position of the actual food producer continues to be undermined.

The large multiples continue to build more stores, gain market share by whatever means, and the other links in the chain continue to pay for this excessive and growing power. It’s as simple as this: hello to another 10 years of multiple dominance of Europe’s food production, goodbye to what’s left of Europe’s family farms.

The Market Monitoring Centre presents the EU and indeed you Minister with an opportunity to finally address the issue of margins in the food supply chain and I would urge you to pursue this vigorously and insist upon real power to intervene and a proactive approach.

We also need action on input costs.  In the 5 years between 2008 and 2012, farm inputs costs have increased by 41% while farm overhead costs have increased by 18%. These increases are simply not sustainable and must be addressed by policymakers.   Veterinary medicine costs is a case in point, with an increase of over 46%, A number of years ago ICMSA highlighted the price gap between Ireland and Northern Ireland in terms of costs, and presented the case to the Department. Minister, not a thing has happened. I should point out that I raised this matter as recently as last year and still nothing happened.  Why are we paying more for veterinary medicines than our colleagues in Northern Ireland? One reason is the blatant barriers to fair competition.   Across all inputs, we need to look at the regulations and barriers to competition and remove them where possible. If farmers are going to be forced to operate on global markets then we need access to inputs at global prices. The area of veterinary medicines and professional costs is yet another one of these mysterious areas of our economy that seems to have remained remarkably immune to the slash-and-burn cost-cutting we saw everywhere else.

Quite clearly, superlevy is going to be an issue this year and almost certainly in the final year of milk quota.

This is a major issue for dairy farmers and I wish to compliment you, Minister, on your efforts to seek a resolution to this matter and would ask you to redouble your efforts in this regard despite the ongoing resistance at EU level. The policy as presently structured makes no sense and issues such as the butterfat co-efficient or EU wide superlevy need to be pursued again.  ICMSA will support you in full on this matter.

The Sustainability and Dairy Quality Assurance Scheme is a new initiative being launched shortly. Will dairy farmers be 100% happy with it?  The honest answer is probably ‘no’.  Do we need it as a sector?  The answer is in my opinion at this stage is ‘yes’. We export over 80% of our dairy products and will have to compete on the global market. We have two choices, the simple one would be to compete on commodity markets, with all the highs and lows associated with that, or try to reinforce that perception of superior quality that already exists and for which we farmers can take fair credit. We can create that differential in the market but we need a structure that our international markets can have full confidence in and that, in turn, needs independent verification. The balance to be struck here is between accreditation and practical realities. I have no doubt there will be issues for farmers in relation to this scheme, there will be teething problems initially and ICMSA will work hard to resolve these issues on an ongoing basis.  The scheme will go ahead and it will be successful but I want to make one thing abundantly clear today: dairy farmers will not be paying the direct cost of this audit. The processors said this scheme is needed, the processors committed to paying for the cost of the audit and Minister, you must ensure that the processors pay that bill.

That was the basis on which ICMSA engaged with this scheme and we’ve no intention of allowing the goalposts to be moved at this stage.  The processors said they’d pay for the audits and we’re going to hold them to that.

In relation to the beef sector, we obviously started the year with the horsemeat crisis, a crisis again that should not have happened and, thankfully, Ireland eventually came through it relatively unscathed.  On my travels around the country, farmers continually raise the issue of over-regulation and inspection at farm level and why problems at other links in the chain can potentially undermine our business and our income.

Farmers are clearly saying that there must be greater checks and balances on both the input and output side because if an issue arises, it is almost always the primary producer that will pay through lower prices. The horsemeat crisis is a warning to us all and we must ensure that it doesn’t happen again.

The recent TLT receivership again highlights the vulnerability of farmers where buyers of their produce run into difficulties.   One such event can wipe out a family farm and the existing legislation is simply inadequate.  As the supplier of the primary raw material, it is ICMSA policy that farmers should be made preferential creditors under the law and thus afforded a higher level of protection than is currently available. Successive government have failed to act on this matter to the severe cost of many farmers and I would ask you Minister to consider this matter once again.   The live export trade is of huge importance to Irish farmers from calves to finished cattle and it is crucial that the Department and Bord Bia continue to promote this trade and ensure it is not undermined by TLT’s difficulties. Live exports provide farmers with a level of competition for the meat plants that is a fundamental necessity.

Beef prices in 2013 remain at a high level that is likely to continue because there is a reasonable balance regarding supply and demand for beef in Europe. But that begs a question: why was there a gap of 76 cents/kg last week between an R3 steer in Ireland compared to an R3 steer in the UK, this is equivalent to nearly €270 per head.  Where is this margin going to?

This can only be explained by the higher margin being taken by our processors and other links further up the beef supply chain at the expense of Irish farmers. ICMSA repeats our call for a proper investigation of this astonishing and very long-standing price difference.

With the expansion in the dairy herd, it is inevitable that a greater proportion of Irish beef will come from the dairy herd and our beef industry needs to have action plan in place in this regard. The beef grid was a bad deal for dairy farmers –as ICMSA was almost alone in pointing out at that time – and I believe in light of the changes coming in Irish farming, now is the time to review the grid to address the inevitable. People need to wake up to the fact that the suckler herd is not going to stay at current levels and we need to develop a credible plan for beef from the dairy herd.

CAP post 2013 was agreed this year and now, Minister, you have some key decisions to take.   I cannot stress how important these decisions are for our members because there are very real fears that they will face unprecedented cuts in their payments.   Unfortunately, Minister, under the agreement reached, the vast majority of our members stand to lose but the extent of the loss will be determined by you. The list of possible cuts is substantial and I am urging you to ensure that these cuts for active farmers are kept to an absolute minimum.   ICMSA is clearly stating that active farmers must be protected and I am deeply concerned at this stage that we are going to see a massive transfer of funding away from active farmers to people who simply own land.  This cannot be allowed to happen but I fear greatly this will be the net result.

Farmers will judge the outcome of this CAP Reform on the basis of the extent of the loss/gain compared to their current payment – not on the basis of Ciolos initial proposals.

ICMSA is the family farm organisation and decisions taken must be on the basis of protecting our family farm structure and not simply to provide our dairy and beef processors with the maximum amount of produce at the lowest possible cost. On this point I’d like to be very clear: ICMSA does not support a coupled payment for the suckler herd funded from the Single Farm Payment Budget.  Given the extent of possible other reductions, our members cannot afford another percentage cut, whether it be three, four or eight percent to fund a suckler cow payment.   Indeed, Teagasc research has shown that only 20% of suckler farmers would actually gain from a coupled payment.

So we’re left with the following question to which ICMSA would like an answer – is it possible that a farmer with an average payment is going to  suffer another deduction to fund a coupled payment for a farmer whose single farm payment is very possibly a multiple of the national average? Does this make any sense on any level to anybody?

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.   The vast majority of our members are fulltime farmers totally exposed to volatility in terms of prices and weather with no insurance policy of an off-farm income. 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 cuts are higher than expected, it will have major negative implications for Irish farmers – specifically the active farmers who should be those most supported and encouraged.

In relation to Pillar II, 50% co-funding is an absolute must.   Farm schemes have been ravaged in recent years with serious cuts in the Disadvantaged Areas Scheme, REPS Scheme and the abolition of schemes such as the Early Retirement Scheme.   The Pillar II schemes are of major importance to all farmers and farmers are extremely disappointed that there is no Agri-environment scheme available in 2014 – probably for the first time since 1994.

REPS has brought many benefits to rural areas and those benefits must not be lost going forward.  In excess of 13,000 farmers will be out of REPS 4 at the end of this year and we need a scheme as soon as possible for active farmers who wish to partake in agri-environment programmes. On a related matter, Minister, farmers in SAC/SPA areas are now at a massive disadvantage to the point where land abandonment will become an issue.  The policymakers will simply have to address the situation where a family farms are being placed in an impossible situation in these areas.  Sterilising their land as is happening now is a recipe for disaster and will bring greater problems and issues down the line.  Pillar II must also deliver for the dairy sector and dairy farmers who will be net losers under Pillar I must get their fair share of Pillar II.

With regard to credit, ACC is effectively gone for farmers, as is Danske. The state’s regulators and authorities must insist that business is transferred to other banks and institutions in an orderly way and without the incurrence of a single cent in legal or other charges. After their catastrophic failure of four years ago, it is the very least we are entitled to expect from our financial regulators. The average farmer, according to a recent Department of Finance survey, has bank debt of €78,000. ICMSA is 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 is a pressing need for long-term capital at competitive rates.  What guarantees will the financial regulators give us that the remaining banks – particularly the so-called ‘Pillar Banks’ – will not abuse their dominant positions?

I said it last year and I’ll say it again: 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 the continuation of the current historically low interest rates. Interest rates are likely to increase in the medium term but we must ensure they remain at a level similar to our competitors.

Like all families, farmers place a high value in ensuring that their children get the best possible education. I wish to compliment the Minister and his colleagues for resisting the Capital Asset Test proposal. It was an outrageously unfair proposal.

Assessment for Third Level Grants should at all times be based on your income and not on the perceived value of your assets.  ICMSA led the campaign on this issue and I hope your Government continues to defend current policy.

Minister, I also welcome your comments regarding the review of the Farmers Charter earlier this week. The charter is a very necessary document but it’s even more important that the commitments made in it are met and in full.  This has not happened in the past and that mistake cannot be repeated.

On the subject of mistakes, the review back to 2009 is brutally unfair on farmers. The Department accepted the land as eligible at that time and no other sector would accept being told – four years later – that the regulators have changed their mind.   Minister, this issue needs to be reviewed. Equally, I’m sure I don’t need to draw your attention to the dangers presented by Mercosur or any other international trade agreements that might sacrifice our agri-food exports for other states’ industrial goods and services. Any such trade-off might benefit other Member States but it will wreck havoc on our biggest indigenous economic activity.

On the wider rural development issue, ICMSA and its members are watching with mounting anger the ongoing decline of rural towns and villages and the failure of state agencies to develop these towns or maintain existing industries – not to mind attract new ones. Our rural public services from garda stations to hospitals continue to decline and it is about time that our elected public representatives remembered that Ireland is more than Dublin and the larger cities. We all can’t live in Dublin and if Dublin wants to have food to eat they might make it a little bit easier for those of us living outside it. We don’t want anything extra but we don’t see why we should be told to make do with less.

A perfect illustration of this patronising attitude is the current Eirgrid pylon controversy. What infuriates people most is the very real sense that as far as Eirgrid – and to a lesser extent, the State – is concerned, that the matter has been settled and that us poor culchies are just going to have to deal with a decision already made.

That’s what really angers people; the clear message that all the blather about ‘consultation’ is just that: blather. That what we are seeing now is a pretence to cover up the fact that it’s already been decided by a handy little group of executives, none of whom can see any pylons from their mansions in Foxrock or Killiney.  Everyone accepts the need for the ongoing upgrade of power supplies but we all know that Eirgrid won’t ever be seeking planning permission for a 400kv powerline through Clontarf or Clondalkin. That won’t be happening but apparently it’s good enough for the people in the Comeraghs or Kilkenny. Eirgrid just have to pretend to be listening to those people and nodding sympathetically while all the time, their bulldozers and pile-drivers are revving up their engines impatiently.

Even more astonishing in its arrogance is the notion that somehow, Eirgrid’s disinclination to ‘underground’ the cables is the last word on the matter. I don’t know where Eirgrid’s decision-makers has been for the last five years but they should know that the time when we all just meekly accepted the word of so-called ‘experts’ on matters like this is passed. Minister, those days are gone. We want a look at the figures ourselves and we’d like independent verification of Eirgrid’s estimates. We will not be talked down to or patronised and we’re going to say that right now and up-front of what could very well be a very bitter and acrimonious row about this proposal. The People in the pathway of these proposed lines have genuine concerns that must be listened to and Ireland should follow the Danish policy of putting all lines underground. The upfront cost may be higher but in the long term and once ‘leakage’ differentials are calculated, I believe we will achieve a much better outcome for Ireland, Eirgrid and most important of all, for the people who are being asked to live in the shadows of these monstrous pylons.

I reject the suggestion – and we’re bound to hear it at some stage – that, somehow, my remarks here are ‘anti-progress’.

I reject that categorically. ICMSA has a long and distinguished record of supporting any and every positive move the state has made in terms of infrastructure. But these Eirgrid plans represent a point of no return. Both yourself, Minister, and Aidan Cotter have done excellent work travelling the world and getting the ‘Green and Clean’ Irish brand out in the markets. Do you not accept that a long line of monstrous pylons marching through our farming heartlands does terrible damage to that truth – perhaps even fatal damage?

Minister, my remarks here today are not any kind of ‘nimbysim’ or petty parochial consideration. I believe sincerely that this kind of plan has the capacity to wipe out decades of successful marketing and hard work on all our behalves. I appeal to you to use your undoubted influence to make Government see sense on this matter before the real fight starts and the real damage is done.