IS RURAL IRELAND TO BE BREXIT’S COLLATERAL DAMAGE?

A month on and has one’s perspective on Brexit changed? Not greatly.

The positive is that the UK now has a new government; well at least a new old one. Is it a re-tread, a reshuffling of the existing Tory cards? Maybe not. Is Theresa May going to govern for the People and not the few? If so has she really been a long-term ‘sleeper’ for the political centre?

Her first steps suggest a hidden sense of humour! Or is it a deep sense of political strategy? She has firmly dealt with the Brexit leadership. Michael Gove sacked, guilty of political shenanigans and Boris, like an errant schoolboy, sent out into the big wide world to apologise for his past misdemeanours; one of which the PM may consider as Brexit itself.

Is there a hint of how the PM feels about Brexit in her treatment of Brexit-supporting rural Britain? The country’s farmers chose to leave the EU and in return the PM has gifted them Andrea Leadsom. Is it a match made in heaven?  Maybe not as she is a lady who we can expect to favour free markets and open trade. I expect that there are already a few long faces in the UK farming industry as they contemplate life without support payments. It is almost as if the new Minister has been chosen specifically to lead Britain’s farmers off into the wilderness? Is this all just a little bit Machiavellian?

But this is not about UK’s farmers; at least they had a vote. Ireland’s farmers did not.

For Ireland’s farmers and, by default, rural Ireland, Brexit could not have come at a worse time. Prices are below the cost of production and farms are being held together by off-farm earnings and support from the EU and Irish tax payer. Nothing about it is remotely satisfactory. The Brexit-created instability around Ireland’s primary export market helps not one iota.

For the beef sector Brexit is another challenge among a progression of challenges. The sector is already a misnomer surviving as it does with apparently no income? Does its resilience lie in it being small-scale, part-time and often done for the love of beef farming? If ever there is a reminder that life is more than about money it has to be Irish beef farming and, in particular, Irish suckler beef. Brexit will mean change for the beef sector as, in all likelihood, its main market becomes more exposed to global trade [will Leadsom lead anywhere else?].

One can already hear Scottish farmers realizing that their future is very much tied to the already well recognized words “Scottish Beef” and their beef’s geographic origins. Some in Ireland may suggest the same but it is an illusionary thought as, in the UK market, Irish and Scottish beef are poles apart when it comes to consumer-facing presence. Simply, over the years Ireland has failed to develop the UK market. The logical explanation is that an oligopolistic supply-chain has focused on high volumes and low margins leaving little room for the promotion of premium beef into niche markets. Beyond that, is it fair to say that premium, niche-marketing is not Ireland’s forte?

And before one mentions the retail Angus scheme; does it yield a farm-gate price premium for its 50% Angus carcasses? Not really. And is that going to change when others the World over are also producing Angus beef? A niche is not a niche when everyone joins in. Ditto with the Hereford retail schemes. It is not by chance that the Beef Industry News reported that the French have long since thought that these retail schemes, with their lack of supply control, were flawed.

Of course one should mention in the defense of the Schemes that they originated at a time when traditional breeds were in decline. One also doubts whether they could have envisaged their own future success. Their sire only rules have, nonetheless, left them vulnerable to easily creating supply and the erosion of premiums that has been their destiny. The Scheme offer important lessons for the future about supply management but first the mechanisms have to be developed to allow farmers to actually put these lessons learnt into practice.

The retail beef schemes provide a good example of what happens when farmers lose control of supply. And too often the farmers themselves are all too guilty of aiding and abetting over supply. The rush to achieve higher yields [per cow, per hectare, per person…] has rarely been tempered by caution over what it will mean for the market price. The economic ‘technological treadmill’ is well named; the hamster within just runs faster and faster. Getting on board the wheel appears to be especially liked by Irish farmers; albeit that they are often given a more than firm bunk-up onto the treadmill by their advisors. By contrast how many premium product producers have actually made a virtue out of tradition and constancy? That said, it is not about ignoring technology; it is about selecting that which can improve farm income and one’s lifestyle.

Overall, one cannot see how producing more for less is ever going to translate into improved farm incomes so long as farmers operate in an environment where they have absolutely no control over their farm-gate price. Brexit will mean even less, if that is possible. For a proportion of the Irish beef sector and, especially, the suckler farmer the future has to be about premiumizing the farm-gate price and that requires changes on the farm and changes in the supply-chain. Brexit just makes the need to change even more imperative; but will Irish beef farmers be willing to embrace change? Will their leadership even be willing to promote it?

Two years ago the dairy sector was bullish and buoyant. To many the good times were here and there was little reason to think that they would depart anytime soon. Quotas were going and it was all about expansion, investment and, as often as not, borrowing to do so. Would a 2014 Brexit vote have dented that confidence and brought about a pause to imbibe some realism?

It was obvious [when I arrived in Ireland] back in 2013 that a bubble was growing in the dairy sector. It was an observation that was based upon supply-side analysis and global reactions to the China situation. Even then one was saying that Ireland [held back by quotas] was going to arrive at the party after it was over. Indeed, the revelers had gone and Irish farmers were greeted by no more than the odour of stale beer. If it was just about China and over-investment in the supply side [and especially in milk powder supply chains] the downturn may have been manageable. But then came the Russian market embargo and the decline in the purchasing capacity of the oil-producing nations. For Irish farmers we now have a Brexit vote that is likely to cast a long shadow over the market.

The above said, one cannot overlook a major depressant for the future Irish milk price; that the post-quota milk expansion has been into milk-powder supply-chains. Due to their scale Irish dairy farms are unsuitable to supply commodity milk powders. The international comparative position of Irish dairy farms was ignored and too much was said about how, supposedly, competitive the Irish grass-based model is [it is negated by scale]. Competitiveness is also dependent on the relationship between grass and cereals and that has gone against the grass farmer in the last year or so. All in all, one wonders just how much farmer-owned capital has been spent on chasing the pipe-dream that Ireland could be a major player on global dairy commodity markets? It has been a lot.

Even disregarding Brexit and its impact upon Ireland’s main export markets, just how soon can we expect to see a significant bounce in milk prices. And by significant one means one that will return to the farmers a sustainable milk price of say 35 cpl [notwithstanding any survival [i.e. not for investment] loan repayments]? Just what will trigger this major market price shift?

Will China return in a significant way? Or will China choose to buy when the prices are low? One can assume that the Chinese will realize that the EU will need to clear its intervention stocks at some point. Ditto for now more cash-strapped oil producers. As to Russia; will we finally see the rise of Mother Russia as an agricultural super power? And at what point will we see Poland and Romania join Germany and France as EU food-producing powerhouses? It will happen and in a time frame that may leave a commodity-focused Irish agricultural sector floundering for a long time yet. Brexit is only the eye of the storm.

And lest one forget, a part of that storm is climate change. The policy demands surrounding climate change are going to impact upon Irish farmers and ignoring such is not an option. Yes, improved production efficiency will help but will that do more than touch the edges of what is needed? A wholesale review of Irish farming practices in the context of climate change has to happen and happen fast. Steady as we go with current systems is unlikely to suffice.

On a climate change note, one will return again to carbon sequestration. The more one reads the more one believes that resolving climate change is going to be about returning the carbon released by farming over the last 150 years to the soils from whence it came. ‘Carbon sequestration’ could [one would like to use a more definite ‘should’] become the great global clarion call of the next decades. But where does Irish farming stand on this issue?

It is rightfully said that Ireland has a small carbon-releasing tillage area. It is not like the great plains of Russia, the Ukraine, Romania or the ploughed-up-for-soybeans Pampas, to name but a few. It is not even like the plains of East Anglia. Ireland’s tillage lands are not a major problem in a global context. The country also has a great deal of carbon-storing permanent pastures. One can question whether Ireland should be penalized for a livestock-biased agricultural industry based upon emissions alone. It should be assessed on net emissions and that include measuring carbon sequestration; after all it is sequestration that can reverse atmospheric carbon levels as opposed to just slowing their rise. Carbon sequestration is not, however, a way to excuse Irish farming from change. The whole gamut of farming practices needs to be assessed and changes made. Irish farming will have to find the best and most effective solutions possible; its national climate change commitments will demand that and farming has to look to deliver.

To add a further degree of vision, carbon sequestering farming practices also need to be included within the presentation of Irish farm products as part of a sea-change away from commodity production to products that can enhance the farm-gate price and farm incomes. So just how far can Ireland offset its farming emissions? Just how close can it get to zero emissions? If it can do so and provide the evidence of such, then it will have something to crow about in the market place. In climate smart agriculture, Ireland does need to be a global market leader but it needs to be so in a way that the rewards for being so go to the farmer [who takes the necessary actions]. It is not an achievement that should be left to be milked by others in the supply-chain. And if proactive action is not taken by the farming community and its leaders, it sure will be.

There is a further outlying thought on the issue of carbon sequestration. There are countries that have massive tillage areas that offer opportunities for carbon sequestration. And it is possible that reintroducing grassland and specific grassland management practices may have a massive impact upon the restoration of carbon to the soils. It is quite possible that many locations will, therefore, see livestock returned to farming systems; a factor that may in itself impact upon commodity markets. Further, we may see a rise in ‘grass-fed’ and ‘eco-friendly’ products resulting from a need to return carbon to the soil in many parts of the World. So do not assume that Ireland has a right to these ‘green’ markets; others will be moving into them if they are not already doing so.

A major concern for the author is whether Ireland’s agri-food supply chains are flexible and agile enough to exploit market opportunities and especially the premium-paying ones that many of the country’s farmers need. For too long it has been about consolidation. Should one now ask whether that very consolidation is what leaves the farming [and rural communities] overly exposed to the market shocks of which Brexit is only one. Is it too easy to highlight market and price volatility and to ignore the supply-chain structural changes and directional choices that have exposed Ireland’s farmers to successive market shocks? The farming leadership needs to be asking the questions rather than, by talking up ‘volatility’, volunteering the excuses.

If Irish farmer are going to survive in anything like the numbers that currently exist [or do we accept 20% and further rural depopulation?], the country needs to be able to exploit the opportunities that an increasingly issues aware consumer should create; be they in the UK, the EU, the USA, the Middle East, India, China…. Ultimately this is not just about Brexit; it is about the reality of cumulative market changes and the need for a wholesale change that allows at least some farmers to provide high-value raw materials for high-value, premium-paying markets.

Into the medium and longer term Ireland’s farming [and political] leadership needs to understands that many Irish farmers have to be at the bedrock of supply-chains that supply the World’s top 10% of consumers [as far as price paying]. For them anything else [even the 60-70% mark] will not suffice. And banning the word ‘commodity’ would be a good start as, for a country with Ireland’s limited farming resources, it is a word that belongs in the Jurassic age. Its continuing use serves nobody apart from the few who currently inhabit Ireland’s too few routes to market.

And lest one forgets, for the tillage sector, so long as it is mainly a producer of raw materials for farming sectors that are themselves on their uppers, what prospects are there? Tillage farmers need to sell into farming sectors that supply a premium product into a premium-paying market. There is a large element of mutual destiny and Irish tillage needs to see the evolution of a genuine, top-10% market supplying livestock sector. And it needs to see market differentiation so it can escape from the inevitable farm-gate pricing based upon the price of what feeds can be imported for.

There will be a future for some to compete on markets that are heavily influenced by ‘global’ markets but it will be the few and not the many. The farming and political leadership seems to be largely unable to grasp this particular nettle but it needs to and fast. They have to start creating and implementing policies that are going to change the face of Irish food and farming for ever. Period.

One can see how easily a debate on Brexit becomes a far reaching discussion. It is inevitable because Brexit is just one issue among many facing Irish farming at present. It should, nevertheless, be the one that focuses minds. It should be focusing minds on how to support Irish farming to make the transition from commodity producer to product creator. Yes, it will remain involved in the former for a very long time yet; it is an inevitable given the investment that has been made into commodities. That said, the change in mindset is long overdue and investment at all levels of the supply-chain now has to begin so as to enable some Irish farmers to produce for supply-chains and consumers who are able to return a sustainable, market-derived, price to the farmer. Anything else is not an option.

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3 thoughts on “IS RURAL IRELAND TO BE BREXIT’S COLLATERAL DAMAGE?

  1. greensideup.ie

    Perhaps I’m being naive but could it be an opportunity for Irish farmers to start targeting home markets more? Perhaps the less intensive farms could interest local communities in community supported agriculture schemes?

    Reply
    1. Stuart Meikle Post author

      Absolutely [not about being naive that is]. Have you read my ‘moving from globalization to localization’ post? On a similar line I have heard it said that Ireland produces 1 in 5 of the apples eaten in Ireland. There are opportunities but we need to move on from putting all of our eggs in the milk powder and manufactured beef markets.

      Reply
      1. greensideup.ie

        We’d be lucky to see that many Irish apples on the supermarket shelves. I suspect most of those head to the drinks industry. Brexit is a massive opportunity to rethink our sustainability initiatives, but will communities and business’ be given the supports they need to do so? I hope so.

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