Monthly Archives: January 2017

TIME FOR A CHANGE – ONWARD AND UPWARD

I have reached the point where I want to see some action. There is only so much writing one can do and I have done my groundwork. I also have a group of social media friends and their feedback is that my logic is on the mark. It has been a very useful verification process for my ideas [many thanks to all] and provided me with my own personal public consultation.

The response to my writings from the agri-food ‘establishment’ is zero but I have realized that expecting one is wishful; change is not welcome and certainly not change proposed by an outsider. The strategic thinking was done in Food Harvest 2020 and Food Wise 2025 and come hell or high water, that is now set in stone. Under their strategic direction farm incomes have lurched from crisis to crisis, farm sector by farm sector, but that seems to be irrelevant. Farm income as an issue is met with political platitudes and U-turns are, apparently, still not in fashion.

I had originally hoped to work with the existing farming organisations but that is clearly not possible. They are focused on lobbying and the idea that projects need to be created to demonstrate alternative options is an anathema to them. Instead they have perfected the Dickensian approach to farmer representation; bowl in hand asking ‘please, sir, I want some more’.

The taxpayer already provides €1.5 billion in support; but this is little more than money to pay the farmer’s labour. The support is needed because the chosen routes to market fail to deliver a return on farming family labour, management or the assets deployed. It is a sad situation that needs rectifying. But where is the inspirational leadership that will stimulate change?

My own plans are to establish the Irish Family Farming Foundation. The title says it all. In an ideal world, I would prefer to drive change through private-sector investment but I cannot see an appetite for such. It is too much to ask give the country’s small farms and their incomes.

There are well funded agencies that should be providing the technical and marketing support to catalyse change but, alas, they seem to be dedicated to supporting the current routes to market and those that operate them. Thus, it remains about the production of more low-cost raw materials for a few major processing-exporting entities. There is also a blatant disregard for whether this can provide, on a fully-costed basis, sustainable economic returns to the farmer.

Hence, how to develop projects to create new routes to market and the products to travel along them. One is realistic enough to know that this is about planting acorns as the only way to grow mighty oaks. It is about starting small but also ensuring that the thinking has been done to scale volume over time. Ireland is a food exporting nation and its domestic markets can only sustain so much premium product. But it can still provide initial markets and, as I have said elsewhere, we must also deliver nutritious, high-quality food to the Irish people.

€1.5 billion is dedicated to agricultural support but it is a tragedy that amongst so much apparent abundance there are few funds to support new route-to-market initiatives. More so when it is about products that are linked to dedicated farming systems and on-farm or locally processing. And when one does look, one finds an unrealistic growth expectation for an investment; an expectation that follows a belief that food-sector investment is about processing generic ingredients into ‘innovative’ products. There is no recognition that premium food products are often linked to their ‘terroir’ and that they require raw materials specifically produced for them down on the farm. This situation inhibits farm-gate price premiumization and income enhancement.

My own Irish Family Farming Foundation website provides an overview of my project proposals. It can be accessed off my Blog site. Further information is then only an e-mail away. I am now looking for farmers [or others who feel that they can contribute] to create nucleus groups for the projects. In one or two cases, it may even be about forming [maybe without creating a formal entity in the beginning] ‘producer groups’ to take the projects forwards. My experience tells me that it requires a group to show that there is ‘stakeholder commitment’ even if that commitment is only an expression of interest in being involved in an evolving initiative.

With an active group in place we can then go forward to seek funds to develop the project and to fund its investments. As said, these may only be small and have a peripheral impact, but we must start somewhere. And as my feedback tells me, many farmers have had enough of the status quo or its promoted alternative; to borrow to invest, to work harder to produce more, whilst not seeing how such will provide themselves or succeeding generations with a viable livelihood.

Hence, please find the time to look at the ‘Foundations’ website and get in touch with requests to join an informal start-up group and/or ideas about how to modify my project proposals and/or, crucially, how to fund them. I can then start planting the acorns.

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UNDER REPRESENTED IN AN OVER-CONFIDENT INDUSTRY

Last night I attended a meeting of the South-East Women in Farming Ireland group. It was an opportunity to gauge the sentiments behind why it has been necessary to inaugurate such a group. At the end of the evening, one of the organisers asked if I was going to write a post about the meeting [now I can take a hint]. As she is aware that I can be outspoken and reluctant to pull my punches, it is probably best that the lady remains nameless!

So why are women so poorly represented in the upper echelons of organizations that represent Irish farmers? Is there a ‘grass ceiling’ imposed within those organisations?

Now I have been quietly observing Irish farming for a while and I do find it rather good at blowing its own trumpet. So much of what is said and written seems to contain expressions like ‘World class’ and ‘punching above our weight’. I doubt if this is how the average farmer thinks of himself [I do mean himself here], but the establishment and the hierarchy seem to consider it necessary to continuously resort to aggrandisements. I am not sure why because, from my experience, most farmers [all] have a grasp of the realities of farming in Ireland.

This contrasts greatly with an impression I acquired last night. Apparently farming women folk are more likely to play down their role, to hide their light under a bushel and to be self-effacing. Is it a juxtaposition to that of their male counterparts? My apologies for the generalizations, but sometimes they cannot be avoided. Does this just reflect traditional rural Ireland?

What came across clearly was that the contribution of women to Irish farming is greatly under-valued. I would suggest that, in these troubled times of low farm incomes, the financial contribution [to support the farm] made by the womenfolk working off-farm is massive. For this reason alone, they should have equal rights in determining the destiny of the family farm.

Not so long after arriving in Ireland I came across the term ‘farming politician’. It was a first for me. I am not sure what representing farmers is to do with the Machiavellian business that is politics, but then again, Ireland likes to do things differently. Maybe the very term, ‘farming politician’ is a part of the reason women are under-represented; politics itself tends to be a male bastion. Is it also one that is better suited to the male psyche? And equality has been slow in coming to politics.

Thus, we have a farming industry represented by ‘farmer politicians’. It also exudes a degree of over-confidence. One can add in a tendency to use ‘technical’ jargon that by its nature excludes those not born and brought up with the relevant dictionary to hand. Do women [and industry newcomers] feel that it is difficult to push themselves forwards [in general and into leadership roles] because they are not sufficiently fluent in the language of farming. From listening last night, apparently so. It is a shame because simplicity is the enemy of exclusivity and the best leaders are those who can explain what may be complex to those who may not grasp the minuity. Vice versa.

Overall one is left asking a few questions. Does an intimidatory environment exist within some of the organisations that represent farmers? Do they have a culture that dislikes, resists and even fears change? And is one of those changes bringing women into the fold? Is it a culture that discourages those who express contrary views? Is it a ‘group-thinking’ culture that is inhibiting the rejuvenation of the very industry that it represents? Is it a culture that is leaving Irish farming in a status quo that is unsuited to a changing world; a world characterised by dynamic markets and fraught with Brexit-type political risks? If so, it is not a good place to be.

It did not take long last night to appreciate why many women feel that they are excluded from farming’s representative structures. And can one safely state that it is their exasperation with such that has catalysed the emergence of a new, women-in-farming group?

One heard last night that there are some dynamic young women in Macra na Feirma. One hopes that they will be free-thinkers who will see beyond just offering a feminine alternative to the current masculine leadership. Re-treads of what has gone before, be they male or female, is not what Irish farming, let alone rural Ireland, needs. It needs leaders of either gender who can, when necessary, embrace the radical. There needs to be a breaking of the mould. Ireland’s family farms need to escape the strictures imposed upon them by recent agri-food policy and they need to find a new, economically-sustainable direction to follow.

So, what about the future; after all it is what the formation of SEWFI is about. It must be for more than the empowerment of women. It needs to be as a driving force for wider change. Central to these changes must, however, be enhancing the contribution to the family farming business of all the human resources available. There is no room for discrimination.

Central to the future of the Irish family farm [if that entity is not to pass into history] must be a movement away from commodity production. Ireland’s small farms must be the foundation stones of supply-chains that create and sell high-value products. A significant proportion of that value must be returned to the farm in the form of premiumized farm-gate prices. In all likelihood, this will involve farming system changes and on-farm or local-community processing. It will also mean farmers or their immediate supply-chain partners [possibly within a reenergized co-operative framework] being more active outside the farm gate.

Such changes will inevitable mean change for the family farm. It will alter the importance of the skills required. Farming systems changes for specific products may enhance the husbandry required but there may also be less emphasis on the traditional ‘heavy-lifting’ activities. It is likely that this will bring the skill set that many farming women can offer to the fore; not least when they have been trained and/or worked outside the industry. The skill set required by an Irish family-farm will change in the future and it will be a fateful mistake not to turn to the womenfolk to provide a significant proportion of those skills.

To conclude, do/will more women actually want to enter the farming industry; not least when they read about how archaic a male bastion it is?

My personal view is that farming is only going to get more interesting in the future. There are so many issues coming to the fore; be they related to climate change, nutrition or meeting the diverse demands of the consumer [who for an Irish family farm must be willing to pay a premium]. As farms move from producing commodities to producing for products, it only gets more interesting.

One consequence of the changing nature of farms will be working environments that are less ‘traditional’ and more appealing to women. It will not just be about farming operations, it will be about adding value by processing what the farm produces. It will be about selling the products and all that it encompasses. It will, most likely, be about cooperating [again] with others. Simply, the family farm will need a new, more diversified skill set and that will change the relative ‘weighting’ of what happens on the farm. This will, inevitably in my view, bring more women to the fore of Irish farming; be they hands-on, in managerial roles, providing industry leadership or all three. It will not be before time.

THE OTHER CLIMATE-CHANGE THREAT TO IRISH FARMING

In what I expect to be a fast-moving food world in the coming decade, thinking creatively is critical. On the other hand, a prevailing ‘group think’ may be highly destructive.

I am closely watching the evolving debate over climate change and cattle farming; not least because cattle have been branded using emissions-based assessments of food production as the arch criminal. In recent weeks, I have written three posts on the subject: ‘Are some cows now more equal than others?’, ‘Let us all just blame the poor old cow’ and ‘Climate change – thinking beyond the emissions’. It may be wishful, but I think I am beginning to see an awareness that not all cows [cattle-farming systems] are equal when it comes to climate change.

Ireland sees itself as a front runner in low carbon-footprint farming. The country’s mainly grass-based systems have conferred an advantage that places its emissions per unit of beef or milk as some of the lowest around. It is seeking to reduce this further through increasing the productive efficiency of its beef and dairy farming. The term ‘sustainable’ is a core part of how the country projects a green image to the World.

So, Ireland is a first mover when it comes to reducing carbon emissions from its agriculture. Is there, nevertheless, a disadvantage from being a leader when the knowledge base is still evolving? So far it is all about emissions and reducing those is a strategic [and marketing] focus of the Irish agri-food industry. The question is; will it be about emissions per se or will it become about net emissions? It may happen once cattle and pasture management is fully recognized as the key to lowering atmospheric carbon levels and reversing climate change.

If this is going to be the case, will the environmental champions be those who are deploying pasture management systems that sequester most carbon? Will it be about zero or negative carbon emission production? And will this later entry to the green field surpass Ireland’s efficiency-focused approach to beef and milk production? Not least if one considers Ireland’s reliance on imported nitrogen fertilizers, less than biodiverse swards and its infrequent use of clovers [let alone other legumes]. Some in Ireland may consider that the country is currently a leader in ‘sustainable’, low-emissions livestock farming but it must not rest on its laurels.

This is also a marketing issue as much of what I read emanates from the USA; oft seen as a key premium export market. The USA already has a clear definition of what is ‘grass-fed’. It must be forage-based and reared outdoors all year [traditional ranching]. It is about marketing because Ireland must produce the product to meet the rules. It cannot operate its usual produce-it-first-and-label-it-second, supply-driven approach. As consumer awareness of the role of pasture management in restoring North America’s historical grasslands grows, one can see that selling loosely labelled as ‘grass-fed’ products will become harder in the USA, not easier.

An interesting point that I frequently come across is that some of the atmospheric carbon rise has been due to tillage farming. Over the last 150 years or so carbon has been released from grasslands that have been ploughed for cropping. One also reads about how dramatically soil organic matter levels have fallen in arable [often former grasslands] soils from on-going tillage farming. Is this, along with fossil fuel burning, the primary cause of rises in atmospheric carbon?

From what one reads one could be forgiven for thinking that it is all down to cattle. In terms of the total atmospheric carbon increase, cattle may not be the victims of an injustice. Their role may be far less than we have been told and they may have only played a part since we stopped grazing cattle and started keeping them in feed lots and feeding them grain.

There is another potential unforeseen consequence for Ireland in the above.

What if returning carbon to arable soils becomes the climate-change solution?

And what if this happens in tandem with using cattle to restore arid grasslands?

And will the green ‘brownie’ points go to those who farm to sequester carbon?

Importantly, what will the consumer perceive to be ‘green’ and ‘sustainable’? We could have a new set of rules. Ireland’s tweaking of its farming systems may then be in sufficient to win over the consumer. As these issues rise in significance [as I believe they will] it will take more than good salesmanship to premiumize your product with green credentials; it will require more radical farming systems changes from the bottom up.

This is a consumer-facing issue. It is about who wins market share in the premium ‘ethical’ markets. It is, nevertheless, not the whole story. Just what will happen to the supply side of beef [particularly] and dairy markets if cattle farming is reintegrated with tillage farming?

Further, what will the implications be for beef and milk production economics if society chooses to support farms that sequester carbon back into the soils whence it came? Are the French with their 4-in-a-1000 scheme already on their way down that road?

Ireland with its preponderance of grasslands may not have contributed to tillage-released carbon over the decades and, thus, it may not benefit from incentives to sequester carbon into soils to the same degree as those with significantly larger tillage areas. It may appear an unfair way of looking at the subject but then is life fair?

Ireland may now be a leader in low-emissions beef and milk production but this may not be enough to capture issues-aware markets in the future. It may have to do a whole lot more when the wider populace realizes that it must prioritize carbon sequestration and the using of pasture management to return carbon back into the World’s arable soils. Do we even have a choice?

IS IT TIME FOR A DEGREE IN AGRICULTURAL HUSBANDRY?

I recently wrote a post entitled “Where to now for ‘chemical agriculture’?” and hearing the term ‘Bachelor of Science in Agricultural Science’ got me asking myself if we do not need to change the emphasis of what we are teaching the next generation at university.

Now I am not anti-science. As I farmed for a few years before I returned to university and having studied economics at school, I could spend more time on the sciences at university than was normal for one studying agriculture and business management. Hence, I managed to fit in subjects like soil science and plant physiology. Later as an academic I worked on bridging the gap between management and economics and technical agriculture and horticulture. I also spent several years working with the National Institute of Agricultural Botany in Cambridge.

Over the years, my own faculty was responsible for much of the development of farm business accounting [i.e. budgeting, planning and business and investment analysis]. This was eventually encompassed in a BSc degree that linked management and agricultural husbandry together. I was its first First Class Honours graduate.

When it came to teaching within the same faculty I was lucky enough to be highly involved with the applied management training of final year undergraduates and postgraduates. It was about encouraging students to question and to analyse. At one end, it was about investigating the markets and at the other it was about what technology to apply within the business [be it agriculture, horticulture or food]. The constant was how to understand the many factors that influence farming and food production. It was about joining the dots.

My concern is that farming is becoming too ‘science’ leaning. It is too much about the spray can and the fertiliser bag and the expectation that science is the ultimate problem solver. Is it too much about using a far too narrow genetic base? Is the farmer in danger of becoming too reliant on outside technologies and external advisors?

Will the farmer of the future have the skill set to operate with less dependence on external resources? We talk about sustainable food production but is ‘sustainable’ a misnomer if the farm is overly dependent on imported technology, advise and resources? If consumers are ‘going local’, will they expect to source their food from farmers doing the same?

There is no specific answer to the above; farmers still just tend towards doing it their way. What will be important is that the farmer [as a manager] has the skills set to analyse what is best for his or her own farming / horticultural / food business? They need to be able to assess what is right or wrong and to make informed choices built upon a knowledge of the markets, the technology [the science and husbandry (which is really a science)] and the economics.

I was lucky enough to spend my childhood on a family farm run by my Grandfather and staffed by his generation. In the 50s and 60s beef cattle, sheep, pigs, chickens and house cows were the norm. I witnessed the change over from mixed farming to arable only.

Even back then many of the farm staff were quick to tell me that moving from mixed farming to arable only was a move in the wrong direction. Interestingly, thirty years ago, they were telling me how the soils had deteriorated in the previous two decades. They would be horrified at the state of the soil’s health now. As ‘chemical agriculture’, has come to the fore, have we lost the plot when it comes to our soils; not the mention the wider flora and fauna that inhabit our farms [including that within our soils]?

I am also very concerned that our food security and, by default, our farm incomes are going to be compromised by an inability of ‘chemical agriculture’ to withstand the pressure coming upon it from resistance to the broad gamut of pesticides. The ‘sustainable’ solution must be a regeneration of our husbandry skills and less reliance on the ‘science’. I see no other way forwards.

Hence the reason for writing this post. Do we need to re-emphasis the role of husbandry again? And do we need a new generation who are less reliant on those outside the farm gate?

I have also often spoken about the need for farmers to regain some control of the supply-chain after produce leaves the farm. Likewise, ‘below’ the farm. For the latter, it is about developing the husbandry skills that will enable the farm to be more reliant on its own resources.

Yes, this can be viewed as a step backwards but it is not about ‘dumbing’ down the role of the farmer, far from it. It is still about deploying the science and the technology but it is about being more critical and cautious about doing so. And it is about knowing how to better utilize the resources that are to hand; it is simply about developing more ‘sustainable’ farms.

‘LEGUME-FED’, ‘HERBAGE-FED’ OR JUST ‘GRASS-FED’?

Much is spoken and written about ‘grass-fed’ in Ireland? But how is/will the label be used?

Will ‘grass-fed’ be a characteristic of well-defined, linked-to-farming, designated-origin products or will it be a generic term used to promote all Irish meat and dairy? One expects the latter. And if so, will it meet consumer expectations when others use the term in a more defined way?

Crucially, will an all-encompassing ‘grass-fed’ label raise consumer perceptions to an extent that translates into a positive impact on farm-gate prices and farm incomes? Or will generic ‘grass-fed’ fall foul of strict definition rules or be replaced with labels like ‘pasture-fed’?

I recently visited a dairy farm eastern England. It had thirty-something Guernseys and added value to all its milk. Everything was sold directly to the consumer. It also used lucerne [alfalfa] as its primary forage. It is suited to drier tillage regions and it is a legume. Is it a sign of what we may see across Europe’s tillage regions?

If I was advising a tillage farmer I would be talking about reintegrating livestock back into the farming system. The reasons include improving soil health, raising organic matter levels, carbon sequestration, blackgrass control, fixing nitrogen and income diversity. It will become an increasingly compelling story and one that will change the supply side of milk and meat.

Although it is not a catchy label, I can see ‘legume-fed’, being a part of a broader ‘sustainable’ product story. As a development from ‘grass-fed’ and ‘legume-fed’, how about ‘herbage-fed’? The term ‘herbage’ encompasses many forages types and suggests biodiversity [trendy for the consumer]. ‘Herbage-fed’ then needs to be part of a holistic, designated-origin story that wraps itself around a multi-characteristic consumer-facing product.

Does ‘herbage-fed’ influence the eating experience associated with the product? Does the flavour relates to what the animal eats? From my experiences eating lamb from the biodiverse pastures in Transylvania, I would say that it does. For something closer to home, try Achill Mountain Lamb [www.AchillLamb.ie]. Or just ask a chef. Will they say that there is a link between pasture and flavour? Why else are so many French products tied to the ‘terroir’? Charolais beef, for example, reared under its home designated-origin scheme must be finished on specified, biodiverse pastures.

Irish Beef’s UK website makes the bold statement; “the flavour shows where the best grass grows”. But just how biodiverse is the typical Irish meadow, especially when reseeded with ryegrass and raised up on artificial nitrogen? There is a great variability in Ireland’s grasslands and can it weaken the genereic Irish beef story? Variability is the antithesis of what is required by the Bœuf de Charolles appellation d’origine contrôlée [AOC] scheme in France.

It is also interesting to read that Irish cattle “boast a world-renowned pedigree”. That said, cross-breeding of the beef animal itself is the norm. By contrast, the French AOC schemes are usually breed specific; not least because that restricts supply and scarcity maintains price [a point that the ICSA has now grasped]. Sire-only breed schemes fail on this point. It is difficult not to conclude that the promotion of Irish beef is about talking-up the generic [‘grass-fed’ included] as opposed to beef products linked to specific breeds, locations and farming practices.

By and large, Ireland’s farmers operate in a business-to-business [B2B] environment. They supply processors and factories and do not sell direct B2C [business to consumer]. The B2B mindset pervades the farming and primary [the largely farmer-owned part] processing industry. It is about raw materials [aka commodities] and ingredients for others to process, to add value and to brand. In such an environment significantly improving farm incomes by adding value to premiumize the farm-gate price is near impossible. The value-added attributed to the final consumer-facing product tends to go elsewhere.

A quality assurance scheme has been rolled out over the last few years. In terms of farming participation, it is successful. In terms of consumer awareness in Ireland, it is successful. But does it return a premium price to the farmer?

For exports, is the QA scheme about B2B relations? Does it allow ingredient users and fast-food chains to tick the sustainability box? Does it allow major retailers to put on their label “produced on quality-assured farms”? Is it about ‘quality’ or ‘farm assurance’?

Does the QA scheme elevate the product onto a higher retail shelf? Does it even do so in Ireland? Or is the QA scheme logo found on products across the quality ranges from budget to premium? Are they all quality assured? If so, can there be a QA price premium? Or are we confusing ‘quality-assurance’ [as in QA systems] with ‘quality’ [as in eating quality]?

Should one have similar expectations for Origin Green? Is it a B2B or a B2C scheme? Is it aimed at raising the level of all Irish produce? Is the aim to help the farmer by enhancing export volumes? And will that translate into consumer-derived, farm-gate-price premiumization?

Ireland is successful at developing B2B QA schemes and it may be leading the World in doing so. But does the Irish family farm actually need to be the foundation stone for B2C, designated-origin, linked-to-farming-practices, eating-experience-enhancing products that can achieve market premiums that translate through to premiumized, farm-gate prices?

To come full circle, in Ireland, is the ‘grass-fed’ term about raising the profile of generic produce? As with the QA schemes is ‘grass-fed’ to be all inclusive? Is it again about ‘premiumizing’ commodities? Is it be about enhancing B2B relationships rather than creating the B2C relationships [and premium products] that the farmer needs?

To put it simply, to create a sustainable future for itself, Irish farming needs to move on from the B2B-only environment into a B2C environment. It is, however, the biggest challenge faced by Irish farming since the Emergency; not least because it has yet to begin the process. It has not even arrived at the racecourse let alone began to run the race.

RISK MANAGEMENT IN A VOLATILE IRISH CLIMATE

A subject that was particularly disliked by many of our agricultural business management students was statistics. So why did we teach it? The rational was simply that farm management planning is about risk management and it is imperative that decision-makers understand probabilities. Preferably. it need to become intuitive as much as formalized. That said, if one is adroit at using spreadsheets for planning, looking at the possible downsides is not onerous.

One should also remember that planning is not solely about cash flows; there are many situations that would not be first considered in financial terms. Feed supply is an obvious one. Although resolving an on-farm fodder crisis will have financial implications, it is preferable not to get into it in the first place. In the days when a farm was entirely self-reliant, farm planning involved ensuring that there was a safety margin between expected supply and anticipated need. Nowadays one wonders if an expectation of government crisis support has led to farmers risking operating closer to the margin than they would have in the past.

I remember commenting in 2014 that the Fodder Crisis of 2013/14 should have been immediately followed by a review of the Food Harvest expansion plans. Just what would the implication be if it was repeated with an extra 300,000 dairy cows on the island? It would certainly mean [yet] another ‘Dear Taxpayer’ letter emanating from those who represent Irish farmers. At present, one wonders how some farmers are coping with the quality of their silage this winter.

Prior to Ireland, my previous dozen years had involved farming in a climate that had warm to hot summers and long cold, dry, windless winters. We did not have long grass-growing seasons but leguminous forage crops grew in abundance. The summers were good enough for hay-making and conservation could be back-stopped with haylage. Land costs were low and we could farm on a low-cost, extensive system that meant a fodder safety margin could be built in. I would say it was an easier location to farm cattle, sheep and, as it was, water buffalo.

How different Ireland is. Yes, it has a long grass-growing season but it has an unpredictable, maritime climate. As I often say, the country has low variable costs of production for milk and meat but those are more than dissipated by the small size of Irish farms. Consequentially, it is not a low-cost producer. And endlessly repeating the statement that it is does not turn the myth into reality. It is a myth based upon partial costing and it is one that continues to undermine the future of Irish farming. That this has led to a processing / exporting model that assumes that Ireland can produce low-cost raw materials is the farming tragedy of our times.

Apparently, the solution of more than a few who advise Irish farmers [and write agri-food strategy] is to recommend that farmers intensify their farming systems. The logic being that if one aims for a greater production per acre [land being a major constraint for most farms] costs per unit of farm produce can be driven down. The more intensive grassland use will lead to greater ‘profits’. Whether this will provide a sustainable return on the farmer’s labour, management and assets is an issue that partial costing does not properly address.

One would also ask if this model can be successful in Ireland’s volatile climate? Is there a gap between the theory and what farmers can achieve year-on-year within risk-set safety parameters? If those who advise are frustrated by farmers’ willingness to adopt their ideas [regardless of how many discussion groups they attend] it is probably because the farmers are weighing up the risks involved and concluding that intensification is not a sustainable solution for them.

One read a headline the other day that referred to producing 44 DM t/ha from grass in Brazil. It was under centre-pivot irrigation. Intensive farming invariable means operating in a controlled environment [indoor livestock or protected crops] or where climatic variation can be mitigated [as with irrigation]. Yes, it rains in Ireland and an awful lot at times. When and how much is less predictable. One wonders how many advocates of intensify grassland use, more stock and greater forage reliance have run the economic models [and risk assessments] necessary to fully assess the wisdom of going down that route on an island that is quite so exposed to the Atlantic Ocean? I suspect that many farmers have [at least intuitively] gone through the processes.

It is why I keep questioning the idea that Ireland is [or can be] a low-cost food producer. The farming structure is unsuitable and the climate too variable. I tend to consider Ireland as more akin to those European regions that have a difficult climate, constrained to small-scale farming and remote to market. It requires a different mindset and farming/food model.

Sadly, many in Ireland’s farming establishment are fixated with New Zealand’s large-scale farms as a model. Sadly, many in Ireland’s agri-food establishment believe that Ireland’s farmers can survive on low farm-gate, commodity prices. Realistically they cannot; regardless of the taxpayer support that flows their way. Irish farming is exposed [by their supply-chain partners] to the wrong markets and they are being advised to rectify the problem by adopting farming systems that simultaneously and increasingly expose them to the vagaries of Ireland’s climate.

The strategic advise given at all levels to Irish farmers should be built upon risk-based farm planning but, one must ask, just who has done such? Has anyone? And, not least, was it done for Food Harvest 2020 or Food Wise 2025? And if not, why not? I for one am left with the impression that there is just too little rigorous farm business planning around.

PRICE CYCLES IN AGRICULTURE AND MARKET VOLATILITY

An issue in Ireland that concerns me is the understanding of price cycles. They are nothing new. For a brief read on the subject I would recommend ‘An introduction to economics for students of agriculture; first published in 1980 and written by my former colleague at Wye College, Berkeley Hill.

To quote from the first edition; “Often they [farmers] are aware of periods when prices are depressed and of others when prices are above the anticipated levels. They also have the impression that a long-run downward trend in prices for their products has been occurring. Part of the difficulty in interpreting and anticipating price movements is that the price mechanism reflects a number of changes which are different ibn cause but which are occurring simultaneously”.

As a note, the long-term downward price trend can be attributed to the continuous investment in technology that occurs in agriculture. It has ensured that supply continues to move ahead of demand. At least that is the case with commodities that do not benefit from any product differentiation that adds value.

The existence of price cycles for agricultural commodities is well known in Ireland and that the accepted wisdom is that prices will move from trough to peak and vice versa. At times, it appears that the confidence in the cycle is such that one can plan their future secure in the knowledge that high will follow low as surely as night follows day.

For the author this is a cause for alarm. More so when it comes to loan finance. To put it simply, is it wise to borrow to survive the bad times on the assumption that rise will follow fall? And how sure can one be that the good times will allow the repayment of bad time loans?

The critical long-term planning factor should be the expected price at the bottom of a price cycle. Investment and borrowing should be made based on this downside price [with sensitivity analysis used to delve deeper]. Borrowing and investment should go hand in hand. Borrowing to plug cyclical downside shortfalls is not to be recommended; not least when the future repayment capacity is entirely reliant on the cycle providing a sufficient upside price.

One should also ask what triggers the ‘classical’ agricultural price cycles. Do they function in a comprehendible way in a globalized market? The classical cycle rational is that there is a time lag between investment and produce sales dates as it takes time to increase productive capacity; either breeding stock or farming infrastructure. A high price stimulate investment but sales volume expansion occurs later. As many individuals make the same decision, a volume surge occurs that depresses prices as the supply increase exceeds any demand rise. As prices fall, farmers then exit the market and supply falls. Lower supplies mean prices rise etc. etc.

Now how effective are the signals in a global market? Can we assume that the global markets for, say, milk powders are going to follow cyclical pattern? Are there too many variables at play? Are there too many supply-side influences at work? What about the numerous factors that impact upon demand? This is not just your local market but the many markets that compromise the ‘global’ market. So how great an influence will politics play within those markets? And what influence will the behaviour [and power] of market players have?

The above are far from the simple assumptions that underpin the ‘classical’ agricultural price cycle. Therefore, is it naive to assume that what goes around will come around? It is risky to borrow and lend on the assumption that the price cycle will enable loan repayments to be made.

By way of further explanation let us return to the milk powder markets of recent years.

The tainted milk powder scandal in China was a significant demand-side event. As was the Chinese economic boom. The combination turned China into a major buyer. These were market signals that the supply side responded to. Did, nevertheless, the supply-side players all make independent decisions without due regard to what other players were doing? Did this create a rapid rise in the stainless-steel capacity dedicated to supplying China? Almost certainly [apparently, the shipping industry did likewise]. Do we now have excess capacity?

We then had the Russian sanctions, the oil price fall and the slowing of Chinese economic growth to cause a demand-side slow down. Meanwhile production and processing capacity was on the increase. In theory, demand-side changes should follow through to processing capacity closing and farmers stopping production [although the ‘pain’ from excess processing investment may have been passed on to the farmer by more powerful processors].  Will it happen or will, for example, low grain prices over-ride the demand side influences on price? It all gets rather complicated.

We appear to be coming out of the milk price slump. It has, however, taken a significant intervention by the European Union to do so. It has funded intervention buying and a scheme to reduce milk production. Are these normal functions within the market? Will the EU repeat its effort next time prices fall? It may not. Just how much political will has it taken to pull the market out of its slump? These interventions are not a part of a normal agricultural price cycle and they should not be taken for granted; they may not happen next time.

So, the question is; just how many of the above factors will be repeated and with a regularity that provides the foundations of a well understood cycle? Probably none.

Hence, should one plan their own farming future on the expectation that rise will follow fall? It may not be so wise as the cycle may not be a cycle after all.