Editorial: farmers cannot be left behind during coronavirus crisis

Until this week, farmers, unlike many other sectors of the Irish economy, had escaped the worst financial hit of the coronavirus. The focus had been on putting in place measures to allow trade continue, with farmers maintaining their contribution to the first link in the food chain: provision of the raw material that drives our creameries, meat factories and vegetable packers.

Imaginative solutions were found to allow milk to be collected and livestock dropped off at factories, minimising contact and the risk of spreading the virus. This enabled factories increase production in response to the surge in retail demand that helped offset the loss in trade from the hospitality sector, especially for steak meat.

Impact of losing burger trade

This has changed with the announcement by the burger chains and café chains that they were closing their doors and drive-through options. At a stroke, a market for tens of thousands of tonnes of beef, cheese slices and ice cream was wiped out and, while retail demand remains strong, it is unclear if it will be sufficient to sustain market prices.

Even though farmers were pressed last week to get livestock into the factories as they ramped up production for their retail customers, it will be farmers who first feel the chill of a cooling market if demand falters.

Of course, farmers wouldn’t be unique if they take a financial hit as part of the fallout from this global pandemic. Workers in travel, restaurants and any non-essential service have found themselves laid off and small business owners have also had to close their doors.

When farmers experience an income crisis, the EU has support mechanisms in place to help offset these. Intervention purchases were used in the dairy sector in 2015 and private storage aid was provided to the pigment sector in 2015 also to curb supply at a time of market collapse.

The Government must make sure that farmers are included with all other sectors of Irish society in the provision of income relief

Dairy, pigs and sheep

The dairy sector across the EU has already called for support and the deficit in global pigmeat supply caused by African swine fever has meant that demand and pig prices have been strong. Sheepmeat is more vulnerable, with the closures in France despite strong hogget prices in recent weeks.

Beef

Most vulnerable of all is an already weak beef sector that is particularly hit by the closures of the burger chains and the fast-growing sector of gourmet burger outlets.

With beef, calls for intervention are completely pointless, given the price it would have to fall to, and private storage aid, while maybe assisting with production of frozen beef for sale to China, which is expected to recover in coming weeks, is of no other practical benefit.

Private storage aid did work as a market support for beef in the past, when the EU had an export refund programme in place to assist companies sell in wider global markets.

The EU mistakenly forfeited this facility in 2005 and the immediate ending of all export subsidies by developed countries was one of the main outcomes of the 10th ministerial conference of the WTO in Nairobi in December 2015.

Devaluation achieves same as export refunds

This policy seriously disadvantages Irish and EU farmers competing in global markets, having already been hampered by adherence to specific EU standards on welfare, the environment and non-use of hormones. Irish and EU produce is forced to compete in global markets with countries that have the option to allow their currency collapse in value, making their beef more competitive.

Brazil, the biggest beef exporter in the world in 2019, has a current beef price equivalent to €2.42/kg at the current exchange rate of BRL5.50 = €1. If we applied the exchange rate of BRL4.65 = €1 from the middle of February, it would make the Brazilian price the equivalent of €2.86/kg.

If we were to use the exchange rate from this time 10 years ago, when it was BRL2.20 = €1, it would make the Brazilian price the equivalent of €6.05/kg.

Currency devaluation provides a country with the most effective market support mechanism and it isn’t confined to Brazil. Argentina exported just under 570,000t of beef in 2019, a 50% increase on the previous year.

If we look at the value of the Argentinian peso, it was ARS22 = €1 at the beginning of 2018 but had collapsed to ARS67 = €1 by the end of 2019. This had the effect of making Argentinian beef just one-third the price in euro compared with two years earlier, and impossible to compete against without assistance.

Economic as well as human health cost

Of course there will be a global economic cost of this pandemic, once the human cost has been brought under control.

A global recovery plan will be required but from an agriculture specific perspective, the EU and Irish Government will have to put measures in place to enable the survival of Irish and EU agriculture.

It is simply unjust that Irish and EU steak meat has to go head to head with a similar product that enters the seriously depleted EU market space assisted by a massive 300% currency devaluation.

The EU has in the past used the safeguard mechanism to protect the market from cheap rice imports and it is time to immediately shut the EU market to beef imports using this same safeguard tool, which was heavily promoted by the then-Commissioner for Agriculture Phil Hogan when defending the Mercosur trade agreement in July last year.

Flexibility for national government

The Irish Government, too, must make sure that farmers are included with all other sectors of Irish society in the provision of income relief, whether that is a factory worker that is laid off, a small business or a major airline.

There already exists a facility for national governments to make up to €25,000 payments to address a crisis without EU state aid approval over a three-year period. This was used to provide support to farmers during the weather-induced crisis in spring 2018 when the limit for payment was €15,000.

This is the route that can be used immediately to get money to farmers if required, as there is little argument about this being a crisis.

Farmers should have same priority as everyone else

If the worst happens in markets as a result of the pandemic, farmers won’t be alone in having their livelihood damaged.

Also, society will correctly judge harshly anyone or any sector who tries to exploit this public health crisis for their own selfish gain.

However, workers and businesses whose incomes have been either wiped out or seriously damaged have been correctly identified as needing support from the State. This also has to apply to farmers, particularly those in livestock who have a low-income business at the best of times.

If the necessary action taken to control this pandemic hits farmers' income, they too must be included in State income support - no more nor no less than any other sector of the economy.

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