This week, a KPMG report for the Irish Farmers Journal revealed that policy changes this decade could cost €3bn annually and cause up to 29,000 job losses.

These numbers calculated by KPMG are essentially driven by a loss of production on Irish farms as a result of policy decisions and are explained in detail in this week’s edition.

Of the three big changes, one, the new CAP policy has happened, the second which is delivering a 25% reduction in greenhouse gas (GHG) emissions is in process and the third losing our nitrates derogation remains a possibility.

Nitrates derogation

Ireland’s nitrates derogation runs out at the end of next year and the Government will have to apply to the EU for an extension with no guarantee of success.

However, it was encouraging to hear Minister Charlie McConalogue tell the audience at the Irish Farmers Journal open day in Tullamore this week that the Government are fully committed to pursuing an extension.

The KPMG report on the potential fall of 8% in output from dairy farms should help frame the Minister's submission to Brussels for an extension!

CAP changes

As for the CAP changes, there were no major surprises there as it was well understood what moving to 85% convergence or land-based payments would mean. There is no overall financial loss rather a redistribution of payments and more terms and conditions to access them.

However, the reality is that payments are leaving farms with higher output and going to more extensive farms. This combined with enhanced support for switching to organic means that the volume of product is reduced and this contributes to the overall reduced supply for the processing sector.

Also as of yet there is no evidence that the enhanced level of organic output from farms is securing a market premium, the category is being driven by the on farm financial supports.

25% emissions reduction

Delivering a 25% reduction in GHG emissions is the most problematic of all when it comes to maintaining output from Irish farms to supply our agri food processing industry.

The updated Teagasc Marginal Abatement Cost Curve (MACC) points different routes to how this might be achieved. All of them identify a reduction in livestock numbers.

For the report, Scenario 1, pathway 1 was chosen as it is the most likely based on experience to date. It shows a way to delivering 13% or half the total reduction that is required but to bridge the gap to 25%, less cattle are required.

The report has apportioned the loss of output pro rata to the proportion of beef and dairy cattle in the national herd but in practice if it comes to cuts, the more profitable dairy category is likely to squeeze specialist beef production even further.

The bottom line is that if we lose output from Irish farms, processing factories lose the raw material that their businesses require to function.

This was put very bluntly by Lakeland CEO recently when he said “the reality is that nobody wants to close facilities, nobody wants to see people losing their jobs” but “as costs increase, if your factories aren’t full to the brim in a low margin business, inevitably job losses have to happen.”

The KPMG report puts a number on job losses of up to 29,000 and a €3bn annual cost across the supply chain.