Next week’s budget gives the Government the chance to recognise the growth opportunities available in agriculture while acknowledging the challenges many sectors are facing.
The most obvious opportunities lie within the dairy sector.
Since the abolition of quotas, our grass-based dairy model has proved to be both competitive and resilient. Over the past two years, dairy farmers have been afforded the opportunity to maximise the financial potential of their business. Future profitable growth will be predicated on the ability of the sector to maintain its competitiveness and further bolster resilience. While farmers and processors have a key role to play, so too does the Government.
A balanced budget must recognise the challenges being faced by the low-income sectors
Budget 2018 has the potential to deliver on two fronts.
The first of these is in ensuring farmers who want to invest in their business have access to funds at competitive rates at EU and international level.
The €150m Agriculture Loan Scheme introduced in January exposed a failure in the market that has yet to be addressed. In its pre-budget submission, the IFA has rightly prioritised the future provision of a Government-led low-interest loan scheme for farmers to fund working capital and on-farm investments.
The Government’s role in improving business resilience centres on recognising the need to introduce income stabilisation tools that reflect the severity of the shocks we are now seeing in farmgate prices.
While the level of price volatility on a rolling five-year average is low, annual swings can be in the magnitude of 8c/l to 12c/l. The absence of income stabilisation provisions that can accommodate this level of price shock has the potential to severely undermine resilience at farm level.
Cashflow is king
It should be acknowledged, however, that the introduction of low-interest rate loans and income stabilisation provisions are only relevant to a small subset of the industry – mainly those farmers who are making sufficient levels of profit to be in a position to either invest or face tax issues.
The second area where Budget 2018 can deliver relates to Brexit.
A balanced budget must recognise the challenges being faced by the low-income sectors and the threat posed by the UK leaving the EU.
In some quarters, next Tuesday’s budget has been dubbed a “Brexit budget”. The extent to which this proves to be the case will be measurable by the level of support provided to the most vulnerable sectors. Few could argue against the view that the Irish beef sector and in particular suckler farmers are most exposed to Brexit.
While Minister for Agriculture Michael Creed has made no secret of his discomfort with coupled payments, he cannot ignore the vulnerability of the national suckler herd and indeed the impact on rural communities. A Brexit-focused budget would move to provide additional support to suckler farmers channelled through the BDGP scheme.
The ANC scheme is another vehicle the minister can use to target increased funding at the most vulnerable sectors. Many of the farmers participating in this scheme, particularly those on the most marginal land, are facing increased pressures this year due to adverse weather conditions. The Government’s commitment to these farmers will be measured against delivery on the previous commitment to increase funding for the ANC scheme by €25m.
There would of course be the option through the ANC scheme to front-load this increase in funding to those farmers on the most marginal land types and facing the biggest income challenges.
Focus on renewables
The budget will also give farmers an insight into the extent to which our Government sees the potential for the agricultural sector to play a role in the renewable energy sector. It has been well flagged that final details of the RHI scheme are being prepared in advance of the budget. Attention will focus on both the funding commitment and whether farmers will be able to apply to the scheme in early 2018.
Teagasc held a very interesting conference on the role of anaerobic digestion in the production of bio-gas this week.
A combination of scale and an adequate feed-in tariff were identified as key to exploiting the potential from anaerobic digestion.
There is no doubt that the opportunity exists for large-scale cooperative type digesters to offer an alternative income stream to farmers interested in providing feedstock – either in the form of grass or maize silage.
Could this be an alternative option for our tillage sector?
There are always smaller ticket items that can be introduced within the budget that make a real difference and help drive change. In the context of the current focus on anti-microbial resistance, it would make sense for the IFA proposal to reduce VAT on vaccinations to be seriously considered.