Dempsey at Large: do comparisons matter?

Costs of production are important, especially if you are an exporting country. It is critically important to know how your costs stack up against not just your neighbours across the field, but also how they measure up against other potential suppliers to the markets you have in your sights.

Last week I attended a competitiveness workshop organised by Teagasc. It was part of a larger agriculture economics conference with contributions from all over the world. The ability to compete is key and the knowledge as to where we are strong or weak in world terms informs this. Are we fit to take on the world on a cost and market-access basis?

Listen to Teagasc's chief economist Fiona Thorne in our podcast below:

Listen to "Is Irish farming competitive?" on Spreaker.

There is still a lot of work to do across the various enterprises in this area but I am glad to see Teagasc taking the subject seriously. Before the various Common Agricultural Policy reforms, it really only mattered if we were competitive in European terms. CAP, through its intervention system as well as export refunds and high tariffs, made sure that competitiveness within Europe was all that mattered but that is no longer the case, despite the theoretical treaty objectives to ensure reasonable farm incomes.

Dairy untouchable

So, what did I learn as I sat in the RDS and listened to the presentations and discussion? The first lesson was that in an Irish context, of the main enterprises, dairying is untouchable. For herds with 133 animals (not just milking cows), we are the most competitive in the world – no wonder milk output is continuing to surge since the removal of quotas. However, based on the Teagasc figures, while smaller herds are not as competitive, the combination of own land, low debt, spring calving, high grass dependence and modest labour bills is a combination that makes Irish dairy farming the most competitive of all the world’s major milk producers.

Beef down the rankings

The Irish beef sector is highly competitive within an EU framework when you are just looking at the actual cash outlay in producing the final product. In other words, if the land and labour are free. However, if you include even a modest charge for these, we slip seriously down the rankings. But it is also worth noting that the average herd size taken for Ireland of 50 cattle is not of a size that will give anyone a full living under modern conditions.

When the net is widened to include other countries – especially in South America – we become alarmingly high-cost but again, the scale of measured Irish operations does not reflect modern realities.

For the final main measured enterprise, tillage, Ireland does surprisingly well in cost per tonne produced and especially so in yield per acre in Europe.

So far there is a scarcity of data in relation to costs of production of cereals for farmers outside Europe. These farmers in South America and the Black Sea are our key competitors and we were relieved to be told that these figures should be fully available in the autumn. We hope they are because they should give us a view on what form of direct payment is justified to sustain EU agricultural production as the next reform of CAP is considered for post-2020.