Opinion: fair food pricing may test CAP commitment of consumers

Sean Molloy, the Tirlán CEO, is a thoughtful man and quite a low-key performer. He doesn't say things for the soundbite effect, he doesn't chase headlines or column inches.

The only things he shares with Michael O'Leary is that he is a CEO of a big organisation who maintains a cattle farm in the midlands (Molloy is from Tubber in Offaly).

So I doubt I was the only one who sat up sharply when I read the words he delivered at Bord Bia's 2025 market outlook conference this week.

As my colleague Rachel Donovan recounts, Molloy told the assembly that consumers will have to pay more for food if they want farmers and processors to deliver low-carbon, high-quality, traceable food produced to the world's highest animal welfare standards.

He's right, of course. Retail prices no longer return enough to the food chain to meet the ever-rising costs of food production. And most of the pain is passed back to the primary producer - the farmer.

Progressive squeeze

When retailers and processors have taken their margin out, the farmer gets whatever is left. As a result, farmers have been progressively squeezed, particularly in years where costs are higher due to external circumstances and almost all of a farmers' circumstances are external.

In 2022, the Russian invasion of Ukraine saw fertiliser, feed and fuel costs rocket by as much as 300%. Then, in 2023 and 2024, as input costs receded, awful weather meant output went down.

What was interesting is that 2022 turned out to be a good year financially for farmers. Commodity prices responded quickly to the changed circumstances and margins were maintained. And consumers didn't complain very much.

I haven't seen much analysis as yet looking at exactly why that was. Perhaps it was because shoppers saw this as a temporary spike, a short-term response to extraordinary circumstances.

And maybe because the fact that food price increases, while significant, were of a much smaller order in percentage terms than fuel, heating and energy costs. The rise in food prices was thus dwarfed by the cost of electricity and petrol.

Constant challenge

In contrast, farmers had to cope with the difficulties of 2023 and 2024 without much market response. The tillage sector saw prices for food crops such as porridge oats and malt barley recede sharply, even though yields were way back.

And fruit and vegetable producers, closer to the consumer than anyone, had to fight tooth and nail for relatively small price rises to keep themselves from sinking, even as their machinery was sinking in sodden fields.

I have nothing but respect for people who sell product directly

Maintaining a margin over costs is essential for any business and farming is no different. But doing so presents a constant challenge for farmers, who essentially are food producers rather than marketers of what they bring to market.

I have nothing but respect for people who sell product directly, be it conventional, organic, farm-scale or allotment. It requires a wide skillset and demands total personal and financial commitment to the cause. For that very reason, it will always be a minority sport - most farmers are not equipped with those skills.

For that reason, farmers need to organise themselves collectively. The farm organisations are not trade unions, but share the same goal of trying to even up an unbalanced playing pitch.

In the case of farmers, it's a pitch where the power resides with the buyers rather than the employers. Processors and retailers hold most of the cards and that has proven resistant to all attempts to provide equity - or even illumination - in the food chain.

This was also the reason for the birth of co-operatives in the late 19th century. Now, in the digital age of the global village, co-ops still have a massive role to play in delivering viable prices for farmers.

As the CEO of Ireland's biggest dairy co-op, Sean Molloy is rightly representing and articulating the economic realities of not just the processor he is employed by, but the farmer suppliers who own the company.

And in the first week of 2025, he has set the theme for what should be the dominant conversation in farming and agri food for the coming year.

How do we build economic sustainability into the entire food chain while delivering on the ambition of lawmakers and consumers for the sector?

CAP consensus may be tested

In other news this week, we saw some heartening evidence that European consumers continue to recognise the importance of food production and farmers.

As my colleague James Hanly recounts, 92% of citizens believe agriculture and rural areas are important for all our futures, with over half saying they are very important.

Support for the Common Agricultural Policy (CAP) is north of 70%, meaning almost three in four people are in favour of the system of supports that are in place for farmers.

That's great - and it's also vital, as those citizens are voters, so both MEPs and member state governments will be guided by such sentiment.

However, one caveat. These voters and taxpayers are also all consumers. And if Sean Molloy is correct (and I believe he absolutely is), these consumers are now being asked not only to support farmers through the CAP, but also through higher food prices.

This may prove problematic - consumers may see this as being asked to pay twice for the same thing. In a way that is true, but in another way it isn't.

Dual purpose

For the first four decades of the CAP, its dual purpose was to support farm production and keep food prices low for consumers. Production supports delivered this. Farmers achieved profitability by increasing output in response to the incentive of production supports, which helped commodity prices leave a margin for them.

However, since decoupling, that link has been broken. The CAP no longer directly supports food production. Payments are linked to the delivery of other social goods, mainly in relation to environmental protection.

At the same time, farmers have lost the ability to scale up or intensify, so output is effectively static. This means farmers are dependent on a marketplace margin for viability.

The CAP cannot bridge the gap between flat food prices and rising costs. Which brings us right back to where we started.

We as food producers have a pretty difficult message to deliver to consumers, who are also taxpayers.

It essentially goes like this - "Thanks for your support for farming through the CAP, but the bargain where that keeps food prices low no longer applies and you must pay more for food."

It's a tough sell and will require everyoone pulling together to deliver a consistent message.

Wake-up call

Lastly, this week's paper carried an interview I did with Jamie and Lorraine Kealy, who sell their cows next Wednesday.

They are remarkable people, excellent farmers and their story should be a wake-up call to everyone who cares about Irish farming, particularly dairy farming.

I wish them well on Wednesday and in all they do into the future.