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CAP and Brexit are the two major influences on Irish beef production that farmers can do least about. Firstly, Brexit is a threat that hangs over access to our main market, the UK, for exports. The Common Agricultural Policy (CAP) is an essential contributor to the support of agriculture in the EU that delivers a consistent supply of food produced to standards above the global norm that EU consumers demand.
There is a major area of overlap between Brexit and CAP through the EU budget and the impact that the departure of the UK will have on this. The annual EU budget in 2016 was €155bn, 39% of which was used to fund the CAP. The UK has been a net contributor to the EU of about €12bn annually, so a quick calculation reveals that there will be between €4bn and €5bn less available to the CAP budget following the UK’s departure.
There is an added challenge for the future EU budget in the form of expectations that the EU spends more on defence and tackling the refugee issue, all of which involves more money. With the CAP being the biggest part of the budget, there will be a political battle over the coming months to maintain funding, particularly in view of the new demands that are coming to the EU.
In a recent EU budget conference, Commissioner Oettinger indicated he favoured a 50:50 split between savings and introduction of new money to fill the financial gap left by the UK departure. In terms of funding new EU initiatives, he suggests an 80:20 split between introducing new money and savings. This would involve an increase in the contribution by member states to the budget from 1% to 1.1% of gross national income. Either way, it appears there will be less money available for the CAP after 2020. It is also expected there will be further environmental demand on agriculture in the next CAP. These, combined with the threat to a 270m tonne annual market, present huge threat and uncertainty to Irish beef producers.
A further push is being made in Brussels this week to conclude a trade deal with the large South American group of countries known as Mercosur. The members – Brazil, Argentina, Uruguay and Paraguay – are among the top exporters of beef in the world and currently supply 75% of all the EU beef imports.
The EU is keen to close a trade deal with the bloc because access to the South American countries for industrial products, particularly cars, car parts and pharmaceutical products, would be a major benefit to the union. However, the price of this deal is huge access to the lucrative EU beef market, particularly for high-value steak meat. The EU is one of the most valuable high-volume steak markets in the world and a target for Mercosur countries.
However, granting further access (and a 70,000t offer has already been made) would mean the EU could be importing the steak meat from the equivalent of 1m cattle into a market where the supply and demand equation is at best in balance. There have been rumours that the EU may increase its offer, with the South Americans expecting more than the 100,000t that was offered in 2004.
There is no doubt that Mercosur countries offer export opportunities for a wide range of EU products. However, for beef producers across the EU, the reality is the market isn’t sufficiently large to accommodate additional supply anywhere near the volumes that are being discussed, whether that is 70,000t or 100,000t.
There is a further issue with imports from South America, particularly Brazil. There have been long-standing issues around compliance with EU standards, with the EU Food and Veterinary Organisation producing several negative reports. It is particularly difficult for EU farmers having to accept sanctions for failure to register calf births within 28 days and compete with product that is imported from outside the EU, where registration doesn’t have to take place until 90 days before slaughter.
Over the past 10 years, support payments to drystock farmers in the form of BPS, ANC and environmental payments have fallen by almost €200/cow. This drop in support has been a direct cut in income to farmers on some of the most marginal land in the country.
Suckler cow farming is a low-margin business that needs support to survive. Increased targeted payments to the suckler herd can deliver much more than just supports to farmers. The IFA commissioned a study a number of years ago and Professor Alan Renwick of UCD showed that every €1 in direct support to the suckler herd underpins €4.28 of output to the local economy.
This support doesn’t sit in a bank account. It’s spent in local shops, rural businesses and in towns and villages right across the country.
These farms act as economic generators and in some areas there is nothing else. IFA president Joe Healy has flagged this week that the Government is planning to spend an extra €3bn in the next budget due to the improvement in the national finances. This, coupled with an underspend in the rural development programme, provides an ideal opportunity for the Government to back up its words of support for the sector.
Minister Creed needs to invest in the suckler herd and tackle the income crisis on livestock farms. Waiting until the next CAP reform may be too late for some farms.
Some farmers find it condescending to talk about farmers being custodians of our countryside, but this is a very important role. We have already seen in some areas where stock are not grazing, invasive species have taken over and our landscape could change forever as farming practices decline in these areas. Policymakers should remember that there is a high cost of compliance with EU beef standards of food safety, traceability and environmental codes. It is decision time on the future of our Irish and European suckler herd and we want to ensure the right decision is made.
In 2017, annual turnover in the beef sector was some €3bn, with beef exports (including offal) amounting to €2.5bn and live cattle exports of around 190,000 head valued at €115m.
Ireland exports over 90% of its beef production. In 2017, 615,000t of beef was exported, the vast majority to the high-value EU market. Exports to the UK amounted to 51% and those to continental EU markets amounted to 43%.
The Irish beef sector comprises 26 major processing plants (over 20,000hd), with some 10,000 people employed directly in processing output.
Taking figures on the whole meat sector from the CSO for 2015 and assuming beef represents 55% of everything, total turnover is €3bn, with total purchases in the economy including cattle of €2.6bn. Then gross value added in beef in 2015 was €447m, of which wages and salaries were €274m.
A meat plant is by far the largest economic entity, spending in the region of €70-80m in the local economy between cattle purchases, wages and local services. On average, a single factory supports 400 direct jobs, 150 indirect jobs and 3,000 beef farmers.
A 2015 study by KPMG highlighted the economic impact of ABP’s plant in Cahir. It showed the Cahir site sustained 615 direct jobs, which in turn generated €85m in gross value added (GVA) to the national economy annually. A further 1,048 jobs were created or sustained along the supply chain, to include meat and livestock hauliers and procurement agents. These indirect jobs are estimated to contribute €111m to the Irish economy annually.
The economic effects of the wage spend of all those employed operationally at the ABP Cahir site (either directly or along the supply chain) is estimated to sustain a further 286 jobs. These jobs are estimated to provide a further €13.3m to the economy. Therefore, overall the Cahir site supports some 2,000 jobs and contributes €209m in GVA to the national economy. On top of this, some 2,800 farmers supply cattle from surrounding counties to the plant.
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