Budget a real opportunity for volatility measures

The agri-food sector continues to play a crucial role in Ireland’s economic recovery with our exports valued at €11.15bn in 2016, marking incredible growth of over 56% since 2009.

Budget a real opportunity for volatility measures

Overall, agriculture and food accounts for 8.6% of employment.

Critically, the increase in export value from the sector has been achieved using inputs sourced from the local economy, creating a much wider multiplier effect across rural Ireland.

However, we are facing unprecedented uncertainty due to external factors.

Brexit will result in a huge upheaval as the UK accounts for 37% of Irish food and drink exports. Moreover, income volatility remains a significant threat to the achievement of the Food Wise 2025 Strategy. For example, the farmgate milk price has fluctuated from highs of circa 40c per litre to lows of circa 20c per litre within a relatively short time period in recent years.

This leads to great uncertainty at farm level which impacts upon day- to-day business decisions and long- term planning and investments.

As a mechanism to address extreme income volatility, the ICOS is strongly urging the Government to announce in October’s budget the establishment of an income-stabilisation measure whereby some income might be deferred in a period of high prices and drawn down in a period of lower prices. In last year’s budget, the Government committed to further consideration of such a measure. It is now time for its implementation.

The ICOS is proposing that a farmer can enter into a voluntary agreement with their co-operative to defer up to 5% of their gross annual income. The deferred income will be held in an account for the specific purpose of the scheme and can be drawn down at any time and subject to income tax at the time of drawdown.

The proposal by the ICOS can result in a significant stabilisation impact on the income of a typical family farm enterprise. It will incur a minimal cost to revenue and can be considered cost- neutral. Further, our proposal is designed to ensure compliance with EU state aid rules under the De-Minimis Regulation.

Additionally, the Government must include measures in Budget 2018 to deal with the unparalleled threat to the economy by the UK’s decision to exit the EU including current Brexit- related sterling weakness.

Although formal exit talks between the UK and the EU have begun, there remains huge ambiguity with regard to the future trading relationship. In the meantime, investment insecurity and market volatility are dominant issues for the sector.

The uncertainly has already caused severe market disruption with the euro is at its strongest level against sterling in eight years resulting in a very challenging trading environment for Irish exporters.

The UK is a vital high-value market for Irish agri food, valued at €4.13bn in 2016 including €825m in dairy products and more than €1.1bn in beef products. The shared land border between north and south has seen the development of a highly integrated agri-food sector, with large volumes of trade in live animals, finished products and products requiring further processing including dairy products and ingredients.

The ICOS is calling for increased funding for key State agencies such as Bord Bia and Enterprise Ireland to support the promotion of agri-food exports on new markets and on product diversification. The Government should also investigate the requirement for a national export credit scheme to assist businesses in expanding to new global markets. Expanding to new markets can put a strain on cashflow due to upfront logistical, marketing and regulatory costs. Further, the greater utilisation of EIB financing by the agri sector and rural businesses must be prioritised.

We also support calls on the Government to work with the European Commission to establish a temporary state-aid system to enable those sectors most affected by Brexit to receive all necessary support.

The ICOS is seeking specific supports for livestock marts. The livestock marts sector provides an important alternative and secure market for farmers to trade their animals. The mart is a key focal point in many rural towns and is a valuable social service to communities.

There are many challenges facing the marts sector including higher costs such as insurance and local authority rates.

The ICOS is reiterating its call on the Government to introduce a fairer system of rates collection for marts based on the number of days trading annually rather than the standard method.

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