CAP reform may lower consumer food prices by 6% in short term
That's the view of John O'Connell, Department of Agribusiness in UCD, in an article published in the Irish Banking Review.
"Given that EU farmers probably receive no more than 30% of the average consumer euro spent on food, a relatively large farm-level price reduction of 20% will result in only a 6% reduction in consumer food prices. Thereafter, consumer food prices will probably continue to increase as the marketing sector continues to add more services and as unit costs in that sector increase."
Mr O'Connell's article predicts taxpayers will not benefit from further CAP reform as there is no planned reduction in the EU agricultural budget.
But changes under the CAP mid-term review will have major implications for farm structure, volume of farm output, agriculture exports and imports.
While stressing that projections must be treated with caution, he identifies the likely consequences for Irish agriculture as a reduction in the volume of beef and lamb output with increases in output of some other agricultural products.
Dairy product prices will decline, as will the incomes of dairy farmers and significant restructuring of dairy production is expected.
As to impact on the structure of dairy farming, Mr O'Connell draws on the work of IFA chief economist Con Lucey, who states that "medium-sized dairy farmers, with a 45,000-gallon quota, will no longer be viable".
Mr O'Connell concludes that EU farmers will, in the main, realise they are better off having their businesses directed by market forces rather than by politicians and bureaucrats.
"Ultimately, efficient and energetic farmers will be able to forge ahead. On-farm operational factors will be understandable because they are dictated by market forces rather than by political expediency.
"Farmers will be able to get back to applying science and knowledge to what they want to do that is, produce food and food raw materials," he states.
