Plans could lead to decline
Teagasc economists, who are attached to the FAPRI Ireland economic analysis unit, have reached this conclusion, which they outlined at a conference in Dublin.
They predict, however, that the new policies would result in a rapid acceleration in the decline in the number of dairy farmers.
But they say that dairy farmers who stay in production would be better off due to a substantial increase in milk output. Those who leave the industry would also do better because of EU payments.
Teagasc economist Thia Hennessy said the number of dairy farmers would decline from 26,500 at present to 15,000 by 2012. Average milk output per farm would increase from the current level of 188,000 litres (42,000 gallons) to 320,000 litres (70,000 gallons) while the 15,000 remaining dairy farmers would have incomes 25% higher than if current policies continued.
Their analysis shows that the exodus from dairying would be significantly faster than if current policies were continued.
This would be due to a combination of lower milk prices and the availability of compensatory or ‘decoupled’ payments.
The EU proposals provide for compensatory payments for all dairy farmers, including those who quit production from 2004 onwards.
“The maximum payment of 4.5c/litres (20c/gallon) would be payable from 2008 and would act as an incentive for some farmers to cease production,” said Thia Hennessy.
The Teagasc analysis shows that the implementation of the reforms in the beef sector, which involve the transfer of EU payments from an animal-based to an area-based system, would mean that the majority of beef farmers would experience some improvement in income.
“Two thirds of beef farmers would do better, with some of these getting income increases of up to 50%. These are predominantly smaller producers who are already earning very low incomes.
“About one-third of beef farmers would do worse. These comprise farmers involved in calf production and also the larger producers whose payments would be cut under the modulation element in the new policies,” said Thia Hennessy. The Teagasc analysis also shows that around 10% of beef farmers will completely destock and allow their land lie fallow.
