A dispassionate view of farming
Sixteen months on, his latest analysis of the outlook for agriculture is again worth consideration. Economists have been relatively silent on the CAP Reform, the greatest change facing the Irish agri-food sector for decades.
Like everyone else, they are waiting patiently for the full details. But Professor Matthews and his colleagues Ronnie O'Toole and Janine Jensen have had a preliminary look at the figures.
They predict that full decoupling would have a positive effect on the Irish economy, due to "improved allocation of resources". They say the effect would be even more positive, if the constraint that land and family agricultural labour must remain in agriculture were relaxed. Farmers who take pride in their work and their contribution to the economy may not be too pleased with such findings.
It's a typically dispassionate view of farming from , just what one would expect from its authors. Professor Matthews, who has been a trenchant opponent of the CAP. "We are forcing farmers to produce at a loss in order to qualify for direct payments, a crazy and distorted waste of resources," he said 16 months ago.
He warned then that farmers were getting used to subsidisation, and eventually wouldn't be able to compete in real markets.
Direct payments regardless of quality were causing farmers to lose interest in quality production or in responding to consumer needs, he warned.
He went on to predict a version of the decoupling that is now on offer. "After five 'extremely painful' years, the only limit to the expansion of Irish agriculture would be the ingenuity and skills of farmers," he said last June.
Now, with the Luxembourg agreement of last June in place, he does not see so much pain ahead for farmers; instead, he predicts income on cattle and sheep farms growing by 2.2% and 1% respectively, and falling by 2.7% on cereal farms, if there is full decoupling.
As cattle production falls, price would rise, partly as a result of improved efficiency, because farmers will no longer keep animals at a loss, in order to be eligible for livestock premia. The economists see high quality land released from the higher subsidised cattle and sheep sectors, into alternative uses, allowing the cereals sector to increase its usage of land and dairy farmers to relax stocking rates. They see cattle production falling 11%, cereals production increasing 15.9% and sheep production decreasing 2.3%.
Interestingly, they predict an increase in the price of beef for the home market of 7.4%, because of reduced supply of the domestically produced beef which Irish consumers strongly prefer. If so, butcher heifer production could become more lucrative.
They see imported beef playing a stronger role in processing. Although cattle production is predicted to decrease by 11%, output of processed beef would decrease by only 8.9%, due to increased usage of imported beef.
However, in food processing overall, which currently gets 50 to 60% of its inputs from Irish farms, CAP Reform is expected to have a 'significant' impact on output and employment. Another tip from the economists, which the Government will no doubt take on board, is that full decoupling knock 1.2% of total Irish greenhouse gas emissions.
The economists say partial decoupling would increase national greenhouse gas emissions yet another black mark against that outcome. But their figures would indicate grain incomes increasing 6%, with partial decoupling.
It's all just numbers to the economists, but our more progressive and commercial farmers will be doing their best to drive the industry forward, without the coupled payments that put nearly 14 million cattle and sheep in the fields of Ireland.
The economists' fears that farmers might forget how to compete in real markets are belied by the 92% of our top beef farmers who intend to maintain or increase stock numbers, according to a Teagasc survey.
Just 8% intend to reduce numbers, one-third intend to expand.
Perhaps the most encouraging finding is that a majority are conscious of the need to improve the quality of stock and finish beef animals at a younger age.
