Land rental critical to dairy expansion

A cultural shift towards land rental, good banking arrangements and forward agreements with co-ops will be vital to dairy expansion, farmers heard at the AIB seminar Future Prospects for Irish Agriculture in Silversprings Hotel, Cork.

Some 600 farmers and farm families heard AIB agri advisor Tadgh Buckley say that the actual number of farms available for rent in Ireland every year is very low; at just 18%, the lowest in the EU. In contrast, up to 85% of land in France is rented.

Tadgh’s comments were echoed by Minister Simon Coveney, who held the attention of a silenced room for a solid hour. One of his key messages was the need for farmers to look at their own activities as a business.

He said farmers must solve their own business issues by negotiating the right deal with their respective banks, as well as entering forward agreements with co-ops as appropriate in order to lock in an element of fixed prices in an era of volatility.

Farmers should both build a relationship with their local bank manager, but also demand a good deal from their bank manager. Farmers should ensure that their borrowings are sustainable and that there is room within their financial plan to cope with price volatility.

As a result of quota, in the absence of being in a position to supply unlimited commodity product our co-operatives and processors have instead being increasing value added through nutritional drinks, infant formula, cream liquors and cheeses — this has distinguished Ireland as premium product provider.

All of these factors, together with our unique co-operative structure provides Irish farmers with a great foundation to expand.

The minister said he’d like the banking sector to bring forward innovative new financial products such as loans capable of being collateralised on stock. The minister said that in time, this period will be looked at as an era of extraordinary growth and development in Irish agriculture.

On CAP reform, the Minister outlined his advocacy for a productivity-based payment rather than a straight area-based payment.

On the CAP negotiations, it was clear that the minister is taking all views on board, he spoke passionately about supporting productive farmers while at the same time ensuring that young farmers and those farmers who missed out on the original reference year allocations are not now forgotten.

There will be winners and losers, with those currently receiving the most likely to get less and those receiving little or nothing likely to gain as a result of internal redistribution. Greening measures should not have much impact to most Irish stock farmers. Bio-diversity focus in CAP talks won’t take the form of previous “set aside” arrangements but could cater for the likes of root crop rotations, and two to three crop types in the case of larger arable farmers. The new types of schemes will promote sectoral productivity and sustainability similar in the benefits that were brought about in through the Suckler Cow Welfare Scheme.

Tadgh Buckley reminded us that, with 2012 exports of €9bn, Ireland already punches well above its weight, being the fourth largest beef exporter in the world and the largest exporter in the northern hemisphere. Ireland is the sixth-largest producer of infant formula worldwide.

Demand for food is rising, fuelled by natural disasters like droughts in Australia and central America, and fires in Russia, causing spikes in prices.

Food stocks are low versus historically high stocks in the 1980s and 1990s. EU food prices are converging with international prices, where stocks such as beef were previously much cheaper when imported from South America in the early 2000s.

This difference in price is now significantly eroded, meaning that Irish product is competitive on an international stage. Dairy farmers in Ireland are well positioned for expansion being some of the most lowly geared farms in Europe — in other words the majority of Irish farmers have little or no borrowings.

Some stark reminders of volatility were presented in both the milk and wheat markets, with swings of up to 50% in price. However, Irish grassland dairy farmers have an inherent advantage — feed accounts for 53% of dairy input costs for other EU states.

The Teagasc national farm survey shows only a small number of dry stock farms to be economically viable in their own right. This is a serious issue for a sector so reliant on off-farm income to support the farm family.

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