Bigger picture as vital as milk prices

Since I was elected president of ICMSA three years ago, I have consistently voiced my conviction that a ‘bigger picture’ effects farm incomes to at least the same degree as product prices and that we must concentrate more on ensuring that the context —the ‘bigger picture’ — within which we farm and produce food is balanced and does not, as often seems the case, discriminate against the farmers as price-takers.

The Milk Market Observatory within the Commission’s DG Agriculture to monitor the market situation for dairy products is in place over 12 months. On its launch I warned that this must not become another ineffective cop-out but that it exactly what it has become: a statistical collecting exercise, and that’s what it will stay unless given real teeth. We have all seen the damage the multiple retailers in Ireland have done to the liquid milk market and this problem is being replicated across Europe in the dairy and other sectors. Politicians across the EU — including our own — have spoken on this topic for years and all it has amounted to is a hill of utter waffle. The large multiples continue to build more stores, gain market share by whatever means, and the other links in the chain continue to pay for this excessive power. It is killing farmers and also, I believe, impacting negatively at processor level and, most certainly, the consumer is not gaining. The already too powerful are getting more power and it is at the expense of all others — whether farmers, consumers or smaller local retailers. It’s time somebody stood up to the retail giants and that has to be, it can only be, the EU Commission.

While I’m on the subject of toothless agencies, I’d like to mention our own Competition and Consumer Protection Commission —the artist formerly known as the Competition Authority — whose intervention last November in the beef dispute I described as “brass-necked”.

The reason given for the intervention was to ensure compliance with competition law but that sounded very hollow to farmers who have wondered for years where competition law was when it came to solicitors fees, or veterinary medicine costs, or fallen animal costs, or fertiliser prices, or any of the other costs heaped on farmers often by self-regulated bodies who seem to answer to no-one when it comes to setting charges.

The intervention by the Consumer Protection Commission was seen by farmers as biased on behalf of the meat factories and the contrast with their complete inactivity on any of issues we have raised with them for years was carefully noted. I was widely reported as describing it as “brass-necked” at the time and I stand by every syllable of that. If there’s one group that doesn’t need the protection of a state agency, it’s the meat factories — the people selling to them might need some protection but we never seem to be considered.

Another major component of the ‘bigger picture’ is input costs. In the five years between 2008 and 2012, farm inputs costs have increased by 41% while farm overhead costs have risen by 18%. In the year to September, our output prices have fallen by 11.6% while our input prices have only fallen by 3.5% with the principal reduction being in feed costs. This price-cost squeeze is simply not sustainable and must be addressed by policymakers.

The legal system is also a barrier to competition and I spoke to one farmer recently who was transferring banks and was forced to pay four different solicitors to transfer a lien as he was farming in a company.

ICMSA is very concerned not just with the availability of credit to fund required farm development, but the real cost of credit relative to what is available in other countries. There is need for long-term capital at competitive rates. It would be a major mistake to plan for long-term investment based on a continuation of the current historically low interest rates as interest rates are likely to increase in the medium term.

But we must ensure they remain at a level similar to our competitors.

There has been a major push by our pillar banks in the agri sector, which we welcome, but we need to see proactive policies operated by banks should conditions at farm level deteriorate — including options to restructure without heavy penalties and debt repayments linked to output prices.

Next year looks challenging in terms of product prices, we have to see progress on curbing input inflation and we absolutely must see progress on curbing the runaway power of the multinationals .

It would be a mistake to plan for a long-term investment based on current historically low interest rates; but we must keep rates at a level similar to our competitors