Last week Minister Coveney published the Department of Agriculture Fisheries and the Marine's annual state of the nation report. The overall parameters of the Irish agri food industry remain broadly similar from year to year with the dairy sector leading the way followed by beef then lamb with arable, pork, poultry, the marine, forestry and vegetable production being the smaller but very significant sectors on a localised basis in various parts of Ireland all making a positive contribution to their regional economies.

There is no sector of Irish agriculture that involves so many people as beef production. The reason for this is that unlike dairy farms, many are small family owned units with significant off farm employment enabling the cattle production side of the business continue as a contributor, often very small, to the overall family income. In isolation these individual businesses are insignificant. However their overall importance to the Irish rural economy is created by the sheer number of these spread across the island of Ireland.

This part time production model is rare in the global scheme of things – South America is characterised by huge ranches and feedlots as it the United States, Australia and New Zealand. The model works in Ireland historically because suckler beef production with breeds like Angus, Hereford and Shorthorn grazed the more marginal lands in the west of Ireland, with their calves fattened on the richer pasture of the east. While the breeds may have changed this basic model remains in place with beef bred calves sold through the mart system to buyers and feedlots from the rest of the country and in some cases for onward shipping abroad.

The great threat to this production model is that profitability is both modest and inconsistent and that is in the good years. Bad weather and bad markets can combine to make the process totally unprofitable without support. This is where EU subsidy through the CAP has historically stepped in – it was and is the EU payment that makes most of these units viable and starting a process that adds value along every step of the way through the chain to the retailer's shelf or burger chain either in the UK or much further afield.

The report takes a forward view on the likely demand and value of beef in the immediate future, the next three years and then in a decades time. According to the report the short-run prospects for the EU beef market point to a modest increase in output and demand from 2013 to 2015, followed by a marginal reduction over the following years. On the other hand global beef production and consumption is expected to increase by 12.5% over the next decade, as demand for beef increases from the Middle East and Asia. It is believed unlikely that this demand cannot be satisfied outside of increased production in Brazil.

Globally the view is that current high prices are dictated by lowest cattle herd in the USA since 1951. It is expected that restocking currently underway will ease the scarcity in the US and global prices will turn downwards in 2018. Prices in 2023 are forecast to be similar to today.

Looking ten weeks ahead in the beef industry is a dangerous process never mind ten years. However there are a couple of factors peculiar to Ireland that cannot be discounted I shaping our position in a decade from now. On the positive side, Ireland has demonstrated its robustness in developing International markets and the fact that we have for several months now the best performing market in terms of farm gate process is testament to the work of our farmers and processors. That success is built on successfully servicing the UK market, which takes 51% of our exports according to the report. We have really ridden the weakness of the euro against sterling in recent times. We are the first country in Europe into the US after the BSE ban and first to have it lifted in China which remains a work in progress. We can be confident Ireland will be as good as anyone in the world in developing international markets in the decade ahead.

Now for the downsides that may lie ahead. One was identified very succinctly by Paul Finnerty, CEO ABP this week and that is the implications of the UK leaving the EU. IF that were to happen it would return Irish beef to a dark age. The UK has historically been about cheap food and one of the big breakthroughs in the development of that policy was refrigerated transport which enabled shipment of cheap beef to the UK from South America over a century ago. The logistics would be much easier today and we can imagine how the UK might prioritise international trade deals for itself unencumbered by the collective interests of the EU. Ireland could be displaced in a short time.

A further threat lies in the ongoing reforms of the CAP and the movement to flat rate payments rather than being production based. If the small farms referred to earlier aren’t supported for what they produce, then the incentive is removed to maximise their production, it will be about doing just enough to qualify for the flat rate payment. The other big beef producers in Europe have taken a different view with the French giving €178 per cow direct support and the Polish giving €70 per calf to encourage production. How can Ireland compete with that?

Ireland is at a cross roads in its beef industry. It is performing well in a tough market place with strong competition from other countries and other proteins. We can see a model whereby Ireland is one of the most natural places in the world to have sustainable beef production but it is constantly under threat from low margins and a fragile production model that if lost is unlikely to be easily replaced. It needs to be handled with care by both policy makers and everyone with an interest in its success.