It is hard to believe that only this time last year mushroom growers in Ireland were warning of staff shortages as the industry expanded. It is a very different scenario now, as anyone involved in the industry knows well. Three mushroom farms have closed in the past few months and 130 jobs have been lost.

Donal McCarthy, CEO of Commercial Mushroom Prodcuers (CMP), Ireland’s largest mushroom producer organisation, knows all about these problems. CMP was established in 1999 as a co-operative by mushroom growers to deliver stability to the market by improving the quality of mushrooms, maintaining the consistency of supply and getting a sustainable margin for producers.

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Of the 60 mushroom farms in Ireland, about 50 are within CMP. McCarthy, CEO of CMP since 2014, has seen the industry transition from the stage of staff shortages to the stage of 130 workers losing their jobs. More job losses are expected in the coming weeks. With the mushroom industry employing around 3,500 people in rural Ireland, the job losses so far represent almost 4% of the total employee population.

Brexit

The cause of this crisis? The UK vote back in June to leave the EU, otherwise known as Brexit.

When the Brexit vote happened on 23 June, plenty was written about the legitimate threats to our beef and dairy industries. But little attention was given to the horticulture industry, of which the mushroom sector, worth €180m per year at retail level, is the most successful element.

About 70,000t of mushrooms are grown in the Republic of Ireland each year, and 80% of them end up in the UK. For most Irish growers, the UK is their only market. This “gem” of a market for Irish mushroom growers was built up over 30 years.

The freefall of sterling on the back of low prices drove most of our people into loss-making territory

The crux of the problem for Irish mushroom growers is that the marketing companies who sell their produce negotiate forward contracts in sterling with UK retailers. When the marketing companies were negotiating contracts in the final quarter of 2015, sterling was very strong – about 70p to the euro. It now stands somewhere around the 90p mark.

“When sterling started to move and weaken, the profitability went out of the sector,” said McCarthy. “The freefall of sterling on the back of low prices drove most of our people into loss-making territory.” Since the Brexit vote, some €7m worth of exports have been lost in the mushroom industry, 130 jobs have gone and three businesses have closed.

“Two other businesses are winding down as of now,” McCarthy continued, “and other farms are losing around €2,000 to €3,000 a week.”

The shutting down in the sector is also affecting the Irish tillage and poultry sectors, as the mushroom industry is a significant purchaser of both wheaten straw and chicken litter.

“We need to see a strengthening of sterling, but we also need to get prices up in the marketplace in general,” McCarthy said. “However, this is a slow process because of price deflation in the UK grocery trade and massive supermarket wars in the country.”

The other pressure on Irish mushroom growers is increasing competition from Polish mushroom producers.

After the Russian ban on food and drink exports from Europe was introduced in 2014, exports of Polish mushrooms were displaced from Russia into western Europe, including the UK. Their cost base is only a fraction of growers in Ireland. They pay workers about 28% of our minimum wage.

“In contrast, about 43% of the cost of growing mushrooms in Ireland is labour,” McCarthy noted.

One disadvantage that Poland has over Ireland, however, is that it is two days away from the UK. Mushrooms picked in Ireland can be in the rural distribution centres in the UK at dawn the next day. As mushrooms are a highly perishable product, this is an important factor to consider.

Producer Organisation funding

Poland re-entered the conversation when McCarthy talked about another thorn in the side of the Irish mushroom industry. This is the EU’s Fruit and Vegetable Producer Organisation (PO) scheme. According to McCarthy, the scheme allows the industry to draw down 4.1% of its turnover each year. However, CMP claims it got less than 20% of this amount for 2015.

The money from the scheme is administered by the Department of Agriculture. The scheme is therefore “a source of friction between CMP and the Department”.

“This scheme is an ideal vehicle for supporting the mushroom industry,” said McCarthy. “But for 2015 CMP got a little bit less than €1.6m. This could have been more than €8.5m,” he said.

The problem, McCarthy continued, is that mushroom growers in Poland and Britain have a much higher drawdown, which gives them a significant advantage over Irish mushroom growers. The Department of Agriculture said it is precluded from providing any comment in relation to the operation of the EU Fruit and Vegetable PO scheme and CMP’s participation in the scheme as the issues referred to are the subject of High Court proceedings.

Budget 2017

The minister of state at the Department of Agriculture with responsibility for horticulture, Andrew Doyle, told the Irish Farmers Journal last week that he has been engaging regularly with stakeholders in the mushroom industry and he feels the €150m loan package announced in last week’s budget will help the industry at this time.

Is CMP happy with the Government response?

“We welcome anything that will help, and Minister Doyle has told us that he understands the industry and is sympathetic but at the end of the day we need solids,” McCarthy said.

“Overall we were quite disappointed with the budget. We asked for a halving of the lower rate of employer PRSI which did not materialise.

“The mushroom industry is troubled,” McCarthy concluded, “but we are confident that we can weather this storm. Prices will come back up in the marketplace but that will take about three to four months. In the meantime another six growers and around 300 jobs are in peril. The question is how many of us will be left when prices eventually come back up?”Listen to an interview with Minister of State at the Department of Agriculture Andrew Doyle at the rencent Organic Awards, in which he also discussed difficulties in the mushroom industry:

Listen to "Minister Doyle on organics and the plight of the mushroom industry" on Spreaker.

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