Editorial: can lofty theory become economic reality?

Over the next decade, the performance of the Government, Minister for Agriculture, Bord Bia and Teagasc should be measured on whether Irish farmers become world leaders in farm profitability. While perhaps not immediately obvious, this is essentially the core outcome from the draft agri-food strategy 2030, released at the weekend.

The opening line of the strategy states that Ireland will become a world leader in sustainable food systems (SFS) over the next decade. Within the report, we learn that, according to the United Nations Food and Agriculture Organisation (FAO), an SFS has profitability throughout the supply chain at its core.

Building on this concept, the strategy committee acknowledges that without economic sustainability at farm level, the ambitious and challenging environmental targets set down within the strategy will not be achieved.

As we report this week, the strategy sets very clear and detailed targets in relation to environmental measures, with an over-arching target of delivering a climate-neutral agriculture sector by 2050. Delivery will require the sector to meet ambitious targets by 2030, including a 10% reduction in bio-genetic methane, cut chemical nitrogen use by 14%, improve water quality and enhance biodiversity.

On the weekend the strategy was launched, Irish retailers were discounting beef by 60% and selling 2kg chickens for €4.50

However, the strategy committee recognises that responsibility for delivery of these targets can no longer be laid solely at the doorstep of the farmer. The future strategy clearly identifies that for environmental targets to be achieved, Government – along with key stakeholders – must first deliver the market conditions, policy framework and technical support that delivers economic viability within the farm gate.

The Common Agricultural Policy (CAP) is identified as playing an important role in shaping the future policy framework, but so, too, is the need for Ireland to be more active at EU level in securing a wider range of policies and supports to assist agriculture in the green transition.

A failure to properly position this message last summer saw Ireland receive just 0.4% or €77m from the EU’s €17.5bn Just Transition Fund, established to support the green transition.

The strategy also recognises the extent to which Government policy to date has failed to embed the agri-food sector into the bio-economy.

The committee’s call to develop additional income streams for farmers by putting in place supports for anaerobic digestion and solar technology, while also scaling up the role of farmers in providing raw materials, such as grassland and crops for renewable supply chains, is long overdue.

Importantly, we also see a recognition of the need to develop a regulatory framework that generates an additional income stream by rewarding farmers for capturing carbon – funded through a combination of public and private sector finance.

Teagasc and Bord Bia are once again seen as central to the strategic vision for the sector. A strong narrative for both to be supported in the next CAP has been created. But the strategy committee has called out the extent to which research has failed to develop the scientific capacity necessary to provide expertise at international level around greenhouse gas and ammonia emissions – highlighting an urgent need to develop expertise in methane science and carbon sequestration.

Teagasc under spotlight

If guided by the views of the committee, the performance of Teagasc in relation to research and knowledge transfer will also come under a much more intense spotlight. Uptake of technical efficiency at farm level is seen as key in achieving the economic conditions necessary to deliver on the environmental agenda.

However, perhaps the biggest test of all will be for Bord Bia and in particular its Origin Green programme. A gold membership model, increased focus on mandatory emission reduction targets and an enhanced farm sustainability and quality assurance programme all point to farmers having to jump through more sustainability hoops in the years ahead.

The strategy committee has recognised that these hoops cost money and farmers need to see the benefit of membership. The bar has been set high in this regard and in terms of what will be classed as success.

Despite the long-term projections for the real price of food to be stable or in slight decline, the strategy takes the position that jumping through additional hoops offers the best approach in Ireland seeking a price premium in the global market – inferring that customers of Ireland’s food and drink will play their part in helping the sector become more sustainable by returning higher prices.

Theory v reality

Clearly the future is a far cry from reality, where on the weekend the strategy was launched, Irish retailers were discounting beef by 60%, selling 2kg chickens for €4.50 and milk at a similar price to water. The extent of the chasm between reality and the vision that farmers are now being asked to buy into certainly risks undermining the credibility of the report. Is it a strategy that farmers can have confidence in or a 144-page document full of lofty ambitions that lacks substance?

Ultimately, the answer rests in the hands of Minister for Agriculture Charlie McConalogue. Has he the capacity to build and execute an implementation plan that will turn ambitious theory into economic reality – where the green transition of agriculture will be built on a foundation of economic sustainability at farm level.

Farmers must play a key role in its development. Neither the European Commission nor the Department of Agriculture will come up with schemes or proposals to help farmers.

The IFA input into the straw incorporation scheme was the decisive factor in its emergence as a logical scheme to help farmers and the environment.

Unless similarly well-thought-out policy proposals come from farmers, low-risk and low-cost political gestures will continue to be the norm.

One of the impacts of COVID-19 has been an increase in food sales through retailer outlets – largely reflecting the widespread lockdown of the food service sector. As the financial performance of co-ops and agri-food businesses begin to emerge for 2020, it is becoming clear that this shift has benefited the industry through increased margins. Nowhere is this more evident than in the recent set of results published by Ornua.

As Jack Kennedy reports, operating profit increased by 69% on the back of stable turnover – with a 13% increase in volume sales of Kerrygold undoubtedly fuelling profits. This trend in margin growth in line with growth in retail sales questions whether farmers need to focus more attention on the role of the foodservice sector in shaping farmgate prices. The record profits will provide a major cash boost to co-ops with the Ornua value payment increasing by 56% to almost €70m. Given the extent to which this payment has ballooned in recent years, farmers should have full transparency on how it is passed back inside the farm gate.

Meanwhile, prospects for milk price remain positive with demand growth forecast to run ahead of growth in supply. As environmental restrictions being to bite on the capacity to ramp up global dairy production, the opportunity to add significant value to the Irish milk pool is becoming ever clearer.

We carry a number of letters this week in response to recent comments made around the future of suckling.

Prof Gerry Boyle is right to question the economic viability of the sector but in doing so he should also make clear the reason for the profitability challenges. Nowhere in the world is suckler beef production profitable in the absence of either having access to large tracts of marginal land, growth hormones and large-scale feedlots or the type of subsidies systems prevalent in the EU. The reason the future of our national suckler herd is under threat is because Government has taken the decision to withdraw direct supports to the sector that underpin its economic viability.

It is important that a complete narrative is conveyed in public forums when discussing the future of sucklers.