The comment by Tom Arnold, chair of the agri-food 2030 strategy committee, that Ireland doesn’t have to feed the world highlights the conundrum of achieving a fair price for farmers’ work while successfully developing export markets.
Producing a commodity product for trade in global markets is about being the most competitive producer with consistent quality.
Saudi Arabia does this with oil, China with steel, New Zealand with sheep and dairy, South America with beef and grain, North America with grain and cotton, and Asia with electronics.
Intensive agriculture like pig and poultry production is closely aligned with access to grain for feed.
Ireland can go head to head with any country for dairy and to an extent for pig and poultry despite importing huge quantities of grain.
When commodity prices are high, other areas of the world are competitive and this is where Irish beef production fits in.
Price surges are driven by either a disruption of supply or a surge in demand and if both happen together, as is the case with sheepmeat this spring, then it is a bonanza for Irish producers.
However, demand ebbs and flows while production has always recovered, though this may not always be the case with climate change.
EU cost model
When prices are determined by global markets, as they are for export-dependent countries, it is essential to have a cost structure that can survive that.
This is where Irish beef and to a lesser extent sheep farmers are exposed.
EU production constraints since the beef hormone ban in 1988 have made Irish beef more expensive to produce per kilo than the global standard outside the EU.
The EU’s Farm to Fork strategy and the Irish agri-food 2030 strategy exacerbate this with additional production costs which, as the decade progresses, will be combined by further opening of the EU market to the most efficient producers of beef in the world.
Tom Arnold is of the view that with the strategy Ireland is only marginally ahead of a collection of countries that are on the same path across the world and there will be a commercial benefit being at the top of that list.
That could well be true, but it depends on the others following and the proposed Irish model becoming the global standard.
Need for global alignment
That was one of the models explored by the USDA impact assessment of the EU Farm to Fork strategy.
It revealed that if Europe goes it alone with the strategy, farm incomes will fall by 16%.
If, however, the world was to follow that strategy, then food supply would reduce and become more valuable in the process.
Farm incomes would in that case increase by 15% so if Ireland is only just ahead of the rest of the world with its strategy then it could work.
Farmers will be understandably sceptical but if the Government and EU are really committed that this should be the policy for Ireland to pursue irrespective of what the rest of the world does, then they need to be prepared to underwrite the cost.
The EU effectively did that for beef producers with a protected market though that is now being phased out.
The alternative route to being the low-cost most efficient producer of a commodity in global markets is to successfully differentiate it through branding.
This textbook solution is straightforward in theory but notoriously difficult in practice.
If it is a product that is truly unique like the iPhone, when people see it is a leap forward for mobile communication, it becomes a must-have product.
The value of the brand complemented by astute marketing is persuading users that they have to upgrade every year to have the latest model.
It is more difficult to differentiate Irish beef.
Bord Bia has a plan to brand and promote grass-fed Irish beef and no doubt the agri-food 2030 strategy will underpin the integrity of that brand.
The big question remains how successful will it be and what premium will it deliver back to farmers relative to the grass-fed offering from South America or grain-fed proposition from North America or Australia?
In the developing Asian markets, it is the grain-fed beef that commands a premium in the market because they cannot afford to compete with the grass-fed offerings.
Leap of faith
It requires a leap of faith to visualise Irish beef producers securing a sufficient competitive advantage in the market to offset the lower production models elsewhere in the world.
It becomes more feasible if their production cost base becomes aligned with adoption of the EU Farm to Fork model, but that too requires a leap of faith.
In the absence of certainty on the market delivering, it falls to Government being willing to pick up the tab if the ambition is to be the global leader in sustainable agriculture.