The budget brought few surprises this week, such was the level of revelations in advance, with the exception of the concrete levy.
It continues the trend that was already in place through the CAP of incentivising lower levels of production in return for greater payments.
While there remains no mention of capping livestock numbers, the budget, in a not so subtle way, provides an incentive for farmers to produce less for greater returns rather than more.
Suckler cow payment
An excellent example of this strategy is the announcement of front loading the suckler cow payment of €240, made up by €150 from the new CAP coming into effect next year plus €90 from the BEEP-S scheme.
This will be welcomed by small, inevitably part-time suckler farmers, who, in many cases, will also have benefited from the CAP convergence as payment continues the move away from production to land-based.
Farmers in the category of over 10 cows but not enough to even contemplate having a full-time income from the business will at least subconsciously ask themselves whether it is worth keeping more than 10 cows.
The next level of payment is €190/head, so a farmer on 15 or 20 cows will be looking at what he has to spend on fertiliser, meal and contractor costs for his business and wonder about the benefit of dropping his cow numbers.
This will, at a stroke, reduce costs and labour demand and many will conclude that keeping extra cows simply isn’t worth it.
In a time of rapidly rising fertiliser costs, the option of going organic will also come into farmers’ thinking.
The level of interest is reflected in the huge attendance at this week’s farm walk on the farm of John Purcell in Tipperary.
Huge Government and CAP resources are being directed that way, with the ambition of increasing the area of Irish farmland in organic production up to 7.5%.
Going organic further reduces production capability and is very definitely flavour of the moment at EU and Government level, as shown by the investment in resources by Teagasc and Bord Bia to support the sector.
Organic farming isn’t a shortcut to getting high process for less work, in fact being a successful organic farmer requires arguably more skill than a conventional farmer.
However, it is less intensive and avoids fertiliser and is suited to a farmer wanting to keep small numbers of livestock over a relatively large area. That is also what EU and Government policy is, so it has to be considered.
CAP policy development
Of course, such a system leaves behind the successful relatively intensive suckler and beef farmer, who built their farms on maximising output from often limited acreage.
EU CAP policy and now national policy is stacked against this type of enterprise and, unfortunately, market returns are not enough to compensate.
Many of these farms diversified into sucklers in the 1980s when the introduction of quotas put a cap on dairy production and prevented Irish production reaching the levels of their EU counterparts at that point.
Sucklers was a logical alternative and the introduction of enhanced headage payments on cows and steers in the McSharry reforms in 1992 was a major driver of numbers.
This ended with decoupling of payments from production, though the payments were calculated based on output at the last reference year of 2002.
Progressively, this has been diluted towards an area- or land-based system and, from next year, 85% of CAP payments will be based on land farmed and just 15% on historic entitlements.
This policy, along with the ending of milk quotas in 2015, has resulted in a move to dairying away from sucklers, particularly where farmers have sufficient land blocks and capital to invest in dairying.
It could be argued that EU policy has come full circle, in that it triggered the expansion of the Irish suckler herd and is now causing it to reduce.