The “mot du jour”, as Del Boy might say, in agricultural policy deliberations is “sustainability”.
When looked at from an agricultural sector perspective, most agree that we need to consider three dimensions: economic, social and environmental.
Yet when viewed from outside the sector, sustainability seems to be solely about environmental factors.
Unless this view is challenged, there is a real danger that the centrality of the economic wellbeing of farmers to sustainability will get diluted in the formation of policy.
There’s an unacceptable level of non-viable farm households. According to Teagasc, the overall figure is about 70%, ranging from 21% on dairy farms to 83% on cattle farms. The farm households that fall into this definition, therefore, are unequivocally in a state of poverty.
A dynamic export-oriented sector, if it’s to remain so, needs to attract the brightest and the best
Apart from the immense policy challenge of poverty on many farm households, with all the associated issues of isolation and poor physical and mental health, the improvement in economic wellbeing is of critical importance for other fundamental reasons.
A dynamic export-oriented sector, if it’s to remain so, needs to attract the brightest and the best. That will only happen if there is a prospect for new entrants into farming to generate incomes and a lifestyle that are competitive with opportunities outside of agriculture.
Product and input prices are key factors in driving farm incomes. The relationship between the growth in product versus input prices, or the “internal terms of trade”, has become topical again in recent months due to the re-emergence of inflation as a concern and the substantial recent rise in fertiliser prices.
Farmers’ own behaviour, together with measures adopted by processors, will affect the per-unit value of product that is supplied
Leaving aside bonus payments and penalties, neither farmers nor the Government have any influence over the evolution of product prices or input prices in an open economy like ours. Farmers’ own behaviour, together with measures adopted by processors, will affect the per-unit value of product that is supplied.
Farmers have significant choice on farming systems, although this choice will be constrained by soil type, the farm’s typography and the extent to which the holding is fragmented. Public policy can, of course, influence the choice of system over and above the market drivers through the implementation of product supports and market management systems.
The scale of activity is predominantly under the farmer’s influence, although it will be constrained by the farmer’s attitude to risk and access to capital.
Role of policy
The role of policy is limited but can nonetheless be significant. Measures such as tax relief to encourage long-term leasing of land have proved to be successful. And publicly funded farm retirement schemes can encourage earlier cessation of farming.
Direct payments are hugely important in Irish and EU agriculture and are predominantly driven by policy. They can directly affect the level of farm income and ameliorate volatility and they are being increasingly used to influence farmer behaviour.
Two farms confronted by the same developments in output and input prices will have a very different outcome in incomes depending on their relative efficiency
The most important factor in driving farm incomes on a sustainable basis is the efficiency of the farming operation.
Two farms confronted by the same developments in output and input prices will have a very different outcome in incomes depending on their relative efficiency.
Most important is the innate capability of the farmer. But policy can have a major influence, especially in supporting impactful research and advisory activity (“knowledge capital”) and skillset.
Regulatory measures very clearly can affect farming performance with farmers only having a marginal influence through their lobbying impact
A farmer’s age and the general demographic structure of the farm household can also influence efficiency and while policy has a limited role in affecting these factors, farm retirement policies can be effective.
Regulatory measures very clearly can affect farming performance with farmers only having a marginal influence through their lobbying impact.
Farm households are increasingly involved in off-farm activity and it’s vital to the sustainability of many.
We’re entering a critical period where agricultural policy decisions concerning the CAP, climate change and Food Vision 2030 will determine the shape of the sector up to 2030 at least. It will be important that those factors that can enhance the economic wellbeing of farms are given the prominence that’s required.