The KPMG economic impact assessment of what various emissions reduction targets would mean for farmers crystallises what impact these will have on Irish farms and rural communities. There has been no meaningful challenge to the numbers, with criticism of the report focused on it not looking for alternative opportunities that might arise. That, of course, would be a substantial piece of work that would have to be undertaken in the absence of definitive historic data to model.

Organic

Organic farming is considered by many as an underdeveloped area of Irish agriculture with considerable growth potential. It is an area targeted for expansion by the EU Farm to Fork strategy, where the ambition is to get 25% of EU farmland organic by 2030. With Ireland currently sitting at 2%, it may appear like an area ready for expansion.

The Irish CAP plan also seems to think so, targeting €256m, which works out at over €50m per year, a fivefold increase on current funding levels. The ambition is to encourage the increase of Irish organic farming from 2% to 7.5%, as is the ambition in Food Vision 2030.

Be careful what you wish for

On the face of it, this means that everything is aligned for a massive growth in organic production that will deliver the critical mass that Minister Heyden says is essential for export market development. It also offers the apparent added bonus that a significant switch by livestock farmers will have the spin off effect of reducing cattle numbers and fertiliser and pesticides and in the process deliver emissions reduction from the agricultural sector.

However, it isn’t as simple as creating the production and the customers will come at the premium price point that is necessary for any product to be economically sustainable beyond the period when fuelled by grant aid. Formulation of Irish organic policy would benefit from considering the Agri-Nutri Monitor, produced by Wageningen Economic Research on behalf of the Dutch Authority for Consumers and Markets.

This is a study that explores how payments received by farmers relate to the extra production costs and how margins are distributed across the supply chain. The third element is exploring obstacles in the way of farmers switching to more sustainable systems.

Main findings

The study identifies that producers do indeed secure a premium over conventional production, but this is achieved for the larger commodity products of dairy and pigmeat by strict production controls from the processors.

This means that there is a waiting list for producers to join an organic scheme, designed to protect the premium in the market place for organic produce. In terms of pricing at the consumer interface, supermarkets have been shown to forsake their margin to control the price, hardly the long-term basis for an economically sustainable model.

Organic production in the Netherlands is highest for onions, with 4.5% organic and lowest in pigmeat production at 1%, with everything else in between. Despite retailers forsaking their margin, the share of the population willing to pay the premium remains small and markets are protected by controlling production. The ceiling on what consumers are willing to pay relative to the production and distribution costs puts in place a barrier to market-led expansion in the Netherlands.

Production subsidy

Of course, if there is generous farmer support in Ireland, then it is possible to produce an organic product that is more closely aligned with conventional agricultural produce prices. Yet that is counter to market-led growth and has the consequence of undermining existing organic production that has evolved through committed producers finding niche markets.

If there is a surge in Irish organic production, there is a risk to much of the organic production simply sold in the conventional market, as has often been the case with milk and sheepmeat in particular.

Comment

Organic farming is an option for farmers looking for a more extensive production system, for which there will be Government support to transition into. However, we would do well to identify export markets that are willing to pay the premium necessary to make the system sustainable in the longer-term when we have significant quantities available. The Netherlands, one of the oldest trading nations in the world, hasn’t yet found the formula for commercial success for high volume organics. Irish farmers need to see evidence of how we will be different and avoid driving production of a product for which there is no market beyond the mainstream, undermining existing organic farms and business in the process.