How much volatility as a farmer can you cope with?
We produce a graph for the price of milk over the last 20 years thanks to Dr Declan O’Connor of the Munster Technological University. Interestingly, the pattern in the development of milk prices is mirrored very closely in a similar table for the price of wheat on the most important commodity exchange in the world - the Chicago Board of Trade.
Theoretically, what happens to US wheat prices should have very little effect on us but that’s not true as these are the prices which set the tone for the prices at which almost four million tonnes of feedstuffs come into Ireland each year.
While the price is in bushels – there are 36.7 bushels of wheat in a tonne – a rough rule of thumb is to divide the price in bushels by three and that roughly gives the price per tonne for green wheat at 20%.
So a US$6 bushel price means about €200/t which is above the price at the moment. Two years ago it almost reached US$12/bushel or almost €400/t.
We may aspire to a farm family model of farming but these massive swings in income are not a sensible basis on which to build a family friendly policy.
With a static budget and continuous erosion through inflation and extra deductions to meet new objectives, the Single Farm Payment or its equivalent is no longer remotely the income stabilising force it was intended to be.
Countries have increasingly moved to some kind of income / margin insurance based in the United States of America on market returns but interestingly, in the Philippines, they have avoided the administrative cost in this kind of approach and instead pay out on the basis of regional weather patterns in a particular season.
We need a specialist study to come up with options for policymakers to consider, but it’s clear that some stabilising system is necessary to cope with increasing price and weather induced volatility.
SHARING OPTIONS: