ICMSA's warning on volatility in wake of Teagasc figures on incomes

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ICMSA's warning on volatility in wake of Teagasc figures on incomes

ICMSA president John Comer

The Government must demand that the EU Commission moves away from from the boom / bust model of food markets with its wild volatility and total incompatibility with commercial planning and farm stability, according to ICMSA president John Comer.

Mr Comer, who was commenting following the release of a preliminary estimate of the Teagasc National Farm Survey, said that the 9 per cent fall in farmer income was stark enough, but the 17 per cent fall in dairy farmer income was as bad as had been predicted by ICMSA.

The figures showed average farm income at €24,060, for 2016, with avaerage dairy farm income at €51,809.

He warned it would certainly have been worse had the EU not introduced the EU Voluntary Reduction Scheme in 2016.

“Income volatility, as repeatedly highlighted by ICMSA, is one of the major challenges for the farming sector. When there’s a boom, farmers don’t get the full returns and when there’s a bust, we take the full hit,” he said.

Mr Comer said that the collapse in milk price through 2015 and the first half of 2016 had destroyed farmer incomes and, importantly, the survey shows that farmers invested €100m less in 2016 with direct negative impacts on the wider rural economy.

He noted that the dairy sector was not alone in this regard with the tillage sector also negatively impacted by volatile markets.

Mr Comer said it was impossible for family dairy farms to develop on a basis that could see their income surge or collapse by 20 per cent to 30 per cent in a two-year period. He called on the Government to grasp the central message of these figures which was that some degree of stability and predictability simply had to be introduced into food markets.

He noted, for instance, that the introduction last autumn of the Voluntary Supply Reduction Scheme had an immediate stabilising effect as it signalled to the market that supply and demand would start moving towards a balance and the milk price recovery started in earnest from that point.

Mr Comer said that a useful start towards eliminating this completely destructive boom / bust price cycle would be the incorporation into the Commission’s agri “toolbox” of this supply reduction mechanism as a permanent policy tool to be deployed in the event of farmers’ price falling below a certain level for a certain period.

One thing was for absolute certain, noted the ICMSA president, no other group in Ireland would even be asked to contemplate a scenario where their income could collapse by nearly 20 per cent in a single year and be expected to just shrug their shoulders and carry on.

He further stated that Brexit was an additional serious threat to the agri-food sector and called for initiatives in Budget 2018 that will allow farmers to plan for the threats of Brexit.

Speaking at the launch of the Teagasc results, Dr Emma Dillon, economist with the Teagasc National Farm Survey said: “Despite increased direct payments and a reduction in some of the key input items such as fertiliser, further falls in milk prices and poorer crop yields than in recent years, resulted in a 9 percent decline in average farm income in 2016”.

The continued roll-out of GLAS and the Beef Data Genomics Programme (BDGP) saw direct payments on cattle farms increase by between 5 and 11 per cent in 2016 relative to the previous year. This increase helped offset lower cattle prices and it meant that the average farm income on cattle farms increased by between 2 per cent and 4 per cent in 2016 depending on the production system. Despite this increase, average cattle farm incomes remain quite low, at just €12,908 for cattle rearing farms in 2016.

Milk price was down almost 10 per cent in 2016 on the back of a 20 per cent reduction in 2015, despite this, milk production continued to expand in 2016. This resulted in income on dairy farms falling by 17 per cent to an average of €51,809. Analysis of farms over the period since quota removal, shows that four out of every five dairy farms have increased production.

Tillage farms were severely affected by a decline in crop yields. Coupled with a reduction in the price of cereals, this resulted in a 10 per cent fall in average tillage farm income to €30,816.

Lamb prices decreased by 2 per cent and with direct payments receipts relatively unchanged the average sheep farm income remained stable at €16,011.

Almost €690m was invested by farmers in their businesses in 2016, of which over €245m was invested on dairy farms.

In spite of the fall income in 2016, average farm income has become less volatile over the last five years.