13 February 2003 Edition
Forcing farmers off the land
The legacy of the Common Agricultural Policy
In the first of a series of articles on the crisis in agriculture, ROISIN DE ROSA discusses the EU Common Agricultural Policy and the detrimental effects it has had, with the full support of successive Dublin governments, on agriculture in general and on smaller farmers in particular.
There is considerable anger amongst farmers.
Large farmers are angry because the CAP farm subsidy programme is going to change. This is flagged up for the Mid-term CAP (Common Agricultural Policy) Review and the forthcoming WTO (World Trade Organisation) negotiations. An expanding EU can't afford to continue subsidising farmers in the new member countries, especially Poland, in the way it has done to date in Western Europe.
For small farmers, incomes have already been horridly squeezed - averaging some €6,000-€8000 per annum. Some of these are still full-time farmers, in that farming remains their only source of income, although most are forced to take on other work to supplement their farming take.
The trend of small farmers to leave the land (at least 3,000 per annum in the 26 Counties alone) has continued over the past two decades. This has been made to appear as an irreversible inevitability dictated by the exigencies of technology, capital requirements and farm size required to be competitive in modern agricultural production.
Overall policy in agriculture has followed the Mansholt Plan, which laid out the future for Ireland's agricultural sector in 1972, on the eve of our joining the EEC. The CAP subsidised prices/protection system was designed to develop what Mansholt classified by size of farm, as 'commercial' and possibly 'development' farms. The rest, (under 100 acres now, but around 20 acres at the time), were classified as 'transitional', which meant just what it said, in transition out of agriculture. Over half of 26-County farms were thus classified.
The Plan proposed for the West, where there was a high concentration of 'transitional farms', was centred around trees (in which it was argued Ireland, because it rains, had a strong comparative advantage - and the EU needs timber) and tourism, where the West had a strong comparitive advantage in a beautiful coastline and a cute way of carrying on.
Increasingly, the farmer has been squeezed by increasing consumer (shop/retail) prices and falling farm gate prices, where economic power and increasing concentration in the retail sector, and especially in the co-ops, has meant that the farmer becomes a price taker - the retailer a consumer price setter. This means the farmer gets the price he or she is offered, the shop sets the price it wants and the disparity grows apace. The percentage of the final consumer price of agricultural products that goes to the farmer has fallen greatly.
Increasingly, smaller farmers have become more and more dependent on CAP subsidies - without which they would not earn a return - and the large farmers have become increasingly rich through these subsidies, which of course were originally designed to do just that.
The level of subsidies (through direct payments under the CAP) has reached astronomic proportions in relation to farm incomes. In 2002, farmers (in the 26 Counties) received €1.6 billion in direct payments, which now constitute almost 70% of income arising from agriculture. The high tariff protection policy of the EU has meant that, for example, beef and dairy consumer prices are 50-60% higher than world market prices.
This has come at a colossal cost to agriculture in Ireland. The CAP income support policy (which the government was happy to work with) has done inestimable damage to the agricultural sector, and the competitive position of farmers. The fact that this was not inevitable, that things could have been different, is proven by the farming sector in New Zealand, which has a similar resource base to Ireland. Milk production there, with no subsidies, has increased by 75% over the past decade. But the EU policy of quotas served to maximise the profit to those farmers with large herds and large quotas, who were already on high incomes, while smaller farmers were forced out of milk production altogether. Instead, these farmers were encouraged into beef and sheep, againn with a reliance on subsidies, which meant gross oversupply, given the price interference by the EU. These production lines too would have become non-viable were it not for the high level of premium payments.
In the case of sheep, the consequences of CAP income supports were especially harmful. The enormous expansion in sheep flocks, where the principal component in income was derived from premium payments, led to gross overstocking of poor mountain land, with the subsequent erosion and destruction of the environment in wide stretches of mountain land in the west.
Investment decisions across the agricultural sector (what crop/activity a farmer decides to engage in) have been led by the level of premium payments. This has grossly distorted decisions away from what would be most consistent with the development of a strong viable agricultural sector, retaining small farmers on the land, maintaining rural communities, and ensuring viable incomes (comparable with incomes in other sectors of the economy).
The Dublin government has allowed this situation to develop through neglect, stupidity and a political ideology that ensures support for the richest and largest producers/land holders, to the detriment of the smallest. At the same time, successive governments have presided over the virtual destruction of agriculture as a key component of our economy (agriculture today accounts for 10% of GDP and €7 billion in exports).
This is all the more foolish when you consider that returns in agriculture (at the moment) stay at home, rather than being repatriated to parent multinationals as is the case in growth sectors like the chemical and IT/computer sectors, which have played such a major part in Ireland 's 'Celtic Tiger' economic 'growth' in recent years.
Farmers are trapped in a nightmare of forms and regulations, which often means that farm incomes are a function of how well they can play the rules, rather than their skills at animal and crop husbandry. The 'set-aside' subsidy, where farmers are paid to leave their land fallow, is an extreme example of this and highlights the economic and moral obscenity that the CAP policy has been. In a world where 80% of the population suffer malnutrition and some 20% face starvation, paying farmers to not produce on their land is an outrage.
Equally, the protectionist policies of the CAP have allowed EU countries to sell agricultural produce to third world countries at grossly subsidised prices. This has meant that local third world agricultural producers have been wiped out by competition from EU products, with most disastrous effects on the agricultural sectors within these countries. Absurdity or obscenity? Take your pick.