Financially sustainable farming

dmullins3

I am currently doing a masters project on the consequences to farming in Ireland if all EU grant funding - CAP, SFP, etc was to be cut 100%. I am interested in getting the opinion of farmers and people in general as to what would farmers need to do in order to support themselves in this kind of economic climate. For the sake of this thread, please ignore any Irish government based funding and focus as if all financial backing came from the EU.

I have considered the possibility of small scale co-ops between local farms in order to pool resources and save money through working in partnership. Is this idea feasible in your opinion?

The feedback here will be used as the basis of my research going forward with my investigation. Any research you have ever come across in the area who be hugely appreciated as well.

simx

dmullins3 wrote: »

I am currently doing a masters project on the consequences to farming in Ireland if all EU grant funding - CAP, SFP, etc was to be cut 100%. I am interested in getting the opinion of farmers and people in general as to what would farmers need to do in order to support themselves in this kind of economic climate. For the sake of this thread, please ignore any Irish government based funding and focus as if all financial backing came from the EU.

I have considered the possibility of small scale co-ops between local farms in order to pool resources and save money through working in partnership. Is this idea feasible in your opinion?

The feedback here will be used as the basis of my research going forward with my investigation. Any research you have ever come across in the area who be hugely appreciated as well.

id say alot of farmers would be trying different trying practices. alot of them would probably be forced to rent,i think we should be all working towards be sustainable without sfp etc. incase the day ever came,i do get sfp but im trying my best to work to being able to doing this to be prepared for such an occurance if it ever happened. at the moment i wouldnt be able to do without it but maybe someday

reilig

I have a scenario in mind, but everyone won't agree. Some people will even think that I'm a communist!!

Grants cut 100%
50% of irish farmers rely on the grants for 100% of their income.
Therefore these guys will have to change to farm for to make profit or else get out of farming. ie. Increase productivity, reduce costs, increase the amount that they are willing to sell their produce for.

For example, suckler farmers will no longer be to sell weinlings to finishers at less than it cost to produce the weinlings. In turn, finishers will have to pay more for the weinlings, and therefore they won't be able to sell finished animals to factories at such low prices (the suckler's farmer's profit will have to be factored into it - which doesn't happen in many instances nowadays).
In turn, factories will have to pay higher prices to the finishers which in turn will lead to higher prices in the supermarkets. This will ultimately mean that consumers will have to pay higher prices for food unless the food can be imported at a cheaper price.

I imagine that if there was a a 100% cut in funding, the system would find its own level somewhere in the middle of all of the above scenarios.

pakalasa

The net result of farming subsidies is cheaper food on the table for European citizens. This has always been the main objective of CAP. The welfare of farmers is secondry to this. It's like a Robin Hood tax , tax the rich for the benifit of the poor. If you remove subsidies, then it's the poor that will suffer the most, with higher food prices.
The system does need to be reformed, to be fairer to all farmers. You can see this, with MACRA taking a far diffrent view to the IFA, many of whom seem to be elderly farmers protecting what they see as their pension.
The industry can't keep going when there are more farmers over the age of 70, than under 35. That's plain crazy.

bbam

reilig wrote: »

I have a scenario in mind, but everyone won't agree. Some people will even think that I'm a communist!!

Grants cut 100%
50% of irish farmers rely on the grants for 100% of their income.
Therefore these guys will have to change to farm for to make profit or else get out of farming. ie. Increase productivity, reduce costs, increase the amount that they are willing to sell their produce for.

For example, suckler farmers will no longer be to sell weinlings to finishers at less than it cost to produce the weinlings. In turn, finishers will have to pay more for the weinlings, and therefore they won't be able to sell finished animals to factories at such low prices (the suckler's farmer's profit will have to be factored into it - which doesn't happen in many instances nowadays).
In turn, factories will have to pay higher prices to the finishers which in turn will lead to higher prices in the supermarkets. This will ultimately mean that consumers will have to pay higher prices for food unless the food can be imported at a cheaper price.

I imagine that if there was a a 100% cut in funding, the system would find its own level somewhere in the middle of all of the above scenarios.

I think anyone who could ride out the intermediate period following withdrawal of the grants would be in a good position... Its a model I think merrits further examination..

However!!
I think the kickback from Joe Public over price increases in food would be severe.. I don't have the faith in the political system that they wouldn't loosen the regulation in imports to appease the masses and "create competition".. that would be the worst outcome, no supports AND floods of cheap meat being imported..

towzer2010

I agree Pakalasa. If all the subsidies stopped you would see beef farming in Ireland stop because the consumer will not pay higher prices. What you will get is cheap imports beacuse all the consumer really cares about is cheap food. Questions about traceability wouldnt come into it if the price of meat increases in the supermarket.

reilig

bbam wrote: »

I think anyone who could ride out the intermediate period following withdrawal of the grants would be in a good position... Its a model I think merrits further examination..

However!!
I think the kickback from Joe Public over price increases in food would be severe.. I don't have the faith in the political system that they wouldn't loosen the regulation in imports to appease the masses and "create competition".. that would be the worst outcome, no supports AND floods of cheap meat being imported..

Agreed.

I have only 1 question.

Where can cheap meat be obtained from these days?

The big suppliers of cheap meat to this country over the last 10 years like brazil, argentina etc. have took their farming focus away from producing meat and are now focused firmly on producing bio-ethanol with the result that both countries are barely able to produce enough meat to supply their domestic economy and their nearest neighbours - never mind exporting meat a couple of thousand miles by ship!

In short, I think that here in Ireland we are producing meat as cheap as it gets. That's why all of these markets are opening up to us again, many of whom shut us out during teh BSE era.

pakalasa

All it would take is one food scare, like the baby milk in China, for europeans to suddenly start asking questions about food traceability on these cheap food imports.
Saw a tv programme recently where experts were predicting that by 2020, the world won't be able to feed itself. Again it's the poor that will suffer.

jfh

i was at an IFA meeting the other night & it occured to me that most of those there have become so reliant on subsidies that they would not survive without them. Why should this be so?
i work in retail at the moment & if you cant make a profit, tough, you're out. why should agriculture be protected so.
i think it would be a good thing if they cut the subsidies, maybe i'm a little naive but i don't think the price of food would rise all that much, sure the inefficent farmer would be out of business, & farms would get larger, but that's the nature of business & it's happening anyway.
it would not be just small farms, there's large farmers also relying too much on hand outs.
enough said.

reilig

jfh wrote: »

i work in retail at the moment & if you cant make a profit, tough, you're out. why should agriculture be protected so.

The net result of farming subsidies is cheaper food on the table for European citizens

Its paid to keep prices low for all citizens.

bbam

jfh wrote: »

i was at an IFA meeting the other night & it occured to me that most of those there have become so reliant on subsidies that they would not survive without them. Why should this be so?
i work in retail at the moment & if you cant make a profit, tough, you're out. why should agriculture be protected so.
i think it would be a good thing if they cut the subsidies, maybe i'm a little naive but i don't think the price of food would rise all that much, sure the inefficent farmer would be out of business, & farms would get larger, but that's the nature of business & it's happening anyway.
it would not be just small farms, there's large farmers also relying too much on hand outs.
enough said.

But there are very few, if any involved in the beef system that can make a sustainable sizeable profit to enable a business to develop. Taking away the SFP would mean that there would be no way forward without increasing revenue. Cutting costs can only go so far without compromising our production system, I'm not saying that work can't be done, just that even the most efficient are just getting bye.

People should be very clear.. elimination of the SFP / DAA system would result in higher food prices. The question is if there is a political will to face down the general pubilic over this, my feeling is there isn't.

jay gatsby

Just going to throw out a couple of thoughts on this:
Cereal farmers in this country also rely on the SFP. At the moment it could be said that the price they receive at harvest only really leaves a decent profit if there is a disaster in some other large country, drought, flood etc. In a normal year with reasonable yields, normal prices most, and certainly all the con-acre lads would break even and rely on the SFP to keep them going.

If SFP was cut entirely and we had 3 average to bad years most of these lads would have to rethink and would maybe go down the road of laying down the ground, some to grow fodder, others to stock. Grain can and is imported to this country pretty freely so there are no trade limitations to hold up the Irish cereal growers price. What effect would all these lads moving to grass have on Irish farming.

Maybe I'm wrong but just thought I'd broaden it out beyond the suckler and beef area.

Timmaay

dmullins3 wrote: »

I am currently doing a masters project on the consequences to farming in Ireland if all EU grant funding - CAP, SFP, etc was to be cut 100%. I am interested in getting the opinion of farmers and people in general as to what would farmers need to do in order to support themselves in this kind of economic climate.

Are you looking at the whole thing from an economic point of view, or moreso the farmer side of things?

Both issues have been discussed here so far, from an economic point of view, keeping the the CAP/SPF etc certainly has its merits, in terms of a) cheaper food prices for people of Europe/Ireland, and then b), the loss to the local economy that will happen when many small farmers who are fully dependent on these grants go. What will happen them is they will all probably be driving on to the dole/other jobs etc, and the whole support industry surrounding them, such as the grain companies, meat factories, everything down to the local hardware shops will all suffer! To what degree that would happen certainly isn't something that I'm going to attempt to put figures on ha!

The flip side to all of the above is it would straight away weed out the least productive farmers immediately, and free up land for the most efficient farmers who can survive.

The ulimate disaster scenario is if even the most efficient farmers still cant make a profit (in the case of cheap imports from South America etc), then they certainly aren't going to bother either, and the whole farming sector in Ireland comes to a grinding halt, with a massive consequences for the whole rural/agri community.

However we live in an age of high energy costs, and Ireland has this supposed massive grass based system advantage, every agri report being produced at the minute is telling us farmers to bump up production in the future, so the above is unlikely!


Purely looking at it from a farmers point of view, the winners (if any :P) and losers have been explained above, but no matter what, if all the grants were withdrawn in the morning, there would be a massive knock on effect for the next few years, as retailers/consumers etc resist increases in food prices, and the farmers bare the brunt of cuts in their income. I would tend to agree with Reilig that the whole system would eventually reach equilibrium again, but not before a very bumpy ride for the farmers

The only people I forgot about now are the small percentage (I assume its tiny anyways?) of farmers who currently receive no SFP etc at the minute, its a wonder how they are surviving at all now ha, but if they can make a profit now they will obvious survive when the playing field is more level!

F.D

The sooner it happens the better land wont be as expensive, elderly farmers will retire, factorys creamerys merchants etc will all have to cut there margins to survive because the farmer will either have to be paid more(not that that will happen) or supply will drop because money simply wont be spent on high stocking rates and high input costs as the profit wont be there to pay for it, once there is a level playing field prices will steady out again and the margins will be the same or possibly better with less turn over.
I've said this before i think farmers need to be more self sufficient rather than having there finger in just one pie, and try and spread the risk a little, eg your tillage farmer, if he had some cattle on the side they might be better some years than the grain, and not rely on the sfp as a crutch, only my opinion

Conflats

IMO if the single farm payment is reduced/cut it will see a loss of smaller farms.

Now some of these farms are run by elderly farmers who use it as their pension, the fact their is no scheme to encourage youth into the industry, the saying cant teach and old dog new tricks comes to mind, a younger person will be more likely to change the system to make it more profitable because after all the environmental sustainability the bottom line is the goal.

Dairying is profitable if done correctly, but other enterprises can be profitable although not to the same extent. Beef can be divided into 3 categories
1) weanling producers
2) finishers who buy weanlings/stores
3) combination of the above 2

There needs to be a larger focus on issues such as genetics in the beef industry and now the icbf are starting to distinguish between maternal and terminal as they are different systems. How many beef farmers utilise grass efficently? very few and the excuse of fragmented farms is not enough to justify the poor uptake, things like strip grazing can be done in any size field etc.

Sheep, we had 4 million ewes 15 yrs ago now we have around 2 million, lamb is a meat which has lost popularity due pork chicken etc. the number of lambs per ewe is the best way to generate more money the average number of lambs per ewe has remained static.

In tillage conacre is the enemy it is not a financially justifiable expense money is paid for land which the farmer who rents it will not maintain it with lime etc why? because why would he spend money to benefit someone else if he doesn't get it next year, 5 year leases or share farming is the best option for maximizing profit.
Ireland is an more expensive per tonne than Argentina etc by about 50 euros but transport is the cost which brings the price difference upto the same. The option to import cereals from abroad is there but simple fact the grain is 1000's of miles inland in Ukraine and Russia mainly.

My point is the only way for farms to be financially secure in Ireland is through maximizing production i.e more tonnes per acre to dilute costs esp in tillage.

Smaller elderly farmers should be giving options to take a retirement scheme or encouraged to share farm etc.

The single farm payment provides for less efficient farmers to stay in the industry but the opposite would be large farming companies like in the UK, it has created a vicious circle, but in the long term the price of food isn't going to go down but factors such as rising fuel will hamper any profit

Timmaay

jay gatsby wrote: »

What effect would all these lads moving to grass have on Irish farming.

Assuming that this Chinese milk market/competitive Irish grass based dairy system does hold true, then its the Dairy lads who would expand in this case to take up the extra grassland and bump up output, as they are currently the most profitable and have best scope to expand/invest.

However I think it was the IFJ rag that I read that someone is producing (or has already?) a similar harvest 2020 report on the whole grain sector, and they think there is room for grown there also! So assuming the experts are correct, your scenario is unlikely! (Do any of these experts consider the weather/climate change in their outlooks is my fear!)

Conflats

F.D wrote: »

The sooner it happens the better land wont be as expensive, elderly farmers will retire, factorys creamerys merchants etc will all have to cut there margins to survive because the farmer will either have to be paid more(not that that will happen) or supply will drop because money simply wont be spent on high stocking rates and high input costs as the profit wont be there to pay for it, once there is a level playing field prices will steady out again and the margins will be the same or possibly better with less turn over.
I've said this before i think farmers need to be more self sufficient rather than having there finger in just one pie, and try and spread the risk a little, eg your tillage farmer, if he had some cattle on the side they might be better some years than the grain, and not rely on the sfp as a crutch, only my opinion

Mixed farming is the way to be, as you said it is reducing your exposure to markets. Many lads can't understand that look at the papers the amount of people saying they wont forward sell grain next year, when its proven in the long term they receive more per tonne than spot price.
If a beef or dairy farmer had a few sheep to follow the cattle cheap grass that would be waste and maybe save the topper going out behind cattle. Or if they had some tillage there is an option to outwinter on stubbles, benefits of 1st crop after lay ground and straw grain etc.

dmullins3

I'm focusing on the point of view of the farmers and what will become of them and their farms if funding was to be cut. I have been looking at efforts to form small syndications between farmers as well as diversing into specialized areas of agriculture.

bbam

dmullins3 wrote: »

I'm focusing on the point of view of the farmers and what will become of them and their farms if funding was to be cut. I have been looking at efforts to form small syndications between farmers as well as diversing into specialized areas of agriculture.

When you mention syndicates they already exist in the form of buyers groups where farmers get together and bulk buy meal, fertiliser tec and reduced prices. It is probably happening more in dairy at the moment but for like minded beef farmers it should work too.

jfh

reilig wrote: »

Its paid to keep prices low for all citizens.

i understand the origional reason was to keep prices low, but there are other necessities in life with no such protection. and for that matter, why should food prices be kept so low. quality stable food is too cheap, it's the rubbish processed food thats expensive. low prices encourages food waste.

jfh

dmullins3 wrote: »

I'm focusing on the point of view of the farmers and what will become of them and their farms if funding was to be cut. I have been looking at efforts to form small syndications between farmers as well as diversing into specialized areas of agriculture.

very interesting topic, you'll get plenty of good discussion here,
let us know your outcome.

F.D

dmullins3 wrote: »

I'm focusing on the point of view of the farmers and what will become of them and their farms if funding was to be cut. I have been looking at efforts to form small syndications between farmers as well as diversing into specialized areas of agriculture.

If funding is cut, small farms that are not profitable, will never change and will be rented or bought out by some one driven and will get bigger
Farmers will be wary of joining up with each other and forming partnerships/ syndicates
I dont think there is much Money to be made in Diversifying as the local economy around most farms is not big enough to support it and to trade on a bigger level someone else has to be cut in, so you may aswell supply the exsiting outlets

blue5000

Nobody has mentioned the pig sector so far. A lot of them are farming without subsidies, they are selling finished pigs at a loss, mainly due to high grain and perhaps energy costs.

NZ stopped all subsidies I think in the late 80's. Due to quotas in EU they were able to expand their dairy industry. A consequence of this is that beef and sheep is pushed off any land where cows can be milked.

Something similar might happen here, but I think it would take a lot longer because of our farm structure etc. if subsidies were stopped.

Dont be daft

dmullins3 wrote: »

I'm focusing on the point of view of the farmers and what will become of them and their farms if funding was to be cut. I have been looking at efforts to form small syndications between farmers as well as diversing into specialized areas of agriculture.

If it happened it would be following a gentle wind down of payments. A "cold turkey" abolition would be too volatile and would really throw the market and industry into turmoil.
Can you imagine the speculating on the commodities market if nobody had idea as to what upcoming plantings would be?

So a gentle decrease in payments till eventual removal would be the only realistic option. As to the way that would shape agriculture, I honestly haven't a clue.
I can certainly see a lot of poor or marginal farmers being immediately taken out of the equation.
The market would definitely be more prone to fluctuation. So debt exposed farms would certainly suffer.
Therefore expanding farms would be vunerable. It may be the case that farms would go bust depite being, in reality, effecient and profitable but have bad luck with regards timing and the market. Can be seen right now in the pig industry.

jfh

blue5000 wrote: »

Nobody has mentioned the pig sector so far. A lot of them are farming without subsidies, they are selling finished pigs at a loss, mainly due to high grain and perhaps energy costs.

NZ stopped all subsidies I think in the late 80's. Due to quotas in EU they were able to expand their dairy industry. A consequence of this is that beef and sheep is pushed off any land where cows can be milked.

Something similar might happen here, but I think it would take a lot longer because of our farm structure etc. if subsidies were stopped.

good points about the pig men & as timmaay said, how're the guys surviving with out the grants, must be very good farmers/business people.

was in NZ in the late ninties & saw the switch over from sheep to dairy. sign of things to come, each region specialises in their own area of expertise.

guess everyone is going to look a this from their own perspective, i don't blame people barely surviving to dread these cuts & lads like myself who want to get into farming, hoping as F.D suggests that land prices will come down etc.
interesting times ahead but after listening to henry burns at that IFA meeting, it'll take ages for real change.

dmullins3

the pig industry is surviving through forming their own syndication.

They have little or not EU funding and so they banded together and formed the 'Truly Irish' label. That's the only reason the industry is still alive.

Its the best Irish example I've found so far that backs up my point of view.

And in relation to what Don't Be Daft said - I agree and can't imagine there would ever be a cold turkey end to funding. I'm just looking at ways that farmers today can start building up to prepare for what may or may not happen in 10, 20 or 30 years down the line

freedominacup

blue5000 wrote: »

Nobody has mentioned the pig sector so far. A lot of them are farming without subsidies, they are selling finished pigs at a loss, mainly due to high grain and perhaps energy costs.

Oul fella always said he'd love to be able to lose money like a pig farmer.

One of the local lads was telling me this time 2 years ago it wasn't worth his while buying the 170hp model because it was only an extra €15k for the 190hp model for his tillage and slurry spreading requirements.

Dont be daft

dmullins3 wrote: »

the pig industry is surviving through forming their own syndication.

They have little or not EU funding and so they banded together and formed the 'Truly Irish' label. That's the only reason the industry is still alive.

Its the best Irish example I've found so far that backs up my point of view.

I wouldn't say the pig industry is surviving. There's a lot of former pig farmers who've been forced out of the business that would still be in it if subsidies did exist.

Also the pig industry example needs to be taken with a pinch of salt. Because they have an almost unlimited ability to expand and dont require the most expensive capital investment of them all (land) I think what has happened in pigs wont necessarily ring true for cows or beef.

From what I can see pork and chicken, the two meats totally unsupported by subsidies, see to vary the most in price on the shelf from month to month.

As for how farmers would adapt, sydicates would be more popular. Probably see machinery share agreements become the norm, farming partnerships would also become more common.
They say neccessity is the mother of invention.

bbam

dmullins3 wrote: »

I'm just looking at ways that farmers today can start building up to prepare for what may or may not happen in 10, 20 or 30 years down the line

Well allot of lads could start by learning to look at their production costs for a start.. Its amazing the ammount of lads that still have no method or interest in costing the production of their animals.. this in its self leads to lads selling at a loss without even knowing it !!

Its only through knowing the cost of something that you can make any attempt to profit from its sale..

dmullins3

just want to say a quick thank you for all you contributed today. wasn't expecting that level of interaction. ye've all been a huge help. I've loads of stuff to go on here. no need to post anymore as I probably won't get a chance to use any more.

cheers

Markcheese

pakalasa wrote: »

All it would take is one food scare, like the baby milk in China, for europeans to suddenly start asking questions about food traceability on these cheap food imports.
Saw a tv programme recently where experts were predicting that by 2020, the world won't be able to feed itself. Again it's the poor that will suffer.

If a lot of " tillage countries" insist on converting cereal and pulses to beef then the poor will suffer, leave beef to grasslands... The upside/ downside (depending on wether you're a consumer or a producer) would be a higher beef price...