Government must secure a fully funded Cap budget

OPINION:IFA against any regionalisation or flattening of Single Farm Payment

The next six months will be a significant period for Irish agriculture. Decisions are likely to be made during the Irish Presidency of the EU, which will have far-reaching implications for the future of the farming and food sector. They will also have a major bearing on its ability to reach the growth targets set down in the Government’s Food Harvest 2020 strategy to develop agriculture.

The expectation is that we will see a deal reached on the EU budget by the heads of Government meeting next month.

The focus of Taoiseach Enda Kenny and the Minister for Agriculture Simon Coveney must be to secure a fully funded Cap budget from 2014 to 2020. This outcome would be very much in line with the stated aim of the Irish Presidency to promote jobs and growth.

IFA will maintain the maximum pressure to ensure the Single Farm Payment and the Pillar 11 measures are retained in full. Both are vital supports for farm income, and in the case of the Rural Development Programme, the Government must continue to provide 50:50 co-financing.

On the distribution, our position is clear: IFA is fully opposed to flattening and regionalisation of the Single Farm Payment, as this will cause major disruption of payments at farm level and undermine production in all parts of the country.

Price squeeze

Any future payment system must support active farmers, and underpin production. To maintain the viability of farm businesses, there must be a limit to the total loss incurred by an individual farmer, and any money that is redistributed due to the internal convergence of payments must be directed towards productive farmers. As farmers face into a new year, they are also concerned about the price/cost squeeze.

Input costs are 35 per cent above their 2005 levels, which is in marked contrast to the general level of inflation which is 12 per cent. The significant rises in feed, fertiliser and fuel have not been reflected in the price passed back to producers.

Across all commodities, the power of the multiples continues to put downward pressure on the price paid to producers, yet their margins are maintained. The Government commitment to a code of practice to regulate retailers is long overdue, and must be progressed by the cabinet as a priority.

Retailers have used their power over producers and suppliers to devise and implement a number of methods, whereby they reduce producer margins, although not directly, by reducing the returns to their suppliers.

Some examples of this are:

* Producers are compelled to pay “hello money” to get their product on the shelf or to contribute to the opening of a new outlet;

* Retailers demand “pay to play” money from suppliers in order to have their products re-listed in shelves, or to keep them there;

* Producers and suppliers dealing directly with retailers in the fresh produce sector are subject to costs imposed by the retailer at will, including packaging and transport carrying costs (eg, crate rental), which are compulsorily provided by the retailer;

* Retailers have used their buying power to impose long term agreements (LTAs), which provide for the payment by suppliers of substantial off-invoice rebates at the end of a trading period;

* Processors and suppliers are compelled to carry the cost of product discounting campaigns by retailers, rapidly leading in turn to downward pressure on producer prices;

* Extensive advertising, in-store promotion and the allocation of prominent shelf space to own-brands have significantly increased market control by retailers in particular segments.

* Retailers’ own-brands have damaged greatly private brands built up over many years of substantial investment by farmers.

Making a living

What farm families want is the cost of production and a margin to make a living. They are proud to provide consumers with food produced in an environmentally sustainable way, to the highest quality, safety and animal welfare standards, and with the best traceability in the world. But they have to make a living.

The issue of retail regulation is getting serious attention at European Commission level and the UK government is also moving ahead with its own code.

The Government must rebalance power between producers, suppliers and retailers.

Producers have to get a fair share of the retail price if they are to survive. We need a statutory code of conduct for the retail sector and an independent ombudsman to investigate retailers’ abuses. And we need fair competition law.

Minister for Enterprise Richard Bruton has had enough time to introduce legislation that will have a meaningful impact on the food supply chain by keeping the power of the multiples in check.

The Government made great play on this issue before taking office. Farmers will not tolerate any more delays.

* John Bryan is president of the Irish Farmers’ Association