There is little or no benefit to taxpayers or consumers from the reform of the Common Agricultural Policy, according to an article in the current edition of The Irish Banking Review.
Writing there, Mr John O'Connell of University College Dublin's Department of Agribusiness, said that changes in the CAP will have major implication for farm structure, volume of farm output, agriculture exports and imports but there will only be limited change for taxpayers and consumers.
"EU taxpayers will not benefit, as there is no planned reduction in the EU agricultural budget. EU consumers will enjoy some reduction in food prices," he wrote.
"However, given that EU farmers probably receive no more than 30 per cent of the average consumer euro spent on food, a relatively large farm-level price reduction of 20 per cent will result in only a 6 per cent reduction in consumer food prices," he continued.
"Thereafter, consumer food prices will probably continue to increase as the marketing sector continues to add more services and as unit costs in the marketing sector increase, such costs being driven, as always, by factors which are quite unrelated to agricultural costs, prices or farm incomes," continued the article.
While stressing that projections must be treated with certain caution, Mr O'Connell identified the consequences for Irish agriculture as likely to be a reduction in beef and lamb output with increases in some other agricultural products.
Dairy product prices would decline, as would the incomes of dairy farmers and significant restructuring of dairy production was expected. As the pig, poultry and horticultural industries have long since absorbed the impact of unsubsidised production, growth rates here will continue to be determined largely by economic, technological and generally market-driven factors.
"The intensity of agricultural activity will decline for many farmers and farming activity will cease altogether for some. This will cause some increase in the labour force available for non-farm employment," he wrote.
"It is likely that significant distortion of land prices will remain arising from restrictive conditions attaching to the receipt of the new decoupled payments."
For the economy as a whole, he said, there was likely to be a reduction in beef and lamb output.
The Irish dairy processing sector will have cheaper raw material to process but so too will other EU countries so Irish competitiveness will not improve.
"Product development, foreign market investment and strategic alliances would seem to be at least part of the necessary response of the Irish dairy processing sector to the new policy environment," he continued.
He concluded that, notwithstanding the stress of further reform in decoupling direct payments from current production, farmers will in the main realise they are better off having their businesses directed by market forces rather than by politicians and bureaucrats.
"Ultimately, efficient and energetic farmers will be able to forge ahead. On-farm operational factors will be understandable because they are dictated by market forces rather than by political expediency," said the article
"Farmers will be able to get back to applying science and knowledge to what they want to do; that is produce food and food raw materials," he concluded.