16 August 2002

Irish fear major cut in output

By Philip Clarke Europe editor

DECOUPLING aid payments from production, as suggested in the EU commissions mid-term review of Agenda 2000, would devastate Irish agriculture, leading to significant cuts in output.

The Irish Farmers Association estimates suckler cow numbers and grain output could drop by 35%, and ewe numbers by 32%.

"The structure of our national suckler herd is one of many small farms often run by elderly people," says IFA chief economist, Con Lucey. "We anticipate that, if they do not have to keep cows to get the aid payment, many will cut production or switch to part-time farming.

"Similarly, many farmers keep sheep as a secondary activity to cattle. Given the peak labour demands, some will be tempted to drop the enterprise altogether."

Arable farmers will also be hit, especially on rented land, says Mr Lucey. "For many, area aid is the profit in growing crops. We believe many will get out of high cost crops, such as winter wheat, and go for low input, low output alternatives like spring barley when aid is decoupled."

Taken together, the IFA puts the total loss of national agricultural output at k355m (£223m), or 8.3%, if the mid-term review plans go through.

There would also be significant income losses. As well as the drop in net margin from keeping fewer animals, Mr Lucey blames modulation, which seeks to take 20% off direct payments.

"The commission argues that the budget savings would be used to fund rural development, but our view is that at least half of the loss would not be restored."

In particular, he points to the commissions plan to redirect these funds to Europes poorest regions, and the existing high use of rural development funds in Ireland, which means there is limited scope for further uptake.

Combined with the 5% cut in cereal prices, the IFA puts the total income loss at farm level at k150m (£94m), or 6.5%.

There will also be an impact on the wider agri-food industry. "Lower agricultural production means a reduced demand for farm inputs and services, and less raw material for the food processing industry," says IFA president John Dillon.

The IFA estimates this will lead to a further k136m (£85m) income decline, with the loss of 19,000 rural jobs.

But not everyone is so pessimistic. "The Fischler proposals will result in slightly lower output and increased prices and this is what farmers need," says Irish Cattle and Sheep Association president Charlie Reilly.

The ICSA is opposed to modulation, which it says should not apply to anyone earning less than the industrial wage. It also wants the k300,000 (£188,000) aid ceiling cut to k100,000 (£63,000).