Sunday, September 17, 2006

Pity the Poor Farmer

ICMSA press release 7th September 2006.

The announcement by Kerry Group that it projects a milk price cut of 6c/gallon from 1 January 2007 will mean a €3,000 cut in income for the average milk producer, according to the Chair of ICMSA's Dairy Committee, Dominic Cronin. That projected cut in income comes on top of a drop in income in the current year of approximately the same amount, said Mr Cronin. Falls in income of this magnitude are simply not sustainable and would hasten the exit of large numbers from our once vibrant dairy sector. Mr. Cronin described the decision by Kerry as premature and unwarranted in the face of the recent upturn in the marketplace and he said that in the event of the price cut going ahead it would represent a cruel blow to Kerry's milk suppliers. The situation was now fast approaching where the milk quota will not be supplied unless Co-ops return a price to farmers that will generate realistic returns. It follows that the very future of milk production is now under threat as farmers will not be able to make a full-time living from milk production at current prices irrespective of the scale of their operation, said Mr. Cronin.
The ICMSA Dairy Chairman said that one fact stood above all others in terms of comparison: no employee in Kerry Group will suffer a €6,000 reduction in income over two years and the co-op's dairy farmer suppliers should not have to tolerate this either. The board members elected by farmers must now insist that an immediate freeze in the overall wage bill is introduced. They must also insist that the forecasted price cut for January is not implemented given the critical consequences for Kerry's milk suppliers.

This is just the latest twist in the downward spiral for Irish farmers and also illustrates one of the fundamental problems, which is largely of their own making.

When farmers decided to convert their Co-ops into PLCs, which allowed them to take shares which could be traded on the stock market, they effectively reduced themselves to the producers of raw materials, the lowest rung on the commercial ladder in an increasingly commoditised and globalised agriculture industry.

PLCs must act in the interests of all their shareholders, not just their farmer shareholders. The influence of the original farmer owners has been highly diluted as they have sold shares and PLC Co-ops have raised new capital to fund expansion. Indeed, much of the new investment by the co-ops has been in business abroad.

It would be easier to feel sympathy for farmers if the current situation had not been brought about by their own short-sightedness and greed. In addition, the co-ops have never hesitated to axe workers jobs in order to rationalise or close plants when such decisions benefit the bottom-line.

The other major strategic error has been the pursuit of EU subsidies, investing in farm enterprises that have increasingly defied commercial gravity while inevitably running up the cul-de-sac of an increasingly commoditised global agriculture market. In this folly farmers have been very ably aided and abetted by successive Governments and their own farm organisations, the IFA and ICMSA.

Now they get the Brussels “cheque in the post” regardless of whether they’re continuing to farm or not. Many have been reduced to selling half-acre building plots - at huge prices. No wonder they resent An Taisce and others who complain of bungalow blight and demand planning restrictions.

The paradox is that, with farming now essentially a non-viable commercial activity, agricultural land is changing hands at record prices per acre. The dreaded “hobby farmer” is the new buyer as city-types seek to recreate “the good life” in tandem with their hectic business lives in the big city.

Perhaps no other agricultural enterprise model would have produced any better end result, but surely it’s not just with the benefit of hindsight that the inevitable car-crash outcome for agriculture could have been confidently predicted, considering the strategies that were pursued?

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