It certainly has been a half-decade of misfortune for the farming sector beginning with the first major BSE outbreak here in 1996. The problem was then exacerbated by the depressed world markets coinciding with the Russian and Asian crises, resulting in a succession of three years of falling farm incomes. Then, last autumn BSE re-emerged, causing a further crisis and necessitating the introduction of certain actions, best exemplified in the Republic by the Purchase for Destruction Scheme, which sees perfectly healthy and wholesome beef destroyed. Lastly, we had the foot-and-mouth outbreak, and the imposition of restrictions. For now, however, the BSE problem seems to have receded. I hope we will emerge from the foot-and-mouth crisis with limited direct negative impact on the agri-food sector. However, in combination with BSE and other developments, it is once again putting the focus on farming practices and support policies, and even the future of farming.
With respect to income support, the Agenda 2000 Agreement has continued the process of moving from price and market support as a basis for underpinning farming incomes, to one of direct payments and lower prices. An obvious manifestation of the change in the nature of that support is in respect of farm income formation, where a decade ago direct payments to farmers represented about 22 per cent of total farm income, while last year they accounted for more than 55 per cent. That proportion is set to increase to about 70 per cent by the end of 2006. What disturbs me is that, even with this huge support for the sector, farm incomes are stubbornly low and extremely unstable.
Despite huge transfers from consumers and taxpayers, with EU support averaging almost £1.5 billion (€1.9 billion) annually over the past five years, farm incomes are lagging well behind those in the non-farm sector.
The recent disease outbreaks, especially in the cattle sector, are now claimed by some to be caused by "industrialised" farm methods and the pursuit of a cheap food policy. With respect to the former point, the outbreak of foot-and-mouth is not directly caused by industrialised farming methods - it's around much longer - while it was careless production practices that contributed to BSE. With respect to the cheap food claim, with CAP reform the process of reducing the price of farm products has been underway for some time, but not at the expense of farmers, as the lowering of official EU prices has been accompanied by greatly increased direct payments to them. In response to the adverse developments in the livestock economy, we once again hear calls from many quarters for the farming industry to go "organic".
Despite the current problems in agriculture, there will not be a headlong rush into organic production. The vast majority of farmers are producing CAP-supported products with quota rights, and most are unlikely to trade these advantages for the probably more risky organic ventures. Despite the current crises in farming, we are not facing a doomsday scenario. When we are in the midst of a crisis, it is all too easy to lose perspective. We must not forget that we have a framework policy for agriculture and rural development under Agenda 2000 until the end of 2006 with committed budgetary resources. That programme will remain largely unaltered although the cost of emergency measures to deal specifically with BSE will put severe strain on the EU budget.
However, the new problems in farming may have detrimental effects on farming confidence. Already farmers have been growing increasingly concerned about what's happening in the wider economy in addition to developments behind their own farm gate. They see the Celtic Tiger roaring ahead with unprecedented growth in the national economy, rising employment and incomes, and a sharp increase in asset values. They see all the signs of a booming economy but don't feel part of it, as agriculture becomes a steadily declining sector of the economy.
Expectations with respect to longer-term trends in farming also influence the decisions of potential entrants to the industry. Where such expectations are anything but optimistic in terms of relative incomes, then it can hardly fill such people with enthusiasm for farming.
These realities and expectations have been compounded by the occurrence of foot-and-mouth and BSE, and it will take Herculean efforts by government and the support agencies to restore confidence and reinvigorate the farming industry.
Brendan Kearney is a policy and economic consultant
