Irish farmers were told yesterday they should opt for total decoupling of farm production from direct payments, which has been offered under the latest reform of the Common Agricultural Policy.
An independent analysis, conducted by Teagasc economists attached to the Food and Agricultural Policy Research Unit, showed the highest level of farm income would be achieved by full decoupling in all the sectors.
Details of the study announced yesterday showed full decoupling, combined with some changes in agricultural trade policies under the World Trade Organisation (WTO) talks, would lead to a 10 per cent increase in aggregate farm income in 2012.
The report confirmed that no change in policy was the worst option, leading to a decrease of more than 9 per cent in farm income by 2012. Partial decoupling of payments from production, an option allowed under the EU agreement on CAP reform, could deliver an income increase of as little as 4 per cent depending on the payments which were partially decoupled.
The Minister for Agriculture and Food, Mr Walsh, who hosted the press conference, said the analysis would help him make up his mind on what course of action the Government should take on the decoupling issue.
He has been under pressure from the beef-processing industry represented by IBEC and the Irish Meat Association and one of the farm organisations, the Irish Creamery Milk Suppliers Association, to leave the €80 special slaughter scheme coupled to production.
According to Mr Kevin Hanrahan, one of the Teagasc economists, full decoupling in the beef sector would result in a decline of about 18 per cent in suckler cows, leading to a drop of 7 per cent in the amount of beef produced.
However, price increases of around 10 per cent and reduced farm costs would mean the best income prospects for beef producers.
Mr Hanrahan said: "Maintaining the link between the slaughter premium and production would not halt the decline in suckler cow numbers. However, it would result in an improvement of 5 per cent or more in income for around 40 per cent of beef producers.
"The majority of beef-producers would be better off as a result of full decoupling of payments. The main losers would be the larger, commercial farms. While these account for a relatively small number, there would still be a substantial amount of money redistributed from this group across a large number of small beef farms."
In dairying, the analysis showed the recent decision by the Minister for Agriculture to decouple dairy compensation payments from production from 2005, rather than wait until 2007, would secure the future of the greatest number of dairy farmers.
Ms Thia Hennessy said this provided a more attractive exit strategy for less efficient dairy farmers and a larger pool of milk for farmers with the means to expand.
The team, she said, estimated that as a result of the Minister's decision the number of dairy farmers would drop to 18,000 by 2012 from the current level of 26,500.
Waiting to decouple in 2007, however, would have meant a decline to 16,000 by 2012.
Decoupling in the sheep sector, the report said, would accelerate the decline in sheep numbers which would be down 20 per cent on current levels by 2012.
But this decline would be offset by higher prices and an increase in the value of sheep by that date.
Full decoupling would have a small effect on cereals with the area planted falling, leading to a small decline in the value of output.