Mr. Joe Healy:

I thank the Chairman for the invitation to address the joint committee to outline the concerns of Irish agriculture following the Brexit decision. As we all know, 2016 was a difficult year for Irish farming with low product prices across almost all sectors, bad weather conditions early in the year for all and again for many tillage farmers in recent months. The UK vote to leave the European Union in June this year has contributed to greater economic uncertainty. This has impacted on Irish agriculture and will continue to do so in the year ahead.

As the previous speaker said, with 40% of our exports destined for the UK market it is clear that the Irish farming and agrifood sectors are being seriously impacted from the fallout from the UK vote. A total of €5 billion worth of our agrifood exports go to the United Kingdom. This includes 50% of our beef – the figure was 54% in 2015 - 60% of our cheese, over €350 million worth of pigmeat and in excess of €120 million worth of mushrooms. This trade is undertaken within the EU Single Market. In other words, with no tariffs applied or other regulatory barriers to trade, such as border checks, health certification checks, etc. Ireland is the only member state to share a land border with the United Kingdom. We are singularly integrated with the UK in the areas of trade, culture, language and free movement of people.

The United Kingdom is a high-value market, sharing similar consumer preferences to Irish consumers, and is generally the first export destination for Irish small and medium-sized enterprises. Farmers and processors have developed systems of production and specifications to match market requirements in the UK market. Major work has been done and considerable resources have been employed in terms of standards and quality assurance.

The sudden and sustained weakening of sterling that has occurred as a direct result of the UK vote and subsequent political declarations has had a negative impact on the price returned to producers whose product is being exported to the United Kingdom. This is primarily the case for beef and mushrooms farmers, who have been hit with severe price cuts since June this year. This has left them in a loss-making situation. Our mushroom growers made a presentation to the committee last September outlining the turmoil into which the industry has been thrown and demonstrating that growers are in continuous and unsustainable loss-making territory resulting from the sudden and significant weakening of sterling. We recognise that exchange rate volatility cannot be controlled in the short term. Since Ireland is a member of the Single Market, there are significant limits on the direct support that can be given to exporting agricultural businesses without breaching state aid rules.

In the run-up to budget 2017, the IFA identified practical steps that the Government could take to mitigate some of the worst income effects of the exchange rate uncertainty. I will outline these steps. First, the provision of increased funding for farm schemes in October's budget. These schemes support farm incomes and output and have a positive knock-on impact in the wider rural economy. Funding for farm schemes increased by over €100 million in budget 2017, with new and increased funding for the sheep, GLAS, TAMS and knowledge transfer programmes. Another step is the provision of direct support to farmers and other SMEs through lower-cost and more flexible short-term and long-term credit options. The outcome of the IFA pressure throughout 2016 on this issue has resulted in the announcement by the Minister for Agriculture, Food and the Marine of credit to farmers at a rate of 2.95%. This will be available across all agriculture sectors from January and can be used to convert merchant credit into a more sustainable loan structure as well as to purchase inputs at a competitive cash price. The IFA also highlighted the need for additional support to exporters in the form of increased promotional funding to diversify and grow our export share in the non-UK market. Increased funding in the budget for Bord Bia in this area is welcome. In addition, the market access unit of the Department of Agriculture, Food and the Marine must be strengthened as we need to see new markets for our processed and live export trade.

As I have already stated, in our beef sector over 50% of exports go to the United Kingdom. Consequently, the weakening of sterling presents a major challenge. The IFA has a clear understanding that exchange rate volatility is not the only determinant of price returns. Demand for beef in the United Kingdom remains strong. We have been in the high-demand Christmas procurement period for the last month or more. Trade and market returns have picked up and cattle prices should have risen far more. Clearly, the lack of competition in the beef sector is a major factor. At the recent beef forum, we made it clear to the Minister and the factories that prices must be restored to feasible levels. It is simply not acceptable for processors to return a practicable price to our farmers at this time. Farmers cannot continue to produce beef at a loss. Many more cattle are in the pipeline for 2017. We need more market access and in particular we need more live exports to drive competition and add additional market outlets.

The IFA has also made it clear that factories must demand higher prices from their British retailer customers to reflect the devaluation and pass these increases directly to farmers. That is what should happen in a normal functioning market. However, as producers we well know the imbalance of power in the farmer, processor and retail relationship in the food chain and we are cognisant of the need for further regulation and an ombudsman in this area.

At EU level, the IFA has looked for direct support to be provided to affected producers through CAP market support measures. The decline of sterling arising from the UK vote is a market disturbance that has occurred swiftly and unexpectedly and has resulted in significant price falls. We believe the European Commission must look seriously at providing exceptional support for sectors in respect of which an external political event has had an immediate and negative economic impact.

We are again calling on the Government to pursue this at EU level. We are also asking for the support of this committee on these issues.

In the longer term, the future trading relationship between the United Kingdom and the European Union is a great concern for the agrifood sector. A move by the United Kingdom away from the Single Market will result in increased trading costs and barriers. The imposition of barriers to trade, in the form of tariffs, border checks and additional certification requirements, would add to costs and undermine the competitiveness of our agrifood exports.

The significant cross-Border trade of agricultural produce for final processing also presents a significant challenge if we are to maintain and grow our high-value export markets. Over 350,000 lambs are imported from Northern Ireland into the Republic of Ireland annually for further processing, with 500,000 pigs from the Republic being processed in Northern Ireland. Between 800,000 and 1 billion litres of milk are imported from Northern Ireland every year, much of which is processed and then exported out of Ireland as a high-value product. Barriers to this trade, in the form of tariffs, additional certification or labelling issues, will all add to costs and may make this continued trade simply uneconomic.

Our concerns in this area are best illustrated by examining the position of countries that trade with the European Union outside the Single Market. The average EU tariff on agricultural products imported from outside the European Union is almost 15% for WTO countries. It is much higher for certain products. It is up to 30% higher for dairy products and 50% higher for some meat products. In other words, if the United Kingdom were to leave the European Union and no agreement were to be reached through a bilateral trade arrangement, it would face significant tariffs on its food exports to the European Union. The likely development is that the United Kingdom would inherit the European Union's tariff commitments, with the result that Irish exporters to the United Kingdom could have tariffs placed on their products. This is the reality of the hard Brexit scenario.

A recent ESRI report highlighted the devastating impact on EU-UK trade in the agrifood sector in this scenario, with trade in dairy products potentially falling by 60% and in some meat products by over 80%. It simply cannot be overstated, therefore, how important it is for the Irish agrifood sector that market access to the United Kingdom that is as free as possible be maintained, with the minimisation of any barriers to trade. The potential economic damage to the agrifood sector that would arise from a hard Brexit is too serious to ignore.

Our first position is that the United Kingdom should remain a full member of the European Union's Single Market, including free trade on agricultural products. This is also the position represented by our farming colleagues in the NFU in the United Kingdom, with whom we have remained in regular contact since the vote and with whom we work closely in Brussels through COPA. If this proves unworkable, the IFA is clear that the agreement of a comprehensive free trade agreement between the European Union and the United Kingdom, with favourable access for agricultural products and mutual recognition of standards, must be a priority at EU level. This must include the agreed sharing out of tariff-free imports into the European Union on agricultural products, many of which, such as New Zealand lamb and butter imports, were brought into the European Union by the United Kingdom on its accession to EU membership.

Why is an UK-EU free trade agreement important? If the United Kingdom were to pursue a trade agenda that resulted in the unilateral reduction of import tariff barriers for agricultural imports from all exporting countries into the United Kingdom, this would be very negative for Irish agriculture. It could result in a very significant reduction in the price of UK food, and consequently the price that Irish farmers receive. The IFA is clear that, in the negotiations between the European Union and the United Kingdom, there must be a strong commitment on both sides to achieve a positive trading relationship.

Another issue I wish to highlight is the concern of Irish farmers over the impact on the EU and CAP budget of the departure of the United Kingdom, a net contributor to the EU budget. In the short term, Ireland's basic payment and rural development envelopes are fixed up to 2020, through the 2013 CAP regulations and under the terms of the EU budget. Changes to these would require agreement by the EU Council, the Parliament and the Commission. The IFA is clear that there must be no changes to farm payments before the current CAP reform concludes in 2020, even if this requires additional contributions from the remaining member states. Ireland must be very clear and lead the way in highlighting the need for a strong CAP budget. This is critical for farm incomes, farm output and wider economic activity in the rural economy.

As we are all aware, farmers source the majority of their inputs locally. A reduction in spending power for Irish agriculture would have a significant and negative knock-on impact on the demand for goods and services in the rural economy.

Analysis undertaken by Teagasc shows the potential farm level impact of Brexit. It has estimated the potential impact on farm income of a 10% drop in CAP payments and a significant liberalisation of the UK market, with large volumes of imports from third countries. The figures are stark. In this scenario, farm incomes would fall in all sectors, with the income drop ranging from 20% on dairy farms to 37% on beef farms. Another key concern is what will happen with agricultural supports for farmers in Northern Ireland and for farms on both sides of the Border. They are all part of the CAP right now, but there is no assurance on the level of support that will be provided to these farmers after the UK exit. As identified in the NFU study in advance of Brexit, a reduction in supports for UK farmers will have a negative impact on their income. This is a major concern for these farms in respect of farm income and viability.

The shared land border between Ireland and Northern Ireland presents a unique challenge in regard to maintaining and improving herd health standards. The risk is that differences in regulations and standards that may emerge could have implications for animal health status in either of the economies due to the spread of disease across the land border. Continued co-operation between the Republic of Ireland and Northern Ireland on animal health standards, as currently applied, must be maintained. Coherence in regulations and standards is critical. The IFA will continue to work closely with the UFU and the NFU on this and other issues as part of our long-established relationship irrespective of the final outcome to the Brexit discussions.

The IFA is clear that it very important that free movement of goods and services be retained as far as possible, and also the free movement of people. People living near the Border work on either side of the Border, farm on either side of the Border and have family on either side of the Border. We all have family and friends who live and work in Britain and Northern Ireland. Disruption to this relationship would be a very negative step, economically and socially.

I thank the committee again for the opportunity to highlight for it the key issues concerning Irish farmers in the wake of the UK vote to leave the European Union. This is a very uncertain time for our economies and society. The number of issues identified in our presentations illustrates the complexity of the current circumstances for the agrifood sector.

I again request the support of this committee on the proposals we have put forward at national and EU level for farmers and the agrifood sector. Strong leadership and the ability to compromise will be needed, at both EU and UK level. The strength of the relationship between Ireland, Northern Ireland and the rest of the United Kingdom, at government and civil society levels, must be leveraged to minimise the economic and social disruption in the short term and to achieve the most positive and sustainable outcome to the negotiations.