Oireachtas Joint and Select Committees
Tuesday, 13 November 2012
Joint Oireachtas Committee on Agriculture, Food and the Marine
Pre-Budget Submissions: Discussion with Irish Creamery Milk Suppliers Association
I welcome the representatives from the Irish Creamery Milk Suppliers Association: Mr. John Comer, president, Mr. Pat McCormack, deputy president, Mr. John Enright, general secretary, and Ms Mary Buckley, policy officer. I thank them for coming before the committee to brief it on the association's pre-budget submission and issues relating to the Common Agricultural Policy, CAP, which is quite popular at the moment.
I draw attention to the fact that witnesses are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence in respect of a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.
Mr. John Comer:
I thank the committee, and my organisation welcomes the opportunity to engage with elected politicians and make them aware of our views on issues that are important to farmers. We are thankful for the privilege. There is much ongoing debate relating to the CAP.
Much will be decided in the coming six-12 months. We have made our views on policies well known and have met a number of the political representatives present today on an individual basis. However, it would be worthwhile to go over the important aspects.
Everyone is in agreement that we need the best result in the budget. Our organisation wants the multi-annual financial framework to be put in place as soon as possible. If financial crises occur in other member states, it will not be to farmers’ advantage to have the budget continuously in doubt. It is in everyone’s interest to agree the framework. This relates to pillars 1 and 2. We must keep an eye on objective criteria and the way in which pillar 2 is funded. It is essential that Ireland’s portion of the pillar 2 budget be agreed simultaneously under the multi-annual framework. Perhaps we will have a wider debate on this issue.
We have picked out the main points of the October 2011 proposals on the Common Agricultural Policy, CAP, that will affect us as farmers – flattening or convergence, as it is known, the base year and greening. In the Irish context, convergence or flattening would have a negative impact on active farmers. We wish to flag this issue clearly today. If every hectare of land in Ireland has the same payment attached to it, there will be no incentive for a farmer to remain active and all of the financial power will be placed in the hands of the armchair farmer instead of the active farmer. We support the Minister for Agriculture, Food and the Marine’s position. With his departmental officials, he has a fair grasp of the impact of shifting funds from one set of farmers to another.
We would support proportional approximation, but it should be graduated. A critical wording should be incorporated in the regulation, namely, “a gradual move towards”. This would not require one to arrive at an outcome within a specific timeframe. Even the proponents of different approaches to disseminating the funds agree that a gradual move is essential, particularly given the system’s use of reference years.
We must accept that the historical situation is gone. The Commissioner does not like the word “historical” and wants to move onwards. However, the people with historical entitlements or their sons or daughters remain active on their farms. There are anomalies, but as much as 85% of them are still active. Some 9% or 10% are in receipt of large payments but are doing little, but one should not throw the baby out with the bath water. One should be cognisant of supporting the active farmer.
A useful definition of “active farmer” at member state level is essential. An active farmer should have a meaningful stocking density. In the interests of fairness, we would not be opposed to the inclusion of an off-farm income element, although the Government might claim that it would be difficult to regulate.
Turning to the graduated approximation, up to the first €30,000 the maximum linear cut could be 5%. At over €30,000, the cut could be 10. This would have a large effect on lower single farm payments. A small payment would increase by up to 30%.
Although I am from the west, I represent all farmers. The best way to represent west of Ireland farmers or those who believe that they have less productive land would be to incorporate into pillar 2 a meaningful rural environment protection scheme, REPs, no further cuts and an enhancement of the disadvantaged areas scheme payments. This is the way to channel funds to land that does not have the same productive capacity. Investments have taken place but in the average or typical sized farm operated by a full-time farmer. Cognisance must be taken of that fact. A full-time farmer, operating a labour unit, receives a reasonable single farm payment so what, in the name of God, is the justification for making him insolvent? It is the production basis for this country. Why would funds be shifted away from him, even modest payments of up to €30,000? What is the point of doing that?
Many politicians have told the organisation that the potential impact and speculation about using the base year has gone. I strongly disagree. People continue to speculate, particularly on the dairy farmer element. The land surrounding a milking platform is critical and if anything interferes with it then a farmer cannot milk cows or replace it with land located five miles away. People say that the damage has been done with regard to the reference year. The problem is that I do not believe that the reference year will be 2014. I think that it will go beyond that.
If everything works as best that it can and the multi-annual financial framework is agreed at the end of the month, before Christmas or at the end of December, we get the EU Presidency in January and the Minister gets agreement on everything, then we need regulation and to build legislation around it. Even if all of the civil servants in Europe work flat out I do not think they will get the work done in time for 2014. That means that the base year will role on again. If, like the indications made in the past few days, they run into difficulty then it could be 2015. Therefore, speculation will continue and it is a disaster for the dairy farmer because there are issues with the land around milking platforms.
The IFA has an issue with the third element of the CAP which is greening. There are 18 statutory management requirements for cross-compliance and that bar is sufficiently high enough to justify a single farm payment. We must bear in mind that the Commissioner has emphasised that it is his best card for securing the overall budget and it is the best way to sell it to the taxpayers of Europe who fund the CAP and EU budgets. Keeping in mind that greening is coming, the IFA would like to know more of the details. It is proposed that 30% of lands will be under the headline of "greening". If that is the case then the IFA want it to incorporated into proportional approximation. Otherwise, in year one, 30% of land would be flattened which would be too fast and too soon and would distort many businesses. We would like to know the details of the greening plan. There is a proposal to have five hectares for crop rotation which would be a disaster for dairy farmers as a lot of dairy farmers grow maize. The limit is too restrictive. I know it has been proposed to increase the amount but it is not a Commission proposal. Many issues must be watched. We want to ensure that the greening element does not disallow the need for a proper rural environment protection scheme in pillar 2.
With regard to pillar 1, price supports are important to our industry. The safety net for milk has been decreased to 20 cent per litre which is too low. Every milk producer across Europe would be gone out of business with such a rate. The scientific bodies in Teagasc have told us that the cost of production is 28c per litre this year.
Under the CAP proposals the IFA has not seen anything to identify or address the largest problem that will face our industry. The Minister has noble aspirations for us, such as an increase of 50% in production by 2020. We have not seen anything in any policy about volatility. It is incumbent on national and European politicians to address the elephant in the room which is volatility. That has the capacity to bring the dairy industry to where the pig industry is now. When I was growing up every household has its own pigs, perhaps as many as 20 sows, but now there are fewer than 300 pig farmers. They are struggling financially and scale has not solved their problems. Volatility is the single greatest risk factor for the dairy sector, particularly for investment.
We are working with our European milk board colleagues in promoting the idea of an independent monitoring agency. It needs to be independent of but supported by the Commission in order to get it up and running. It has been tried at national level in several member states and has not worked. It would have a two-fold effect - first, it would address volatility and second, it would take away the power from the multinationals. It is frightening to note that 23 multinationals control up to 90% of the retail food chain process. An independent monitoring agency would clearly identify the cost of production of milk and other products, what the processor takes out of it and what the retailer gets. It would identify where production is going before it actually happens, so an agency would have the capacity to predict production levels in eight to ten months time. We might be able to incorporate a system that would allow for expansion or contraction, if required.
It is of vital importance that we get funding from pillar 2. While we welcome the agri-environment options scheme, AEOS, it is the poor relation of REPS. It is not fit for purpose. A good vibrant, robust well-funded REPS scheme will identify and address many of the issues we raise. The disadvantaged area payments were cut from €220 million to €190 million. It must be reinstated and there must be certainty in the upcoming budget that no further cuts will be made to the REPS and the disadvantaged areas budgets. Under the Common Agricultural Policy proposals, we would like an orderly transfer of family farms. with provisions for installation and early retirement.
We have set out in detail our requirements in our pre-budget submission. I will list the headings. Land consolidation is absolutely critical. We acknowledge the improvement in the stamp duty provisions in the last budget with the reduction from 6% to 2%. We feel further adjustments could be made in the next budget that would make a significant impact. We would like to see the young trained farmers' stamp duty relief, which is due to run out at the end of this year, addressed.
We have major issues with capital gains tax on land consolidation. The capital gains tax is now at 30%. If one wants to sell a parcel of land five or six miles away and buy ten or 12 acres around the home farm, the costs are enormous. It is off-putting. I think for the good of the economy, given we are charged with taking the economy from the financial abyss, we would like the problem we have identified to be recognised in real terms in the budget and give roll-over relief for land consolidation. I think it would be of huge benefit to individual farmers and achieve significant benefit for the national good. We make a strong case that transfer of the family farm should be done on a tax free basis. My colleagues can answer detailed questions on the taxation elements of the pre-budget submission.
We do not want to see cuts in the funding of the schemes during 2013. The targeted agricultural modernisation agricultural scheme, TAMS, covers the dairy equipment scheme and is funded by four tranches of €4.25 million each year. We would like to see the payments front loaded. There is no logical reason that the money which will come on stream on a tranches basis is not paid to the farmers who want to do work. I know there is a requirement under EU legislation, but it does not specifically state that the tranches must be equal. It only states that there must be moneys available at the end of the scheme as well as at the beginning. I think the scheme could be front loaded to meet the demand that is there and leave a smaller portion of the fund for later on.
I think everyone is aware of the view of the capital assets implementation group. We say that land is merely the tools of the trade by which farmers earn an income. To incorporate the value of the land into the equation of income on which the capacity of a parent to send a child to third level education is adjudicated would be unfair, unjust and unworkable. I am prepared to answer any questions on our position.
An issue that is close to my heart, because I have looked for the logic to it on numerous occasions, and with the permission of the Chairman, I will refer to it at this meeting, relates to the conveyancing conflicts group. The Incorporated Law Society brought in a statutory instrument that will become the law of the land on 1 January 2013, whereby it is a legal requirement that a solicitor cannot act for both parties as happened heretofore. This will impact on all property transactions, but on farm transfer it will have a serious negative effect in terms of costs. What typically happens in a land transfer is that one person gets some of the land, another son might get a site and a daughter something else. A family with five children could end up with a bus load of solicitors to go ahead with the transaction. It was introduced under the guise of protecting the elderly and to prevent elderly abuse. We never got figures as to the number of people who were abused, or where it featured in the statistics and if this statutory instrument will resolve it. My view is that it will not. At another level, how did we gift the capacity to enact laws to the Incorporated Law Society when we have 166 elected representatives in Dáil Éireann and 60 Senators in the Upper House without it ever getting to the floor of the Houses of the Oireachtas? If it had been debated in the Oireachtas, the Law Society's position may be vindicated, but at least we would be more educated about it.
I thank the Chairman and members for their attention.
I will deal with the topics in reverse order, I agree with the concerns of the ICMSA on conveyancing. I tabled a parliamentary question to the Minister but I did not get much joy. I believe this issue should be discussed.
At this time of the year everybody comes in with the shopping list. At this stage it is normally way too late but I suggest the committee should look at the issue of the tax ramifications of land consolidation. This is a very important issue for dairy farmers. We need to develop a policy, and argue it out well in advance of a budget. I can guarantee that little will be added to what is already in the budget. As a committee we should set out early next year to consider our policies on these proposals and examine all the implications in order to ensure that barriers to the development of farming, such as land consolidation and the tax regime and so on are looked at. We should not wait until the last minute when it is too late to influence Government.
The delegation from the ICMSA obviously did not read the expenditure report issued by the Government last year, in which it was stated there would be a 6% cut in agriculture next year. I see from the ICMSA shopping list that more money and not less is required. It is a very handy ploy because no matter what happens, it is on a winner. We too can play the same game when talking to the Minister, but one does not influence the game that way. I think the 6% cut is probably disproportionate, I recognise there will be a cut, as there is less money. The first thing to do is to try to make as many savings as we can from administration. We can try to handle the money a bit better and ensure there is no carry forward of unspent cash, which disappears into the ether leaving just a liability.
I still believe the Minister will not be expanding the scheme when all of that is done. We have an awkward decision to make. The Minister has an even more awkward decision to make. Should we recommend the retention of the suckler cow scheme, for example? If we do, where will the money come from? I do not think extra money will come from the Exchequer. I would like to know where the association's priorities lie. If cuts are needed, do the representatives of the association have any thoughts on how they should be made? It is their prerogative not to answer that question if they like. I reiterate that those who do not answer such questions when they know the realities cannot really complain when Ministers make decisions they do not like.
I was interested to hear what the witnesses had to say about the Common Agricultural Policy. It is interesting to examine the derogation figures for people involved in the disadvantaged areas scheme. The people in the mountains have had the fewest rejections. In fact, there are more rejections in severely disadvantaged areas than in the mountains. Proportionately, there are as many rejections, if not more, in the less favoured areas. That seems to indicate something about all this talk about armchair farmers. I do not know where such farmers are to be found, but they are not in the mountains. All of these farmers had to make a case to prove they were farming their land to the capacity of that land. It seems to me that there are two handy ways to be an armchair farmer, to be blunt. If one has a huge single payment, one can lease out the land and the single payment, making sure to build a good return from the single payment - 80%, say - into the single payment lease, and do nothing. When I go around the country, it seems to me that the farmers who take that approach have the good land rather than the bad land. The other way to make a whole heap of money from a large single payment is to contract out the sowing, fertilising and harvesting of one's tillage lands. A farmer who does that will continue to get the single payment.
I am very worried. We are talking about active farmers. When I examined the European definition of an "active farmer", I noted that small part-time farmers on marginal land are specifically included as being active farmers. I get the impression from the farm organisations that they are trying to edge out such farmers in some way. If a different definition is used, it will quite rightly exclude corporate entities like conglomerates and airports. I agree that they should be excluded. I do not see why they are getting State money to farm. When I studied the 2008 single farm payments, I noted that the biggest payments were going to certain well-known corporate entities. They were not all connected to the farming industry. If the association has a definition of an "active farmer" other than the definition proposed by the EU, which specifically includes the people with small farms on marginal land, I would be interested to hear about it.
I would like to mention an issue that is coming more and more to the fore. The association has shown us this proposal. The farming organisations seem to favour the proposal from the Minister, Deputy Coveney. They have justified payments of €150,000 or €200,000 to farmers under the single payment scheme. The same people complain about Deputies getting €80,000 for working seven days a week. It seems to me that the argument being made is that those in receipt of single payments of €150,000 or €200,000 are losing money by farming when such payments are taken out of the calculation. I cannot justify the payment by the State of farm incomes of €200,000 from the public coffers. If we have come to the stage that the more intensive a farmer is, the more money he or she is losing - when the single payment is taken out and put aside - I suggest that farming has become a nonsense. That seems to be the proposition that is constantly being put to me by highly intensive farmers. If we do not rectify that issue, the whole game is crazy.
If one could earn the €200,000 that one is being given just by keeping a minimum amount of stock on the land, all one has to do is get one's minimum payment and not worry about stocking levels. Why would one continue to invest and invest in order to lose more and more money? If that is what is really happening, it does not make any sense. I would love to see the farm accounts of some of these people. If it is the case that the more intensively one farms and the more land one buys, the more money one loses, it just does not make any sense. I know people are very generous, but I am not sure they are that generous. I have to believe the intensive farmer is actually making money before the single payment is taken into account. If he is not, it is a nonsense for him to get more and more intensive. I believe in the principle of equity that is applied to other grants. Therefore, there is a very good case to put a cap on the single payment, just as people want to put a cap on public service wages, etc. We could allow farmers to make as much money as they want beyond the cap as long as they make it from farming. That would reduce the number of very profitable armchair farmers who get the payments but do not really have to do an awful lot. They get somebody else to do all the work.
If we were to impose a cap on the payments received by the 2% of farmers who get 12% of payments - we could also apply it to the guys who are stacking, but I will come back to that in a minute - we could give every farmer an extra €30 on the first 20 hectares of land. That would represent an extra €600 for a farmer with 20 hectares or more. It would help the genuine middle-ranking farmers in the country, but not the 2% of guys at the top who should be able to make their money anyway, especially as €50,000 is a good start. I know this is being vehemently opposed, but I reiterate that it would be better for 98% of farmers and worse for 2% of farmers.
It has been suggested that an increase in payments at the bottom end of it would result in farmers with acres and acres of bad land suddenly getting a fortune because they all have huge farms. When one assesses the farm size statistics, one finds that those who receive the lowest payments per hectare are also those with the smallest farms. As the money per hectare increases, so does the average farm size, with the exception of the people at the very top who get over €500,000 a hectare. I am not talking about those who get the biggest payment, but about those who get the biggest payment per hectare. They actually tend to have smaller farm sizes than people in the next three categories, which indicates to me that people who get over €500 a hectare are stacking. In other words, they had land leased in the reference year but they do not have it leased any more. They are stacking the payments. There is no logic in the way these payments gradually increase along with average farm size until one reaches the highest level. The obvious explanation is that they were not really making €500 a hectare in entitlements from their land in 2001 or 2002 or whenever. They were actually making it from double that amount of land and stacking the entitlements. That explains why those with smaller farm sizes get higher grants.
We have been told that people in the west get all of the disadvantaged area payments. I am as interested in Wexford farmers as anyone else. We are being told we cannot touch people who get single farm payments of €50,000, or set a limit that does not allow them to get €100,000 or €200,000. The limit for a farmer who is depending on the disadvantaged area is €3,400. That is the maximum he can get, even if he owns the mountains of Donegal and the hills of Dublin.
The maximum area under REPS was approximately 100 acres or 40 hectares and the maximum payment was €11,800. I do not believe it will ever go near this again because the type of costings built in previously could not be justified under the greening process. Even if a new REPS were introduced I could not see it giving anybody more than a maximum amount of €4,000 or €5,000.
The pillar 2 budget is now negotiated in a multi-annual framework and is very vulnerable to Government cutbacks. Figures that will surprise some people are as follows: 17% of disadvantaged area scheme payments are made in Leinster and every county in Leinster is included; 26% of payments are made in Munster and every county is included; 17% of payments are made in Ulster, which includes Cavan and Monaghan; and 36% of payments are made in Connacht. There is not a county in Ireland from Dublin to Galway and from Donegal to Wexford which does not have farmers who receive disadvantaged area scheme payments. A myth is perpetuated that it is a west coast payment, but half of payments are not made there no matter how one defines the west coast. Does the west coast comprise Kerry where there is some great land, Clare, Connacht and Donegal? Does it comprise Connacht and Donegal? We should be honest that disadvantaged area scheme payments are made throughout the State to farmers on certain types of land and all counties, including Wexford and Kilkenny, get their fair share of payments relative to the land. It is a very small payment anyway compared with a decent single payment.
Unfortunately I must attend another meeting. I do not know which saint was able to be in two places at the same time but I am no saint so I cannot pull off that trick. Why should low-income farmers who are struggling and working hard on bad land, many of them full time, be asked to tell the Commissioner they do not need the money in favour of people receiving single payments of €50,000, €100,000, €150,000, €200,000 or €250,000? I do not understand this. My honest opinion is that when it is put clearly on the table, as it was in Leitrim, farmers do not understand it either. The same will apply in Wexford, Kilkenny, Carlow and Meath because the vast majority of farmers in these counties do not receive large single payments or high rates per hectare. The vast majority of farmers in every county do not receive high rates per hectare or large payments. My agenda is not a west of Ireland agenda. It is an agenda for the struggling masses as against the very well-paid elite of Irish farming.
I welcome the representatives of the ICMSA. We have held a number of briefings with them and what is most important is to get the budget in place, which I hope will be done by the end of the year. Listening to Deputy Ó Cuív it sounds like we will have a hell of a battle distributing it when it comes to it. How many farmers receive more than €150,000 for €250,000? I do not have the figures with me but the average payment is much lower. I agree with the Minister on keeping farming in Ireland and using a percentage taken off the top to increase payments to farmers on the bottom of the scale in the west of Ireland as it would mean a great deal to them. Perhaps if it was increased a little it would suit smaller farmers better, but I support the Minister on his view and he has support throughout Europe on the issue. We will examine the figures to see how many farmers are in the large payment bracket but I do not believe too many farmers receive payments of more than €150,000 or €250,000.
It is very important to support active farmers. We should get a definition of the "armchair farmer". Young farmers will be looked after in the proposals and we welcome this as it is very important. Perhaps those farmers who are not so young and have been farming and working hard on the land trying to earn an income since 2002 but have not received a single farm payment should be looked after as well as young farmers. They should receive a single farm payment.
We must sort out the problem in the commonages. We spoke about this earlier and we will have a meeting on it. If the commonages are not sorted out many farmers will be penalised for the sins of their neighbours. It will create a hell of a battle in hill areas. One group of farmers will want to work the commonages while another group will just put sheep on them and not care about anybody. This will create war on the commonages and something must be done. It must be sorted out. Farmers cannot be penalised for another farmer taking the law into his or her own hands and over-grazing on commonages.
An environmental scheme is very important and we should have something better than AEOS to replace REPS. Perhaps it will not be as good as REPS, but a good scheme should be put in place to help farmers who look after the environment. Suckler cow and sheep schemes are funded under pillar 2, as is the disadvantaged areas scheme. We will all work to try to achieve these.
The points made about solicitors working for families was quite right. Introducing a bus load of solicitors does nothing for transferring farm assets. One solicitor is quite adequate, once what needs to be done is laid down quite clearly.
I welcome the representatives from the ICMSA whom we met last week to discuss the same matter. I ask the Chairman for latitude, because normally when witnesses are present the Chairman does not allow us to debate, but as a Member of the Seanad I do not get much opportunity to debate with Deputy Ó Cuív and I would like to respond to his comments. Approximately 500 farmers in the country receive a single farm payment of more than €100,000. Deputy Ó Cuív stated we would create a group of armchair farmers. Those who receive the single farm payment do so because they farm intensively, have been working and will not stop doing so. I do not accept his point. Deputy Ó Cuív feels some of the farming organisations are trying to push out part-time farmers and I do not accept this point either.
Farming organisations are working in the best interests of all farmers, be they part-time, full-time, intensive or extensive.
I welcome the points on solicitors, land consolidation and capital gains, and we will take up those matters. If our country is to progress Food Harvest 2020, land must be consolidated. People should not pay capital gains tax for swapping fields and so on.
I would welcome Mr. Comer's comments on another matter, although he may not want to put them on the public record. Two weeks ago, Deputy Ó Cuív made proposals on the Common Agricultural Policy, CAP, and the single farm payment. What is the ICMSA's opinion on those proposals?
My next point is not a pre-budget one, but post-Common Agricultural Policy. It relates to 2015 and the disappearance of quotas. Glanbia is taking an important vote today and I wish it the best. It will help the future of agriculture in Ireland. Some sides are proposing caution whereas others are proposing that we should go for it and start producing milk in vast quantities. The ICMSA has many members. Farmers, land and stocking rates differ, but most people involved in the milk sector are committed to increasing milk production. The danger is that we could land people in financial difficulties if the market collapsed after they made their investments. Has the ICMSA held meetings with its members on the post-2015 situation and discussed, for example, what increased percentage of capital investment they should make in stock, buildings or land? Should it be 10%, 20% or just 1%? Has the ICMSA conducted a study in this regard?
I apologise for my rant, but this is the only forum where I am able to discuss matters with Deputy Ó Cuív.
Mr. John Comer:
Deputy Ó Cuív has left, but we discussed many of these issues at a forum in Carrick-on-Shannon not too long ago. I have covered much of this area in my introduction, in which I recognised that there would be anomalies. However, 85% to 87% of those who were active in the historical years are still active. Some 1,640 people are in receipt of more than €50,000 per annum and only a few hundred receive more than €100,000. That number is insignificant compared with the overall package. It looks wrong and the aesthetics are not great, but there are 110,000 farmers.
I was asked about payments. Across the 27 member states, the average single farm payment is €4,000. In Ireland, it is €9,000. Proportionate approximation was applied at member state level because the Germans, French, Austrians and others did not want to shift the budgets too dramatically. Deputy Ó Cuív's suggestion of giving people a lift of €30 on the first ten or 15 hectares sounds lovely, but the reality is that most of those involved might not be full-time farmers and might have sizeable off-farm incomes. For example, they could be gardaí, teachers, solicitors, doctors, etc. The money will go to them.
Our organisation is trying to protect the one constant, that is, the family farm unit, a labour unit that produces enough to make a living with the incorporation of the single farm payment. It is as simple as that. The amount involved usually hovers between €20,000 and €50,000, depending on one's borrowings. I hate characterising farmers, but someone who has 1,000 acres of hill and 50 sheep could theoretically be called active. However, he or she has plenty of time to generate other income. Such farmers are not solely dependent on farming and have developed other ways to live. I do not want to segregate farmers, but giving €30 on the first ten hectares would be disastrous. It would create more anomalies than it would solve.
Senior departmental officials have crunched the numbers. We support the position taken by the Department to lessen the impact of the change in funding. A gradual convergence is fine. By 2020, the vista across food production in Europe will be different than it is now and there will be many plans to shift the emphasis back onto coupled payments.
Senator Comiskey mentioned young farmers. We support his comments. The issue of commonages must be sorted. The notion of collective responsibility is lunacy. I do not know how anyone could have come up with it outside of a communist society. If four farmers who have sheep on a hill are dependent on one another, it is a recipe for disaster and must be rectified. A commonsensical approach must be taken.
The rural environment protection scheme, REPS, was also mentioned. A whole-farm approach is the best in that regard. Under the agri-environment options scheme, AEOS, each item of expenditure is receipted and only parts of a farm are involved. To be successful, a scheme must take a whole-farm basis.
The suckler cow scheme has been prioritised and is funded from the Exchequer, but we are not in favour of coupling payments in the next CAP budget. There is no justification for recoupling those moneys. With one hand a linear cut of 5%, 10% or so on would be applied to everyone and, with the other, it would be given back again, only with terms and condition attached, including the requirement to keep the cow. Beef prices are high because of the law of supply and demand. Numbers have decreased and prices have increased. If payments are coupled, farmers will need to keep their animals, which will lead to a decrease in prices. Recoupling in respect of a small percentage now would be detrimental for farmers. The situation might be different if everything was recoupled, but our organisation is against recoupling just 5% or 10%.
Senator Comiskey referred to land conveyancing. We have serious issues in this regard, but they are not specific to farmers. Every citizen is affected, as all property transfers are involved. The only element that is excluded is the physical transaction of cash. One will even be required to have two solicitors to conduct the transfer of a share in a council house. Heretofore, it was always advisable to have a second solicitor, but that is different from being required to set up a new account with a second solicitor and duplicating the searches. What sticks in my craw is the fact that the Law Society implemented this statutory instrument and its members are getting the business. I want to make the Houses aware that this expensive and impractical approach will not solve the problem.
I believe I have covered everything, but members might remind me if I have left anything out. Post-2015 was mentioned.
We have lots of ideas on that, which Mr. McCormack will outline.
Mr. Pat McCormack:
Senator O'Neill is correct that today is an important day for Glanbia supplier shareholders because of the awaited clarification around the intended processes and facilities post-2015 from a processor perspective. It is anticipated there will be a significant increase in 2015, probably never to be matched, of in the region of 15% or 20%. I know having attended branch AGMs last year and this year that the train of thought in this regard differs. The climatic conditions that prevailed during 2012 have brought a sense of realism to farmers. We are encouraging individual farmers to get to grips in terms of expansion costs because, contrary to what Deputy Ó Cuív said earlier, a farmer on wet soil who meets difficult times as regards price volatility and a challenging climatic year and who has increased stocking density and milk output could find himself or herself doing more and creating a bigger hole. We are advising our members of the need to consider costs and capabilities because in 2011 the cost of production varied between 14 and 25 cents a litre, depending on efficiencies and soil types of the individual farmer. It is paramount that they know where they stand before they step forward because they need to be in a position of profitability in order to expand at a sustainable rate.
We all know that the test farm is in Kilkenny. Prices in 2009, at the time the test in terms of trying to prove milk could be produced at a certain level was applied, were really depressed. Thankfully, market prices have increased since then. While it was hoped the result would set an example and that the land used was good, I do not believe the test, in terms of what was hoped would be achieved in relation to the cost of production, was realistic. I note Mr. McCormack's statement that the organisation is urging caution on the part of its members post-2015. However, that scenario must be set against what Mr. Comer had to say in regard to the suckler cow welfare scheme, the cost of which is currently met by the Exchequer.
As I stated earlier, I believe part of Pillar 2 should be a couple of payments to support the suckler cow payments. I am not suggesting that every situation will be black and white post-2012 because it is not possible to milk cows on all lands because of some of them are not suitable or large enough to support milk production. My concern is that land close to that of an intensive or active dairy farmer, which becomes available for lease, sale or rent for 11 months will be designated as suitable only for milk production, resulting in tillage, suckler cow, beef, sheep or pig farmers not being able to rent that land. I have previously stated in public and to the Minister that I believe that some of the money obtained during the next CAP negotiations should be used to support other parts of agriculture besides dairy farming. It should be used to support the suckler cow or sheep scheme and so on. I am not suggesting that the dairy sector should not get support. Currently, our herds are 50% dairy and 50% beef. During the past six to eight years we have built up, through quality assurance, traceability and so on a reputation worldwide in relation to our beef. We are second to none in terms of quality of production and traceability in respect of products exported from Ireland. I would hate if post-2015 the 50:50 ratio would be changed to 60:40, 65:35 or 70:30, which would make it unviable for even meat factories to continue here. I know that, unless everything is set before inception, beef will be produced from the dairy herd. However, that will not do anything for us in terms of sale to the market. Previously, beef from our dairy herds was exported to Third World countries such as Lybia, Egypt and Russia. The consumers with the most money are those in Europe, including France, Italy, Spain and Germany. They want quality. Since the introduction over three years ago of traceability and so on there has been a significant increase in the price of product, which may be down to scarcity. We do not want countries such as Argentina or Brazil, which do not provide assurance in terms of quality, meeting beef needs in Europe. We must be in a position to support the needs of Europe.
It was stated earlier that support for the suckler cow scheme should be discontinued. I believe it must be supported through Pillar 2 post the next CAP negotiations.
Mr. John Enright:
Our concern is that a 5% or 10% cut in everybody's single farm payment will be proposed as part of Pillar 1. We are under pressure in terms of the budget and from other schemes, including the young farmer scheme, the international reserve, etc., all of which are good initiatives in their own right. The money for all these schemes must come from somewhere. We are concerned that the current Commission proposals on coupling could result in a 5% reduction in payment to dairy, tillage, sheep or suckler farmers.
Our objective is not to look after the people who receive payments above €100,000. The vast majority of our members receive single farm payments of between €5,000 and €20,000. Our objective-----
Mr. John Enright:
-----is to look after those people. We have members in the 26 counties. We have looked at the various options available under the single farm payment scheme. On balance, while it is not perfect, we believe the Minister's proposal on convergence is the best way to go to try to protect these payments. The single farm payment is hugely important to our members. Without the single farm payment in 2009 our members would have faced a catastrophic situation. Our key objective is the protection of single farm payments. If the payment is reduced in the budget, we will be under pressure. A change to the level of distribution will also cause us problems. Our objective is to protect the people who are actively farming the land.
The issue of armchair farmers was mentioned. We have come across situations both last year and this year of landowners who, having rented land to farmers for up to 20 years, are now taking that land back in order for them to draw down entitlements themselves. We believe this is widespread.
While we have not touched a great deal on budgetary matters, the point was made earlier that there may be a 6% cut in this area in the forthcoming budget. Many schemes were mentioned during this debate. In Mr. Comer's view, what, in terms of the forthcoming budget, are the priority issues? In the event of, say, the suckler scheme being given priority, from where could savings be achieved in order to supplement it?
Mr. John Comer:
While all schemes have merits in their own right, we would like to see an enhanced budget. We believe that the cuts to the agriculture sector have been disproportionate, in particular in 2011 when the cuts were 14% versus 5% to 6%. I believe the ICBF that the suckler cow scheme is important to them in terms of data collection. One wonders if people would supply the required data to the ICBF if they had no incentive, in terms of the suckler cow scheme, to do so. In terms of prioritising cuts, there is no cost to many of the proposals made in our pre-budget submission.
These are elements that would not have a huge cost. There should be a concentrated effort by the Department of Finance to facilitate mechanisms by which land consolidation can take place in this country. Apart from volatility, one of the single biggest constraints is fragmentation of the Irish land structure. Anything facilitating an orderly consolidation of the land base is a priority. The rural environmental protection scheme, REPS 4, has taken a 19% cut and there was a cut of €19 million last year. No other cuts could be justified in that respect.
The importance of the disadvantaged areas scheme is critical, as it is the least complicated way of getting money to farmers who farm on areas of natural constraint. It does not have the complications of other schemes and a cut in it would have detrimental effects. I am not sure I have the political skills to answer the question without committing myself to anything but I have done my best.
Mr. John Enright:
It is important to point out that we must consider where farmers are now compared to this time last year. Teagasc has indicated there will be a 30% cut in income this year and we think that might be a conservative figure. Given the terrible weather farmers have experienced since before May, increased costs in the system will be evident until next May. The first six months of next year will be very expensive for farmers because of increased costs in the system. We are seeing on a daily basis in the office evidence of increased pressure on farmers, as people are contacting us about financial issues. We strongly feel that these schemes must be maintained in 2013 as farmers are feeling major financial pressures.
I have a straight question. Are the witnesses opposed, in principle, to any cap in the amount of payment that any individual can get? If they are, that is fine, but if they are not, perhaps they could indicate a suitable cap? There have been suggestions from Commissioner Cioloş and the European Parliament, which basically stipulates that there can be a payment of between €200 and €300 per hectare. That is a dramatic cap. The Minister also has a proposal. An interesting mind game concerns where we are likely to end up and how likely it is that the Minister's proposal will get through the European Parliament. I am not sure it will.
An issue could arise if we do not get the answer we want but rather an indication that no payment will be less than €200 per hectare. There are not many hill farmers with 1,000 acres but they would make a huge gain because there would be no cap. By having a cap, one would avoid an unintended consequence arising because the advocacy groups do not control the negotiations; there are 27 countries involved in the process. I notice there is much concentration among member governments but the European Parliament is in the game. It is interesting to note what its rapporteur put forward, which is, if I may term it, Cioloş mark 2, plus or minus 20%. When all these people get together and start compromising, things happen that may not be expected. I am interested to hear the views on such a cap.
People often raise the question of whether farmers work full time. We know the vast majority of farmers do not work full time, although dairy farmers are the exceptions. They are not necessarily the people with the biggest single payment, as it is not the way the payment is made. For example, people in the beef industry did relatively well in single payments; if they were well organised they would get the first and second tranches, as well as the slaughter premium in reference years. The idea that the highly paid farmers - either taken on a per hectare basis or in total - are dairy farmers is a nonsense. I do not know how many dairy farmers are in the country, although the witnesses probably know this.
There are 120,000 registered herd owners. It is interesting that 90% of these get a payment of less than €25,000, and there must be many dairy farmers in the group. Considering the amount paid per hectare, the majority seem to be under the famous €274. If we cap the really big operators, who do not need the single payment if they are making any money from farming, we would hit what is termed the "armchair farmers". Capping the amount per hectare means that every farmer - including every dairy farmer except any near the 2,000 top payees - would gain. If we assumed there are 400 or 500 dairy farmers in the top group, the other 17,500 dairy farmers would gain €600 if they had 20 hectares, which most dairy farmers would have at least. It may happen, by chance, that money may end up with a farmer on poor land, such as that in Senator Comiskey's area. That would not come from the middle ranked farmer or the very prosperous farmer, instead it would come from the farmers who either stack entitlements or have a very large payment.
It is interesting to consider farm size. The more one digs into figures, the more we can see that some people are earning disproportionate amounts. It is amazing that everybody accepted the capping principle with REPS and the disadvantaged area scheme. If capping is good for one scheme, it should be good for the other. If it is not, capping should not operate anywhere. It is fair to say that the people who oppose capping the single payment would be the first to complain if there was no cap on the other two payments. An entire farm must be farmed in an environmentally friendly way if the farmer is part of that scheme.
Those with the smallest payments have the smallest farms. On average, it is not true to say that those with poor land have much poor land; those with poor land have small payments and those with small payments have the smallest farms, with an average of 32.7 hectares. If there are some enormous operators in this group, there must be many farmers under the average. At payments between €150 to €250 per hectare, the average size farm is slightly bigger at 33 hectares. At payments between €250 and €500 per hectare, the average farm size is 39 hectares. For the farmer receiving between €500 and €1,000 per hectare, the average size is 44.9 hectares. That gives the lie to the idea of the few farmers who own all the mountain. Senator Comiskey could bear out that idea. With most mountains, there could be 50 or 200 farmers who have to walk on 1,000 acres to get to their sheep.
At the point where payments are greater than €1,000 per hectare, there is a collapse in average farm size to 34 hectares. Anybody in this case with €1,000 or more per hectare would have stacked payments. That is the only rational explanation, and these are the real armchair farmers. They are getting money for half the farming. I am interested to know if the witnesses are in favour of a cap on payments. Are they in favour of a cap on the disadvantaged area scheme? Are they in favour of cap on acreage and total payment for REPS?
With regard to the points raised by Deputy Ó Cuív, the figures have been texted to me. Some 245 farmers are in receipt of a single farm payment of over €100,000, which is 0.05% of the active farmers in the country. Deputy Ó Cuív is talking about armchair farmers but I think anyone with a payment under €100,000, even if it is €99,000, has worked hard to build up the payment. They are not armchair farmers.
They could be but this is speculation. While Deputy Ó Cuív was absent from the room, Mr. Comer mentioned that between 85% and 90% in receipt of larger payments are active farmers. Some 245 farmers have payments over €100,000. The flawed argument should not be made that we have produced all these armchair farmers. We have nearly 90,000 active farmers in the country who receive below the average of €9,000. At least 50,000 farmers in this country have a payment under €30,000. Only 245 farmers receive a payment over €100,000 and one or two receive enormous payments, which is not right. They are corporate bodies. I do not accept the argument that we will produce a legacy of armchair farmers. The majority of farmers are active and want to stay active. The single farm payments they have built up through a legacy of being active and intensive must be protected by the Minister for Agriculture, Food and the Marine. It cannot suddenly be dissolved. How will we achieve Harvest 2020 targets if we dissolve single farm payments?
I want to clarify because there seems to be a major misunderstanding of what I said. The allegation seems to be made in farming organisations that marginal farmers on marginal land are the armchair farmers, the guys who make a killing.
Reference was made to farmers farming 50 sheep over 1,000 acres. The only farmers I know forced to chase 1,000 acres for 50 sheep have been forcefully destocked by the Department of Agriculture, Food and the Marine. They are not allowed to have 200 or 400 sheep and there is as much chasing in 50 ewes across the mountain in a commonage of 1,000 acres as there is in 400 ewes. One must still gather them up and separate them from the neighbours' sheep. The idea is that many hill farmers willingly and knowingly have low numbers of stock.
The Minister should watch for the following point in his payment regime. Europe is very ecologically minded at the moment and, because the sheep have been taken from farmers forcibly, many young farmers will not chase through the mountains for the sheep. There will be an ecological disaster of land abandonment. When that happens, Europe will fine Ireland severely in agriculture payments and ecological fines for not maintaining the mountains in good farming order. In that circumstance, the lowland farmer could be paying the penalty for not making it viable for the hill farmer to get out on the hill and maintain the sheep. If members think land abandonment is not a reality, they should go to Scotland. It is a significant problem there because they are not allowed to keep the number of stock they believe make it viable to go up the hill. The idea does not stand up.
I never said the biggest farmers were the armchair farmers, I said the evidence appears to be that where the leasing of a farm with a big single payments is happening, it is not in the hill areas. Mr. John Enright accepted the analysis. The analysis after the derogation in the hill areas this year bears out my point. It is happening in the lowlands. There are a certain number of armchair farmers in the country and nothing will stop them. It is not something connected to low payments; it is connected more to the intensive leasing that takes place in the land and letting of land in the 11 months system on more fertile parts of the country. That is where the armchair farming exists but I do not know how to stop it. We could examine the rules. The idea that increasing the single farm payment to farmers on bad land would make them all armchair farmers is nonsense.
To go back to the statistics, there are more than 2,000 farmers in receipt of more than €50,000. This represents approximately 2% of all farmers and they receive a payment that amounts to 12% of payments even though they have the best farms. Like other schemes, I suggest these farmers are doing very well and we are talking about a seven year slide-off. At the beginning of the debate, as agriculture spokesperson, I said this must be done on a slide-off basis because it cannot be handled like the farmers with REPS, where they were told overnight the payment would go. I did not agree with what happened with REPS. There should be a cap, which will help the other 90% of farmers. I am amazed at the fight being put up for the 2% at the expense of the 90%. Good on Senator O'Neill, he can explain it to the farmers and I will explain my side to farmers. In all the counties in Ireland, the highest average single payment is in Kilkenny, at €16,000. If there is a standard deviation around the mean even in Kilkenny there must be few, if any, farmers receiving over €50,000, it will show that some 90% of farmers will be under the ceiling to which I referred.
Mr. John Comer:
To employ the method used by Deputy Ó Cuív, I will go in reverse order. Our organisation is in favour of a meaningful stocking density. This should be correlated to the production capacity of the land. This will address the point envisaged by Deputy Ó Cuív in respect of the ecological disaster taking place in the hills. If there was a requirement to have a stocking density based on the science in order to draw down any payment-----
Mr. John Comer:
There are 1,640 farmers in receipt of €50,000, with 245 in receipt of more than €100,000. Adding the two, one comes up to 1,890 out of registered herd numbers of 120. It is a very small proportion. I readily acknowledge to the committee there are anomalies but I assure members that any other scheme would also have anomalies. Beef farmers, who were lucky enough to get the first, the second premium and the slaughter premium, are an example. There are anomalies with beef finishers because those involved in heifers got nothing at all as it applied only to male animals. There are major anomalies.
The direct question to our organisation was whether we are opposed, in principle, to a cap. We are not opposed in principle and it could be very useful. A cap is provided for in the proposals of Commissioner Cioloş from October 2012. It begins at €150,000 and is graduated to a maximum of €300,000.
One might drill it down to a meaningful cap.
On the question as to whether member states will be able to use discretion to place a cap on some of the payments under the Common Agricultural Policy, it would be folly for a farm organisation to start to pick figures on where it would like to see a cap but not be in position to implement it. We have a duty to represent all our members as best we can and not to have one set of farmers going against the other. We are not opposed to the principle of placing a cap, we would welcome it. I do not believe that discretion will be given to member states to place a cap on the Common Agricultural Policy.
We did discuss Deputy Ó Cuív's proposal to give everybody a €30 per hectare uplift. In my view and that of ICMSA that will create more anomalies than it will solve. We all know that a farmer who has a low stocking density and a large farm has the scope to have off-farm income and to have a job. Perhaps if he has a partner, that person has scope for a job. So the payment will end up going to doctors, solicitors, lawyers, teachers and everyone who has a few hectares of land. They work off-farm and have a good income. They will get this uplift from the money being taken from the full-time farmer, who is required to work full-time by virtue of being the labour unit on the farm. He has no scope for off-farm income. Farmers, as a collective group have €6 billion in borrowings. The percentage of those farmers who are active and involved in the real productive sector are those who have borrowed that money. If one distorts the one constant they have, a single farm payment of between €15,000 to €30,000, it will neither do the farmers who have invested in productive farming nor the national economy a service.
Mr. Comer is missing the point. That €600 to which I referred would come from the elite farmers. All of the farmers who have the high borrowing, except the 2% elite, would get extra money. It would pay a fair amount of interest in a year. If one puts a cap on the payment to the top 2% and redistribute that money in some ways to the struggling 98% of farmers who would benefit from this help. None of the money would be coming from the farmers to which Mr. Comer refers, the single labour unit farmers.
Mr. John Enright:
On the questions of the Common Agricultural Policy, a proposal for some linear reductions, for example for young farmers, the national reserve for disadvantage areas and so, we would have concerns about these linear reduction because they could add up to be a significant percentage of all the money for the various initiatives being implemented. We have suggested other options, such as a cap being used to fund those initiatives.
No. I have looked at the figures. I asked the Department how far €50,000 would go on a payment of €500 per hectare. It would give a €50 million saving and gives €40 million saving in the other aspect. I have asked further questions to elicit more information but basically if one wanted one could opt for a Cioloş mark 11 or a Minister's mark 11. I do not believe the Minister's proposal is correct because it does not do enough to level it up towards those in the middle, the farmers the ICMSA should be concerned about, the ordinary dairy producer with between 40 to 100 cows, who are the backbone of the ICMSA and not the farmers with 800 to 900 cows. I believe in retaining the structure of Irish farming, as farming based on the family farm and not major corporate farms. I would be very open to the valuable ideas put forward by the ICMSA. If the IFA gets its way, it wants a coupled payment and a payment for young farmers and so on.
I am open to the idea that all of these payments are funded by the Common Agricultural Policy. Mr. Comer states that one cannot cap payments, but one can average out payments. For example, the proposal put forward by the European Parliament rapporteur was basically a cap and a floor. I believe there is a total underestimation of the role of the European Parliament. Mr. Comer spoke of a minimum payment of €200 and a maximum of €300. If one takes €250 as being the real average rather than €274, then he is effectively putting a cap on it. There is a good case to be made as to how one will fund the add-ons. I would be very interested in Mr. Comer's ideas on that.
Mr. John Enright:
On the issue of land consolidation, we would have members who would have availed of that option but for the simple reason that the lease was up on the land they were renting and they did not get the land. They lost the land they consolidated but a year or two years later they got other land. While their payment per hectare might seem high, they have land without entitlements as well, which would make it lower. It must be taken into account that farmers could have genuinely lost land under the present system and it may take a couple of year to get it back. That needs to be taken into account, in that they have so-called clear land with no entitlements on it, due to no fault of their own, only that the lease date was up.
As that concluded the consideration of the pre-budget submission, I thank Mr. Comer and his delegation for their contribution to this very productive meeting. We have addressed many issues and I thank them for appearing before the committee.
As there is no further business, I will draw the meeting to a close.