Mr. John Lynskey:

I thank the Chairman and member of the joint committee for the opportunity to address them today. I am accompanied by Mr. Kevin Kinsella, IFA director of livestock, as well as Mr. John Bambrick and Mr. Sean Quirke from County Kilkenny.

As part of a recent announcement on CAP reform by the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, it was proposed that the sheep grassland payment would be abolished from 2015 and that the payment involved would be subsumed into the single farm payment. There are a number of problems with this proposal, including that most of the benefits of the sheep grassland scheme will be lost to individual sheep farmers and to the national sheep sector. Before I explain the problem in detail I will provide some background on the importance of the sheep sector to Irish agriculture.

Sheep farming is a major farming enterprise. It involves more than 34,000 producers across the Twenty-six Counties with a significant concentration in mountain and hill areas, where it is not possible to farm any other type of agricultural enterprise. Sheep farming is particularly important in counties Donegal, Galway, Mayo, Kerry and Wicklow and is also strong in counties Roscommon, Cork, Wexford, Meath, Tipperary, Sligo and Carlow. The sector has a number of unique and positive characteristics, of which members will be aware. It has an output value of €250 million with exports of more than €175 million. The total production is 56,000 tonnes, of which 45,000 tonnes are exported to our main markets of France and the United Kingdom. There are eight key meat plants involved in processing lamb for export and a large number of small abattoirs servicing the domestic butcher trade. Lamb consumption in the domestic market accounts for approximately 16,500 tonnes. As well as producing top quality lamb the sheep farming sector also plays an important role in protecting the rural environment and the biodiversity in hill and mountain areas.

The income from sheep farming is low. The most recent figures from the 2012 Teagasc national farm survey show that incomes on sheep farms at just over €18,000 per annum are approximately 55% of the average industrial wage. The sheep sector has come through some very tough times. In the past two major reforms of the Common Agricultural Policy CAP, the sheep sector was badly short-changed. In the first Fishler CAP reform, with the low ewe premium, sheep lost out. In addition sheep farming was also overlooked for extensification premium payments.

In 2005 under decoupling, this problem was ingrained in the system with sheep farmers ending up with generally low direct payments. Throughout the past decade, sheep numbers on Irish farmers have been in serious decline. Total sheep numbers have fallen from 4 million in 2005 to 3.1 million in 2009. The IFA worked hard to get support for the sheep sector during this period and it culminated in the reintroduction of the sheep grassland scheme valued at €18 million per annum in 2010. The scheme proved to be effective and was simple to administer. The figures show that it halted the decline in ewe numbers and helped to restore some confidence at farm level. The total sheep numbers have made some degree of recovery, rising to 3.6 million at the end 2012. The ewe numbers have increased by 273,000 from 2010 to 2012 and now number 2.47 million. The sheep grassland payment played an important role in this recovery. However, the latest CSO data for December 2013 show a reduction in sheep numbers back 3.1% on December 2012 levels.

The breeding flock is back 1.2% or 30,000 ewes. Unfortunately the sheep grassland scheme was cut in the 2012 budget from €18 million to €14 million in 2013, with some €3 million transferred to the Sheep Technology Adoption Programme scheme, STAPS. Payments at farm level reduced from about €8.50 per ewe to €6.35. Under Food Harvest 2020, the Government has set down a modest growth target for the sheep sector of 20% in output value by 2020. If ewe numbers start to decline again at farm level, which is feared as a result of the loss of the sheep grassland scheme, this target is unlikely to be reached. As part of the current CAP reform, IFA put forward proposals for a coupled payment for the sheep sector. The Minister, Deputy Coveney decided not to go down this route. The problem with the proposal for the Minister on the sheep grassland scheme are very clear. He has proposed to abolish the scheme and have the 2014 payments added on to the single farm payment of the flock owner in 2015 and future years. For farmers above the average single farm payment, the sheep grassland portion of this payment will be eroded over time up to 2019 as payments converge downwards. For farmers with lower single farm payments, the value of the sheep grassland payments will also be eroded as their payment move up towards the average. Specifically, farmers under the minimum single farm payment will lose the entire value of their grassland scheme payments as their payments will move up to the minimum of €150 per hectare by 2019 regardless of the grassland scheme change.

The IFA has highlighted this problem since the announcement by the Minister in January. IFA representatives have also met the Minister and explained the problem in detail. We have specifically highlighted the problems with convergence. The Minister indicated that he did not want to introduce a coupled payment or to move funds from Pillar 1 to Pillar 2, however he accepts there are problems for sheep farmers with the current proposal and stated he would re-examine it.

Against this background the IFA has proposed that the total funding under the sheep grassland scheme be restored to the original €18 million as part of the single farm payment of flock owners going forward from 2015. Additional funding to go towards compensating farmers against the loss as a result of convergence. For farmers on the minimum payment by 2019, it is essential that their grassland payment is fully protected over and above the minimum payment level as they would have been entitled to this basic level of payment without the sheep grassland scheme add on. Today, the IFA is requesting the full support of this committee to restore the value of the sheep grassland scheme to €18 million as part of the single farm payment of sheep farmers in the new CAP and to protect the benefits of the scheme for Irish sheep farmers and the Irish sheep sector.

I thank members for their support.