Mr. Tim Cullinan:

I thank the committee members for inviting the IFA to address them today. Sheep production is the second-largest farm sector in the country based on farmer numbers. There are more than 36,000 active sheep farmers in Ireland, accounting for 2.7 million breeding ewes. The sheep population in this country is 4 million, with an average flock size of 111 sheep. The average number of ewes per farm is 75. Ireland is the fourth-largest sheep meat exporter worldwide and the second-largest exporter of sheep meat in the EU. Almost 3 million sheep were processed in 2022. The sheep industry is an important economic component of our local economy and generates wider economic activity and employment in rural communities throughout the country. The sector is strongly export-oriented. In 2022, exports to more than 35 countries were valued at €476 million, an increase of 17% on the previous year, with more than 75,000 tonnes of sheep meat processed, representing a 10% increase.

Sheep farming is carried out on some of the most difficult land in the country, thereby generating economic and socioeconomic activity in those areas, while also adding enormously to the biodiversity and environmental objectives of the entire country. Sheep farmers produce a public good through the use of extensive grass-based systems, including protection of the environment and biodiversity and preservation of the landscape and unique features. Sheep farming is the lowest producing farm system in terms of greenhouse gas emissions. Wool produced on sheep farms is a renewable product with multiple added-value uses, which is not reflected in the price provided to farmers for this unique product.

The sheep sector is a low-income vulnerable sector that is dependent on direct payments for more than 100% of family farm income. This challenging income situation is a major deterrent to new entrants to the sector. In 2022, gross margins on sheep farms decreased by 14%, with net margins dropping 81% to just €7 per ewe.

This included the sheep welfare scheme, SWS, payment. A return of €7 per ewe in the sector is unsustainable. Direct supports for sheep farmers must be increased to €30 per ewe to encourage generational renewal and ensure the economic viability of existing sheep farmers. For 2023, Teagasc forecasts a 1% increase in total sheep production costs. Feed concentrates are projected to increase by 10%, with no weakening of fertiliser prices, which have increased by 195% on 2021 levels. Other direct costs on sheep farms are forecasted to increase by 4% in 2023. Lamb prices are currently 70 cent per kg or €16 per lamb on average below 2022 levels. Inflationary pressures are projected to continue into 2023, impacting on demand for lamb.

Direct payments support the continuation of the family farm structure, preserving farming and economic activity across Ireland through various direct payment methods. Direct payments contribute over 100% to overall family farm incomes, and a targeted €30 per ewe payment is essential to support the sector. Store lamb finishers are an integral part of our production system in terms of maintaining a year-round supply of lamb and providing a vital outlet for our hill sheep farmers. Store lamb finishers must also be supported for finishing lambs.

The impact of Brexit on Irish sheep farmers has the potential to be devastating. The UK and French markets are key markets for Irish sheep meat. Bilateral trade deals agreed by the UK with countries such as New Zealand and Australia have the potential to undermine the UK market for Irish sheep meat and have the potential to displace domestic produce in the UK, which in turn undermines the French market for our sheep meat. Sheep farmers must be supported from this threat through the Brexit adjustment reserve.