Irish agriculture – subsidy heaven!

Irish agriculture employed 101,500 persons at the end of March 2009 – just about 5% of the total Irish labour force.  There are 7,000 fewer farms in the country than five years ago.  There are currently 128,300 farms currently operating engage in the following specialties:

Speciality	% of total farms
Beef production	54
Dairy	15
Mixed grazing livestock	12
Specialist sheep	12
Specialist tillage	4
Mixed crops and livestock	2
Other	1

The following table gives an overview of the trend in output and public expenditure between 2004 and 2008:

€ million	2004	2005	2006	2007	2008
Gross value added at factor cost	3,876	4,272	3,958	3,985	3,951
PUBLIC EXPENDITURE
EU subsidies	1,465	1,904	1,479	1,438	1,438
Irish Government	1,259	1,355	1,437	1,666	2,104
TOTAL	2,724	3,259	2,916	3,105	3,543
Public expenditure % GVA	70%	76%	74%	78%	90%

This trend begs the question as to what proposals are likely to emerge to curtail subsidies in the context of prevailing economic trends.

The Irish pigmeat industry earned €360 million in exports last year.  The industry faced a shutdown last December for less than a week after dioxins were found in slaughtered pigs after the animals ate contaminated food.  While the risk was not considered to have been ‘significant’, the dioxin level in the effected animals was 200 times above the recognised safety level.  A Bunclody, County Wexford based animal feed plant, Millstream Recycling was believed to have been the source of the contaminated animal feed.  The Irish Government provided no less than €180 million for the destruction of up to 130,000 pigs, 7,000 cattle and 9,500 tonnes of pig meat.  The subsidies were restricted to Irish processors and the maximum amount  was equivalent to €54.77 per pig and €468.62 per head of cattle.  While the response to this issues was prompt and comprehensive one would wonder why a subsidy equivalent a half of a year’s export earnings was necessary to cope with a one-week closure of the industry – especially in the context of Government borrowing increasing at the rate of €60 million every day.

The annual expenditure estimate at the Department of Agriculture, Fisheries and Food for 2009 is €1.59 billion.  Spending by this Department for the first half of 2009, at just shy of €750 million is 37% ahead of what it was in the first half of 2008, according the the latest Exchequer Statement.

New Zealand, an island nation with a demographic profile not unlike Ireland has not provided farm subsidies since the early 1980’s when the Federated Farmers of New Zealand argued that controlling inflation rather than subsidising the consequences of inflation would be of greater benefit.  They considered that the provision of farm subsidies, which caused Government budget deficits, were the main cause of inflation.  More subsidies only aggravated the problem, as they saw it.

Agriculture reform was part of a wider economic agenda that included scaling back on import tariffs, the deregulation of utilities and public transport, the introduction of a sales tax and the floating of the New Zealand dollar.  There were about 80,000 farmers at the time and it is estimated that about 1% of them abandoned farming.  The removal of subsidies motivated farmers to become more efficient and to diversify. The agriculture sector there has grown faster and accounts for about 17% of GDP and employing 10% of New Zealand’s labour force.  It is the eighth largest world milk producer accounting for 2.2% of world production.

Perhaps the Irish Farmers Association will have to raise their horizons higher than lobbying the Minister for Defence to get the army to buy chickens raised in Ireland if they really want agriculture to have a prosperous and self-reliant future.