I welcome the Minister to the House and thank him for coming. My initial comment on reform of the Common Agricultural Policy is that it is not as bad as it might have been, but it is not as good as it could have been. The present state on Common Agricultural Policy reform reminds me of Alice in Wonderland, words mean what the speaker wants them to mean, not necessarily what the listener normally understands the English language to mean. In this world of make-believe the Minister for Agriculture and Food when welcoming the changes in the sheep premia — which were incidentally conveniently announced on the day of the referendum count — proclaimed that it would help the farmers' cash flow problems. To the rest of us the cuts meant an annual reduction in transfer of resources from Brussels to Ireland of £23 million and a cut in farmers' incomes of approximately £30 million per annum.
Likewise, Commissioner MacSharry does not appear to see the agreed reforms as others see them. For example, the Commissioner's objectives in the Common Agricultural Policy reform programme were a more equitable distribution of the Common Agricultural Policy support between larger and smaller farmers; a reduction in the Common Agricultural Policy costs; a more balanced market with the burden of adjustment being placed on intensive producers; a more competitive agriculture industry; a more environment friendly agriculture, etc. I regret to say that in all of these objectives he has failed totally or partially in the final agreement as it emerged. Nevertheless, the Commissioner actually appeared to believe what he was saying when he boasted of his success to the world and challenged the US to match his achievements. Britain and the US were the first to react. Their interests are diametrically opposed to ours and it is interesting that they both praised the outcome. That, in itself, is a sufficient warning to us of what is in store for our small producers.
The objective of a more equitable distribution of support between small and larger producers was a very worthy one but, unfortunately, it failed, now the larger producer will be better off producing less, while the smaller producer will be still receiving the crumbs and will be worse off in the sense that a small producer, because of all the quotas now in place, can never become a large producer. This, in turn, will make it virtually impossible to bring young new blood into farming.
The Commissioner set out to achieve this objective with a combination of reduced prices and producer compensation based on modulated support but, one by one, the modulation proposals were rejected. All cereal producers now, whether producing 10,000 acres in the Paris Basin or 100 acres in Kildare or Wexford will get compensation at the same rate.
The dairy cow premium on the first 40 cows was withdrawn. Likewise, the proposed ceiling for premia payments of 90 suckler cows and 500 ewes on lowland or 1,000 on hill land were rejected. Thus, the larger producers in Britain and mainland Europe will continue to get the lion's share, perhaps even a larger share than heretofore, of Common Agricultural Policy support. In the make-believe land of Brussels that is seen as a success.
Regarding the Common Agricultural Policy costs which was the Commissioner's second objective, it is now quietly admitted in Brussels that the Common Agricultural Policy costs will rise by about £2 million per annum. Regarding a more balanced market, the objective was that the burden of adjustment would be placed on intensive producers; in other words, factory-type farmers. With minor exceptions, all producers will get the same level of compensation regardless of intensity of production, while the factory-type farmers — the livestock farmers — will get a windfall in the form of cheap feed because of the cheap cereal policy now embarked upon.
With regard to having an agriculture industry that is more environment friendly, small concessions are made to the environment in terms of encouraging more extensive grassland production. However, the real danger to the environment, as we know, is from large pig and poultry units in Ireland and large cattle feed lots elsewhere. I am not talking about grass-fed animals, but rather grain-fed animals kept in huge feed lots and this practice is set to increase as a direct result of the cheap grain policy.
In a world of increased liberalisation of trade it is fundamentally important that European agriculture be more competitive. Unfortunately, these reforms do nothing to enhance our competitiveness. On the contrary, the general thrust is anti-competitiveness.
For Ireland in particular our comparative advantage with cheap grass for red meat and milk production will be seriously if not totally eroded by the cheap cereal policy. Within the Community, Ireland is unique for the dependence of its economy on red meat and milk, roughly 37 pence in every £1 of net exports, and unique for its dependence on grass for the production of these products. A cheap cereal policy would put all this in danger first, by making white meat — poultry and pork — relatively cheaper than red meat — beef and lamb — and, secondly, by eroding our comparative advantage with grass by making cereals cheaper for those relying more heavily on cereal feed, particularly the Danes and the Dutch.
A cheap cereal policy in the US resulted in beef production shifting into huge feed lots in the sun belt states and away from the grass ranges of the north. The same could also happen in Europe with cattle fattening going to feed lots in the Mediterranean area, fed by cheap grain from the Paris Basin and the Po Valley.
The compensatory payments that have been talked about are dangerous. They constitute the biggest risk for Ireland. Our biggest risk now is that too much of the farmers' income in future will be in the form of compensatory payments, and hence vulnerable to the whim of the Community taxpayer. There is no legal obligation on the Community to continue these payments. Last week's cut in the sheep premia — which was seen as a model for compensatory payments — does nothing to enhance my confidence that compensatory payments will last.
European farmers are losing their livelihoods for exactly the same reasons that millions of workers lost their jobs in Europe in car production, steel production, shipbuilding and various other industries as a result of new technology, increased imports, change in market demands and so on. Those workers did not get compensatory payments, they just got redundancy.
I doubt if those people will accept that farmers alone should continue to get an annual payment in the form of compensatory payments. The taxpayers too, particularly when they realise that the lion's share of the Common Agricultural Policy support is going to a minority of farmers, will make demands that the money be spent on better health care, housing, education, roads and job creation.
Furthermore, there is still no agreement in the GATT negotiations that the compensatory payments are acceptable to the US anbd the CAIRNS Group, in other words, that they should go into the green box. If they are not acceptable, in my view they will be sacrificed as the Community will not risk failure in the GATT on behalf of agriculture which now accounts for less than 2.5 per cent of Community GDP, Risks for the 97.5 per cent would be too high a price to pay for the 2.5 per cent.
Furthermore, we should remember that, politically, farmers are a minority in the Community. They are outnumbered by almost every other sector in the Community, even by the unemployed — in this country, they are outnumbered by more than two to one by the unemployed, but in almost every other country farmers are also outnumbered by the unemployed. I predict that when the pressure comes — whether from GATT, the taxpayers or the employed — they will be prepared to sacrifice these compensatory payments.
The most plausible selling point for the Common Agricultural Policy reforms is that food will be cheaper — and it should be. However, the experience since 1977 when prices to farmers, in real terms, dropped by nearly 40 per cent without a corresponding drop in food prices, should give us reason to think again. Price cuts to farmers in the past were invariably accompanied by increased marketing margins to the middlemen at the expense of the consumer. It is imperative that the benefits in terms of lower food prices be fully passed on to the consumer; otherwise, nationally we will be losing out at two levels, at farm level and consumer level.
I am not alone in voicing these opinions and I am not speaking politically rather than as an academic. Some other people hold the same view. For instance, the editorial in Business and Finance of 28 May states:
Amidst all the relief that a deal on the Common Agricultural Policy has finally been implemented are we in danger of confusing the wood for the trees? While the reaction to the successful conclusion of a deal is hardly surprising, it might be a better idea if we closely examined the details of the compromise and their implications for Ireland.
The absence of any milk quota cuts and a milk price reduction of just 2.5 per cent seems like good news for Ireland. It is also possible to put a positive construction on the 29 per cent cut in cereal prices and the fact that Irish farmers will receive some compensation for losses suffered as a result of the MacSharry deal.
That is about as far as the good news stretches. When looking at the Common Agricultural Policy deal it is not a good idea to look at Ireland in isolation. We are after all just one among 12 within the EC. It is when one takes a pan-EC view that the picture looks far less rosy.
While it is true that the proposed price reductions in the Irish agricultural staples of milk (2.5 per cent) and beef (15 per cent) are far less severe than the 29 per cent price cut prescribed for cereals, the fact remains that the cereal price cuts will work against grass-based Irish agriculture. Sure, Irish animal feed costs will fall but as our farmers need to use far less animal feed in the first instance the benefit will be far less than that accruing to the more intensive Continental farmers.
The effect of this loss of relative competitiveness will be to further increase our dependence on Intervention. Ultimately, if Irish agriculture is to have any future, it will have to wean itself from its Common Agricultural Policy addiction.
It would be naive to assume that last week's deal will do any more than temporarily postpone the clamouring of the US and others to dismantle the Common Agricultural Policy. The bout of self-congratulation the deal unleashed is likely to be proved premature sooner rather than later.
My conclusion would be that these reforms of the Common Agricultural Policy will be damaging to the longer term health of Community agriculture in general and disastrous for Irish agriculture in particular. If the compensatory payments do not last — and I cannot see them lasting — the commissioner's reforms of the Common Agricultural Policy will make Cromwell's efforts to shift the people off the land look like an amateur, crude and abject failure.
In regard to the various commodities in the agreement — for example milk, the commodity in which I have greatest interest — I was pleased that at least for this year there are no cuts in the quota, but I note that cuts of 1 per cent are proposed for 1993 and 1994. I was astonished that two other countries got an increase in their quota, although this is not stated in the information document I have from the Department of Agriculture and Food. I do not know who has forgotten that we had written into the quota agreement in 1984 that Ireland would get priority in the event of an adjustment upwards in quota; that appears to have been forgotten in the most recent deal.
As I said, the biggest changes will be in the cereals sector. While for the moment we will be getting compensation, regrettably, I do not think that will last, but even more serious is the impact it will have on our competitiveness, the erosion of our comparative advantage and the fact that it will make poultry and pig meat much cheaper, thereby challenging our beef and mutton on the market and displacing much of it. Already red meat is under pressure for a variety of reasons, including health, price and so on, but to significantly bring down the price of pig meat and poultry meat would add further pressure.
I also referred earlier to the fact that producers, regardless of size, will be compensated at exactly the same rate. Surely it is not equitable that farmers with thousands of acres in East Anglia, the Paris Basin or the Po Valley will get the same levels of compensation per acre as smaller producers and the Irish are very small producers.
The beef sector is very important, beef being our single largest item of production and export. As has already been noted in several places, there will be a 15 per cent cut in prices over a number of stages. Much has been made about the increased premia, but it should be remembered that the premia only applies to male animals; therefore, 50 per cent of the total cattle population is automatically excluded.
I am pleased, however, to note that in calculating stocking rates in order to qualify for premia, heifers will not be taken into account. This will make it easier to maintain a reasonably respectable stocking rate and still qualify for the premia payment.
I note with satisfaction the special grant of 60 ECUs or £52.32 where the animal is slaughtered between 1 January and 30 April, but I doubt if this will have the desired effect; it will help, but I doubt if it will make a significant difference. That benefit will simply be passed back to the store producer and the farmer will have difficulty making the profit he should on winter fattening. The clause whereby the farmer must have 40 per cent of his stock slaughtered in a certain period in autumn in order to qualify for the grant seems unnecessarily restrictive.
With regard to intervention — and this is where we could have our biggest problem with beef — the cut in the amount to be purchased into intervention from 750,000 tonnes in 1993 to 350,000 tonnes in 1997 will put great demands on our ability to market. The safety net intervention will be retained at 60 per cent of intervention price, but this would be a sacrifice price.
The sheep sector is of growing importance here. I am surprised that the British Minister for Agriculture got away with his demands to have no upper limit put on the number of ewes. Admittedly, beyond 1,000, the level of premia for ewes will be reduced, but that does little to control the output of animals. The huge increase in sheep flock numbers in Britain combined with imports is the direct cause of the collapse in prices for farmers here.
I am also pleased to note that there is an early retirement scheme for farmers, although I doubt if this will be a success. I believe it will fail just as those in the past failed. I would prefer if an effort had been made to introduce long term leasing. The main reason farmers are not prepared to give up their farms is that, in rural Ireland still, a person without property is a person without status. If they could hold on to the ownership and be compensated adequately for a long term lease, this would be the best prospect we would have of bringing young, vigorous people into the farming industry. That is something farming is urgently in need of as the average age of farmers is now far too high.
The outcome of Common Agricultural Policy reform has not been as bad as we all expected earlier in the year, but from Ireland's point of view it is not as good as it should have been. My difficulty with the reform of the Common Agricultural Policy is that Ireland is being punished far more heavily than any other Community country. The reforms will weigh much more heavily on Ireland. No other country in the Community relies so heavily on agriculture for its economic health or on milk, beef and lamb exports. Those are the commodities that run the greatest risks as a result of these reforms.
