On behalf of all members of Macra na Feirme, I extend my gratitude to the committee for inviting us to today's hearings. I am the 36th national president of Macra na Feirme. I am delighted to be joined by our chief executive, Mr. Denis Duggan; our agricultural affairs manager, Mr. Derry Dillon; and our agriculture policy officer, Mr. Paul Smith.
Macra na Feirme is the only organisation representing the unique interests of the young rural people of Ireland and in particular young farmers, so the opportunity to voice their concerns and their vision for life both during and after Brexit is greatly appreciated. We are delighted to get this opportunity to attend the Seanad Committee and to reaffirm our commitment to the European project. Young farmers, and indeed young people across Ireland, many of whom we represent, have benefitted tremendously by the freedoms of movement, financial supports and market access offered by membership of the European Union. Young farmers and rural youth cannot be allowed to suffer the effects of a decision in the UK that is not of our making.
During our recently completed CAP consultation with approximately 1,000 young farmers, the impact of Brexit was to the fore in their concerns. Some of the recommendations proposed in our CAP policy 'Young Farmer Roadmap for Generational Renewal' include maintaining the strongest possible trade links with our largest trading partner post Brexit, and ensuring that the CAP budget is maintained post Brexit.
According to the UK Agriculture and Horticulture Development Board, AHDB, the UK imports approximately 35% of the beef and veal it consumes every year, which amounts to 250,000 tonnes or 50% of the beef produced in this country, and Ireland supplies 70% of that beef meaning we supply almost nine times as much beef to the UK as any other country. In comparison it exports on average 100,000 tonnes of beef but, according to the AHDB, this is mainly due to the lack of processing capacity and most of this meat will end up back in the UK market as a value added product; 37% of what it exports comes to Ireland.
From a sheep meat point of view, the UK has a balance of trade with approximately 100,000 tonnes of sheep meat going in both directions but it is the type of cut that is the differential. According to the AHDB, a lack of processing capacity means that the UK exports a higher proportion of carcasses while importing value added cuts. Ireland is the largest EU supplier of sheep meat to the UK following New Zealand and Australia, while the UK sends over 50% of the meat it exports to France and 9% to Ireland.
From a dairy point of view, UK exports were estimated at £1.1 billion in 2015, with some £800 million generated from trade with the EU and £300 million going to third countries. A total of 90% of UK dairy exports go to the EU, 67% of that going to Ireland. Most of the liquid milk trade between the UK and Ireland occurs in both directions across the Irish Border, therefore putting dairy producers along the Border in a very uncertain situation. According to the AHDB, a large proportion of exported UK liquid milk returns to the UK after processing. For Ireland, the UK market was valued at around €840 million and accounts for some 25% of total dairy exports. In 2015 Ireland exported to the UK 65,000 tonnes of butter and dairy spreads and 139,000 tonnes of cheese, predominantly cheddar.
Taking all of this into consideration, the picture in front of every young farmer around the country but particularly in Border areas is stark. Young farmers are starting their farming journey. They have completed their education and are likely to have had to make significant investment in their business, probably availing of much needed credit meaning that they are working every day just to keep their businesses afloat. This, compounded with currency fluctuation, means that young farmers are more exposed to volatility than others in the same industry.
Now the uncertainty that Brexit has brought about threatens the business of every young farmer in the country as most have not had the time to establish the appropriate levels of capital and financial reserves to protect their businesses from the current and most likely continuing uncertainty and volatility surrounding Brexit. Hence, young farmers face a dark future where the likelihood of their business becoming crippled by low farm returns and a need to repay loans will become a reality if the UK's departure from the EU is a cliff edge scenario.
Macra na Feirme, however, has not come here today to tell the committee what the problems are, we know that it is well aware of them already. We are here to be positive, to identify the priorities that will protect all farmers, young and old, and to offer solutions that we feel can help protect agriculture in Ireland from the sort of crash we saw in the last decade.
The first priority is the relationship post Brexit. There will be a lot of discussion over the next two years about what sort of relationship there should be between the EU and the UK after the divorce has been settled. Listening to the Prime Minister, Theresa May, it sounds as if the UK is going to step out of the customs union. We would, however, propose that maintaining the UK inside the customs union post Brexit should be a red line issue for the Irish Government. Keeping the UK inside the customs union ensures that EU regulations continue without tariffs, duties or regulatory change. In the event that this red line is unattainable, the Irish Government must lobby for a period of transition, where the UK remains within the customs union during any protracted exit negotiations beyond 2019. Temporary membership of the customs union would allow for the appropriate time to be dedicated to developing a full and comprehensive trade agreement.
While political tensions may make this a difficult result to achieve, we believe that this transitional period will allow the time it will take to develop a full free trade agreement which can take anything up to seven years as seen with the recent Comprehensive Economic and Trade Agreement, CETA arrangement. A transitional phase would at least offer some stability in the intervening period. It would also allow time to work out the implications an exit from the customs union would have for farmers near the Border, in particular with the flow of products and services in both directions, which is set to disappear overnight. This would cause huge problems for young farmers especially relating to country of origin labelling. A customs border brings costs and obvious barriers, and it is the young farmer who will suffer in this scenario as most of the processors, especially in the meat and dairy industry, have the financial ability to mitigate the risks facing their businesses but the young farmer cannot relocate his or her flock or herd.
It is highly unlikely, given the complexities of a comprehensive trade agreement, that one will be negotiated within the timeframe set out by Article 50 thus making a transitional agreement essential for both sides to avoid the cliff edge scenario facing all industries at the end of the two year period. Imports are rarely mentioned in the context of Brexit. As a nation we import as much from the UK as we export to it. We are not advocating for more imports. Many of those, however, are inputs required by farmers: agro-chemicals, veterinary products, and tractors, for example, all come from the UK. This is the double impact that is rarely discussed regarding any UK withdrawal from the customs union.
The second priority is identifying new markets, within and outside the EU. Speaking at the Agricultural Science Association Conference last year, economist Colm McCarthy when questioned about Irish trade dependence on the UK highlighted by Brexit countered with the point that the UK is a lucrative market. He argued that of course Irish farmers and agri-companies should seek to supply as much food as possible to our nearest neighbour which eats the same food as us, pays a top price for it, and is the closest geographically to us. It makes complete economic sense, instead of trying to service markets at the other side of the globe.
With that in mind, Macra na Feirme during its recent CAP consultation with 1,000 young farmers, highlighted the view that young Irish farmers want to maintain the strongest possible market links with the UK market. According to the recently published KPMG Farmers Journal global agri-business report, four of the top ten global economies are in Asia and South America, driven by rising levels of new Asian middle class consumption, with over 3 billion new consumers, or 40% more, expected by 2030. Bord Bia recently reported that in 2016 global exports to markets outside the eurozone accounted for 70% of exports, with an 8% decline in the UK and a 35% rise year on year of exports to China.
There is no doubt that strategic targeting of new or emerging markets is economically prudent. However, we cannot afford to leave the UK market without a fight. As a nation, we must defend the interests of young farmers in the UK market. The UK is not self-sufficient in food and in the minds of the UK consumer phrases like "British and Irish beef" are common marketing parlance. Every opportunity must be used to ensure that the maximum viable market is retained in the UK.
Opportunities may also exist as a result of Brexit. However, we in Macra na Feirme caution against over optimistic views of the opportunity from a young farmer perspective. In a possible tariff environment with the UK post Brexit, Irish farmers could seek to displace UK products into mainland Europe. This, however, may not be as economically lucrative as the current UK market due to the make-up of the UK exports for example, replacing UK sheepmeat carcasses for France with Irish carcasses is not as valuable as Irish lamb cuts exported to France.
Bord Bia is to be commended for its efforts, along with the industry, to proactively target new markets for Irish food products through new market exploration and indeed expansion into existing markets. That effort, combined with Origin Green further promoting the sustainability of Irish food produce, is a significant competitive advantage. Over the coming years, Bord Bia must not be left short of either human or financial capital as it continues efforts to ensure Irish product maintains market share and builds new markets.
Increasing the diversity of destinations for Irish products is crucial for the future viability of Irish agriculture. There is a genuine fear that the United Kingdom will pursue a cheap food policy post-Brexit. Speaking in Dublin recently, Patrick Coveney, chief executive of Greencore, cautioned that many backbenchers within the Conservative Party in the United Kingdom favoured a cheap food policy. Bord Bia must have adequate marketing resources to reaffirm for consumers in the United Kingdom the value, quality and sustainability of Irish food products.
The third priority is adopting an all-island approach. Consideration must be given to the implications of Brexit for animal health and the environment on the whole island of Ireland. Diseases and pollution do not respect lines on a map. Within the Brexit negotiations a framework for North-South co-operation and converged regulation of animal health and the environment must be provided for. While it is our understanding that after Brexit the North-South Ministerial Council will have no legal power, co-operation between the two Governments is mutually beneficial. Macra na Feirme encourages the Government to ensure some legal mechanism is created in the negotiations to provide legal standing for such co-operation. Being an island, Ireland as a whole has a biosecurity advantage and our island advantage makes disease control easier. The implications of a future animal health crisis or disease outbreak in a post-Brexit economy include the potential to destroy the combined efforts of initiatives such as Origin Green. An all-island approach to animal health was commissioned by the North-South Ministerial Council in 2001 and could act as a template for continued co-operation between the two Governments post-Brexit. Should such a strategy be continued into the future during times of crisis, it will need to be able to act effectively and rapidly based on solid scientific advice.
The North-South Ministerial Council should also continue the work it has undertaken to deal with the environmental challenges the island faces. It already works in the areas of research, environmental protection and water quality and waste management in a cross-Border context. In the post-Brexit scenario waterway pollution on the other side of the Border, for example, could have a detrimental impact further downstream for Irish farmers. Similar to the advantages of an all-island animal health strategy, a continued all-island environmental strategy is crucial. As a non-political organisation, it would not be appropriate for Macra na Feirme to engage in discussion on a united Ireland, but we are clearly stating the mechanisms are in place today to support all-island responses to issues of animal health, the environment and disease. These mechanisms must be retained in any legal framework negotiated as part of Brexit.
The fourth priority is upskilling. In the Irish Farmers Journal today the research of Dr. Kevin Hanrahan of Teagasc sets out the impact of Brexit on family farm incomes. It worryingly forecasts income reductions of up to 40% in certain farming sectors. The European Union makes significant resources available to member states or regions impacted on by globalisation. Macra na Feirme believes the Eurpoean globalisation fund which is normally deployed in situations where multinationals or large companies close down or relocate with the loss of jobs is relevant. The chief economist at the Department of Finance has warned that up to 40,000 Irish jobs could be lost as a result of a hard Brexit. Macra na Feirme is concerned that many of these job losses would be felt most harshly by young people in rural areas where there are traditionally fewer opportunities to avail of job mobility. If Teagasc’s research is borne out, a significant number of farmers will be forced to exit the industry and should also become eligible for EGF support. Should significant job losses become apparent as a result of Brexit, the European globalisation fund should be deployed to provide training and upskilling programmes to enable those affected by Brexit to retrain.
The fifth priority is meeting increased education demands. Every year a cohort of Irish students who have completed their leaving certificate examinations head to the United Kingdom to complete agriculture degrees in areas such as animal, food and crop science, with agribusiness, veterinary and forestry studies. We estimate that there are approximately 300 to 400 Irish students studying these or similar courses in the United Kingdom. In 2015, according to the Higher Education Authority, just over 3,300 students were enrolled in agriculture, horticulture and veterinary related degree courses in Ireland. On the back of Brexit and if there is no agreement for the shared funding of education courses and the cost of studying abroad between the United Kingdom and the European Union, we estimate that 300 Irish agricultural students currently studying in the United Kingdom could be returning to Irish shores to pursue their studies. If this becomes a reality, there would be a 10% increase in the demand for agriculture courses based on the 2015 figures. The CAO system correlates the demand for a specific course with a number of points. Hence, the return of these 300 students to the Irish third level education system would mean a consequential increase in the number of points required for courses, making it harder for Irish students to gain places on agriculture courses.
UK universities and Irish higher education institutes compete in the Middle East, Asia and elsewhere to attract undergraduate and postgraduate students. Possible travel restrictions and a reduction in the number of EU research opportunities in the United Kingdom could have a positive impact for Irish higher education institutes in their efforts to attract international students. However, any rise in the number of international students must not lead to a displacing of opportunities for Irish students studying for the leaving certificate examinations in years to come. Together, the impact of additional foreign students and the additional demand for places on agri-related courses could create an upward spiral in the number of CAO points required for agriculture courses. Provisions need to be put in place to allow Irish universities, colleges and institutes of technology to cope with the potential increase in demand for places on agriculture courses. If the agri-sector is to continue to grow and expand, it is highly important that there be a continual flow of educated, young and vibrant people into the sector.
The sixth priority is the CAP budget. For agriculture to remain vibrant, we need young people to see farming as a viable career. If they believe they will be washed away by the first crisis they encounter, they will not risk entering the industry. That is why we call on the Government to ensure funding for young farmers is not cut on a pro rata basis with any decrease in the CAP budget following the exit of the United Kingdom from the European Union. We ask the European Union to show its support by maintaining the funding currently directed towards young farmers, ensuring their ability to develop and expand their businesses. We leave the committee with a challenge. Can we have a commitment that, as Members of the Oireachtas, committee members will sign off on an increase in the Government's contributions to the EU budget to sustain the CAP budget for young farmers?
I thank the committee for its time. We will be happy to take questions from members.