Martin Ferris
Question:90 Mr. Ferris asked the Minister for Agriculture and Food if he will make a statement on the impact of rising input prices, particularly fuel and energy costs, on farm incomes. [20550/04]
View answerTuesday, 6 July 2004
Questions (57)
Oral answers (3 contributions)
The cost of fuel and energy is an issue for all parts of the economy, not just the farming sector. Nevertheless, it is an issue of particular concern as I am conscious of its possible implications for the agriculture sector. In this regard, under this Government inflation and interest rates have been maintained at historically low levels.
The recent increase in fuel prices contributed toward the recent marginal increase in inflation. Fuel and lubricants, which include petrol, diesel and motor oil, account for approximately 3% of the total basket of goods used in the compilation of the consumer price index. The ESRI, in its recent summer bulletin, has indicated that there are several other issues at work in the general economy, such as exchange rate changes, which are also affecting inflation.
The CSO publishes the output, input and income in agriculture at an aggregate level on an annual basis. The 2003 results have been recently released. The CSO revised the methodology in the 2003 report and this resulted in the value of energy and lubricant inputs decreasing from the previous value of €301 million to €222 million in 2002 and from €317 million to €228 million in 2003. These results show that spending on energy and lubricants increased by 2.9% in 2003 following a decrease of 8.8% in 2002. The spending on energy and lubricants of €228 million in 2003 constitutes 10.5% of operating surplus or farm income. This proportion is unchanged from 2002 and slightly down from the value of 10.7% in 2001.
Average farm incomes are contained in the national farm survey produced by Teagasc. This is an in-depth survey, which measures farm incomes across the main farming systems on an annual basis. In 2002, the latest year in which data are available, 1,176 farms were surveyed, representing 116,400 farms. The survey found that in 2002, overall direct costs or inputs increased by 5% on all systems. The average farm income calculated on this basis for full-time farmers is €27,758 in 2002 and is not affected by the CSO aggregate changes.
Additional information not given on the floor of the House
The Central Statistics Office measures the changes in agricultural inputs in the agricultural input price index on a monthly basis. The costs of all agricultural inputs as measured by this index increased by 2.5% during 2003. The latest available data for April 2004 show that input prices have increased by 3.7% over April 2003. During 2003, all energy costs increased by 5.9% while fuel costs have increased by 4.6%. However, fuel cost increases are below that of the total input increases from 2000 to present and stand at 4.4% compared to the total increase for all inputs of 8.8%.
The fact that input prices tend to rise annually underlines the importance of ensuring that all inputs are used efficiently. It is important that all types of farms pay attention to the issue of productivity. It is also important to note that the figures I have cited tend to be averages over a large sector. While many farms are operating at an impressive level of efficiency, there are many others where there is considerable room for improved productivity and efficiency. When we move to the new single farm payment the increased focus on market returns will underline these facts and will increase the focus on efficient use of inputs. It will be increasingly obvious that wasteful use of resources is not an option.
Fuel diesel now costs 50% more than it cost in 1995 and overall energy costs are 43% greater. Nine months ago, a farmer or fisherman who depended on fuel to do his or her work paid 34 cent per litre; the price is now 42 cent per litre. In the past nine years there has been a decline of 25% in farm incomes and, at present, the farming sector owes approximately €1.1 billion, which is 40% of farm income. At the same time, the retail sector is charging more. Take the example of apple producers. In nine years, the price has fallen by €100 per tonne, yet the retail sector continues inflating its prices and passing that on to the consumer even though the producer is earning less.
Does the Minister agree that farmers are paying a price for the fact that large multiple retailers can dictate prices to the disadvantage of farmers? Does he agree that the Department and, perhaps, the Competition Authority should investigate this?
General costs continue to increase and that is the case with regard to input costs for farmers, as I outlined earlier. However, the fact that inflation and interest rates are at low single figures is vital for farmers. Some of us remember when inflation and interest rates during the late 1980s were more than 20%. That was a far more serious problem for farmers. With regard to the multiple retailers, it is a problem that there are now three or four major multiples in this country that dictate, to a large degree, the margins for individual producers at farm level. Thankfully, however, there are some retailers still based in country towns who take produce from local suppliers so there is a degree of competition. Some of the new member states of the European Union, however, did not have that structure under the old communist regime so they are in a difficult situation. There were no shops in rural towns as the economy was centrally structured.
The farming organisations and stakeholders are conscious of this problem. There was what was called the "trolleycade" earlier this year to insist on reasonable margins in, for example, the liquid milk sector. There will continue to be such campaigns. The Competition Authority is keeping an eye on this, as it should. The primary producers are entitled to a fair income and a reasonable margin but they are getting the least of the price for any product or range of products at present, and that is not how it should be.