Agrifood Sector

Dáil Éireann Debate, Wednesday - 30 November 2016

Wednesday, 30 November 2016

Questions (4)

Willie Penrose

Question:

4. Deputy Willie Penrose asked the Minister for Agriculture, Food and the Marine his views on whether farmers should be encouraged to expand production substantially in order to meet the €19 billion target of Food Wise 2025 when uncertainty reigns due to Brexit, trade deals and the general imbalance in supply and demand in world markets which would suggest that extra output will further reduce prices, undermine viability and risks leading farmers into further debt; and if he will make a statement on the matter. [37787/16]

Oral answers (6 contributions)

Deputy Willie Penrose

The result of the Brexit referendum on 23 June has clearly created an environment of uncertainty as to how our relationship with the UK will change in the coming years. Food Wise 2025 highlights the ambitious targets of the food and drinks sector with a target of €19 billion in exports to be achieved by 2025. That requires a growth of €8 billion over the next nine years and there will probably be numerous trade deals as result of Britain entering trade deals with international partners such as Australia, New Zealand, North America and Mercosur. All those issues have to be addressed. Are we going to sleepwalk into a scenario where we overproduce which would have an impact on prices or is the Minister developing a plan to ensure we do not arrive in that situation?

Deputy Michael Creed

Ireland is a small, open economy that exports the vast bulk of its main agricultural commodities. Therefore, producer prices here are largely determined by commodity prices on world markets rather than by production levels within Ireland. We have seen significant commodity price volatility on world markets over recent years. However, there are measures in place to help Irish farmers through these periods.

Direct payments estimated by Teagasc at more than €17,000 per farm in 2015 provide a valuable source of farm income support and act as a hedge against price volatility. Food Wise 2025, the new ten-year strategy for the agricultural food sector, identifies opportunities and challenges facing the sector and provides an enabling strategy that will allow the sector to grow and prosper. Food Wise 2025 includes more than 400 specific recommendations spread across the cross-cutting themes of sustainability, innovation, human capital, market development and competitiveness. As well as specific sectoral recommendations, Food Wise 2025 is not just about expanding production. I believe that moving up the value chain, where possible, in terms of the types of products sold and how they are produced is also an important hedge against volatility.

In light of the UK vote to leave the EU, Brexit has been included as a standard item on the agenda of each meeting of the Food Wise high-level implementation committee. It is clear that driving the implementation of the Food Wise recommendations, particularly those relating to market development, competitiveness and innovation, will assume even greater importance in the light of the decision.

The UK’s decision to leave the EU reinforces the need to develop as many outlets for our agrifood exports as possible to minimise our dependence on any one market. Indeed, this principle of market development is a key component of Food Wise. We have been very active in recent years in efforts to diversify markets, and in aiming to respond to consumer demands in emerging markets. In September, I was in south east Asia with the Minister of State, Deputy Doyle, and I led a trade mission to China, Vietnam,. Singapore and South Korea. I have also recently been to Morocco and Algeria looking at diary and beef situation, particularly in respect of live exports of cattle.

Since taking up office, one of my priorities has been to address the impact of the sustained period of lower commodity prices on farmers. In that regard, we introduced a low-cost finance option in the budget and reformed the tax code to deal with farmers opting out of five-year income averaging in a particularly bad year. We are committed to further initiatives in this area. I have also increased funding under the rural development programme.

Deputy Willie Penrose

The UK is Ireland's largest customer for food and drink. Exports were valued at €4.4 billion in 2015. The UK takes approximately 40% of our food and drink exports. There has been strong growth in non-EU markets in recent years but the UK remains our main market, with the value of this trade increasing by more than €1 billion. Clearly, Brexit will have an important impact on targets. There should be a review of Food Wise 2025 in order that we do not sleepwalk farmers and ourselves into incurring additional capital investment to achieve targets, which could result in loss-making scenarios. In other words, the head would not be worth a wash. I accept that the Minister is not a soothsayer but surely it must be the essence of prudence to review matters by way of evaluating alternative scenarios that might emerge in order that the farming public might be fully advised. There will not be many agreements made. Under CAP, Ireland gets €1.2 billion and Brexit will have a huge impact on this. I have been on about this for a long time. What countries will fill the €10 billion hole in the CAP budget when the UK leaves? We had better be straight with farmers and say that Brexit will have an impact on CAP payments now. The Minister should not fiddle around and pretend that something will not happen when it is clear that it will happen.

Deputy Michael Creed

The Deputy's argument seems to be predicated on the fact that the UK decision to leave the EU means we will lose a market for 43% of our exports. It will undoubtedly be challenged and this is why, for example, I have visited the UK twice to meet major multiples that buy substantial volumes of our exports. I will meet Andrea Leadsom, my UK counterpart, tomorrow to indicate that we are open for business and that, notwithstanding the challenges we face in the context of Brexit and the immediate adverse impact of currency fluctuation for Irish producers, we will not walk away from the market we understand best.

Food Wise 2025 is not the Department's blueprint; it is the industry's blueprint for itself. There is a high-level implementation committee and the Brexit decision has been placed on the agenda for every one of its meetings. We are, therefore, not burying our heads in the sand. Part of our strategy is to copperfasten our foothold in the UK market and part is to examine other market opportunities. There is no silver bullet or single policy option. Farmers are prudent. They will make the appropriate investment decisions themselves based on what they perceive to be the macro circumstances in which they operate.

Deputy Willie Penrose

Britain is only 60% self-sufficient and, of course, there will be a market. Given our linguistic and cultural links, our good products, including Origin Green, and sustainability, we will penetrate that market. However, let us face reality. A 1% weakening in sterling equates to a 0.7% decrease in exports to the UK. There is an 11% differential with sterling today but it was almost 50% at one stage. We must factor this in. Bord Bia and the other agencies are involved but has the Department adopted a co-ordinated approach to point out the scenarios to farmers? This decision will take five years or more to implement. When this is all over, farmers will be whinging and crying and saying "We were not informed". I want them to be informed as soon as the Minister finds it possible to do so. I acknowledge that he does not have a silver bullet and is not a soothsayer but, in so far as he can, he should outline a number of scenarios to ensure they are fully alert.

Deputy Michael Creed

We have taken a number of initiatives, one of which was to establish a stakeholders forum. Farming organisations, those involved in the processing sector and the fisheries community are all inside the tent informing our deliberations on this matter. This is an unprecedented challenge. We are not all knowing and that is why we need to engage in the consultation process to give every one of those legitimate stakeholders a voice in order that we are better informed to feed from the forum into the dedicated Brexit unit in the Department, which is scoping out all the scenarios that might emerge, ranging from the worst-case, hard Brexit scenario to what we would prefer, which is as close to the status quo as possible. There are conflicting voices off stage. Some are arguing for a hard Brexit "to teach them a lesson", while others want us to end up as close to the status quo as possible. We do not know and, as the Deputy said, I am not a soothsayer in terms of envisaging where this will end up. There will be many more twists and turns and who knows whether they will be in the House of Commons, the British Supreme Court or anywhere else. We are adamant that we will listen to the voice of the industry and be informed regarding what we should do in that context.