There is only one theme upon which I wish to touch. It is a central theme in that, where agriculture is concerned, it is necessary to plan a few years ahead and to have some sort of rational estimation of what agriculture will be like not just this year but five years or ten years hence. In farming enterprises, particularly those relating to livestock, it is impossible to change direction very quickly, except at great expense. Rational forward planning involves an assessment of perspectives. From the point of view of perspectives, there are two alternatives; within a period of a few years we may find ourselves inside the European Economic Community or, with Britain, we may find ourselves outside that Community. Notwithstanding what seems to me to be a general acceptance of the proposition that we will probably go in, my view is that it is only 50/50 as to whether Britain will go in. That is the way the betting goes in my opinion. It has nothing to do with us. It is a matter of the British political and economic situation. It is a long shot. A possible alternative is that we may try to enter without Britain. That is not an impossible alternative, but it is one I do not propose to explore. It had hardly been explored at all until the very recent past. The reason I want to talk about this is that there is a chorus of voices from farm organisations, NFA and Macra. In passing, may I say that although I disagree with them about this I am an admirer, supporter and generally an upholder of their activities and beliefs. I think they are both wrong in their assessment of EEC prospects but when we get the farming press, farming organisations, radio and television and two out of three political parties all saying the same thing, farmers are likely to take that as being the probable outcome. In that I am bound to say I think they would be wrong and that this mistake, while it might not cost the farming organisations or the media or the political parties very dearly would cost the farmers themselves very dearly.
I want to assure the Chair that although on occasions I have spoken at great length I do not propose to do so now. I have been rather reproached, myself and a few others, by the Taoiseach for doing so recently. I have done it deliberately at certain times and, I feel, properly. I have used this as a parliamentary weapon and would use it again if necessary and I am glad to be able to use it. Certainly, to the extent that we get the prospect of Parliamentary reforms and we get co-operation from the Government we will co-operate with them in getting business through Parliament. Therefore I do not propose to speak on many agricultural issues of great interest at all or on this issue at great length.
We have a very misleading circumstance which is that from the middle 'fifties until the very recent past the price of all agricultural produce inside the European Community has been vastly higher than that which obtained on world markets or than that obtaining in Ireland. I do not propose to analyse reasons for that but it is a fact. We had applications in the early 'sixties and all you had to say to farmers at that time was: "You are getting so much per gallon for milk and so much for beef or so much for lamb and your opposite numbers in the Community are getting perhaps twice as much, perhaps 60 per cent or 80 per cent more" and all the farmers said was one voice "Would it not be marvellous to get a crack at that market on equal terms?" The short answer is: "Of course, it would be marvellous." But to present that and nothing else is to present a vastly distorted picture that will lead farmers into errors of planning and very serious loss and damage in my view.
I do not propose to analyse why Community prices were so much out of line with world prices but very briefly I must refer to the fact that these very high Community prices produced the surpluses that we have all heard about inside the Community, and produced the so-called butter mountain and all the other mountains of surplus produced in the Community and apart, for example, from disrupting the world's dairy industry when the Community offloaded at horribly low prices their surplus in markets where we might have hoped to do well, it also had the effect of creating a profound crisis in the EEC agricultural policy. As of the end of 1968, when the document now known as the Mansholt Plan was presented to the Council of Ministers by the Commission there is evidence for all who are willing to look, of a major change of price policy inside the Community. Mansholt says quite explicitly in the December 1968 document that the agricultural policy of the Community is in crisis; that more realistic farm prices must be adopted—a whole series of statements which make it absolutely clear that farm prices in the Community will come more and more into line with world prices and that in real terms they will come down.
In answer to this it may be said that in the next few months we shall see a small rise in Community prices for commodities such as butter and beef. That is true but they have said that will be the last rise before the culmination in either failure or success of the present negotiations to admit four new applicants. The reality of prices in the Community is that although it is politically almost impossible to reduce farm prices in formal terms, in real terms farm prices in the Community have been reduced quite sharply and will go on being reduced. The technique is that which we see in operation in many countries every day —to hold the price at a set level and allow inflation to erode it every year by 5 per cent or 7 per cent or, perhaps, 10 per cent or whatever rate at which inflation happens to be running.
Real prices inside the Community, apart from the odd reduction such as the reduction in the butter prices which was a formal reduction, are being reduced and will be reduced. Community prices will come more into line with world prices. That is the prospect of the evolution of prices. When you say to an Irish farmer: "Perhaps you will get 3s 8d, or the metric equivalent, per gallon for milk; perhaps you will get 60 per cent or 70 per cent more for beef" that is true at this moment but one has to have extrapolations a few years hence and we have no reason to believe these price differentials will exist to anything like the same extent in the near future. It is true also that if we had got into the EEC in 1961 we would have had a decade of far higher prices than we have enjoyed but that hay-making period is over in the Community; the good decade for small farmers in the Community who made big profit is over because those big prices created the mountains of surpluses and created the crisis. We have no right to tell Irish farmers that they can expect the price differentials currently existing between Community prices and our prices to last for any significant distance in the future because all indications are that they will not.
This is the first point that must in fairness be made about Community prices. Secondly, I want to make a point about British prices. In the whole life of this State we have had the awful national tragedy which is the fault of nobody and which is certainly not a political football but something everybody regrets, that the whole of Irish industry, every Irish farmer and all the Irish people have suffered bitterly, because the British used their wealth to subsidise their own farmers but, as the greatest food importing nation in the world, they bought on the world at extremely depressed prices, whether from the New Zealanders, the Irish, the Danes, the Argentinians or the black African countries supplying tropical produce. All supplying countries were seriously exploited by this classical neo-colonialist trick which impoverished all of us. Of course the ending of that situation and a crack at the British and European markets on equal terms with anybody else is something our farmers very much desire and undeniably it would be vastly to the benefit of our agriculture, but the plain fact is that as early as two years ago the British Conservative Party were saying explicitly through their then agricultural spokesman, who did not become Minister for Agriculture, that they proposed the dismantling of their price support system.
Under the prevailing economic ideas of the British Conservative Party, now the Government, and in view of the difficulties under which the British economy is now labouring, that price support system costing £300,000,000 or £400,000,000 a year is in the process of being dismantled and British home prices are being permitted to rise and the cost of food to the British housewife is being permitted to rise. We can expect the spillover of that policy under the Free Trade Agreement to permit a rise in our farm prices for the products we are sending to the British market. This is why, three, four or five years hence, we have even less reason to expect a very large differential between the prices we get in Britain—assuming we stay out and Britain stays out—and the prices we would get on the British market assuming we are both in. That differential will become less in the light of economic forces already in operation. That is the final long-term argument in regard to food prices.
I have not analysed the reasons why prices were high in the Community in the sixties They were high, there is no question about that. There were perfectly good reasons but it would take more time than I am prepared to take to outline them. In the long run, the prices of food, the prices paid to farmers, the prices paid by the housewife inside large dynamic industrial countries are subject to certain tendencies which were visible in the UK in the last century when there was a battle over the repeal of the corn laws; which have been visible in the battles between the industrial and farm lobbies in the United States and which have been visible in every large dynamic industrial area.
If one looks at the history of the development of the dynamic economies in the world over the last century and a half, there is a tug of war in regard to the price of farm produce. On one end of the rope tugging it towards higher prices there is the farm lobby and on the other end pulling towards lower food prices there are two forces. One is the force of the industrial employers, the business force. They have to compete for exports and they want the lowest price possible so that their exports will be competitive and since for working people food represents such a large proportion of their total expenditure the employers want the lowest possible price for food so that wages can be as low as possible and therefore their products can be as competitive as possible. The workers also want the lowest possible price for food so that they will have wages to spare for other things. If you have a tug of war with the farm lobby on one end of the rope and on the other end you have the employers and the workers, who is going to win? The latter group are vastly more important than farmers, farmers who are diminishing in numbers and therefore in political leverage, and farmers in Ireland are tragically divided so that they cannot even pull, with the diminishing rate which they do possess, in a unified way. Of course the farm lobby loses.
Of course the long term tendency inside the one-quarter of a million highly industrialised European Economic Community is towards low food prices notwithstanding the fact that when the Community originally came into existence the price of food was very high. That is the long term tendency. We would be misleading farmers to pretend anything else. We would be misleading them if we urged them to do their long term planning, their long term investing in the expectation that the present rate of profit on a gallon of milk or on a fat beast would remain as it is now.
The other great consideration is that farmers are not in the least concerned, any more than a businessman or anybody else who produces products for sale, with how much they actually get for the product; what they are concerned with is the profit on it. If the price of the in-goods rises steeply then you have to calculate your profit not just in the light of the selling price but in the light of the cost of production as well. We therefore have to explain to farmers "sure, you will go to 3s 8d per gallon now or something like that, but not just will it be eroded in the long term by the processes I have been outlining but also your in-puts will get more, will cost more". You cannot get an efficient dairy cow producing effectively on roughage, you have to put concentrates into it. All right, what do the concentrates cost? These are relevant questions as well as the question "how much does the gallon of milk cost? How much does the end-product cost?
When we look at the EEC let us take the example of pig producers. Do not say "How much is the pig going to the factory"; say "What is the profit on the pig in the Community?" No gain on the current situation and possibly a slight loss for producers. I am not saying it is a slight loss; I do not know whether it is a slight loss or a slight gain or whether it is exactly the same. Anyway it is going to fluctuate from month to month. For pig producers as a whole there is no significant advantage. I am also saying in terms of real costs there is a good deal less advantage for milk producers than there seems to be on the face of it. I do not want to overstate what I already consider to be a strong case, and which I do not wish to mar by overstatement, but certainly there is, especially in view of our grassland capacity and our expertise with livestock, real benefit in beef and probably in sheep products also.
Let us tell it like it is and not as if it were to be the solution to all the farmers' problems. Let us not feed them with the pap that everything will be great on the day because then they will make mistakes, mistakes which will cost them dearly. If one reads what is published about the forward planning for agriculture for the Community quite clearly the long-term intention is that farmers will certainly live well in the way that Mansholt says but there will be much fewer of them. They will be big efficient units that can generate the sort of productivity that will give them a good life without very high prices, without a very high profit per gallon of milk or per beast. You have to get the through-put either in milk or in beasts or whatever it is to get the good living. I have no doubt this is the long-term intention. They have been quite explicit about it. I do not want to raise the hair on anybody's head with the terrors of Mansholt but the long-term intention is a much smaller number of very efficient, bigger farmers living well but also producing food cheaply and efficiently.
There is no place for the inefficient, small producer in this perspective. Mansholt talks about humane measures of retraining, of retirement, of purchase of the land from small producers, but he talks about all these things in the context of having a very dynamic local industry where the displaced workers can go. It is a valid plan for the circumstances on which his experience is based, in Holland, but what if we do not have the dynamic industries to take in the displaced small farmers who have been displaced by the erosion of profit margins? That is how they will be displaced, not because of promises of retraining, or promises of pensions; they will be forced out by the erosions in their margins. If you have a Mansholt situation with booming industry, and the booming industry of Holland is sucking in workers even from North Africa and from Turkey, then your displaced people can get jobs near their homes, inside their own language and cultural areas. If we can be guaranteed that we will get a booming industry in European Community conditions where the displaced small farmers can go, great, but how can that be guaranteed when the Community's regional policy is non-existent, when the Community's regional policy is the same sort of pap as the pap being served up to farmers about agricultural prospects?
We cannot guarantee that for small farmers and therefore we are not in a comparable position to the Dutch, French and Germans who have not just places for the displaced rural workers but who have indeed an acute labour shortage. We cannot in conscience tell the small farmers that they have a future in ten, 15 or 20 years in the Community. The whole concept, the whole ideology, the whole trend of development is away from that. The Community have thought up through the Mansholt Plan a mechanism by which this transition can be made humane in the circumstances of the Six. The plan was not thought up for Ireland and does not apply to Ireland. In these circumstances, which in my view are perilous for our small and medium farmers, and we have no option but to tell them that, we should be taking certain long-term policy steps in a very vigorous and organised way. I have been trying to be temperate and constructive in what I have said and I will try to go on being so. I have to make it clear that I think there have been serious failures of initiative in the whole of our agricultural thinking, in the light of the pressures that will face us either in or out and in my view they are not so very different.
Let me speak first about the question of the volume of production. I know the arguments that increased production means that you have to put money from other sources into the countryside. I know that the amount of money currently put into the countryside is high, having regard to the size of our economy and the spare wealth we have. Were I in the position of having to make a budget, I do not think I would apportion the funds available in a very different manner. I am not complaining about the amount of money that has been spent in this direction. On occasions I have said harsh things about Government policy, but in terms of allocation of funds the Government have been generous to the countryside.
However, they have been extraordinarily unwise and lacking in creative policy. We have seen that funds alone solve nothing and very often they aggravate problems. Regarding the volume of production, recently we have had a price system in milk which has bitterly discouraged the people who were most efficient and productive in milk. When I was responsible for informing the farming section of new ideas and techniques, the advisory services, the farm journalists and I urged men with 15 cows to borrow in order to go into the business in an intensive way. We told them to build silage lay-outs, build cubicles, increase the number of cows, to intensify stocking rate per acre and to apply fertilisers. We said this with passion and conviction and in the belief that this is what the nation needed.
I think that was correct then but I know that the reversal of policy on the part of the Government when they introduced a steep multitier price system led in a number of cases to such a revulsion on the part of the Minister's servants who had carried out the Government's policy honourably that they could no longer serve the Government.
I am not opposed to the principle of a tiered-price system. It is proper to make compensation in areas of difficulty, and to make compensation on a scale. I am not asking for a flat rate although I think a flat rate is what exists in the Community. I believe the number of steps and the nature of the graduations were such as to discourage profoundly the most creative and vigorous section of our milk producers who were getting their costs right. These people considered they had been let down and betrayed.
Had we had some sophisticated forward planning in relationship to Europe and had people thought politically about the evolution of the European price scene in the way I have tried to indicate, then the change of policy inside the Community could have been seen. We could have seen that the change of policy would put farmers out of milk in Europe, that the butter mountain would rapidly dwindle and that we could have used extra milk production just at the time when we had not got it. We have not enough milk now and because of incorrect policy at a crucial time we are losing our place in the British Market and the possibilities of expansion. Expansion is not just desirable in a flat rate kind of way. The more you can increase volume, the easier it is to get costs right. The greater the volume, the better the costs picture.
One might say the same thing about the pig situation on the British market. Lack of sophisticated economic analysis about demand and lack of political thinking about the political economy of demand in the United Kingdom and in the Community led to diametrically wrong policies so that we were wrong-footed time after time in regard to the possibilities of outlets.
There were serious errors in regard to the efficiency of production all along the line. It is a truism—and nobody in this House can quarrel with it—that the real cost structure is set by the efficient producer. The small producer either exists by subsidies or else he goes to the wall. The only way one can be competitive is to get costs right. You can get the big units either by co-operation or by bankrupting the small producer, but it is impossible to get costs right on five or ten cows.
Livestock is a lucky industry in view of the evolution of Europe, the evolution of incomes and public taste. We have a great climate and great possibilities in regard to grassland and we have the good fortune to be in livestock. At least we have a bit of luck in that respect because we have the expertise and the climate. However, due to a series of mistakes and instances of incompetence, the basic stock is very poor. Our basic milch cows are rotten as productive units. One might possibly make the argument that the milch cows of the sagas of 1,800 years ago were better than the stock today.
In beef we tried to get some European strains. While the English buyers may like our product, when we get down to basics of how efficiently can the product be converted and what is the cost of production, we have a bad performance. In cattle, pigs and sheep, because of our climate and the aptitude of our people for livestock, not alone could we be, much better but we could have the bonus of supplying the world.
Who comes to us for our products? It is only for the odd beef animal and the thoroughbred horse. Scandinavian pigs can get a premium; they are smuggled all over the world because the Danes refuse to let them out. Nobody wants our pigs because they are not that good.
On the question of product development and market research, we have spent large amounts of money—which I do not deplore—on various kinds of agricultural research. However, it is not nearly enough for specific development and market research. We could import the result of fertiliser trials from other countries of comparable size and climate. What we want to do is to spend our resources of men and money on product development and market research, on economists, on finding out what kind of packaging we need, and the structure of industry.
We need rationalisation in all our bacon factories and the creameries. I understand the attachment of farmers to the local creamery but one must look at costs. We all have a duty to be tougher with the natural feelings of people to defend small inefficient local institutions. If the Minister wants to push amalgamation we are not going to play politics and we will support it. No politician will quarrel with any Minister who pushes rationalisation and amalgamation. Matters such as farm ownership of the processing factories, matters of vertical integration, where it is possible to get costs right from the farm gate into the market are neglected and ignored. We have the irony of branded Danish meat products selling in Ireland and no comparable branded Irish meat products selling in Denmark. I do not wish to mention brand names. This is a failure. This is a big league but the Community is a much bigger league. If you do not have millions of pounds for advertising, product development, packaging, all that, you are simply not in the hunt. Our good climate, our understanding, our expertise, our love of livestock, will be fine as a basis but not enough. It must be carried on to market research, product development and so on. Here we have been noticeably weak.
