Thank you, Chairman, and committee members for giving the IFA the opportunity to make this presentation. I know that you are busy, but the CAP debate is so important that we felt we had to get in here before the Dáil recess.
In the ongoing negotiations on reform of the CAP post-2013, there are three key issues for Irish farmers and policy makers. These are the maintenance of a fully-funded EU CAP budget, the retention of Ireland's national envelope both for Pillar I and II and the distribution of CAP funding within Ireland.
Farming in Ireland in 2010 is beginning to recover from a horrendous two years, during which time farm incomes fell by 40%. In 2009, average farm Income fell to €12,000, or about 35% of average industrial earnings. Total direct payments from Europe, including the SFP, REPS, disadvantaged areas and other national payments, such as the suckler cow premium, were worth more than €1.8 billion in 2009, while national farm income was only €1.6 billion. Farmers in all sectors found themselves producing below the costs of production. Even with recovery, the reality is that for many sectors, particularly the livestock sector, farm incomes will remain dependent on direct payments in the future. The livestock sector is very important in supporting thousands of jobs in rural communities and providing the raw material for our €2 billion beef export industry.
Agriculture and the agri-food sector play a very important role in the Irish economy and society. Farm households account for 25% of all households in rural Ireland. Irish farming and the agri-food industry and related services provide about 250,000 jobs, most of which are located in rural Ireland. Ireland's agri-food industry is the largest Irish-owned productive sector, accounting for more than 60% of exports from Irish-owned manufacturing.
Agriculture is playing a key role in contributing to Ireland's export-led recovery. Figures for 2010 already show a recovery in export values for our food and drinks exports. The agri-strategy 2020 committee has set ambitious but achievable targets for the sector over the next decade in recognition that global population and demand for higher value food is increasing and Ireland is well positioned to meet this demand. There are many opportunities, but a fully funded CAP is essential to realise the potential of the sector.
The CAP remains a vital support for producers and provides European consumers with a plentiful supply of high quality, environmentally sustainably produced food. It has a multi-functional policy role, and provides benefits in several key areas. For consumers, the CAP provides security of food supply, price stability, and guarantees on food traceability and environmental and animal welfare standards. The CAP has delivered on its target to ensure reasonable prices for EU consumers, who now spend less than 13% of their household budget on food, compared with 30% in the early 1980s. Farmers under the CAP meet high environmental standards for sustainable food production and the provision of public goods, including water quality, landscape management, biodiversity and provision of carbon sinks. Funding received by farmers through the CAP is redistributed throughout the rural economy, through expenditure by farmers on locally provided inputs, labour, goods and services.
Over the decades, the CAP has undergone significant reforms to reflect changing consumer preferences and an increased focus on environmental and rural development issues. For the farmer, the major reforms began in the early 1990s with the MacSharry CAP reform, which involved a switch from price supports to production-linked direct payments. In the 2003 CAP reforms, the direct payments were decoupled from production, and allocated upon a historical level of production. For the producer, price and income volatility has increased greatly with the decoupling of payments from production and greater exposure to an increasingly liberalised world market. This is threatening the viability of the European family farm model. The CAP post-2013 must support active family farms through ensuring a fair income that rewards labour and capital input; maintains and supports the production base to underpin the rural economy and grow exports; supports sustainable grass based production systems; allows farmers to respond to the demands of European consumers for high quality, environmentally sustainable food production; ensures that imports satisfy EU-equivalent standards on food safety, traceability, animal health and environment; and ensures that climate change goals are met while maintaining the production base.
Ireland's national envelope must be maintained post-2013. It is vital that Ireland retains sufficient funding to ensure the continuation of a viable family farm production system. The SFP must be directed at supporting active farmers while encouraging the entry into agriculture of talented young farmers under the system that currently operates.
Farmers require certainty of funding. There must be no further erosion of the single farm payment through diverting of funds into pillar II through modulation. Rural development programmes must improve the competitiveness of farming through investment support, restructuring measures, and funding of less favoured areas.
Future agri-environment measures must maintain and build upon the environmental achievements of the REPS programme. In addition, farmers must be supported in meeting new challenges identified in the CAP health check — climate change, renewable energy, water management and biodiversity.
Separately funded and effective market support and management measures must be maintained post-2013 to minimise the effects on family farm incomes of price volatility. Farmers' position in the food chain must be strengthened, including enhanced producer groups. At home and in Europe, regulation of the retail sector is critical, and the IFA continues to put pressure on the Government for the introduction of a statutory code of conduct and independent ombudsman.
For the individual farmer, and to improve the efficiency of the CAP, the payments and cross-compliance system must be simplified. The majority of the EU 15 member states adopted the historical model when implementing the single payment system. These countries included Ireland, France, Spain, Italy, Portugal, Greece, Belgium, Scotland and Wales. The present system of payments, while not perfect, has delivered on maintaining production and sustaining family farms in Ireland and the IFA can see no alternative system that will better deliver for the Irish agriculture sector and economy. At an aggregate level, a move away from the current system of allocation towards other systems has the potential to significantly reduce the overall CAP funding that Ireland would receive.
The current system of allocation reflects the pattern of agricultural production in Ireland and a move to a flat rate would result in a reduction in national agricultural production and output and a consequent fall in exports and national income. At individual level, a move to a flat rate could lead to an income collapse among individual farmers and in certain sectors, with implications for employment and maintenance of farm businesses.
It must be a priority for Irish policy makers to secure the maximum CAP budget for Ireland in the ongoing negotiations. I believe our strongest argument for retaining the maximum budget for Ireland is through maintaining the existing system of allocation.
The Irish agriculture sector has enormous potential to meet the growing demand for high quality food production and has a major role to play in driving the rural economy, creating and sustaining employment and maintaining viable rural communities. The agri-food sector provides employment for 250,000 people, with €8 billion worth of exports and output of €25 billion annually. With 9 million farmers, and a further 30 million employed in agri-food and related enterprises across Europe, it is vital that the CAP post-2013 supports the continuation of the family farm model of production. A strong CAP is critical to ensuring sustainable and viable food production across the EU, and a secure supply of high-quality food for European consumers at reasonable prices.
The CAP has delivered for EU consumers, providing security of food supply at reasonable prices, and guarantees on food traceability and environmental and animal welfare standards. In the debate on CAP, the importance of retaining it, and retaining agriculture in Ireland, has come to the fore. With the economic downturn, agriculture is being properly appreciated in the economy. This committee has always realised that and put agriculture at the centre. For us to retain that, and to make the contribution we want to make to the economy, it is essentially that we protect the CAP. In this, the IFA, this committee, the Government and our MEPs have a vital role to play. I thank the committee for its support in the past. Any time I have appeared before the committee, it has always been exceptionally supportive of agriculture.