I thank the committee for the opportunity to put our views forward. As the chairman rightly said, we have taken up our new positions in ICMSA relatively recently so it is a learning curve and I ask members to bear with us while we find our feet on this ground. We took over from Mr. Jackie Cahill, who is a very competent and capable person and represented ICMSA for the past six years. He was before the committee on many occasions to put the case forward.
It is not an understatement to say the two most important issues that will affect the next generation of farmers are CAP reform and milk production post-2015. Today, we are here to deal with CAP reform and to get our views on record as to the most important issues for our sector and society. There are three main headings we would like to address: first, the base year of 2014, second, flattening, and, third, greening. I would also add a fourth heading, that of budgets, as it goes without saying that the most important point for farmers and for Ireland as a nation is to secure the maximum budget possible, both in terms of the single farm payment and the rural development budget, which we would like to discuss at the end of our submission.
As members know, the multi-annual financial framework will be negotiated, hopefully, by the back end of this year and it will then be easier to know exactly where we are going in regard to deciding what has to be prioritised. If we are to achieve the ambitions set out by 2020 and capitalise on the potential for us as an exporting nation, we need to get this right, and it is only proper we spend time getting the basis of CAP reform right.
I have submitted a document to the committee and will address some of the issues within it. CAP has, since its inception, provided many benefits for European consumers such as safety, security and stability of food supplies which are produced in a way that ensures the sustainable use of land. However, given the projections for world population growth and the associated food security issues, ICMSA believes that a strong CAP, with an adequate budget, is now more critical than ever to ensure a dynamic and competitive agri-sector and the attainment of the EU 2020 strategy.
On the question of funding the CAP, the key issue is how much money will be available up to 2020. The negotiations on the overall EU budget from 2014-20 are not yet concluded but that budget may come under further pressure due to these negotiations, with possible consequences for the CAP budget. It is our view that a strong CAP will make a positive contribution to job creation as there will be up to 300,000 jobs in that sector.
Once the CAP budget is decided and secured, the next issue will be how to distribute CAP funds among member states and, ultimately, how the single farm payment will be distributed internally. As already stated, we believe that, at a minimum, Ireland must retain its existing funding from CAP. Current Commission proposals regarding the distribution of payments to farmers within member states and proposals for a gradual move away from the historic-based payments to a system of flat rate, uniform per hectare payments by 2019 are unacceptable. The ICMSA is convinced that any shift to a flat rate payment will be detrimental to active farmers on the ground and we believe there is no compromise to that position. If the payment is moved to a per hectare basis, all the power is given to the landowner, not to the farmer producing the food. We see a massive downside to that.
This is also tied in with the 2014 date, which is already creating massive problems for farmers on the ground, in particular those in the dairy sector. Up to 30% of dairy produce is coming from rented land, which must stand on its own economically. Where a farmer does not own the land and has to rent it, it is the person who owns the land and gets all the payments based on a future date of 2014 who holds all the cards. The ICMSA believes the base year must be on an historic basis and cannot be on a futuristic basis, which is creating havoc for the market. We referred to the budget timeframe and the way the budget will be disseminated at the end of this year and early next year. However, it could potentially be two years hence and we could have this date hanging out there on the market.
The ICMSA made inquiries on the legal side and found that, under Irish land law, no person who breaks a lease should be able to benefit in the future from a single farm payment. Perhaps the Government would have the responsibility to get this written into the European legislation. Ireland is unique among member states in regard to the rental sector because leases in mainland Europe run for 20 to 25 years whereas they run for a shorter term here. This futuristic date is playing havoc. While I believe the Minister for Agriculture, Food and the Marine understands this, I want the committee to clearly understand it as well.
With regard to the 30% figure mooted in regard to greening, the ICMSA firmly believes there is already enough cross-compliance in existence to convince the citizens of Europe they are getting value for money. As a farm organisation, we understand the practicalities in that this is European taxpayers' money. However, the marketplace will never compensate for the environment aspect, so funding must come from somewhere. The reality should be explained to the citizens of Europe: the CAP is not just a farmers' subsidy because it is equally a support for consumers and works to maintain a healthy, sustainable environment whereby we can produce food and have the capacity to hand on our farms and our planet to the next generation.
The question is how to do this. We believe that under the cross-compliance heading and the good agricultural and environmental practices heading in Pillar 1, there is enough to justify to European citizens that we should be entitled to the single farm payment and that it would be prudently spent. If there are to be extra environmental requirements, we firmly believe this will have to go under Pillar 2, which I will address later. We understand that the citizens of Europe and the Directorate-General for Agriculture and Rural Development are pushing hard in order that Pillar 1 would contain a greening element. However, that greening element will just be a formula of words that satisfies the Commission and Council. Therefore, we can be creative in coming up with a justification, which I believe exists.
With regard to flattening, we wrote to the Minister to clarify whether he was suggesting a "gradual move towards" the average. We would accept that formula of words because if there is a move to a flat rate, per hectare basis of €270 per hectare by 2019, there will be a complete sea change from the way agriculture exists today, which would be of complete disadvantage to the active farmer and would skew the reality of the active farmer being supported for production. If there is a €270 per hectare payment regardless of whether one is farming the land, it is obvious what will happen. We would be happy with the form of words "gradual move towards" because the Commissioner appears hell bent on having an average across Europe.
We also strongly support the approximation position. In fact, much of the thought and words behind approximation were actively promoted from day one by ICMSA, and we believe it should operate along the lines of the model used by the EU 27 for their own budgets, whereby there is a minimum and a maximum. The Minister, the analysts and those involved in formulating the policies are talking about 10% to 15%, but the critical question for ICMSA is "10% to 15% of what?" We say it should be 10% of the existing moneys because if one excludes the greening element of 30%, there is potential in the LFAs - less favoured areas - for 5% to 10% recoupling. There is no entitlement on approximately 500,000 ha in this country. That could take 10% from the overall budget. If these parts are excluded it would be meaningless.
We recognise that the Department is running a number of models and it is in nobody's interest to see a massive shift in monetary terms from one farmer to another. It is generally acknowledged that, other than a few anomalies, the active farmers are benefiting from the current structure. As a country we have to look after our active farmers as best we can.
We are adamant that Pillar 2 has to be secured or enhanced but not at the cost of Pillar 1. Even if we secure an amount equal to our current budget in nominal terms, the impact of inflation means that its monetary value will be significantly less by the end of 2020. Co-funding should be in place for early retirement and installation, and a particular emphasis should be put on a new REPS. It is generally accepted across Europe that the scheme is good for the participants, the environment and the sustainability of agriculture.
Market supports will be critical because, as everyone knows from milk prices and the headline in today's Irish Independent, there is potential for catastrophe in Europe. The Commission established a high level group in 2009 but the proposals it came up with after deliberating for many months were pretty much useless. They contained nothing that would put a floor under milk prices for producers. Volatility is catching the perceived good guys and the larger operators. If 2009 brought a message home, it was that bigger, younger and more intensively developing farmers were getting caught because their borrowings were larger. The larger one’s borrowings, the greater one’s exposure to prices that are lower than the cost of production. The farmer with 40 cows and little debt will survive for a year or two but the bigger and more progressive farmers will get caught. I am concerned, as a dairy farmer, that milk prices may head south suddenly. I do not want to be recorded as talking down prices because the situation might not be as bad as 2009. There are differences between now and 2009 but the capacity remains for going short in milk production in Europe in the space of one year. The Commission sets a safety net of 21 cent per litre but the cost of production is 28 cent per litre.
Critical elements of market support need to be addressed now in terms of CAP reform. Aid to private storage must be maintained in its current automatic form. It cannot be discretionary, as is being proposed. Even though last year was a good year, 98,000 tonnes of butter went into aid to private storage. More than 40,000 tonnes have gone into aid for private storage this year. If that tool for managing the markets was not available we would be in dire straits. It needs to be improved and enhanced rather than changed. We need a monitoring agency that is catered for through legislation and a safety net that is based in reality.
I will conclude to because my colleagues may also wish to contribute. I am open to further questions as I have a feeling that I left out some aspects that might be important.
