Transcript Supplementary Budget April 2009

ITBA EXPO 2010
Farming during the economic downturn and
the potential for growth
Rowena Dwyer – IFA Chief Economist
January 30th 2010
Agriculture and the Economy
• Agri-food sector provides an estimated 270,000 jobs - 1 in 7 jobs in the
country.
• Largest Irish-owned productive sector, accounting for over 50% of
exports from Irish-owned manufacturing.
• Exports of €8.2 billion in 2008 represent 10% of total manufacturing
exports and account for 32% of net foreign earnings
• High Value Added Sector – Multiplier of 1.73 v. 1.11 for Chemical
Industry
Irish Bloodstock Sector and the Economy
• 22,084 employed in thoroughbred equine industry – rural employment
• Gross Value of Industry - €1.1 billion
• Registered breeders - 10,106 – 93% of whom own fewer than 5 mares
• Exports in excess of €180 m annually
• Tourism – 80,000 visitors for race meetings, sales and stud operations
Effects of Economic Downturn
A combination of factors are causing serious financial problems on
many farms and for thoroughbred industry:
– Low product prices and incomes in all the main sectors of farming due
to global economic downturn
– Weather related problems, resulting in increased costs particularly for
fodder, and lower animal production and crop yields.
– Cutbacks by the Government in a number of farm schemes and
funding for equine industry
• Horse and Greyhound Fund – Cut of €17 m or 22% of funding
• REPS, DA, Fallen Animals, Installation Aid, Early Retirement, Suckler
Cow – Cut of >€125 m or 25% of funding
Effects of Economic Downturn
– Reduced availability of credit in the economy, arising from the
crisis in the banking sector
– Ongoing weakness of sterling, significantly reducing value of
exports to UK
• Agri-food and drink exports down €1 billion in 2009
• Exports of horses down 20% in volume (number) and 55% in value
– Reduced domestic consumer demand (-7%) – horses a
luxury item
Cost-price Squeeze in Farming
180
170
160
153
150
146
INDEX
140
INPUT PRICES
130
INFLATION
120
PRODUCT
PRICES
110
100
93
90
80
1995
2000
2006
2007
YEAR
2008
2009
Agricultural Prices and Farm Income
• Output Prices have fallen in 2009
–
–
–
–
–
Cattle
Dairy
Cereals
Bloodstock sales
Sport Horses
Down by > 12%
Down by > 30%
Down by ~ 30%
Down by 32% (€30m)
Foal and 3 Year prices Down by ~20%
• National Farm Income fell by 30% in 2009
– Average Farm Income - €13,000
– Average Farm Income with no off-farm employment - €16,000
Rural Employment 2008-2009
• Employment in primary agriculture has fallen by approximately
15%, or 16,000
• Estimated 15-20% drop in employment in equine industry
• Employment in food manufacturing has fallen by 18% or 10,000
• 30% of farmers have lost their off-farm jobs
Challenges in Business Environment
• Energy Costs
– Reducing Energy Costs Essential for Competitiveness – NCC
October 2009
– Gap in energy prices between Ireland and EU is closing –
Sustainable Energy Ireland January 2010
• Access to Bank Credit
– Bank recapitalisation - increase lending to SMEs by 10%
– NAMA –intended to increase liquidity of banks and increase lending
to businesses
– EIB Loans for SMEs at competitive rates – AIB, Ulster Bank, BOI –
for business development purposes
Challenges in Business Environment
• Labour Costs
– Min. Agricultural Wage Northern Ireland – 25% below Irish
Agricultural Wage
– Lower labour costs in other European countries – e.g. Germany
• Broadband Roll Out
– Usage marginally below OECD average and far behind advanced
countries, download speeds and infrastructure still lagging
– Ending of Eircom and ComReg dispute over charges to competitors
for supplying broadband over telephone lines – 26 January
• Dominance of Retail Sector at National and EU level
– Statutory retail code of practice and a supermarket ombudsman
Structure and Education
• Only 7% of farmers below 35, but greater numbers going
through agricultural education and training today than in decades
– >3,200 undertaking further education courses with Teagasc
– Demand increasing for all higher education agriculture courses – 1st
preferences up 50% 2009/08
– Food Routes – Guide to Agriculture and Food Courses – AgriAware
January 2010
• Economic recovery dependent on competitive exporting sectors,
including agri-food
Opportunities from the Downturn
• Land Use
– Agricultural Land prices down 43% in 2009
– Potential for land transfer and consolidation – access to credit
– Mobility in land use has increased – 33% of all farms renting over
750,000 ha in 2007 (21% - 550,000 ha - 1991)
– Tax-free long-term land leasing – 10/12/15 years
• Construction costs
– Tender prices down by more than 20% - at 1999 levels
– Opportunities for restructuring and improving efficiency – at individual
farm and industry level
• Other Input Costs
– Feedstuff costs down 10% in 2009 - increased opportunities through farm-tofarm trading
Opportunities with Recovery
• Exports
– Sterling should strengthen as 2010 progresses as currently
undervalued– recovery for main export market
– Recovery in main EU markets will lift Irish exports
• Medium term
– Demand for food is increasing globally – quality, sustainable
production
– Need to add value to produce – move from basic commodity
production into higher value markets
– New markets and opportunities – agriculture and renewable energy
production – Government investment required for development of
market
Thoroughbred sector
• Sterling recovery will benefit thoroughbred sector also
• Demand remains for high quality output – evidence of strong
sales at top end even during 2009
• Disposable income down and private consumption subdued
– Need to decide on market, produce right animal for market and use
high quality breeding stock
– Watch input costs
– Use best practices on-farm to maximise output and quality – e.g.
RACE education and training programmes for ITBA members
What we have to offer
Opportunities for Rural Economy
• Challenge for actors in rural economy is to coordinate
better
– Rural unemployment – construction related, slow recovery
– Restricitions in public funding in next 5 years
• Rural Tourism – the Vision
– Tourism Ireland – “specialist activity holidays” a best prospect for
achieving tourism goals
• Visitor stays in rural guesthouse – landscape maintained by farming
sector
• Attends local race meeting
• Eats in restaurant serving locally produced food
Thank you for your attention