Dismal outturn in 2009 for Irish agriculture

While attention today is understandably fixed on tomorrow’s budget, it is important not to forget what is happening in the real economy. The advance estimate of the value of farm output and income in 2009 published yesterday by the CSO underscores the severe impact which the drop in milk prices has had on farm output and incomes in the current year, although a dramatic drop in the volume of cereals produced as well as a continuing decline in sheep production also contributed to the dismal result.

Overall, the value of agricultural output at market prices fell by 18.9%. This includes a fall in the value of milk production of 34.8% and in cereals production of 52.1%, while the value of cattle production fell by 10.7% and pig output by 12.6%.

Farmers made some savings on expenditure on inputs, which fell by 9.0%.  However, this was not sufficient to prevent gross value added at basic prices (these are market prices corrected for the tiny amount of coupled subsidies to farmers still remaining) falling by 42.3%.  In absolute values, gross value added in agriculture fell from €1.6 billion last year to €0.9 billion this year. If depreciation is factored in, then net value added by agriculture in 2009 amounts to only €176 million. This estimate was prepared before the recent flooding which will add to the losses of farmers in the affected areas.

Farm incomes include, in addition, the value of direct payments which were more or less maintained in nominal value. Thus the operating surplus in agriculture (after taking account of payments to employees) fell from €2.3 billion to €1.6 billion, or by 30.3%. This comes on top of an 11% drop in 2008 over 2007 which admittedly was a relatively good year.

In addition, farm household income has been hit by the loss of off-farm income coming into farm households, as well as by the collapse in land prices which has brought the potentially lucrative activity of selling sites to a standstill.

Although prices for dairy products and beef show some signs of recovery which should help to lift farm incomes in 2010 above the awful outturn this year, any further cutback in government schemes such as recommended by the McCarthy report if followed up in the budget tomorrow would tend to offset this.

An important issue is whether the 2009 outturn is just a temporary blip – a disastrous year but one from which the industry will recover under a business-as-usual scenario, or whether it will turn out to be the year which finally revealed the underlying weaknesses in Irish agriculture and thus will lead to a once-and-for-all structural adjustment.

The 2008 National Farm Survey showed that, for the first time, direct payments exceeded family farm income on the farms covered by the Survey – this will surely be amplified by the much poorer outturn in 2009. However, structural adjustment will not be easy given the absence of alternative opportunities for those who might want to leave farming.

There is much talk about the agri-food sector being an engine of recovery from the current recession. But with the food sector being hammered on the UK market because of the depreciation of sterling, and much of Irish farm production being inherently unprofitable, it is hard to point to green shoots.

22 replies on “Dismal outturn in 2009 for Irish agriculture”

@Alan Matthews
I know I drag NAMA into everything but surely from what you say the farmers will soon be asking where’s their NAMA? NAMA will be like the last chopper out of Saigon – everyone will be demanding a seat.

The implications for farming families on the ground are very serious. That drop in gross value added of €.7billion is taken off the top. The sum of €176million of gross value added is all thats left after costs. Please correct me, but I think thats all thats left to meet bank repayments and family income. Thats not a 10% cut in income: its more like an 80% cut.
Add to that the pollution control building that was grant aided. But this time last year the Government deferred the grant just as it would be paying out and also reduced it. So those who built were hit with a need for very substantial borrowings just after Lehman. And with the traditional off-farm work of construction dried up as well.
The 80’s were bad, but at least that time we did not have a global recession and the bubble borrowing was in farm development and factories which had a productive use. While we picked ourselves up and sorted out who was broke the grass kept growing and the factories were available for someone else to use. This time the bubble is in locked up houses which have no productive use
This time we are in serious effluent.

@ Alan,

Very interesting and (I think) underreported.

Farming in Ireland is in crisis. It has always been a matter of wonder to me that you can put New Zealand lamb or Brazilian beef on a dinner table in Ireland cheaper than lamb form Galway or beef from Tipperary. Are Irish farmers so inefficient that even with the subsidies they cannot compete with New Zealand and Brazil? Or, do the subsidies come with so many strings that Irish farming is tied done and cannot compete with the vast and destructible rain forest of Brazil. So we can eat Brazilian beef off a table made of Brazilian mahogany while we sell houses and pensions to one another.

The Operating Surplus Table is informative.

Bulgaria + 57.1%, Czech Republic + 11.6%, Hungary + 35.0%, Romania + 68.6%, Slovak Republic + 40.0%.

Are these countries experiencing a boom in agriculture from EU capital? Just as Ireland did?

What are the terms of trade here? Are they protected? Is this catch-up?

“Farmers made some savings on expenditure on inputs, which fell by 9.0%.”

Is this not internal to the crisis? Do the inputs come from abroad?

“This comes on top of an 11% drop in 2008 over 2007 which admittedly was a relatively good year.”

Was 2007 not the year of commodity the price boom? An aberration.

“…once-and-for-all structural adjustment….”

More than not likely the case. And without being political here, I think it is a structural adjustment driven from the EU. Ireland no longer makes trade agreements with other States. The interests of the EU with respect to Irish farming are not the same as those of Irish farmers or of the Irish people.

It is absolutely astounding that a country as fertile as Ireland finds itself in the position of having what is close to a bankrupt food production economic.

How many more WTO agreements by the EU will it take before Ireland imports all its food?

You know that subsidies make ineffeiciency! Shame on you 😉 !

Most countries have removed subsidies as they destroy the third world as they end up as the dumping ground. Inhumane policies just to prop up domestic politics.

Australian farmers have had it worse. But many still survive and some prosper, with the state assisting by exploring new crops, eg “bush tucker” with fruits and veg never eaten by Europeans. But we all agree land use in Ireland is at the heart of all the current woes?

Ireland has rainfall and this is still a magnificemnt comparative advantage. Trees grow faster in Ireland than anywhere except the tropics, where they have three growing seasons. Fast growing crops of male hemp, bamboo, willowmay feed power stations, but only if linked by rail, the most efficient ground transport.

We previously agreed that Bismarck was correct. All we need now is to reverse this centuries old trend …. should be easy!


Just a small correction. The net value added figure is at basic prices so excludes subsidies not linked to a particular commodity output (mainly the Single Farm Payment, but also payments under the Less Favoured Areas directive and the REPS agri-environmental scheme). To see what is the aggregate income from farming of farm families, which is the money available to pay the bills include interest on loans, you need to focus on the operating surplus figure. This is the amount which is down 30%. Despite the increase in farm indebtedness, the very low interest rates currently means that the estimate of interest paid by farmers this year will be down slightly on the previous year (€335m as against €445m) which will go just a little way to reducing the squeeze on living standards.

The big increases in operating surplus for some of the new Member States arises again because of subsidies – in these countries, the single payment is being phased in over time, with the amounts increasing by 10% points each year until 2013, so this in part explains the buoyancy in farm incomes experienced in these countries.

The question of the competitiveness of Irish farming is a vexed question, particularly if comparisons are made with producers outside the EU. If we define competitiveness as the ability to produce sustainably at a profit at global market prices, then under present structures the top tier of Irish dairy farmers are competitive but beef production is generally not competitive. Part of the problem is scale, and part is that we have gone for high-cost systems whose uneconomic nature is now exposed as market prices fall. There is a discussion of competitiveness indicators in the following Teagasc working paper by Fiona Thorne, Carol Newman and myself

@ Alan

The big increases in operating surplus in 2008 for some countries from Central and Eastern Europe, particularly Bulgaria, Hungary, Romania and Slovakia, are not all due to increases in subsidies.

Data on agricultural income accounts for all EU member states can be downloaded from the Eurostat website (http://epp.eurostat.ec.europa.eu ).

A large part of the increase in agricultural operating surplus between 2007 and 2008 in these countries is due to increases in cereal and oilseed areas harvested and very large increases in yields for these crops in 2008 relative to 2007.

The change in Romanian operating surplus in 2008 is particularly dramatic (+68.6%) and is almost all due to very large increases in the value of cereal and oilseed output (up 138% and 129% respectively). The value of subsidies on production in Romania actually declined in 2008 when compared with 2007.

Behind the dramatic increases in cereal and oilseed output value in Central and Eastern Europe are increases in area but also dramatic increases in yields.

For Romania soft wheat area in 2008 was 2,108.6 thousand hectares (up 6.8% on 2007), soft wheat production in 2008 was 7,176 thousand tonnes (up 135% on 2007). This represents an incredible 240% increase in yield per hectare.

Looking at year on year changes in Romanian yields, or yields in general, is not a good idea. 2007 was a bad year for grain and oilseed yields in Central and Eastern Europe (one of the reasons incidentally for the very high commodity prices in 2007). Provisional yields for the 2008/09 season in Romania are back down at closer to trend levels.

The OII story for Ireland in 2009 is I agree very bad. However, projections from OECD-FAO (http://www.oecd.org/document/10/0,3343,en_36774715_36775671_42852746_1_1_1_1,00.html) and FAPRI (http://www.fapri.iastate.edu/outlook/2009/) are that most international agricultural commodity markets will improve over the medium term. Any such improvement will reverse at least some of this year’s deterioration in Irish agricultural sector income but the fundamental competitiveness problems of Irish agriculture definitely remain.

@Conor O’Brien
No disrespect to farmers intended. I was making the point that everyone in the economy is hurting but the massive bailout is happening for the wrong people. Those just left to twist in the cold economic winds include farmers. With the numbers Mr Matthews has given they are obviously suffering.


Thanks for the update on what has been happening in central europe which makes interesting reading.

While the medium-term projections of higher global food prices will certainly be positive for Irish agriculture, I wonder if the full effects will show up in improved farm incomes, for two reasons:
* to some extent higher farm prices reflect the assumed increase in the cost of oil, which in turn affects the prices farmers pay for energy, transport and fertiliser. The OECD-FAO central forecast was based on oil prices rising from USD44 per barrel in 2009 to USD70 per barrel in 2019 – I notice NYMEX futures are now running USD20 ahead of the OECD projection a decade hence. Of course, oil prices in euro may not increase by as much if the USD continues to depreciate as I suspect is partly built into these futures prices, but I would still feel that farmers’ terms of trade will not rebound to the extent that might be expected by looking at output price projections alone.
* the other issue is that Irish farm prices are not fully coupled to world market prices because of CAP trade protection. This is not so important for dairy products where rising world market prices will feed through fairly fully to Irish prices, but beef and lamb prices are relatively insulated by high protection given that the EU is an import market and the transmission from higher world market prices will be much more limited.

My dairy farm expected turnover for this year will be €320,000 compared to €520,000 in 2008. Costs excluding interest and depreciation will be €342,000 for 2009 as opposed to €434,000. This includes my Single Farm Payment.
In 2008 before interest and any wage to me I made a profit of €71,000. In 2009 I estimate a loss of €46,000 before interest and paying myself anything.

Fortunately for me I got some land CPO’d in the boom and I can lose money for 1, maybe 2 years; sorry for the cynicism. Without it I’d be dead meat.

I would be considered a large dairy farm with a quota of 1 million litres and over 200 acres I have hammered my costs but will still lose money. And it is not sustainable for me to keep my costs this low- everything that can be postponed is postponed, my 1 full-time worker will quit if the hours continue (and his 12% pay cut)

My volume of milk sold is down (due to weather and cost cutting) and overall average milk price is down by 31%.
I have 3 options open to me:

1. Increase production by renting more land- perhaps this will be easier this year. And with no fear of a superlevy fine (one year I paid €46,000 fine for overproduction) this is a chance to expand.
2. Downsize and fire my employee and do everything myself. In the short term this will improve my profits but longterm I will be going nowhere.
3. Sell my cows and get out. If I am looking at figures like these next autumn I will be gone

That’s my report from the coal face.

@Danny Haskins:
Without being in the least aggressive about it, can I ask why so many farmers ignore the signals from the market? It has being trying to tell them, for many years, that their produce is not wanted and that they should take up some other activity, but they don’t go. Why not?

If more of them went, would you (clearly a businesslike farmer) be able to buy more land and then make a profit?


No disrespect found.
Farming is caught between the food processors and retailers, farmers own mindset of the family farm, the enjoyment of the rural community lifestyle, and the importance of that rural ambience to the tourism industry.

The processors and retailers want European standards at Brazilian prices and use a reverse intervention to get what they want: “90% of our meat or milk is Irish but we need to import another 15%” It is that last 5% that determines the price of the Irish 90%.
The only way of satisfying the food industry is to go Brazilian -or NZ. That implies farms of minimum 200 acres and optimally 400, with wire fences.
Imagine the outcry from the tourism industry if that policy were pursued: but that is the reality of milk at 13c/litre which it was in NZ this year. If you want an industry that produces at European standard and is competitive with world prices that is what has to be done.
The family farm itself is an anachronism.
When I was growing up the dinner table was the center of most of the social, decision making and learning experiences. That is where knowledge was kept, passed on and developed. I do not know of any farmer who went to university to learn farming: it cannot be done. Farming is passed on through living in it.
But nowadays the farmer is most likely to be told: “Your dinner is in the microwave and if anyone calls let me know”
That is asking people like Danny Heskin to manage one of the most complex production systems there is with just the social interaction that he gets from 1 workman. And in a good year he gets €71,000 before interest. And if we go the NZ route his nearest neighbour will be at least a half-mile away, not down the corridor or at the coffee pot. Imagine an office building where you meet no one all day.
In that situation the 200 acre man will either become depressive, get out, or grow to 400 acres. Either way the rural ambience that is supposedly so highly valued is destroyed.
Since the establishment of the advisory system in the 50s we have pursued the ideal of mass food production. It is only in the past 7-8 years that the advisors have developed the criteria for profitable food production. Don’t snigger, they are at least 15 years ahead of any department being even capable of proper accounting standards.
In the same period Austria and Switzerland have developed massive tourist industries which support small farms where they have cows with bells. And BMW cars in the yard. And still produce a lot of food.
We do not have the scale for massive industries in this country. We do not do ‘urban’ well. We have other resources though. We punch above our weight in literature and music. We do community and networking well. We do ‘rural’ very well. But ‘rural’ is nearly broken.
Tell me, what is it that is really systemic in this country? The banks???

Farming is by nature conservative and does not like change. Particularly dairy farming. There are significant barriers to entry in dairying- quotas for example. You cannot quit milking cows one year and get back in easily the next- unlike tillage where you grow different crops in response to the market price.

Ireland is probably the European country most dependant on export for it’s dairy products- 80% is traded. Unfortunately most of that is as basic commodities- butterfats, SMP and whey. These are the most subject to market changes. Other European dairy industries are far more value-added and more responsive to retail price changes. Basically dairy industries in Europe produce things that the consumer wants and will pay a premium for, Ireland doesn’t

Irish dairying has for years been encouraged to compete with that other big exporter- New Zealand. Yet the average size of dairy farms in NZ is 5 times that of Ireland at least.

Until recently it was impossible to buy land at a price justifiable. Even now it is too expensive for the return on investment. And it is immovable- you can’t walk cows 5 miles away, land and labour costs are way lower too.

Why don’t more farmers quit? Well they have been. The problem is now what do they quit to do? Previously they were deeply involved in the building industry (sic). They are hanging on in there in some vague hope that it’ll get better and the powerful French and German lobby will support them.

@ Everyone

Very interesting discussion.

Excuse my ignorance, but is there nothing that Ireland has a competitive advantage in except growing grass for dairy? It seems like the industry is thoroughly exposed to a change in the regulatory environment. You may have all read the Commissions leaked draft on Budgetary reform. It can be downloaded from this blog: http://www.iiea.com/blogosphere/copenhagen-the-commission-the-iiea-and-sustainable-agriculture about half way down, pp16-18 I think. Although the Commission is unlikely to fully get its way in this, I think the days of SFP on historic levels of production might be numbered.

Is it time for a profound rethink for the sector in the period to 2020? I don’t see anyone doing the strategic heavy lifting on this one…is this not something for a high-level task force? Conor’s points above within this context are well made.

Are we going to put all of our resources and efforts in trying to resist the inevitable, or are we going to try and adapt?

@ Danny

Thanks for the very interesting “from the coal face” feedback. You are in some predicament! Related to the above (and I’m assuming you have considered this), is there no prospect of experimenting with setting aside a portion of your land to go after something with higher value added? Are there any options available worth considering?

@ Alan,
Thanks for the clarification. The story on the ground is that it feels a lot more than a 30% drop in income. Danny’s figures tally a lot more with what I am hearing in discussion groups. Whatever; it is deep effluent and I do not see great change within our present social and government structures.
“go after something with higher value added”
Dairying is an extremely high value added product. It turns a totally indigestible plant into one of the best and most versatile foods that there is. It is not easy, it is not simple, but we are good at it. To suggest that we stop doing it because it is uneconomic is like saying that we should reject cancer vaccines because they are uneconomic. It is a society problem as much as a farming problem.
To take an example. Danny is selling his milk at 20c/lt. 24 hours later Tesco is selling that same milk at between 85c and 120c depending on the packaging. It is not the processors margin that is driving that difference. It is the nature of the retailer system as it operates within our structures.
The retailers argue that it is a competitive market: if we really had the transparency of a competitive market we would know their margins just as much as they know our margins. We do not.
This is a society problem but if a problem is kept hidden how can one define it. Transparency is key to solving society problems: “given enough eyeballs, all bugs are shallow.”
You can only play the hand that you have been dealt. We are not going to get the multiples to become more transparent when we cannot even get transparency in our departments. As an example. A system of outdoor pads and earth bank lagoons had been researched and verified, first by individual farmers and then scientifically by Teagasc. It worked, it was good for animals, it was cheap, it did not leach. The research was completed well before the criteria for the Pollution Control grants program was established; but it was not certified until after the program was signed and so was not eligible for grants. It would have used a very small fraction of the resources that were poured into conventional buildings.
The program was a windfall for the cement and construction industry. The earth bank system was later certified. Go figure. I have to assume that everything was above board but without transparency we will never be sure.
Looking for transparency in dealing with the multiples is not in the hand we have been dealt: transparency in government and our coop structures is. If we want it.

“Ireland is probably the European country most dependant on export for it’s dairy products- 80% is traded. Unfortunately most of that is as basic commodities- butterfats, SMP and whey. These are the most subject to market changes. Other European dairy industries are far more value-added and more responsive to retail price changes.”

“Dairying is an extremely high value added product. … Danny is selling his milk at 20c/lt. 24 hours later Tesco is selling that same milk at between 85c and 120c depending on the packaging. It is not the processors margin that is driving that difference. It is the nature of the retailer system as it operates within our structures.”

I buy almost all of our food from markets, from producers or from front-line processors (eg butchers). I have to visit supermarkets to buy toilet paper, but that’s about all … except for milk. The one product that should characterise the Irish food industry is available only through the large retail networks, and it is pasteurised, homogenised and essentially rendered characterless: a basic commodity, as Danny says.

Should there not be scope for non-commodity milk and milk products? I have always wondered whether the milk from cows on the Shannon callows would differ from that of cows eating grass elsewhere. Couldn’t callows milk be a premium product?

I know that Cuinneog in Mayo produces distinctive butter and buttermilk, at least one person around here makes butter by hand and Ardrahan was selling milk to help people sleep. (I see that both Cuinneog and Ardrahan are in Good Food Ireland http://www.goodfoodireland.ie) I know too that some (former) milk producers started making cheese instead and eventually gave up their own herds to buy in from neighbours.

But these examples don’t prove the existence of a larger market for distinctive milk and milk products. Has Teagasc (or anyone else) investigated alternatives to the commodity market, with the milk itself and its immediate derivatives as premium products?

If I’m asking simplistic questions, please forgive me: my knowledge of food is at the consumption end.


Before I got to your posts I was about to say that Dairying is dying on its feet in the Midlands. There are three farmers around my house. Two of them are out of dairy in the last two years. The other is tillage and is still suffering from the loss of sugarbeet. He’s at a loss as to what to put in the rotation instead.

The agricultural sector as a whole is taking a pasting. Without a supply of greater idiots to sell boggy fields with road frontage to, it is in for serious decline. To my mind, the commercialisation of the coops has done great damage as they turned into base profit centres without many of them actually achieving anything in terms of value added – they skimmed off the cream and poured the rest away.

I don’t know what the answer is; it’s not as simple as the farmer doing value added him/herself as once you get over a certain size you move from artisan (with relatively low regulation/hygiene standards) to commercial (with high regulation/hygiene standards). You need to go from small to very big to bridge the gap in regulation costs.

It’s all very well to say that there is over-capacity and that subsidies have softened the industry, but what we eat and what we drink is important. That we could continue to eat and drink come what may with the rest of the world is, I think, also important.

An anecdote from Hungary – sunflowers have taken over the country. My hungarian relatives complain that the country is now importing food for the first time in its history as so much land has been given over to oil crops – sunflower and rape.

@ Yoganmahew and Brian.

What follows is wild yonder thinking: but lets throw it out for what its worth.
We have developed systems that constrain us towards concentrated hierarchic structures which produce only standardised products. Our milk is collected and bundled until it reaches a large scale plant. Our retail structure constrains us towards large shopping centers. The products on our plate tend towards the same product in every house.

Equally our representative and governing structures constrain everything towards the center in Dublin from which it all comes out again, but without any control from us.

I would say that we do not do central control well; that we kick at it; we dislike it. That lack of attitude is like gravel in a machine. In another culture a small amount of attitude might be like sand in an oyster and produce pearls. Our systems are cobbled together from broken-down machines.
But our small community and business units are like nodes in an intricate network. And they work. Our village communities are vibrant. I have a choice of at least 2 good dramas and someitmes 4 every weekend. I have a very very good ballad session every Friday night afterwards if I want it.
On the business side the small coops are outperforming the big plants. Wexford Cheese is as good a cheddar as one would get anywhere. The same goes for the West Cork coops.
Our Credit Unions haven’t got as much as 5cents of a bailout; they managed that without the benefit of any elite financiers.
No: we do small networked units very well. We are a natural internet being forced to fit into a hierarchical, pyramidical, and neccessarily authoritarian system.
So what does one do?
One does not get Teagasc “investigate alternative markets”. The answer will not come from the center. One encourages local effort. Instead of voting every 3-4 years one votes every day by supporting local.
We have got some world class food producers at every level; from large commercial farms to small artisan kitchens. Set them free from this regulations that are designed to control mass production.
Every small producer is expected to be an expert in the minutiae of regulations as determined by a minimum of three statutary bodies and a minumum of 3 inspectors. Why? So that their product will be commoditised by making it fit within a standard category. That is what an Organic lable does: it enables the retailers to say that this shrimp from Thailand is “organic”. Really??
Each producer should have no more than 2 inspectors and if those cannot remember all the neccessary regulations with which they are dealing on a daily basis, then how can we expect our producers to remember the interpretations of 4 or more inspectors as at present.
You ask what are our resources. Our resources are ourselves and we are bloody good when given a chance.

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