No agri-food boom on way, warns economist
EXPECTATIONS FOR the agri-food sector have been blown out of proportion and young farmers should not get carried away by the promise of boom times ahead, the Macra na Feirme conference heard at the weekend.
Jim Power, chief economist at Friends First, told the conference of young farmers there was a view that the agri-food industry had become a licence to print money. “Don’t get carried away about it. I feel the expectations are being blown out of the water,” he said. “You will be subject to a hell of a lot more volatility . . . do not get carried away with expansion plans.”
Kildare-based farmer Jim McCarthy, who also runs farms in the US and New Zealand, said Irish farmers were already spending too much money on machinery.
Many farms were “grossly over-mechanised” because farmers had the money to buy the newest and best machinery, thanks to the cheque in the post from Europe.
He said the safety net of the agricultural subsidy system was causing farming to stagnate. Irish farmers receive an average €270 per hectare in the single farm payment from Europe.
When subsidies were eliminated in New Zealand, productivity gains went from 1 per cent to 5 per cent a year, over 20 years. “The price we pay for subsidies is far greater than we realise,” Mr McCarthy said.
Seán Molloy of Glanbia Dairy Ingredients Ireland also urged the young farmers to be cautious about spending. He said some of the new tractors were like toys “with the coffee percolators in the back and the fridges under the seats. But, if you are doing that, be aware that you are doing that because you like the tractor not because it’s making money for you on the farm.”
He said the “iron curtain” was about to be lifted for young farmers, with the ending of the milk quota system in 2015. The world needed more dairy products produced in a high-quality and sustainable environment.
“It’s estimated that by 2020 there will be an additional 10 billion litres of milk produced across Europe.”
Mr Molloy said one-quarter of that growth in milk output was expected to come from Ireland.
Earlier, Mr Power, who previously worked with Bank of Ireland and AIB, cautioned against being “led down the garden path” by bankers. “Agriculture is probably the only area of the economy that credit is flowing into reasonably freely at the moment. But if you believe in the wisdom of bankers and the prescience of bankers, think again. They haven’t a clue. They never had, they never will,” he said.
He also advised people to lower their expectations about the opportunities in China. “In my experience China is not the next incarnation of the [St] Vincent de Paul. China is an incredibly difficult country to do business in,” Mr Power said.