Shape up or get out

All change on the farm - Part 1: In the first of two reports, Seán MacConnell examines how changes in the EU's agricultural policy are pushing farmers out of the industry

A rural Irish landscape denuded of people and livestock. Ten per cent of the land in rural areas unused and quickly reverting to scrubland. Closed down milk and meat factories blotting the landscape. Provincial towns in decline.

In the pub sits the local farmer, spending the annual EU cheque based on what he once owned and farmed in the first three years of this decade. Now he gets it for doing nothing and is whittling away what in essence is his redundancy payment.

That is one picture of rural Ireland after the latest reforms of the Common Agricultural Policy have been implemented, under which Ireland is to snap the link between agricultural production and farm supports.

There is another picture also. This is one of 30,000 young commercial farmers, freed of the constraints of having to farm subsidies rather than animals, creatively and intensively working the land, extracting maximum benefit from the land and the markets. This other Ireland is a land filled with part-time farmers hurrying home from their day jobs to tend their animals, and later in the evening, perhaps, going out to meetings of local development groups involved in enterprises to develop rural Ireland, such as small industrial schemes or plans for tourism.

As the annual national ploughing championships (which officially mark the end of the farming year here) start today, the farmers of Ireland can deliver either one picture or the other. But no one is sure which way things are likely to go.

Already, most of Ireland's 130,000 farmers have been told what they can expect when the first EU Single Payment arrives in the post at the end of next year.

It will replace all the direct payments, which were like a secular litany: the suckler cow premium, the special beef premium, the extensification premium, the slaughter premium, the national envelope payments, the ewe premium, the rural world premium, the sheep national envelope and the arable aid payment.

In the past, farmers responded to this litany with a prayer of thanks, because many Irish farms, particularly the sheep and cattle ones, would not have survived without the cheque in the post.

This led to the jibe from non-farmers that the worst thing that could happen in Irish farming was not foot-and-mouth but a postal strike.

It was the EU Commissioner for Agriculture and Rural Affairs, Dr Franz Fischler, who reformed the Common Agricultural Policy - which had been in place for over 40 years - and offered Europe's farmers the choice of decoupling these payments from production. This was done to ensure the payments could continue after the EU reaches agreement with the United States on agricultural trade in the World Trade Talks. Now, the EU can argue that these are supports for farmers rather than for their produce, and therefore are not distorting world trade.

Ireland is one of the few EU countries that entirely broke the link. Most others have retained some element of coupling to some of the EU schemes. The idea of having to fill in only one form annually rather than service the litany of schemes, was a big selling point to Irish farmers who detest huge amounts of paperwork .

Already 100,000 farmers have been told what to expect in the post in December 2005, an amount that ranges from €2,000 to €100,000 but averages around €11,000 per farmer. A further 30,000 farmers, who have had difficulties in the so-called reference years of 2000, 2001 and 2002 because they purchased farms, were destocked because of disease or inherited their farms in the middle of the reference period, are still waiting for their assessments. Some, like sheep farmers caught during the 2001 foot-and-mouth outbreak with far fewer ewes than they were claiming for, will be penalised by a reduction in their single payments.

In all, the farmers will receive more than €1.4 billion in a single payment, which will signal the end of an era when farmers were forced to keep animals they did not want - and sometimes could not feed from their own farms - in order to draw the premiums.

While no farmers will admit that they are quitting farming because of the changes that come into force from January 1st next, the expectation is that the new system (under which farmers will only need to keep their land in good agricultural order) will accelerate the number of people leaving farming. That is already running at two to three per cent annually and this figure could double, especially among the 80,000 farmers who do not rely on income from their farms to survive but have off-farm jobs, spouses who work or social welfare or other entitlements.

However, nobody is disputing the findings of the most comprehensive study of the likely impact of the decoupling, carried out by Teagasc and the Food and Agricultural Policy Research Institute (FAPRI) last year for the Department of Agriculture and Food.

It found that the Irish beef herd would drop by 30 per cent by the year 2010 and this would lead to a 12 per cent drop in beef production by the same year. There was a prediction of a 5 per cent drop in cattle prices next year, but by 2010 cattle prices would be 8 per cent higher than now. Irish beef exports would drop by 18 per cent by 2010.

However, there is confusion in the marketplace this autumn about this because farmers are continuing to pay very large money for calves that, according to this report, will be devalued by the time they are ready for market. The same is true in the sheep industry, where farmers are still paying as much as they did last year for young breeding ewes despite the fact that the Teagasc-FAPRI report predicted a 12 per cent drop in the national ewe flock over the next six years and a 12 per cent reduction in Irish lamb production.

It is far too early to even comment on the report's predications that the drop in cattle and sheep numbers will in turn lead to increased prices for farmers and, presumably, for consumers by 2007.

The report also predicted a drop in farm inputs, a reduction in farm level incomes and an increase in processing activity as people get rid of their animals at the beginning of the cycle. It predicted that producer prices would then gradually improve as would farm income, but the reduction in the breeding herd would reduce the volume of animals for processing and employment would fall in the meat processing sector.

No one disputes that the environment will be a winner, with less stock on land and a reduction of as much as 12.5 per cent in greenhouse gas emissions from agriculture.