Sir, - Professor Alan Matthews of Trinity College (July 13th) stated: "The current market value of land even in agricultural use bears no relationship to its intrinsic value but rather reflects the very significant public transfers to land owners."
This allegation must be challenged on two fronts. First, his statement implies that income from farming is high enough to be capitalised into high land prices. The facts are that average farm income last year was about £10,000 compared to average industrial earnings of £18,000. To produce this modest income typically requires about 30 hectares of land, together with farm buildings, machinery and livestock.
The reality on the typical Irish farm is that income is not even adequate to compensate the farmer for his labour, management and working capital, and does not give a return on land.
It is widely recognised that the main reasons for the relatively high market value of land are its scarcity value and its location value. Less than one-quarter of one per cent of the total farmland area of 4.3 million hectares comes on the market each year. The purchasers may be farmers who are prepared to pay "over the odds" because of location, or non-farmer investors whose decisions generally have little to do with the potential income from farming, or developers who purchase for building purposes.
Second, the issue of "public transfers" to farmers needs to be clarified. In the EU, particularly since the CAP reforms of 1992 and 1999, food is being produced at less than the cost of production on Europe's 7 million farms. This is in effect a subsidy or transfer to consumers from farmers, and it means that only 15 per cent of household expenditure in the EU goes on food. The budget transfers referred to by Alan Matthews compensate for this cheap food policy and also for farmers' role in managing the environment.
It can be argued that food is produced more cheaply on large-scale farms in South America and Australia and traded on the "world market", but consumers in Europe would not have guarantees as regards food safety and traceability.
If EU farmers had to compete purely on price with world market prices without transfers in the form of CAP premia then the family farm structure in Ireland and throughout the EU would be undermined. This would have very negative consequences for the natural environment and for the rural economy and society.
As pointed out by Alan Matthews the issue of compensation for compulsory acquisition of land is not straightforward. But the central question is not the academic one raised by him on the price of land. The question that must be addressed by Government is: Is it fair to treat landholders as willing sellers under the law when clearly they are not winning sellers? The IFA is a pro-development organisation but development must be fair to all stakeholders including farmers whose land is compulsorily acquired. We are seeking this issue with the Government and the National Roads Authority. - Yours, etc.,
Con Lucey, Chief Economist, Irish Farmers' Association, Dublin.