Jul 29th, 2009

ICMSA PROPOSALS ON REPS FUNDING AND DAIRY CRISIS

The Government has made three major decisions since last October cutting the funding for three important support schemes for farmers – REPS, Disadvantaged Areas and the Beef Cow Welfare Schemes. Minister Brendan Smith T.D. on 8 July 2009 announced two major cuts, namely the ending of REPS 4 and a further €100 million cut to the Disadvantaged Areas Scheme for the period upto the end of 2013. This statement on cuts to farm schemes actually predate the Bord Snip Nua proposals, which were published on 16 July 2009.

The main purpose of this policy note is to outline proposals for the funding of a REPS scheme for individuals who have been caught in a no-mans land as their REPS 3 payments come to an end and they cannot now join REPS 4. In addition, the core policy of ICMSA on the dairy sector crisis is summarised.

Jackie Cahill,
President.
July 2009

ICMSA Proposals on REPS

There is an absolute need to continue REPS 3 type payments for individuals who come to the end of the normal five-year plan and cannot avail of REPS 4 payments as this scheme is now closed. All of these farmers have loan commitments and/or are dependant on this flow of funds to meet ongoing expenses.

Therefore, ICMSA is proposing that the normal REPS 3 contract period can and should be extended to 7 years. This is provided for under the EU Regulations for REPS 3 but this modification may require EU approval.

The advantage of this approach would be to get farmers over this difficult period. Furthermore, it would not involve these farmers having to engage REPS consultants involving further costs.

Alternatively, if necessary, the new REPS scheme should be designed to give the same outcome for these farmers in that it should be primarily based on the REPS 3 plan and to provide for REPS 3 type payment for at least the initial two-year period of the new REPS plan.

Funding available

The Department of Agriculture (Press statement on 8 July 2009) provides details on new funding and re-allocations of €207 million. This figure in reality consists of €113 million which was always part of the CAP Rural Development Programme which runs from the period 2007-2013. Two important points arise from this. Firstly, while the re-allocation is to ensure that Ireland can hold the associated EU funding of €56m, ICMSA believes that this funding will either not be used or is the wrong focus for funding at this critical time for farmers. All of this funding requires additional expenditure by farmers that is unlikely to be undertaken and is not a priority at this time.

It is also important to note that this reallocation is being forced upon Ireland by EU rules and is a consequence of the Government’s decision to end the Early Retirement Scheme and Installation Aid. Ireland should seek a change in the EU rules (the 10 per cent minimum funding rule for Axis 1) to allow for some or all of this funding to be used for the payment of full REPS for people coming to the end of their REPS 3 plan. ICMSA is also very concerned that if this rule is not changed, this funding could be lost to Ireland as it is unlikely to be used in its present format by the end of 2013.
On a technical point regarding funding, but an important point, the Department of Agriculture is wrong in stating that new Irish co-funding of €100 million is required in order to draw down the EU funding, as to do so is double counting and, at most, only €45 million co-funding is required.

This is an important point as the Minister has identified €25 million per annum in cuts in the Disadvantaged Area payments over the 4 year period 2010 to 2013 to yield him this €100 million.

The other source of funding, which is additional funding, comes from Modulated Funds (in reality farmers’ own money deducted from their Single Farm Payment) and funding from the new European Economic Recovery Programme. These new EU funding streams amounts to €134 million to the end of 2013 which together with the required basic Irish co-funding amounts to €179 million minimum.

Taking the various funds available to the Minister, it is the ICMSA considered view that a REPS type 3 payment can be readily funded for the 12,600 REPS 3 farmers who would otherwise have no REPS payment in 2010 and 2011. The cost of REPS 3 type payments for these farmers would amount to an estimated €94 million over these two years.
We firmly believe that the Government can and should adopt this proposal.

Funding in 2012 and in subsequent years for these farmers and the additional REPS 3 farmers (whose REPS 3 five-year plans end in 2011) should also be addressed. In any event, the funding obligations of the Department of Agriculture, at that time, will be considerably reduced given the ending of the phased Farm Waste Management grants payments.

Disadvantaged Areas Scheme.

The Ministers targeting of Disadvantaged Area Payments for further possible cuts to finance Irish co-funding is not valid in fact nor can it be justified given the direct income support role of the Disadvantaged Areas Scheme.
Therefore, ICMSA is totally opposed to any cuts in the Disadvantaged Area payments for many reasons. Further cuts in Disadvantaged Area payments will bring about an even greater reliance on the Farm Assist, given the depressed state of farm incomes

Suckler Cow Welfare Scheme.
The Government must reject the Bord Snip proposal to end this scheme as the rate of payment under this scheme has already been cut by 50 percent.

The Dairy Sector Crisis

Dairy farming and the wider dairy sector are in an unprecedented crisis due to poor policy decisions at both national and EU level. The dairy sector supports 20,000 farm families and dairy processing directly employs 4,500 people.
The income loss for a 250,000 litre milk producer in 2009 relative to 2007 is €32,250 while the income loss relative to 2000 is €21,000. ICMSA estimates that the value of Irish milk output will fall by €1 billion in 2009, which is not only a loss to dairy farmers but also a substantial loss to the Irish economy.

For the first time, dairy farmers are producing milk below the cost of production and farmers are being paid the same price for milk as received in the early 1980s. The general consensus at this stage is that it could be late 2010 before any real recovery in market prices takes place. Substantial long-term damage is now being done to the sector in particular for dairy farmers who have invested heavily to secure their future in the sector. The ultimate responsibility for this disastrous situation rests squarely with the EU Farm Council, including the Minister for Agriculture, Fisheries and Food and with the EU Commission.

In the short term, the EU Commission must use the price supports available to it (intervention, export refunds and internal supports) to raise the milk price being paid to farmers to at least 28 cents per litre. The current policy of the EU Commission is to support milk price at approximately 20 cents per litre which is a totally inadequate response. In the long term, a total reversal of the CAP Health Check policy agreed in November 2008 is required. The policy agreed is disastrous for Ireland and farm families will simply not be able to survive under such a policy.

The French and German Governments at the July 2009 EU Farm Council meeting have acknowledged this by seeking a change in direction in policy and, indeed, the French Minister for Agriculture called for a reversal of the EU Commission’s dairy liberalisation programme. The French Agriculture Minister, Mr. Bruno Le Maire, stated “We can’t just leave agriculture to the laws of the marketplace. We need regulation of the milk market on a European scale”.

Ireland had traditionally supported the French in agriculture negotiations and ICMSA believes that we should now realign ourselves again with French dairy policy, which would be good for all EU, including Irish dairy farmers.
Key elements of ICMSA Dairy market policy
1.The milk quota system, modified where necessary to give an effective and flexible supply management regime must continue beyond 31 March 2015 in order to ensure farmers receive a viable milk price.

2.Current import tariffs must remain in place to protect this viable milk price

3.Increases in supply must be tightly linked to overall increased demand within the EU and profitable exports to non-EU markets.

4.Within the supply management regime, an appropriate system of price supports is required to guarantee milk producers a reasonable minimum price in the event of a downturn in the marketplace.

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