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CAP REFORM 2014-2020 POTENTIAL IMPACT ON AGRICULTURAL OUTPUT FROM INTRODUCTION OF MINIMUM PAYMENTS 6 th March 2013.

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Presentation on theme: "CAP REFORM 2014-2020 POTENTIAL IMPACT ON AGRICULTURAL OUTPUT FROM INTRODUCTION OF MINIMUM PAYMENTS 6 th March 2013."— Presentation transcript:

1 CAP REFORM POTENTIAL IMPACT ON AGRICULTURAL OUTPUT FROM INTRODUCTION OF MINIMUM PAYMENTS 6 th March 2013

2 Threat from CAP reform developments Latest negotiations on CAP – implications for Ireland’s SFP distribution Potential introduction of a minimum per hectare payment – Commission have indicated they want a €196/ha minimum In Ireland, this may lead to redistribution of €145m from farmers with above average payments to bring all farmers up to €196/ha minimum In addition, SFP available for general distribution among farmers will be €110m less than is currently available Leading to a potential drop in SFP for farmers with payments above €250/ha of 27% - there are 60,000 farmers in this cohort 17,000 farmers with payments between €200-€250/ha could also face some losses due to reduction in overall budget and redistribution due to Young Farmer etc. (-9%)

3 Potential impact on Farm Incomes For the 60,000 farmers with payments above €250/ha, a 27% reduction in the SFP would have the following impact on income*: Cattle – 25% Tillage – 20% Dairy – 10% Sheep – 25% Those on higher payments have ‘significantly higher stocking rates, roughly double the rates of those on low payments’ ( DAFM, Joint Oireachtas Committee on Agriculture, 21/02/2013) (* based on SFP as a % of average farm income , Teagasc National Farm Survey )

4 Farmers’ decisions in light of SFP cut* What would a 30% cut in SFP mean? Farm inputs would be cut back Extensification of farm enterprise Reduction in farm output Capital equipment would not be replaced Short-term land rental (conacre) would be unaffordable Selling of stock to meet bank repayments Reduced capacity to purchase stock No compensating output increase would make up difference (* UCD case-studies undertaken on behalf of IFA, 2011)

5 Implications for the Cattle Sector Prior to introduction of Suckler Cow Premium, the suckler cow herd stood at 420,000 Suckler cow herd today million In 2010 the 15% drop in income from had led to a fall in suckler cow numbers of almost 100,000, and a fall in farmgate output value for the sector of almost €200m Under SFP scenario, cattle farmers with above average payments will lose 25% of their income/purchasing power Negatively impacting on the price that can be paid for progeny of Suckler Cow Herd - Viability of maintaining suckler cow herd in question Leading to a potential reduction in Suckler Cow Herd of hundreds of thousands FH2020 targets of increasing the value of output of the beef sector by 40%, or €600m will be lost

6 Implications for the Dairy sector FH 2020 targets of 50% expansion cast into serious doubt: Cost of investment in processing, €400m capital requirement and €500m working capital €1.5b on-farm investment requirement Expansion is dependent on farm profitability, including SFP, repayment capacity and land availability Potential of 9,500 jobs created, €1.3b additional export revenue at risk to Irish economy

7 Implications for the Tillage Sector Major volatility in sector with huge fluctuations in income due to price and cost volatility and weather issues – 2007, from €40,000 to €15,000 in 2009 and back to €36,000 in 2010 Current reform proposals creating land availability and cost issues – rocketing land rental prices and/or landowners taking back land to establish own entitlements Importance of SFP to maintain production - area planted fell by 15%, or 50,000 hectares between 2008 and 2010 With 40% of arable area rented – lead to significant stacking of entitlements on owned land area, therefore average losses will be far in excess of 27% average A permanent reduction in income due to fall in SFP will impact heavily on production decisions and overall viability of enterprises

8 Overall - Devastating impact on expansion plans Farmers most negatively affected are those with greatest levels of current productivity and plans for expansion Capacity to repay existing borrowings, make new investments severely diminished Ability of farmer to withstand volatility – price/cost fluctuations, impact of weather disturbances Introduction of minimum payment will firmly capitalise SFP value into land rental prices – reducing viability, land availability and curtailing expansion plans FH 2020 targets to increase farm output by €1.5b and exports to €12b cast aside

9 Overall - Devastating impact on expansion plans Farmers most negatively affected are those with greatest levels of current productivity and plans for expansion Capacity to repay existing borrowings, make new investments severely diminished Ability of farmer to withstand volatility – price/cost fluctuations, impact of weather disturbances Introduction of minimum payment will firmly capitalise SFP value into land rental prices – reducing viability, land availability and curtailing expansion plans FH 2020 targets to increase farm output by €1.5b and exports to €12b cast aside


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