Agri Food 2010 Committee

Executive Summary

Context

The agri-food sector will face major challenges in the next decade, arising from a variety of sources. We have at best only a few years to prepare to meet these challenges, and this will require major changes at all levels from the farm to the retailer.

We cannot predict the outcome of the new round of world trade negotiations, but we can say with some confidence that they will lead to further trade liberalisation. Change in EU policy will be driven by the outcome of these negotiations and by EU enlargement and budget pressures. These issues will come to a head as early as 2003 when a review of the EU agriculture budget is due, which may coincide with a decisive phase in the trade and enlargement negotiations. The overall picture that emerges of the likely future is of a much more challenging environment, which will expose any lack of competitiveness in the agri-food system.

These changes in the international policy context will be matched by new trends in the EU food market. This market is changing rapidly and fundamentally, driven both by new consumer lifestyles and concerns and by globalisation and concentration at retail level. The effect of these changes has been to squeeze margins for processors and farmers and to place much greater emphasis on innovation, marketing and food safety assurance. These trends will intensify in the next ten years and further changes will emerge from the much wider application of new technology. The future success of our food industry will depend crucially on our ability to develop and apply the skills needed in this new marketplace.

Farm structures are also changing and this process will intensify in our ‘tiger’ economy. The threshold for an acceptable income is rising, and in the future full-time farmers will need output of at least 70,000 gallons of milk, or the equivalent in other enterprises, to be viable. Part-time farming will continue to grow rapidly. The Committee believes that it is likely that by 2010 we will have 20,000 full-time and 60,000 part-time farmers, with a further 20,000 in transitional groups.

Vision

The Committee’s vision for the future of agriculture and the food industry is framed in the context of the challenging future that lies ahead. It envisages:

- A dynamic agricultural sector, consisting of both full-time and part-time farming households, which is

• providing a viable living for farm households;
• firmly focused on consumer requirements, in partnership with the food industry;
• closely integrated with the wider rural economy; and
• contributing positively to the natural environment.

- A competitive food industry

• focused on consumer markets, with strong innovation and marketing skills and an unwavering commitment to food safety;
• built on a strong partnership with its farmer suppliers;
• with the necessary scale and efficiency at primary level;
• which includes a large and growing sector focused on product innovation and quality markets;
• which delivers competitive returns on investment, and attractive careers to employees.

Achieving this vision will require great change. This will need the committed action of all participants in the industry and a clear focus in public policy. The Committee has identified a set of strategic actions, which are necessary for the kind of transformation that is required. These changes will not be achieved without pain, but the alternative is far greater difficulty at a later stage.

Consumer Needs

Addressing consumer needs and concerns must be the absolute priority for all stages of the food chain – farmers, the food processing industry, retailers and food service.

• Farmers, processors, retailers and caterers must accept a shared responsibility for food safety. A national Food Safety Plan should be produced, which sets out the responsibilities of all agencies involved and outlines the contingency plans for food safety emergencies. Urgent attention is required for the development of a co-ordinated laboratory service to support food safety activities.
• A range of actions are required aimed at improving the quality and production standards of beef, sheep and milk. A clear distinction should be made between the eating quality of Irish beef, which is good, and the standard of cattle, which is declining.
• Achieving and maintaining the highest standards of animal health and welfare is imperative. Clear targets should be set for animal disease measures. A new Animal Welfare Forum, with wide representation, should be established.
• There is a real market opportunity for organic production. Ambitious targets should be set for the development of the organic sector, and a new Organic Development Committee should be established to oversee the process.

Food Industry

Significant changes will be required if the food industry is to be profitable and to prosper in the increasingly competitive and demanding market conditions that are developing.

• A more pro-active approach to marketing by the food industry is needed, supported by a comprehensive market research and intelligence service operated by Bord Bia.
• Radical improvement in the level of customer focused innovation in the sector is required through, among other things, a much-increased research and development effort. The possibility of allocating additional NDP funds to this heading should be reviewed regularly.
• Stronger and clearer strategic partnerships need to be developed across the food chain from producer through to final consumer.
• The industry must develop the necessary efficiencies and scale of operations, and face the need for considerable rationalisation in many sub-sectors especially beef processing, dairy processing and poultry processing. Public funding to the primary processing sector should be dependent on structural change, but primary responsibility for action lies with private stakeholders.
• Action is needed on a range of issues in the major commodity sectors, particularly in the light of further trade liberalisation. The implications for the beef industry are particularly serious. The Committee endorses the Government’s stand on the defence of ‘blue box’ payments and export subsidies in the WTO negotiations, but believes that the industry must prepare itself for significantly lower levels of protection on the European market.
• The dairy sector should continue to focus on the development of branded products where these have been successful, while also recognising the potential of newer value added products. Increased production of cheese should remain a priority.
• Import penetration of the domestic pigmeat and poultry market is a cause of serious concern. If the domestic industry is to respond effectively, urgent action is needed on rationalisation and the development of value added products.
• Large food firms should be encouraged to form partnerships with small innovative companies in the prepared consumer food sector. State agencies should give special attention and focused support to small and micro companies.
• Far greater attention to human resource development is required if the food industry is to achieve the necessary growth in productivity and to be a competitive purchaser of labour in our tight labour market.

Agriculture

Agricultural policy must be framed with a full understanding of the differing needs and capacities of full and part-time farmers, and in the light of the challenging environment which farmers will face in the future.

• A national competitiveness action programme should be developed, which includes actions and performance targets on structural reform, cost efficiency, research, technological change and training. Key competitiveness indicators should be published regularly.
• Increased land mobility and transfer of farms to younger farmers should be encouraged through tax incentives and the provision of retirement payments for farmers over 65 in place of disadvantaged areas (headage) payments. The scope for innovative forms of farm ownership should be examined.
• Considerable consolidation of milk quota will be required, as only 3,000 farmers are now over the 70,000 gallon minimum threshold for future viability. A free market in quota would be desirable well in advance of the elimination of quotas, should that arise. Specific measures should be put in place to assist smaller dairy farmers who have the potential to become viable.
• Investment will remain a key concern for both full and part-time farmers. Public support should be targeted towards lower income and younger farmers and public good investments.
• Agricultural education and training must be adjusted to meet the different requirements of full and part-time farmers. The fundamental overhaul of agricultural education currently being undertaken should be pursued urgently.
• There should be no distinction made between full and part-time farmers in terms of eligibility for schemes.

Rural Development

Agriculture and the food industry have a significant capacity to contribute to sustainable rural development, as recognised in the White Paper on Rural Development.

• Future policy should be focused on farm household viability in all its dimensions, including farm and off-farm income sources. Appropriate data is needed to support this new approach.
• Consideration should be given to innovative approaches, including insurance schemes, in supporting farm income and simplifying direct payments.
• Specific targets for reducing poverty levels in low-income farm households should be set and monitored. Disadvantaged areas payments should be targeted at lower income farmers, and the impact of the Farm Assist Scheme should be monitored.
• Balanced regional employment growth should be encouraged. The successful implementation of regional policies will be crucial in providing off-farm employment opportunities in rural areas.
• Environmental protection is a prerequisite for the future development of the agri-food sector, and specific measures to improve awareness and raise standards should be taken.

New Technology

In order to prepare for the technological changes that will occur in the first decade of the new century, the sector will need to:

• Develop a strong competence in biotechnology so that we will have the ability both to apply and regulate it; and
• Make rapid progress in the use of Information and Communications Technology at all levels of the sector from the farm to the consumer market.

Support Services

The support services operated by four of the main State agencies involved (DAFRD, Teagasc, Bord Bia and Enterprise Ireland) play a crucial role in the development of the agri-food sector. Their focus is changing to adapt to the new challenges facing the sector.

• Every effort should be made to ensure that the very large number of schemes and services operated by DAFRD are undertaken with the minimum possible bureaucracy, consistent with the necessary national and EU controls.
• Speedy implementation of the programme of change for research, advisory and training services set out in Teagasc 2000 is urged. The re-orientation of the advisory and research services around the separate needs of full and part-time farmers is particularly welcome.
• Investment in marketing, in which Bord Bia will have a key role, will be critical to the future of the sector. A comprehensive market research and intelligence service, operated by Bord Bia, could be a key catalyst for consumer focused development in the sector.
• Enterprise Ireland will have a pivotal role in providing leadership on many of the priority actions identified for the development of the food industry.

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