OPPORTUNITIES AVAILABLE – WHAT NEEDS TO BE DONE?

OPPORTUNITIES AVAILABLE – WHAT NEEDS TO BE DONE? Encouraging Young People into Farming 4th March 2009

Introduction • “Not in Kansas anymore” • Economic growth has come to an abrupt halt – increases in unemployment, job uncertainty, emigration • Young people – no experience of recession • Opportunities for young farmers? • Need to first look at current situation for Irish agriculture

Agriculture and the Irish Economy • Numbers working in agriculture have declined - 128,000 family farms in 2007 from 170,600 in 1991 • Still an important generator of employment and indigenous wealth • Agri-food accounts for over 50% of exports from Irish owned manufacturing • Farming, food and related services provide 300,000 jobs or more than 20% of employment outside Dublin • Low profit outflow and low import requirements • Contributes to balanced regional and community development

Agriculture during and after the Celtic Tiger • Attraction of farming as a career suffered due to easily available alternative employment in construction • Numbers in construction doubled in less than a decade, 280,000 in 2007 – fell 22% in 2008 • Other driver of economic growth was consumer spending, largely driven by borrowing – this has fallen significantly, with deflation, or falling prices in early 2009

Agriculture during and after the Celtic Tiger • Choosing farming as a career option is now more attractive – challenge is to ensure that career is sustainable throughout economic cycles • Young farmer is self-employed and in more control of his/her own career path • Policymakers must realise that Ireland is a small-open economy and economic recovery will be driven by export sectors, including agri-food

Outline of Presentation • Provide Initial Overview of Structure of the sector – need to know from where we are starting out • Highlight key incentives and schemes currently in place to encourage young farmers, and the opportunities these provide • Identify shortfalls in schemes and suggested other desirable measures • Focus on two specific sectors – dairying and biomass crops

Structure of Sector – Age profile • An ageing sector • Majority of farmers aged over 55 – 50.5% of farming population in 2007, up from 39.5% in 2000 • Approximately 9,000 farmers, or only 7% of farming population aged under 35, down from 13% in 2000

Structure of Sector - Farm Structure • Average farm size increased by 25% between 1991 and 2007, up to 32.3 ha • Mobility in land use has increased – 33% of all farms renting over 750,000 ha in 2007 • Farm fragmentation still an issue – 3.5 land parcels per farm • High price of agricultural land in last decade, particularly relative to income that can be generated – but fell 16.1% in 2008

Enrolment in Agricultural Colleges • Increase in demand for agricultural courses at further and higher education level • Dramatic increase in enrolments in Teagasc agricultural courses – 621 students in 2008, up from 298 in 2006 • Points increases in higher education courses – Bachelor of Agricultural Science increase from 315 to 375 between 2007 and 2008 • Contrast with fall in demand of over 30% for courses in the Built Environment

Where to now? • Agriculture in Ireland is at a crossroads • Unfavourable age-profile and farm fragmentation • Increasing numbers in agricultural courses • Economic recovery dependent on competitive export sector • Farming needs new blood, with well trained new entrants enabled to drive a market-led farming sector

Farm Inheritance and the CAP • Almost 100% of new entrants enter through inheritance • Access to land often provides the greatest constraint – quantity and quality • Type of farming enterprise inherited • Common Agricultural Policy – Payments decoupled from production • May delay withdrawal from farming or reduce land mobility

Policy instruments General • Taxation system has been amended to encourage land consolidation and transfer • Specific reliefs for young farmers Long Term Leasing • Annual Income tax exemptions of up to €20,000 for landowners who lease out land for long periods • Leased land also eligible for Capital Gains Tax Retirement Relief

Policy instruments – Stamp and Stocking Relief Stamp Duty Relief • Full relief for young trained farmers for transfers of land and farm buildings • Relief for all farmers for land purchased for purpose of consolidation Stocking Relief • 100% relief for young farmers expanding their herd size • Farmer can offset increases in value of stock against tax liability

Policy Instruments – Capital Taxes Capital Acquisition Tax • Applies to recipient of property • Agricultural relief reduces market value of agricultural property by 90%, thereby increasing relief threshold Capital Gains Tax • Charged on any profit made on disposal of land – 22% rate • Major barrier to farm consolidation and land transfer • Proposal – CGT Relief if proceeds from sale of land are used to acquire other land for farm consolidation

Policy Instruments – Grant Aid Installation Aid and Early Retirement • Installation Aid used to offset establishment costs, or used as working capital • Early Retirement Scheme provides pension for retiring farmers aged over 55 Budget 2009 • Suspension of applications to schemes • Incredibly negative decision • Exchequer Funding is limited - Priority must still be given to schemes that encourage innovation and restructuring in productive industries • Decision to suspend applications must be reversed

Policy Instruments - Partnerships • Formal Agreement between two or more people to farm together and share profit • New entrant/parent partnerships - 450 partnerships in operation in dairy sector • Disincentives exist - Benefits of partnership are lost through loss of individual rights • Maximum allowances for partnership same as for single farmers - Installation Aid, On-farm Investment Schemes, DA Payments, Modulation-exempt threshold • Need to address this – other country examples, e.g. France

No man is an Island Accessing and Using Support Services • Interaction with other farmers is important, both from a social and business perspective • Need to access advisory services, such as Teagasc – 3C discussion groups, farm visits, assistance with application forms • Importance of membership of organisations such as Macra and IFA for social contact and discussion of farming issues

Accessing and Using Support Services • I-Farm Initiative – facilitates farm to farm trading and is a portal for accessing required farm services • IFA Skillnet – assist farmers with efficient management of their business • Role of technology will be of increasing importance - need for roll out of National Broadband Scheme • Services go beyond monetary support measures – challenge for young farmer, farming organisations and advisory services to develop strong relationships

Dairy Farming • Market-based, full-time farming career option • Milk Quota regime provides priority access at a lower price to young farmers • Abolition of milk quota will provide opportunities to expand • Challenges will include • Production at a scale and cost-base competitive enough to withstand volatility in milk prices • Capacity of processing sector to process increased volumes

Biomass Crops • Increasing role of biomass crops in generating renewable energy and reducing emissions – particularly heat energy • Forestry is largest biomass resource in the country – 300,000 hectares under farmer management • 2,000 hectares of Willow and Miscanthus planted under Bioenergy Scheme • Currently not viewed as an integral part of farm system - often planted on marginal land • 20 year tax free income, of up to €760 per hectare but Replanting obligation a disincentive

Biomass Crops • Government must create a market for these products • IFA Proposal - Biomass Public Procurement Initiative – convert 25% of all public buildings to biomass heating systems • Potential to reduce public sector annual heating costs by €100 million • A supporting environment that enables income generation will incentivise young farmers to diversify

Conclusion Economy • Downturn in Irish economy – difficult for any enterprise starting out • Access to working capital is constrained and incentive schemes have been suspended International decisions • Size and structure of CAP post-2013 unknown – need to ensure food security and maintain family-farm structure • Agreement on WTO deal will affect structure and viability of Irish agriculture – particular implications for beef, sheep and dairy

Conclusion • Farming is attractive as a long-term career choice • Technological advances and developments in different farm sectors will provide their own opportunities Finally – Opportunities from Adversity • Pork product recall – consumer demand for accurate Country of Origin labelling • Commitment by Government to extend labelling to pigmeat, poultry and lamb sectors

Thank You Questions?

OPPORTUNITIES AVAILABLE – WHAT NEEDS TO BE DONE?