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ITBA EXPO 2010 Farming during the economic downturn and the potential for growth

ITBA EXPO 2010 Farming during the economic downturn and the potential for growth. Rowena Dwyer – IFA Chief Economist January 30 th 2010. Agriculture and the Economy. Agri-food sector provides an estimated 270,000 jobs - 1 in 7 jobs in the country.

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ITBA EXPO 2010 Farming during the economic downturn and the potential for growth

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  1. ITBA EXPO 2010Farming during the economic downturn and the potential for growth Rowena Dwyer – IFA Chief Economist January 30th 2010

  2. Agriculture and the Economy • Agri-food sector provides an estimated 270,000 jobs - 1 in 7 jobs in the country. • Largest Irish-owned productive sector, accounting for over 50% of exports from Irish-owned manufacturing. • Exports of €8.2 billion in 2008 represent 10% of total manufacturing exports and account for 32% of net foreign earnings • High Value Added Sector – Multiplier of 1.73 v. 1.11 for Chemical Industry

  3. Irish Bloodstock Sector and the Economy • 22,084 employed in thoroughbred equine industry – rural employment • Gross Value of Industry - €1.1 billion • Registered breeders - 10,106 – 93% of whom own fewer than 5 mares • Exports in excess of €180 m annually • Tourism – 80,000 visitors for race meetings, sales and stud operations

  4. Effects of Economic Downturn A combination of factors are causing serious financial problems on many farms and for thoroughbred industry: • Low product prices and incomes in all the main sectors of farming due to global economic downturn • Weather related problems, resulting in increased costs particularly for fodder, and lower animal production and crop yields. • Cutbacks by the Government in a number of farm schemes and funding for equine industry • Horse and Greyhound Fund – Cut of €17 m or 22% of funding • REPS, DA, Fallen Animals, Installation Aid, Early Retirement, Suckler Cow – Cut of >€125 m or 25% of funding

  5. Effects of Economic Downturn • Reduced availability of credit in the economy, arising from the crisis in the banking sector • Ongoing weakness of sterling, significantly reducing value of exports to UK • Agri-food and drink exports down €1 billion in 2009 • Exports of horses down 20% in volume (number) and 55% in value • Reduced domestic consumer demand (-7%) – horses a luxury item

  6. Cost-price Squeeze in Farming

  7. Agricultural Prices and Farm Income • Output Prices have fallen in 2009 • Cattle Down by > 12% • Dairy Down by > 30% • Cereals Down by ~ 30% • Bloodstock sales Down by 32% (€30m) • Sport Horses Foal and 3 Year prices Down by ~20% • National Farm Income fell by 30% in 2009 • Average Farm Income - €13,000 • Average Farm Income with no off-farm employment - €16,000

  8. Rural Employment 2008-2009 • Employment in primary agriculture has fallen by approximately 15%, or 16,000 • Estimated 15-20% drop in employment in equine industry • Employment in food manufacturing has fallen by 18% or 10,000 • 30% of farmers have lost their off-farm jobs

  9. Challenges in Business Environment • Energy Costs • Reducing Energy Costs Essential for Competitiveness – NCC October 2009 • Gap in energy prices between Ireland and EU is closing – Sustainable Energy Ireland January 2010 • Access to Bank Credit • Bank recapitalisation - increase lending to SMEs by 10% • NAMA –intended to increase liquidity of banks and increase lending to businesses • EIB Loans for SMEs at competitive rates – AIB, Ulster Bank, BOI – for business development purposes

  10. Challenges in Business Environment • Labour Costs • Min. Agricultural Wage Northern Ireland – 25% below Irish Agricultural Wage • Lower labour costs in other European countries – e.g. Germany • Broadband Roll Out • Usage marginally below OECD average and far behind advanced countries, download speeds and infrastructure still lagging • Ending of Eircom and ComReg dispute over charges to competitors for supplying broadband over telephone lines – 26 January • Dominance of Retail Sector at National and EU level • Statutory retail code of practice and a supermarket ombudsman

  11. Structure and Education • Only 7% of farmers below 35, but greater numbers going through agricultural education and training today than in decades • >3,200 undertaking further education courses with Teagasc • Demand increasing for all higher education agriculture courses – 1st preferences up 50% 2009/08 • Food Routes – Guide to Agriculture and Food Courses – AgriAware January 2010 • Economic recovery dependent on competitive exporting sectors, including agri-food

  12. Opportunities from the Downturn • Land Use • Agricultural Land prices down 43% in 2009 • Potential for land transfer and consolidation – access to credit • Mobility in land use has increased – 33% of all farms renting over 750,000 ha in 2007 (21% - 550,000 ha - 1991) • Tax-free long-term land leasing – 10/12/15 years • Construction costs • Tender prices down by more than 20% - at 1999 levels • Opportunities for restructuring and improving efficiency – at individual farm and industry level • Other Input Costs • Feedstuff costs down 10% in 2009 - increased opportunities through farm-to-farm trading

  13. Opportunities with Recovery • Exports • Sterling should strengthen as 2010 progresses as currently undervalued– recovery for main export market • Recovery in main EU markets will lift Irish exports • Medium term • Demand for food is increasing globally – quality, sustainable production • Need to add value to produce – move from basic commodity production into higher value markets • New markets and opportunities – agriculture and renewable energy production – Government investment required for development of market

  14. Thoroughbred sector • Sterling recovery will benefit thoroughbred sector also • Demand remains for high quality output – evidence of strong sales at top end even during 2009 • Disposable income down and private consumption subdued • Need to decide on market, produce right animal for market and use high quality breeding stock • Watch input costs • Use best practices on-farm to maximise output and quality – e.g. RACE education and training programmes for ITBA members

  15. What we have to offer

  16. Opportunities for Rural Economy • Challenge for actors in rural economy is to coordinate better • Rural unemployment – construction related, slow recovery • Restricitions in public funding in next 5 years • Rural Tourism – the Vision • Tourism Ireland – “specialist activity holidays” a best prospect for achieving tourism goals • Visitor stays in rural guesthouse – landscape maintained by farming sector • Attends local race meeting • Eats in restaurant serving locally produced food

  17. Thank you for your attention

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