Urgent Action needed to protect food sector and Irish farm Families

The great American Liberal Jim Hightower once said that that is was still possible to make a small fortune in farming. The trouble was that you needed to start out with a large fortune. It is a sentiment that any dairy farmer would agree with. This year sees milk prices plunge to 1983 prices while supermarket prices remain at 2009 levels. According to the IFA farmers are now selling milk at between 4 to 7 cents less than the cost of production. A typical milk producer who produces 250,000 litres of milk can expect to end the year with a loss of at least €18,000. Such losses are simply unsustainable, and will lead to an exodus from milk production in Ireland.

It has become popular in some circles to discount the economic contribution which Agriculture makes to the Irish economy. Indeed the ESRI does not even have an Agricultural economist on its payroll. Yet Agriculture and Food are vital to the national economy and vital in particular to balanced regional development. The sector employs 230,000 and buys 80% of its raw materials and services in the Irish economy, valued at €8bn in 2007.

However the strength of the food sector and contribution it makes to the economy is ultimately dependent on the survival of Irish family farms. Without farmers there is no food industry. Sadly many farmers, and in particular dairy farmers, are facing a disastrous year.

There is a clear onus on everyone to respond to this crisis at EU, Government and the Co-op level to respond positively to the plight of farm families.

At an EU level we need to put in place a floor price for milk to prevent the massive swings in prices we have seen over the last two years.

In Ireland, we need a programme to reduce the cost of doing business to enable Irish processors and Irish businesses to compete. It is 25% more expensive to run a business in Dublin than it is in Belfast. The cost of electricity in Ireland is amongst the highest in the European Union. Government must put in place.

At a Co-op level we need to see the industry paying a decent price to farmers and work to put in place a more efficient processing sector.

The current collapse in milk prices is not the only issue facing the food sector. The decision by Tesco to begin sourcing grocery goods directly from the UK and to slash the amount of space allocated to Irish brands on its shelves in Ireland will have a potentially disastrous impact on the Irish food sector, on the choices available to Irish consumers and on the survival of the independent retail sector.

I say everyone favours a fair deal for hard pressed Irish consumers. There is no contradiction between a fair deal for farmers and a fair deal for consumers. But if the cost of temporarily low prices for consumers is permanent Irish job losses, that is too much to pay.

If Tesco genuinely wanted to deliver lower prices to Irish consumers all it had to do was cut some of its margin. Tesco, according to its own documents, is earning 9% profits in Ireland compared with 6% in the UK.

And while it is one thing for major retailers to decide to source international brands in the UK, Tesco has gone much further. It has dramatically cut the amount of space available to Irish brands on its shelves. The space allocated to Irish brands has been cut by between 40% and 75% according to Irish suppliers. Tesco Ireland is also seeking price-cuts of up to 20 per cent from Irish suppliers to guarantee their place on the shelves of its newly-reconfigured stores.

These moves are very serious and will have grave implications for the Irish food industry. In the short term this move will lead to job losses in sales and distribution, logistics and haulage firms as well as indeed at Tesco’s own headquarters. 140 jobs are to go in Tesco’s Headquarters in Dun Laoghaire. It will also lead to serious job losses amongst Irish suppliers. SIPTU has warned that two major manufacturing firms employing its members are already in serious trouble. Long-term affects include major job losses numbering in the thousands (estimates vary from 12,000 to 16,000) amongst Irish suppliers and the disappearance of well known Irish brands such as Bachelors, Kilmeaden Cheese, Lyons Tea, Miwadi, etc as well as loss of revenue and jobs in the media and marketing industries as the Irish food market becomes simply a subset of the UK market. Reduction in prices paid to primary producers and the possible elimination of certain types of horticulture production etc. The exposure of the Irish Grocery sector to increased currency risk and higher prices as sterling strengthens.

Where Tesco goes now other retailers will be forced to follow. They will ignite a price war that will devastate independent retailers, particularly smaller retailers who will be unable to survive the ensuing competitive storm. It may well lead to the collapse or the takeover over one of the current retailers taking control of the Irish retailer out of Irish hands.

The Irish Government must act swiftly to redress the balance between all powerful retailers and suppliers and farmers. We need fair trade legislation, and we need it quickly, if we are not to see the Irish food sector reduced to nothing more than the supplier of cheap commodities for the UK market.