January 5, 2003
Farmers must move away from class system to productivityPosted in · 1 comment ·
Status was based on the ownership of land. The lads who had land drank and played cards in the tap-room, under the old photos of famous local hurlers. The labourers downed their Beamish and Murphys at the bar. On Sunday, the lads with land sat at the front of the church, while those without congregated at the back door smoking their Navy Cuts and scanning the Sunday World.
The class system that covets agricultural land over agricultural productivity has resulted in a very rigid agricultural base in this country. This base was ideally suited to the ‘free-money’ days of the early Cap when money was linked to production rather than productivity. But questions have to be asked as to whether this peasant value system can adapt to the changes now facing agriculture across Europe.
As farmers intend to march in Dublin on Wednesday, it is important to reflect on the five major changes going on at the moment that entail a massive structural shift away from the old regime.
First, the enlargement of the European Union means lower prices and less money to go around for the rest of us. Also, particularly since Poland’s inclusion, it is the first time that an agricultural country producing similar products to Ireland has joined the club. Although agricultural countries like Spain, Portugal and Greece joined, we had little to fear from their olive oil business. This time it’s different.
Second, Germany, which has (reasonably willingly) bankrolled the EU, has run out of money. With four million on the dole, an ageing population and faltering growth rates, the last thing the Germans can afford is to pay for the likes of us.
Third, the US, together with the so-called ‘Cairns’ group of Australia, Canada, New Zealand and Argentina, has mounted an extremely successful campaign through the World Trade Organization to dismantle European agricultural tariffs. In the past, surplus EU production was dumped on foreign markets with the EU taxpayer picking up the tab. This is increasingly impossible as it contravenes free trade.
Fourth, the entire philosophy behind the Cap was informed by the famine that haunted Europe after the war. Such conditions, and the resulting idea that production had to be subsidised, are now firmly consigned to history.
Finally, and most importantly, in the search for value for money, people want cheaper, mass-produced food based on relatively intensive production techniques where the companies that add value, rather than the original producers, gain most.
Faced with such daunting challenges, a rural economy that values land ownership above land productivity doesn’t have a prayer. If land has been bought and hoarded simply to have, rather than for its own productivity, then Irish farmers have to ask themselves who they are — workers or landlords?
Considerable anecdotal evidence suggests that farmers regard themselves as landlords. Worse still, with the new Cap reforms that break the link between production and income, farmers are becoming the rural equivalent of urban teenage single mothers — totally welfare dependent.
Irish farming suffers from a strange affliction, a type of bizarre financial paradox. It is the paradox of property. (Bear in mind that this article is looking at average figures and not taking any regional disparities into account.)
Typically, an investor would expect the price of an asset to go up with its productivity or yield. The most expensive land should be the most productive. In Ireland the opposite is the case. We have just about the most expensive agricultural land in Europe, which is among the least productive.
The average cost of agricultural land in Ireland is €7,000 a hectare. One would expect the asset to yield about 10 per cent per year. Thus a hectare should be yielding about €700 per year. Even the smallest farmer with 30 hectares should be earning about €21,000 per year.
But, according to the Irish Farmers Association (IFA), the average farmer is making €15,000 per year. (Readers may point out that there are huge differences between farmers in the west and those, for example, in Kildare, but we are using average figures here.)
Working off the back of the envelope, either Irish farmers are being underpaid by 25 per cent or farming land is overvalued by at least 30 per cent. As Irish farmers are being paid from Brussels there is little point focusing on the farm-gate price, but we can say something about land prices. Farmers are paying over the odds for land, not to work it, but to hoard it. The land as we know gives them stature, but it also ironically makes them poor. So the average Irish farmer is asset-rich and cash-poor.
The land is bleeding farmers dry and given that only 1.5 per cent of agricultural land changed hands last year, farmers are hoarding more and more of the stuff.
So why hang on to any of it? One reason is the class system, and the other is that farmers are now developers. Many Irish farmers make considerably more money selling sites than producing product. Thus, psychologically, emotionally and financially, Irish farmers have a vested interest in keeping the price of land high.
This is one of the biggest scams operating in this country. The obsession with land has allowed land prices to hold steady and even rise in the face of a collapse in farm productivity.
The IFA has every reason to keep the price of land up. In contrast, every non-farming first-time buyer, every young rural family looking for its own home, every politician that complains about young people in remote areas not being able to afford to live in their own village, should be railing against this.
But they are not and this is because they subscribe to the old peasant value system where land is king, denoting status and class, whereas honest work and productivity is frowned upon.
Looking forward, the EU’s Fischler plan envisages paying generations of farmers’ dole. Worse still, these will all be asset-rich landlords sitting on farms worth on average €180,000!
Michael Davitt would turn in his grave if, 120 years after the Land League, asset-rich landlord/farmers end up on the dole, paid for by indebted industrial workers who are mortgaged up to the hilt and paying through the nose for probably the most expensive food in the world!