September 28, 2015

Food sector sows seeds of growth

Posted in Sunday Business Post · 79 comments ·
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While at the National Ploughing Championships last year, in truth I felt like a bit of a fraud mooching among the Massey Fergusons. My suburban Dun Laoghaire is about as far from an upbringing in the Irish countryside as you are likely to have on this island.

Yet, when you look a little closer, most of my Dublin teenage friends had at least one grandparent from the land.

Although not so much the case for this generation of teenagers, my generation of Dubs has extraordinarily strong links to farming.

As the Jackeen cousin of a big Cork family, I get reminded of this any time I venture south beyond Newlands Cross. The Ploughing is Irish agriculture. Agriculture is crucial to the economy and the fabric of Irish rural society and it is still the biggest indigenous industry in the country.

Despite the problems with beef prices last year and milk prices this year, Irish farming has the capacity to grow rapidly. There is real value in land, food and farming. The global demand for food is constant and growing.

After all, if the world population is exploding to seven billion, someone has to feed these people. For example, who will provide milk powder to Chinese infants?

It could be Ireland – one of the world’s natural milk producers. Tiny New Zealand has already achieved the remarkable feat of becoming China’s biggest dairy supplier. Why couldn’t we follow suit?

But to get there, the complexion of Irish farming has to change dramatically.

The most successful farmers in the world are Dutch. The old quip that if the Dutch lived in Ireland they’d feed the world and if the Irish lived in the Netherlands we’d drown, is half-true.

The Netherlands does feed lots of the world. It generated a phenomenal €79 billion in agricultural exports in 2013, second only to the US.

That’s over three times the level of Ireland, in a country that has a constant battle with the North Sea and has one of the highest population densities in Europe.

Three times the value with a land mass just a bit bigger than Munster. Now that’s efficient farming, and Holland has one of the highest environmental standards in the world in terms of pollutants used in farming.

So it is possible to dramatically increase capacity to meet new food demand. And we know that the demand for the type of food we produce is rocketing. And the change in the Asian diet is not limited to dairy.

It is a little appreciated fact that when less-well-off people get richer, the first thing they change is not their iPads, their smartphones or their cars as you might expect – people on the move upwards change their diet. When they have a few more shillings, people shift to eating more meat.

We are already seeing this in India and China, where the new middle classes have dropped their traditional diets and are adopting western red meat to indicate their higher, more westernised, social status.

This diet shift comes with its own environmental issues because such a changed diet demands massive increases in inputs, fertilisers, water and so on. But let’s park these concerns for the moment and think about the future for Irish agriculture in the context of these global changes.

There is an enormous global opportunity for efficient Irish farming in a world of growing populations and changing diets. And the figures in Ireland for agriculture bear this out.

Agriculture is still Ireland’s biggest indigenous sector, contributing €24 billion to the Irish economy, almost 10 per cent of all exports and 7.7 per cent of all employment. (According to Teagasc, this figure rises to 10 per cent when all agricultural subsections are included.)

And crucially in a world where industries are footloose and move freely, an industry like agriculture is fixed. It can’t move. (Many industries in Ireland are simply input/output industries, whereby lots of imports come in and they are redirected out to the world from Ireland with very little local value added bar the wages.)

Farming is different because most of the materials are local: the workers, the land, the crops, the fertiliser and the animals. As a result, according to a recent UCD study, every €1 investment into Irish agriculture leads to a €4 return in the economy.

We can see this by the gap between farming output, which is just above €4 billion, and agricultural and food output, which is €24 billion.

This implies a massive €20 billion in value is added from farm to export market. This is huge and would get bigger if farmers adopted the Dutch approach to agriculture.

This economic ratio, which measures how much €1 circulates in the local economy, is called the multiplier. It explains how each euro spent can be amplified.

For example, I buy from you, you employ my friend and pay his wages, he buys something with his wages from me and I employ someone else who, with new wages, buys from you. In economics, your spending is my income and my spending is your income. The more local the trading, the more this applies, and this is what the Ploughing is all about.

Agriculture and food is local. Raw materials are local. Employment is local and sales are local. More than 70 per cent of farming raw materials are locally sourced, as opposed to just 44 per cent for domestic manufacturing companies and much less for multinationals.

But here’s the rub: in order to change to a Dutch model, the essence of Irish country life would have to change quickly.

There could be no place for small holdings. Huge tracts of land, which are now in effect hoarded, would have to be sold and ultimately the very landscape of Ireland would change irreparably.

Is that too high a price? I don’t know. What do you think?


  1. Green Kiwi

    Subscribe!

    • Deco

      I have added a piece at the end that indicates that the article is based on lazy assumptions.

      In fact, it is completely dishonest.

      Ireland average size 32.3 hectares.
      The Netherlands average size 29.5 hectares.

      DMcW – you are being either lazy or dishonest.

      • DECO

        Here’s my sources

        http://www.hollandtrade.com/sector-information/agriculture-and-food/?bstnum=4909

        Have a look if you want.

        And btw, to you and everyone I am getting a little bit fucked off at the tone of all your comments. If you don’t agree fine, but this accusatory attitude is pissing me off. If you don’t like what I write, then off you go somewhere else.

        As Oscar Wilde said “Consistency is the hallmark of the unimaginative”. If you want a litany of boring factoids every week, fuck off somewhere else!

        D

        • Deco

          David,

          Have you lost the plot ?

          There are weaknesses in Irish agriculture. But I seriously doubt that the problem is smallholders. The elimination of smallholders in Irish retail has destroyed the main street of Dun Laoghaire. The problem with your argument is literally around the corner and down the road.

          You have changed recently. I could warn you as to where this will end up. And it is not a good place.

          I could quote Marcus Aurelius, but I suspect it is best that I (and possibly others) wait for you to calm down first, and see the obvious.

          Some gratitude to people for speaking their opinions, rather than giving you fawning adulation, might be in order.

          Personally, I always respect people for disagreeing with me and stating their mind, rather than giving me unearned praise.

        • Your source does not indicate a change in the Dutch landscape other than unsustainable activities were taking place resulting in sewage problems but that now these practices were reversed.

          There is nothing there about larger holdings. Rather the mention of a huge use of greenhouses would have the reverse effect of making smaller parcels of land highly productive. I surmise that there will even be aquaponic practices that recycle water and effluent through the growing of crops planted in high density.

          “In 2010, there were more than 10,000 hectares of greenhouses in the Netherlands. Half of this, 5,000 hectares, was used for growing vegetables.”

          Intensive agriculture on small holdings is the likely future trend. Agribusiness does not produce the yield per acre of the efficient small holding.

          Large agribusiness is more interested in exercising control over food and its supply. Try an article on Monsanto and see if you can justify its continued practices of poisoning the planet with pesticides.

        • From the link

          “Dutch agricultural entrepreneurs use efficient and sustainable production systems and processes, resulting in a productivity that is five times higher than the European average.”

        • SMOKEY

          Does this mean we cant come to Kilkenomics?

      • Deco

        I felt that it was important to be accurate in one’s assumptions.

        Now, come on David, you can do better than produce this. The response indicates an inability to handle criticism.

        Facts, should be welcome. And we are talking about the official statistics of both countries.

        What does it mean, if they are not ?

  2. markodxb

    What you are saying is more larger Industrial and efficient farms. would that not mean less people employed.. Large Corporate Farms will care little for ‘local manpower and welfare’…

  3. Antaine

    I came here via
    “Everyone should pay their fair share”
    Nobody likes paying taxes. We hate income taxes such as the USC. We loathe consumption taxes like Vat. We truly hate even the idea of a wealth tax….
    but am reading about farming.

    Isn’t the Netherlands model more like a big factory? Artificial lights and heaters. They might produce tons in smaller spaces but I’m sure this could be replicated anywhere not just Ireland.
    Isn’t the Irish ‘clean green natural’ image what we’re selling abroad?

  4. Thriftcriminal

    Yep, larger more efficient farms, no little farms, no part time farmers who have a job and use their small inherited (very tax efficiently) plots inefficiently as a part time venture.

    But that would lead to all sorts of lost votes, so even though it is the correct and efficient thing to do it will never come to pass as people anachronistically cling to the trappings of a foregone century.

  5. grougho

    David, interesting article,
    However the last paragraph concerning the inefficiency of smallholdings is dangerously inaccurate and misunderstanding this leads to another theme you are currently writing about which is wealth concentration.

    Please read and understand the following discovery cited from an article by George Monbiot
    “It was first made in 1962 by the Nobel economist Amartya Sen(2), and has since been confirmed by dozens of further studies. There is an inverse relationship between the size of farms and the amount of crops they produce per hectare. The smaller they are, the greater the yield.”

    This is fully detailed in this link
    http://www.monbiot.com/2008/06/10/small-is-bountiful/

    Can you please stop repeating the erroneous assumption that small is inefficient.
    or if you want to continue please cite references, because your misunderstanding is perpetuating land and wealth concentration.

    Regards

    • “There could be no place for small holdings. Huge tracts of land, which are now in effect hoarded, would have to be sold and ultimately the very landscape of Ireland would change irreparably.”

      You are correct David, you have no connection with the land. This is totally incorrect. In the North Peace factory farming arrived in the late 60′s and farms went from 160 acres to 10,000. The yield for wheat went from 35-40 bushele an area to 15. I will not bore you with the details.

      In my allotment this summer, I grew sweet corn at a high density, by careful tendering, that was 2-3 times that of a field crop. Without herbicide and using organic compost. Market gardens here using a combination of planned husbandry and green houses produce 60-80,000 dollars worth of produce per acre. It is a very efficient use of small holdings where large implements and machinery are not suitable.

      As an aside. All GMO crops and Procuce should be labeled as such as the herbicide used to produce them is part of the plant and infects all who eat with a cancer producing poison. That includes meat and eggs amd milk produced from such food. Sterility is just one side effect within five to 10 generations of animals fed such food.

      Monsanto seeks to control the world food production by the use of such herbicides and the patenting of the seeds required that have to be planted which are all GMO. Most wheat, corn, soy, peanuts, canola etc are subjected to this. Monsanto lobbies with millions to prevent GMO labeling.

      Ireland needs to protect itself from such parctices.

  6. mick.dfarmer

    David comparing Irish agriculture to Dutch agriculture is like comparing apples to bowling bowls. In Holland they use 10 times more pesticides/ hectare than we do. That’s just pesticides, not fertiliser or sewage sludge. There is room for improvement here. The land commission basically made a proper b*llsup when large estates were divided up in the early 20thC. We are still suffering the consequences of this today, the biggest problem being fragmentation. Farms here are inefficient because farmland is scattered in 3,4 or more parcels. Compare that to polders in Holland, each farmer got a square single block of land when they moved in. There was no nepotism or parish pump politics involved either. Polder land was given to farmers on merit, only the best most progressive farmers moved on to the polders. Please don’t be blaming Irish farmers for being inefficient we try and do the best we can given our resources and limited access to markets. How many 100 million potential customers have the dutch got within a 2 hour drive of their border, and how many have we got?

    • coldblow

      I was looking at something a few weeks ago about enclosures in Friesland where, probably getting on for two centuries ago, they rationalized the scattered holdings into more easily managed single holdings. I suppose this is what happened in England too in the 18th C.

    • J999

      “How many 100 million potential customers have the dutch got within a 2 hour drive of their border, and how many have we got?”

      How many 100 million potential customers would you say New Zealand has within a 2 hour drive? And New Zealand dairy herds and farms are much larger than Irish ones, which strengthens David’s article somewhat.

      That said, I just don’t agree with factory farming in the main, and it would be a shame to see us loose that indigenous character that helps market Irish produce.

  7. mike flannelly

    The Multiplier.
    At present 300,000 variable rate mortgage customers have to divert 4,000 euro each from the domestic economy. This failed bankers charge is placed on top of the real variable rate by Irish 2015 bankers( same 2007 bankers)in order to make Irish Banks stronger.
    Forced firesales(forcing up front losses) instead of restructures have a multiplier effect for the domestic economy also.

    Poor political and central bank leadership has little regard for the human & economic cost.
    A 30bn (0 %)for 25 years from ESM fund would have provided industry best practice restructures for domestic grossly overvalued debt so that Irish Banks could grow organically.
    A 20 year recovery plan for bankers pensions and Irish banks would have been more appropriate for the greater public good than the shocking insider political decisions taken over the last seven years.

  8. michaelcoughlan

    Hi,

    A really ignorant article. How will farmers farm when the land has been bought by hedge funds pricing farmers out of the market as the only way to preserve wealth in the monetary madness consuming the planet? Have you not read what Tony Brogan has been telling you all along re small holdings? I have wanted to farm for a long time now but cant because I wasn’t left a farm.. Con acre (rented land) is too expensive to generate an ROI on

    http://observer.com/2011/05/hedge-farm-the-doomsday-food-price-scenario-turning-hedgies-into-survivalists/

  9. Hi David,

    Whilst I agree with some of the points in your article (e.g. agriculture has significant export potential for the Irish economy and has a major contribution to make to our society generally), there are other points where I would have a different view.

    One of the major advantages that Irish agricultural products have on the world market is the “clean and green” image which is based on family farms selling top-quality products using practices that are relatively better than the standard from an environmental perspective (e.g. grass-based dairying as opposed to intensive dairying). If this is given up and a more industrial scale approach is adopted, Ireland will lose one of its major unique selling points (I bet that Kerrygold is thought much more highly of in Germany than the equivalent Dutch brand). I accept your point that the Dutch may have the highest environmental standards, but I, and I suspect many millions more, would choose grass-based dairy products over intensively produced dairy products any day, if given the choice.

    That said, I do think that we can learn from others, including the Dutch. At the Ploughing this year, it was evident that we are already learning from the likes of New Zealand and we need to take practices from elsewhere and apply them to our own context. Yes, Irish farmers could become more efficient, but as you mentioned in one of your articles a few years back, one needs to be very careful that we don’t lose farming as a skill amongst the population generally. In the UK, where I am based, most of the practical work on orchards and increasingly in dairying is done by East Europeans. By the way, the East Europeans are great workers and without them, the British apples and pears sector would be out of business. The UK example proves that inputs to agriculture (of which labour is one of the major one) is no longer a local one and is part of a much bigger picture. I don’t think it would be a good thing if that link between the town and country in Ireland gets diluted to the extent that it is in the UK.

    We need to look for ways to work with the family based model of agriculture in Ireland and help it to develop so that it can survive and prosper in the 21st century. Concepts such as share farming (where a young farmer without much land could farm the land owned by an older farmer whilst sharing the profits). That way, the younger farmer has a bigger farm of land, which can be farmed more efficiently whilst the older farmer (and the older farmer’s family) would still maintain a link with the farm. Also, the potential of agri-tech to enable farmers to pool their resources together needs to be investigated. For example, in Germany, neighbouring wheat farmers group together and use the benefits derived from scale to apply precision farming practices to maximise profitability. Then GPS is used to share the profits amongst farmers based on the yields derived from their individual land parcels and associated costs.

    These are just a couple of the ideas which can be applied to help push the efficiency of Irish agriculture whilst not developing some sort of industrial scale factory farming model that goes against a “clean and green” image and the type of rural economy that I believe most Irish people would like to see remaining in place.

  10. Plonker

    David
    A very interesting article. A few comments the Dutch had a fully developed agriculture industry before the advent of milk quota’s. The advent of these set Irish Agriculture back 20 years as we were working off a small base. We have no indigenous markets unlike the Dutch who not only have a large population base 17 million as opposed to 4 million in Ireland but they also have access all around them to markets in France, Germany, Belgium etc. Every thing we export has to go through one if not two ferry journeys.

    You then have the land base while we have a larger land base it is questionable how much is of a similar quality to the dutch. Dutch Agriculture is based on a hi-input/output system based on access to cheap raw materials. This in a way is similar to the UK where they have access to byproducts (distillers from a brewing industry that has access to a large population base as well as fruit, veg and grain food products that are not used for consumption). Yet the UK agriculture output/Ha is not much different to Ireland.

    The UK rainfall while similar Ireland in places in Scotland and Wales is much lower in the SE of the UK, Holland is similar having lower rainfall than Ireland this allows the growing and harvesting of crops like maize which while we can grow in Ireland we cannot get consistent crops like they can on the Continent.

    As well the Dutch model is not based on large farms like the UK and the US. The Average farm size is 25-30 HA very similar to Ireland but with a different ethos of a hi input/output model using foodstuff often imported from outside the farm. Can we follow such a model?, maybe however it could only be achieved if we received similar prices for milk and meat products that they do.

    However it would be at a cost in terms of the countryside and this might effect another indigenous industry, tourism. However it will be interesting to watch over the next few years to see if the ending of milk quota’s will see an expansion of Irish dairy output and the knock on effect this will have on the Beef industry. However profitability drive everything and in the end agriculture output will be driven by farmgate prices for products.

    • Deco

      Agreed.

      Ireland’s reliance on beef has been a disaster, for both agriculture and for politics. It has given us a major tribunal into corruption.

      The EU shafted Irish agriculture, as it shafted Irish fisheries.

      And our so-called leadership consented.

  11. coldblow

    Crotty needs another outing. As a young, self-taught farmer he employed more than a dozen people on his farm and engaged in labour-intensive, high-output farming using all the latest techniques. His next door neighbour did nothing but graze cattle and did nothing but let them run wild. Every so often he’d call in a buyer and let him go down into his fields and see what he could lassoo. In contrast Crotty was exhausted after his day’s labour. He also realized that he wasn’t getting a penny more in profits out of the farm.

    The reason was the cost of inputs, from seed to fertilizer to wages. Although he was producing more than his neighbour his inputs were sucking his profits away. So he got to thinking and started to study, mainly economics, to get to the bottom of it. He ended up laying off the workers and selling the land anxious that he no longer wanted to profit from a the iniquitous institution of property in Irish land no matter how profitable it might be.

    A Dutch model could not be just grafted on top of Irish agriculture and tearing up hedgerows to make mega holdings would be no more than vandalism, as others here have already pointed out.

    Crotty argued that the balance of factor pricing means that the most rational way to use Irish land is for grazing which employs little labour and requires a large amount of land for the same output of tillage (what he calls, perhaps a little misleadingly, land intensive as it requires a lot of land). For inputs to be cheaper the whole state would need to be reorganized, cutting down on the state itself and on the rent seeking of those who benefit from it. Land would have to be taxed so that the most enterprising and energetic could have access to land while those who weren’t willing or able to work it (like his old neighbour) would have to make way way. With free tenure of land it will tend to be used inefficiently and as its value rises so does the inefficiency increase.

  12. coldblow

    Here’s a bit of Crotty I have on my computer.

    From Raymond Crotty, A Radical’s Response:
    “The Irish establishment, more durable than the walls of Jericho, did not crumble when Irish Agricultural Production was published. Indeed, apart from the odd, mainly favourable notice in obscure journals, Ireland and the world proceeded after the book’s publication precisely as they had done before. Academic argument, however cogent, impinges little, if at all, on the course of events.

    “The broad outline and general thrust of the book had occurred to me while still farming full blast in Dunbell, Kilkenny. The essence of my thought was that the land of Ireland belongs to the people of Ireland, equally to the entire people of Ireland. Property in Irish land had been a disaster for the nation ever since its creation by the confiscation of the clans’ lands under the Tudor monarchs; and it continued to be so. Unless the Conquest could be undone by causing Irish land to be used efficiently and once more for the benefit of all the people, the Irish economy could not prosper.

    “The necessary and sufficient condition for having Irish land operated efficiently on behalf of all the people is that it should be taxed to its full annual value. Land’s full annual value is broadly equivalent to the ‘rack rents’ that the Anglo-Irish landlords extracted in the 19th century; or the competitive rents that Irish farmers extract from the one-tenth of all land that continues to be let out on yearly tenancies. The revenue from a tax on land would make it possible to reduce, or to remove, taxes on the inputs to and the outputs from land.

    “A land tax would ensure that only those best able to best operate the land would continue to do so. The others would retire or take up other jobs; or, probably most frequently, give up all but the land that they could operate efficiently. There would be no need for a Department of Agriculture, for the proposed land tax would, far more efficiently than that institution, secure the efficient use of the nation’s land. The savings from closing down this costly Department would make possible further reductions in taxes on the inputs to, and the outputs from, land.

    “The combination of a tax on land and the removal of taxes on inputs to, and outputs from, land would transform Irish agriculture. It could easily cause it to double output virtually overnight. This large and rapid expansion in output would arise because the land tax would replace what are arguably the least efficient farmers in the world by persons who would be likely to be among the most efficient. Expansion would also occur because, as a result of the reduction in the cost of inputs and an increase in the value of outputs, efficient farmers would use many more non-land inputs to produce greater outputs.

    “When I removed with my family first to London and then to Aberystwyth, the farm at Dunbell had been let on conacre, or on a succession of one-year tenancies, during the seven years. As soon as Irish Agricultural Production, with its central proposal to tax away the annual value of land, was published, I offerred the farm to the Irish Land Commission, because by then property in land had become obnoxious to me.

    “Property takes different forms. Property in things which people produce but do not consume, or capital, has been the key to man’s realization of his vast potential as a rational being, without which he never could have raised far above the brute beast. But property in land I now perceived to be hardly less socially inequitable than property in man, or slavery, which Aristotle describes as “the first, the best and most useful form of property”. Indeed, some might deem property in land to be more heinously anti-social. One recalls, for example, that while a million Irish people starved to death during the 1840s so as to maintain or increase profit from Irish land, the negro slaves of the United States of America, without any augmentation from the slave trade which by then had been stopped, were increasing in numbers by 2.5% annually. This was possibly the highest rate of natural population growth in the world at the time. Indubitably many starving, rack-rented Irish peasants, if given the choice, would have opted for slavery rather than be the victims of property in Irish land.

    “I would have escaped sooner from the burden of of land ownership but to have done so would have exposed me to the charge of first selling land and then proposing to tax its value away. Offering it to the Land Commission at their valuation, following publication of my book, appeared to be the least culpable way of disposing of a disagreeable responsibility. It would of course have been possible and profitable to to have retained the land and to have continued to draw the conacre rent. Unless Irish economic history was to be turned on its head, that rent could have been relied upon to increase over time at least as rapidly as the cost of living. The spoils of the system could in that way have been used to sustain such efforts as I could make to end a system which appeared to be utterly incompatible with the social wellbeing. There were good precedents for that sort of approach: the illustrious Frederick Engels used the profits of his textile mills to sustain himself and Marx in their onslaught on the capitalist system which generated those profits. For my part, I was unsure of being able to sustain a committed attack on property in Irish land if I continued to profit from that institution. Moreover, even the minimum effort required to manage land being let on conacre had become impossibly tiresome, distracting my modest capacities from the imore important task of understanding why the economy failed to serve adequately the Irish people.

    “Ireland in 1966 was experiencing its age of ‘economic miracles’, as Garrett Fitzgerald was given to describing the recovery from the depression of 1958. The last thing Ireland was interested in just then was the sort of radical reform necessary to rectify the underlying structural defects in its economy. These latter would only surface again, in magnified form, when the state’s credit was exhausted and it was no longer possible to pay with borrowed funds the subsidies that financed the Irish ‘economic miracle’.

    “There was no question of being able to return to Ireland to participate in implementing radical reform. Nor was I willing to reintegrate back into the Irish economy, holding there whatever appointment was available and serving a socio-economic order that was inequitable and ineffecient in the extreme and was bound to fail sooner rather than later. It would have been perfectly possible to continue as a lecturer in Agricultural Economics at the Universtity of Wales. Life was pleasant in Aberystwyth; it was a very civilized existence, and our children were doing well at school. With a publication of some substance to my name within five years of appointment, there was the expectation of at least normal advancement in an academic career. The snag was that I was not cut out to be an academic. Time to move on.”

  13. michaelcoughlan

    Hi All,

    This guy Will Allen a 6 foot 7 inch African American is showing they way forward for farms of the future;

    http://www.growingpower.org/

  14. michaelcoughlan

    Off topic but……………….

    Rent controls in Dublin Dathi. And look what happens when rent controls go in; The exact opposite of what you want.

    http://www.independent.ie/opinion/comment/only-bombs-destroy-a-city-more-quickly-than-rent-controls-31277247.html

    We now Dathi have a centrally planned and controlled economy. Peter Sutherland must be on one week long orgasm. You know David the best way to reduce demand in a centrally planned economy?

    Shoot everyone. Better still starve them to death sure food prices and rent costs can be reduced simultaneously at the one go and sure with all the educated people dead you can tighten your grip on power like pol pot.

    https://en.wikipedia.org/wiki/Holodomor

    • michaelcoughlan

      See Stalin knew what he was doing. You whack all the better off farmers and drag the whole thing down to the lowest common denominator,

      Since all the smart productive farmers are whacked you then can control the scum that’s left behind by giving the ones happy to do all the whacking more of the food confiscated and when you run out food and resources blame everyone else so you can justify whacking them too;

      https://en.wikipedia.org/wiki/Dekulakization

    • Rent controls never work. Lack of income leads to no maintenance which leads to substandard housing. This also leads to no investment and nobody willing to rent anything . The result is higher rents of poorer quality.

      zoning is also a problem. Not allowing rental housing leads to shortages decause of lack of land on which to build. The usual government reaction is a hairbrained scheme of some sort of subsidy to a sector thereby ensuring everyone pays to subsidise the housing that is available.

      Leaving housing to the free market and everyone is provided for. It is the same for farmers. Just get government out of the way!!

    • Manhattan has some stringent rent controls and I don’t see it wilting.

      David

      • Yes we have rent controls in BC too. There were all sorts of problems created initially but over the years the government listened to both the landlord and the tenant organizations and a good compromise is working.

        Essentially any property looking for a new tenant can advertise to the market price. Existing tenancies can only be increased once a year at a maximum rate announced by government as a percentile based on the cost of living index plus 2%.

        The office of the rentalsman acts as a dispute forum and resolves problems quickly. In matters of money settlement is is inequitable with the bias to the tenant. If a tent is awarded a monetary settlement it can be obtained by deducting from future rent payments. How ever the most common problem is where a tenant leaves owing rent and has cause damage.

        A landlord can get an award from the rentalsman but is left to collect through the court system. Chasing a departed tenant through the court system is expensive and counter productive. This has resulted in tenants being asked for character references and having a credit check performed. There is also an unofficial “black list ” of troublesome tenants as reported to the landlords association. An enquiry as to whether there is information on hand about a potential tenant can be revealing.

        As usual, any problems are with the 1% of tenants or 1% of landlords. The majority get along fine. Basically we have a market value system with little actual control and a good mechanism for dispute settlement.

        I still stand by the assertion that essentially rent controls are a negative influence on the rental housing stock.

  15. mick.dfarmer

    https://www.youtube.com/watch?v=IcWuVXUvj9w&feature=iv&src_vid=PB0VfVfdbvg&annotation_id=annotation_544931335

    David have a look at this video then tell me how many €3 chickens it would take to pay for the kit?

  16. Deco

    Bullsh!t.

    Dutch Agriculture holdings are smaller in size than Ireland.

    Ireland average size 32.3 hectares.
    The Netherlands average size 29.5 hectares.

    Sources : [ both official, and based on official state statistics ].

    http://www.askaboutireland.ie/enfo/sustainable-living/farming-in-ireland-overvi/
    http://ec.europa.eu/eurostat/statistics-explained/index.php/Agricultural_census_in_the_Netherlands

    The central premise of that article is not even factual.

    Not even remotely factual.

    A theory based on bullsh!t.

  17. DB4545

    mick.dfarmer

    Nothing like a farmer to tell it like it is. I don’t believe there’s a farmer in the Country who has two brain cells to rub together who would buy into David’s bigger is better argument. I think David is playing devils’s advocate again. I’ll stand corrected on this (probably by Adam Byrne) but I don’t think specialising in cash crops like sugar cane or bananas turned the Caribbean Islands into paradise for most of the Islanders. It certainly made a fortune for companies Tate & Lyle and Del Monte while plantation workers lived and worked in appalling conditions. The term Banana Republic didn’t start out as an upmarket clothing store. It’s shorthand for Countries so corrupt its citizens are compliant serfs and whose wealth is pipelined and extracted for others to enjoy.We can look a little closer to home for similarities on that score.

    There’s a nice New York phrase don’t be a sucker. The sucker is the grafter who takes all the risks while others reap the rewards. Who are the suckers in the beef industry? Is it the farmers taking all the risk producing the product or the beef barons forcing farmers through specific factory gate pipelines because they’ve achieved regulatory capture by way of EU regulations? Do Irish farmers want to buy into a new bulk milk pipeline where they take all the risks to produce baby milk formula? Whoever controls that pipeline will extract the wealth it produces and my guess is it won’t be Irish farmers. Using David’s figures if farm output is 4 billion and the “added value” is 20 billion someone is on a nice little earner and it ain’t the man in wellies.

    I have some contacts involved in the fast food supply chain. In global terms it’s a constant battle to find a new sucker desperate enough to risk and bet the family farm on supplying the multiples and fast food outlets. The multiples are somewhat constrained to have products correctly labelled so the sucker is a farmer somewhere in Europe before they eventually go bust. Fast food outlets are under no such constraints which is why your take away chicken left the egg in Thailand or somewhere similar 9 weeks ago and eventually arrived in a container in Holland or elsewhere to be distributed around Europe and turning up in a snack box or chicken kebab. Eventually the sucker at the end of the third world supply chain goes the same way. In summary turning your labour and inputs into a commodity for the convenience of others to profit from is not a good idea and never a long term profitable one. Bigger is not usually better. Don’t be a sucker.

    • michaelcoughlan

      An excellent analysis. Really really good.

      “I have some contacts involved in the fast food supply chain. In global terms it’s a constant battle to find a new sucker desperate enough to risk and bet the family farm on supplying the multiples and fast food outlets. The multiples are somewhat constrained to have products correctly labelled so the sucker is a farmer somewhere in Europe before they eventually go bust”

      The Irish construction industry works exactly the same way. Another sub contractor sucker who wil get the job done usually badly and too thick to now they are working at a loss. Every 2 years they go bankrupt but there is always another sucker.

      This is why Denis O’Brien gave Bernard McNamara the most failed developer of all still another 30m to build an office block for him in Dublin 2 years ago. Bernard will bankrupt the sub contractors and denis gets his building for an artifically low price.

      The tax payer will make up for the losses taken in state owned banks and get a massive Denis O’Brien Cock shoved up their holes.

      • DB4545

        michaelcoughlan

        It’s not my analysis Michael. I’m an ordinary Joe with no background in economics but I’ve spent a lifetime trying to avoid being a sucker sometimes with a little success. The analysis I’ve used is from the book Antifragile by Nicholas Nassim Taleb a former options trader. I applied his distinguished analysis to Irish farming. In essence don’t do to others what you wouldn’t like done to yourself. In fairness Michael I think the credit should go to mickd.farmer who hit the bullseye in relation to 3 Euro chickens. If it ain’t fun for the chicken the man at the other end of the supply chain isn’t having a party either.

        The building industry as you state is no different. I nearly got sucked into that subby bullshit to the tune of £80k sterling many moons ago. Fortunately I did my due diligence and found out my supposed new benefactor stiffed a decent honest man who lost £50k sterling and his house and marriage. The man wasn’t thick just so focused on pricing the contract and trying to do a good job that he didn’t think there was a thieving bastard trying to sucker him.

        We’re heading towards an election and the usual suspects are trying to sucker the Irish voter again. I noticed most of them made it their business to head to the ploughing championship. They’re promising all sorts of nonsense from 26 billion on roads and infrastructure to “millions of jobs” to ipads for every child over five. Who do you think would have to pay for the garbage they’re spouting about? They’ve spent the time since they were last elected helping MNCs turn Ireland Inc. into a silicon republic piping the wealth out while the little guy gets it in the a**. The gentleman you mentioned above is trying to float the Digicel IPO to hard nosed New Yorkers. He’d like 1.7 billion folding stuff for his troubles and in return investors get pay as you go third world customers who “in the future” will suddenly be able to afford expensive subscription channels? We’ll see if he turns out to the cable guy or a pirate of the caribbean. Don’t be a sucker for big business or politicians. Nobody can f**k you in the ass without your consent.

        • mick.dfarmer

          DB
          I think I know who the suckers are in the beef industry, and I have a fair idea too where the money is being piped to. All these guys got a break from previous govt ministers. Shag all can be done about it now.

          • DB4545

            mick.dfarmer

            I think the tribunals laid it out fairly well Mick. So why doesn’t the farming community learn from it and avoid the “bulk baby milk formula” tribunal down the road? Do you think the recent Glanbia and Danone or other plants will deliver more cash into Irish farmers pockets? Will the farmer have any more control over the price he receives for milk than he does for beef at Kepak or other beef processors? How much national milk production is being tied up in this industry? Is there an alternative use for the product or the land? I don’t know only a farmer can answer that.Can farmers co-operate to diversify away from what is bound to become a commodified product and the 3 Euro chicken of the future? Look at what happened to the sugar beet industry.Just google the faces present at the opening of the plants I’ve just mentioned and you’ll see who’ll be getting a slice of the action. I’m a resolute Dub and I wouldn’t know one end of a cow from the other. But I know when someone tries to play me for a sucker. I try to see the positive if there is one and I’d agree with David that the food sector potentially sows the seeds of growth. But locking into a monoculture has unlimited downside and a restricted potential for the upside. Even Dubs know not to put all their eggs in one basket.

          • DB4545

            Mick.dfarmer

            I naturally forgot about the elephant in the room with monoculture which was the Famine. The Island was changed forever as a result. People will sell the upside of milk and beef. Imagine the shock to the farm economy and the wider economy if the price of either dropped 40-80% for a sustained period. If the Famine teaches us anything it is that we should be highly diversified if at all possible.

  18. coldblow

    I was wondering why there was an increasing demand for dairy products in China, seeing as they are lactose malabsorbent. I had assumed they were forcing themselves to eat it, out of fashion as it were. It never occurred to me it was for baby formula milk, which is the obvious reason when you think about it.

    I think agriculture is basic to every economy in that (as I understand it), looked at historically, industrial sense followed on from successful agriculture.

    • Aren’t Chinese babies lactose malabsorbent as well then?

      • coldblow

        No, human babies and those of mammals are fine with milk, which normally makes adults sick. Apparently our pastoral ancestors thousands of years ago (say 10,000 but maybe more recently) adapted to milk and dairy and this was a huge advantage as you can get, I think, ten times as much nourishment from the land this way than relying on meat. (Tillage is more productive still, but doesn’t suit everywhere.)

    • Babies are better fed with breast milk for at least the first 6 months.
      Putting babies on formula is a mistake for their future well being is compromised.

      It is regarded as the latest fashion in many developing countries.

      Women in the work place have a problem being available for their infants.

      Economics says they have to work, while natural health and sustenance, of the mother too, suggests the first priority should be the child.

  19. coldblow

    I do think, however, that David should try to be a bit more consistent.

    What? Did I just say something?

    Seriously, I hope David hasn’t been getting too much flack from his mates over the comments here about immigration, some of which have been, let us say, candid. I appreciate the fact that this site has welcomed free speech over the years and can’t think of another to match it.

  20. Ireland as a food producer is likely to do well in the portending greatest depression as people have to eat. Those with their own 5 acre in production will survive while the world collapses around them. People have to eat.

    These graphs show the real economy not somebodies supposition

    http://investmentresearchdynamics.com/the-fed-tragi-comedy-revs-back-up-dudley-says-economy-fine-fed-to-raise-rates-this-year/

    • DB4545

      Tony Brogan

      Put options hedging against VW traded at 70 cents on Monday up from 1 cent last Friday. A 70/1 bet against VW made someone seriously wealthy. It wasn’t the shareholders because their stock is in the toilet and it’s not the customers because their loyalty was misplaced and their purchase is devalued. Can a bet on gold really give that level of upside Tony?

      • Maybe if you take a paper bet in the options market. BUT somebody lost an equal amount of money on the trade. Does the counter party have the ability to settle the trade.

        All the paper derivatives are similar one way or the other to your example. Highly leveraged according to what I have read.

        Take a look at Deutsche Bank as an example. There are signals that it is broke because of these same leverages gone astray.

        You the tax payer made good on the last bank failures. Depositors of any cash will be “bailed in” in the next bank failures. Many countries have already passed this legislation in anticipation of such an event.

        It is also proposed to have a cashless money system and then you will be unable to save yourself by withdrawal of funds from the banking system.

        As for gold it is best taken as an insurance against inflation/deflation hedge of wealth protection. Bullion in hand is money with no counter party risk. It cannot be devalued like a paper currency. It is what it is and has value because of what it is.

        Governments and central banks will only be able to suppress the price until somebody asks for delivery of bullion and there is none available. It will happen and then the leverage will be infinity to your currency as the currency drops in value to pennies and the value of gold soars.

        When this will happe, and it will, is an open question but likely sooner than many think but overdue in the opinion of many students of real money. To leverage the gold by silver bullion if you want to pay the 20-35% premiums over the world spot price already being asked in many parts of the world.

        • Silver will give double the returns on gold as it always does just as it gives double the losses on the way down.

        • http://www.zerohedge.com/news/2015-09-28/ubs-about-blow-cover-massive-gold-price-rigging-scandal

          And anything may be the trigger from a bank failure to a state leaving the EU or a province like Catalonia voting to secede from a country. OR a regulator finally doing the job assigned.

          http://blog.milesfranklin.com/catalon-astrophe-pt-ii-the-beginning-of-the-end-of-the-european-union

        • DB4545

          Tony Brogan

          That’s fine Tony but people who have serious stakes and therefore serious skin in the game have already priced those factors into their trades. The software issue for VW was unknown except to a limited number of insiders hence the 70/1 shot from friday to monday. The geopolitical situation is the reason gold bugs are in the game. Gold has already been priced in to the equation just like oil. My dog is aware of the geopolitical situation. Why hold Gold when other options can return 70/1?

          • That is incorrect DB

            With due respect. nobody gives any credence to the facts, documented, that there is a major serious effort to short the precious metals.

            Not only are theses short positions basically illegal, being bare naked with no hope of delivery, but are ignored by the official regulators. Nothing to see here folks, move along.

            This has been documented by the Gold anti Trust Committee for 15 years plus. http://www.gata.org

            It is not in the interest of the US or more correctly in the interest of the US dollar to have a healthy gold/ silver price as this real money is the direct challenge to the Ponzi scheme we use as money, the US dollar. In fact it is not tin the interest of all the fiat central bank currencies to have a strong gold/silver market.
            It makes their currencies look bad. There is a reason that the IMF forbids member countries from using gold or silver as money. This despite the fact that the US constitution stipulates that ONLY gold and silver coin are constitutional money.

            The so called bullion banks are the agents of government in enacting policy for the benefit of the state while profiting immensely at the same time.

            The unvarnished truth is that the current price of gold would ordinarily reflect the increases in the money supply.

            Recent events in Zimbabwe show this. As the currency increased exponentially the price of gold in that currency went to the moon. At one point no currency was accepted by those selling food. Only gold was acceptable.

            If there is a lack of confidence in any currency the same thing happens.If you look at Brazil for example you will find gold at all time highs. It may not be 70 to 1 but it is up 550% in 10 years. No leverage required.

            As far as other investments you suggest. did you participate?

            There are many other investments to make but gold is insurance and the only investment that will not go to zero in a downturn.

            Because of the suppression gold and silver it is substantially undervalued.

            When confidence evaporates in paper money as it always does your winnings at 70:1 will still be used to paper the walls or used to light the fire to keep warm.

            Gold and silver will be last men standing when the music stops. Your paper profits will be worthless.

            Since the formation of the Federal reserve the US dollar has depreciated 98% against gold even at the suppressed price.

            The average life span of a paper currency backed by nothing is 40 years. 1971 is the year Nixon reneged on the gold backing of the US dollar effectively putting the whole world OFF the remaining gold standard. That is 44 years. The time is nigh for the collapse of all the current fiat currencies and the great reset is soon upon us.

            It remains to be seen how this plays out. Will the central bankers win or will there be a return to an honest money system.

            Peace and prosperity to all> :)

          • DB

            “That’s fine Tony”

            Sort of dismisses everything I said previously.
            You do not consider anything said there as relevant. Why not?

            You seem obsessed with making a 70:1 return over a weekend?

      • http://news.goldseek.com/GoldSeek/1443539340.php

        ” I ask you this, if something was found to have occurred but was in the “interest of national security” …would it be “actionable”? ”

        “”Should the PPT lose credibility, neither the Fed “put” nor PPT “put” will be in place and it will be every man for himself. We are very close to the moment in time where the only solution to halt the selling will be to “pull the plug”!”"

        • cont..

          ” It is also key to understand the suppression of gold prices also act to support the value of both dollars and Treasury bonds. In other words, the dollar can be seen to be more valuable than it really is and also allow interest rates to be lower than they otherwise would be.”

  21. michaelcoughlan

    Hi David,

    Your little blow out has caused me to contemplate what might be ailing you. At a superficial level I’d say that over the last few articles almost everyone has disagreed with you especially suggestions like putting Syrians in vacant Irish houses and this one about bigger farms being a good idea etc.

    But at a deeper level I’d say you were really and truly shocked that Yellen didn’t raise interest rates as you said the Fed was about to declare victory when I’d say the exact opposite is about to happen but time will tell. So I think that its worth reconsidering all the super stuff you have gotten right to put one small forgiveable miscalculation in the ha’penny place.

    Your graph of a bull trap a year or so ago in my view is THE most important contribution made by any economist for the last few years. The bulls are about to get roasted. Next; You alone have been pointing out that morality is very important for capitalism to work and that without it you have fascism. You were right about Spain of yesteryear having to shoot its way our of its problems after the post gold credit collapse, you alone have been speaking about the inequality between capital and labour. You are right about deflation too in much (but not all) of the economy. Non of the other economists are saying any of this.

    One of your most important contributions was Galbraith’s observation re looking for proof when events prove us wrong. Stop looking for proof. You have excellent insight on bubbles and the derivatives one needs analysis. I am throwing you your toys back David. There is one massive blow-out brewing right now and Yellen knows it. Don’t get distracted by minnows and tell us what you think? I am really interested to know because I think much of what you write is advent guard. What I think doesn’t mean anything of course but it would be a pity to lose the robust nature of the dialogue here.

    Best regards,

    Michael.

  22. StephenKenny

    It’s unarguable that improving productivity of agriculture, without losing the hallmark quality, would be beneficial, and that Holland is evidence that it can be done.

    Generally my criticism of this argument, and David’s made it before, is that there are no first world agricultural economies. But given the fact that the multiplier for agriculture is 4, and for the overall economy I think it’s something like 1.5, it does cast an interesting light on things. Perhaps, given 20 years of the so-called ‘financialisation’ of the economy, there might be opportunities.

    More focus on improving the agricultural output, given the same human inputs, can only be a good idea.

    p.s. I thought David’s answer in the comments is brilliant – more of that generally, and fantasy ‘financial’ economy, as well as we smart-arsed commenters, will have the light of reason shone upon us.

    • StephenKenny

      and one final thing. When David’s pieces each come from a different continent (so to speak), as they have of late, I conclude two things: As any human would be, he’s knackered, and that we can expect a new book/TV documentary/both.

  23. michaelcoughlan

    Db4545 and Tony

    I an short gold on my spreadbetting platform but long a cef in gold and oil which sells options for income with roughly 50/50 weighting. I also buy coins.

    Gold will be sold until the meltdown at which point it may skyrocket but if it does it will be confiscated. The Db4544 observation on the 70/1 bet is valid.

  24. DB4545

    Tony & Michael

    It’s hard to see the downside of a 70/1 result on VW options in those circumstances Michael. I certainly wasn’t being dismissive Tony I’ve stated repeatedly I’m here to learn. You clearly have a deep knowledge of precious metals and you show a strong desire help people avoid disaster in the event of financial meltdown. I live a fairly modest lifestyle so I’ve no interest in a so called fast buck just safe investments with potential for growth while avoiding the sharks.

    This site gives a really diverse range of perspectives and it would be a shame to lose sight of that. Reading some of the comments above people must be getting a bit tetchy with winter on the way and I can only echo the value of robust free speech, occasional sunshine and a few beers. I think you get the most honest and best responses when someone gives you both barrels and you have to defend your theory or argument or rethink your position. Why would anyone bother doing it any other way you’d be as well off reading a newspaper? Where’s the fun in that?

  25. Hi there, sorry for the blowout. I’m only human too! Now lets get on with the job at hand:)

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