Wednesday, 22 Jan 2020

Eddie Molloy: 'Hysteria won't help our beef farmers – but planning to transform their sector will'

The reaction of farming leaders and some politicians to the announcement of the Mercosur trade deal bordered on the hysterical.

There were cries of “sell-out”, with Agriculture and Food Minister Michael Creed vowing to “dismantle” the new agreement with Brazil and a cluster of other South American countries.

Phil Hogan, long seen as a champion for the cause of Irish farmers, is now portrayed as the villain of the piece, accused of “betrayal”.

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Leaving aside the wider benefits of the deal for practically every other industrial and services sector in Ireland, Mr Hogan has rebutted some of the arguments about negative climate impact; for example, contrary to claims the deal fails to respect the Paris Agreement on climate, he asserts the deal “contains strong commitments for the effective implementation of the Paris Agreement”.

The real hysteria surrounds the amount of South American beef that will be allowed into Europe – 99,000 tonnes. This amounts to 222 million pounds of beef being exported to the EU, which has a population of 513 million.

This would work out at less than half-a-pound of beef per EU citizen, less than two Big Macs. In any case, Pat McDonagh won’t be switching to Brazilian beef any time soon. The Irish sector will not be wiped out.

There is no doubt beef farmers have had a hard time making a decent living for a very long time. They only survive because of EU subsidies, especially small suckler farmers, mostly in the West of Ireland.

It is also true the importation of South American beef together with Brexit, whether it happens or not, will put further pressure on this beleaguered sector.

So what is the answer to this predicament? It is certainly not to “dismantle” the Mercosur deal which took 20 years to negotiate. Nor is it to further subsidise a sector that is already commercially non-viable and will be less so into the future.

It will be found in thinking strategically and creatively about the future direction of the beef sector in particular and the wider agri-food industry. Key lessons about how to respond to this kind of existential threat may be drawn from the history of the Danish pig industry.

In the middle of the 19th century, Europe began to be flooded with cheap grain as fleets of sailing clippers raced across the Atlantic with the bounty of the American prairies. The reaction of most countries was to impose tariffs to protect their own farmers.

The Danes, in contrast, welcomed the cheap grain and used it to feed pigs and build what ultimately became their renowned bacon industry.

Supported by farmer-led governments they adapted to the new landscape, seeing it as an opportunity rather than erecting barriers to protect the status quo.

Crucially, farmers owned the abattoirs that processed the pigs. Imagine the difference it would make if Irish farmers owned the meat factories. No more battles with Mr Goodman for a fair price.

They established Danish bacon as a globally valued brand, starting with exports to Germany and England. In 1957 Danish bacon was one of the first food products advertised on commercial television in the UK.

By this time Denmark had long overtaken Ireland as the main source of bacon to the UK. A memorable line from one campaign read: “In 793, the Danes invaded wielding axes. In 1847, they invaded wielding bacon.”

More recent evidence of their farmers’ capacity for thinking ahead is in their early embrace of wind farms; 70pc-80pc of are owned by farmer co-ops and community groups, who pocket the profits.

It will take 10 years for the full 99,000-tonne quota to be allowed into the EU and this is another reason why the initial reaction was over the top. This allows plenty of time for the sector to adapt and even to entirely transform itself.

The EU will make funds available to enable farmers to cope with the impact of Mercosur but it is vital this is not deployed to shore up an unsustainable sector, and certainly not as it is currently structured.

When it was put to IFA president Joe Healy that ultimately farmers would have to adapt in response to Mercosur and Brexit, he agreed – but added it won’t be easy for a farmer living 10 miles from Galway to get used to navigating the traffic jams to go to a new job in the city.

This is the nub of the problem, to assist farmers who would view a future outside the industry with great trepidation to find a solution suited to each one’s situation.

They and their families will not be best served by a policy that gives them an incentive to cling to a business and way of life which are unsustainable even in the medium term.

In this kind of situation, where there is an inevitability about the decline of a particular business model and associated way of life, the best advice is “plan or be planned for”.

Instead of declaring a “catastrophe” and demanding “the Government must vote against Mercosur”, farmers should take control of their own destiny and use the time and resources available as a window of opportunity to radically transform the beef sector and migrate to new solutions, on or off the land.

Eddie Molloy PhD is a management consultant specialising in strategy, change-management and innovation.

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