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. 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 for Chemical Industry

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

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

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

Cost-price Squeeze in Farming

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

Rural Employment 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

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

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

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 – 1 st 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

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 ) –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 increased opportunities through farm-to- farm trading

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

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

What we have to offer

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

Thank you for your attention