Land – the huge Land – the huge potential of a limited potential of a limited

resourceresource

Peter YoungPeter Young

Irish Farmers JournalIrish Farmers Journal

Land area of IrelandLand area of Ireland

6.9million hectares6.9million hectares 4.4million hectares - agriculture - 64% 4.4million hectares - agriculture - 64% 650,000 hectares for forestry - 9.4% 650,000 hectares for forestry - 9.4% 80% devoted to grass80% devoted to grass 11% to rough grazing 11% to rough grazing 9% to crop production. 9% to crop production. Beef and milk production -60% of Beef and milk production -60% of

agricultural output at producer prices. agricultural output at producer prices.

Ireland’s agriculture and food Ireland’s agriculture and food industryindustry

Largest indigenous sector Largest indigenous sector Total employment of 155,000.Total employment of 155,000. Over half of Ireland’s indigenous Over half of Ireland’s indigenous

exports exports Represents nearly one tenth of the Irish Represents nearly one tenth of the Irish

economy. economy. 2006 - Total turnover of Irish food and 2006 - Total turnover of Irish food and

drink is estimated at almost €20bn drink is estimated at almost €20bn – with relatively low import content.with relatively low import content.

Irish Food & Drinks ExportsIrish Food & Drinks Exports

Category Category 20052005

€€mm2006(e)2006(e)

€€mm2006/2002006/20055

% +/-% +/-

Dairy Dairy ProductsProducts

1,9631,963 2,0802,080 +6+6

Beef Beef 1,3401,340 1,525 1,525 +14+14

PoultryPoultry 257 257 237237 -8-8

PigmeatPigmeat 238238 250250 +5+5

SheepmeatSheepmeat 189189 180180 -5-5

Live AnimalsLive Animals 150150 200200 +33+33

Key Economic Statistics for Agri-food Sector, 2005Key Economic Statistics for Agri-food Sector, 2005

Primary Primary agriculturagriculturee

Food Food processinprocessingg

Agri Food Agri Food totaltotal

%age of total %age of total Gross Value Gross Value Added*Added*

2.7%2.7% 5.7%5.7% 8.4%8.4%

Employment Employment 5.7%5.7% 2.8%2.8% 8.5%8.5%

%age total %age total exports*exports*

5.2%5.2% 3.3%3.3% 8.4%8.4%

* Estimated.Source: Department of Agriculture & Food, Fact Sheet of Irish Agriculture2006

Land – limited resource Land – limited resource

Not making it anymoreNot making it anymore– NDP 2001-2006 – 40,000 acres NDP 2001-2006 – 40,000 acres

swallowed upswallowed up Clonee – Kells motorway Clonee – Kells motorway

– 1,700 acres for 50 km road1,700 acres for 50 km road

– Housing etc. ?Housing etc. ?– Set to continueSet to continue

New NDP plan New NDP plan

Increase in land price Increase in land price CSOCSO

6,4746,888

8,539

10,577

12,65113620

13,81113,945

15,35217,318

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1996 1998 2000 2002 2004

€/acre

RETURNS FROM RETURNS FROM FARMINGFARMING

YearYear Gross Margin Gross Margin Cow/AcreCow/Acre

Land Price €/AcreLand Price €/Acre Yield / Acre %Yield / Acre %

19961996 820820 6,4746,474 12.6712.67

19971997 806806 6,8886,888 11.7011.70

19981998 800800 8,5398,539 9.379.37

19991999 795795 10,57710,577 7.527.52

20002000 795795 12,65112,651 6.286.28

20012001 795795 1362013620 5.845.84

20022002 784784 13,81113,811 5.685.68

20032003 728728 13,94513,945 5.225.22

20042004 623623 15,35215,352 4.064.06

20052005 645645 17,31817,318 3.723.72

Note: Gross Margin calculated on one cow per acre producing 4,500 litres annually. Source of information: Teagasc – Management Data for Farm Planning. Land prices taken from CSO data on agricultural land sales.

Relative Cost to install a Relative Cost to install a cowcow

YearYear Cost to Cost to install install cowcow

MarginMargin Years to Years to repayrepay

19721972 €€20502050 €€380380 66

19801980 €€41004100 €€480480 99

20062006 €€2680026800 €€550550 4949

Where we have come fromWhere we have come from

30 years protection30 years protection

Guaranteed pricesGuaranteed prices

Export restitutionsExport restitutions

Quotas and TariffsQuotas and Tariffs

Politicians set pricesPoliticians set prices Land price not Land price not

related to economicsrelated to economics Developed bad Developed bad

habitshabits

Now Now

2005 – Decoupling 2005 – Decoupling Freedom to farmFreedom to farm

2007 – Cross 2007 – Cross compliancecompliance

2015 -Milk quotas 2015 -Milk quotas gone (if not before)gone (if not before)

Food Price Index 1950 - 2000Food Price Index 1950 - 2000

Wheat Price Index: 1316 - 2000Wheat Price Index: 1316 - 2000

Cereal stocks at historic lowCereal stocks at historic low

US plans bio and renewable US plans bio and renewable fuelsfuels

Current Current 5.4 bn gallons5.4 bn gallons Coming on stream Coming on stream 6.2 bn gallons6.2 bn gallons 2017 2017 35 billion gallons35 billion gallons

– Worlds largest exporter of corn - exports Worlds largest exporter of corn - exports 20% of it’s corn20% of it’s corn

– Ethanol would require over 300 m tonnes Ethanol would require over 300 m tonnes of cornof corn

– 39-50 million more than current production39-50 million more than current production– Need other sourcesNeed other sources

China - shakes the worldChina - shakes the world

1.3 billion1.3 billion 1984 - China was one fourteenth 1984 - China was one fourteenth

the size of US economythe size of US economy 2005 - China was one sixth the size 2005 - China was one sixth the size

of a much bigger US economyof a much bigger US economy Prediction 2030 - Chinese economy Prediction 2030 - Chinese economy

could be larger than US economy.could be larger than US economy.

Adapt or fade away Adapt or fade away

Distribution of Irish Beef Distribution of Irish Beef Exports, 1995 to 2006 Exports, 1995 to 2006

(%)(%)

0%

20%

40%

60%

80%

100%

'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 06(f)

EU Markets

International Markets

0

100

200

300

400

500

600

2000 2001 2002 2003 2004 2005 2006(f)

Irish Beef Export Distribution, 2000 to 2006 ('000 tonnes cwe)

- Int. Mkts

- Continental EU

- UK

Looking forward Looking forward

Era of low grain prices overEra of low grain prices over Increased demand – China, IndiaIncreased demand – China, India Bio fuels creating another use for landBio fuels creating another use for land

– expected to double each year for the next expected to double each year for the next 3 years.3 years.

High input – grain fed confinement High input – grain fed confinement system will suffer system will suffer

Grass based system – huge benefit Grass based system – huge benefit

Challenges aheadChallenges ahead

WTO – concernsWTO – concerns Need to adaptNeed to adapt Industry efficiency – dairy Industry efficiency – dairy Farm efficiency – scale + low cost Farm efficiency – scale + low cost

systemssystems Developing nichesDeveloping niches

– Ireland inc.Ireland inc.– Individual farmersIndividual farmers