Delivering a 25% reduction in greehouse gas emissions, the loss of the nitrates derogation and CAP changes could combine to cost the rural economy up to €3bn annually and as many as 29,000 jobs could be lost, an Irish Farmers Journal/KPMG report has found.

The report, which can be read here, also examined the impact of CAP changes and the policy of increasing the area of land farmed organically that came into effect last year. It shows that there has been a huge redistribution of payments from Leinster and Munster counties to Connacht and the three Ulster counties.

Ireland’s nitrates derogation has already been reduced from 250kg N/ha to 220kg N/ha and is in place until the end of next year. Ireland can apply for a continuation of the derogation but if this is unsuccessful, Irish farmers would have to comply with the EU limit of 170kg N/ha.

KPMG found that this limit would hit 9,500 Irish dairy farmers which would bring an 8% loss in output, and intensive beef finishing farms that supply up to a quarter of all cattle going to factories.

Reduction in emissions

Delivering the required 25% reduction in emissions will also cause a loss in output. Using the latest Teagasc Marginal Abatement Cost Curve (MACC) and applying scenario one, pathway one, the most likely direction of travel, KPMG found that economic output from the dairy sector will fall by 7% and the beef sector by 10% - with cattle numbers in each sector down by 12% and 15% respectively.

CAP

On the CAP changes, the big issue is the further flattening of payments which means a transfer from highly-stocked more intensive farms to more extensive farms.

The counties that stand to gain the most are Mayo where payments are up by 11%, Roscommon and Donegal come next with a 10% increase. Carlow is the biggest loser with payments down 19% followed by Wexford where payments are down 12%.

Organic farming has been actively promoted in the new CAP and this is expected to result in a loss of production of between 15% and 25% in cattle and sheep farming and as high as a 50% loss in tillage farming.

Financial and employment impact

The combined effect of these measures would create a loss of up to €1.4bn in the supply chain up to the farm gate with a further €1.6m loss in processing each year, KPMG found.

In addition the report highlights that between 22,000 and 29,000 jobs in farming, agri-food processing and the associated supply chains are at risk.

The report was released at a forum during the Irish Farmers Journal Tullamore Farm open day and there will be in depth analysis in this week’s Irish Farmers Journal.