The publication of the Agri-Food Strategy Board’s ‘Going for Growth’ strategic action plan in May 2013 left many farmers and growers, on the whole, feeling optimistic for the future of the agri-food industry in Northern Ireland.

This provided a well-developed, industry-produced, all-encompassing action plan that stressed the importance of a single, integrated supply chain where all partners are profitable and it included a commitment from the government to support the sector.

There has been a willingness from farmers and growers from the outset to engage with supply chain partners to deliver on the plan’s commitments. However, the intervening months have proved challenging.

It has taken nearly 18 months for the government to officially sign off on the plan and there is the looming threat that the financial crisis at Northern Ireland’s Executive may impact adversely on previously promised funding.

Despite these challenges, the key message from the plan is that there needs to be a single, integrated supply chain where all partners (farmers, processors and retailers alike) are profitable, for the agri-food industry to flourish. A supply chain that can react, as one, to the ebbs and flows of the marketplace through effective communication.

The action plan targets a 60% increase in turnover from the agri-food sector within Northern Ireland to £7bn (€8.92bn), plus a 75% increase in product sales outside of Northern Ireland to £4.5bn (€5.74bn) by 2020.

The plan identifies that effective communication of the requirements of consumers down through the chain, and the challenges and obstacles from producers back up the chain, is the only way that the industry can hope to ensure the sustainable growth required to meet these 2020 targets.

Farmers accept this principle, but, while there are a small number of suppliers who already benefit from a single, integrated supply chain, unfortunately it is not something that exists for ALL farmers and growers in Northern Ireland. This needs to change.

Farmer efficiency

Alongside securing access to new and expanding markets, farmer efficiency and profitability will be the linchpin for the success of our agri-food industry. The current farm gate price volatility experienced across all sectors is unsustainable and undoubtedly will have an impact on how a farm business operates and if it continues to operate at all.

Within the new Rural Development Programme, there has been a government commitment to fund a farm business improvement scheme, worth up to £250m (€318.7m). This would help farmers improve and develop their businesses through a suite of measures, including capital investment, skills provision, knowledge transfer and performance efficiency.

The scale of this scheme is unprecedented and is a direct result of the board’s ‘Going for Growth’ action plan. The potential funding available will have the capacity to dramatically improve the efficiency of a large number of our farms.

The board is quite clear that, despite the size of the scheme, it should not be a case of simply throwing grant support at farmers. We realise that any expenditure by government has to be extremely well justified in current times and we agree with this.

We believe that this proposed scheme must be regarded as government investing in the wider Northern Ireland economy by backing a sector that has the capacity to generate further growth.

This investment must be targeted at enterprises that can deliver a return, with demonstrable outputs and impacts. However, for the scheme to be a success, and to get substantial uptake, farmers need their businesses to be in profit. If a farm is not profitable, there will be no money in the business to match funds to a grant from the scheme.

Provenance matters

Consumers are increasingly concerned about the provenance of the food they eat and many want to buy local products. This is encouraging. The popularity of farm shops in local areas also demonstrates farmers’ initiative to take products directly to consumers and that the demand for locally sourced food items exists.

A well-functioning, single supply chain will be of benefit to the entire agri-food industry as it will:

  • Ensure the viability of farm businesses;
  • Ensure processors and retailers have a consistent supply of the local, high-quality raw materials their consumers demand.

    • Changed CAP focus

    The newly reformed Common Agricultural Policy (CAP) will also play its part in shaping the future of our agri-food industry. Already, direct payments play a critical role in farming and, in 2013, made up 87% of the total farming income in Northern Ireland. This only adds to the argument for a single supply chain that delivers sustainability for all partners, because clearly the current market is not doing so.

    Unfortunately, it is our belief that the new CAP is likely to act more as a barrier rather than a supporter to the growth and development of the industry.

    Its focus has shifted from targeting the core function of producing food to one of a social payment keeping farmers on the land.

    Under the reformed CAP, there were always going to be winners and losers. On the one hand, the winners are likely to see lofty gains in their single farm payments but, on the other hand, there are many farmers set to lose at least half, if not more, of their direct payments.

    The one positive at least is that these farmers will have a seven-year transition period to try to adapt their farm businesses to these substantial losses.

    However, the changes to these farm businesses will be significant and it is likely that the reform of the CAP in isolation would drive an overall contraction in production, rather than growth and development.

    It is possible that those who have made gains under the new CAP will increase their production capacity, but it is highly unlikely that this will be enough to counter the reduced production from those who are losing.

    This is where the commitment of government to deliver on the recommendations in ‘Going for Growth’ will be key. Support is critical to encourage sustainable development in the context of changing single farm payments.

    Ending of quotas

    The removal of milk quotas in 2015 should be a driver for growth in the milk sector, but this could also be hampered by the reformed CAP.

    With low returns from the market and a reduction in their single farm payment, many dairy farmers may not be in a position immediately to begin to grow their businesses in order to take advantage of the removal of milk quotas.

    This puts us at a significant disadvantage in the global milk market, as many of our competitors, such as the Republic of Ireland, are already pushing ahead with expansion plans, backed up by very significant levels of support from their governments.

    We believe that it is vital that we make the best use of our land using these policy drivers to ensure that we can sustainably produce food from it as efficiently as possible.

    We are only a small country, with a finite amount of land. Land size and profitability will dictate how the industry here should expand. The board is very aware of this and that is why the targeted growth in the red meat and dairy sectors is specifically focused on growth by adding value, rather than increasing livestock numbers.

    Increasing the quality of our dairy output is vital to ensuring its long-term sustainability. Our action plan targeted a 65% increase in the turnover of the dairy sector by 2020 through increasing value-added and by growing milk solids by 22%.

    Beef from the dairy herd also offers significant opportunity to secure best value, but not at the expense of the suckler herd. The action plan targets growth in international markets where tastes and preferences will vary. We need to have an industry flexible enough to respond to the markets.

    Maintain sucklers

    Maintaining the suckler herd at its current levels to 2020 would be a noteworthy achievement in itself, but that is not to say that farmers cannot be profitable in the beef sector.

    Enhanced processor-led relationships should seek to get producers to work together to ensure that what they are producing on-farm meets consumers’ requirements. And they should be suitably rewarded for this.

    An enhanced supply chain approach to the production of red meat is the only way that the sector will be able to deliver on our target of increasing its turnover by 65% to £1.6bn, with sales to key external markets increasing by 78% to £1.25bn.

    Increase intensive sectors

    The action plan targeted increases in the number of livestock in the intensive sectors, which will require an increase in the number of pig and poultry houses. The availability of land will not be the obstacle to this expansion, but environmental regulations are likely to constrain those wishing to grow.

    The board is committed to sustainable growth and believes that regulators should be able to work with, rather than against, the food industry, to ensure that we grow our businesses in a sustainable manner.

    However, there is no point restricting food production here simply to export its production elsewhere. And if this happens, it is likely that the regions where it will be produced will be less committed to the concept of sustainable production.

    Sustainability is key

    The ‘Going for Growth’ action plan highlighted the competitive edge in global markets provided by our clean, green and sustainable production methods. The industry must take advantage of the business opportunity that this provides.

    The sustainable use of the land resource available must be delivered at a strategic level. The industry recognises this and recommended such an approach to government.

    We are pleased that the Northern Ireland Executive has committed to develop an agricultural land use strategy. This will establish how to optimise production efficiency and balanced environmental outcomes from our agricultural land.

    This will be fundamental to the long-term sustainability of the agricultural resources at our disposal. We await with interest its findings, because these could result in new policy drivers to transform the way our land is used.

    Access to finance

    The other major factor in the strength of agriculture moving forward is access to finance. The action plan called for targeted government investment of £400m across the entire sector, which would lever over £1bn in total investment to the industry.

    Investment schemes, such as the farm business improvement scheme, will be offered at grant rates of approximately 40%. If farmers are unable to source the other 60%, then the scheme will be under-utilised. Financial institutions have a vital role to play in supporting the sector and must make lending accessible to those wishing to develop their enterprises sustainably.

    It would be a wasted opportunity if grant support from government was not to be drawn down, simply because the matching finance wasn’t available. This is a further area where integration across the supply chain can help to progress the sector. The security and business focus that a market-led, integrated supply chain offers to a farming enterprise makes it a much more attractive proposition to a bank.

    Internal redistribution of CAP

    Also on the horizon is the 2017 review of the CAP. Farmers in Scotland have made no secret about their desire to see the redistribution of CAP funds across the UK.

    As Northern Ireland has a substantially higher average payment than the other UK regions, our pot of CAP money could be in the firing line.

    Should this UK redistribution come to pass around €100m, almost one third of our annual CAP direct support budget could be lost. This would have a devastating impact on farming in Northern Ireland.

    Land use

    Within the Agri-Food Strategy Board’s vision for the local agri-food sector, we hope to realise sustainable improvements in productivity, efficiency and market responsiveness for all sectors through enhanced supply chain integration.

    For the extensive sectors, we propose growth in turnover through securing greater value-added, rather than through increases in livestock numbers.

    However, crucially, we do not aspire to the view that some sub-sectors might develop at the expense of others in the agri-food industry.

    To that end, we do not, at this stage, foresee any significant shifts in land use in the short- to medium-term, though the findings from the Northern Ireland Executive’s proposed agricultural land use strategy might have more implications for the longer term outlook.

    With the global population rising, there is a real opportunity for Northern Ireland to grow and expand all parts of the agri-food industry and to tap into new markets, whether they be for red meat, dairy, poultry or pork. And despite some significant challenges, there is an appetite in the farming community to grow and develop farm businesses.

    With the challenges posed by the newly reformed CAP, farmers will be looking for a better return from the market in order to keep their businesses viable.

    Never has a single supply chain, that delivers profitability for everyone involved, been more important.