Representatives of Farmers for Action (FFA) have discussed the Gosling Report with members of the Stormont Agriculture Committee.

The publication, commissioned by FFA and produced by independent economist, Paul Gosling, assesses the current state of agriculture in Northern Ireland.

It also teases out the implications of a guaranteed farm gate price system, if operated on a statutory basis.

The report follows on from an initial study, produced by Paul Gosling back in 2016.

FFA coordinator, William Taylor said:

“The new Gosling Report specifically references the attempts now being made in France to introduce a form of payment system for farmers that would have a degree of government backing.

“We are also seeing closer relationships being formed in England between dairy processers and milk producers.

“Admittedly, this is a voluntary arrangement. However, the need for the UK authorities to agree a system of guaranteed farm gate prices remains a priority.”

From an FFA perspective, this objective is encapsulated within the organisation’s draft Farm Welfare Bill for Northern Ireland.

It has been developed to prevent damage to the welfare of farming families by making provision for the prices of farm produce.

The future policy option also references the appointment of a Fair Farm Gate Pricing Panel, the members of which will oversee the compilation and maintenance of the relevant prices paid back to primary producers.

William Taylor again: “We met with members of the Agriculture Committee to discuss the implications of the Farm Welfare Bill directly in the wake of Paul Gosling launching his report.

“It comprised an hour-long engagement with members of the committee, during which we asked for the Welfare Bill to be formally introduced on the floor of the Stormont Assembly.”

According to the FFA representative, the agriculture committee will respond to this request in due course.

“However, he envisages that it would take up to 12 months for the bill to finish all its statutory review stages, assuming it is taken forward by either individual politicians at Stormont, or a political party,” he said.

The Gosling Report

Paul Gosling is confirming that a financial implication has been impacting on agriculture in Northern Ireland for many years.

This has a severe negative impact on rural life, which is increasingly becoming marginalised, despite the slow improvement in Northern Ireland’s wider economy.

In Gosling’s view, it is essential that Northern Ireland does more to support its rural life and social infrastructure.

There has already been a reduction of 36% in locally owned working farms since 1981 – the sector needs greater protection.

Market collapse

According to the new report, international farm gate prices collapsed after the Great Recession of 2008.

Dairy prices paid by supermarkets and food processors fell heavily and wholesale milk prices moved substantially below the cost of production – in some cases, farmers received only around two thirds of their costs.

Dairy cows in a field — Dairy cows on William Irvine’s farm. Image source: Cliff Donaldson

Gosling further explained:

“This, it should be stressed, did not provide any margin to allow for investment. In Germany, the European Milk Board reported, milk producers were paid only 66% of their costs. The situation was similar in relation to other food items.

“The fact that prices paid have partially, and inconsistently, recovered demonstrates the inequalities of market power within the supply chains: the supermarkets and food processors largely and unilaterally control the prices paid to farmers.

“That higher returns were paid to farmers was the result of choices belatedly, and likely temporarily, made by supermarkets and food processors. This is not a free market, but one based on buying power and market strength.

“There is volatility in prices paid to farmers, which farmers themselves have little ability to control, or even influence.”

Volatility

According to Gosling, this volatility and the partial recovery of farmgate prices demonstrates that fair prices could have been paid to farmers over the recent years in which they were repeatedly paid less than the cost of production.

He believes there needs to be protection to ensure that farmers are paid sufficiently to meet the costs of production, linked to inflation, plus a reasonable margin of 10% or so.

The report indicates that supermarkets and food processors return large profits year after year, which are achieved through consumer loyalty and what is sometimes more than manipulation of farming businesses that are unable to consistently cover their costs of production.

It also points out that Tesco and Sainsbury’s, for example, have each returned large profits in recent years. Tesco reported an operating profit on UK and Irish activities of £1.2 billion in 2023; £2.1 billion in 2022; £1.9 billion in 2021; £1.9 billion in 2020 and £1.9 billion in 2019.

Meanwhile, Associated British Fods, a major UK-based food processer, grew revenue in 2023 by 16%, with pre-tax profits rising by 9% to £1.5 billion.

Premier Foods is another large UK food processor: its turnover grew by 11.8% in the 2022/3 year, and pre-tax profits rose 9.6% to £112 million.

The Gosling report also confirmed that farming represents 1.6% of the Northern Irish economy, compared to 0.5% in a UK context.

There are significant structural differences between the farming industry that operates in Northern Ireland, relative to that in England, Scotland and Wales. The much smaller siee of farm businesses is a case in point

In 2021, there were 26,077 farms in NI, down from 29,818 in 2001 and 40,700 in 1981. There has also been a reduction in UK agricultural production in recent years, as measured by tonnage of production.

Currently, Northern Ireland produces 16.9% of all UK dairy output; 14.8% of all cattle; 14.5% of pigs; 12.1% of poultry and eggs; and 6.2% of sheep and wool.

According to Gosling, agriculture generated £716 million for the Northern Irish economy in 2021.

The case for Stormont intervention

Gosling said that there is nothing new about the principle of government intervening in markets that are not functioning in the national interest.

Such steps include protecting food security and the sustainability and viability of the farming sector.

“After the Second World War, food security was regarded as such a political priority that strong measures were put in place to protect farmers and the financial sustainability and viability of their operations.

“Indeed, the immediate cause of concern around aspects of food security is directly related to ongoing war within Europe.”

Gosling explained: “Given the political insecurity of the world today, including warfare and the often tense relationships between major trading nations and trading blocs, it would be helpful to re-establish those principles of protecting food security.

“Globalisation has had a negative impact on national food security, requiring new policies and interventions from government.

“One of the intended consequences of globalisation was to cut the price of food, by opening up the international trade in food. Indeed, one of the claims of Brexit was that the UK would be better able to buy food cheaply on the international markets, with less need to grow food at home.

“This lack of attention to the need for food security was shown to be misguided by the Ukraine war and its impact on food supplies.”

Gosling strongly argues that agriculture in Northern Ireland is a sector that is subject to unfair market distortions, with supermarkets and food processors able to use their dominant market positions to unfairly manipulate prices paid to suppliers.

These are often small operations, without market power. This happened as supermarkets responded to input inflation and the cost of living crisis by punishing farmers, often unilaterally cutting prices paid to suppliers.

In his opinion, farmers have, therefore, been subject to unfair price pressure from corporations buying from them, while having little or no influence over their input costs.

As a result of the Ukraine war, fertiliser costs have risen substantially, while farmers believe they have had to bear a disproportionate burden on the move to reduce carbon emissions as part of climate change policy.

Meanwhile, sanctions on Russia – as a result of the Ukraine invasion – have had their own negative impact, by closing off the country as an export market.

The Gosling Report

Market collapse

Volatility

The case for Stormont intervention

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