What are the future policy options for suckler beef and sheep?

Significantly, the recommendations contained within the report have been endorsed by the three commissioning stakeholder organisations. Initial contact has been made with the Department of Agriculture, Environment and Rural Affairs (DAERA) regarding the detail of the report and its final recommendations.

LMC, UFU and NIMEA representatives have also confirmed that none of the future support policies that they wish to champion are trade distorting either within the UK or on international markets.

The study undertaken set out to identify the policy framework and associated measures to deliver a sustainable and competitive Northern Irish (NI) suckler beef and sheep sector.

This encompasses providing a fair income to productive farmers, enabling processors to be internationally competitive whilst delivering public goods, notably environmental and societal outcomes, which are valued by society and contribute to a vibrant economy.

The study used a combination of primary and desk-based research to explore several options for supporting the suckler beef and sheep sectors in NI to ensure that a sustainable and viable industry is maintained. It addressed the following objectives:

1. Identify the reasons for the decline in suckler cow numbers and variability in the scale of sheep production in NI.

2. Conduct a review of the impact of historical and current agricultural policies in beef and sheep producing countries on suckler cow and breeding sheep numbers, the environment and society.

3. Provide an evidence-based analysis of the impact of the existing suckler beef and sheep industry across the NI economy, environment and society as a whole.

4. Undertake a review of the net benefit of beef and lamb production as a public good.

5. Propose options for support measures that demonstrate the potential economic, environmental, and social outcomes that a viable suckler beef and sheep sector can deliver.

Why the decline?

The report outlines why the suckler beef and breeding sheep sectors have declined over recent years.

Poor profitability emerged as the leading reason as the suckler beef and sheep sector has struggled in comparison with other sectors (e.g. dairying) in recent years. Linked with this, the growth in dairying on the island of Ireland and the increase in dairy-bred beef coming onto the market has eroded suckler beef’s competitive position. Competition from abroad was also influential and could become more problematic in future if the UK alters its tariff regime.

Policy impacts are closely linked with profitability as many NI farmers’ incomes are heavily reliant on support. Looking at the output from suckler beef and sheep, the introduction of decoupling in 2005 was seen as especially influential because thereafter, farmers did not have to engage in much productive agriculture in order to continue to receive support payments.

Structural challenges impede the sector from two perspectives. Firstly, the vast majority of suckler beef and sheep farms in NI are categorised as being “very small”, thus limiting opportunities for occupants, particularly young farmers, to expand. Secondly, the age profile of farmers is a major concern. In comparison with 2000, farmers aged 65 or over has risen from 24% to 36% in 2018. Frequently, older farmers tend to have lower stocking rates which has contributed to a reduction in numbers in recent decades.

Beef and sheepmeat consumption levels have steadily fallen in the UK since 1990. Coupled with this, the rise of alternative proteins and diets has meant that beef and sheep now faces a greater degree of competition. The beef sector in particular is targeted by some activist groups that claim that it is a major contributor to greenhouse gas emissions. Linked with this, the BSE crisis of 1996 contributed to a major downturn in beef consumption which the sector has not recovered from in the decades since.

Price has also been influential because, relative to poultry for example, beef and sheep meat is significantly more expensive meaning that it has increasingly become a special occasions protein. Although beef cow and sheep numbers have stabilised in the last decade, there is significant concern that with Brexit now a reality, trade friction could become a major issue, particularly with GB which is by far the most crucial market. This could contribute to a further decline in output.

Learning from other regions

The report looked at the impact of various cattle and sheep support policies in other countries, including the devolved regions of the UK. This work, which included discussions with relevant industry representatives, confirmed that a number of themes, some of which may have relevance in Northern Ireland

Productivity and the environment emerged as the leading focus areas with many industry experts stating that these concepts can be complementary if applied correctly. In addition, Results-based support schemes are becoming more prominent. But these need to be controllable, and easily measurable, at the farm-level to have the best chances of success.

Skills development and knowledge transfer are likely to have driven productivity growth in Australia and New Zealand though this may not be easily transferable to Northern Ireland given structural and commercial differences (e.g. greater influence of off-farm income).

Insurance schemes received mixed responses as they tend to be complex to set-up and administer, particularly given the lack of culture concerning the utilisation of insurance in NI.

Some analysts view deficiency payment schemes in a positive light while others deem them to be heavily trade distorting and would cause issues with neighbouring countries. Coupled payments were viewed positively by some. However, the need to avoid quality decreasing was also highlighted in this context. Some urged for such schemes to drive positive behaviours such as lower emissions or better quality.

Savings schemes act to encourage farmers to conserve some funds until a “rainy day”. It was felt that such an approach would help to improve resilience within the suckler beef and sheep sectors.

Where the delivery of public goods is concerned, the environment is the main focus and most schemes tend to consist of a menu of options/initiatives which farmers can undertake. These often tend to be “add-on” schemes to a basic support mechanism.

Other key public goods themes include: tourism and landscapes. Many of these policies focus on the contribution of suckler beef and sheep towards the aesthetic value of the countryside as well as making it more accessible. Accordingly, the concept of cultural landscape is frequently cited as a key public good.

Security of supply has been cited as a public good in several countries and is distinct from food production. It also has linkages with food safety and traceability which are seen as particularly important in the context of public health.

Productivity improvement is, increasingly, regarded by some as a public good given its potential to enable scarce natural resources to be utilised more efficiently and sustainably. Here, the scope to extract greater value from data (e.g. leveraging breeding databases to support genetic improvement) was also mentioned as constituting a public good.

Specifically where Northern Ireland is concerned, productivity and the environment were frequently mentioned as was the need to reform the conacre system of farm rentals and the need to ensure that farmers receive a fair income for the work that they undertake.

Desired outcomes

According to the report, the long-term vision is that, by 2027, the NI suckler beef and sheep sector is competitive and increasingly sustainable meaning that emission levels are reducing at a greater rate than the UK’s Paris Accord targets.

Productive farmers should receive a fair income for their market-leading produce and that the support they receive mitigates the effects of volatility whilst permitting processors to be internationally competitive and develop sales in growing markets.

In addition, the suckler beef and sheep sectors deliver public goods, especially environmental and societal outcomes, which should valued by society and contribute to a vibrant economy.

Future support policy options:

The report lists a number of future support policy options, which have been designed to help secure the outcomes listed above. Three strands of support are envisaged. These are:

1. Environment and Productivity Support (EPS)

This is the core component of the support framework. It focuses on a select number of key performance indicators (KPIs), four of which are compulsory with three being optional. To receive full support, farmers must achieve all compulsory targets and one of the optional KPIs. These are designed to be straightforward to measure and several can be obtained using existing datasets. The payments are set at 70% of existing BPS payments and would be lodged into a special interest-bearing savings account where monies would only be taxable upon withdrawal. The farmer could draw out of the account at any time and could “shelter” the money tax-free until the rainy day (when cash is needed and the tax bill is likely to be lower) thus bolstering resilience. The estimated cost across all NI farms would be £196.7m.

2. EPS Plus Payments

These will address the scale of the environment and productivity challenge. Additional measures are also required but farmers need greater flexibility to choose which options would be most suitable for their businesses. To this end, an enhanced form of support (EPS Plus) is proposed.

These payments would only be made if the basic EPS targets were achieved. Options from a suckler beef and sheep perspective include ‘coupled schemes to promote efficiency, sustainability and quality; low methane beef calf payments; changes to the farm quality assurance scheme, which would include the introduction of lifetime quality assurance and a sheep welfare and efficiency payment (SWEP): targeted at improving the welfare of breeding ewes. Taken together, these coupled payments would equate to £48 million. This would represent 14% of the total support given to agriculture in Northern Ireland (£333 million) and 2% of 2019 gross output; within EU and WTO limits.

An Environmental Farming Scheme (EFS) – Successor Programme is also envisaged: targeted at farmers that deliver more for the environment than what is provided for within standard direct payments schemes (e.g. targets within the EPS). Free of income foregone or costs incurred constraints, the delivery of environmental enhancements could become profit centres (farming enterprises) in their own right. Here, greater funding would be required and would come from the 30% diversion of funding from the old BPS to EPS Plus schemes such as this. It is proposed to increase funding to £21.7 million, a 50% increase on funding for the current EFS, LFA Compensatory Allowance (ANC) and Countryside Management Schemes (non-capital).

For young farmers wishing to participate, it is proposed to use approximately 50% of existing Young Farmers’ Payments (£2.9 million) as a means to provide a small top-up on EPS Plus payments on land which is under an agri-environment scheme.

A proposed Northern Ireland Rural Disadvantaged Area Scheme (RDAS) would recognise the substantial diminution of support to Severely Disadvantaged Areas (SDA) under the Areas of Natural Constraints (ANC) scheme has had a severe impact on the suckler beef and sheep industry.

The need to provide an additional payment to farmers in disadvantaged areas in return for the delivery of enhanced public goods (e.g. visual landscapes etc.) has justification and should be given approval. The amount of funding should cover the decreases in funding experienced by SDA farms in recent years as a result of convergence under the BPS. Other industry initiatives include the ramping up of land mobility and associated tax relief schemes.

3. Other Rural Development Grants

Capital Grants would be used to deliver on the productivity and environment themes outlined above. However, there would be greater flexibility for farmers in terms of the grant amounts (i.e. much lower minimum grant levels), time available to complete the works and the auditing and assessment approach adopted by regulators. This calls for a productivity mindset to be adopted by the regulatory authorities as well as by farmers.

Young farmers would receive a top-up for such grants based on the other 50% (£2.9 million) of the current Young Farmers’ payment.

Other proposed support mechanisms identified within the report include hardship and disease compensation; enhanced broadband connectivity in rural areas and support for further diversification within farming businesses.