The Current “Problem” with Margin

Currently, 5 multiple groups control over 90% of the retail market and there is a high level of price competition between these groups. Irish fresh produce growers are in a weak position to bargain for a fair price as many are competing with each other and often they have only sufficient scale to supply one of the supermarket chains. In recent years, this power imbalance has led to producers frequently obtaining prices that just cover the cost of production and often only achieving prices that fail to cover their production costs. The IFA has recorded a drop of 15% in the prices being paid by multiples for fresh produce over the past four years.
Multiples regularly employ low price promotions of fruit and vegetables to attract footfall, often selling produce near or below the cost of production. This practice undermines the value of fresh produce in the eyes of the consumer, making it increasingly difficult to achieve higher retail prices and reduces the potential for more sustainable margins in the future.
The above factors have contributed to a rationalisation in the number of commercial growers of fruit and vegetables in Ireland. Fortunately so far, the fall in production caused by exiting growers has largely been filled by existing growers increasing their production to fill the gap. However, unless those remaining in production can soon secure a level of price for their produce that provides an adequate living and the capacity to re-invest in their businesses, even these resilient growers will begin to exit the market.

Current Impact of Prolonged Low Margins

• Few new young entrants are being attracted to a career in horticulture and the majority of remaining producers are now in their fifties and sixties
• Early and late season production is no longer viable for some crops such as Winter Cauliflower
  Reduced or no capacity of growers to absorb recent rising input costs e.g. increase in the minimum wage, rise in value of sterling etc
• Reduced or no capacity of growers to sustain crop losses due to increasingly challenging weather growing conditions
• Evidence that the productive capacity of soils here and in the UK are deteriorating due to increasingly intensive farming practises

Likely Future Impact of Continuing Low Margins

Many existing producers will soon retire or exit the industry. Critical expertise from the industry’s grower base will be lost and would not be easily replaced should Ireland need to increase production in future years. Increasing risk of the industry’s production output becoming reduced to a non-sustainable level. Irish soils will continue to deteriorate and yields will be seriously impaired

Threat to Ireland’s National Food Security

Scientists expect that Climate Change will cause world food production to become increasing volatile. For example in 2008, 42 countries banned food exports to ensure enough food for their own populations. Last summer problems with transport through Calais resulted in a sudden surge in demand for Irish grown mushrooms, peppers and tomatoes. Such food “shocks” result in sudden increases in the price of food and in some case in the non-availability of particular food lines.

Salient Points relating to National Food Security

• Unless the issue of near or below cost selling is effectively addressed Ireland’s capacity to produce fruit and vegetables will diminish significantly in the coming years
• Ireland grew enough Carrots in 2014 to feed its population for 268 days, Tomatoes for 48 days, Onions for 32 days and Strawberries for 306 days
• The increasing impact of Climate Change will make the growing of fruit and vegetables ever more challenging in Ireland and the UK
• As an island nation imported food has to be flown or shipped into the country, which makes Ireland even more vulnerable in the event of food “shocks” and points to the need for Ireland to maintain and develop its capacity to produce food
• Ireland needs to implement an effective national policy on Food Security
  The UK government conducted a food security review in 2009 and concluded that the UK needed to produce as much food as sustainably possible to meet future demand

Government Action Required

The threat posed by the near or below cost selling of food is an international problem and others are taking measures to tackle it to protect their food production capability and ensure a stable supply of food. The Irish government now needs to act promptly to enhance Ireland’s food production capacity and ensure we have adequate supplies of food to feed our population in the years ahead.

The EU & Other EU Countries are Addressing the Issue of Below Cost Selling

• In 2008 Germany introduced legislation, which made it illegal to sell food below the cost of production and are now working on further improvements to this law
• The UK appointed a Groceries Code Adjudicator in 2013 to prevent unfair trading practices impacting on suppliers
• The EU Agriculture Commissioner recently stated “All players in the food chain should realise that it is imperative that producers get a decent return for their raw material” and the EU Commission is reviewing policy in this area as an earlier EU voluntary initiative has failed to work.

Required Government Measures

In the interests of national food security the incoming Government must grant special status to horticulture to facilitate the retention of a viable horticulture food industry. This special status would enable the industry to arrest its decline, stabilise and in time develop to its full potential to become a major contributor to the Irish economy. This requires government to;

• Implement a detailed strategy to combat “Near or Below Cost Selling” (BCS) to include;
  > Amending the Competition & Consumer Protection Act 2014 to prohibit BCS
  > Regulating the commercial relationship between producers and retailers to ensure fairness and transparency
  > Supporting improvements to the structure of the industry to deliver better outcomes for the participants
• Conduct a national food security review
  > This to specifically include a review, by a working group, of the impact on BCS on the production of fresh produce and that officials from the Department of Jobs, Enterprise and Innovation be represented on this working group
  > Compile and execute a strategy to ensure national food security until 2030, which reflects integrated thinking and linkages between the different agriculture sectors
• Provide resources to horticulture at a scale commensurate with the resources already provided to the other sectors of Agriculture to support education, research, development and promotion
• Provide funding for the Horticulture Industry Forum
• Rationalise Producer Organisation administrative requirements to facilitate immediate development of Horticulture Producer Organisations
• Introduce measures to attract new blood and encourage succession

Current Funding of Horticulture Vis-à-vis Other Agriculture Sectors

Horticulture is not receiving support from the state commensurate with size vis-à-vis other sectors. Some examples of the inadequate levels of support for the sector are;

• In comparison with the Beef and Dairy Forums there is no state funding provided for the Horticulture Industry Forum
• Funding for DAFM Plant Protection Section in Backweston is insufficient
• Availability and quality of Horticulture training and education has declined
• Teagasc has insufficient resources to service this sector. For example;
  > 10 horticulture advisers in 2008 but just 5 remain in 2016
  > Currently there are just 2 full time horticulture research officers

Teagasc provides research, advisory and educational supports to the sector.  Appropriate agronomy and research resources are a requirement for a modern progressive horticulture industry. The increasing diversity of the sector and the increasing regulatory demands around food production has increased demands on the service in recent years. The degree of specialisation, advances in integrated crop management, precision technology and requirements for technology adoption will place further demands on the Teagasc advisory service into the future. Building research and advisory competency and critical mass in the face of such challenges will be the cornerstone of maintaining and developing horticulture in Ireland.