competitiveness and productivity: an update...competitiveness of the irish cereals sector . source:...
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Ag Econ and Farm Surveys Dept. Fiona Thorne,
Maria Cillero, Patrick Gillespie,
Kevin Hanrahan, Anne Kinsella and
Michele McCormack
Competitiveness and Productivity: An Update
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Overview
• Brief summary of the updated position
• Why the renewed focus on competitiveness
– (and productivity)
• Cereals
• Beef
• Dairy
• Summary and conclusions
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Summary of Research Update
• DAFM funding through the Research Stimulus Fund
• Focus on Competitiveness and Productivity
• ‘Something for everyone in the audience’
– International costs for cereal crops
– Trends and sources of productivity growth in the beef sector
– Trends in productivity growth in the dairy sector
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Why the focus on competitiveness?
Why is it important to be competitive?
CAP Reform, WTO Reform
Decoupled payments
Quota abolition
Brexit
Ability to compete at or near world prices
Volatility
Ability to withstand cost price pressure
Competitiveness is about survival & not just about being the best
DAFM funded Research Stimulus Fund
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International Competitiveness of the Irish Cereals Sector
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Source: FADN and Authors own analysis
Positive sign for average size cereal farmer in a comparative sense
Costs as % of total output - Selected EU specialist cereal farms
Second lowest cash costs as per cent of output
Economic costs also lower than the avergae
Competitiveness of Irish Agriculture
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International wheat yields(2016)
Source: Agribenchmark, Cash Crop Network, 2016 data
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2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016
AR330ZN AR700SBAAR900WBAAU4000WB*AU4500SC* IE80KE RU16000KURRU20000BSRU21000KRAUA2600WUUA7100PO*US1215INSUS1300ND US2025KS
AR AU IE RU UA US
Yields - t/ha
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International costs of cereal production
Source: Agribenchmark, Cash Crop Network, 2016 data
Ireland is a yielding producer but also a high cost producer
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2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016
AR330ZN AR700SBAAR900WBAAU4000WB*AU4500SC* IE80KE RU16000KURRU20000BSRU21000KRAUA2600WUUA7100PO*US1215INSUS1300NDUS2025KS
AR AU IE RU UA US
Total costs and Gross Revenue - USD/ha Cash cost Depreciation Opportunity cost Gross revenue Revenue incl. dec. payment
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Productivity growth in
the Irish beef sector
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Background
• The beef sector is Ireland’s largest agricultural sector
• But faces several important challenges
– Highly exposed to price volatility for beef and to very
competitive international markets.
– Long term problems with economic viability and low farm
incomes of most farms in the sector.
– Highly dependant on direct income support.
• Food Harvest 2020 & Food Wise 2025 have placed
increased focus on improving competitiveness and
quality of production.
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Specialist Beef Finishing Farms v. Non-EU Farms
Cash costs higher than average non EU farm
Total economic costs much higher than the average
Source: AgriBenchmark data (2015)
Worrying sign for average size specialist beef finisher
Competitiveness of Irish Agriculture
Question we ask is whether there are sub segments of
the Irish beef sector that are performing well ????
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Background
• Explore Total Factor Productivity (TFP) trends and sources:
– Volume measure of aggregate output/volume measure of aggregate inputs.
– CAP 2013 reform selected TFP as an impact indicator for monitoring the CAP
• But heterogeneous farm types, production systems and practices:
– Type and ages of animals, intensity, feeding system, uptake of new
technologies, regions, soil types, etc.
– Evidence of farms operating under different technologies found in the
literature.
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Research Findings (Classes)
• Class 1 Largest and young:
– largest farms, highest labour and capital inputs use, youngest farmers
• Class 2: Small and off farm workers:
– smallest farms, high off-farm work engagement
• Class 3: Old and good soil:
– oldest farmers, lowest capital input use, most favourable soil type
• Class 4: Intensive:
– highest stocking rate, high labour input use, high output per hectare
• Class 5: Extensive but relatively large:
– lowest output per ha., lowest labour input and stocking rates; BUT 2nd largest
• Class 6: Poor soil:
– located in the most disfavoured types of soils, low output per hectare and stocking rates
• Class 7:High output, high capital:
– highest output per hectare, highest capital input use
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Identification of different classes of beef farms Farm gross output, subsidy intensity, farm size, stocking rate, soil type, rearing or finishing specialisation,
farmer’s age and off farm work engagement.
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Research Findings (Productivity)
• Class 1 Large and young:
– largest farms, highest labour and capital inputs use, youngest farmers
• Class 2: Small and off farm workers:
– smallest farms, high off-farm work engagement
• Class 3: Old and good soil:
– oldest farmers, lowest capital input use, most favourable soil type
• Class 4: Intensive:
– highest stocking rate, high labour input use, high output per hectare
• Class 5: Extensive but relatively large:
– lowest output per ha., lowest labour input and stocking rates; BUT 2nd largest
• Class 6: Poor soil:
– located in the most disfavoured types of soils, low output per hectare and stocking rates
• Class 7:High output, high capital:
– highest output per hectare, highest capital input use
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Identification of productivity growth amongst classes
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Research Findings (Productivity)
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Identification of productivity growth amongst classes
1.20 2.50
-2.80
2.50
-2.20
1.80
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-5.00
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Largest
and young
Small, off-
farm
Old, good
soil
Intensive Estensive
and large
Poor soil High
output,
high capital
An
nu
al T
FP
Gro
wth
%
Technical change is the man driver of
productivity in most cases
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Productivity Growth
of the Irish Dairy
Sector
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International Cash Costs of Milk Production
Source: IFCN, 2015
Positive sign for the average and larger Irish dairy farm in a non EU context
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-133
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IE-7
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AU
-27
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-349
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-11
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A
UK
-160N
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UK
-25
9S
W
US
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Perc
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tag
e o
f o
utp
ut
Competitiveness of Irish Agriculture
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Teagasc Presentation Footer 18
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Ind
ex (
2010 =
100)
TFP Total Output Total Input on Irish Dairy
farms 2005 -2016 (2010 - 100)
TFP Total Input Total Output
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TFP Total Output & Total Input on Irish Dairy farms
2005-2016 (2010 = 100)
Teagasc Presentation Footer 19
‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16
TFP 101 105 103 99 99 100 102 97 96 102 110 113
Total
Input 97 99 99 99 96 100 102 106 113 112 114 116
Total Output 98 104 103 99 95 100 104 103 109 114 125 131
Next to look at international comparisons and sources of growth
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Summary
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• Putting the Outlook presentations into context
– International cost comparisons for cereals
– Potential positives in the Irish beef farming sector
– Charting the recent growth in the dairy sector
• Ireland in context
– High cost producer internationally for cereals
– One policy does not fit all for beef farms
– Recent growth in dairying has been at relatively low additional input
• Final note of appreciation to DAFM for funding this research