BACKGROUND PAPER DRIVERS AND SCENARIOS OF LAND USE CHANGE IN IRELAND Prepared by Teagasc November 2014 Note: The views expressed in this background paper do not purport to reflect the views of the Minister or the Department of Agriculture, Food and the Marine 1 TABLE OF CONTENTS 1. INTRODUCTION ...................................................................................................................................... 3 2. AGRONOMIC AND ENVIRONMENTAL DRIVERS OF LAND USE ................................................................. 5 CURRENT LAND USE IN IRELAND ................................................................................................................................ 8 AGRONOMIC IMPACT OF ENVIRONMENTAL CHARACTERISTICS........................................................................................ 12 3. ECONOMIC DRIVERS OF LAND USE ....................................................................................................... 12 LAND MARKETS .................................................................................................................................................... 13 LAND STRUCTURE AND DEMOGRAPHIC DRIVERS OF LAND USE CHANGE .......................................................................... 15 POLICY DRIVERS OF LAND MOBILITY ......................................................................................................................... 16 NON-AGRICULTURAL LAND USE DRIVERS .................................................................................................................. 16 LESSONS LEARNED FROM NEW ZEALAND ................................................................................................................... 19 4. TECHNOLOGICAL DRIVERS FOR HIGHER RETURNS TO LAND USE .......................................................... 20 TECHNOLOGICAL DRIVERS: ANIMALS ........................................................................................................................ 20 TECHNOLOGICAL DRIVERS: TILLAGE AND GRASSLAND................................................................................................... 20 COLLABORATIVE FARMING AND LAND ACCESS ............................................................................................................ 21 5. SCENARIO ANALYSIS ............................................................................................................................. 22 SUSTAINABILITY IMPACT OF SCENARIOS ..................................................................................................................... 22 FORESTRY OPTIONS TO REDUCE NET CARBON EMISSIONS............................................................................................. 30 REFERENCES................................................................................................................................................... 32 2 1. Introduction As a primarily animal based agricultural system in Ireland, agricultural production depends heavily upon the land base. The objective of this paper is to consider how to maximise the agricultural return from our land base while maintaining or enhancing our sustainability credentials by factoring the necessary behavioural, market, technological and policy drivers. With this objective in mind, we structure the report in four parts Agronomic and Environmental Drivers of Land Use Economic Drivers of Land Use Technological Drivers for Higher Returns to Land Use Scenario Analysis The underlying story in relation to potential is the ongoing differential return to land resulting in the different returns per hectare across different systems, where the income per hectare in Dairy is more than double that of most other systems. When subsidies are excluded, this difference is even greater. As in the case of the sectors strategy to 2020 in Food Harvest 2020, the dominant policy driver is the abolition of Milk Quota. Providing markets can be found for increased output, an expanding Dairy sector in volume terms is likely to continue to be the dominant theme. Prior to the introduction of Milk Quota in 1984, there were 3 times more Dairy cows than Suckler cows. As a result of a variety of policy changes, suckler cow numbers increased and dairy cows decreased so that both were at parity from about 1998, with a subsequent decline in numbers to the present where there are about 1 million dairy and 1 million suckler cows. Given the differential income between sectors, and given the abolition of quota, it seems inevitable that there will be a gradual drift in the relative size of the two industries, involving land use change. In terms of the Agricultural context we regard land use change not only as the movement of land between agricultural and non-agricultural uses such as Forestry or Settlement, but also in land use change between different systems; important given the different returns. Much of the focus of this report will be on intra-Agricultural land use changes. However despite income differences, there are many obstacles to substantial land use change. This paper considers some of these obstacles and the drivers under the four headings described above. 3 Figure 1. Land Use Drivers LAND USE Agriculture and Forestry Forestry Infrastructure and Urban areas Un-utilisable area Use determined by land use capability and infrastructure demand Use determined by land use capability Agriculture Wood products Grassland Annual Cropping Ruminant feeds (Conc feed Forage Whole crop) Milk, Meat (Ruminants) Use determined by: Land use capability, local markets/infrastructure, knowledge/tradition and the need for: high feed-value transportable animal feeds high value food product substrates Monogastric feeds (Conc Feed) Meat, poultry products (Monogastrics) Human food Hort Malt etc Land use options and products. Black boxes are land uses, Green are intermediary products and red are final products. Figure 1 details the relationship between different land use drivers. Land use such as Agriculture and Forestry, Urban and Infrastructure and un-utilisable land is determined by land use capability and infrastructure demand. Agricultural land use in terms of Grassland or Annual Cropping is determined by land use capability, local markets/infrastructure, knowledge/tradition and the need for high feed-value transportable animal feeds and high value food product substrates. 4 2. Agronomic and Environmental Drivers of Land Use One of the drivers of land use and agricultural or forestry return from this land base are agronomic or environmental characteristics of the land. The soils, and the dominant agricultural activities that they support in any area, are influenced by a number of environmental factors, including: Geology or sediments that soils are formed from Climate, particularly rainfall and temperature Position in the landscape (topography); The structure of agricultural and forestry production is driven by the interaction between these environmental characteristics. Tillage land is found in the free-draining soils of the south-east, with intensive livestock farming on the limestone-rich lowland grasslands of the south and midlands and the more extensive hill farming and forestry on the acid and peat soils of the hills, mountains and western seaboard. Resulting from this interplay between environmental factors, we see the clear North-East South-West dividing line between more intensive/productive/higher income lands to the South and East and more extensive/lower income lands to the North and West (Commins and Frawley, 1996). These broad landscape categories were originally defined in the General Soils Map of Ireland (Gardiner and Radford, 1980). Understanding the environmental factors that are important in the formation of soils provides an insight into the soil properties. These, in turn, can inform the understanding of the spatial distribution of agricultural production in terms of soil capacity, limitations and management and soil suitability for various enterprises. Fealy and Creamer (2014), utilising the rich spatial data of Teagasc (including the new Soil information system), detail the spatial pattern of these characteristics. They highlight particular drivers of agronomic conditions resulting from environmental characteristics such as soil moisture deficit and grass growth days. Climate and weather exert significant influence on agricultural production and by extension the decisions on land use and the spatial distribution of agriculture enterprises in Ireland. While the impact of major weather events such as drought or floods are generally obvious, the impact of smaller variations in climatic factors such as temperature, radiation and soils moisture are harder to see but significant nonetheless. Ireland has a cool temperate western maritime climate with mild, moist summers and cool to moderately warm, cloudy summers. The main atmospheric influences are maritime air from the Atlantic and frequent eastwards passage of depressions. The prevailing winds are westerly to southwesterly. Mean annual temperatures range from 9.0 deg C in the northeast to over 10.6 deg c in the southwest. Crop growth is affected by the total amount of heat received during the growing season. This variable is measured in degree-days which are the total cumulative degrees by which mean daily temperature exceeds a crop specific threshold. The number of degree days above 6 deg C ranges from 1,400 in the north to 1,700 in the south. However even in the south the number of degree days above 10 deg C is only 700 which inhibits the growth of crops with high temperature requirements. While the influence of temperature is most directly evident in relation to crop growth it also affects animal production though direct impact of temperature on animals but also indirectly influencing fodder production. 5 Figure 2. Annual average rainfall Although precipitation facilitates amongst the highest grass and crops yields in the world, excess precipitation can impact on grassland through the effect arising from excess soil moisture with reduced productivity and limitations to trafficability and though direct incidence of liver fluke on cattle and sheep and can result in ripening and harvesting difficulties and to disease risk for cereal crops arising from excess moisture. 6 Figure 3. Map grass growing days Note: Isobars indicate days of grass growth The configuration of geology, soil and topography in various climate zones across the country give rise to recognizable landscape types in Ireland. These can be classified into a number of primary landscape categories , or physiographic divisions, which were originally delineated by Gardiner and Radford (1980). These five major physiographic divisions are: Mountain landscapes support shallow soils (Lithosols) mostly on steep slopes at > 500 m elevation. Wet soils (Groundwater and Surface-water Gleys) and acidic soils (Podzols) are present where slopes are less steep. Blanket Peat occurs on flat and gently undulating plateaus. Hill landscapes occur at altitudes from 150 to 365 m with soils generally developed from shale, sandstone or occasionally granite. These soils are mainly acidic in nature, including Brown Podzolics and Brown Earths, and some Surface-water Gleys. Drumlin landscapes were formed during the most recent period of glacial advance. 7 Drumlins are oval-shaped hills that stand out as an undulating landscape. They were formed from glacial deposits, sometimes with a rock core. These deposits vary in thickness; thin deposits over rock cores tend to have drier soils on the drumlin slopes such as Luvisols, Brown Earths and Brown Podzolics, whereas drumlins with thick glacial deposits have wetter soils (Surface-water Gleys). Wet soils (Groundwater Gleys and Peats) are usually found at the base of the Drumlin where water running off the slopes accumulates. Flat to undulating lowland landscapes in limestone-dominated areas give rise to very shallow soils (Rendzinas) where limestone bedrock is close to the surface, but deeper soils (Luvisols and Surface-water Gleys) develop on the limestone-dominated glacial till that covers much of the limestone bedrock. Acidic soil lowland landscapes are underlain by glacial deposits made up of sandstones and shales, or granite or igneous and metamorphic materials, from surrounding hill and mountains. These soils tend to be significantly more acidic than those underlain by limestone. Brown Earths and Brown Podzolics form in coarser till material and finer material (i.e. in shale areas) gives rise to wetter soils such as Surface-water and Groundwater Gleys. Alluvial and Valley landscapes are found in small areas all over the country often at the base of the hills/mountains and on the floodplain and terraces of the major river valleys. The associated soils are mainly Groundwater Gleys, Alluvial Soils and Peat. Figure 4. Physiographic Regions of Ireland Current Land Use in Ireland 8 Green et al. (2014) quantifies the spatial distribution of the nature of the land use resulting from these environmental and agronomic conditions. They note in particular the challenges in doing this as a result of the fact that Ireland does not routinely develop maps of land use. Official estimates utilising LPIS, report that that in 2012, there are 382 kHa of crops and 3635 kHa of Pasture.1 Utilisable agricultural area has been declining at about 24000 hectares per annum. Utilising CORINE data (See Figure 5), non-arable agricultural areas are the largest land cover are, accounting for 62.6% of the land cover, with wetlands accounting for 15.2%, followed by forestry and semi-natural areas at 12.9% and Arable at 4.7%. Figure 5. Percentage of Level 1 land cover in Ireland for 2012. Source: CORINE 2012 (unreleased data) Specifically for forestry, the national forestry inventory estimates that 10.5% of the country is covered in forestry, while the Teagasc Hedgerow map finds that in 2006, scrub and hedgerow occupies 6.4% of the country. There is a clear spatial pattern of Agriculture in Ireland. It is unsurprising that sectors with higher returns are on the lands with better agronomic potential such as Dairy in the South and West. Specialist sheep farms are concentrated in upland areas, where the land is less suitable for larger animals or tillage. Beef production systems dominate land use in the Border, Midlands and West region, but as the most common farm type, have a strong presence in every region and land type. The resulting economic scale is thus highly spatially correlated. Figure 6 describes the spatial structure of Agriculture by Family Farm Income generated by the Teagasc Simulation Model of the Irish Local Economy (SMILE). This model combines the 2010 Census of Agriculture with the 2010 Teagasc National Farm Survey to provide farm income information at a local scale. Figure 6 describes the pattern of market farming income from farming (excluding a return to labour or land) per hectare, direct payments per hectare and their sum family farm incomes per hectare. Market Income from farming reflects the location 1 LPIS is a geographically enabled accounting mechanism for the Single Farm Payment. 9 of dairy and tillage farming in the South and East. The spatial pattern of direct payments is less clear cut. Combining the two measures, market income drives the overall spatial pattern. 10 Figure 6. Spatial Pattern of Farm Incomes (a) Market Family Farm Income per Ha (b) Direct Payments per Ha Source Teagasc: SMILE-FARM Model 2010 11 (c) Family Farm Income per Ha Agronomic Impact of Environmental Characteristics Given the share of pasture land within Agricultural areas and the importance of ruminant animals within the agricultural industry in Ireland, an important driver of the return from the land is the level of grass growth. Teagasc have currently developed a methodology utilising remote sensing technologies based upon satellite imagery to quantify relative grass growth cover across the country and over the year. Magnan et al. (2014) have undertaken a simple statistical analysis utilising a model between the environmental and agronomic characteristics described above and both grass cover at the start of the year and average grass growth in the Spring. They find that while agronomic drivers are important, human intervention and grass management is also very important. Soil Functions as a driver Schulte and O’Sullivan (2014) emphasise the importance of differential soil functions as a driver of land use and land use change. While increasing agricultural productivity is essential given global food security objectives, the agricultural industry is expected to meet increasingly stringent environmental objectives. These include targets set in the Nitrates Directive that sets out a regulatory framework for nutrient management; the Water Framework Directive that requires that water bodies be of good ecological status; the national biodiversity plan, through the designation of Natura 2000 sites. This means that there is an urgent and growing pressure on soils to deliver these multiple functions simultaneously. The EU Soil Thematic strategy outlines five functions delivered through agriculture: Primary productivity Water purification Carbon storage Habitat provision Nutrient Cycling All soils provide all soil functions, but different soils are better at some functions than others. Soil capacity depend upon land use and soil type. The challenge is to optimise the functions of soil so that primary productivity achieves balance with the other functions. It is difficult to increase production and carbon sequestration, water purification and biodiversity and nutrient cycling, all at the same time in each location. Instead, the aim of Functional Land Management is to enhance selective functions in specific places or soils to meet demands. Functional Land Management means that the use of land is managed in such a way that the total suite of soil functions is maximised, or – put colloquially – that ‘each soil performs those functions that it is good at’. This does not equate to legislative ‘zoning’ of land use. Instead, it would see the development of land use policies with the provision of mechanisms to ensure that actual land management decisions reflect policy. 3. Economic Drivers of Land Use Agriculture involves the derivation of economic output from the environmental potential of the land outlined in the previous section. This report considers a number of economic and social drivers of land use and land use change. Hanrahan and Donnellan (2014) details macro-economic drivers of develops in Agricultural development and land use change. These include: 12 Income growth which will drive demand Income and employment growth will have an impact on agricultural factor markets Economic recovery and associated employment growth may reverse the decline in off-farm employment observed since the onset of the economic crisis. This will have the effect of enhancing the household economic sustainability of low margin farming systems. It is likely also to slow down incentives to land use change. Such a dynamic would represent an obstacle to the expansion of dairy land use in Ireland. Land Markets Land markets in Ireland, discussed in Hanrahan (2014) are characterised by Extremely low land sales Relatively high land prices Moderate levels of leasing, however disproportionally of a short term nature Excessive land fragmentation, with farms often comprising multiple parcels Data from the Census of Agriculture (CoA) and the Farm Structures survey illustrates the importance of rented land in total Irish agricultural land use. In the 2010 CoA rented in land accounted for 18% of utilised agricultural area (UAA), 30% of farms rented in some land, while the average area rented-in in the State in 2010 was 19 hectares. The importance of rented-in land varied by farm type and by region with rented in land most important on tillage and dairy farms and least important in terms of share of land used on sheep farms. The proportion of agricultural land that is rented in is low in comparison with other EU countries and relatively stable over time. Official data on Irish agricultural land rents and prices are currently not published by the CSO or Eurostat. In data from the series developed by Nunan and used by Nunan and Murphy and Roche and McQuinn (N-R-McQ) that has been extended using the survey of Irish agricultural land sales by Busteed is presented. The nominal prices (euro per ha) are deflated to 2013 prices using the CPI (2013=100). In Figure 7 the rental price data from the extended N-R-McQ dataset is also presented with the data from the Teagasc NFS on average rents paid used to extend the Nunan-Roche-McQuinn dataset. 13 Figure 7. Trends in Irish Agricultural Land Prices 1979-2013 Source: Nunan, Roche and McQuinn, Eurostat, CBOI, CSO. The trends in the data illustrate that the housing bubble and general macroeconomic imbalances that characterised the first decade of the 21st century in Ireland had, unsurprisingly, an effect on Irish agricultural land market sale prices and that the collapse of the property bubble from 2007/2008 forwards led to a large and dramatic downward correction in Irish agricultural land prices. In contrast Irish agricultural land rents have been largely stable for the last 30 years. There are no data collected on the term structure of Irish agricultural rental contracts. Anecdotal evidence suggests that the majority of Irish land rental agreements are conacre rental agreements and in this respect Ireland is an outlier in a European context where longer term rental agreements are more prevalent. This type of land market is a barrier to land use change through acquisition, both as a result of low levels of land sales and relatedly the high price relative to the agricultural income available on many farms. While leasing land remains an option to access land or expand the land base, the extensive use of conacre or short term leasing reduces the incentives to improve land and make it more productive or to make land use changes that involve long term investments in facilities such as milking parlours, roadways and water supplies that are required for dairy expansion. Land fragmentation limits the use of land and technology more effectively, and also limits the establishment of dairy farms, which require land close or contiguous with milking parlours as animals must go to the milking parlour twice per day. 14 Land Structure and Demographic Drivers of Land Use Change Geoghegan and O’Donoghue (2014) consider the impact that land structure and socioeconomic characteristics have on potential conversion to dairy farming. While much of the dairy expansion anticipated over the period to 2020 will occur on existing dairy farms, replacing existing beef cattle herds on these herds and through increased yield and intensity, larger and higher stocked cattle farms are the farms more likely to convert to dairy in the medium term. However they find (see Figure 8) that only relatively few cattle farms have characteristics that are associated with the possibility of converting to dairy; on good and moderate soil quality. The majority of agricultural land in Ireland is used for the purposes of cattle farming. However, since public policy targets envisage an expansion of dairy production, it is likely that there will be a necessary increase in the amount of land with dairy. There is already a pre-existing share of land on dairy farms that is either spare dairy platform or is being used for non-dairy purposes. According to NFS data, land on dairy farms currently being used for other purposes corresponds to 11.9% of all agricultural land (44.4% of land on dairy farms), while spare dairy platform corresponds to 2.9% of all land (11% of land on dairy farms). Of the alternative farming systems, cattle managing systems are the most complementary for moving into dairy. Nearly half of the land on farms with good or medium soils is used for cattle farming. However, of these, 24% have farms with less than 25 hectares and would thus require consolidation before moving into dairy. Of the remainder, 55% of cattle farms on good or medium soils have stocking rates of less than 1.4 livestock units per hectare (LU/ha) and are larger than 25 hectares. The stocking rate is low largely due to either age (31% aged 65+) or due to other work commitments (33% with an off-farm job). Those most likely therefore to consider moving into dairy are those with stocking rates of 1.4 LU/ha or higher and a farm of at least 25 hectares, which amount to 21% of cattle farmland in the good/medium soil range and to 10% of all farmland with these soils. Of the farmers with the necessary land and stocking rate, 25% have off-farm employment. Age is also likely to be an issue with 19% over 65 in 2011, and only 29% 50 years of age or younger. 15 Figure 8. Land Structure in Cattle Farms (in hectares), 2011 Policy Drivers of Land Mobility Many policy initiatives have been enacted to encourage land mobility in Irish agriculture, but access to land continues to be a problem. These initiatives include mechanisms such as incentivised land leasing, the removal of barriers associated with farm partnerships and farm consolidation restructuring relief. However challenges remain to increase the extent of land mobility. Due to the tiny amount of land put on the market each year, as well as the prohibitive expense, purchasing land is not an option open to most farmers. In 2011, only 17.6% of land was accessed by farmers through renting according to the National Farm Survey (NFS), which remains far below the European average. There have been recent efforts made to improve incentivise long-term land rental agreements (5 years or greater) through tax relief on long-term rental income. Consideration should continue to be given to the interplay between land mobility incentives arising from both the tax system and the direct payments system. The definition of an “ active farmer” is one such example where the taxation system and direct payments system could be aligned. Non-Agricultural Land Use Drivers Non-Agricultural land use in recent years has had very significant impacts on national land use. Meredith and O’Donoghue (2014) analyses changes in agricultural land use and the land area allocated to housing over the period 1991 to 2011. It explains the increase in utilisable agricultural area identified above, arising from a change in methodology and mainly occurring in the North and West on more marginal land. 16 It notes the increase in housing by 366,000 in rural areas as result of population growth between 1991 and 2011 (Figure 9). Reflecting the concentration of urban areas in better farming areas, most of the increase in housing occurred on better soils. Figure 9. Changes in Agricultural Area Drawing upon the CSO’s population forecast, there will be an expected half a million more people in Ireland in the period to 2026. The largest population growth rates are expected in areas of best soil in the South and West, which could see a significant area lost from farm land. The CSO in its recent regional population projections has forecasted an increase in the national population by 10% to 2011 (See Table 3), with the population expected to surpass 5 million people. Although this is about a third of the population growth that occurred between 1991, the expected growth is likely to be concentrated in areas in the South and East with better land. Over time, Ireland has converged to European norms in terms of the number of persons per household. Given the ageing population, this is likely to continue to 2026. If the number of persons per household reached 2.5 per household in 2026, then Ireland would require in the region of 340 thousand new houses (including apartments) by 2026, with approximately 150 thousand in rural areas. On the basis of the analysis above, including ancillary services and infrastructure, this may require in the region of 180 thousand hectares of additional land, 17 much from the better farming areas, which for example is greater than the entire likely forestry planting area in that period. 18 Table 1. CSO Population 1991-2011 and Projections to 2026 by Region 1991 1996 2011 2026 % Increase (1991-2011) Border 403 407 516 531 27.9 Dublin 1021.5 1058 1,262 1,448 23.5 Mid-East 329.1 347 534 639 62.2 Midland 254.9 206 284 307 11.3 Mid-West 310.7 317 378 403 21.6 South-East 383.2 392 499 542 30.3 South-West 532.3 547 662 719 24.4 West 291.1 352 441 455 51.4 State 3526 3626 4,575 5,044 29.8 Number of Households 1127 1678 2018(e) Persons per household 3.22 2.73 2.50(e) Source: CSO Census of Population and Population Projections (e) – Estimated by Authors % Increase (2011-2026) 3.0 14.8 19.7 8.2 6.6 8.6 8.5 3.3 10.3 Lessons learned from New Zealand Given the focus on grass based animal systems, there is much discussion about learning lessons from New Zealand in relation to their dairy expansion over the past 3 decades. Thorne et al. (2014) undertook a comparison between Ireland and New Zealand in relation to lessons that can be drawn in relation to how land use change may differ in a post quota environment. In terms of countries which have an extreme export orientation, NZ does appear to relatively low total costs of production. In addition, NZ has exhibited one of the fastest paces of productivity growth internationally in recent times. While climatic conditions and ensuing successful grass-based dairy farming are common to both countries, there are dissimilarities in relation to the degree of industry liberalisation. Part of this relates to the policy environment. While milk quota abolition will make the market environment more similar, Dairy farming in Ireland will continue to operate within the confines of the CAP and the associated conditions, such as GAEC, Greening etc. that is associated with the CAP. Also in New Zealand the rapid expansion in dairy production following deregulation happened in the absence of much of the restrictions of Environmental Policy that will apply in Ireland post quota. As a much bigger country with larger distances between urban and rural areas, there are fewer non-agri-food employment opportunities in New Zealand than in Ireland. The land market in New Zealand also is much more fluid than in Ireland, where less than 1% of the land is traded in any year. Ireland is much more reliant on rented land, which reduces incentives to invest in facilities required for dairy expansion. There have also been differences in the way debt is provided for land acquisition. On the taxation side, zero level capital gains tax and the agri deposit type scheme which operates to handle income volatility are two very important differences in taxation policy, which facilitate agricultural expansion. 19 A tradition of succession planning, through lower order share-milking to 50:50 share-milking partnerships, facilitated the asset accumulation of young farmers and an exit strategy for those ready for retirement, which is not replicated in Ireland to the same extent. NZ has a long history of competing at world market price levels and has mechanisms in place to deal with volatility such as income smoothing tools which are not evident in Ireland, which has built up a business/commercial ethic which is not fully mirrored in Ireland which still bears a lot of hallmarks of family farming type operations. 4. Technological Drivers for Higher Returns to Land Use Increasing the return from land depends upon a number of factors Improved technical efficiency through the use of better technologies Sustainable intensification, where land is more intensively farmed within environmental limits Land use change from lower value to higher value systems Finding markets for increased output Different technological and practice adoption pathways will result in different outcomes in terms both Agricultural output and the required land use to achieve specific goals in specific sectors. So better technology and practice adoption can achieve a given dairy outcome, requiring less land and/or at a lower intensification level. Technological Drivers: Animals French et al. (2014) detail that farm level intensity and technological adoption were lower than economic optimum levels during the quota period due to an inability to expand on farm. The study details how milk production per cow grew at 2.8% in the pre-quota period, but only by 1.2% in the post quota period. An improvement in the growth rate of milk yield is expected post quota, particularly given the advances in genomic selection. The study outlines target growth rates in a variety of on-farm practices in dairy farms. These include Milk characteristics Calving intervals and dates Genetic improvement Stocking Rate Labour Efficiency Environmental efficiency Net Margin Technological Drivers: Tillage and Grassland Spink and O’Donovan (2014) outline potential sources of production and efficiency gains for grassland and crops. In relation to grassland, targeted improvements were outlined for Higher grass utilisation. Earlier calving. Higher Nitrogen usage on farms. Land improvement/ adaption. Higher reseeding levels. 20 Soil fertility improvements . Higher usage of clover within swards. Better use of varieties using Pasture Profit Index. Better use of grassland technology Increase usage of clover in grass swards, based on achievement of higher DM output and animal performance Move areas for silage harvesting to out farms on dairy farms. Better focus on grass nutritive value across the grazing season. More focus on prediction of grass growth. Areas of genetic improvement has been identified in relation to the following traits: Nitrogen use efficiency (NUE) in ryegrass Cold tolerance in ryegrass Waterlogging stress in ryegrass In terms of tillage, most of the potential for expansion lies in continued yield improvements. As specialist tillage farms have a high technology uptake, the biggest potential yield gains can occur through tillage enterprises on mixed farms increasing technology adoption. Given stagnation in farm yields in most tillage crops in recent years whilst genetic improvement has continued there is pent up yield potential to be exploited through improved management, it is estimated that yields could increase by between 1.5% and 2.5% per hectare per year over the coming decade. In terms of management there is room for improvement in: Improved timing and targeting of fungicide inputs. Increased movement from spring to winter feed barley to result. Development of agronomic approaches for oilseed rape and beans suited to Irish conditions. Increased production of break crops to meet greening rules. Development of low cost reliable establishment systems that can cope with variable soil conditions. Genetically, there is room for improvement in Yield potential. Nitrogen use efficiency (NUE). Disease resistance. Waterlogging stress in barley. Collaborative Farming and Land Access In addition to technological and farm management practice innovation to improve land use efficiency and productivity, there are opportunities to achieve gains via organisational innovations. Collaborative farming, described in Curran and Phelan (2014) can contribute to increasing the productivity of Irish farmland by bringing together factors of production such as land, labour, capital and enterprise, improving management ability and a means of achieving greater scale in a socially sustainable way. 21 Collaborative farming can produce improved outcomes at farm level, resulting in a more productive use of the land base, while allowing farmers to maintain control of their own land. Collaborative arrangements such as registered farm partnerships, contract rearing and share farming demand that the landowner is as a minimum an active participant in a management sense. Collaborative farming takes a more inclusive approach that encompasses more than just taking over the land. It is a business arrangement that is to the benefit of all the parties involved. It includes the land and labour (skillset) that is available through all the participating farmers to the arrangement. When land and labour are taken together, they can lead onto a more balanced lifestyle for all involved. This is a core value of good collaborative farming. 5. Scenario Analysis Given the variety of drivers for land use change, Donnellan and Hanrahan (2014) consider, scenarios of potential change within the Agricultural sector. They utilise Teagasc’s FAPRI model to generate a reference run to 2025 and consider the economic implications of two alternative possible scenarios. The reference scenario anticipates that Beef and Dairy will remain the dominant systems, but that dairy cow numbers will expand to return to the number that existed prior to the introduction of milk quota in 1984, by 2025. With stagnant returns in the beef sector, it is anticipated that Suckler and Other cow numbers will gradually decline over time, declining by about 13% to 2025 from 2014 levels The reference scenario assumes that while the national stocking rate is likely to increase only slightly, it is anticipated that the intensity of dairy farms will increase. Land may transfer to dairy production from other enterprises, principally beef production given its low profitability, but given that the rate of land sales in Ireland is as low as ¼ of a percent per annum, this process is likely to be slow, barring a radical increase in liquidity in the Irish land market. Developments in other sectors will not be very dramatic. The area allocated to tillage crops is not expected to grow. The number of sheep is expected to decline due to low levels of profitability. Production of pig and poultry meat is expected to grow but not dramatically. In order to test the robustness of the projection, two alternative scenarios are considered (albeit not modelled); a Low scenario that sees a lower increase in dairy and lower decrease in Beef and conversely a High scenario, with the opposite trends. They find that as the time horizon extends towards and beyond 2025 competitive tensions between dairy and beef production should begin to become more pronounced. While in the short term dairy expansion will take place largely within the existing land base of current dairy farms, this expansion potential will be become exhausted at some point in the medium term. The difference in the profitability between dairy farming and much of the existing beef production will create an economic incentive for the conversion of land use. Sustainability Impact of Scenarios 22 Different development pathways are also likely to have different environmental implications. Schulte et al. (2014) considers the environmental implications of alternative growth pathways. They find that the 2025 growth scenario will result in small increases in animal numbers and fertilizer usage. These projected increases are much smaller than those frequently assumed in the public discussions surrounding the potential environmental impact of Food Harvest 2020. The study considers the implications of the alternative scenarios under different environmental dimensions: Water Quality Greenhouse Gas Emissions Biodiversity The main issues requiring consideration and mitigation in the context of water quality are: Pressures: a potential local concentration of livestock leading to increased organic N and P and fertiliser N loadings, with associated localised increases in farm N surpluses; Pathways: an increase in surface-subsurface-stream connectivity through maintenance and upgrading of drainage networks; Receptors: the requirement to further reduce impacts on water quality in high-status sites. The study notes that there opportunities to improve nutrient use efficiency; improvements that would improve both a farmers bottom line and reduce impact on environment. While FH2020 calls for growth in Irish agriculture, this may pose challenges in an environmental context. In 2012 agriculture was responsible for almost 32 percent of Ireland’s total GHG emissions (EPA 2014). In this context Ireland is unusual, since typically in developed economies agricultural emissions would represent a much smaller share of the national total. Figure 10. 2010 Proportion of GHG emissions from agriculture in EU Member States in 23 Source: European Environment Agency Data Viewer At a global level it seems inevitable that agricultural greenhouse gas (GHG) emissions will increase in the coming decade. Decoupling food production from associated GHG emissions globally is much talked about by policy makers, and indeed the dual challenge of maintaining food security while mitigating emissions has been acknowledged under the 2030 Climate and Energy Policy Framework (EU 2014). Achieving this decoupling will be challenging in the short term. Such decoupling would require that while food production grows, aggregate agricultural GHG emissions are contained or even reduced and /or carbon sequestration enhanced by increased forestry and optimal pasture management. The challenge of decoupling food production from GHG emissions will be influenced by a number of drivers. Implications of projected agricultural activity levels for GHG emissions The changes in agricultural activity levels projected for the period to 2030 have implications for the evolution of emissions of GHG from the Irish agricultural sector. As noted earlier, growth in the volume of agricultural output will always lead to growth in the volume of GHG emissions in the absence of an, as yet unobserved, productivity change that delivers additional output without the use of additional physical resources. However, offsetting some of these emissions via an optimal land-use policy may contribute to further reducing Agricultural emissions intensity. In summary, by 2030 the number of dairy cows will have increased while the aggregate inventory of cattle is expected to have decreased marginally when compared with the FH2020 reference period. The number of beef cows is projected to decline significantly, while the level of tillage activities will be largely stable over the projection period to 2030. The intensity of grassland synthetic nitrogen use is illustrated in Figure 11. A downward trend in nitrogen use per hectare is evident in the period 2000 to 2012. Some of the decline can be explained by more efficient usage of slurry, but the rising price of nitrogen may have also been a factor in the decline in its use. 24 Figure 11. Intensity of Nitrogen Usage on grassland in Ireland Source: FAPRI-Ireland (2013) Nitrogen use reached a low in 2011 and 2012. However, nitrogen use rose again in 2013, most likely as a reaction to the experience of the fodder crisis. It is difficult to be sure what the required amount of nitrogen is at the current level of production intensity, given the extent of the variation in nitrogen use in the last three years. In turn this makes it more challenging to project future levels of nitrogen use. Over the projection period there is an intensification of some agricultural production (most notably dairy production) which is projected to result in increased usage of inputs. This is particularly noticeable in the case of projections of synthetic nitrogen use, principally due to the increase in milk production which is projected to occur. Milk production has a synthetic nitrogen requirement per hectare that is typically three times that of beef systems. In the aggregate, fertiliser usage rises over time reflecting the increasing intensity of production and the increasing share of milk production in overall bovine agriculture. Activity projections (animal numbers, waste volumes, synthetic nitrogen use) can be used to estimate the GHG emissions from the agriculture sector in the same manner that historical GHG emissions are estimated in the national GHG inventory report. The projected GHG emissions to 2030, along with historical emissions since 1990 are shown in Figure 12. 25 Figure 12. GHG Emissions from Irish Agriculture 1990-2030 Source: FAPRI-Ireland (2013) The net effect of projected developments in levels of agricultural activity and input usage is to leave agricultural GHG emissions in 2030, at 19.7 mt CO2 eq. Over the projection period, aggregate agricultural GHG emissions exhibit an increase relative to the 2005 level by over 5 percent. At the EU Member State (MS) level existing GHG reduction targets, as set out in the EU ESD place an overall cap on the level of GHG emissions and do not make allowance for the impact of upward drivers. Policy therefore requires that the reduction in GHG emissions achieved via the downward drivers should outweigh the growth in GHG emissions resulting from the upward drivers. However, in the context of the next ten or fifteen years, given the expect growth in food production and anticipated developments in GHG mitigation technologies, containing agricultural emissions may be an unrealistic aspiration in an Irish context. In terms of biodiversity, critical conservation, relating primarily to 14% of the land area of Ireland designated as Natura 2000 sites, is unlikely to be significantly impacted by potential changes in land-use patterns to achieve the production targets of Food Harvest 2020/2025. However, the biodiversity associated with the remaining 86% of the land area is more likely to be impacted by changes in land-use patterns such as expansion or intensification.2 The ecological value of agri-ecosystems can be viewed as a gradient (Figure 13) ranging from sites that are considered to have high ecological value (e.g. Natura 2000 sites that host a 2 In relation to hedgerows, the majority of them are designated as landscape features under GAEC (Cross Compliance) and hence they are afforded some protection (generally, landscape features cannot be removed, under certain circumstance they can). However landscape features are only one of a n umber semi-natural habitats, the majority of which are more likely to be impacted by changes in land-use patterns such as expansion or intensification. 26 range of habitats and species of conservation concern) through to agri-ecosystems that are considered to have relatively low ecological value (e.g. improved agriculture and forestry hosting a low abundance and diversity of species) (Finn & Ó hUallacháin, 2010). Figure 13. Gradient in ecological value associated with agri-ecosystems Natura 2000 (SAC+SPA+NHA) Eligible habitats not designated for Natura 2000 Habitats containing rare or threatened species High Nature Value Farmland Common farm habitats Semi-improved grassland Improved agriculture/forestry This study identifies three generic pathways, through which the Food Harvest 2025 targets can be achieved (Figure 14): ‘intensification’, ‘expansion’ and ‘resource efficiency’. Figure 14. Visual representation of the three pathways towards Food Harvest 2020: Intensification, Expansion and Resource Efficiency 27 Sources: Schulte et al., 2014 The intensification pathway may be associated with negative impacts on water quality, and potentially biodiversity, if intensification takes place on land of high nature value. By contrast, the expansion pathway is unlikely to impact significantly on water quality (unless associated with significant drainage works). This pathway however, is likely to impact on greenhouse gas emission targets and biodiversity. Finally, the resource efficiency pathway will few, if any, impacts on the environment, but this pathway is likely to be associated with significant costs, if pursued in isolation. The pathway analysis suggests that a sustainable increase in agricultural production requires a mosaic of solutions, i.e. a targeted mosaic of the three scenarios above. Obviously, the ‘efficiency’ scenario is preferable from an environmental perspective, but this scenario on its own is unlikely to deliver on the Irish 2020 agricultural growth targets, because of the diminishing economic returns, and ultimately higher costs. As a result, it is likely some form of both ‘expansion’ and ‘intensification’ will be required, both at national scale and indeed global scale. Here, we introduce the concept of ‘Functional Land Management’, where these scenarios are managed with a view to achieve the growth targets, while minimising impacts on the environment. The risks associated with each of these pathways is context specific, i.e. specific to the existing farm systems (infrastructure and management), soil types, hydrology, and landscapes. As a practical example, consider in Table 4 the drivers of changes in gross margin amongst dairy farmers over a similar length period as 2014-2025 in the past, 1997-2008. We note that farmers in the four highest quintiles of gross margin achieved income growth by increasing their yield annum, by increasing the area they farmed with dairy, but interestingly reducing their intensity. The bottom quintile had the lowest growth rate, with the lowest yield increase, but increased stocking rate. While intensity growth was driven by increasing yield combined with overall limits driven by milk quota, the environmental implications of the top farms resulted in fewer cows producing more milk and thus reducing the environmental foot print. Thus farm level growth has been driven by a combination of land expansion and yield growth – the resource efficiency scenario. Those farms at the top of the distribution have demonstrated very significant yield growth, demonstrating strong potential for the resource efficiency scenario. Table 2. Annualised Growth Rate in Components of Gross Margin 1997-2008 1 0.005 0.016 2 0.024 0.018 Gross Margin per Hectare Quintile 3 4 0.030 0.037 0.015 0.019 Gross Margin Yield (Lt per Livestock Unit) Intensity (Livestock 0.006 -0.010 -0.006 Unit per Hectare Area (Hectare) 0.018 0.027 0.030 Source: Teagasc National Farm Survey Note: Quintiles of Milk produced, ranked by Gross Margin per Hectare 28 5 0.032 0.025 -0.007 -0.012 0.030 0.020 In Table 3 we summarise the scientific evidence to date on known impacts of each of these pathways on the five indicators of sustainability, corresponding to each of the five soil functions introduced above. Table 3. Projected primary impacts of three contrasting pathways of increased agricultural production on five aspects of sustainability. ‘+’ and ‘-‘ indicate positive and negative effects, respectively, and ‘o’ indicates no effect. Scenario Economic Water sustainability quality Greenhouse Biodiversi gas emission ty intensitya Nutrient recycling Intensification + – o o/– o Expansion + o – – + Resource efficiency +– + + o o a. Emission intensity is defined as the greenhouse gas emissions per unit of agricultural produce, using life cycle analysis. The intensification pathway may be associated with negative impacts on water quality, and potentially biodiversity, if intensification takes place on land of high nature value. By contrast, the expansion pathway is unlikely to impact significantly on water quality (unless associated with significant drainage works). This pathway however, is likely to impact on greenhouse gas emission targets and biodiversity. Finally, the resource efficiency pathway will few, if any, impacts on the environment, but this pathway is likely to be associated with significant costs, if pursued in isolation. ‘Functional Land Management’ means that the use of soils is managed in such a way that the total suite of soil functions is optimised to achieve maximum economic productivity which does not undermine other environmental functions, or – put colloquially – that ‘each soil performs those functions that it is good at’, in line with contemporary thinking. At this point, it is important to consider that implementation of Functional Land Management does not equate to legislative ‘zoning’ of land use. Rather than legislating for particular land management practices, an alternative would see the development of land use policies with the provision of incentivisation mechanisms to ensure that actual land management decisions reflect agreed policy priorities. There are two mechanisms through which such a bottom-up approach could be readily incentivised. First, the process of developing and continuously updating River Basin District 29 Management Plans can in principle provide an essential tool to facilitate this bottom-up approach. These plans are – by definition – context-specific in terms of soil and water resources, and are developed with stakeholder consultation as a core-ingredient of the process. There is scope to further strengthen this process by deeper engagement with and from the agricultural stakeholders, including farmers, advisors, local authorities and agricultural state actors. Secondly, specifically where context-specific measures may be required for the protection of ‘high status’ sites (as provided for in the draft GLAS scheme), these can be incentivised by specific targeting of agri-environmental schemes towards measures and sites where maximum (positive) impact is likely to be achieved, in line with the review and recommendations by Finn et al. (2009). As Ireland uses its strong environmental credentials to market its food exports via the Origin Green programme, it is essential that as the Agricultural sector expands, it is essential both to monitor continued good practice in terms of these sustainability credentials, but also important to provide early warning systems to the sector to be able to mitigate potential risks to these status. It is important to utilise representative, detailed farm level data to identify these issues. Forestry Options to Reduce Net Carbon Emissions Farrelly and Ní Fhlatharta (2014) highlights the potential contribution of forestry in reducing net carbon emissions for agriculture is highly dependent on further expansion of the forest estate and getting an ‘early start’. Current Government forest policy is to increase forest cover to 18% of the land area by 2046, requiring an annual planting programme of 16,000 ha per annum. The expansion of the forest estate depends on land use change to forestry; much of this is currently in agricultural use. An analysis of suitable land resources for forestry in Ireland carried out for COFORD land availability working group, indicates that approximately 54% of the land area 3,75 Million hectares of land are most likely to have potential for afforestation (Farrelly and Gallagher, 2013). This excludes areas biophysically and biologically unsuitable for forestry and areas subject to national and EU designations. These lands could be considered more suitable for targeted agricultural production associated with Food Harvest 2020 targets and may be less readily available for forestry expansion. An area of 1.3 Million hectares of land with more difficult soils and subject to a more limited range of agricultural enterprises may have more potential for forestry expansion given historical planting rates. These lands have been shown to have high production rates and may have significant sequestration potential if planted with appropriate species, this could offer significant potential to reduce net carbon emissions. The conversion of land to forestry will continue to depend on farmers availing of grant aid and annual premium payments, which may prove to be attractive to landowners depending on farming enterprise, land quality and individual social circumstances. Some farmers hoping to expand agricultural production may see forestry planting as a mechanism to reduce GHG emissions and may opt to plant more marginal parts of farms. Other forestry measures that could assist in reducing net carbon emissions include the use of forest management options which may increase forest carbon sequestration capacity in the new and existing resource. 30 Figure 15. Area of land (3.75 million hectares) most likely to have potential for afforestation (Farrelly and Gallagher, 2013) Note: Green: Higher potential for afforestation 31 References Curran, Tom and Fintan Phelan (2014) Collaborative Farming and Land Access, in O’Donoghue et al. Land Use Drivers and Scenarios to 2025 Consultation. Carlow: Teagasc, the Irish Agriculture and Food Development Authority. Donnellan, Trevor and Kevin Hanrahan (2014) Food Harvest 2025: Market Drivers and Trends, in O’Donoghue et al. Land Use Drivers and Scenarios to 2025 Consultation. 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