Lots More on Why Farmers Across Europe Are Furious

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1:11Sorry, I must put all my speak into foreigners' voice. Hello, Tracy. How are you today? It's Lorcan. I'm so excited. Hey, Lorcan. It's been too long. And Lorcan, I'm sorry to say, I just found out that all episodes now go on radio and we can't swear anymore. so you're gonna have to wait but we can actually bleep it out no because then it's i think that should be the start of the podcast yeah that's what we're gonna start it there i did a deadlift one two three

1:48barges this is an after school special except i've decided i'm gonna base my entire personality going forward on campaigning for a strategic pork reserve in the u.s where's the best squid ink pasta. These are the important questions. Is it robots taking over the world? No, I think that like in a couple years, the AI will do a really good job of making the Odd Lots podcast and people will say I don't really need to listen to Joe and Tracy anymore. We do have The Perfect Guest. You're listening to Lots More, where we catch up with friends about what's going on right now. Because even when Odd Lots is over, there's always lots more.

2:24And we really do have The Perfect Guest. Tracy, I miss when we worked with Lorcan, our Irish farmer friend. Yes, working with Lorcan was a singular experience in many ways. There was a lot of swearing. I remember that. But it also meant we had an agricultural expert that we could just turn around and ask questions to. And it means that Bloomberg, for a few years, had a six-mile bridge bureau in Western Ireland. And I visited— The most desirable Bloomberg Bureau of all, I think. I visited the Six Mile Bridge Bureau. I think Dash visited. Yes, I have been there. I love Six Mile Bridge. It's beautiful there.

3:07Yeah, but Tracy, at some point, you're going to have to make your pilgrimage, even if it's not a formal bureau anymore. I really want to. Wait. Okay, so we have our former colleague Lorcan Roche-Kelly with us. He left Bloomberg a little while ago, and he is now working at the – what was it? The Irish Farmers Journal? What are you doing these days, Lorcan? yeah i i'm business editor at the irish farmers journal i won't say it's my perfect job but it's close to my perfect job when it came up i couldn't say that much as i love bloomberg and love working with you all it's still this was an opportunity that could not pass up when that would you like joe if you if you had invited to be the editor of irish international country music magazine yeah right no that's exactly what when you left i was like oh god i'm so devastated that lorkin is leaving but then you're like i'm going to be the editor of the irish farmers journal it's like all right.

3:55I really like, I can't blame you. It sounded right. It's a good face, yes. Okay, that's good. For those who don't know, Lorcan has a really interesting career history, and he sort of willed himself into being a financial commentator around the time of the Eurozone crisis. But Lorcan, give us your background before we dive into it, because I don't think everyone knows. People who don't know the Lorcan lore. Oh my God. Did we do a podcast on this before? Can we just reference that one? yeah yeah i'm yeah i used to do lots of things i used to do some mining i used to be um i used to an art gallery i used to um do some um advisory work for u.s hedge funds i used to i used to a lot of things i think maybe i get bored easily that could possibly be what the problem is but um i think you think it's kind of not quite fake it till you make it but it's you know if people say i always say why can't they do that rather than why can i do that so that's kind of my in my philosophy and it's worked out well so far.

4:50That is a great philosophy. The day that I, or I was there, I think I was there visiting you for three or four nights, but I think I was there when you sold at least some of the last of your cows on the farm. And I went with you to the local cow auction, which was really fun. Yeah, you had the full agricultural experience. Even if I remember, you had the Irish breakfast in the local cow auction, which is definitely one free pure. Yes, it was a great Irish breakfast. And I just want to make one point about that Irish breakfast, which is really good. and I posted a photo on Twitter. And for those of you know, Lorcan, you've probably wisely moved off Twitter.

5:23I'm still addicted. We all know how Tracy views Twitter. But I posted that photo of this Irish breakfast that I got at this like small local, you know, auction, little auction house in Western Ireland for cows in the cafe and the canteen there. And all these people are like, oh, it looks like tourist, oh, tourist food and stuff like that. Because I guess that's just how people react online. They seized some food in the first impulsive to insult it. And they probably thought I was in like some, you know, expensive Dublin hotel or something. And it could not have been less of a tourist area. And so it confirms all the bad things about Twitter.

5:57I have never seen a tourist in the market. It's one big, I have to say. So yourself, aside from yourself, yes. Yeah, aside from myself. Lorkhan, so Joe mentioned you sold the cows. And I seem to remember for a while you became a tree farmer of some sort, taking advantage of EU carbon credits. You are absolutely touching such a raw nerve right now. I'm sorry. You have no idea. I'm going to start marching up and down the office here. Wait, what happened to the trees? The trees are still not in the ground due to unbelievable bureaucracy. Oh, wow. Like astonishing levels of bureaucracy. Well, this is...

6:36We can go into that. Well, this is... Can you hear how my tone has changed, Jess? My understanding is that there are many farmers across the EU these days, France, Germany, the Netherlands, probably elsewhere, that are angry. Some of them are shutting down. Have you shut down any highways yet? Not yet, but we're going to go out. I think the farmers are going out in solidarity this evening in some areas, but we're not shutting down these because we're not actually protesting right now. We're just in solidarity. But it sounds like maybe you understand, you can sympathize with the frustration, or have a deep grasp of what the frustration is.

7:15I can tell you exactly what the frustration is caused for. And there's three things that have caused frustration. The first thing is what has happened. The second thing is what's happening right now. And the third thing is what's about to happen. I think we're going to need you to expound on it. All right, what are the three? Why don't you build that out a little bit? Yeah, so I think what happened is kind of farmers in the EU, because the EU has got very high welfare standards for farmers, which is very laudable. They've got very high environmental standards as well. So these environmental standards have been kind of increasing for the last 25 years.

7:50One of the big ones was the water safety directive came in in 1999, and that has been kind of slowly implemented over the last 25 years. And every kind of iteration of that implementation brings in more rules that farmers have to follow. So it brings an increased burden of administration, but also they tend to limit how much production the farmers can have on their land. And this is kind of something that's been there for a long time. And farmers don't like it particularly, but they're accepting of it. But the problem they have right now is that a lot of the trade deals the EU signs with countries like the Mercosur one particularly, but also in New Zealand and Australia, those trade deals are trade, like they're free trade agreements.

8:30So they cover everything, including farm products. but the farmers in Europe the problem is they look at these trade deals and say hang on a sec, these guys, particularly in South America they do not have anything like the environmental standards we do. They can produce animals, cattle at a 60 % of the cost and send it to us and undercut our food in the market in the EU because there's a trade deal in place. Okay, the workers are not in place yet but if you look at New Zealand land, if there's slightly lower environmental standards in New Zealand they can be taken eventually because they'll have they'll just have lower margins or lower margin requirements coming into the EU.

9:04So that's kind of both what has happened and what's happening next, I think, are the two sides of that. What's happening right now is farmers are being squeezed in Europe for lots of different things. In 2022, farmer incomes skyrocketed. They went up 40%, 50 % across the board because we had the huge squeeze on costs for everyone in Europe. There's lots of supply chain problems. There was lots of things. The farmers were in a position that they were able to sell more products in the local market. there was less global trade and demand particularly for countries from Asia shot up. So farmers took advantage of that, sold lots of them.

9:37But that was okay in 2022 because at the same time we saw that the input costs for farming also skyrocketed. I'm sure you've seen the European gas prices, we're looking at fertilizer prices tripling, we're looking at fuel prices, electricity prices have shone up as well. But farmers could eat those costs in 2022 because their output costs rose so much. This year, last year, 2023, farm income's dropped by 40%, kind of back to 2021 levels, slightly above 2021 levels. But the farm costs dropped by maybe, maybe kind of 75%, I was like, they're 25 % higher than where they were in 2021. So the cost base has dropped a lot, but not as much.

10:17The income has dropped back to where it was kind of 2021 levels. And for some farmers, they're having negative income in 2023. So their cost base is unsustainable in lots of ways for lots of different farmers. And on top of that, then, you have new legislation coming in on some of the tax breaks the farmers are getting, particularly in Germany. And, Joe, I know you're a huge fan of this. Hang on, I'll get the pronunciation right. The Bundeswehr Fassunggericht has had their ruling last year. That's the German Constitutional Court, which had their recent ruling on the German budget. And as part of those, the German government can't spend money anymore.

10:53So one of the costs that the Mediterranean side introduced was to cut the tax relief on agricultural diesel and agricultural machines. So basically, one of the big costs lots of farmers have, particularly on the tillage sector, is diesel to power their tractors and buy new machines. So the question of this tax relief on that in the budget has really pushed German farmers over the edge. I think they're starting to get some concessions on that in the last day or two. We've seen some concessions announced. So basically, the tax deal will be there for another while, I think. I think a lot of politicians in Europe are also concerned that we have elections coming up for the European Parliament in June, And that's because if we see farmers protesting, we might see a push more towards the right from the center and in European elections.

11:36That's the short version. That was excellent. That was a really good overview. But one thing I don't get, so the sort of clean water initiatives, I don't understand. I thought the big problem with cattle farming was the sort of large scale stuff where the cows fart and poo and all the manure goes into like a giant cistern where it doesn't degrade in a natural way. And then that runs off into the water system and makes everything out of balance. But I thought the smaller farms, it was like slightly better. But it seems like the smaller scale farms are affected as well. I think the tightness of legislation in Europe is quite a lot higher than it is anywhere else in the world.

12:19There's even legislation. I suppose to take a step back. There's a thing called a common agricultural policy, which is the European policy to make sure that food in Europe is cheap. Because the production cycle in Europe is quite expensive. So farmers are given money to produce food at a high level that can be sold at a rate that is accessible to consumers. So the common agriculture is kind of a compensation mechanism for a lot of the rules that come in. But the rules on the common agricultural policy are quite tight, I suppose. So it is what they call the good agricultural environmental condition.

12:54It's called a GAEC. So to get the cap money as a farm, you've got eight things you have to do. establish a buffer strip along a watercourse. So if you've got a river flowing through your land or a stream, you have to have a bit of land that you don't farm against that. You have to have protection against groundwater pollution. That's quite simply like you have a tank to keep your cow slurry in. You have to have a minimum of the soil cover. You have to have land management for specific site conditions to limit erosion. You have to leave hedgerows in place. You have to have at least 4 % of your land that is what they call space for nature.

13:28That's not onerous to a lot of small farms, but on some farms it is. You've got the retention of landscape features, so again, you can't clear hedgerows. So that's kind of these kind of, they're almost finicky little rules, but they're all in place. And on top of that, then, they do water quality tests across Europe, and the water quality tests measure nitrates, which is kind of, if you've ever heard of algae blooms across, there's a big sign of pollution. That's a high nitrogen level of water. So they do the water quality tests with Europe to measure the nitrogen level. And what they've done is they've established a base level of nitrogen per hectare of land in Europe, which means basically limits chemical fertilizer in lots of ways.

14:08But it's like the amount of nitrogen in the soil can't be more than 170 kilograms per hectare. So 11 to 170. In Ireland, uniquely, we have what's called a derogation from that, where our limit was 250 per hectare, because Ireland is a fully grass-based agricultural system. We don't have big sheds with feedlots. It's all cows on grass. So because you have all cows on grass, you have a higher nitrogen level in the fields generally. So we had that at 250 per kilo up until the 1st of January this year when it got reduced to 220. And 250, 220 doesn't sound like a lot, but for a lot of dairy farmers who are being tested and were farming at 250, to cut to 220 means their production will drop by about 6 % or 7%.

14:52You basically have to get rid of the cows, right? There's not a lot else that you can do. Well, you can get more land. Get more land and get rid of cows. That's the two options. That has a knock-on effect because dairy farmers, they earn, I suppose they have the highest turnover. They've got income levels, so they can then rent leased land that's close to them. A lot of farmers are leasing land that traditionally was tillage land. The tillage sector in Ireland has been squeezed by the dairy sector, but the only reason the dairy sector is doing the squeezing is because of this nitrous legislation that's in place.

15:22that water quality legislation again comes from 1999 which incidentally i think is the same year that the mercer trade talks started so you know these things are are a long time in the grass before they're biteless and just all kind of biting right now

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17:19What was the deal? You took a deal, right? You sold your cows and you were going to get money from the EU to plant trees. Tell us that. What was the basic program? This is the Paris climate change targets. It's where it comes from. Because Ireland is a high-emitting country because we have our cultural high-emitter. We've also got a large aviation sector here. We have lots of difficulties. But the one that we can kind of control, I suppose, locally is the agricultural sector. So in order to get the recent Paris climate change agreements, the Irish government has undertaken certain things we're going to do by 2030.

17:55and one of those was to establish 8 ,000 extra hectares of forestry per year in the country. Now the policy has been an abject failure from the start. They're getting around 2 ,000 hectares per year, but much of that is commercial forestry anyway. And the reason for this is that the rules that surround it and the environmental rules are almost are drunk, they're not clear enough either to the farmer, to the forester or to the inspector. so everyone kind of either doesn't make a decision which is a typical problem in bureaucracy across the world or else they err on the side of caution so put such stringent restrictions on plantations that plantations never happen at all and in my case that was one of the things we had such stringent conditions on the plantation I couldn't get a forester to commit to plant it because he couldn't guarantee the plantation when it was finished would be exactly within the spec that was required because the spec was so tight That seems so crazy because tree growth this so unpredictable?

18:52Like, how do you ever, and you're working on such long timelines, it seems like if you don't know what something's going to look like in 20 years, it just seems like a huge risk to take in order to get the subsidies. Exactly. That is precisely what the problem is. If there was a thing where you just gave free trees to farmers to plant that and will give you a month per acre for years, then that would be a much easier thing. But because there is, again, reams the EU environmental data, the administration for everything, that they started doing that, they started to keep it quite simple, but they were brought to court by, believe it or not, environmentalists who felt that the environmental laws weren't being fully implemented in these planning, in these tree planning applications that were given out.

19:34So that put a stop for a couple of years as well. So we're big into, I suppose, legislation and regulation here in ways that most Americans might find somewhat So there aren't protests in Ireland yet or there aren't big protests there's a lot in like France seems to be where they're always and the Netherlands so how does the situation in Ireland I think it's kind of important when you look at the protests in Europe they're protesting over different things, they're all the same level of they're all the same level of upset but they're protesting over this thing so if you look at the farmers in Poland they were protesting over the fact that the Ukraine farm products had a free run into Europe.

20:18And because if you're driving a truck from Ukraine, you stop the first product type chance you get. So you stop in Poland and sell your grain there. So the Polish farmers felt that Ukraine was dumping them. So they've got a deal now. I think they're trying to get a deal sorted out today where they'll get that. The trade will still exist, but it'll be more distributed across Europe. In Germany, as I said already, they were protesting over the price. Diesel was kind of the catalyst. In France, it's, Mercosur is a lot of it, the Mercosur, that's the trade deal with Paraguay, Uruguay, Brazil, and Argentina.

20:52That trade deal, like I said, has been negotiated in 2019, after 20 years of negotiation. But that is seen in France as a big threat to the French economy, particularly because of the beef and stuff, that stuff that's coming up. Also, there's wine as well that could come up. So, Macron has said he wants the EU to stop the negotiation, stop the ratification of that trade deal. The EU came out, again I think previously it said they will continue talking but if France votes against it France has a veto Ireland has a veto Austria everyone's got a veto on it so if they can't get that trade over the line and French politics right now looks like France is going to vote against it then that's going to be a problem but that's also then a problem for Germany because the trade deal of markets there is a full free trade deal and the Germans want to sell cars German cars are back on the headlines again Germany wants to sell cars into Brazil so it's kind of there's a real push and show up there Ireland even, we have a huge pharmaceutical sector here.

21:45So the Irish government kind of isn't that much against markets, even though it might mean there's more beef coming from South America to Europe, reducing the margins Irish beef farmers can make, because we'll make more money on pharmaceuticals. So it is either very complex, I think, kind of situation to kind of get a solution to, but the problems are obvious. Lorcan, I have a very... Go back to your question on the Irish farmers. Irish farmers are obviously the derogation is the big problem at the moment with the nitrates thing, the problem with the water but Irish farmers right now are busy calving cows so they have to be really cross to get out in a busy period whereas if you're in Europe and you're a tillage farmer this is not your initial quiet period so you can get out and set fire to the European Parliament whatever you need to do at the moment Lorcan, I have a really important question which is whatever happened to the cows that you named after us?

22:35I assume they're long gone but there was like a Joe cow, a Tracy cow and I think there was a Lukawa. Lukawa. Lukawa was the first to get the chop, I think. Lukawa was a fine, fine, fine animal. He went off to be burgers many years ago. Tracy, I'm sure, is still around because they were breeding cows and Tracy grew up to be a good-looking heifer. Last time I saw her, she was a heifer. It's not the first time I've been called a good-looking heifer. Go on, Mark. We need the back story there. But Jokho was definitely Jokho's burgers as well. Or fine steak. I miss you, Lorcan. We should do this more often.

23:16Yeah. Lorcan, I actually have some concrete tree advice that I need from you because I've got all these interesting trees on two acres in Connecticut now, including, I'm very excited about this. You're going to claim to be a smallholder now, right? Yeah, that's right. I've gone into farming. Oh my goodness. trees. Joe's really sick of hearing me talk about this, but we found a tree that might be an American chestnut. And so we're trying to figure out how to deal with that and protect it and what we can do. And someone might come over and hand pollinate it in the spring. So that'll be exciting.

23:53That's very exciting. So you've only got one, so you need two trees to mate. Is that your problem? Yeah. And there are, well, there are not many American chestnuts left. They They all sort of went functionally extinct in the early 1900s. So someone has to come and do it by hand. And the tree's like 50 feet tall, so I don't know how they're going to do it. But it'll be interesting to watch. Cool. That's like artificial insemination. We do it for cows. The man turns up and gets the cow pregnant. Can I just say, I cannot wait until this goes on the radio. And we're just talking about like cow farts and slurry and artificial insemination.

24:26This is going to wake someone up on a Saturday morning. I'll tell you what. The introduction of AI into the general discourse has really messed up my SEO on my farm articles when I write about artificial intelligence. I have nothing. Oh, God.

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