Farmers fight to weather EU storm

The agricultural sector faces many challenges including the removal of levies on imports and a more open market as a result of EU membership. How are farmers, herdsmen and others faring and what lies in store for them? Natalino Fenech met some of the main players to explore the issues.

The permanent secretary in the Ministry for Rural Affairs and the Environment, Philip von Brockdorff, has no illusions about the future of Maltese agriculture: The only way for it to survive and thrive is to change and develop.

"The agricultural sector includes farmers who grow crops, herdsmen who keep cows for dairy and meat, pig breeders, poultry producers as well as wine makers. There is also the agro-food industry which processes vegetables, fruits and meats and the budding olive oil industry.

"So when speaking of agriculture, one is not talking merely of fields and rubble walls which are, nonetheless, still very important," Dr von Brockdorff said.

He said the removal of levies has been the biggest challenge the sector has had to face. Malta-grown produce is placed on shelves next to imported ones and the choice is up to the consumer. But the ministry has embarked on a drive to inform the Maltese that locally produced crops are better because they are fresh and because of controls on the use of fertilisers and pesticides.

"Many farmers complain about the grading plant that is being introduced at Ta' Qali. Ideally, grading should be carried out by the farmers themselves as they harvest their crops. But farmers cooperatives are being given the opportunity to use the grading facilities that will be available shortly," he said.

Although farmers might have to discard a percentage of their produce, in the long term grading will mean more income for them because the middlemen (pitkala) will have to offer more for grade A produce while the competition means that the consumer price will not necessarily go up.

It is common knowledge that farmers are paid a pittance for the crops they sell at the pitkalija while the middlemen and the vegetable seller make more money from the produce than the farmers themselves. "Grading will change part of the imbalance in this equation," Dr von Brockdorff said.

Grading of crops is not something new to Malta. Potatoes meant for export have been graded for quite some time. There is strict quality control: potatoes are GM free and the amount of fertilisers and pesticides used is restricted. This means better prices are obtained in The Netherlands as well as in new markets such as Germany and Denmark.

Rejects are not necessarily thrown away. They can be processed or sold as Grade 2 produce. But not all vegetables landed by farmers at the pitkalija are sold, so there is always an element of discarded crops.

Why can't Maltese consumers get the same treatment that others abroad get when buying our produce?

"With effort and investment, our farmers will meet the challenges. Things will not happen overnight, but things will change for the better," said Dr von Brockdorff.

"The milk sector is the classic example. The producers held talks with the ministry and laid their cards on the table. We realised that one of the biggest problems in the sector was the price of animal feed, so we subsidised it and are still doing so in order to stabilise the market. Meanwhile, the producers have made new investment and improved their product.

"In spite of the strong advertising campaigns conducted by importers of milk products, the local dairy product has emerged stronger. And the end result is a better industry and higher quality products for the consumer. What happened in the milk sector can happen in others sectors too."

The poultry sector was initially badly hit because producers failed to make the necessary improvements as they waited for the results of the EU referendum and general election. As a result, they had less time to restructure and were not prepared for accession.

"Essentially, they were restructuring while facing competition, which was tougher for some of them. Had they restructured earlier, the transition would have been much easier.

"The number of heads being produced has dropped from around seven to four million, but the market is now more consolidated. A level of around 4.5 million heads is more adapted to the size of our country. A number of producers who were not up to scratch had to fold. But this means higher quality produce for consumers too," Dr von Brockdorff said.

"Producers in most agricultural sectors are also importers so in a way they still retain some control over the market. They do not have total control as there are other importers, but producers import significant quantities."

Subsidies are being given but in some sectors, rather than investment being made and the benefits being passed on to the consumer in terms of better products and cheaper prices, the subsidies are just being pocketed, he said.

"Change has to happen across the board. Egg producers will soon have to start stamping their eggs as consumers have a right to know what grade they are buying. This sector is still untouched by competition from abroad because local producers produce enough to satisfy local demand and there are no imports yet. But one should not assume that the situation will always remain so. Producers must brace for eventual competition in all sectors."

A problem exists in the pig sector as the price of locally produced pork is too high.

"We are trying to help them export some of their produce to Sicily and have sent a number of carcasses. There is a big demand for pig meat there and our meat is of high quality. But the price is not yet right. The difference between what they are asking for and what they have been offered is not very big, but big enough to remain a barrier.

"Producers have to realise that prices fluctuate and can go up as well as down. Pork produced in Spain is much cheaper. I do not advocate rock bottom prices in order to compete, as quality counts too and some people are prepared to pay for that quality, but the price has to be right. If they manage to start exporting they could perhaps even increase their production."

Substantial amounts of money are being paid to farmers because the whole of Malta and Gozo has been declared a "less favoured area" for the purposes of EU funding. Malta was the only country to be able to negotiate this arrangement because of the poor quality of its soil and small size of its fields.

"There are just over 1,000 full-time farmers. The ministry has built the administrative capacity to pay them and the cheques started to be issued in December. We are also working on a rural development plan suited to our conditions and needs and are benefiting from funds from the European Agricultural Fund for Rural Development.

"We are insisting that the less-favoured-area status should be retained in the next EU budget period, as nothing has changed since accession. It is a cardinal issue for us and it means more money for the farmers."

Changes have been taken place across the board. In the wine sector, one can still produce table wine but some have made a quality leap by producing wine of excellent quality.

"There are people willing to pay good money for a fine wine and the DOC criteria exist so that those paying more know what they are buying. Some local producers are working along this track and I believe others will follow suit," he said.

Liberalisation has had an impact on tomato producers because imports are very cheap, particularly imports from small manufacturing plants.

"The kunserva (tomato paste) market has remained intact. Some agro-food producers have intensified their export drive. If we produced new products we could compete better. Big names in Italy boast of canning only Italian-grown tomatoes. We could be doing the same.

"But all in all, we are putting agriculture back on the agenda. Sitting with others around tables in EU institutions provides us with learning experiences. We are not being pushed around," Dr von Brockdorff said.

'We have survived'

The Farmers' Central Cooperative Society embraces seven cooperatives of farmers tilling land at Mgarr, St Paul's Bay, Rabat, Dingli, Siggiewi, Qormi and Zabbar. Each cooperative sends a representative to the central cooperative and farmers are free to decide if they want to join the cooperative or not.

The cooperative runs the vegetable market at Ta' Qali and employs a number of pitkala.

FCCS president Toni Sammut said vegetable and food prices have fallen since Malta joined the EU and the subsidies being given by government may be enough for some farmers but not for others.

Farmers get paid according to the sales made and the pitkala, even those employed by the cooperative, compete and try to get the best prices possible.

"It's an open market and prices vary. A particular fruit or vegetable can fetch Lm1 at one point and just 50 cents a few minutes later. Grading of produce can eventually make prices more uniform," he said.

But grading is still a thorny issue for many farmers, who do not see why a straight cucumber can be sold but one which is bent should fetch less money or can remain unsold.

Mr Sammut said farmers should start grading produce themselves. "Graded produce will fetch a better price, because it will be the best quality. In a way that is already happening, as best quality produce is the first to be sold at the pitkalija, but it will be more structured. Other produce, still good for consumption but which is not grade 1, may be sold for processing.

"The problem with processing is that the volume of produce in Malta is not very big and the investment that has to be made is quite big while the equipment would only be used for short periods of time each year," Mr Sammut said.

Asked about the impact of EU membership on farmers, Mr Sammut said initially there was a "big invasion" as the market was inundated with imported fruit and vegetables but this was now slowing down. "Many imported fruits and vegetables had to be thrown away. Such goods are very perishable. The main advantage of locally produced crops is that they are fresh.

"The best certificate that Maltese products are better is given by importers themselves, when they place the imported produce in the crates used for the local one. That is the best certificate they could give that our produce is superior and they tried to pass theirs off as Maltese. Imports can substitute local produce only when it is not available," Mr Sammut said.

But do farmers want to change their old ways and are they prepared for the changes that have to be made?

Mr Sammut thinks farmers are able to face the challenges as they have always done. "Farming is all about challenges, and this is the way of the world. You are either up to scratch, or you can pack up," he said.

Mr Sammut said experience had shown that farmers have to grow to be able to survive.

"Profit margins are getting smaller and you can't survive unless you are big. Being an island is an advantage as we can't easily be invaded by produce from abroad," he said.

One of the things that is burdening farmers is the administration and book-keeping involved.

"Farmers need to keep records as aid is given accordingly. Many now rely on their children for their book keeping. But some farmers are finding it very difficult to cope," he said.

In spite of the difficulties, Mr Sammut is optimistic about the future.

"Many farmers used to say we will be worse with EU membership. I think we can manage to at least maintain our share, if not even improve. The amateur farmer has been swept by the roadside. The professional received a blow but survived. I believe the worst stage is now over. Once we have survived the onslaught of competition in the first year, we will survive and next year will be better," he said.

Funds for farmers

Farmers and herdsmen are receiving financial aid to the tune of Lm18 million until 2006, mostly in EU funds, and the government is negotiating another package that will cover the period 2007-2014.

For example, last year, Lm750,000 was paid to farmers tilling land and close to Lm4.2 million were paid in relation to rubble wall maintenance, subsidies on production of fruit and crops, planting of vineyards and other ad hoc payments to full-time farmers.

Herdsmen involved with rearing cows for meat or milk have received, or are earmarked to receive, a total of Lm1.92 million. The 171 pork producers have received Lm1,524,020. Those involved with poultry and egg production have been given Lm1.06 million.

Project to improve milk

Koperattiva Produtturi tal-Halib Ltd (KPH) is the milk producers' cooperative. It was established in 1958 and incorporates all the 162 licensed milk producers in Malta and Gozo.

The member milk producers own the cooperative, their main objective being to promote the general and economic interests of members according to cooperative principles.

The president of the cooperative, Gejtu Buttigieg, said EU accession had the same impact on the dairy sector as on the other sectors in agriculture and the agro-industry.

"On accession, the dairy sector had to adopt the Common Agricultural Policy, in particular the common market organisation in the milk and beef sectors, and all other applicable EU directives and regulations.

"Moreover, the dairy sector also had to face the removal of import levies and competition with imported products, particularly beef and dairy.

"All this necessitated an intensive restructuring and investment programme to continue to upgrade and improve efficiency and standards all along the chain from 'stable to table' in the dairy sector. In brief, these were the main challenges the milk producers and their cooperative KPH were and are still facing," Mr Buttigieg said.

Asked whether the situation at KPH was now better than it was a year or two ago, he said there was no comparison. "The scenario for the dairy sector has totally changed - the local market is now open to competition from imported products. Over the past year, the most important consideration was that the members, with the support of KPH, continued to find a market locally for all the milk and beef produced. This will remain the most important challenge - to secure a market for local production and thus sustain the livelihood of the milk producers, employees and all those working in this sector."

The KPH president said the cooperative went through substantial restructuring and investment and this was intensified in the last two years.

"Malta Dairy Products Ltd has invested about Lm3 million to continue to modernise the whole dairy plant and production processes. This continues to improve its efficiency and standards and hence it is in a better position to face competition. Likewise, there is a heavy investment programme planned to upgrade the dairy farms."

The cooperative well knows that in this day and age, change is continuous. "In milk production, change and improvement in production techniques and management is an ongoing process. It is even more so today, as we continue to achieve better efficiency and quality standards in milk production.

"KPH, MDP, the ministry and departments are pooling their technical expertise in a joint 'milk improvement project'. The objective is to support and help the local milk producers to improve the farm management and production techniques, thus ensuring better quality and efficiency," Mr Buttigieg said.

The cooperative as an organisation does not receive support from the government or EU agencies but the milk producer receives the support directly.

"This consists mainly of the special beef premium and the slaughtering premium on the local beef production and the SMPPMA and Rural Development Programme support measures for milk production and farm upgrading," Mr Buttigieg said.

Asked whether KPH planned to introduce new products or to export any, Mr Buttigieg said local milk production has to remain within the limits of the EU reference quantity of 48,698 tons.

"MDP feels the first obligation is to satisfy the local market and the Maltese consumers with fresh milk products on a daily basis. Obviously, innovation and new products are also part of the marketing strategy."