Odd Lots - Lots More on Why Farmers Across Europe Are Furious

Episode Date: February 2, 2024

In France, the Netherlands, Germany, and Poland, we've seen a wave of protests recently from angry farmers. So what's driving the activity? On this episode of Lots More, we speak with Lorcan Roche Kelly, a former cattle farmer in Western Ireland who is now the business editor at the Irish Farmers Journal. He explains how a combination of factors from climate obligations, economic conditions, government regulation, and free trade deals have put the squeeze on many farms, causing this public revolt. He explains the unique conditions facing each country, as well as broader political and economic ramifications.See omnystudio.com/listener for privacy information.

Thanks for listening to Oddlots. Follow the show on Amazon Music for more future episodes or just ask Alexa play the podcast, All Thoughts on Amazon Music. Sorry, I must put on my speaking to foreigners voice. Hello, Tracy. How are you today? It's Lorkin. I'm so excited. Hey, Larkin. It's been too long. And Lorkin, 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 going to have to... Wait, but we can actually please.

It's not. No, because then it's... I think that should be the start of the podcast. Yeah, that's what we're going to start it there. I did a deadlift. One, two, three. Hedgemi. Okay, go.

What's... ...theimony. Barges. This is an after-school special, except... I've decided I'm going to base my entire personality going forward on campaigning for a strategic pork reserve in the US. Where's the best with impostin? These are the important questions. Is it robots taking over the world?

No, I think that like, in a couple of years, couple of years, the AI will do a really good job of making the Odd Lots podcast. And people are saying, I don't really need to listen to Joe and Tracy anymore. We do have... Cha-ching? 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.

And we really do have the perfect guest. Tracy, I miss when one of our, when we worked with Lorkin, our Irish farmer friends. Yes, working with Lurkin 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 it.

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 Sixth Malbridge. It's beautiful there. Yeah, 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, Lorkan, 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, Lurkin? Yeah, 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 the job working with you all, it still, this was an opportunity that could not pass up. Because, like, Joe, if you had invited to be the editor of Irish,

International Country Music Magazine. Yeah, right. No, that's exactly my phone. 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, I really like, I can't blame you. It sounded right. It's a good fit, yes.

Okay, that's good. For those who don't know, Lorkin 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 Lorkin, give us your background before we dive into it. Because I don't think everyone knows. People who don't know the Lorken lore. Oh, my God. Didn't we do a podcast in this before?

Can we just reference that one? Yeah, yeah. I used to do lots of things. I used to do some mining. I used to be, we used to an art gallery. I used to do some advisory work for U.S. hedge funds. I used to a lot of things. I think maybe I get bored easily.

That could possibly what the problem is. But I think it's kind of not quite fake it to you make it. But 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 philosophy. It's worked out well so far. That is a great philosophy. The day that I, or I was there, I think I was there visiting you for three or four a night. But I think I was there when you sold at least some of the.

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 the service, you had the Irish breakfast in the local cow auction, which is definitely one free of yours. 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, Larkin, you've probably wisely moved off Twitter. I'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 see 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 on Twitter. I have never seen a tourist in the market six hundred big to happen to say. Yourself, aside from yourself,

yes. Yeah. aside for myself. Lorkan, 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. I'm going to start marching up and now in the office here.

Wait. What happened to the trees? The tree is. are still not in the ground due to unbelievable bureaucracy. Oh, wow. Like astonishing levels of bureaucracy. Well, this is...

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 out 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. I 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 that? I think we're going to need you to expound a bit. What are the story? What do you build that out a little bit? Yeah, really, so I think what happened is, it's kind of farmers in the EU, because the EU has got very high welfare standards,

FAMLU, 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 out. One of the big ones was there's a 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

has 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 their free trade agreements so they cover everything including farm products but the farmers in Europe their problem is they look at these trade deals

say hang 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 an undercut or food in the market in the EU because there's a trade deal in place okay the mergers won't have 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 advantage of because they'll have, they'll just have lower margins or lower margin requirements coming into the EU. So 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 kind of the huge squeeze on costs for everyone in Europe. There was lots of supply chain problems. There was lots of things. The farmers were in a position that they were able to sell more product in the local market. There was less global trade. And demand, big leave countries from Asia shot up.

So farmers took advantage to that. So lost them. But that was okay in 22 because at the same time, we saw that the input costs for farming also skyrocket. I'm sure you've seen that European gas prices. We're looking at fertilizer prices, tripling. We're looking at fuel prices, electricity prices. I've shown up as well. But farmers could eat those costs in 2022 because their output costs,

rose so much. This year, last year, 2003, farm incomes dropped by 40%, kind of back to 2021 level, slightly above 20201 levels. But the farm costs dropped by maybe or maybe kind of 75%

or so they're 25% higher than where they were in 2021. So the cost basis dropped a lot but not as much. The income was dropped back to where it was kind of 2021 levels and for some farmers, they're having negative income in 2023. So they're kind of of 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. I'll get the pronunciation right. The Bundesfare Fassunggerich has had their ruling last year. That's the German Constitution Court, which had the recent ruling on the German budget. And as part of those, they see the German government can't spend money anymore. So one of the costs they were to cut the tax relief on agricultural diesel

and agricultural machines. So one of the big costs, lots of farmers, particularly on the Tilly sector, is diesel, the 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 last day or two.

We see some concessions announced. So basically the tax deal will be there for another while. I think a lot of people that 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. So one thing I don't... That's a 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 is in Europe is quite a lot harder than there's anywhere else

in the world. There's even legislation. There's four. I was supposed to take a step back. There's a thing called the Common Agriculture Policy, which is the European policy to make sure the people 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 art is a 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's what you can call the good agricultural and environmental condition. It's called a GAEC. So to get the cap money as a farm, you've got eight things you have to do. You have to establish a buffer strip along watercourse.

So if you've got a river flow into 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 gold or 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 land management of 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 to call space for nature.

That's not honest a lot of small farms, but on so many small 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, there is, they do water quality tests across Europe. and the water quality tests measure nitrates, which has got to have you ever heard of algae blooms across as a big sign of pollution. That's a high nitrogen level of water. So they need to work on the test 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 fertiliser in lots of ways. But it's just 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 actor, 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've 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, farmers who are being tested and were farming at 250. They cut to 220 means their production will drop by about 6 or 7%. You basically have to get rid of the cows, right?

Like 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. And that has a knock on effect because dairy farmers are, they earn, I suppose they're the highest turnover. They've good income levels. So they can then rents, lease land,

that's close to them. And a lot of farmers are leased land. the tradition was tillage land. So the tillage sector in Ireland has been squeezed by the dairy sector. But the only reason the dairy sector is doing the squeezing, it's because of this nitrous legislation that's in place. That water quality legislation, again, comes from 1999, which incidentally, I think, is the same year that the Merkister trade talks started.

So, you know, these things are a long time in the grass before they're biteless and just all kind of biting right now. On April 4, 2023, around 2 in the morning, A man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16.

What separates good leaders from transformational ones? I'm Jessica Chen, and in season two of... of Leading by Example, we'll sit down with executives like Grace Chen of Bertie Gray to find out. It's important to understand where you spike, but also really acknowledge where you don't and find people who can fill those gaps. Listen to Leading by Example, Executives making an impact on the IHeart Radio app, Apple Podcast, or wherever you get your podcasts. Your trees, Tracy struck a raw nerve, asked you about your tree farm. like what 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. Like, tell us that what's the, 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 agricultural high emission. We've also got a large aviation sector here. We have lots of difficult. 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. And one of those was to establish 8,000 extra hectares of forestry per year in the country. Well, the policy has been an abject failure from the start. They're getting around 2,000 hectares per year, but much of that's commercial forestry anyway. And the reason for this is that the rules that surround it and the environmental rules are almost our drugs, they're not clear enough either to the farmer, to the forester, or to the inspector. So everyone kind of edged from 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 happened 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 is so unpredictable. Like, 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 farm and said plant that and will give you a small per acre for years, then that would be a much easier thing. because there is, again, reams of you, environmental data, the environmental legislation for everything,

that they started doing that as they start. Try to keep it quite simple, but they were brought to court by, believe or not, environmentalists who felt that the environmental laws weren't being fully implemented in these planning, in these three planning applications that were given out. So that would have stopped with a couple years as well.

So we're big into, I suppose, legislation and regulation here in ways that most Americans might, find somewhat amazing. So there aren't protests in Ireland yet, or there

aren't big protests. I mean, there's a lot in like France seems to be where they're always Shetland. Yeah,

and the Netherlands. So what's, how is the situation in Ireland? Yeah. The situation is quite, I think it's kind of important to remember

when you look at the protests of Europe, like that there's different, they're protesting over different things. Yeah. They're all the same level of, I'm sorry, they're all the same level of upset.

But they're protesting. So if you look at the farmers of Poland, but they were protesting over the fact that the Ukraine farm products had a free run into Europe and 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 themselves so they've got the deal now I think they're trying to get a deal and sorted out today where they'll get that that will get the traders still exist but it'll be more distributed across Europe in Germany as I said really they were protests over the price diesel was kind of the catalyst in France

it's a market there's a lot of it the mercuracy that's the trade deal with Paraguay Uruguay Brazil and Argentina

that trade deal like I said been negotiated was signed in 2019 after 20 years of negotiation but that is seen that France is a big threat

to the French economy because of the beef and stuff that's coming off also there's wine as well could come up so Macron has said he wants the EU

to stop the negotiation to stop the ratification of that that trade deal the EU came out again, I think very recently it said they will continue talking, but if France votes against it, France is a veto, Ireland is a veto, Australia, everyone's going to veto one. 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. Everybody wants to sell cars into Brazil. So it's kind of, there's a real push and show up going there. Ireland even. we have a huge pharmaceutical sector here. So the Irish government kind of isn't that much against Marketer, even though it might mean there's more beef coming from South America to Europe, reducing the margins of 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. Lorkin, 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 crossed. They get out in a busy period. Whereas if you're in Europe and you're a tillage farmer, this is not your energy quite period. So you can get out and set fire to the European Parliament, whatever you need to do at the moment. Lorgan, I have a really important question,

which is whatever happened to the cows that you named after us. I assume they're long gone, but there was like a Joe cow, a Tracy cow. And I think there was a Luke Cowah. Luke Cowah. Luke Cowah. Lou Cowell was the first to get the chop, I think.

Luca does 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 they, Tracy, go up to be a good-looking heifer. Last time I saw her, she was a hamper.

It's not the first time I've been called it. Good-looking heifer. Go on, Markham. He's the back story. Yeah, but Joe Cow was definitely that Joe's burgers as well. Or fine steak. I'm sure. I miss you, Larkin. It's a, we should do this more often. Yeah. This is a...

Lorkin, I actually have like some concrete tree advice that I need from you because I've got all these like interesting trees on two acres in Connecticut now, including I'm very excited about this. You're going to claim it to be a small holder now, right? Was that where you were? Yeah, that's right. I've gone into farming. Oh my good. Trees. Joe's really sick of hearing me talk about this but, but we found a tree that might be a tree that might be a, 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.

That'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 all sort of went functionally extinct in the early 1900. 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 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. This 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 insemination. I have a thing. Oh, God. Lots more is produced by Carmen Rodriguez and Dashel Bennett with help from Moses Ondum and Kail Brooks. Our sound engineer is Blake Maples. Sage Bauman is the head of Bloomberg podcasts. Please rate, review, and subscribe to Odd Lots and Lots More on your favorite podcast platforms.

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