Committee for
Agriculture and Rural Development
Friday 22 September 2000
MINUTES OF EVIDENCE
Debt - the Particular Circumstances
Faced by the Pig and Beef Industries
(The Livestock and Meat Commission)
Members present:
Rev Dr Ian Paisley (Chairman)
Mr Savage (Deputy Chairman)
Mr Bradley
Mr Douglas
Mr Dallat
Mr Ford
Mr Kane
Mr McHugh
Mr Paisley Jnr
Witnesses:
Mr D Rutledge )
Dr M Tempest ) The Livestock and Meat Commission
Mr P O'Neill )
The Chairman:
Gentlemen, I apologise for the delay.
Perhaps you will make a statement, which will be followed by questions from Committee members and from the Chairman. We would like to have answers to all of our questions because those answers will be given to the Committee's adviser, who has responsibility for compiling the report. We want to go through this question and answer session as quickly as possible, but without curtailing you. Our time limit is 45 minutes.
Mr Rutledge, Mr O'Neill and Mr Tempest, I welcome you to the Agriculture Committee.
Mr Rutledge:
Thank you, Mr Chairman. We are pleased to return to give evidence to this Committee to further your quest to explore the present circumstances of the beef and pig industries. In my opening remarks I will not attempt to deal with the schedule of enquiries attached to your letter of 10 August. Instead we have submitted a comprehensive response, and I hope all members have a copy.
The Chairman:
Yes, thank you.
Mr Rutledge:
I intend to introduce the responses briefly and make a few comments under the headings contained in your enquiry: co-operation and organisation of producers; high value niche markets; quality of Northern Ireland beef; and branding.
With regard to the issue of the co-operation and organisation of producers, we believe that there is benefit in encouraging such an iniative. However, we are doubtful that the suggested level of participation is achievable. While we would not discourage ambitious targets for such a group, we do not believe that 50% of producers is a realistic figure.
The main opportunity for such a group is to address seriously and aggressively the existing opportunity to improve the conformation quality of Northern Ireland cattle at slaughter. We believe that it should begin with a strict protocol in relation to the sought-after livestock characteristics and develop production regimes and genetics appropriate to delivering those carcass qualities.
In our response relating to high-value niche markets, we have confirmed our continuing belief that further high-value niche markets would, under the current initiative, be opened to Northern Ireland beef once the export ban is lifted or relaxed. We highlighted our concern that perhaps the biggest problem is the small proportion of our cattle at slaughter which meet the requirements of these niche markets.
It is appropriate to mention that there are a number of niche opportunities in addition to those past niches among premium retailers and caterers. The Livestock and Meat Commission (LMC) has assisted Aberdeen Angus and, laterly, Hereford producers in developing markets for these specialist traditional breeds at a significant premium.
The structure within the bodies promoting these breeds is similar to the one suggested in your hypothesis. We are concerned about the implications of the beef-labelling regulations for those breeds, but we are continuing to support such developments fully.
Organic production currently enjoys very positive press, and there is doubtless a significant premium available for producers in this niche. It is a niche that suits some extensive producers, but it is not a solution for everyone. For example, in the Iceland group there is increasing evidence of a desire for organic produce, but there is also a reluctance to pay a great premium for it. If production and demand become more balanced, organic prices will fall more into line with current market prices. Producers who opt for this niche must ensure that there is an adequate premium to cover the inevitable loss of production and premia.
Even since our written submission, a small but useful niche for bull beef production from the suckler herd has emerged. We are holding discussions with a major processor to explore the possibility of creating a fairly tightly contracted group of producers to satisfy this niche, which will be an attractive opportunity. The Livestock and Meat Commission would be concerned if too many producers went down this road, but we will support this initiative because we believe it is well defined and sensibly profitable.
On the issue of conformation quality of our beef herd, there is massive potential to enhance the value of our industry through beef herd improvement. In saying this, we do not want to imply that there are not many producers who are producing top quality cattle which are well matched to the market, but there has been an overall deterioration in cattle conformation in Northern Ireland. In some other European regions and member states, the average conformation quality of cattle at slaughter is well above the level we achieve. The improvement of conformation quality is a major strategic issue for the industry if we are to regain the export market for premium beef products.
Northern Ireland is held in high regard by many present and past customers for the quality of its cattle identification and traceability systems, its farm quality assurance scheme and the high level of service provided by the processing industry. We would be well positioned to gain more business from these premium customers if a larger percentage of our cattle met the higher specifications demanded by these people.
The issue of branding was discussed extensively when the red meat strategy was produced a couple of years ago. The beef and sheepmeat industries at both producer and processor level acknowledged that branding could increase the value of Northern Ireland red meat. The Scottish model demonstrates that a consistent 10% premium is available on Scottish beef in comparison with other unbranded UK produce. However, it was also acknowledged that branding and the promotion of a brand add to costs. We must be convinced that this cost will be outweighed by enhanced returns and that this revenue will be directed to those who fund the promotion of the brand. On a fundamental level, we must also be assured that the characteristics attributed to the brand, through promotion and advertisement, can be unfailingly delivered to consumers.
LMC has had a prolonged, positive experience of the use of the Greenfields brand for the promotion of beef in Holland. Dutch consumers who bought Greenfields beef through the Albert Heijn group grew to appreciate the qualities of Northern Ireland steer beef, which was produced to a specification developed with the Albert Heijn group. The superior eating experience, allied to LMC's investment in promoting the brand to consumers with the supermarket group, has resulted in the Greenfields brand being recognised in Holland as a premium beef product.
One possible out-turn is that consideration might be given to a broader branding of the Northern Ireland agrifood industry where the costs might be spread broader than simply in the beef industry.
Finally, I would like to mention the sheep/meat industry. I want to highlight that sheep farmers have also experienced many of the difficulties experienced by the beef and pig sector. We would urge you in your consideration of the problems of Northern Ireland agriculture to remember that the output value of Northern Ireland's sheep production exceeds that of pigs, poultry, eggs, crops and horticulture, and in some instances by a considerable margin. Therefore we urge you not to forget that particular sector.
The Chairman:
Thank you very much. We now have some questions to put to you.
Your paper supports the principle of a major co-operative, but suggests that it would be better to target 10% of producers initially. On that basis, I have three questions to put to you.
First, what steps do you believe would be necessary to bring this about? Secondly, how would the remaining 90% be affected? Would there be an incentive to become a member, or would it be the end of the road for them? Thirdly, what resources would the LMC be prepared to devote to the establishment of such a co-operative?
Mr Rutledge:
We have not attempted to address in any serious way the mechanism for setting up such a group. We have taken your hypothesis, and we have responded to it. History suggests that it would be difficult to get this going. However, I believe that it might be helpful if the Government could put in some seed capital or moneys in order to incentivise people to come into such a group.
In our paper we suggested very clearly that while the group initially might be exclusive, if it were to be successful others would be encouraged to join. We have said very clearly that we would want to leave it open for everybody to join the group as soon as they could meet the standards that were set in the initial phase - standards of genetics and carcass quality that are appropriate to a premium niche group.
The resources of LMC are the resources of the industry. We do not have any resources other than what the industry gives to us, and, therefore, we would have to turn the question back to the industry and ask "What do you want us to have, and how do you want us to use it?"
The Chairman:
The creation of a well organised and market responsive producer group would undoubtedly require very significant leadership. If it were launched, it would be the leadership that would be tested and tried, and if it were going to move anywhere it would have to, at least, show some results.
There are many organisations in the beef industry. Which one of them do you think should play the most major role? Is this something that LMC ought to do? As others have said, you should absolutely not remain an impartial servant of the industry, but you should give a lead to the industry.
Mr Rutledge:
That is an extraordinarily difficult question. We have toyed with this. We are willing to provide leadership, but we do not believe that we can lead people in a direction unless they are willing to travel in that direction. Regarding the whole issue of discussion at the red meat strategy level, the industry unanimously took the view that it was LMC's role to co-ordinate, to administer and to lead the activities associated with the red meat strategy. We are doing that. If the industry collectively came together and agreed that this initiative was something to be taken forward in a serious manner, and if the resources were made available to us, we certainly would be willing to take on this challenge.
The Chairman:
If a strong producer group could be created, how do you think it should be funded? Should it be by the farmers themselves; by the farmers and processors; or should Government be expected to contribute to the funding of such a development? Your paper refers to costs of several hundred pounds per year per producer if branding were involved. Is this realistic for Northern Ireland producers, who are now at such a low ebb?
Mr Rutledge:
You have a number of questions there. Funding is clearly important. One would hope that such a group, if it were at producer level, would be able to produce a return for its farmer members that would encourage them to provide a significant part of the funding. As I said earlier, I believe that it is unlikely to happen unless some seed money can be found to kick-start it and get it up and running.
The biggest costs, as we said in our paper, are associated with getting an executive or team in place to provide the leadership that you described. We agree wholeheartedly that leadership will be the essence of the success of any such group.
Mr O'Neill:
It would be essential to ensure the commitment of farmer members, and there would have to be full consultation with producers beforehand. However, we feel that it would be necessary and essential for farmers to buy into, or invest in, it to ensure their commitment to the concept - while not failing to recognise the plight that they are in at the moment.
The Chairman:
The Committee members now have some questions. If you answer their questions as well as you answered mine - nice and cleanly - that will be helpful. I ask the Committee members not to make speeches, but to ask questions.
Mr Savage:
Is it your opinion that the beef industry should be investing in creating strong brands, and selling its products only to outlets such as Albert Heijn in Holland, which are prepared to work in partnership to promote and strengthen the brand in the markets they serve? Also, can there be sufficient trust between producers and processors here to make this work? That is important.
Mr O'Neill:
There is no doubt about the desirability of having a brand in any product that is produced. We look at colas and think of Coca Cola; we look at breakfast cereals and think of Kellogg's. If we could achieve the same for Northern Ireland beef there is no doubt that it would put it in an enhanced premium position. That will require huge investment. It will also require - and perhaps this is the most challenging bit for our industry - the definition of the brand promise of what the consumer can expect when they buy that brand. That is the first step.
You referred to the Dutch supermarket. That is a fine example of a partnership working. We suspect that that could not happen on a United Kingdom basis, but, if we think of it in an investment context, I could not say conclusively that it would not happen in a United Kingdom context. I believe that all retailers are amenable to ideas in this area. The issue comes down to how well, and to what extent, we are prepared to support, and invest in, the brand. For example, no United Kingdom retailer would dream of leaving Coca Cola, or Kellogg's off its shelves. That is because those companies invest millions of pounds per annum to support them.
Mr Savage:
Would you agree that we are being led by consumers?
Mr O'Neill:
Absolutely.
Mr Kane:
Is the LMC setting standards of excellence for producers in Northern Ireland which are unrealistic and unachievable, as it is estimated that stricter grading by the LMC has pushed cattle grades down in the Province by a grade and a half? Also, changes in the LMC grading were implemented suddenly and failed to recognise the necessary time frame required by producers to apply changes in production. How does the LMC see this having an effect on the Province's average grades?
Mr Rutledge:
Grading is the bane of our lives. We do not have a choice on the grading standard. Everybody who is trying to assist and work with this industry has got to realise that. We do not have a choice in the grade that we put on animals, nor does any other Member State. It is a European regulation that we adhere to. The competent authority, the Department of Agriculture and Rural Development, supervises us; they in turn are supervised by the European Commission. Whatever standard they have dictated for all Europe is the standard that we have to adhere to. The LMC does not have that choice, we simply provide a service to the industry. Are the standards being set impossible or are they realistic? They are absolutely realistic. We have only got to look at other regions of the United Kingdom, and other member states, to see the quality of cattle. I do not mean to say that we are not producing good quality cattle. Many of the cattle coming forward for slaughter are superb and as good as anywhere else in Europe, but the average is not as good as we believe it could be. There are opportunities within the specialist beef sector to get away from the influence of the Holstein which has crept into improve the performance of both the male and female of the breeding herd. There are also opportunities for improvement of that part of our slaughtering which is coming from the dairy herd.
Mr Kane:
Our cattle, whether the chief executive likes it or not, are equal to any other cattle or stock within the United Kingdom. It is not being downgraded in any way, but our grades are being downgraded by one and a half grades. Could the LMC chief executive tell us why this is being done?
Mr Rutledge:
I do not think I have to repeat what I have already said.
The Chairman:
Therefore you do not want to make any further comment.
Mr Rutledge:
We grade to a standard that is laid down through that chain that I have mentioned. We do not have a choice in the standard of the classification that is applied.
Mr Douglas:
You have said today that markets will improve if the ban is lifted, but at the same time you are not enthusiastic about co-operatives or their success. There is no doubt that meat plants control the price the producer receives. Are the producers being asked to continue being monopolised by these purchasers if we do not have some change through a better organisation? We will soon have no industry left unless someone is prepared to step outside the defenceless position we are in at the minute. We seem to be hiding, and nobody is prepared to take the step forward. Our industry is failing by the day.
Mr O'Neill:
You have said that we are not enthusiastic. It is quite the contrary; we would be very enthusiastic if this could be achieved. In our submission, we have said that we have tried to deal with the practical difficulties with achieving what would be very desirable. There is evidence on the ground - not on a Northern Ireland-wide basis, but on a small scale for particular niches. We have mentioned the Aberdeen Angus, the Herefords and the bulls that are in the process of being developed. These are examples of groups of producers coming together to produce a very tightly defined specification for a meat plant and in the process achieving a very significant premium over the standard base price. We would be very enthusiastic if it could be delivered; it is delivering that is the difficulty.
The Chairman:
Could you apply yourself to what my Friend has said about the monopoly. We have a limited number of meat plants. It seems that they have a stranglehold on the industry, as we get complaints at this table from farmers who want to get rid of animals, but are in the grip and vice of the producer. By holding back and not taking their animals when they want to get rid of them, they are in a situation where they are tied-in to the whim of the meat plant.
Mr Kane:
That is a fact too, Chairman.
Mr Rutledge:
We have to be neutral in these matters, and we are.
It is a fact, however, that if we see rushes of cattle coming forward in an unplanned manner, then the supply/demand goes out of balance. It may be the processors, the retailers or indeed the consumers who are not eating enough - but who do you blame for this? One of the possible benefits of a co-operative would be a better planned arrival of cattle in slaughter halls. That would prevent fluctuations in supply undermining and creating a situation that the market cannot absorb. There are currently a lot of cattle coming forward, more than is needed to satisfy the market that we have. Come November it may be the opposite.
The Chairman:
Do you get complaints from farmers?
Mr Rutledge:
Absolutely.
The Chairman:
Are farmers not complaining to you, as they are to us, that at times there seems to be a move to have a build-up or a backlog of cattle, and at other times there seems to be a move not to have that? Now five meat plants, in a very small area where there is a lot of cattle, have a very big influence.
Dr Tempest:
The one thing that we do not understand, is that there are meat plants in Great Britain that are offering what seems to be a higher price for cattle. Why is there not a massive movement cattle to those meat plants?
The Chairman:
Do you understand that transport is a difficulty?
Dr Tempest:
We understand, at the moment, that the prices being paid in Great Britain are about £75 more a head and the transport costs are about £30. That still leaves a substantial difference, so we can not explain why farmers are not shifting those cattle to those abattoirs.
The Chairman:
Let me put this to you as it has been put to me as Chairman of this Committee. The meat plants across there demand that those animals arrive at a certain time. If they do not arrive at that time then they are punished. All this major profit that you are talking about could be down the drain if your animals arrive late.
Dr Tempest:
That is all about planned intake and planned deliveries to factories.
The Chairman:
No. It rests with Almighty God what sort of weather we have, and what can be a very choppy sea crossing. These cattle are not going over in the sort of boats that have club class travel. They have to face the elements and, let there be no doubt, if there is a delay then they are punished.
It is an interesting point and certainly needs further development, but we must move on.
Mr Bradley:
In section six your paper raises a worry regarding the production of bull beef. Is this reversible if there is no change in the way subsidies are paid out?
Dr Tempest:
There is, as our chief executive mentioned in his introduction, an apparent niche beginning to develop for continental bulls. There are two markets, one is for dairy-bred bulls, which is basically for manufacturing, and there appears to be one for continental bred bulls. We do not know what the size the market is yet, but we believe that it is a niche worth exploring.
Mr Rutledge:
Philosophically, we worry that too many people may be incentivised, by the Agenda 2000 Reforms, to move into bulls. The use of natural resources in Northern Ireland - our ability to produce grass - is where we should be concentrating. The extensively-produced steer should be the major feature of our industry.
While we are supportive of niches, we believe that the better good of the industry is served by the steer.
However, we do see a dilemma in the short-term, where the subsidy regime, and particularly the constraints imposed by the extensification rules on stocking rates, is moving people towards the bull, which can be finished at nearly half the age of a steer. That allows cattle to move through more quickly. We are worried about that.
Mr Savage:
The reason farmers went into bull beef is that they were getting it from their calves because they did not want to shoot them. That is the only reason that they have reared them, and now bull beef has come onto the -
Mr Rutledge:
That is essentially the Holstein.
Mr Savage:
I work with bull beef and mine comes from continental-bred Holstein. However, that is the reason why people went into it.
Mr Rutledge:
The combination of better feed conversion of the animal if it remains entire, and the subsidy regime, is drawing people down that road. However, we believe that from a branding or a marketing perspective, the uniqueness of what we can do with steers is better for our industry in the long-term.
Mr Savage:
This is a short-term.
Mr Dallat:
Your paper mentions the commissioning of a market researcher to investigate and quantify niche markets. When are they expected to report?
Mr O'Neill:
That person has been in place since late spring this year. Visits have already been made to three European countries, with one trip beyond Europe and another one planned for the autumn. Reports are compiled on an ongoing basis. Those are made available to interested parties in the industry. Reports of visits made have been disseminated to the industry.
Mr Ford:
I want to tease out what I took up with the National Beef Association - the evidence that beef processors are not reflecting the differential value of higher quality carcasses in the prices they pay. The references in your paper are different, but if the price more accurately reflected those values, what effect do you think that would have on the development of the industry?
Mr Rutledge:
From a strategic perspective it would be better in the long-term if the lower-grade cattle attracted a lower relative price to bring about a greater differentiation. However, it is not for us to determine where the average market level is going to be. Following the proposition in your paper for the highest quality and for a group to produce that, we believe that there ought to be a reward for them in the market place that reflects the meat yield. There are opportunities for improving the payment structures in that regard. However, it may mean that those with the lower-grade cattle may suffer if the top end goes up a little. That is unless the average goes up.
Mr Ford:
What will that do to the dairy-bred beef sector?
Mr Rutledge:
That there are two sides to that, and a long-term debate. There are opportunities for improving the output of calves from the dairy sector. If we get exports open up again, they will go to the veal trade. There are also opportunities for improving the quality of the beef from those that remain. There are opportunities for using technology to get a better and more productive animal. We are now seeing the opportunity of sexed semen coming in. Embryo transplantation, and associated technologies, may be harnessed in the future to allow us to get a prime and very valuable calf from a dairy cow, if we do the right sort of development work.
Mr Paisley Jnr:
Today, in camera, we heard evidence of a possible cartel operating in Northern Ireland. The allegations, which where explosive, indicated who was involved, when they were involved, why they were involved and how they were involved. Given those allegations, it seems improbable to me that your organisation is not aware of a possible cartel. Do you believe there has been a cartel or do you believe that price fixing is part of the standard marketing regulation in the industry.
Mr Rutledge:
First of all, we do not know whether there is a cartel as we are not privy to the evidence that may have been presented to you. If there were such evidence and wrongdoing, we would urge that it be sorted out - that it be brought out in the open and dealt with.
The Office of Fair Trading has investigated it and found no evidence, although there is a lot of circumstantial evidence that might support such an allegation. If we can find hard evidence of wrong doing, certainly we will want that dealt with. However, if we examine price reporting and prices that are reported, there is also circumstantial evidence that would support an opposite view.
The Chairman:
The Office of Fair Trading has admitted that there was a time when there was a cartel working; it does not say that it is working now. Had you any evidence of that at that time?
Mr Rutledge:
We have no evidence. We have price reporting statistics so that we can see what is being paid for all of the animals - as is required to be reported under the European regulations. We can see that there is diversity in the prices paid for cattle. That diversity sometimes can be surprisingly wide.
In recent weeks we have looked at some of the price reporting, and there is not a consistent price. A cartel would suggest that every animal be robustly paid at the same price - which is not happening. I emphasise again that we do not know whether there is a cartel. We can tell you that there is circumstantial evidence on both sides, but there is no hard evidence. If hard evidence comes forward and if there is wrongdoing it must be dealt with, because in the long-term it is not good for our industry to have such practices.
The Chairman:
The Office of Fair Trading has said that it is convinced that there was a cartel, but you are saying that to your knowledge you had no evidence of that.
Mr Rutledge:
We would not have such evidence. When the Office of Fair Trading examined this we provided them with price reporting information. We collect such information on behalf of the intervention board for European reporting. We sought the permission of our client, the intervention board, and we passed the entire price reporting data to them.
The thing that causes me some consternation, however, is that at the time that you say that a cartel operated, Northern Ireland beef prices to farmers were in the top quartile in Europe. At the time before the export ban there was very intense competition for cattle. What has happened in the meantime may produce evidence to the contrary, but at this time we were saying "Let us stop and look at this sensibly". From time to time we were the highest price in Europe.
Mr Paisley Jnr:
You have suggested that if there were a cartel operating during that time it could have affected the grading system, and if it affected the grading system, it affected the prices. Surely that implicates your organisation, directly or indirectly, as being used by that cartel, whether you like it or not?
Mr Rutledge:
I do not follow your link to the grading system.
Mr Paisley Jnr:
It must affect the price paid to the farmer.
Mr Rutledge:
The grade of the animal affects the price paid for it. It is not the system.
Mr Paisley Jnr:
Therefore you do not think that it is the system -
Mr Rutledge:
The system, whether it is right or wrong, is determined by the European Commission and is under its supervision, and it is the competent authority supervising the standards that we apply. The grade of the animal is the grade of the animal, and the pricing structure has evolved around that.
Mr Paisley Jnr:
Could the cartel have affected that in any way?
Mr Rutledge:
I do not see the linkage between the grade that is put on the animal and cartel activity. There is a misconception, we are not influenced by meat plants or by farmers towards the grade we put on the animal. If we were, then we would be incompetent; we would not be able to do the job that is required under the law. We put the grade as honestly and genuinely as we can on every animal.
Mr Paisley Jnr:
If the supply line were being manipulated, surely that would affect the grade you are putting on it?
Mr Rutledge:
I am not exactly sure that I can make that link. The animal comes down the slaughter line and we put a grade on it.
Mr Paisley Jnr:
That supply line is the very thing that is being manipulated by the cartel in terms of price fixing and supply in the chain. Then you become implicated in that in someway, directly or indirectly. Do you not accept that? The grading system then becomes questioned.
Mr Rutledge:
I do not see that we are being manipulated; if we are it is without our knowledge - that is all I can say to you. I am not making the link that you are, I am obviously missing something in your argument.
Mr Paisley Jnr:
The grading system is directly affected and guided by the supply and quality of cattle that you receive.
Mr Rutledge:
The grade that is put on the animal is the determination of the conformation and fatness quality of the animal. That is the only thing that influences the grade that is put on it and the only thing that should influence it.
Mr Paisley Jnr:
It has nothing to do with the supply of cattle.
Mr Rutledge:
No.
The Chairman:
Let me just say - so we do not misunderstand - that this is all on record and can be checked. However, when you gave your first answer to that, you did not seem to know that the Office of Fair Trading had, in the past, thought that there was a cartel. Coming back to your answer, you implied that you did know.
Mr Rutledge:
Sorry, Chairman. We know that the Office of Fair Trading visited Northern Ireland, and I did refer to that. It took information - indeed, we supplied it with the information that I have described. I have to confess that I did not know the actual out-turn of that. If you say that it agreed that there was a cartel, I was unaware of that. Perhaps my colleagues were more aware of it than I was, but personally I was not aware of that.
Dr Tempest:
If there is a perception among your Committee that there is this alleged link. Can I remind you that we have invited, through yourself, the Committee to come and view grading in practice and we would welcome you taking up that opportunity so that we can bury this hatchet.
The Chairman:
You do not suggest that you want to downgrade us?
Mr Rutledge:
It is a very contentious issue and we would be very anxious to -
The Chairman:
We, as a Committee, have various farming organisations and other representatives which tell us these things and naturally we feel a responsibility under the present legislation of this Committee. We are supposed to be monitoring these things and looking at them, and therefore we have a sense of responsibility. It is only right that we have to do this, but what alarms me is that the Office of Fair Trading now admits that it was convinced that there was a cartel. That is a very serious thing which you know you gave information to, but you did not know the outcome, but you said that those with you might. Did Dr Tempest know the outcome?
Dr Tempest:
No.
The Chairman:
Did you?
Mr O'Neill:
No.
Mr Rutledge:
We were certainly not communicated to by it with the out-turn of that. Whether we were delinquent in not seeking the outcome, I do not know, but certainly it appears that none of us knew.
The Chairman:
It is quite amazing that it came and took all these facts and figures from you, and then it was all forgotten about.
Mr Rutledge:
It went on over a very prolonged period and we -
The Chairman:
It did come to that conclusion.
Mr Rutledge:
It did not advise us of that conclusion.
The Chairman:
We have to finish our session:
Mr McHugh:
Not only have we heard allegations of cartel, but we have also heard allegations in relation to the control of cattle into the factory gate. One of the things I would ask you is, how can we have a future industry, if the primary producer over decades is going to continue to be unfairly treated by those beyond the farm gate, and if he finds that there is no trust between the processor and the primary producer.
How can we get into the branding that you were talking about earlier in terms of creating a better production system to enable us to sell a good product from this part of Ireland to the rest of the world? How can we deal with that with this mess of unfair treatment of the primary producer - the farmer? That is why we are here today. We are trying to find the reasons for that problem and to solve it.
Mr Rutledge:
The point which you raised about the need for better relationships is very relevant. If there is wrongdoing, if the allegations that are being made can be brought out in the open, substantiated and put to bed, then those responsible should be exposed. That is one of the ways of trying to begin to build better relationships. I agree with you wholeheartedly. We must try to get through this and build constructive relationships. For farmers to get their meat to market they need to have it slaughtered and processed. I would remind you that there is a farmer-owned meat plant. One of the big four operators in Northern Ireland is 70% farmer-owned. Is it participating in these poor relationships? Why can it not build better relationships?
Mr O'Neill:
The observation you make emphasises is how desirable your proposition is that cattle be marketed through a farmer group in an orderly and structured manner. We must remember that meat is a fresh product. If we get an excessive supply relative to demand at a particular time, that causes the problem and difficulty in relationships. This prize would be really worth winning because relationships would be improved. When we work with a number of small producer groups from niche markets we have very orderly marketing of cattle. Everything is planned weeks and even months ahead. If that could be achieved on a wider scale, it would go a considerable distance towards solving some of these problems. The prize would be really worth winning, but it will be difficult.
Mr McHugh:
The farmer-run factory is a precedent, but is it any better than the rest in what farmers have been up against? That is the crux of the matter. We have a system -
Mr Rutledge:
Is there some structural problem that prevents the farmer-owned plant from having better relationships? There is something wrong structurally if there cannot be a better relationship when they own it.
Mr McHugh:
The problem is the farmers have become individualised and remain so to their detriment.
Mr Kane:
The LMC remains condemned by its contract with the meat-processing plants in Northern Ireland. Its role in the establishment of the co-operatives is questionable, and its impartiality is questionable.
Mr Savage:
How many producer groups do you think there should be in Northern Ireland to cater for the cattle?
Mr Rutledge:
There are already a number of producer groups, and we have described some of them in our submission to you. Where niches grow and there are opportunities for Aberdeen Angus, or Hereford, or organic, they will have a group where there is a mutual and common interest in developing that particular niche. It is hard to know how many of those there may ultimately be, but probably between five and ten. For the rest, who are producing the majority of the cattle that are going to the major customers, the proposition is that they can improve their lot through co-operation. We are supportive of that concept, but sceptical that it can be achieved. We would encourage that development in any way we can.
The Chairman:
I have three questions. Perhaps you can give us quick answers. The LMC's involvement with the quality beef initiative is of interest to the Committee.
Although it may be in its infancy, you appear to be keen on its expansion. How can this expansion take place? Are there difficulties in trying to introduce a strict production protocol when the organisation has developed without one?
Dr Tempest:
The organisation at the moment is a collection of like-minded producers who are attempting to improve the quality of beef through genetics and production, and it even aims to incorporate parameters on eating quality. The issue is whether, when it became formalised, farmers would sign up to a strict protocol. We believe a strict protocol is absolutely necessary because we are talking about quality improvement and quality product at a niche end of the market. Therefore, by definition, that is bound to be exclusive. It would start with the top end of forward-thinking producers, but if and when the benefits accrued, the remaining 90% would eventually come in.
The Chairman:
Your paper referred to the decline in interest in the Ulster Quality Livestock group. Can the short-term approach of farmers be addressed or is this likely to be a major problem facing every improvement scheme?
Dr Tempest:
The problem with many of these groups is that subsidies - by subsidies, I mean financial assistance - were given for the use of nominated bulls, improvement in management et cetera. It has reflected the difficulties that we all experience with these groups in that once the funding and the financial assistance began to dry up, the interest dried up. That would suggest that either the group was not properly formulated in the first place, or there was too much emphasis on financial assistance.
The Chairman:
You say the single greatest obstacle to exports will be the inadequate supply of local quality raw material to meet European markets. You also mentioned the livestock breeding initiative, the blueprint for quality beef and several rural development and council-operated livestock improvement schemes. Are there too many schemes? Is a more strategic approach necessary at this stage? Who should lead the genetic improvements issue, and how?
Dr Tempest:
The livestock breeding initiative is a specific scheme designed to improve genetics. The quality beef initiative is an initiative designed to draw like-minded people together who have used the improved genetics. There are probably not too many schemes; they are designed with different objectives in mind. The blueprint for beef was in draft form and was being prepared by the Department of Agriculture and Rural Development the last time we saw it.
The Chairman:
Thank you very much, Gentlemen.
22 September 2000 (part i) / Menu / 4 October 2000 (part i)