Committee for
Agriculture and Rural Development
Friday 30 June 2000
MINUTES OF EVIDENCE
Pig and Beef Industry
(NI Agricultural Producers’ Association)
Members Present:
Rev Dr Ian Paisley (Chairman)
Mr Armstrong
Mr Bradley
Mr Douglas
Mr Dallat
Mr Ford
Mr Kane
Mr McHugh
Mr Paisley Jnr
Witnesses:
Mrs N McLaughlin)NI Agricultural Producers’ Association
Mr J Carmichael)
The Chairman: We would like to deal with the two matters separately — pigs first and then beef. We would like you to make a presentation on the pigs first bearing in mind that if you go for ten minutes with your presentation you will only have 20 minutes to hear the Committee. So we ask you to make your presentation as succinct as you can so we can at least have a full 20 minutes to hear questions from the Committee.
Mr McLaughlin: Right, thank you, Mr Chairman. First of all, we would like to thank you and the Committee for welcoming us back here to make a presentation. Both the beef and pig industry as it stands you are all well aware of the crisis within the red meat industries in Northern Ireland. In our earlier presentation we made our proposals to you about how we would like to see things and we are aware of how sympathetic you were. Now at this stage here Jim would like to make a presentation on the pigs, to add to that we would like a two way dialogue.
The Chairman: Right.
Mr Carmichael: The presentations that we will make will be reasonably brief in order that you can question on them.
The pig situation, as you know, in the province has been disastrous in returns for producers this past two or three years. We note that a few years back we were actually about half or less than half production that we had perhaps five years ago and the number of pig producers declined. We have, in our presentation to you, the paperwork we put to you before, given what we think or the main reasons for this: The strength of Sterling; the fire at the plant in Ballymoney; the effects of the world market, and; the health and welfare legislation. The returns to producers, we have noted before, you asked the question in your initial document about whether returns were fair, we have said that one can judge for themselves whether returns are fair. If you look at the price of production of pig meat at approximately 85 pence a kilo and the average price return in 1999 approximately 69 pence. You can see for yourself there that is a loss on each pig produced of maybe £12 to £15. The industry has had additional costs, partly due to BSE and dealing with offal disposal and complying with health and welfare legislation. The offal costs could have been approximately £5 to £6. As well as that the health and welfare legislation implemented in the UK, we seem to have all legislation more than well implemented throughout the UK for all different commodities. In relationship to pigs this has put an additional burden of cost on pig producers. Throughout the UK which was an exporter of pig meat we now find in the latest report that the UK is now, in the three months, January to March, imports were up, the UK is now actually an importer of pig meat. The imports have been up from the Netherlands, something similar from Denmark, slightly up from Germany. So we find now that pig meat is being imported, being imported at a lesser cost, partly the strength of Sterling has had an impact on this as well. Producers here and producers throughout the UK are, in fact, suffering.
In the Blair document there were proposals for an outgoers scheme and an ongoers scheme. We would like to see the outgoers scheme implemented as soon as possible. Now, in order to have an ongoers scheme we must have an outgoers scheme which takes some 16% of sow places off the market, that is some 120,000 sows throughout the UK. If we don't have that scheme we can't have an ongoers scheme because then it could be described as being national aid. The Dutch have got the go ahead for measures to assist in complying with more stringent hygiene rules for pig assembly centres - they notified to this to the European Parliament in 1998. They have got the go ahead now for farms willing to adapt would get assistance, they will get compensation for the loss of income and assets. I would say here for the outgoers scheme we have to try and see — the outgoers scheme is part compensation for the number of sows, you take the number of sows that were there in June 1998 and we have to have a reduction from that. We would like to see that the people who have gone out and have reduced up until now being taken into the calculation for the reduction of pig numbers. We also have to be left, which I think is most important of all, with an industry which can stand and the people who have stayed thus far and are in some considerable debt, as this is what we are talking about here, the debt of the industry as a whole and debt in particular to the pigs industry, not only do they owe banks but they owe meal suppliers etc, that these people have to have support to have an industry for the future. We will leave it at that for questions.
The Chairman: Thank you very much. There are four questions I want to put from the Chair to you. If you make your answers as brief as possible. We need these for the record because we have to prepare a report and we must have a concise statement of the evidence that you are putting to us so that we can comment. The first one is: We have heard in previous evidence sessions the argument that producing high quality produce for premium markets is the only way to secure the future of our industry, do you agree with that assessment?
Mr Carmichael: There are premium markets and commodity markets which are all serviced by the industry. It is felt, I would say, throughout all commodities and we have heard this before, that producing a high quality product for a premium market is definitely the way forward, but there is a commodity market as well which takes other than premium parts of any livestock. So I would say the influence on any of these is the multi-nationals or the purchasers of the product who are dictating to the suppliers what they need to produce. So we are in a situation where producers, again to help welfare regulations and all the rest of this, but at the end of day the producers here aren't producing the best quality product, we would feel at present.
The Chairman: Thank you. Do you support the idea of farmers joining Quality Assurance schemes and do you feel these are a necessary part of future marketing? If so, how can farmers be encouraged to participate particularly, as has been alleged to us, the numbers currently participating are poor?
Mr McLaughlin: If I could take it further than that, the world is awash at the present time with commodity products. We are having to compete with pork products from the Middle East and from further afield. A lot of the product that is floating on the global market is not being produced to the welfare standards of the Northern Ireland product. It is not being produced to the veterinary and scientific standards that are set down and even legislated that our industries have to stand in. So the quality assurance marks, even the new proposed EM 4 50 11 regulations which are being developed throughout Northern Ireland as a whole, that we see them as a necessary bench mark that we can measure, that we can market. The flip side of that is that there's a production cost with attaining those standards and it needs to be reflected in the market place and also needs to be reflected back on a price that the retailers are paying back through the supply chain to the primary producer. We are told continually that quality product, niche product, high value product is what we have to produce, but whenever we go to market we are told New Zealand products costs this much, that pork products throughout the world, if there is a blip in Poland then through economics you have to compete with that. Now that, we feel, is unfair sharp practice and in any other business would be classed as sharp practice. Farming by its very nature is a long term business, there are many variables in agriculture outside of price fluctuations and currency fluctuations farmers - I didn't set out to have a remit as an international financier whenever I started out in my farming career - so I think that we have to take cognisance that there is a lot of products coming into the UK, especially pork from ROI, from Denmark, whichever, which is not meeting with the welfare standards which are set down in legislation in the UK. So I think that although the little red tractor logo is going to be interesting to see how far it travels, if it is going to mean anything real or if it is going to be yet another stamp on the packet.
Mr Carmichael: Could I add to that just one thing? As far as quality assurance is concerned as well there seems to be bolt ons to quality assurance. If quality assurance is going to be a bench mark, you are going to be measured, meet a standard of quality assurance whereby others don't come in and say: Our standard is higher or different, because if producers try to achieve whatever is required as a bench mark for Quality Assurance to be told: No, that doesn't satisfy our individual needs, we would find out from people who are purchasing, that they are setting standards which are quite hard to attain when we have quite good, the best, in fact, we think, conditions for production of meat in this province.
The Chairman: In what ways do you believe farming structures need to change to meet future demands and how can this change be brought about? You, in your presentation, have told us that the news - well it's not news to us round the table, but it is probably news to the general public - that we have lost half of our business already, that we have now become an importer of pig meat. That being so, what way do you think the pig farmers need to change?
Mr Carmichael: Well producers, I suggest, it is not a lot different to other commodities. The difficulty, pig farming in itself is a specialised industry and people who are there have spent quite a lot of money to have farms to the best conditions possible for producing pig meat. The difficulty there is the expense already incurred, to try and maintain these farmers they must get an adequate return for their product. If you are producing less than production costs or if you are receiving less than production costs you will not stay in business. Though all commodities attaining what we call a critical mass of production is essential to try and obtain the best return, but the pig industry, as it is, is intensive, and there is quite a lot of pig meat produced by a lesser number of producers. It is a question of getting a chain whereby each part of the chain gets an adequate return. The primary producers themselves have no guarantee of what they will get, the product is taken from them, it has value added to it, it is sold to the consumer and there is a guaranteed mark-up right through the food chain after the primary producer. Unless people can get together and ensure that each link of the food chain gets an adequate return we aren't going to have a primary production facility, we aren't going to be fit to afford it, and the people who are there are going to be bankrupt. So we would want equality through the food chain. If there is no equality there we won't have primary production. As you rightly say the UK production has now gone down that much that we are importing, again the strength of Sterling, the world trade are affecting us there and the input costs in this province, as far as the regional, are higher than the rest. We have extra transport costs between bringing in inputs and taking out the final product.
The Chairman: One final question from myself, the Department have talked about putting £400,000 into this to be made available for the purpose of marketing pig meat. Now this is a strange question to ask you, I think I know your answer, is this enough - we have to get this thing on the record - and how do you feel this £400,000 for marketing would be best spent?
Mr McLaughlin: Well the money spent on marketing can never be enough, but I think the old adage is that you have to try and get value for money on whatever you spend. There is no point in putting notes into a hole and hope you are going to dry up the bottle. I think a lot of what has to be done is that again marketing, where do we target the money for marketing? Do we target into the retail sales? I think that the Department here, we have had an affiliation that they wish to develop marketing solely with multi-nationals. I think it has been a dangerous line to go down, that Northern Ireland products are being targeted towards the major multis. There are a lot of figures and percentages going round about meat sales in the UK as a whole. The multiples would claim 80% of meat sales. Other surveys have been done will put that at half the figure or even less. I think we are yet again getting back into targeting sales of commodity product and that again is the weakness, that you're selling the commodity product and you are at the mercy of competing on a commodity market with other commodity producers. There are specialisms, there are specialist markets in Germany or wherever for specialist pork products and other meat products. I think rather than having a broad brush approach and not trying to plug money, I think that source markets. I also think that there needs to be reality that people out there are researching the markets, there is no point an academic going out and saying: There is a market here for two legged snails, let's produce them in Northern Ireland if the people in the industry in Northern Ireland say we can't do that. So I think there needs to be realism. I think the people on the ground, the primary producers and the retailers, I think everybody needs to be involved in the market research and the market delivery and whether it can be done or whether it can't. I think that has been one of the failings in the past.
The Chairman: Could I bring my friends in because we have now 15 minutes and we must get them in? Gardner Kane.
Mr Kane: Thanks Chair. To yourself, Jim, you have mentioned in your submission about farmers trying to produce their way out of difficulties. Would you accept, as has been alleged to us on a previous evidence, that one of the factors causing the crisis in the industry was over-production in a buoyant market resulting in the beef crisis?
Mr Carmichael: As a result of the beef crisis different types of meat for a time replaced beef on the consumers' list. Over-production has been stated as being the cause of quite a few problems to the industry. The situation at present is that in the UK there is not over-production. In fact, as we have stated before, we are now net importers. But from a producer's point of view, he is getting no more for his product even though we are.
One other comment I would like to make, just to relate to the last question, if we are going to market a product the one thing about the moneys that have been allocated is that we can't talk about an indigenous product, a Northern Ireland product as far as I am aware, money is allocated through Brussels, we talk about pork product or whatever, and here we are trying to save our regional industry which is a Northern Ireland industry in pork or whatever. I would note too the estimates of average household expenditure for the first quarter of this year where pork per household, the amount spent on pork is actually down, so we have to target consumers. In reality we could have had over-production throughout the world of a lot of products, but within the United Kingdom and within this region now the situation is reversed where we now have less than half capacity. We talk about half, we have actually less and declining capacity. Even with that and the fact the UK is now net importers, the producer is seeing very little return for the product. It is going to take a long time, if they are in deficit, some of them have large amounts of money owing, to get back to a baseline, never mind make a profit.
Mr Kane: Just one additional if I may, Chair? Jim, how do you foresee how we could overcome the price differential between the UK and the Province?
Mr Carmichael: The difficulty is that we here have an export market. This is one of the major problems for us here. And in the UK as a whole with product being imported to there and us being an exporter we are going to have severe difficulties. I don't honestly know exactly how we could ....
Mr McLaughlin: I think to add on to that, Gardner, that the developments we are having at present and the proposals that are being put forward for low BSE status for beef is going to have a knock on effect for pork in that hopefully if the regulations follow through that we are allowed to export, then our meat and bone meal is going to be accepted as a saleable product and benefit to the Northern Ireland pig industry which was unfairly penalised as an offshoot of the BSE crisis. In addition to that, the offal disposals, hopefully we will be able to salvage an economic benefit there for Northern Ireland as well, as well as having available export opportunities for the Northern Ireland pork industry. I think we are in very good position. The major problem we have is the variability of Sterling and the fact that we have a land border with a Euro state. This has been causing a lot of problems for our pork industry, that a lot of product is able to move throughout the border counties where a lot of the pork industry in ROI is located and is having severe supply problems for the Northern Ireland pork industry. Hopefully we can move out of that, but I think that is going to take several months yet.
Mr Kane: Thanks Chair.
TheChairman: We will have to limit this to one question because this clock is killing us today.
Mr Ford: In your presentation, Jim, you talked about the need for an outgoers scheme, you talked about 120,000 places, 16% of the total. Where does that figure come from? Is it based on specific hard evidence? Is it likely to be acceptable in Europe? Is it not too late anyway?
Mr Carmichael: I will take your question about whether it is too late anyway, any returns or anything that would help an industry has to be appreciated, that is number one. It is late in the day, it is very late in the day. With regard to the figures, those are taken from the June 1998 census which is the starting point for the outgoers scheme. The difficulty with trying to achieve the 120,000 or 16% is that if there is any slippage there we do not get an ongoers scheme which is really what this is all about. We are trying to retain what part of the industry we can, support that part of the industry. Therefore there will be two questions in relation to the statistics:
- In June 1998 the people who were returning census forms may have been more optimistic about moving forward than their actual situation, so the question of our baseline and where we come from 0% has to be addressed.
The other question is that if we have 16% as a static figure and we come in half a per cent or 1% under that will we be fit to move. Those are some of things that have to be addressed along with other issues - valuations of farms and so on for our outgoers scheme. The outgoers scheme is hopefully going to announced perhaps for applications by October for people to reduce a pig herd for claims possibly by January. And there are also health and welfare questions about reduction of herds because it takes you quite a time to reduce a herd of sows, particularly if you have been managing them, they are in pig and so on. So it has to be welfare friendly, it has to be sufficiently funded and it has to have the uptake. That is why we would like consideration to be given to all the numbers of places which have disappeared, if you like, since 1998 to be taken into consideration. At the present moment with any other scheme you can't do anything until you get permission and then only that which you do from then is included in the numbers taken. But we have lost - it is on record the number of places we have lost, and those should be taken into consideration and therefore we shouldn't fall below. Every means at the disposal of the UK Government should be taken to ensure that we don't fall below because if we don't get an outgoers we don't get an ingoers. So how do we help the industry?
Mr Bradley: You mentioned bankruptcies in the industry. Can you provide any figures that we can go on? What figures have you?
Mr Carmichael: Well we have individual farmers - is this what you want - we would have to approach individual farmers to see if they are prepared to come forward and say the to the Committee on their own basis that they have been made bankrupt. I don't know whether a lot of them are prepared to do that. Anecdotal evidence, anyone who actually reads farming press will see the numbers of farm businesses, not alone in pigs, which are presently for sale. I have seen figures from individual pig producers, some of them quite young people, I would say, at the start of their career in agriculture which if any other business or industry had, quite honestly depression wouldn't be the only word I would use for the situation with them. If they would want to come, we can ask producers to come forward if they want to come forward with actual figures.
Mr Bradley: (Inaudible) Have you any ballpark figure?
Mr Carmichael: I don't honestly know, we can try and supply them for you.
Mr Paisley Jnr: With regards to the stall and tether ban in the United Kingdom would you agree with me that has been a complete unmitigated disaster as far as the pig industry has been concerned? Tied in with the whole policy of welfare of the pig and indeed Quality Assurance schemes the whole policy has been misplaced. Your evidence today proves it has been misplaced because we have an industry that is practically dying on its feet in Northern Ireland and we are now importing more than we are currently buying from our local market. So all these policies have proved that the consumer really doesn't give a fiddler's about the welfare standard of the pig - as long the product is cheap enough she will buy it. The reality is therefore that what we are really doing is a pricing policy and nothing else. As long as we can produce a cheap product it appears to me the consumer is going to be prepared to buy it, would you not agree with that?
Mr Carmichael: To be quite honest, I would have to agree, that at the end of the day it would appear to us, again from looking at supermarkets trends, purchasing trends from consumers, it would appear that the consumer is not overly concerned, definitely not about the farmer and the income of the farmer to be quite honest with you in all commodities. I don't know if there would be sufficient numbers, as we are led to believe, concerned about health and welfare of livestock. All the things you have mentioned, the stall and tether, have led to increased costs for the producer for which there has been no additional return. In fact, returns have gone down over this past number of years. The consumer, I would think with most commodities, their first concern is cost, convenience. We talked to consumers about different types of local farmer markets. Really one of the things that comes back to us is they aren't convenient enough because they can't purchase everything that they want to purchase at a one stop shop. So convenience and cost would appear to be two of the main things, as Nigel has said too, a lot of the commodity product there is going to people who perhaps can't afford to buy the type of premium product as in all commodities, therefore cost is very much an important factor there. But the additional costs that have to be born to the industry to produce a product which is getting less than before is ridiculous actually. Then we talk about the imports with other areas which I would doubt if they fulfil the regulations we have here.
The Chairman: If you would like to come in just after, but we must get another member of the Committee in here.
Mr McHugh: Jim, you have mentioned the difficulties in attaining the standards from the multiples. I would feel that some of that would be used as a method of suppressing prices to farmers.
The other thing is the marketing. I get the notion that marketing seems very much confined to within the UK for those that are in the business of doing the marketing in the farming. The farmers are producing the product, but those beyond the farm gate who are in the business of actually marketing it should be looking to market it in Italy and in everywhere else in Europe, that isn't happening. They are confined and they are at the point now where we are importing from other places while other people are suffering in terms of sales.
Mr McLaughlin: Right, going over into Jim's last answer, we tend to find that in European standards that if European directives was set there, that UK will go to their compliance and Northern Ireland will go further than that. But we tend to find that the variation within the application of European standards within the other member states tends not to or suggest would be that it tends not to be the standard that is set down in black and white. Now yet again we are back into the market and UK standards. Yes, supermarkets are setting down very stringent standards to Northern Ireland suppliers and it has been spiced up then that this is a Northern Ireland product, but we would find there is a debacle going in whereby we were having products sold in market shelves that has allegedly been produced in Northern Ireland, but there would be a lot of evidence that isn't, but it has been packaged in Northern Ireland. Yet at the same time we are having to produce to that standard but we are having to compete with commodity coming in from Poland, coming in from wherever which definitely does not meet that standard and does not meet the regulations set down in meat and bone and everything else.
The Chairman: We are dead on time, we have to leave it there. We will have the presentation of beef now, if you would like to do that.
Mr McLaughlin: Right. The Northern Ireland beef industry, I think the reflection on Northern Ireland farmers, they are tenacious, they actually will hang on to a piece of string, hang on out there as it stands. We are still in the situation in Northern Ireland where basically the primary producer is receiving approximately a third of the retail price of the product. That still has not changed significantly. The speculation would be that perhaps until we get into an export situation Northern Ireland producers are in the stranglehold of: A) the multiples; and, b) the primary processing industry of Northern Ireland because we don't have the possibility of live exports. That situation hopefully will change in the spring of next year. Again meat and bone the other cost advantages which may be paid back to the industry, they are not to be that significant in the form that they are probably going to amount to £5.00 a beast, but it is significant that it will be to the benefit to the primary processors yet again. If they are able to sell meat and bone into ROI, but if their end of industry in Northern Ireland are still confined or don't have a critical mass of BSE product to operate with, that is going to be an extra cost to their end of industry here. So the benefit is going to be very tenacious, if any, on the fifth quarter. So as it stands we are still basically involved here with the major multiples. Again, what we have been talking about before with the standards that are being set down, we have a plethora of standards being set down from the retail industry. One of the things we are working on in the LMC and the red meat industry is the EM 4 50 11 accreditation which is a European standard which we think, if it is brought down and set down in Northern Ireland and we can apply it to our farms, we have a European standard bench mark which is going to be internationally accepted as an add on to the FQA scheme. I think it is one of the good things we can have. As it stands we are still in the grip where we are still pedaling behind the rest of the UK in meat prices.
The Chairman: Thank you very much. You know there is a big move to achieve low incidence BSE status for Northern Ireland. Say we did achieve this speedily, is the industry able to respond to market demands on the continent? If we are not ready, how can farmers get prepared to be ready? What can others such as processors, retailers and Government be doing to help towards this, keeping in mind of course that we have lost our market in Europe and keeping in mind we would have to start not from the first floor but from the basement to build it?
Mr McLaughlin: Right, well I think there is a large sense of apathy there in Northern Ireland and that producers feel that whatever they do, they are not going to get an economic return anyway. If we get low BSE status, as it stands approximately 37% of our herd product meets export standard. I think if we get low BSE status we are going to move into the situation where a lot of the loss of BSE status and a lot of the traceability is because of late notification of calf births which is ridiculous because it doesn't happen anywhere else. That is to say a calf born on a Northern Ireland farm that doesn't move off it but hasn't been notified to the Department within the specified number of days it loses its traceability, which is ridiculous, it is not applied in any other European state except for the UK. However if we get low BSE status then that should cease to be. Overnight that would mean that approximately 80% of our calf births will then move to export status. So that is going to be a major significant move as it stands. It will be a benefit to the beef industry. I think the first beneficiary of it is going to be dairy industry. If we have a significant European market for our black and white calves, that is going to get a financial input into the Northern Ireland industry immediately and it is going to open up a market place. If we can get live cattle into Europe and on to European feed lots it is going to provide competition and the life of the trade is competition. That is a major impetus, we see, of low BSE as it stands. It is probably one of the best red meat markets in Europe because of the value of Sterling as it stands, but that value is not being paid back to the primary producer. If we have competition and competition is the life of the trade and to have competition is -- I remember one person, a farmer himself: There is never going to be a market for Northern Ireland beef until we can get stuff out of here on the hoof. I think that is as true today as it has always been.
The economic returns are going to be the biggest impetus. Farmers are economic animals and they do respond to a pound sign.
The Chairman: Well then you would agree that if we are going to have "good times" with the Northern Ireland beef industry it has got to be export led, that that is really the key to getting us out of the mess we are in?
Mr McLaughlin: Well prior to May 1996, 95% of Northern Ireland meat was export led. We had the highest price for red meat through Green Fields into Albert Heyjn that any part of the UK had. I think that to go from that after 26th May to getting the lowest price in the British Isles I think was a major blow to the Northern Ireland industry. It was one which Northern Ireland took the brunt of the BSE crisis. Scotland still had their premium for Scot beef, the English beef market still had their local butchery trade and domestic trade, so the brunt was born by Northern Ireland unfairly, but export is essential for the survival and even possibly the restructuring and re-development of the Northern Ireland meat industry.
The Chairman: One complementary question I would like to put to you on that: We were competing well in the European market before the BSE thing, do you think that while we have been out of the market the other competitors have reached the standards that we were setting?
Mr McLaughlin: I don't think they have. I think that the standards set down by Northern Ireland, the traceability we had, the farm assurance schemes that were in place through the producer clubs into Albert Heyjn have yet to be replicated anywhere else. I think the main or immediate competitors with Albert Heyje are ROI and the feeling would be that they haven't met our standards.
The Chairman: What way do you think the production of beef on the farm structures need to alter to meet future changes and how can such changes be brought about?
Mr McLaughlin: Well I think we are going to find that while we were dealing with major multiples we are dealing with a commodity product and that has been reflected in the carcass classification of beef throughout Northern Ireland as it has dropped. Two reasons for that was the breeding input, the influence of extremes of both types into beef production and the market returns for it was it wasn't just economically feasible to feed cattle to an aspired finish. If we can get back to having the sale product for a top quality weanling I think that what has happened in ROI through the (inaudible) clubs is that the standard of breeding has improved dramatically within two to three years where they are going from a situation of having maybe 50% meeting our standard to over 80% meeting our grade within two years. I think if the economic incentive is there that beef farmers are going to source beef from beef type animals and we are going to move into a two tier system where we have got prime beef product meeting a specific market be it two tier beef or prime type bull beef out of Northern Ireland, but it is going to meet all the market assurance standards that are required out of the niche and the high value markets. We are still going to hopefully have our beef from our dairy industry which is going to be farm assured, it is going to meet the highest welfare standards, it is going to hopefully attain a high value commodity type product.
I think the opportunities for the Northern Ireland meat industry are immense if we can get back into the market place again. For the survival of the industry it is essential we get back in there within the next year.
The Chairman: Thank you, right.
Mr Armstrong: Just on the quality assurance, I did notice this week on the wee note that they weren't giving any extra money for quality assured beef, so there is no incentive to do that. What's the point if we do have these quality assurance schemes there and there is no incentive?
Mr McLaughlin: Part of that is the standard, Billy, of Quality Assurance. For an animal to obtain a Quality Assurance standard if it is sourced on your farm or Boyd's it only has to be on my farm 70 days to get quality assurance standard. You don't have to be quality assured, nobody else has. One of the things being talked about in the industry is the move towards lifetime Quality Assurance. There's pluses and minuses with every development, but I think if we can move towards lifetime assurance standards for all meat product in Northern Ireland then we are going to have a major and very important marketing tool.
Mr Armstrong: That wasn't my question, just an observation.
Mr McLaughlin: Quality Assurance, well again as plants require meat to have critical mass they are operating mass. We are into a time now of low supply.
Mr Armstrong: Farmers have no control over their marketing. I think that farmers do deserve some control but most of the control is there in the abattoirs and Live Meat Exporting Commission. What way would you suggest that meat should be marketed? How would it be marketed and what can you do with NIAPA to give encouragement to the farmer and to abattoirs and other people?
Mr McLaughlin: To answer that question, Northern Ireland meat industry, farmers co-operatives has a share in one of the plants in Dungannon and it is a part sharing and the feeling I would have is that they haven't been doing enough. I think if we are going to go down the avenue of having live exports I would like to see the Northern Ireland meat industry having a feed into the power base and supplying prime Northern Ireland product solely through that. It is a very adventurous statement to make, but I think that if Northern Ireland meat industry can own similarly as what they are doing in New Zealand, the meat industry in New Zealand is owned by farmer co-operatives. They are not hoping to access the private meat processors like what we have done here. I think their success speaks for themselves. That is a major change in that I think there is going be to a lot of competing economic pressures against that statement. But I think it is something that Northern Ireland yet again, if we can use some of the marketing funds, if we can use some of the development funds and develop a scheme whereby farmers own the product from birth to retail and take out the cost that everybody else, and take out the processing costs and their development costs whatever else, their shelf space and everything else out of that, in between, but that chain needs to be owned by a farmer responsible co-operative or organisation. But yet again on that there, farmers are notoriously bad marketers, you are going to need and what has been reflected in the ROI where the co-operative movement has worked well, they have specialist marketing people and management people there, but I think they have to be responsible.
The Chairman: We will have to move on because Billy has had an observation then he has had his question. We will have to ask to you try and make your answer a wee bit more succinct.
Mr Douglas: Thanks Chair. We have heard that under Agenda 2000 beef prices are heading in the direction of world market prices with farmers being compensated for lower prices through increased subsidies - I suppose you might wonder where the subsidies are coming from - in your view will this lead to production to collect subsidy rather than production to meet market demands? I think where we are coming from, the emphasis seems to be on quality product so we could be five years down the line and not any further forward if we get don't get into quality production.
Mr McLaughlin: Yes, definitely what you are saying, Boyd, is that the envelope is going to make a more and more important part of the farmers return. But then, on the flip side of that is that to justify produce there is no point in farming if the subsidy is more than 100% of the net return of the animal. If you are dipping into the subsidy package to produce a sub-standard product I think you are on the road to slippery ruin. What's happening now at the present time with the Hill proposals that are going on where we are having to move to an area base is the first major watershed we have had in the meat industry since May 1996. Although the farmers are still going to get that packet of money but it is not going to be tied to suckler cow or yield to get that, that means that animal has to sustain its own economic viability. So I think the only way that can be done is by producing a quality product that meets a market, a premium market. I think that is five years down the line. I think we are going to have a highly specialised beef industry and highly specialised dairy industry and sheep also meeting a variation of themes, be it organic, be it semi-organic or be it quality.
The Chairman: Jim, do you want to add something?
Mr Carmichael: Just fairly quickly in relation to premium there are two or three things to be taken in, one is European enlargement in relation to available funds which I would estimate will reduce the available funds for premium. We know that the Agenda 2000 discussions were 2005/2006, we now know they are for review in 2002. The other thing is the premium actually which is in place for this year, for example, I would estimate or we would estimate that it could be 10% lower than last years without agri-monetary compensation because we are only talking 60% as opposed to 100%. But I think for the industry to rely on premium payments over the next few years as being the way forward I think the industry itself will find out as it goes along finance might not be there, there is the possibility of reduced payments with enlargement and, as Nigel says, there are a lot of people now know the benefit or can see the benefit of a better quality of product perhaps in markets. So I would suggest that the improvement in quality in the marketing will take precedence over the premium.
Mr Paisley Jnr: Are we in danger in Northern Ireland of winning the battle in terms of achieving low BSE status, but losing the war in terms of - I'm thinking particularly of beef labelling categorisation - that any benefits that we could accrue to the industry here in terms of getting our product out will then be lost on how we have to go through another process of standard and welfare in terms of labelling our product? Secondly, you mentioned New Zealand and the co-operative scheme, have you been out to New Zealand and looked at any particular projects there or have you more than just anecdotal evidence about the New Zealand co-operative scheme?
Mr McLaughlin: No I haven't been to New Zealand unfortunately, if the offer stands I will take it certainly. It is largely anecdotal and it is coming through --.
The Chairman: The whole Agriculture Committee may want to go to New Zealand.
Mr McLaughlin: I have been to South Africa, I have observed marketing and meat production systems there. The whole South African meat industry is basically operated by four companies, its affiliations and it is economically driven that the feed lots own major shares in the meat processing industry. So it is co-operation but through an economic thing. Again, there's a lot of difference there in the type of product, the product that they are marketing. To move further than that, for Northern Ireland to lose out on labeling I think there is a possibility that there will be a lot of anecdotal evidence if we get low BSE we won't be seen as a British product any more. To my mind we are still there, we still have a part to play there, because we get low BSE is, I think, an upmark, a star in our picture that we have got a good product to sell, that we have traceability, we have got all the standards that are required through welfare. I think it will actually be a marketing benefit to us. There are threats on labeling on the way it is implemented. I think we have to develop new products. We would like labeling just basically to be endemic, that is UK product. We don't want differentiation between heifer beef, bull beef, steer beef and that having to be followed through the supply chain and through the processing chain where the product has to be done in three time separation and also been replicated in retailing where it is going to have to be stored and marketed separately. That is an impossible cost.
Mr Carmichael: I think we did make representation to the MEP's at one stage there on the initial beef labelling, whenever the first drafts came out it was ridiculous the amount of labeling, as Nigel said, they required. As a matter of fact some of the butchers in local shops would have found it more than hard to comply with. The additional costs as we asked the industry at various meetings was who was going to take on the burden of additional costs, we know where that finished at. So the response back, I think they actually have reviewed it, it is going to be somewhat less than initially thought and to the batching and all the rest.
The Chairman: The issue, of course, is you see the battle in Europe, there are people who want one label - European Union, well that doesn't suit us. I mean we need to have sourced here from Northern Ireland. That actually doesn't suit us but that could eventually come because it was a very strong debate in the House out in Strasbourg on that issue. It is coming up again this week but I think it is in the melting pot. There are some requirements in present proposals that the housewives are not going to ask about. The gender of a piece of meat, is the housewife going to say: Is this female or male? I think that is ridiculous. But, you see, there are people there whose meat is not up to our standard and they just want European Union on it so that covers a multitude of sins. I think that the debate is probably going on, but I don't think that we are going to be bothered with the amount of minutiae that originally was declared.
Mr Carmichael: We talked about the labeling of product coming in here, whether it is packed in the UK or produced, it is back to this --
The Chairman: Sourced, that's right.
Mr Carmichael: Yes
The Chairman: We have to move on. Gardner?
Mr Kane: Just two brief matters, Chair, to Nigel and Jim here, what additional solutions, gentlemen, other than has been just mentioned does NIAPA have to the current difficulties? Your submission this morning alleges that the retail price of beef is not reduced, other evidence we have heard claims that the values obtained by retailers per animal have followed the same pattern as prices obtained by producers. Who has got it right?
Mr McLaughlin: Well yet again I think the cost, everybody is maintaining their mark-up costs, Gardner, in the supply chain after the farmer after the marketplace. That share of cost has not varied, as you say, in Northern Ireland. The element of competition between those costs, between the plants in Northern Ireland I think is, I wouldn't say surprisingly, I would say amusingly similar in that there doesn't seem to be an awful lot of variation within their costs. So I think that speaks for itself, I can't talk about those things. Again, we are marketing yet again at the major multiples and we are targeting them as our major marketing source and our sole marketing source, namely two main supermarket groups have the Province carved up between them. Now there are other supermarket groups, other marketing areas in the UK that I think could be targeted. But I think through reluctance on both the part of the meat plants and on the part of DARD that they are not willing to look towards marketing anywhere other than the two major supermarket groups.
Mr Kane: I would support that.
Mr McLaughlin: I think that is reflected in all aspects of development of the food industry that is going on here. I think it is something that they are up for criticism.
Mr Kane: Thanks Chair.
Mr McHugh: Just in relation to our last sitting here, I had a difficulty with the meat exporters, they are supposed to be the experts in terms of selling the product beyond the farm gate and as you say the farmers are not good at that nature. What they actually said was that the farmers didn't bother getting into Quality Assurance and I made the point that you made yourself, you have to have returns, you have to have an incentive. How do you see them actually getting to the point where they start to give farmers a positive return in terms of going down the road of Quality Assurance or even taking the bother out of all the paper work in terms of sending in returns to the Department on time and so on? You have to get a return for this. The two parts of the industry, if we are to have an industry here at the end of day, not just those who can source the stuff or the product at any part of the world, if we are to have an industry that survives it has got to take the whole industry on, the whole industry and those involved in it; stakeholders are going to have to take it forward otherwise one is going to cut out the other. How do you see them inputting into that?
Mr McLaughlin: I think, Gerry, in all fairness they will have that whenever they have to compete with a boat in (inaudible) harbour or wherever. I think that they are going to have to start then and do what they have been paid to do and that is market the product and obtain a market premium there that is going to ensure their viability. As it stands I think they will be prepared now to look towards the aspect of bringing in a commodity product and cutting it up and further processing and putting it out of Northern Ireland and forgetting about a Northern Ireland sourced product. I think they have to be tied into trying to source their product from Northern Ireland and market it. We have been a capital supply base, because of the difficulties we have in moving cattle across the water and getting markets in the rest of GB for meat I think that the fact that over 50% of the GB meat processing industry is controlled by three Irish companies. So if we have live exports I think we have got a major lever there that we can say: Right guys, unless you are giving us the right price on to the boat it goes. Whenever that happens they are going to have a major impetus there that they are going to have a traceable product, they are going to have to have all the bells and bobs on it to try and get a market premium. They are going to be out there actively trying to drive it on further. I think that DARD, the marketing groups - LMC, that we have to develop and actively pursue the live exporting of Northern Ireland product out of here. Now to me, there is a responsibility there, LMC are funded by the Northern Ireland farming industry primarily so I think the responsibility there to market that product to the most economic return that can be obtained, both in the long term and short term so there is a responsibility on their part, there is a responsibility there for DARD and a responsibility for everybody to do their part to get the best possible return from the market place wherever it may be, rather than just saying: Right, we just want to have a processing industry in Northern Ireland and farmers only supply part of that. So I think the impetus is going to have to come from you, you are political people, to say to the DARD people: There is going to be a market next year for Northern Ireland product, target it. They will say: No, we have the money in through from IDB or whoever into building up processing plants and we want that, we need Northern Ireland product for that. We want a fair share. I think there is a major opportunity in the spring of next year to do something.
The Chairman: Well, Jim and Nigel, thank you for being with us and thank you for your contribution, we found it very helpful. The time always beats us on these things but at least we have probed into some things and we have got answers which will be useful to us when we make our report. Our first report will come out next Wednesday, but it is dealing with the chain from the farmer to the retailer - that is dealing with that - and then we are bringing one out on pigs and one on beef.
We are going to have a break now for 15 minutes. There will be coffee and something to eat so you are welcome to join us.
Mr McLaughlin: Mr Chairman, Committee, I would like to thank you for having us. We found this discussion very good and very thorough and the involvement of all of your Committee in that.
The Chairman: We are looking forward to seeing you in the very near future.
Mr McLaughlin: Thank you Dr Paisley.
The Chairman: We are adjourned now until 11 o'clock.
The Chairperson: I expect so and thanks again.
Menu / 30 June 2000(part ii)