Committee for
Agriculture and Rural Development

Friday 8 September 2000

MINUTES OF EVIDENCE

Pig and Beef Industry

(United Pig Producers)

Members Present:

Rev Dr Ian Paisley (Chairman)
Mr Savage (Deputy Chairman)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Kane
Mr McHugh
Mr Paisley Jnr

Witnesses:

Mr E Carson)
Mr S Crossey)
Mr C McGuikian)United Pig Producers
Mr C Pogue)
Mr T Shields)

The Chairman: Gentlemen, time is tight. We want to finish this session 10.45am sharp. We ask you for a 10-minute presentation and then we will ask questions. We would like you to answer the questions rather than have a discussion, because this meeting is to elicit information to help us draw up the recommendations in our report. I would like to welcome you all, but especially Edward Carson. I declare the meeting formally open.

Mr Shields: Mr Chairman, Ladies and Gentlemen, we are very glad to be here to put our case to you. In 1995 we set up a group of 10 members which we called Propork. We marketed 500 pigs a week and got compound feed for those members. That group has grown from 10 members to 35 members at its peak. We presently have 32 members and we are marketing 1,300 pigs per week and buying 550 tonnes of compound feed per month. This has kept this group of producers well intact. Probably 40% of Northern Ireland's pig industry has collapsed owing to the crisis over the last two years' and we have had an 8% drop in our members, from 35 to 32.

When we first set this group up there was not one processor in Northern Ireland who would buy our pigs, so we visited quite a number of processors in Southern Ireland and managed to get a home for them. Once we had this home for our pigs the Northern Ireland processors quickly showed interest. We were there for real, and they did want to buy our pigs. For quite a time they were not prepared to give us even the price that we were getting farther away, and that did disappoint us. Our group was based in South Down and South Armagh, and it did disappoint us that we had to drive by the local factory that was boycotting our pigs because the processor there did not want farmers to come together and work together.

We are now marketing 1,300 pigs per week and at the end of July we went to the largest processor in Northern Ireland and had a meeting with people there. We were very concerned about the differential in pig prices between here and the rest of the UK. We voiced our concern that we would have to send our pigs elsewhere if they did not narrow the gap. The base price in Cookstown was 85p a kilo, yet Malton's base price in England is 106p. This week they said that that was entirely our business. From our point of view it was good business to get the best price for our pigs so we started to sell pigs to England on 3 August. This week we sent 600 pigs to England and are getting considerably more money for the pigs there. The processor who was getting most of our pigs came to us yesterday and said that he was no longer going to give us the price that he had quoted for our pigs, but a base price which is considerably less than we are achieving. Since we are still sending them probably more pigs than most, between 350 and 400 pigs a week, they really want to crucify us, and in some cases I would call it blackmail. They do not want us to sell our pigs for the best price we can get. In Great Britain Malton's price is 106p a kilo. They are certainly the highest buyer of pigs in the British market., and the Northern Ireland pig industry is subsidising that, which leads me to what we are here to talk about today, United Pig Producers.

It was in the spring of 1998 that the South Down co-operative Propork Ltd, got together with the Department of Agriculture and Rural Development (DARD) representing sellers to discuss the possibility of creating a large pig producer co-operative. In the summer of 1998 Propork succeeded in obtaining grant aid towards the cost of a feasibility study, which was entitled 'A Review of the Current Policy for the Marketing of Pigs and Recommendations for a Future Marketing Strategy'. The main recommendation to emerge from the study was that an application should be submitted to the marketing development scheme run by DARD to assist in the establishment and operation of a large pig marketing co-operative. Further discussions were held in August 1998 when 20 representatives of pig producers from across Northern Ireland came together. This was after the fire at Ballymoney, and there was a need for some stability and leadership within the pig industry. At the instigation of DARD, the Ulster Agricultural Organisation Society (UAOS) and the Scottish based pig marketing co-operative of Scotlean were invited to speak with the producers.

After a series of meetings in the autumn of 1998 a five-man steering group was established. Following the first official meeting of the steering group held in December 1998 it was agreed that that structure should be legalised and go under the name of United Pig Producers Co-operative Ltd (UPP). It was also agreed that the UAOS should act as secretary to the co-operative and that Scotlean would fulfil the role of its marketing agents.

At that early stage a questionnaire was circulated to pig producers to try to ascertain the number of producers who were committed to joining the co-operative and the number of pigs involved. A total of 97 questionnaires were returned accounting for 14,904 sows and an average of 6,783 pig sales per week.

Following the recommendations of the feasibility study an application was made to the Marketing Development Scheme for £150,000, which was passed in March 1999. During the first few months of 1999, Scotlean, acting as marketing agents, had tried to establish a marketing relationship with Malton and other local pig processors, but they refused to take pigs under the UPP name. In April 1999, at the first meeting of the co-operative with Mr Hilliard of Malton, he confirmed that he would not deal with UPP on a marketing front, and that was with Scotlean on board.

During a public meeting of pig producers held in Dungannon in March 1999, Mr Sommerfield, chief executive of Unigate plc - Malton's parent company - stated quite categorically that he would have no hesitation in dealing with UPP.

Following that impasse, Scotlean withdrew its marketing agents for UPP. After consultation with DARD and the UFU, UPP made the decision to act as its own marketing agent. As a result the MDS grant proposal had to be resubmitted. Both the UAOS and the DARD were extremely helpful in that process.

Following a second meeting with Malton in May 1999, it was agreed that they would take UPP pigs but that they would pay individual farmers rather than the co-operative. Local processors continued to ignore the UPP and refused to take their pigs.

Nothing more could be done until the resubmitted MDS grant application was approved in October 1999. A letter was then sent to Mr Hilliard seeking a meeting, but no such meeting was held until February 2000. After a positive meeting Mr Hilliard indicated that he would now be prepared to work with the UPP and that everything was up for discussion, for example, contracts, prices, et cetera.

An invitation was extended to the UPP Committee to visit the Malton plant in England to witness at first hand the superior quality of the English pigs that merited higher prices. Accompanied by representatives of the UAOS and the DARD, the visit took place in April 2000. Despite seeing a very impressive and well-run operation, all those on the visit were in agreement that there was no difference in quality between the Great Britain and the Northern Ireland pig cuts that were displayed. I have the evidence to show that: grading results on pigs to date that have been supplied to England.

Following on from that two-day visit, a meeting between the UPP and Malton was held in June 2000 at which contracts were discussed. Despite the promise of contract details and another meeting in July, nothing has ever materialised, and the pig industry continues to progress towards an uncertain future.

Over the past two years the committee has attended more than 40 meetings. Lots of time, effort and expense have been invested by the directors in the pursuit of co-operation and supply-chain development within the pig industry. However, because of its experience, the UPP is now left asking itself if it is the only willing partner in an industry where structured producer, processor and retailer partnerships are long overdue.

We feel as pig producers that the processing industry is not giving us a fair crack of the whip.

The Chairman: Thank you very much. That has been very helpful. How strong is the industry support for the creation of a better producer base for pig-meat?

Mr Shields: You can see from our questionnaire that we had a very promising response. At the moment Northern Ireland pig producers are the most feasible anywhere in Europe as far as saving money and efficiency are concerned. If we were getting the same prices as our competitors in Great Britain, we would certainly not be in crisis.

The Chairman: We have crossed swords with Mr Hillard. He made an appalling statement which was a colossal falsehood. He said that producers were not paying any more across the water than they are in Northern Ireland. We have written to him demanding proof of that. If he does not reply, this Committee has the power to summon him here. You are being crucified because of their fear of demands from the pig producers for a fair price. If you make a move, they are afraid that they will have to move too. What steps should the Department of Agriculture and Rural Development now take to strengthen the union of pig producers?

Mr Shields: The Department of Agriculture and Rural Development has been supportive of our trying to co-operate and bring producers together. There are some things we would like the Department to do. For instance, since we started sending pigs to England we have not had one condemnation, but two or three per cent of condemnations are going into factories in Northern Ireland. That is where the Department of Agriculture and Rural Development could join with us in getting the processor and producer closer together to solve these problems.

The Chairman: This is such a broad co-operative in which the pig producer would have a real say in the negotiations. What steps do you think the Government should take on ongoing support for such a move and what are the contingencies if you do not achieve the levy which is forecast?

Mr Shields: We are very much in their hands. There is no competition for pigs in Northern Ireland and, until we can create competition, we will not have many outlets.

The Chairman: The creation of a well-organised market response to it would require significant leadership. How can this leadership be provided in your co-operative? Is Mr Murray's departure going to have an effect?

Mr Shields: No. Mr Crossey has now taken over Mr Murray's role.

Mr Crossey: At one stage we talked about furthering the relationship with Malton. The committee would be broadened to take in other sorts of prospective pig producers, and this would add more strength and depth to the committee.

The Chairman: Your application to the Department of Agriculture and Rural Development identified the need for grant aid for a marketing manager, quality-control staff and a non-executive director. Assuming you can proceed with the venture, is the necessary expertise in marketing and quality control available? How can you be sure your co-operative will secure this expertise?

Mr Shields: We need to have some sort of relationship with Malton to buy our pigs. It is the largest processor in Northern Ireland and we need to bring something on board to take in the whole of Northern Ireland. With regard to employing staff to run a successful co-operative, I think we have a track record with Propork, which has been done in a small scale.

The Chairman: You are saying that there must be a cross for Malton and that it must feel some of the nails, because it has been crucifying you. We are coming to a decision about the future of the pig industry. If you do not get this, you are finished.

Mr Shields: Yes, that is right

The Chairman: This Committee has already decided that we need a radical change to position you to get the right price to clear your production costs and a fair profit.

Mr Savage: I have listened very carefully to what has been said and our Chairman has asked the question that I was going to ask. We are thinking of the future, and I know exactly what the situation is. You do not get a fair price for the pigs, and it is very clear that there is one big company in Northern Ireland that dominates the whole market. Have you any future plans to start up a processing plant of your own, or do you not think that is viable in opposition to this? Competition is the life of trade, and the pig industry is a very important aspect of the Northern Irish agricultural sector. No firm or business can operate unless it is getting a fair price for its produce. I know you can produce the goods, but when it comes to selling the goods and you are not getting a fair price, this cannot go on. What steps would you advise the Committee to take to assist you?

Mr Shields: Any further competition in the marketplace is very welcome. We have discussed whether we can get involved in the processing end at committee level. A number of us were in the Republic last week looking at research and we visited a very large pig unit with 2,000 sows in Mitchelstown which were going into the Galtee chain. It is owned by Dairy Gold. This is a farmers' co-operative which has grown from strength to strength.

Mr Savage: It is not exporting into America, but I want to know what assistance we can give you to capitalise on that?

Mr McGuikian: Although Malton is the main player here, there are two other processors who are sitting on the back of Malton and they are doing well, but they are playing a very low profile.

A Member: They are quite happy to sit behind the smoke screen.

The Chairman: Oh yes, let Malton, the big men take the stick.

Mr Pogue: Presently, our problem is that pig farmers have no capital. Two years have bled them completely, and the capital is not there for further investment. We had talked about a future processing plant, but where now could we get the shareholders and build up the amount of capital that would be necessary? Presently, there are adequate killing and processing facilities in Northern Ireland. There is a study being done on Ireland as a whole and we do not want to pre-empt the judgement of that study, which we will look closely at later. If we could work closely in partnership with local processors, and indeed Malton, there is no reason for a pig industry's not being a lucrative business in Northern Ireland and adding to the economy of the country. Pig production was high in the economy of Northern Ireland.

Mr Dallat: We all know some fine stories of gombeen men down through the years and how they won their battles and survived through the whole principle of co-operatives. In developing your organisation and in creating links with the Republic of Ireland and Britain could more be done to make your organisation stronger so that it develops enough muscle power to ensure that it is not always the victim of one large company? I applaud the principle of the co-operative that you are involved in, but how can that be developed so that you can benefit from the support of other co-operatives in Britain and the rest of Ireland?

Mr Shields: At the outset we wanted to get a Scotlean pig producer group with a track record on board - one of the larger marketers of pigs in Great Britain - but Malton was not interested. It did not want to work with us.

Mr Dallat: The Government should be aware that this type of sharp practice is taking place. There is an urgent need for the Department and the Assembly to pay heed to that because it is the crucifixion of the working-class person trying to make a living.

Mr Shields: That is true.

The Chairman: We do not know how much money Malton received from the Government in getting their hands on Cookstown and in compensation for the factory that was burned down. We are sitting in darkness and nobody will tell us anything. Malton's power must be broken so that the producer has some say in what he is going to get for his meat.

Mr Carson: We are looking for funding to develop in Northern Ireland and we should think twice before handing out any more money to the Malton group because it is not acting responsibly. If the Government are handing out money to the Malton group, they have to accept the responsibility for looking after the producers, but they are not doing that. There is a difference of about £14 or £15 per pig between Great Britain and Northern Ireland. We need that to pay debts and to build up some fat for the next downturn because the industry is supposed to be making a slight recovery at the moment on the mainland. So if we do not get that, the Northern Ireland pig industry is slowly going to crumble away. So the Government and the Assembly have to apply more pressure to make the main processors more responsible to the suppliers. The situation which exists is similar to what was prevalent in the nineteenth century when the landlord told the tenant what he was going to do, what he told him to do and take what he got. We are fed up with this. It is time that the people had the power and influence to stand up and fight harder for the Northern Ireland pig industry.

The Chairman: We are getting that message.

Mr Douglas: All sectors in farming have lost out because they have not been prepared to work together, so I commend you for trying to bring your group together. I do not know a lot about the pig industry but you say that there are three processors. Do you feel that you can unite enough of the producers to get some control and talk to Malton properly, or will there be other producers working behind your back supplying other processors.

Mr Pogue: There has been a problem subsequent to the fire in Ballymoney. The number of pigs had built up on the farms because producers had no outlet. There is now a fear among producers that if they step out of line they will have no outlet for their pigs and they will not know what to do with them. One could be left with pigs on his farm. Producers feel that they have the thumb on them. That fear has to be broken. We want the producers to be confident that they will have an outlet for their pigs.

At present in East Anglia there is swine fever and pigs are building up on the farms because there is no outlet. Pigs are only a saleable item up to a certain time. They are of no value once they get overweight.

Mr Paisley Jnr: I want to ask a straight question. Are you telling us today that Northern Ireland's pig industry has been undermined by Malton? If so, is it part of Malton's strategy to undermine the development of strong producer groups?

Mr Shields: Malton definitely does not want producer groups; there is no question about that. It wants to keep us as individuals and keep us weak.

The Chairman: According to your paper, Hilliard says one thing and Somerfield says the opposite.

Mr Shields: Correct. Somerfield said that he had absolutely no bother in working with the United Pig Producers.

Mr Carson: I do not think that Somerfield is there anymore.

The Chairman: He has gone.

Mr Shields: The week after, when we said there was no problem, we booked the pigs into Cookstown as United Pig Producers' pigs. We also booked pigs into other processors in Northern Ireland and not one of them would accept our pigs through United Pig Producers. That tells me only one thing; they are scared of our coming together. Coming together is the only future for the Northern Ireland pig industry. Divided we are going to fall, and we are crumbling fast.

Mr Carson: That applies to all the processors. No processor has the support of this, so it cannot all be put on Malton.

Mr Shields: That is right down to some processors who do not even slaughter pigs. They just buy product and reprocess it.

Mr McHugh: I understand your situation, and it relates very much to the beef and various other farming situations. There is enough in the total kitty to keep everyone right The difficulty is that it is the people beyond the farm gate who are winning and have done for hundreds of years. Is there any way that pig producers as a whole can move directly into the global markets you are talking about? Are the farmers right across the North prepared to sell outside? What are the obstacles in selling to England and cutting out the local processors entirely, or at least having that threat there? I suppose that going down South is not an option because of a difference in the price. Your long-term strategy for the next five or 10 years has to be to try to find a way of cutting out people, such as Malton, who have a noose round your neck.

You need to get into a position where you can have a say over the added value of your pigs. You are selling the raw product, but you have no say over the added value - which should be through a farmer co-operative. Malton and others now have a massive hold in terms of money, so you are in difficulties.

If Malton or anyone else were to get any money from the Government, they should be held accountable to allow the base of the industry to thrive as well. What are the major obstacles to cutting out the processors? Is it possible to do that?

The Chairman: We have to get to this question now.

Mr McGuikian: Historically, some of the producers in Northern Ireland have sent live pigs to England. In 1995 I started selling live pigs to England. Propork Ltd is currently selling pigs to England, but it is not always easy to get a processor over there to take pigs on a weekly basis. He will take pigs if he is short. He will only take pigs if there is a hole for them. It is not always possible to have a hole for those pigs in a one-off situation.

The other big problem with selling pigs to England is our inclement weather. We might go to Larne with a couple of loads of pigs, but if there is a gale blowing, those pigs cannot sail. They have to come back to the farm again. They are not supposed to come back to farm once they have gone off farm. If they are from an Aujeszky's disease-free farm, you cannot bring them back to the farm - that is a big problem.

We have endeavoured to sell pigs to England and have done it.

Mr Shields: We are presently selling pigs in England and are building up a relationship with the processor over there. He likes our pigs - they are very good quality pigs. However, he is not prepared to take too many of them because, if there is a storm, we cannot get them over. He has a killing line waiting for pigs and no pigs to supply it, that is the problem.

The Chairman: They have a marketing difficulty.

Mr McGuikian: Yes, although they are happy with our product.

Mr Armstrong: I spoke to Max Hilliard in September 1998 and suggested that he contact all the pig producers who would be willing to supply pigs to him and get them to make a commitment to him. He did not seem to like the idea of farmers in a co-operative or of having commitment to any particular farmer. He wanted to keep every farmer at arm's length. He does not need them, but they need him. Your way forward, in my view, is to form a co-operative and leave Malton behind because it is no good to you. You will need finance so we will have to speak to our financial departments to see if they will support you.

The Chairman: Can you, under these circumstances, let Malton go? I think, personally, that it is impossible at the moment. How far can we take Malton on without a proper organisation? You cannot take it on until you have that. Do you agree?

Mr Shields: We can hold pigs on the farm for one to two weeks, but after that they have to go. Malton knows that. Malton always said "Why should I buy your pigs, I am getting them anyway? Why should I negotiate with you?"

The Chairman: As long as Malton has the supply it does not care.

Mr McGuikian: It will not give us written contracts. In 1997 Max Hilliard stated that there was no such thing as contract pigs in Northern Ireland. All pigs in Northern Ireland are spot pigs. That means that they can be bought on a weekly basis and he was not prepared to give anybody contracts. He gives contracts in England because there is opposition there.

Mr Armstrong: You have to work to try to leave Malton behind; I do not know how but you have to keep working at it.

The Chairman: We have got to use the Government as a lever. There should be no more money to employers who are not prepared to abide by the proper standards and ethics. The clear message must come from the Government that that cannot be tolerated.

Gardiner, I know you are dying to get in and I want you to live!

Mr Kane: How do United Pig Producers intend to maintain producer loyalty to the co-operative in the short term or until there is a financial incentive for co-operative members?

Mr Shields: In the past, in Propork, we held back one pound per pig for every pig that was brought through the system, and we paid it back at the end of three months. If a producer did not keep loyalty he did not get it. We have now built up our present 32 members. We have a good relationship, we work well together and there is no problem. We do not even collect that pound because every pound is needed.

Mr Pogue: Could we also say at this stage that Propork, with 32 members, will be the base for the new co-operative and they have agreed to that at the AGM. So we already have the base there to work on. We have

32 to35 members already there as a base for a co-operative.

Mr McGuikian: You asked what incentive there is for farmers to join our co-operative. The big incentive is to be part of a bigger organisation, and we would be selling more pigs to the factories here in Northern Ireland. That will definitely get us a better price because there are different prices being paid by Malton in Cookstown at present. The bigger producer gets more. That is a fact. No one is supposed to know that, but that is the way it is. If we were in the position where we were selling, say, 6,000 to 7,000 I can assure you they would have to pay more.

Mr Armstrong: Do you have confirmation of that?

Mr McGuikian: Yes.

Mr Bradley: In recent times, the pig meat industry has had unified marketing, farmer-owned processing, and farmer own brands. All of those have either gone, or have been moved out of farmer control. What are the implications of this, and what lessons can the Committee learn from what has happened?

Mr Shields: I would like to think that I am still a relatively young pig farmer. However, I have been in the pig industry for over 20 years. In the early days they used to tell us that when they got Cookstown going right, the pig industry in Northern Ireland would be very profitable. The lesson to be learned is that you do not put a farmer in to run a processing plant. You hire the appropriate expertise. I have always been critical of how the Unipork plants in Cookstown, Enniskillen and Newry were run. It was diabolical. If they had introduced a hatchet man to sort out the business we would not have this problem today.

Mr Paisley Jnr: Could I return to what you said earlier about getting some of your pigs to England. Does every cloud have a silver lining? Has the fact that there has been a swine fever problem affected Malton's market and their source of pigs there? Could Northern Ireland benefit if that swine fever problem is not resolved sooner rather than later?

Mr Sheilds: I suppose there is no ill wind that does not blow somebody good. We would not wish ill on anyone. However, the pigs that were held within a region were not being released so -

Mr Paisley Jnr: Have you noticed an upturn since swine fever was reported?

Mr Shields: No, we have not seen an upturn.

Mr McGuckian: I do not think that it will do us any good at all. If it had occurred in Denmark or Holland perhaps the answer would be yes. As it happened in the south of England, the answer is no.

Mr Paisley Jnr: You are pro-European then?

Mr Pogue: It could have an effect on the exports from England to a certain extent. Some countries have stopped taking pig meat from England.

Mr Shields: It may have made our case for getting pigs on to the mainland easier.

Mr Pogue: Generally, it has not given us an upturn in pig meat prices.

The Chairman: This has been most helpful. It confirms a lot of things that we have already been persuaded about. We need to consider - and you will also need to consider - the way we can take steps to strengthen the power of the farmer through as wide a co-operative as can be achieved. That will mean that farmers can actually be at the negotiating table. You fellows are not actually at the table; other people make decisions on these matters. They make those decisions purely on a commercial basis, and they are keeping their eyes on their investors.

Eventually, we will break the Malton stranglehold. However, it is not just a question of his stranglehold. There are others behind him and they are all together. All of the producers are at it. We will be pressing strongly that the pig producers must be in a position where they can negotiate the future of the industry - not the big man with the big factory, the big money and the big investors who are not really interested whether or not pig farmers go to the wall.

You will get copies of this evidence and please feel free to put in writing to the Clerk of the Committee any comments you might have which have come out of today's session. We would be grateful for that. Thank you very much.

Mr Shields: Thank you for taking the time, and we hope that in the near future you will be able to do something positive for the industry.

The Chairman: We will always have a friendly ear for your case.

Mr Shields: As far as we are concerned we are in this together. It is the Northern Ireland economy which is suffering.

30 June 2000 (part iv) / Menu / 8 September 2000 (part ii)