Committee for
Agriculture and Rural Development
Wednesday 4 October 2000
MINUTES OF EVIDENCE
Pig and Beef Industry
Members present:
Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Ford
Mr Kane
Mr McHugh
Mr Paisley Jnr
Witnesses:
Mr Cecil Mathers )
Mr Colin Duffy )Northern Ireland Meat Exporters Association
Mr Richard Moore )
Mr Campbell Tweedie )
The Deputy Chairperson:
You are all very welcome. We have allocated ten minutes for you if you wish to make a statement.
Mr Mathers:
I intend to make a short opening statement before questioning begins. It would be prudent for me to clear the air on some issues which were referred to in the Chamber previously. It has been reported that there is an Office of Fair Trading report that confirms conclusively that there is a cartel in the Northern Ireland meat industry. I would like to refute that; it is inaccurate. That sort of loose talk is causing the Northern Ireland beef industry embarrassment and damage and is further adding to the stress of an industry trying to struggle out from the BSE crisis. In our frequent formal and informal discussions with farmers, we do not detect that relationships have deteriorated to the extent that members of the Committee have sought to suggest.
Last year we went through an investigation by the Office of Fair Trading and resolved a number of issues to their satisfaction. There was one issue on which the Office of Fair Trading asked us to take remedial action and that was done. Let me clarify that for you.
In 1996, when the BSE crisis arose and the rendering industry here was prohibited from marketing its products, high costs were imposed on the meat industry. Following discussions with farmers' representatives, it was agreed that the industry would absorb part of these costs and that the farmers would absorb the remainder. Distances made those costs different for each plant, but, at the insistence of the farmers - and I must emphasise that - plants agreed to apply the same charges across Northern Ireland, so that it would not confuse pricing quotations.
It was here that we made our mistake, in so far as we were not aware that such agreements should have been registered with the Office of Fair Trading. The Office of Fair Trading had no problem with the principle of a levy, but they ruled that a system in which the same amount was charged by each plant amounted to an agreement and was, therefore, a breach of the legislation. That agreement was immediately withdrawn and annulled and a press release issued accordingly. All sorts of inaccurate interpretations have been placed on that by individuals and the media, and it is obvious from last week's activity that further inaccurate interpretation of that is still being spewed out.
The Committee's letter of invitation was entitled "Committee Inquiry into Debt - Circumstances Faced by the Pig and Beef Industries". Although we sympathise with the level of farm debt, we also recognise that the structure of rural farming will have to change. The food processing industry simply translates market forces facilitates, rather than organises the industry.
I would now like to address some issues that are relevant to today's deliberations. Firstly, the highest-ever recorded price for Northern Ireland beef was 289·5 euros per 100 kilos, in 1995. The price of beef in Northern Ireland in 2000 has been as high as 281·9 euros per 100 kilos, which is 97% of the 1995 price. In 1995, that price equated to 225 pence per kilo but because of the exchange rate the price in 2000 is equated to 158 pence per kilo.
The exchange rate mechanism is outside the control of anyone in this room. I hope that each member of the Committee fully understands the implications that the strength of the euro has for the price of beef and, indeed, for farm subsidies. I link those two things together because with the massive increase in subsidies the product price is now less than half of the farmer's return. That should be noted. Both have been affected by the unfavourable exchange rates. This week, the euro is still below 60p. If the beef ban had never been introduced, beef prices would be little higher today than they are, because of that.
Secondly, given what has happened to sterling and the decisions of elected politicians that have closed 50% of our markets, the market penetration achieved in Great Britain and the current sterling price are very commendable. Professional farmers have played a large part in that success story by reacting quickly to market requirements: consider the beef prices to farmers in the Republic of Ireland, in sterling. They have full export access with little or no market restrictions. Yet, the industry here has delivered considerably higher prices to farmers in Northern Ireland. Over 350,000 Northern Ireland cattle have been marketed in a single market - the Great Britain market - without any public purchasing or export subsidisation since 1998. That is a fantastic turnaround, by anybody's standards.
Thirdly, the questions in your consultation paper alluded to more protection for Northern Ireland produce. Were other regions of the United Kingdom to adopt that policy, and had European regions adopted that policy previously, the consequences for Northern Ireland, which markets 80% of its product outside the region, would have been disastrous. That is a dangerous route to go down when we have to find markets, as we are currently experiencing with the French.
Fourthly, there is a wide range of production costs in the farming industry in Northern Ireland. For milk, they range from 9p to 18p per litre in the various farming enterprises. For beef, there is a 100% difference between the best and the worst. Production costs are a significant factor. I refer to last week's press reports on store cattle prices. According to one headline, a 398-kilo steer made £725: that equates to a dead weight price of around 325p per kilo. Another headline quoted £510 for a 400-kilo Charolais: that equates to a beef price of 240p per kilo.
The current average beef price, according to the Department of Agriculture, is 158p per kilo. If that were to rise by 50p per kilo - I noticed that you mentioned a rise of 5p per kilo - it is still difficult to see how farmers would ever make a profit on those cattle. No doubt, the blame will be apportioned to someone else. No doubt, one section of the producers is very happy with those prices, but I would suggest that the finishers giving those prices are in some difficulty.
With the price differentials between Northern Ireland and Great Britain, there is always the option of live exports to GB. Those who tried it found that, because of differences in grading and trimming specifications, they were as well off at home. Currently, Northern Ireland farmers are importing store cattle from Scotland. Where is the preference for local sourcing? That defies all logic when considered along with regional beef prices.
The similar prices in meat plants, surely, are evidence of strong competition among the different bidders in the marketplace. Economists view the rapid convergence of prices as evidence of strong competition. As for co-operative ventures in the meat industry, it would appear that no recognition whatsoever has been granted to the one meat plant co-operative in Northern Ireland that took extreme risks, but did not get the backing of farmers.
The main contributors to farm debt in the past four years are the politicians who have removed our export livelihood, and who have refused repeatedly to compensate producers on the currency issues as they are entitled. A report was published in the Republic of Ireland last week on the investigation into price fixing in the industry there, and, as the Minister said this morning, the conclusion was that there was no evidence to support that claim. The information is freely available on the worldwide web. There have been recent allegations too, in the Chamber that a cartel existed in the 1980s and continues to do so. Is the Committee aware that Northern Ireland steer and heifer prices became possibly the highest in the world outside Japan, in that period?
In passing, I would like to comment on grading. Is the Committee aware that this is an EU scheme, paid for by farmers and operated by an independent body at the request of farmers, and agreed to by processors? The scheme is policed by the competent authority, which in our case is DARD, and audited periodically by Brussels. European criticism, so far, has been that the benefit of the doubt has been in the producers' favour. I hope the Committee realises the significance of that judgement and the implications of unsubstantiated criticism of the credibility of this system for Northern Ireland producers.
The Deputy Chairperson:
I would ask you, Mr Mathers, to draw your comments to a close.
Mr Mathers:
In a previous report, the Committee pointed out the value of the Livestock and Meat Commission. We are shocked that the integrity of this independent organisation is being called into question under the privilege of the House. Their schemes, which are the foundation of our quality assurance and traceability in Northern Ireland and are the envy of all our competitors, have been damaged by those remarks Again, loose talk has done untold damage to the image of Northern Ireland beef.
Please realise what you are doing to the very industry that you are proposing to help. Consumers are already beginning to question the integrity of Northern Ireland beef, purely because of loose talk. It is very much a matter of regret to us that there appears to be a number of members of the Committee, who are more keen to twist the facts for political point scoring, than they are to attempt to improve the entire marketing of Northern Ireland produce. It is a matter of regret to us too, that none of the Committee Members responded to my invitation to learn about the complexities of the Northern Ireland industry by visiting a meat plant and seeing for himself what happens. You do not do that in five minutes.
The Deputy Chairperson:
The Committee has met on two days every week; we also have the Assembly downstairs, which takes up two days of the week; and we have our constituency businesses. The time that we have is very scarce, but we will take you up on that - I will, anyhow.
Mr Mathers:
In conclusion, I would like to compliment the Chairman of the Committee, Dr Paisley, on the robust way that he has represented the industry in past crisis. Such experience, we believe, is not shared by other members of this Committee. Things are moving so fast that regular update visits to the industry are essential, if you want to keep up with what is actually taking place.
Our main aim is to ensure that there will be a viable industry in Northern Ireland. No part of the industry has any desire to see that diminished. Comments in this week's agricultural press suggest that Ireland should become the source of weanlings for the feedlands in the UK and the rest of Europe. However, until the Government take that decision, it is the intention of this industry to market the Northern Ireland product to the best advantage of everyone in the chain. Our presence at the World Food Fair in Paris in two weeks' time will be a demonstration of that commitment, even though the ban is still in place. Is the Committee aware of that food fair, and has it made arrangements to attend, in support of the Northern Ireland agri-food businesses, including the meat industry, and to see for itself the competition, not only in the beef world but in other aspects of the food industry?
We welcome any investigation and when - not if - these allegations are shown to be unprovable, we expect that retractions will be made and that a fertile debating environment can be created. Thank you.
The Deputy Chairperson:
Thank you. The first time that we heard of the food fair was this morning, when the Minister was in. I have no doubt that representatives will attend. But we are tied to time. We need a quorum in the Committee at all times, and sometimes different things crop up for members, leaving them unable to attend. However, if at all possible, the Committee will be represented.
Do members have any issues to raise? Please keep your questions brief because our time is short, and tightly scheduled.
Mr Duffy:
Most of the questions will probably be directed to me and I will endeavour to answer them. There may be some which I, as chairman of the organisation, may not be able to answer, so I shall direct them to Mr Moore and Mr Tweedie. We brought more people here today to give us the most representative view of the industry possible.
Mr Kane:
Mr Mathers, according to information that you provided in 'Foyle Valley Focus', a publication sent to all members of Foyle Valley Producers Club, UK consumption of beef has reached pre-BSE crisis levels. How does this correlate to meat plant figures showing a drop by two pence in the past week? Also, we have been unable to export beef over the last four years. Where has NIMEA been concentrating its efforts? I notice little, if any, difference between factory quotations for beef from week to week. What does this suggest to you, and - perhaps more importantly - what does it suggest to producers?
Mr Duffy:
If prices are competitive, there will never be a great difference, although there will be some. Meat prices at the various plants are reported in the LMC bulletin, and that is how things have been for as long as I have been in the industry. It is not the responsibility of the organisation to promote the produce of the Province directly; that is up to individual members of our organisation, who can tell you what efforts they have made over the past few years since the crisis.
Mr Kane:
Allow me to add to that. For a typical steer, what is the standard margin between the price paid cold weight to the producer and the price of the carcass leaving the factory? Given the status of the Republic of Ireland with regard to BSE, do you think that the procurement of cattle from the Republic for slaughter in the North disadvantages Northern Ireland in its attempts to achieve BSE low incidence status?
Mr Mathers:
It has no more effect than the importation of 5,000 cattle from Great Britain, which is an even higher BSE incidence region. Five thousand cattle have come from GB into Northern Ireland in the year 2000.
Mr Duffy:
It has been an integral part of the industry here that store cattle have traditionally come from the south and, particularly, the west of Ireland, to feed the units here. Those units have actually taken the cattle from our industry through the finishing stages.
Mr Kane:
If cattle supplies in the Province were to dry up, what action would processing plants here take? If Northern Ireland has low incidence status - in the near future, I hope - how would export orders be filled? Can we guarantee those markets that beef is sourced in, for example, the Republic of Ireland will not be used?
Mr Duffy:
Competition is the spice of life. Significant investments have been made here by a number of members and associations, and, obviously, if the raw material is not available because of increased competition - or whatever the case may be with live cattle - they will have to take whatever measures are deemed necessary .
Mr Paisley Jnr:
I agree with you that the allegations that have been made damage the entire industry. I hope that you will also agree with me that it is in the interest of the entire industry that the allegations be cleared up. Any allegation that is made to the Committee is examined, and, if it has no standing, it is knocked down quickly. If it does have standing, it is investigated. The Committee heard the allegations in camera. I agree with earlier comments around this table that they were allegations and not evidence, and that should be of some assistance.
Are you aware of the Office of Fair Trading investigation? Will you, if asked by the Office of Fair Trading, co-operate with it in an investigation into the allegations? Have you already been asked by the Office of Fair Trading about the allegations that have been made? Have you or any of your associates been involved in the past in anything that could be regarded as a price-managing system?
Mr Duffy:
Neither Anglo Beef Processors (ABP) nor NIMEA has been asked directly to give a submission to the OFT about a cartel or about price-fixing in Northern Ireland. We will co-operate fully with the OFT to bring these matters to a close, because they are not in the interest of the industry. It was said earlier that names have been named; we wish to know those names so that the allegations can be refuted. To answer -
Mr Paisley Jnr:
The Committee had a session in camera because it did not want to fuel allegations that had not been substantiated or publish anything without evidence, which would be unfair to everyone.
The Deputy Chairperson:
You said that you had to qualify your responses to our questions because of doubt about our intentions. Let me clarify. What the Committee has in mind is the kind of responsive supply chain that is commonplace in all industries, a supply chain that delivers the correct quantities of raw material, at the required quality, at the right time. Long lead-in times are a problem, but the Committee thinks that there is room for improvement.
Can we confirm what you are saying in your replies? Your answer to question 4A implies that the guaranteed Government payment to the farmers removes the incentive to produce what the market demands. The Committee finds this hard to believe, as that is the equivalent of saying that the subsidies your members receive from the IDB reduce their desire to make money. Is it not more likely that the pricing arrangements your members have in place do not motivate them to produce quality goods?
Mr Tweedie:
I addressed a meeting of south Tyrone farmers on Monday evening, and we discussed the issue of quality. Statistics have proved that the quality of beef cattle in Northern Ireland has dropped. Four years ago, our company made a large investment to get more supplies of British meat to supply one of the biggest retailers in Britain. To get supplies of British meat we had to buy a meat plant in the north of England. Ninety-one per cent of those cattle meet the specifications of that supermarket. Fifty percent of the cattle that we kill in Northern Ireland are eligible for that specification. I was speaking to farmers' groups last night. They acknowledged that, in Northern Ireland, we are not using the appropriate bulls. Holstein influence in Northern Ireland is too strong. Moreover, many farmers in England, feed concentrates to cattle from an early stage in life and throughout their whole existence. While many in Northern Ireland, feed concentrate only in the last six or eight weeks of the animals life.
The south Tyrone farmers, at a constructive meeting last night, acknowledged that the quality of Northern Ireland cattle had been slipping. Farmers should be advised about improving their husbandry, through using better bulls and better concentrates. If they did that, more of the cattle would come up to the quality class. Fifty percent of the return is on subsidies. We feel that if subsidies were paid on quality, it would change things. There is so much subsidy around that farmers are not concentrating on quality, but on getting a quick return on the animal. We want the Northern Ireland producers to get the return. They get a good return on good quality animals, but unfortunately there is not a high enough percentage of those out there to meet the market demand.
We would be happy to show you the whole process on your visit to our factory - animals slaughtered, boned, put into retail packs and yielded.
The Deputy Chairperson:
Would you rather see fewer cattle, but cattle of better quality?
Mr Tweedie:
Of course, but when the Government banned beef exports in 1996, they did not ban beef imports. Two hundred thousand tonnes of beef imports come into the UK - and it is cheap beef. We must produce top quality beef for our supermarkets. We should not be producing more lower quality beef, because it is at that level that we are competing with imported meat.
The Deputy Chairperson:
What is the price incentive for a farmer to deliver the quality of animal that you need for your most demanding customers? Does that reflect the added value to you as processors?
Mr Tweedie:
Each company has different bonus schemes; ours involves the payment of a bonus for cattle that fit into the specification at a particular supermarket. The bonus ranges from £10 down to £6 a beast. Also we pay on a grading system. But in general, in Northern Ireland, there is not a wide enough gap. Perhaps better cattle could attract a little more money and worse cattle a little less, but again, that weakens that principle. Most companies have policies on cattle quality, but add bonuses to get cattle to suit their specifications. That is why we cannot understand the allegations about a cartel. Each farmer, each plant, has different bonuses for different jobs. Even the Livestock and Meat Commission bulletin 'Prices Weekly' shows the variation in prices. That makes things difficult.
Mr Duffy:
Contrary to popular belief, a lot of work is going on to move value from the lower to the upper end of the scale and to put greater transparency into the chain. I am sitting on a working group with the unions on this matter, and a number of others, two of which we have successfully concluded.
Mr Moore:
Genetic changes do not take place quickly. Prior to the export ban, we were competing in a free market within Ireland for sourcing livestock. In many cases, the export subsidy regime - not the farmers direct subsidy but the subsidies for exporting to countries outside the EU - made cattle of inferior quality equally valuable to those of superior quality. In many cases, we were fighting a losing battle. Our own company is guilty - I am happy to say - of paying a flat rate export bonus to attract anything with four legs and a tail to our factory for nine months, in order to run an export scheme. We put a non quality incentive bonus into the market place. Farmers have received conflicting signals, but those are the signals that come from the market place.
The Deputy Chairperson:
The signal is that if you provide quality, you will get a good price for it.
Mr Moore:
In the long term, our industry has done more than any other in Europe to try and hold up standards in pricing.
Mr Dallat:
I am sure that the last thing that we need is bad blood - excuse the very bad pun - in any element of agriculture. That is not in the interest of farmers facing debts of £800 million. I took the opportunity to clarify that there was no evidence of a cartel, so I am not guilty of that. In relation to my failure to visit a meat plant, I would say that I have received any information I needed from your organisation by telephone. Although I have never gone in person to see cows being killed, I am happy with the information that your organisation gave me. Let us now begin to operate in the interests of those who matter most ¾ the farmers with their back against the wall.
I found your document most interesting and well worth discussion. I have a particular interest in co-ops because I have been a member of the Credit Union for 30 years. I have seen how that organization has had a positive impact on the lives of thousands of people across Ireland, many of whom are farmers. The concept of co-operatives should not be dismissed and this has not been done in Question 4(b). The Committee does not dispute the main facts that you provide, but the picture is different for the other main meat production supply chain.
The poultry industry may have its problems but the supply chain is not one of them. Would it be fair to say that poultry processors have invested heavily in setting up a stable and responsive supply chain that has stood them in good stead? I am not suggesting that a five week production cycle in controlled conditions should be applied to beef animals, but, the involvement of the processing sectors is necessary to create an effective co-operative producer supply chain. Is the Northern Ireland Meat Exporters Association enthusiastic about creating a modern supply chain or are you set against it?
Mr Moore:
I am happy to respond to your question, as I am a representative of what is possibly the last co-operative meat plant in Europe, which says something about the success of co-ops. However, I am not saying no to co-operative involvement in the industry. There has been no clear direction or strategy on co-operative involvement in meat processing across the three species.
Unfortunately, we are frequently given examples of successes of co-operatives involving white meats and pig meat. The subsidy environment in those industries is entirely different. Poultry, in particular, is a free market commodity inside and outside Europe. This has allowed people to enter into contracts because they have been in control of most of the factors which bore down on the contract. The life cycle of the animal is also an important factor.
The association has no aversion to the development of a supply chain relationship. However, primary producers must play a large part in the thought process and creativity involved in developing it. In meetings held throughout the country, we did not receive any substantial ideas to bring to the table. If we contract forward from birth to beef, how can the producer make an assessment of the market environment he is moving into, or of subsidies?
In the past three years, there have been substantial changes in the architecture of subsidy provision, including the way a farmer receives his subsidies. The debate over area aid payment continues in Brussels. We are open to debate, but we are experts in meat processing, rather than in supply chain relationships of that length. Nevertheless, we would be very happy to bring to the table other ideas.
Mr Dallat:
If the Department of Agriculture and Rural Development were to accept this idea as a serious possibility, would you be a willing participant in the development of a suitable concept?
Mr Duffy:
Supply chain management has been discussed, particularly, in the sub-groups of the vision group. They have been exploring ways to tighten the chain and improve communication between the links. There has been a long-term focus on trying to educate producers about where the best returns are and also the quality demanded by the market place. Meat plants have done a lot of work, through partnerships with suppliers, but that is not a national effort, it is a local one. The situation can change overnight depending on the market, or the decisions taken in Brussels, which can be frustrating.
Mr McHugh:
We have certainly listened with interest to your robust defence of your position and, of course, you are entitled to do that. We have a number of questions that we need to ask on the debt situation, but there is not really time to answer all the questions posed. You said that there had been allegations and that we should visit your meat plant. I have been to meat plants before and I am not sure that I would get that much out of it by going again. I would welcome a visit to a plant, but we would probably find it difficult to fit another meeting of any description in. However, we will try to do that, if it helps to clarify the situation.
We need clarification of the relationship between yourselves and the other vital part of the industry - the primary producer. The Minister has set out her view that if farmers organised themselves to any great extent, processors would go elsewhere - for example, Brazil - to source the product. That option is open to processors and meat plant operators. If the price gets too high locally, they could move to where it is lower. We have only limited time to come to any conclusions beyond just grasping the simple questions.
In question eight, you eloquently set out the realities of fluctuating supplies. Is that not an equally eloquent argument for investment in fixing the supply chain to make it meet market needs - that includes all of what we have said about why farmers have not, as yet, fully integrated with the quality from their end?
The Deputy Chairperson:
Could I ask members of the Committee to keep their answers short? I have three more people to get in and I want them all to get a question in.
Mr Tweedie:
I think that the question is totally wrong. As far as we are concerned, 95% of farmers, while they are not happy with their return, find that their relationship with the industry has never been better - contrary to what the member says. We have 3,500 members in our producers club. Every week, 20 to 30 farmers visit our factory. We take them through our costing from start to finish; we have farm visits; we teach them how to rear cattle; and we offer farmers beef contract systems. The relationship has never been better. That does not mean that income is good, but only a minority says that there is conflict between the industries. I would like to say that the member is totally wrong; 95% of farmers have good relationships with their plants. I want to make that clear. As far as we are concerned, there is no antagonism. We have concerns - big concerns - but not antagonism.
As far as the supply chain is concerned, I must point out that, in 1996, our market was cut off completely. In five years, we marketed 350,000 cattle into the major supermarkets in the United Kingdom. We did this in two ways. First, we invested in packaging meat to specification. We are committed to using Northern Ireland and British meat for the British supermarkets. Two years ago, when the ban was partially lifted in the United Kingdom and the database scheme allowed the United Kingdom to shift a small amount of beef into Europe, beef from the Republic of Ireland was prevented from going into Britain and our percentage of market share rose by 16%. In essence, while there was a meat export ban, there was also a protected market, because we were able to go into the United Kingdom. It has been proven by the Republic of Ireland that the United Kingdom is the best market in Europe and the North of Ireland farmer has been enjoying the benefits of that market for five years.
The real crux is not the relationship between the farmer and the processor - it is Government policy sterling is so strong. Seven or eight years ago, the pound sterling was worth IR£0·90, now it is worth IR£1·30. These conditions are beyond our control. The Government are allowing import meat in, the pound is too strong and the situation is beyond the processors. I am not saying that we should not do the best we can. If we raised the price of the meat 5p, as you suggested, that would only be the tip of the iceberg for farmers' needs. The farmer needs Government intervention in this emergency situation. Sterling is overvalued and that is crippling the industry.
I appreciate what is being said here today. Farmers are our lifeblood and we want to co-operate. We have spent millions on factories, to slaughter and bone cattle. The industry has got to work because we need it. Most of the meat plants owners are farmers themselves. There is no money in farming. Relationships have never been better, no matter what the minority of farmers say.
Mr Ford:
In paragraph 4(e) of your submission, you state that Northern Ireland is currently losing ground to neighbours, both in Scotland and the Republic. In the Republic of Ireland, Farm Quality Assurance Scheme legislation is in place and the voluntary standards conditions in Scotland are higher. Can you tell us why we have lost ground, what is the cause and how can we put it right? You have suggested that we need to look to the lifetime Farm Quality Assurance Scheme legislation here; could you explain that? Mr Moore referred to £6 to £10 bonus for better quality cattle. That is insufficient reward from the market to compensate farmers for meeting the higher standards that you say we need.
Mr Duffy:
I will make one point and then answer your question. There is an oversupply in the chain, much of which is down to the current subsidy system and the over 30-month scheme that we are obliged to operate. We do not want such volumes of cattle, but that is outside our control and we have to handle them. We would welcome a lot more in four or five weeks' time.
With regard to the Farm Quality Assurance Scheme others have looked and learned and adopted many of the approaches that we have taken. There is a lot of work being done on funding a scheme that could go into lifetime assurance arranged jointly between the producer and processor. We are also looking towards updating and de-regularising the APHIS computer scheme and bringing it in as a major marketing tool in our export effort. We have lost ground in some areas, purely because others have copied what we have and improved their systems. The Government of the Republic of Ireland probably see farm legislation as the easiest way out; we are trying to do it on a voluntary basis in Northern Ireland with a market-led approach.
Bonuses in the region of £10 to £15 are paid although I would still contend that that is not enough at the upper end and that too much is being paid at the lower end. We are endeavouring to address that. Unfortunately, although subsidies take up 50% of the value of the animal - and will continue to do so, according to Agenda 2000 - that bears no relation to the quality of the animal. That is a problem we have to live and work with.
Mr Moore:
Those bonuses are paid on top of the price already paid. The spread of price is as much as £100 per animal.
Mr Bradley:
The Committee's agenda from the beginning has been to address farmers debt and get a better deal for farmers. I assure you that you are not alone in facing these questions. We questioned the multi-national supermarkets and the banks on prices. For some reason, that did not get as much publicity as the meat trade. Do not feel that you are being singled out in any way. I also welcome your support for a possible enquiry that can deal with the allegations, once and for all.
I looked at your reply to a question about whether NIMEA would be prepared to contribute financially to resolving the fragmentation at producer level. I am sure that the Committee appreciates your willingness to explore ways of overcoming the problem. You have not, however, answered our question: would NIMEA be prepared, in the right circumstances, to make a financial contribution to a move which would be of great benefit to the industry? We have put that question to the other players and we need your answer. Let me ask that again: are processors willing to make a significant financial investment in creating the kind of supply chain which a modern industry needs to be efficient?
Mr Tweedie:
We are willing to invest and have been investing. As I said earlier, there are 3,500 farmers in our producers club. We have invested a lot in that. We have four men on the road all the time, advising on Government grants and how to produce better beef. We are now getting computers onto farms, at subsidised rates, to help farmers do their books. We are really spending a lot of money in this fashion. If the Committee can come up with a system that is better than ours, we will be happy to look at it. We have invested hundreds of thousands of pounds annually on the relationship, making things better for farmers and getting them to produce better cattle. We are willing to get involved in anything that is better than what we have. Individual companies have individual needs for individual customers, so it is sometimes very hard to have a co-operative supply chain for everyone. We are willing to consider anything you can recommend to us.
Mr Duffy:
In these working groups the industry has come together with the LMC to co-fund promotional marketing issues regarding the levy for the LMC budget, the Farm Quality Assured Scheme and its funding, and the red meat strategy. That is the most effective way, until the reports are produced by the Agri-vision Group on how the money could best be spent, centrally or individually by the various plants on promoting Northern Ireland produce.
Mr Armstrong:
I am pleased to hear that the Northern Ireland Meat Export Association is not encouraging production of bull beef; I believe in naturally produced beef. We do not need any more beef than there already is. Dungannon Meats has a half page feature in the recent 'Farming Life' promoting the production of Holstein beef. I mention that simply to point out that at least one of your major members is forming a club for the purpose. Our concern is not that Holstein cows have bull calves or that farmers strive to maximise their profits. It is that bull beef, once it enters the processing chain, will be in danger of diluting product quality. What steps are your members taking to ensure that this does not happen? In my view, since we have meat coming from other sources and it is not farm quality assured, we do not know what it is really, and it is not of the same standard.
I do not believe that the Farm Quality Assured Scheme in Northern Ireland is doing justice to the meat plant. There is a great differential between the price the farmer gets for his product and what the meat plant gets for it. Meat plants are always sure to have good profit. Nobody considers that the farmer needs a profit to provide the product for you at the quality that you expect.
Mr Duffy:
Unfortunately, yet again, the whole agenda has been driven by Agenda 2000 and the changing subsidy system. Part of the vision for the future of Northern Ireland agriculture is the creation of differences and niches. In Northern Ireland our strength is our size. With regard to the black and white bulls, there was and still is a niche there to replace the CPS scheme. In the past six months, and at present, it has been one of the most attractive schemes for producers and they will openly admit that. We have been a successful producing country in the past, and we should not lose sight of that.
Our company is promoting a scheme which will be contractually binding on a small number of producers whom it suits to produce that meat. There is a market there and a certain premium for it, so there is nothing wrong. It is a commercial message with a commercial focus.
Steer production is our main production portfolio - about that we cannot delude ourselves. Those animals, as well as the bulls, will be part of the chain. They will also have to have quality assurance and traceability for the consumer. One of the reasons why people look to us, even in the small niche markets, is that they know that we can give them assurance of quality. It may be of a different quality, but there is still a market for it.
Mr Armstrong:
Yes, but we do not want the number of farmers producing bull beef to increase.
Mr Duffy:
Hence the clear message that we have put through the LMC. Unless the producer has a contract for his produce in that area, he should definitely not get involved in the ad hoc production of young bulls. I know this from past experience, so I agree with you.
Mr Tweedie:
A year ago, when the calf schemes disappeared, young calves were being shot and buried in the ground; in fact, that was shown on television. Our company, along with other companies, approached the supermarkets and said that we would take these young bulls and feed them for manufacturing purposes. We then launched a bull scheme and people contracted to feed 10,000 bulls. Those bulls are coming to the market place now, so that was an alternative to shooting and burying the calves or the farmer receiving £10 to £15 for them.
Ten thousand of those cattle are now coming to the market place and we give people a guaranteed price for them, a price based on the market price plus a bonus on the low graded cattle. Today, they are receiving £50 a head more for the cattle than anticipated. Everyone who entered the scheme is making a profit and we can bring you those members to show evidence that that is happening. Thus a lot of bull beef has been brought on for manufacturing purposes.
Mr Duffy:
The value of that calf now in comparison to what it was 12 months ago in itself justifies the returns that have been given.
The Deputy Chairperson:
As a bull producer, I congratulate you on seeing the niche in the market and taking the initiative. As Mr Tweedie said, it is better to keep the animals on and finish them rather than shooting them.
Mr Paisley Jnr:
I have visited a number of plants in the past and that has proved to be a useful learning exercise, although it does not get to the heart of what we are discussing today. It would assist if the invitation were open for us to look around the plants at any time.
I do not think that the Committee is suggesting that co-operative groupings become involved in processing but rather that they be a means to creating the more responsive supply chain that the industry lacks.
In your correspondence with us, you mentioned producer clubs. Will you explain how these clubs work? Are they contracts between the partners? Do club members enjoy price advantages over non-club members? What demands are made on club producers beyond those which would be to made on other suppliers? That would help us gauge the difference between beef producer clubs and the co-operatives that were mentioned earlier.
There has been good co-operation around this table in the past. For instance, in the beef labelling categorisation scheme, we worked hard and actually achieved something. I also remember being in a meeting with the leader of the SDLP and, I think, Jim Nicholson. We made major progress on that issue and the entire industry welcomed that. It is important that co-operation continues.
Mr Tweedie:
In Ireland, we now have a retail packing plant, which takes beef from slaughter and brings it straight to the retail parks. In one visit, we can now do three or four things. We can identify the return to the farmer, the price of the meat and the retail price to the supermarket all in one place. Northern Ireland has the only packing plant in Ireland where this can be done. There is more transparency, which means that we can even show the retail price of meat in the supermarkets, and we can show you what we are charging them. We are happy to do that.
My other point is about producers clubs. The life of a supermarket now depends on being able to trace where food products originated. Buyers want to be able to go to the plants and find out where the animals have come from. We need to be able to take that buyer directly to the farm. We have to ensure that the farmer has a Farm Quality Assurance Scheme, that he is feeding animals correctly and that his farm meets the necessary standards. We must do that for all of our animals. In order for this process to be more effective, we encourage people to join our producers club. The farmers do not guarantee a supply, but we have found that 90 per cent of those in the supply chain keep returning to same plant, because a relationship has developed. We need producers clubs so that we can inform the supermarkets about where the animals are coming from. We also have bonus schemes for different types of animal. We organise educational trips and computers, we arrange shows, and there are many other benefits. The function of a producers' club stems from the need to tell the customer where the animals originated. That is what a producers' club is for.
The Deputy Chairperson:
Thank you gentlemen.
Mr Kane:
Could I be provided with a list of memberships of the association, including occupations?
Mr Moore:
It is on the web.
The Deputy Chairperson:
On behalf of the Committee, I appreciate your contribution this morning. I can assure you that I want to see all loose talk put to bed. Nobody benefits from it. Gentlemen, we appreciate your contribution; it has been a learning exercise for many of us. There are several more questions that we had hoped to ask, but some people were a wee bit long-winded. We will send those questions to you in writing.
Mr Duffy:
We also appreciate the opportunity to come here. As the Minister said we are all part of the chain and have to work together.
The Deputy Chairperson:
We had a period in Northern Ireland when there was no Government, but things are gradually coming together. As you have said, we are all part of that chain and there must be more co-operation between everyone involved. Thank you all very much.
22 September 2000 (part ii) / Menu / 4 October 2000 (part ii)