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PROCEEDINGS OF THE COMMITTEE (Continued) 510. Mr Savage: Mr Murray, what can Government do to assist the industry to make the change from one of fragmented production to co-operative producer group led production? 511. Mr Murray: Well, I would hope that, through you, Chairman, that they could work with us and they do have, I would give credit where credit is due, the Supply Chain Development Division within the Department who are seeking to do that, I believe we can work and by working together we can probably achieve more than by not working together and trying to move this idea of co-operation forwards because we have again got to look at the continent. We have only got to look at New Zealand, Australia and elsewhere to just see how much their industry is controlled by the actual producers. I mean we are seeing currently in England the Farmer’s Co-operative being split into three and yet we are seeing in Denmark MD Foods which I think handles 90% of milk and is farmer controlled actually merging with Arla in Sweden which handles about 85% of the milk and is farmer controlled. That is the sort of organisation we will have to compete against. 512. Mr Savage: I would just like to say to you I’m very conscious in your letter back here to Mr Wilson when you said you were involved in off-farm employment opportunities. Could you elaborate a wee bit more on that? 513. Mr Murray: Yes, certainly. We would relate to a reference to the Fivemiletown Bio-gas project and also the study we are doing into short rotation forestry because both of those will lead to employment off-farm in terms of running generation plants. Certainly to us the most exciting one would be the Bio-gas project where it is really an environmental waste management project which will hopefully result in reducing the phosphate pollution in the Erne and Blackwater systems. The product goes back to the farmers actually pasteurised so the weed seeds and cattle diseases are killed so there will be less use of (inaudible). Obviously there will be construction of a plant and there will be employment opportunities offered by that plant to people in the rural community. 514. Mr Savage: Thank you very much. 515. The Chairman: Gardiner? 516. Mr Kane: Yes Chair, I would first of all congratulate Patrick and Ian and their co-op and the constructive business you are carrying out to the Northern Ireland farming community. It is great indeed that you are doing that. Just two points, Patrick, taking into account the producer group influence has been to illustrate the carcass quality differences, although on many occasions it has little bargaining power over prices etc, do you also feel in periods of high availability of stock the producer groups are easily sidestepped? 517. Mr Casement: Yes, I think both of those points are probably correct, that we have, the producer groups have run into some problems if you like with the meat plants in that we have been, to a certain extent, used as a cheap and easy procurement facility for high quality lambs and we are not getting the rewards that we probably should get. We are not strong enough, I think, we do not have enough push to actually dictate or to bargain with them on equal terms if you like. They are the dominant partner inevitably in negotiations and they set the weekly price. We can only help to negotiate price differentials between different grades but the actual overall base price or price upon which the lambs, the different grades, are finally priced is set each week by the meat plants. We feel very strongly that they have not just a lot of power in this, but they probably appear to act together in this respect because there is a remarkable uniformity in prices set each week by the various meat plants. I think it is a problem that we are trying to address by the lamb marketing groups coming together in this, Ulster Lamb Group, as we call it, to try and look at ways in which we can increase our marketing power by working more closely together and producing a more united front from our point of view because that is the other point that is being done, they have selected out individual groups and maybe done deals with them and then presented that as a fait accompli to the other groups which means that they have to fall in line behind that. It is a difficult problem, how one addresses this negotiation. We have certain latitude but we don’t have as much as we would like. 518. Mr Kane: Just one other question Chairman, if I may, it is said by numerous farmers that there is a cartel working between the abattoirs, processors and the retailers. Patrick, could I ask you what is your view on that as an organisation? 519. Mr Casement: I have no evidence of that. One may have suspicions at times, but it is very hard to get any evidence or idea of whether that is operating. But one would have to say that it is more than apparent to us, as it is to you, that the price differential between the lamb or the beef carcass leaving the farm and the price that is obtained for that amount of meat in the supermarket or the butcher is widening all the time to the detriment of the producer. It is a source of ongoing, increasing worry to all of us because we are seeing, indeed we are paying for meat we wish to eat ourselves, the same or more than we were several years ago and we are all obtaining less and less for it all the time. We are, meanwhile, going out of our way to add value to that product in terms of traceability, in terms of lack of harmful environmental inputs and so on through quality assurance schemes and all the rest. We are getting no reward for that added value that we are putting in, that added costs certainly and I think in theory added value we are contributing to it as individual farmers. This is something that I think while coming together in larger groupings of whatever form, co-operative, we should or hope to gain more power and control within the market, but it is very difficult at this stage to do that, I think. We have almost reached a point where it is very late in the day for that. I do not believe it is too late in many ways but I think it is much, much more difficult than if we had strong established large marketing co-ops and that would have made that job easier. 520. The Chairman: I want to move over to Mr Armstrong. 521. Mr Armstrong: Thank you Chairman, I am interested in your Bio-gas operation. I think that there is one way forward to cut down on pollution and to create a healthy country, getting rid of a lot of gasses and a lot of disease, and we blame slurries and we pollute our waterways and pollute in a lot of ways, I was just wondering what way do you see of reducing that? Then I look at your Aberdeen Angus cattle beef programme that you have. I hear people saying if farmers are paying too much for young stock to produce beef and then the farmers are receiving that money for their store cattle, say they are not even getting to keep their profit, I wonder how you are going on your Aberdeen Angus thing to get the farmers profit and also to get the consumer a good quality beef and the slurry and how are you going to achieve your objectives if you are not there with funding? 522. Mr Murray: Chairman, thanks Billy, that is quite a handful to deal with. 523. The Chairman: Be as brief as you can, there are two more. 524. Mr Murray: Chairman, on the Aberdeen Angus initiative, that was taken by some members of the Aberdeen Angus Society with our support and with the support of Crawford Henderson Meat Enterprises in Omagh and Foyle Meats to go for a quality product, to a specialist niche market. In doing so they have been able to negotiate premium prices for their stock provided they meet certain grade criteria so that reward is coming back to them. 525. Mr Armstrong: Can I stop you there? The farmer set out in the marketplace that the persons out in the market place buying store cattle and buying maybe those young stock, are giving too much for them, there is no profit there for the persons giving so much for them, that there is no profit in the return on the beef. Whenever they are sold to the abattoir, there is no profit for the beef farmer. Then a person says that the storeman is giving too much for them, so how do you compensate that? 526. Mr Murray: My understanding, and I have not been that closely involved with the Aberdeen Angus, there is a full traceability and these tend to be producer, we are fatteners, we are finishers, so they are not going into the market place to buy their stock, there is full computerised traceability of the breeding, feeding etc of those animals. 527. The Chairman: I call Mr Ford. 528. Mr Ford: Thank you Chairman. Looking at your list of new co-operatives you promoted in recent years, apart from the lamb groups they all seem to be what you might call niche markets. Is it too late when the crisis strikes to consider the co-operative option? Specifically on that I mean United Pig Producers, you seem to be fairly downbeat about what you have achieved including the fact there is apparently no funding from DANI and you have been spending money. Is it possible that that is simply going to fail to achieve anything for pig producers? 529. Mr Murray: It is a possibility, Chairman, it would be very disappointing if it was because we did, working with those people, put together a proposal which DARD accepted for funding on the Market Development Scheme which would produce £150,000 of grant over three years to operate that co-operative, but tragically we cannot operate the co-operative unless we can get a meat plant or bacon factory to run with us. That is the most unfortunate thing about it. Just a very brief aside in relation to pig meat, when we visited the Malton Bacon Company we were shown a pork loin, Chairman, with the fat removed and told that that retails in Tokyo at £70 a pound. In other words, one pound of that loin in Tokyo actually goes for more than a pig sells for in Northern Ireland. 530. The Chairman: Of course, the trouble is that Malton, having such an overseas influence via America, can do that. 531. Mr Casement: I think this brings us back to the point that was made earlier, we need to have recognition from the processors and so on further down the food chain to assist with the co-operative movement by recognising that this can lead to much higher quality and much better, more even supply and so on that they seem unwilling to realise that there are advantages in working with co-ops, not merely the disadvantage of having an organised line of production. 532. The Chairman: I think we all must take loins to Tokyo and charter a flight to get some finance for your organisation. PJ? 533. Mr Bradley: Thank you Chairman. We are all inclined maybe wrongly to talk about the farmer as "he" or "him" or to refer to him in the male sense. I want to ask can rural woman be co-ordinated by organisations such as yours for the betterment of the agricultural industry? I think that diversification being the in word, that woman have a bigger role to play in the economics of the farm and the farmhouse. Perhaps with co-ops and women organised that could be the saver for a lot of small farms. 534. Mr Murray: Thanks, PJ. I think, Chairman, I agree with the point that is being made and that we so often point out, the farm comes in two halves, a male half using a female half. Very often it is the female half who does the VAT and the books and who may well feed the young stock. I am certain there is a role. With our involvement with Family Farm Development which has brought the Union and NIAPA and ourselves and Rural Development Council and Department together their staff certainly worked more closely with the women of the farm and perhaps with the development by the Farmers’ Union of a farmer market I could certainly see there being a role for the farmers’ wives and the other ladies in the countryside to co-operate particularly again in the marketing of the produce they are taking forward into the market. 535. The Chairman: As PJ has got one of his colleagues, lady member as a lady Minister he has done very good, hasn’t he? 536. Mr Bradley: The entire Committee here, every deputation came in, we did not see a woman in sight. 537. Mr Murray: Sorry Chairman, I must apologise, we were due to have to a third party here, Ms Sheelagh Blair, who is our Legal Secretary, but at the last minute she was unable to attend. 538. The Chairman: Thank you very much, gentlemen. MINUTES OF EVIDENCE Friday 9 June 2000 Members Present: Rev Dr Ian Paisley (Chairman) Witnesses: Mr B O’Kane ) Northern Ireland Poultry Federation 539. The Chairman: Thank you very much, gentlemen. Welcome to you all. The way we are working is that you are going to give us an opening comment, which we would like to be restrained to about 10 to 12 minutes, and then some of us around the table will have some questions to put to you. If there is time the rest of our colleagues will be putting questions to you. 540. Mr O’Kane: Thank you, Chairman. The poultry industry is a significant part of the agricultural industry in Northern Ireland and it has developed and prospered considerably over this past 30/40 years. Even after our entry into the Common Market it continued to grow and prosper. Unfortunately, with the events of this past three years in particular, and especially within the past 18 months since the arrival of the Euro and when the UK decided not to enter into it, conditions have worsened and in fact compounded to such an extent that the industry is in serious trouble. It did not receive the attention publicly that the other sectors of agriculture have received this past period, nor do I believe recognition generally within the community as to the state of affairs. Agriculture is the largest area of employment in the Province and within that poultry is the largest single employment area, sustaining 7,000 full-time jobs and considerably more part-time and ancillary jobs. 541. We are very pleased to come along and put our position to the Committee. This was embraced within a letter which we sent to the Committee on 13th January, which I am sure you would all have had a copy of. The conditions, in fact, within the poultry industry are very similar to that within the pig industry, they are both intensive sectors of agriculture. Whilst the Common Agricultural Policy, we believe, was intended to create conditions whereby support could be given to different sectors of agriculture so that they would prosper, maintain employment in the community in agriculture, and support and retain livelihoods of farmers in all the areas, unfortunately the structure which was set up did not address nor did it adequately support either the pig or poultry industries. They have been left in a state of limbo. 542. We are all very well aware of the fracture which took place within the industry arising from the BSE problem which exploded in March 1996. We were compounded then by the currency problems which have come thereafter, creating conditions whereby both the egg and poultry sectors have suffered badly. It has impacted the community, our agriculture community in the Province, differently in that whereas in the other livestock sectors (those sectors other than poultry) producers were left to carry the load of whatever the marketplace threw up. The contractual arrangements upon which the poultry industry, particularly the poultry meat industry, was structured, had producers contracted with processors who were also marketing; giving security to producers that they were protected from the vagaries of the marketplace; that it was a partnership basis which gave them all the support which can come from a larger organisation; gave them secured returns relative to performance levels with the removal of the risks or particularly the troughs which inevitably seem to come in food industries. It created conditions whereby large scale industries developed from the 1960s right through to now in a province when theoretically we were not an area which was best and naturally suited for such development. Producers got the benefits of being parts of large scale operations. Products were produced and marketed, and marketed in a manner in which Northern Ireland has by its own efforts come to the top of the industry in both quality of product, health of product, and presentation and marketing of product. 543. It is the only section, I believe, where this support has been used to a large extent. It may well be developing slightly some of the other livestock sections, which we would imagine you as a Committee would certainly wish to consider. Whilst we wouldn’t want to put ourselves forward as being experts or advising other sections how to go, we are quite willing to put to the Committee what we believe has been the strength of this system. It has worked well. As I say, the employment is as I have outlined but we are at serious risk of maintaining that. We have had to recognise the changed circumstances which have come about, and whilst our industry developed on the basis of locally produced product being processed and marketed both within the British Isles and to a certain extent beyond the British Isles, we cannot sustain our position under the present economic circumstances, and those particularly relating to currency. It can well have been unfortunate but it is reality. We have suffered so badly over this past two to three years, and especially this past 18 months. Admittedly there is some currency movement at the moment. We can only hope that that change and movement which is taking place will continue but the uncertainty is still there, and if we do not get considerable movement and weakening of sterling vis-a-vis Euro our future is bleak. Up to the moment now we admit, and we admit openly, that those in the industry which are in the further processing end of the industry, which is the growth end of the industry, are well now exclusively using product imported from elsewhere, both from within the remainder of the EU and particularly outside the EU. Whilst that is sustaining employment within the Province it is not really doing anything of great benefit to the producers themselves or to the ancillary industries which service the industry. We have some suggestions which we would put to the Committee. How feasible they are, how practicable they are within the structure of the EU system we will have to leave in your hands to determine. We are very willing and very keen to co-operate and help in every way possible with the Committee. 544. The Chairman: Would you like to mention these, Mr. O’Kane? 545. Mr O’Kane: Yes. On the basis of the bullet points and questions you have put to us in your letter we are prepared to put the structure of our industry to you for your consideration. Can it be extended in any respect to other sections which might be of value for the future of the relationships between production and processing marketing within Northern Ireland? I should say that even from the earliest days of the creation of the industry, the contractual arrangements which were set up were set up on the basis of co-ordinating the different aspects of the industry to suit the market conditions. It has always been market led — for volumes, quality, the different aspects of different products to fit different sections of markets. It has never been, as most of our other agricultural sections are, that it was production orientated. Where product was produced it was always cleared off the marketplace. Particularly in the early days of the EEC those were mainly by intervention systems which was an open-ended pit, for want of a better word, through which all production which was surplus could be disposed. We had to balance our business, so therefore the industry itself had to control the volume and the standards of the product coming forward. I recognise that in some niche areas within our industry this is starting to develop in other sections, but that is up to them to consider how it works and particularly how committed other sections of processing and marketing are prepared to become with producers. We are aware that there are social aspects to the community here in the Province as well as the economic ones. Our big problem of late has been that the risks which are run are that if a collapse takes place, the proportionate impact can be considerably larger than it may be in some of the other sections of agriculture and the rundown may be much more sudden. As I say, our financial positions must improve if the industry is going to remain as it is. We were capable of producing the healthiest product, quality which will compare within anywhere else in the world, a range of product which surpasses most of the rest of the world. Our problem has been that when we come to the marketplace we are just not competitive. It is a question of arithmetic. Our physical performances are as good as any in the world. In fact as we can outline, we do outperform the American market, which is the home of all chicken production. There are areas in which, as well as the organisation internally, there are obviously areas in which the government can impact the health of the industry. 546. The Chairman: Yes, I would be interested in that. We are running to a tight schedule, but you have given us a good introduction and it has been very helpful. We would like to know what propositions you have put to the government in order to deal with this matter as you see it. We have the money thing, there may be some slight changes but I would not hold out too much about a radical change in the monetary relationship. There may be some lessening of the strength of the pound, but I can’t see that being so radical that it would turn the tide. I may be completely wrong but that is what I get from Europe when I am there, and I will be there at the beginning of the week again. There does not seem to be any move from the British government, because I think the British government would be afraid that the other previous governments interfered with the problem and got themselves into more trouble. So I think there would be big political questions there. Would be afraid that the pound would remain strong, maybe not as strong, but still we have a battle there. It is almost beyond us, that particular battle. You are really saying to us, Mr. O’Kane, it is when you have the job done you have an absolutely good commodity to sell. It is nothing to do with competitive standards, it is to do with the price of the world market which prices you out. Are there any other suggestions that could be put to the government on that. 547. Mr O’Kane: Yes, could I just make one further statement. Many of us in the industry, having experienced life within the EU with the UK standing out from the Euro, there is no way that we could survive on the UK going into the Euro area at today’s rates, but for long term prosperity within the industry a lot of us would contend we must be part of the Euro. By saying that, it is a currency matter, a trade matter. We don’t want it confused with harmonisation or otherwise of labour laws, of fiscal policies, of federalisation, but we contend that there is a relationship between trading and currency which should stand alone. If British industry wants to prosper, we need to change. Our reading of the situation is identical practically to your own insofar as value currency and probable movements in currency is concerned. 548. The Chairman: Well, if you could address that; what would you say to the government outside that? 549. Mr O’Kane: There are areas, and we make no apology for saying that we would wish to see conditions which are relevant to Northern Ireland as a region within the UK being applied. We think we have a valid and justifiable case for this. It has been a problem in the past and it has been a problem with areas within agriculture in addition to that with poultry. We would like to see our adverse feed cost disadvantage being addressed. We are hoping that there may be a relaxation at government level on this aspect of nationwide policy being applied. We would wish to have our adverse feed cost addressed. We are hoping that a precedent may be set very shortly on the low incidence BSE level. We would anticipate that there may well be situations where conditions within the Republic of Ireland might well be presented and promoted within Europe which don’t necessarily coincide with those which would be applicable in the remainder of the UK, but in the situations where we in Northern Ireland would benefit from such that hopefully through your different channels we would not be left aside and that sufficient sympathy could be applied to our situation in Northern Ireland, to be at least at no disadvantage against the Republic, and that every benefit could be had to offset this continuous disadvantage that we have could be addressed. Would you like me to say anything further on the meat side? 550. The Chairman: Maybe you would come in on these questions because my friends here would like to put some questions to you. First of all, Mr. Savage. 551. Mr Savage: Thank you very much for your presentation, gentlemen. I am very conscious of the problems facing you because one of the biggest broiler producers in Northern Ireland is my next-door neighbour. I am very conscious of the concerns that he has. There are two or three things that you highlighted. I read with interest your written presentation very closely. I can see the problems that you have in your industry are very much the same as what the problems are within the pig industry, with both of them running hand in hand together. I would just like to ask you something nearly related to it, because the stretch of water between here and GB means that there is a differential of about £15 to £20 a ton in difference in feed price. I think that is something that we are going to have to take on board very seriously. Is there a compensation mechanism for currency that is permitted within the EU regulations which you would like to see government avail of; and why do you consider government is unwilling to assist the poultry industry at this time. Do you think they don’t want to do it, or do you see any obstacles that they have put in your way? 552. Mr O’Kane: Yes, on the compensation there are mechanisms within the CAP to compensate other livestock producers. It does not apply to poultry. In the earlier days right through from, I think, 1972 (if that wasn’t the year we entered, it was about that time) there was a mechanism of monetary compensatory payments or amounts which adjusted the movements in currency values insofar as market prices were concerned. That worked very well, maybe not perfectly but it worked very well, but we prospered through those years in trading between the nation states within Europe and companies trading out. We worked that very well. I do not know the mechanisms within the community as why that was dismantled, but certainly when the single market came in and the Customs systems were dismantled they did not have the mechanism to continue that system. The agri-monetary compensatory payments which I understand were put in position to replace the mechanism which addressed currency movements in the previous structure, and that covered all agricultural products, when it came in it was put in on the basis of the structure of support within CAP. It did not embrace either pigs or poultry. We do not get the brown envelopes coming through the letter box every number of weeks to make up part of the shortfall. We are there purely trading without support, and it has just proven to be impossible because of the extent of the currency movements. We would very much like to develop somewhere along the lines which you are outlining in principle, but how Dr Paisley and his colleagues back in Brussels can get that done. 553. The Chairman: It is very difficult because we are coming now to the heart of what happened to our pig industry. It is the same thing. It would be a dreadful thing if we had a repeat of that in the poultry industry, and that is what really worries me about it. They washed their hands really of the pig industry until the question that we were putting to our Department was do you want to keep a pig industry; now, do you want a keep a poultry industry? I would have thought if we could get something done with this feed cost, which could be done more or less immediately, it will not save the situation but it could ease it. We need to go and perhaps at the meeting today with the Minister put it in her lap. She has a lot in her lap but that would be something that would be very important. 554. Mr Savage: I think something, Mr Chairman, whatever is going on in Spain and Portugal, there is no reason why it cannot work here. It may work in a different way but at least if there are means to do it there are ways to do it. I think that this is something that has to be pursued. 555. Mr O’Kane: Dr. Paisley, if I could come in on the background of that, my understanding is if we had made representations at the time of our entry into the EEC as it was, we had a good case which in all probability would have been accepted which has worked for Spain and Portugal, and in a somewhat similar manner has worked for the Scandinavian countries when they came in. But our problem was we were all newcomers to the EEC, we did not know the ropes to pull and we missed that opportunity. I believe that the Community has not been prepared to look back and grant us as a region something that they have granted to Spain and Portugal and to a certain extent in a slightly different manner to the Scandinavian countries. 556. The Chairman: Would you say that Heath was so keen to get us in that the negotiations — because we had very fierce debates in the House on that, why we did not have all the safeguards, and they would not even think of them. Wilson had a row over the payments, you remember, and then Mrs Thatcher succeeded in getting what he did not get. Now they want to go back on that, and that is where the battle is at the moment. Blair thinks that if he asks anything more that they are going to take it out on him on that. It is a very difficult one. This thing here is something that they could do, and I think with the sad happenings to our pig industry it strengthens our argument. 557. Mr O’Kane: Doctor Paisley, can I say to you just for the information of your Committee, and let there been no doubt, if it was not for the fact that the groups within the industry have supported the industry through taking losses, and serious losses which we have outlined volume wise, the poultry industry in Northern Ireland today would be in the identical same position as the pig industry is today. It is just a matter of how long is the industry prepared or capable of sustaining that. I do not apologise for saying that. 558. The Chairman: Well thank you very much. This has been a very interesting exchange and very helpful. We look forward to receiving your application to the Minister. We certainly would be concerned that there is not money coming to you from the Government and certainly we will be with you on that in trying to get that rectified. Thank you very much. Billy? 559. Mr Armstrong: Right. Thank you. In your opinion, do the supermarket giants support you in your initiative and in the products that you produce? Really what I am saying is that the product a few years back was of a good high quality, it seems to be that supermarkets now require a product of a different make up and it takes away the efficiency of the farmer that produces the product. 560. Mr O’Kane: Well I just might not present it as you have presented it. The position is number one, the most obvious factor, in Northern Ireland the main supermarkets, all of the major supermarkets, not one of them has a Head Office in Northern Ireland. When we want to go to talk to one of our big customers with anything relating to our business we either go to the Mainland or to Dublin. If you take them all, you have Tescos, Sainsburys, Marks & Spencer, Safeway, Supervalu, Dunnes, that might be them all, it might not, they all have their office of influence outside the province which does not help our case, whereas previously when we were going along to Castlereagh Road or wherever else we had a stronger case. On top of that, that has coincided with erosion of profits since they have arrived. There may be further problems down the road. We now have two discounters Aldi and Lidl coming in, two organisations who work for considerably lesser margins than the main supermarkets and that again will be a depressant impact on prices. We recognise that the supermarkets now are giving more support to local suppliers, I wouldn’t like to misguide the Committee, those who are working with the supermarkets are getting very substantial volume business, very important business, business without which we could not survive. The problem has been, number one, maybe very slightly different from what you were presenting, they have been pushing as champions of the consumer for higher quality products on the basis that the consumer has every right to expect the very best quality and demand such quality. They have imposed, with our support, those conditions and we are producing, but they are all at added costs. The trouble has been we have not been successful on passing those added costs and getting recompense for that. In addition to that, I certainly would not want this said too loudly. 561. The Chairman: We could cut this off, couldn’t we? 562. Mr O’Kane: Well anyway — 563. The Chairman: Just be careful. 564.> Mr O’Kane: Okay, there is still an amount of product coming and this has been well documented, there is still a lot of product coming in from areas other than the UK, products not produced under the same conditions or to the same standards at much lesser cost which have an adverse impact on the average prices in the market place. So therefore as well as having added costs in production side we are pressurised by products still coming in to the retail and manufacturing market at lesser cost than we can produce. 565. The Chairman: EU boundary, once it gets in, will come across the main boundary, that it is a very dangerous thing. 566. Mr Armstrong: How much better is the product that the consumer gets now than the product prior to say five years ago since the new regulations came in, that birds had to be in looser housing and the more environmental friendly bird, how better is that bird than she was getting prior? 567. Mr O’Kane: I would state that the product has never been better than it is today. All the conditions which have been imposed mainly by supermarkets have all been to the benefit of improved quality which the consumer has every right to expect and demand. We are not against that. The only thing is we contend that we are placed at a disadvantage by not having level ground to compete with our competitors. 568. Mr McHugh: Thanks, Mr. Chairman, I am certainly glad to hear the whole side of it in relation to poultry. It is not one field I was particularly sure of, but there are mirror images of yourselves with the pig industry, indeed with the whole industry if you take it at the producer level and that is where our concern would be from. You know, a lot of investment has went in at farm level in recent years by farmers, into white meat production with the notion that it was going to be the salvation versus the red meat side, a lot of personal money has went into it in farms in terms of turkey houses and they are very expensive. Now do you see that working out in the years to come in terms of future and where do you see farmers, what should they be doing at the minute, should they still be continuing to invest in that side of it? You know, this is part of the push for diversification. I would say that the Department here as compared to the South did not actually do as much to help farmers move into that side of things a number of years ago when it might have been more of an advantage than now? 569. Mr O’Kane: My reply there, Chairman, is up to the moment I do not know of any producers who have of recent times — now I must qualify, of recent times — who have gone into expansion with turkeys or chickens without the support of and encouragement of a group developer, nor do I know of any particular producers who have got into financial difficulties arising from that because they have been protected, they have been getting income right through all this crisis period recently. The risk is if the structure itself does not hold up, the risk to them is in the future, they have not taken any of the hardship up to now, it is down the road that if things don’t work out correctly. 570. The Chairman: Storm clouds are ahead. 571. Mr O’Kane: Yes. 572. The Chairman: Still to burst, I can see that. 573. Mr McHugh: In relation to the playing field, Mr Chairman, you mentioned level playing field, the supermarkets, I would also contend, the supermarkets have imposed conditions as has the beef industry, which all ended up being paid for by the producer rather than them taking part of that themselves and that that creates a major disadvantage for yourselves. I do not know what you can do about that, but in terms of organising yourselves I think you are a minority industry as far as agriculture is concerned. Have you any difficulty in trying to have a better future in maybe trying to get a bit more strength at your own farm gate level? 574. Mr O’Kane: Not at farm gate level, there is an area in which progress could be made, probably could be made. If we compare ourselves to the Republic, the supermarkets in the Republic are the same supermarkets as we have here and they are mainly British supermarkets, a lot of the big supermarkets in the South. In the North here we come in under the umbrella of their nationwide marketing as part of all UK so we are having our product sold in the retail supermarkets here in Northern Ireland the same prices as they are throughout the UK whereas we are in a higher cost production region than the other UK areas because of the feed differential. In the South that is somewhat different in that it is a different State, it is a different currency, they can break away from that nationwide pricing basis they can apply prices which correspond and are appropriate to the conditions in the Republic. We are putting our products into Northern Ireland stores at the same prices as we put them into the GB stores and they are being retailed at the same level, but we have that cost disadvantage whereas the supermarkets who bring mainland product in here have to pay the additional sea freight across on them. We do not get any recompense our seafreight at all. If they were prepared to sell their products at what I would call a Northern Irish price rather than the GB price, that would be of advantage but there are sensitive problems with that especially when we are supplying the same product to both our Northern Ireland stores and our GB stores. 575. The Chairman: I can understand that. One last question, Gardiner, time is up. 576. Mr Kane: Thanks, Chairman. Mr O’Kane, you say imports especially from non-European sources do not accord cost through animal welfare, traceability and environmental protection legislation as faced by our producer. What steps are you taking to ensure consumers are aware of these factors when making a choice as to which product to buy? Also, Mr. O’Kane, I take it that your organisation is well down financially, can you give this Committee a general figure of financial loss to your organisation from the BSE crisis commenced being up until to date? 577. Mr O’Kane: On the last part no I cannot from the BSE crisis, but we did give you a figure which we will stand over totally for this past year. Admittedly when you see the extent of that that was our worst year and by far no other year compares to that. Introspectively BSE was one of the worst things that ever happened to our industry because the euphoria that set into the white meat industries in 1996/97 just encouraged unreasonable expansion and that was one of the main causes to the surplus product which has come on to the markets in 1997, 1998 and 1999 and we have been paying severely for that. Sorry, what was your first point again, the environmental? 578. Mr Kane: Yes, that is correct. 579. Mr O’Kane: This is a big problem with us. I do not know how we are going to get round it. If the British market had been prepared to purchase product produced to their welfare demands only, we would have a much better chance of competing. You have seen this in particular with the pig industry and there is a lot of imported product coming in which does not meet those standards. We have the feeding regulations, welfare regulations and density levels all to our disadvantage. If we were competing on level ground we would have nothing in that area to complain about. We still have the currency, but they have serious advantages. 580. The Chairman: We have found this very helpful. And I think it was good for you to be with us and point out the seriousness of coming. Does any one of your colleagues want to add anything? 581. Mr Thom: I would just like to say as far as the egg production, that all that Mr O’Kane has said really refers to egg production as well. There is a contracted arrangement, the companies financed the whole thing and prices over this last 3 or 4 years have been atrocious, down below the cost of production. So all that has been said really does refer as well to egg production. 582. The Chairman: Right. 583. Mr McAuley: Chairman, if I may I add just perhaps a personal view, but to try to address some of the problems and in the interests of brevity just aiming at one particular thing, I believe that the feed cost is one major issue and you have discussed that one. It is also a major hurdle and has been for a long time. We must be realistic in how we may or may not get over that hurdle. There are other elements in the costs that are directly affecting production in Northern Ireland, a number of them and I do not need to go over them, but for instance our electricity costs and our diesel costs and haulage costs and so it goes on. I would have suggested that we should have a concern that the task force set up by the Minister which should be influential and I hope will bring some results in the medium to long term, may not address the short term. I would have hoped that the Minister could look for a facilitator to be appointed to look at the short term and that the short term issues are perhaps the issues that we can sit down and try to help with. But the issues such as the introduction of the climate change levy which will be introduced, should that be introduced into Northern Ireland where we already are suffering high electricity costs, is there any possibility that we can negotiate a separate deal on an issue like that? There will be other issues, the haulage issue in Northern Ireland, should we go forward with a special case to allow the hauliers in Northern Ireland to use diesel at the same price as our competitors in the south of Ireland? There are a number of issues and there will be many more, I am sure, that the industry could bring to the table and discuss. If the Government could bring together a very small group of people and perhaps just one facilitator in Government circles who would be there to adopt a "can do" attitude rather than a "can’t do". One example I would give you historically in recent times that perhaps we could have had a different outcome had we had that type of opening within Government would have been the debt crisis on the border in the pig sector that I know has been discussed many times. The South adopted the "can do" policy and managed to achieve a £1 million assistance package. We were faced with the "can’t do" attitude coming from the Minister. If the Minister had grasped the opportunities there was at least the possibility that working together with your colleagues in Europe that that single point could have been addressed North and South. We believe that it was killed off before it had a chance to actually be pushed forward. Therefore, it is a simple point perhaps but it would support anything that our Chairman here has stated today, and anything that we could do as a group to bring forward any innovative thinking on our side that might be applied elsewhere in the industry, if we had a vehicle, somebody who had that position to try to achieve something, we will not hold it against them if they don’t, but if they have an opportunity and they are focused to try to achieve something in the short term whilst hopefully the Task Force addresses the long term, I would make that point, Chairman. 584. The Chairman: That is a very good point because we will be meeting the Minister this afternoon on that very issue. We will put that to her, short term is the thing. Also I think this "can’t do" I mean, you go to the departments in Westminster and they all can do nothing. We have a battle royal with them and I said: Well you cannot do it until you make the application. With regard to Objective 1 areas now, we know the outcome was they said they couldn’t do it, we lost it. The South said, with an Everest in front of them, we can do it and they have it partly. Our fellows gave up, they gave up when they were out there, they all gave up and so did the two Ministers from here. I was in a meeting, we are not going to try for Objective 1. Well, the three MEP’s were all agreed that you do not give back, you try and you keep at it, keep at it, that is the way you do it in Europe, they did not do that. So I would agree with you fully, a facilitator who was a do maker would be the person. I do not know, of course, anything about this Steering Committee. We have not been taken into confidence by the Minister at all as some of us might think that they thought when this body was formed they better have something to confront us with. I may be wrong on that, but I have my suspicions that might be true. It does not matter, we have to gain something, it does not matter who gains it. It is something that is going to be for the better for the farmer and the better for everybody concerned. We have got to dedicate ourselves to that. I would like to thank you on behalf of my colleagues for your contributions. Thank you for being with us. If you want to enlarge on anything you have said to us today by letter we will be glad to have it. 585. Mr O’Kane: Thank you very much. 586. The Chairman: The meeting will now be closed to the public but the members of the Committee need to stay for a minute or two. MINUTES OF EVIDENCE Friday 9 June 2000 Members Present: Rev Dr Ian Paisley (Chairman) Witnesses: Mr M Hilliard, (Malton Bacon Factory Ltd) Malton Bacon Factory Ltd 587. The Chairman: Well, I declare this Agriculture Committee meeting of the Northern Ireland Assembly duly opened to continue the business that we commenced this morning. Welcome, Mr Hilliard. Could I say to you that the format we have been taking is a simple one, you make to us an opening presentation for ten minutes or so. We do not want to go longer because we have 40 minutes for each interview and then myself and my colleagues would like to ask questions. We will not have time for everybody, possibly we may have, but we have appointed three of our company to lead off in this. If we have more time, as we hope we will have because if we make it questions and not semi-speeches and you give us answers and not semi-speeches, we will go through a bit more. It is better for both sides to have that. So, if you would like to commence your presentation now. 588. Mr Hilliard: Okay, good afternoon, if I can just make the first point that I was actually contacted last Friday with a view to attending here today and I have actually been away on holiday, but I felt therefore it is still important for me to come and make myself available so perhaps a shorter speech to start off with and perhaps more questions later on. 589. The Chairman: We are sorry about that, but we felt we needed to have you here. 590. Mr Hilliard: It is no problem. 591. The Chairman: Thanks for facilitating us. We would remind you that we would have powers to draw you in, but we would not think of using that on a nice man like you. 592. Mr Hilliard: If I can introduce myself and my business. I am Chief Executive of Malton Foods which is the pig meet processing subsidiary of Unigate PLC. We operate across ten sites employing 7,000 people. One of those sites is based at Cookstown which slaughters pigs and employs 360 people. The total size of the business, £600 million turnover of which over £500 million goes to the major UK retailers. The remaining trading sales are made of manufacturing meats and offals generated through the slaughtering and boning operations, about half of which we export around the world to America, Europe and the Far East. That is really presenting the business that I look after. A few words about the state of the UK pig industry: I feel it is important to focus on what were the causes of the losses that have been borne by pig production and pig processing over the last 2 years. It effectively started on the back of over-production, the oversupply of pigs. I think one could identify that that arose from profitable years of pig production in the mid-90s to late s particularly influenced by the outbreak of BSE. We had demand driven price inflation for raw material on the back of the consumer switching out of beef and switching into other proteins. Certainly the pig industry benefited from that and there was extra demand which pushed the price up and gave producers better returns. That was followed quite shortly afterwards in 1997 by disease problems around the world - outbreaks of Foot & Mouth in the Far East in Taiwan, a major exporter to Japan; and perhaps more recently Swine Fever in Holland. That effectively created a period of time where we had supply driven inflation again. On the world markets suppliers disappeared, an entire herd was destroyed by the Army in Taiwan, to put it into perspective, and that obviously buoyed the prices around. Against just as farmers were putting more product down, difficulties elsewhere within the industry, an opportunity particularly in the UK to enter pig production with local capital investment compared with previously because of outdoor pig production where people could rent land and put pigs out there, we saw more pigs coming through, not just in the UK but across the whole of Europe. We ought not to kid ourselves that it was other EU countries that brought this upon us, we saw the same herd expansion at home. All these extra pigs came on to the market when we started to experience problems in the export markets, Russia effectively closed down. We have to remember that a third of all the exports outside of the EU went to Russia. We saw a slowly strengthening pound. The expanded herds, just to put it into perspective, we would typically expect the EU herd to be 285,000 pigs per week - it rose to 325,000. Denmark, typically averaging 360,000 pigs per week rose to 425,000. When we started to really experience problems that were particular to the UK, we had the welfare legislation that banned domestic production systems incorporating stalls and tethers. The UK industry invested over £200 million of their own money, farmers, to take those systems out to meet the unique UK legislation. So it certainly caused them a problem that when the losses came along their financial status had already been undermined by having to make that investment. It was also on the back of reports that a lot of farmers might not make the investment to go out of business that when farmers did make that investment they actually took the opportunity to increase their herd size. It became a bit of a vicious circle that people invested into the new system, not as many people did go out of business on the back of good times therefore that added to the increased number of pigs coming through to the UK. The second and major problem that we face today within the industry is the exclusion of meet and bone meal from our ability to further process that into animal feed. If we put into context the losses that the British pig farmer has suffered, on average I would calculate that a farmer has lost over £10, just over £10 on every pig that he has sold for the last 2 years. The cost of the BSE taxes, as we referred to it, with no connection between BSE and pigs we have the banning of porcine meet and bone meal from further use in animal feed. That is calculated to cost the industry £5.25 per animal. So to put it into context, more than half of the losses that the British pig farmer has sustained have been down to just one element and that unfair banning of the inclusion of meet and bone meal within feed. Then we have seen up until recently, the Pound gaining strength against the week Euro and that has made it doubly difficult for processors and producers making it very difficult to export. But in a country where we are only 70% self-sufficient and with plentiful supplies of European pork it has only served to cheapen imports. The impact of that has been today that we see the UK herd falling away quite critically very far, very quickly and we are currently down to below 240,000 pigs a week being slaughtered. That is 15% down on last year’s weekly average. If we look at what is happening on the Continent we see the Dutch herd down only 2% and absolutely no change in the Danish herd, if anything it is going to rise. The situation we find ourselves in as an industry now is that farmers are returning back to profitability as the supply of UK pigs falls away. The losses now are shifting on to the processing industry once again. We have a situation now where abattoirs are fighting for the pigs. Most abattoirs are now down to the equivalent of 4 day working and a British pig today commands at least 20% premium over its Dutch and Danish equivalent. |