The Northern Ireland Assembly - Report on Retailing in Northern Ireland

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
INQUIRY INTO DEBT IN THE AGRICULTURE INDUSTRY
WRITTEN SUBMISSION BY: TESCO

Thank you for your letter of 28 January. I can confirm that representatives from Tesco will attend, as requested, a public meeting of the Committee for Agriculture and Rural Development on Friday 11 February, at 10.45am.

Please find attached two memoranda, one outlining Tesco procurement policy in general and one dealing specifically with potatoes.

Unfortunately, I shall not be in Northern Ireland on the 11th, but senior colleagues will be attending in my absence. The Tesco representatives at the meeting will be:-

Mr Cliff Kells Northern Ireland Commercial Category Manager
Mrs Gwynneth Cockcroft Davidson Cockcroft, Public Affairs
Mr Peter Timoney Northern Ireland Finance Manager

They will be accompanied by a representative from the Tesco designated potato supplier in Northern Ireland

Thank you for your helpful notes on the Committee, and its procedures. I am conscious that your original letter emphasised the need to find a way forward for the agricultural industry in Northern Ireland. With this in mind, I should like to offer our co-operation in endeavouring to find practical and sustainable solutions to the problems currently encountered in an increasingly global retail market.

We firmly believe that our position as the number one retailer in the UK has been reached as a result of our complete customer focus. We would be willing to share this consumer understanding, plus relevant research and technical expertise should the Committee feel that this could be of benefit.

We would also be pleased to participate in any discussions pertaining to the development of customer-orientated agricultural strategies and have listed some suggested topics regarding potatoes in our memorandum on the subject.

I trust that the attached submissions, and forthcoming meeting, will be of assistance to the committee in its analysis of the issues, and development of potential solutions.

In general Tesco does not deal directly with farmers, although there are a few exceptions. Our direct contact is normally a supplier in the form of a processor or manufacturer who has negotiated overall terms with us and who, in turn, negotiate individual terms with each farmer. However, our local procurement policy supports hundreds of farmers across the province spanning all of Northern Ireland’s agricultural sectors. Suppliers range from small specialist producers right through to large companies most of whom in turn, source their raw materials locally. In addition some of these larger companies are major suppliers to Tesco GB.

1. Our procurement policy is to source locally wherever possible. With the exception of a few speciality products our local sourcing commitment is as follows:

2. At present, Tesco spend more than £220 million per annum with local suppliers and is on target to increase this to more than £290 million by the year 2002. Tesco also has an office in Belfast supporting our 7000 local employees. All of these staff are dedicated to supporting local suppliers and producers to meet the needs of our customers.

3. Since our entry into the market, Tesco has invested heavily in store refurbishment, new stores and a new distribution infrastructure which facilitates local procurement of fresh agricultural products.

4. Over the last two years, Tesco technologists and the local Tesco team have forged links with local producers, agricultural colleges and universities with the aim of encouraging product development. We have done this through practical and financial support.

5. The company is part of a trade development group, originally set up by Tesco, consisting of representatives from DANI, IDB, LEDU, CBI and the Northern Ireland Food and Drink Association.

The last decade has witnessed fundamental change in the Northern Ireland potato market. Consumer expectations, purchasing habits and consumption patterns all continue to evolve to reflect lifestyle changes. We have sought to address these changes by working in partnership with local suppliers. This has resulted in a clear and ongoing commitment to source as much as we possibly can from indigenous potato producers.

1. Our supply partner for fresh potatoes is Wilson’s Country Potatoes. Since this relationship began, Wilson’s Country has grown into a significant business, employing 90 local people.

2. Our policy is to source our fresh potatoes from Northern Ireland. From time to time, however, to meet customers’ range and quality expectations, we supplement our local offering with imported varieties, not available locally.

3. Through Wilson’s Country, we have worked with local growers to enable them to meet the specifications now demanded by our customers. This is particularly the case with washed potatoes, which now constitute almost two-thirds of our overall fresh potato sales, and is helping local growers to produce to internationally accepted standards.

4. In relation to further-processed potato products, we have developed strong relationships and growing business with key local companies in areas such as crisp and frozen chip manufacture. We do this through the promotion of indigenous local brands and, in the last year, following intensive technical support, the launch of a number of locally-produced Tesco brand products.

5. We have worked in partnership with government departments such as DANI and together with Loughry College have pioneered the development of traditional products, such as champ, into a new and convenient format, in order to meet the changing needs of our customers.

Tesco are prepared to work with the committee and with the broader agricultural community to provide practical assistance in various key areas, and we would suggest the following as potential topics for discussion:

2. Provision of adequate storage to extend the season for locally-produced potatoes.

4. The development of a local (and international) marketing strategy for Northern Ireland potatoes.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
INQUIRY INTO DEBT IN THE AGRICULTURE INDUSTRY
WRITTEN SUBMISSION BY: LIVESTOCK AND MEAT COMMISSION FOR N I

I refer to your letter of 17 December to our Chairman on the above subject. In responding to your enquiry, we should start by advising that in general our role does not involve us in having a particularly high awareness of the levels of debt within agriculture as a whole. Indeed, with the exception of a few approaches which farmers have made on a private and confidential basis for advice, our awareness of debt levels in the beef and sheepmeat sector is also limited.

It was clear in each of the individual cases where approaches have been made to us that high debt levels had been incurred through the acquisition of agricultural land for beef and sheepmeat production at prices which were clearly not sustainable on a stand-alone basis for such a business. In each case, it seemed unlikely that banks would have granted facilities for such asset purchases without having a lien on other assets of the particular farmer.

Within our particular sectors, while the levels of profitability have been substantially curtailed and the values of livestock have significantly reduced over recent years, it is still generally possible for producers to cover their costs. The transitional period to the current low prices have of course resulted in some individual cases, particularly of beef finishers, where working capital borrowings have not been fully discharged on the disposal of stock. We conclude, however, that within our sector, the most significant reason for debt problems have been where significant asset purchases have been made.

In order to explain the current situation, we have prepared the attached business model which looks at the current year prospects. The model demonstrates that for a typical Northern Ireland specialist beef farm, a small profit can be achieved, but this profit is scarcely adequate to service the investment in "liquid assets" (stock and machinery). The model concludes that the value placed on land for beef and sheepmeat production should not exceed the amount required to be invested to generate an average industrial wage of £16,000 per annum. Since the model concludes that a land area of 120 acres is necessary, it is difficult to see how a land value of more than £1,000 to £1,500 per acre is justified. With land values remaining throughout Northern Ireland at levels of three and four times this value, it is difficult to see how land, buildings or other major asset purchases can be financed.

Throughout this period of declining fortunes for beef and sheepmeat producers, you correctly identify the reluctance which Government has displayed to take up EU aid which might be available. Agrimonetary compensation is the prime example. This reluctance of course is due to the effects which it would have on the UK rebate and on the budget when the UK Exchequer is required to make a direct contribution. Agrimonetary compensation, however, is only a transitional support while currencies are undergoing change relative to one another. While it would be helpful to alleviate debt in some instances, if Government were to be persuaded to retrospectively make these payments, they do not in themselves reverse the conundrum which we face in the future. We have an industry which needs reorganisation to improve competitiveness, and yet asset values as they are at the moment do not allow that reorganisation to take place.

We recognise that the circumstances in other sectors may be different, and indeed in some sectors we understand that current costs are not being covered by market prices.

In writing, we are conscious of the evolving Govermental arrangements within Northern Ireland. We are keen, at an appropriate time, to ensure that the Committee for Agriculture and Rural Development has a suitable level of knowledge and understanding of the work of LMC. We would like therefore to extend an invitation to the Committee to visit us at our offices at Lissue House. We would propose to make presentations about the various aspects of our work and focus on some current issues within the beef and sheepmeat sectors. Perhaps you would raise the possibility of such a visit with the Committee and if there is agreement in principle, we can agree a mutually acceptable date.

50 Suckler Cows @ 1.0 Livestock Units each
50 Calves up to 1 year @ 0.3 Livestock Units each
50 Store Cattle 1-2 years @ 0.6 Livestock Units each
150 Cattle 95 Livestock Units

50 cattle per year
Average age at slaughter 2 years
Average carcase weight 300 kg
Average sales price (after expenses) £1.50/kg
Average grad 0+3
£450 per animal x 50 £22,500

Suckler Cow Premium
50 @ £115 (assumes Objective 1 supplement) £5,750
50 @ £21 (extensification) £1,050

Beef Premia
25 @ £76 first stage £1,900
25 @ £21 first stage extensification £525
25 @ £76 second stage £1,900
25 @ £21 second stage extensification £525
50 @ £17 Slaughter Premium £850
25 @ £20 Heifer Slaughter Premium £500

Cow depreciation £1,250
£25 per cow per year
Concentrates
£50 per head for cow + calf + store £2,250
Veterinary/Medicines
£5 per animal per year £750
AI Fees
50 @ £15 £750
Building Depreciation/Repairs
£50,000 @ 2% depreciation + 1% maintenance £1,500
Machinery Depreciation/Maintenance
£50,000 @ 8% depreciation + 2% maintenance £5,000
Labour
Average NI industrial wage £16,000
Fertiliser
120 acres @ 150kg/acre @ £110/tonne £2,000
Fuel, Electricity, Telephone £1,000

Even to invest these "liquid assets" at current rates of just over 5% this would yield profits of c. £5,375 as against the profit of £5,000 shown above.

1. To collect extensification premia as set out in the model, the minimum area of land required is calculated as:-

2. Land used for beef production has a value equivalent only to the investment necessary to generate average industrial wage of £16,000 per annum. This realistically cannot be more than £1,000-£1,500 per acre. Even assuming that, no other job is available which is a suitable match for the skills of the beef farmer.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
INQUIRY INTO DEBT IN THE AGRICULTURE INDUSTRY
WRITTEN SUBMISSION BY: NORTHERN IRELAND MEAT EXPORTERS’ ASSOCIATION

You wrote to our Chairman, Mr Colin Duffy on 17th December 1999, regarding the inquiry into the debt in the agricultural and fisheries sectors in NI. I am responding to your letter on behalf of Mr Duffy and the NI Meat Exporters’ Association.

The membership of the NI Meat Exporters’ Association is made up of the majority of the EC Export approved beef and lamb slaughtering and processing companies in Northern Ireland.

While it is the brief of your committee to ascertain the level and extent of debt in the Agriculture and Fisheries sectors, that is not a subject which this Association feels competent to discuss. Our remarks will therefore be confined to pointers for the future which we believe will contribute to a strong rural economy and ensure a viable rural programme and community life.

This Association believes that now is the time for major changes to take place in Agriculture to safeguard the rural community life. Over the past three years we have seen the Pig Industry almost wiped out. This has not just been a NI problem, in fact it is a world-wide problem with over production in every country in the world. In the light of this it is not terribly sensible to give producers false hopes of better things to come when the problem exists to the magnitude it does and on such a world wide scale. Local consumers may talk of supporting home produce but when it comes to value for money that philosophy tends to be forgotten.

The beef industry is not all that different. Over 70 pieces of legislation on top of what was there before, have been introduced to the processing sector since 1996 and all of them have added cost upon cost to the industry, leaving NI one of the most uncompetitive regions of Europe. The fact that so much red tape surrounds any attempt to begin to market our way out of the situation is strangling the industry from its full export development potential. Currently less than 50% of cattle in NI have export status due to documentation and administrative problems on farms. This is a very poor image of our quality standards and our ability to demonstrate to consumers a high degree of management. It does nothing to instil confidence in those quality niche markets that we once enjoyed prior to BSE. No matter how good we think we are we need to set our sights much higher. Like every other part of the food industry farmers must accept that more accurate paperwork and maintenance of records is a necessary part of any future development of the food industry.

In recent years in the sheep sector over 50% of the annual lamb crop is smuggled to the ROI leaving processors here in a weak development position to add value and thus improve returns to farmers. In 1999 around 580,000 lambs were processed in NI out of an annual crop of around 1.5 million. The loss of levy revenue to LMC on these lambs is also a major financial problem, money which is needed by the LMC for promotional activity in respect of the sheep sector.

Any future strategies to improve the situation for producers and processors must take account of the demands of the consumer whether we like it or not. There is little point in producing anything that has to be sold at a discount price just to get rid of it. All future production should be linked to quality market criteria so that the highest prices can be achieved for the maximum amount of product rather than 50% of the right product subsidising 50% of what somebody just wants to produce. For instance last year between April and September 37,700 cattle were classified in the undesirable grades for any quality specification and had to be simply traded at discount prices to find an outlet for them. While this is mainly a breed problem a further 9,400 cattle in the same period were produced at fat class 4H or 5 totally outside any quality specification and purely as a result of farm management. These facts have to be faced and action proportionate to the problem taken to improve the quality of NI production.

Traceability, Farm Quality Assurance, Livestock Chain Management, Farm Auditing and the Red Meat Strategy, are all part of the future food production systems and there needs to be a much more pro-active attitude on behalf of everyone to secure our own future. It may not be attractive and it may be more bothersome, but if we cannot deliver what the consumer wants then there is no point in crying for Government help. It is absolutely essential that all farmers take seriously the demands being forced upon the industry, no matter how unpalatable, to ensure that NI can have the edge in the food industry of the future. It is either that or close the door. It is no longer adequate to adopt the attitude of "I’ll do it my way".

Like New Zealand and every other Agricultural country in the world that has been forced to grapple with the same problems, it has to be accepted that those who choose to ignore the demands of the consumer are writing their own exit strategy from the industry. There will be casualties but it will be confined to those who do not want to keep abreast of an efficient 21st century food production industry. It is therefore our opinion that the Government should introduce a forceful rural education programme urging everyone in the rural areas to meet the challenges of the future and rise to the demands and standards being made by those who ultimately buy their produce.

No-one has any desire to see the demise of the rural hinterland and therefore the proper management and development must be in place so that production can be adjusted to meet the current demands of quality and consistency. Farming structures probably need to change to meet the demands of the future and we believe that there is a viable future for those who decide they want to be part of it. It is our opinion too that this is the best way to insure against future debt in this sector. We accept that some of these points may be far reaching but we also believe that we do not do anyone any favours by just moving from one crisis to another. There needs to be planned development based on quality production to ensure a sustainable rural future. Production is currently fragmented and there is little by way of co-operative production and marketing. There needs to be major changes in this area so that input costs can be reduced further still to the benefit of everyone.

While these points may on the face of it seem to be a bit radical and far reaching nevertheless we believe that there has to be radical changes for everyone if we are to establish a future for NI Agriculture.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
INQUIRY INTO DEBT IN THE AGRICULTURE INDUSTRY
WRITTEN SUBMISSION BY: ULSTER AGRICULTURAL ORGANISATION SOCIETY LTD

Thank you for sending me the terms of reference for the enquiry by the committee.

As discussed on the telephone they are probably not relevant to our Biogas project. However I do believe that we can respond to the final term of reference by outlining positive steps that have been and can be taken by producers to help alleviate the situation. It will not happen, though, without commitment and support.

1962 President J F Kennedy ‘Farmers are the only businessmen who buy retail and sell wholesale’

We would be delighted to make a short presentation outlining the positive contribution marketing and purchasing co-operatives have made and can make to:

We look forward to the reconvening of the committee and the opportunity to put forward positive and innovative ideas.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
INQUIRY INTO DEBT IN THE AGRICULTURE INDUSTRY
WRITTEN SUBMISSION BY: NORTHERN IRELAND POULTRY FEDERATION

You have written individually to several of our members within the poultry meat sector. As the representative body of our industry we have been asked to formulate a common response. Individual members of our association may also wish to highlight issues separately. We would wish to make the following points.

The levels of loss which have been sustained in the poultry meat sector over the last 2-3 years are as serious as the much publicised situation within the pig sector. The sole reason that this has not received the same publicity is that the losses have been carried by the processing companies. Producers have been sheltered from the hardship of the market place under the terms of their producer contracts with processors. However the current situation is unsustainable. If the current level of losses continue and any of the three larger companies were to go out of business, the consequences will be sudden and dramatic. The processing sector employs over 5000 people directly. In addition over 1000 farms derive some or all of their income from production of meat or breeding birds. These farms tend to be small family enterprises which would have little in the way of alternatives should their poultry unit fail; especially so with agriculture in such a depressed state.

As with many sectors of agriculture the strong pound has resulted in a flood of imported European and third world product entering the UK at prices below local production costs. Such imports now represent nearly 40% of UK poultry meat consumption (source BPMF) compared with the situation a few years ago where an exportable surplus was produced. Indeed the processors in Northern Ireland have been obliged to use a significant amount of imported product for further processing, without which their financial problems would be much worse. Local production levels have been maintained only by virtue of the expanding overall market, subsidy of farmers by the processors and some success in developing niche markets for speciality type products such as free range and organic.

Northern Ireland has long suffered from a relatively higher feed cost. This stems from transport costs in importing raw materials and higher energy cost in the manufacture and distribution of feed. It is estimated that these additional costs amount to some £15/tonne compared with GB or mainland Europe. For many years the industry has managed to absorb this premium through extra efficiency and production advantages based on the high health status of its stock. However, it has now an additional cost burden which uniquely penalises the Northern Ireland industry.

The industry has been burdened with a plethora of additional costs in recent years which are damaging to our industry in a market where we compete with imported product, especially from non European sources, which does not have to incur these costs. Examples include the ban on the use of meat and bone meal, on the use of antibiotic growth promoters and legislation relating to animal welfare, traceability and environmental protection. The industry does not disagree with the need for some of these measures, especially where they impact on food safety, but we find it iniquitous that imported products are able to evade the need to comply with these requirements and the on costs stemming from them.

We hope we have made clear that a very real threat to the continued existence, at the very least, of the primary production sector of the Northern Ireland poultry industry exists. Such a loss would deal a savage blow to the local economy. The important role of the small family farm which our industry supports should not be underestimated. It both assists in maintaining a viable rural economy and sustaining a strongly work focused labour force which is also available to other local industries.

We request that the Assembly should urgently consider the introduction of the following measures:

The industry recognises that assistance to producers has been made in an attempt to offset the current crisis in agriculture under Commission Regulation (EC) No2808/98. These forms of agrimonetary compensation to producers are not directly available to the intensive sector. Additionally we do not see the current remedies as being adequate either in scale or nature to redress the problem. In the past the financial traumas affecting trade in the food industry arising from movements in currency values have been addressed by a system of "Monetary Compensatory Amounts" (MCA’s). This system was developed by the commission in the 1970’s under Regulation EC 974/71. The aim of this regulation was to "remove any advantage or disadvantage to traders which can result purely from currency changes, and to act as a balancing factor in trade between countries with different currency values". We argue that the current situation is so grave that the application of a scheme along these lines, which directly relates to trade, rather than to producers is urgently required.

Firstly a scheme aimed at overcoming the differentiation between GB and NI perhaps via creating intervention storage within Northern Ireland or allowing imports of third country grains at tariffs which result in Northern Ireland prices replicating average UK prices — (this type of scheme is already in operation in Spain and Portugal and details are attached as Annex 1).
In the medium term we should seek to replace direct price support for cereals with a support system for farmers which is not based on a guaranteed price for grain. This would allow grain prices to fall to world market prices and thus allow our poultry farmers to fully exploit their competitive advantage in terms of production efficiency.

It seems anomalous that the end product of the intensive livestock production chain exists in a situation where it is exposed to world-wide competition, whereas an intermediary in this chain ie, the cereal producer, enjoys the luxury of a guaranteed price for his product.

We request that grant aid towards interest payments is made available to the poultry industry. We understand that such aid is under serious consideration for pig producers in the Republic of Ireland and may also become available in Northern Ireland.

We request an increase in the allocation of funding towards assistance into capital expenditure, research and development and training for companies involved in the sector. This will help the industry maintain its position as a leader in innovation and product and process development.

The Northern Ireland Poultry Industry is highly integrated and is recognised world wide to be an extremely efficient industry.

Unlike many parts of the world practically all production is carried out by bona-fide farmers.

The nature and scale of the problem is such that political input will be required to redress the problem.

In the light of these extreme problems we request a meeting with the Chairman or with the Agricultural Committee as soon as possible to discuss these matters further.

W P O’Kane OBE
Chairman
Enc.
1. Summary.
2. Annex 1 Details of "Abamiento System"

Submission by Northern Ireland Poultry Federation to
Committee for Agriculture and rural development

The poultry industry is the largest employer in the Northern Ireland food sector. The sector has been unprofitable for several years.The reason that this has not been highlighted is that farmers contracted to the industry have been supported by the processing companies.With a level of loss now estimated at over £12m/annum, the situation is reaching crisis point.The reasons for these losses are detailed.

This scheme is operated by the EU and grants the above countries the right to import non EU grain.Normally such imports incur a tariff which would result in the net price to the end user being much higher and so uncompetitive with grain of EU origin.In this case a concession allows import of a fixed quota (currently 2.2 million tonnes/year) at a much reduced tariff.The tariff is set so that the imported grain is sold at an identical price to that prevailing in Spain or Portugal at that time.Thus the price paid to local producers is not disrupted but the country is not disadvantaged by having to use more expensive imported grain.
It is our understanding that had NI had direct representation at Brussels available in the past, then an equivalent scheme to that in Spain and Portugal would have been open to NI.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
INQUIRY INTO DEBT IN THE AGRICULTURE INDUSTRY
WRITTEN SUBMISSION BY: NORTHERN IRELAND GRAIN TRADE ASSOCIATION

Following a number of lengthy reports NIGTA wishes to respond to the single question of examining alternative proposals for addressing problem of debt.

All other issues have been addressed in the past and NIGTA would suggest that the Department of Agriculture and Rural Development is best placed to produce any verifiable statistical information.NIGTA would also contend that they are not aware of any initiatives that are being taken by the Department to alleviate debt.NIGTA would suggest that urgent short-term measures are desperately needed to allow enough time to address the longer-term problems facing the industry.Short-term measures should be focused on reducing the burden of debt and its ancillary costs.NIGTA would seek a change in attitude whereby DARD should continually utilise all resources to find solutions rather than emphasise obstacles.NIGTA would request the Minister and all members of Government utilise ingenuity in their approach to problem solving.

As secondary bankers to agriculture NIGTA members are keen to play a full role in any discussions to alleviate debt believing that there is an opportunity to reduce farm input costs further if the debt burden can be realigned.

NIGTA contends that the opportunity exists to seek special terms for Northern Ireland to assist the Peace Process, but it also contends that opportunity exists to utilise self-help to reduce the problems associated with the debt burden. Immediate consideration should be given to the following:(1) Emergency assistance for the pig industry to alleviate the losses incurred as a direct result of the fire at Lovell and Christmas. Losses of £10 million were directly attributed to the fire and were over and above the losses incurred as a result of a falling market. This figure is established by measuring the normal differential of Northern Ireland versus UK prior to the fire against the additional differential following the fire. NIGTA would contend that the European Union should recognise the benefit of backing this proposal, as close association with the Republic of Ireland on this issue would demonstrate that the Peace Process could bring advantages. The current DARD response is that the Welfare Scheme addressed this issue, that is not the case as it only addressed the Welfare problem on farm, and it was never anticipated that the losses directly because of the fire would reach £10 million.(2) Maximum effort by all Government departments and the IDB in particular to find a way of offering direct assistance to the poultry processors to help them retain their Northern Ireland production base.(3) To seek a regional status to allow Monetary Compensation to be paid in Northern Ireland.(4) To pursue the proposal of an interest relief package for Northern Ireland farmers.(5) To immediately utilise the Ministerial position to bring about round table discussions of influential people that could materially assist the farming industry.

(6) To introduce and support an influential body based on the outline of An Bord Bia.

To develop relations with the ‘achiever’ Nations in Europe to bring the Northern Ireland dimension into focus.To develop dialogue that enhances the principals of fair-trading within the European agricultural policy.

To develop dialogue with other nations to seek support to reduce the price of grain to world prices, thus allowing the competitive production of meat products within Europe.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
INQUIRY INTO DEBT IN THE AGRICULTURE INDUSTRY
WRITTEN SUBMISSION BY: NORTHERN IRELAND GRAIN TRADE ASSOCIATION

The integration and partnerships within the Poultry sector have addressed the issue of minimising cost. We would recognise that integration and/or partnerships can help sustain businesses through the difficult times.A facilitator with a ‘can do’ philosophy within the Government and Department of Agriculture and Rural Development could play a leading role in bringing food industry players together for the common good.

Northern Ireland faces, currency, geographical and input cost disadvantages.While losing money, the Poultry sector has faced these problems without stopping their technical advance and product innovation.(A) The single biggest issue facing the industry is currency strength with particular reference to Northern Ireland, because of the land border with the Republic of Ireland. Mechanisms already exist within an EC context (monetary compensation) and where mechanisms do not exist they could be sought by government eg the Republic of Ireland’s scheme in 1983 which was geared towards exporting companies.(B) The Government should appoint a facilitator with appropriate resources to seek out opportunities and bring them to the support of the farming industry. The specialist knowledge held within DARD should be utilised as a positive force rather than the negative force that we have seen in the past. Opportunities for co-operation with other member States will occur and a facilitator working closely with the agricultural industry should be tasked to find a way through the difficulties that will also arise.The agricultural industry needs to know that they have access to a positive thinking office within DARD. The most recent example of what might have been achieved by this approach is demonstrated by the £1m debt plan to assist the pig producers in the ROI, who were affected by the Lovell and Christmas fire.(C) The farming sector and all manufacturing industries within Northern Ireland suffer from the high cost of electricity. We would propose that Northern Ireland should be made a special case when applying the Climate Change Levy. The level set for Northern Ireland should be reduced to reflect the premium already being paid in Northern Ireland.(D) The haulage and fuel industry is being decimated by the difference in fuel prices across our land border and this is having a major knock-on effect to the agricultural industry. We would propose that Northern Ireland should seek a dispensation on diesel and road tax, for use in Northern Ireland, to allow prices to equate to ROI prices.(E) The intensive sector in Northern Ireland face input costs of between 5% and 10% higher than GB, they face input costs of between 15% and 20% higher than the USA. The grain regime in the EU has an intervention base price that keeps the price of grain high to support grain farmers and the EU uses restitutions to allow the export of that grain at World prices. The result is that the livestock industry pays an inflated price for its raw material and gets no assistance on exports or protection on competing imports. In the USA the grain farmer gets world price plus a guarantee up to a minimum price. The livestock industry, get grain at world price cheapening their produce and assisting their export potential. The Government should seek to match this system allowing the livestock producers an even playing field in a bid to export value added product. Failure to match the American system will result in the collapse of our intensive sectors in the longer term.(F) A long term Government Loan Scheme which would offer low interest rates and an opportunity for farmers to re-structure their business should be considered.

(G) The other issue which would make a difference would be the effective labelling of food products as having been produced in the UK (primary production). Existing proposals have been watered down due primarily to supermarket pressure. The Food Standards Agency should help educate the consumer regarding countries where products are sourced and the production methods in those areas.

Quality produce is being sold to the buyer and is therefore competitive, however the producer may be making a loss to achieve the sale.Poultry imports are achievable at a significant discount over home produced products, and may not have been produced to the same standards as this country.Many factors mitigate against a GB producer and additional costs burden a NI producer. Some of the added costs are Government imposed, the Government should pay compensation when they exceed EU standards.

Across a range of parameters from welfare standards (pig industry) to bacteriological status of product (poultry) to meat quality (beef and BSE status) the produce of the province is of an extremely high standard. NI cannot compete with commodity prices, only niche markets are sustainable for home-grown produce.

Where the processor fits into the price gap from the farm gate to the consumer

While the food retail index has followed inflation over the last decade, farm incomes and processor incomes have seen a major decline.

The evidence suggests that processors are losing money or not making an acceptable return. This is demonstrated by losses within the major processors in Northern Ireland and the knowledge that major PLC processors such as Glanbia, Kerry, Malton would welcome discussion with any concern interested in stepping into processing.

Partnerships and integration within businesses can offer efficiency, however co-operatives agenda does not always equal efficiency.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
INQUIRY INTO DEBT IN THE AGRICULTURE INDUSTRY
WRITTEN SUBMISSION BY: WILSON’S COUNTRY LTD

Please find below information required by the Committee following the proceedings on Friday, 11th February 2000.

POTATOES SOURCED BY WILSON’S COUNTRY
August 98 – July 99
	NI	ROI	GB	GB M.PIPER	CYPRUS	TOTAL
%	71	11	5	11	2
August 99 - July 00 (estimated sales)
%	73	10	5	10	2

1. Product from ROI is used to introduce the early new set-skin season and bridge the gap between the local old season and new season.2. Maris Piper is difficult to grow in NI due to common scab and slug susceptibility, yet it is recognised by consumers as a premium tasting potato.3. Cyprus potatoes are offered to consumers as a new potato before our local new potatoes are in season.4. 5% GB product is imported to supplement our local crop.5. As a company, we are actively involved in working with growers to develop local growing of Maris Piper and extending our local season, hence the increase in NI % for this season.

Ulster Farmers’ Union – Paper on issues to be addressed in the local agri-food supply chainAssembly Research and Library Services – Paper on Farmgate and Retail Prices

ULSTER FARMERS’ UNION
ISSUES TO BE ADDRESSED IN THE LOCAL AGRI-FOOD SUPPLY CHAIN

The Ulster Farmers’ Union would highlight the following key issues which farmers feel need to be addressed in the local agri-food supply chain.

Farmers are greatly concerned at the huge mark up between farmgate and retail prices for many commodities. For example top grade beef cattle are valued at c. 174p/Kg. In the supermarket sirloin steak retails at c. £11.80/Kg. Pig producers receive about c. 68p/Kg for their pigs. Pork fillet retails at c. £8.00/Kg. More transparency is needed in the Agri-food chain to ensure fair pricing structures are in place.

Proper labelling of Northern Ireland produce is crucial. The retail sector has not properly addressed this issue. Primary produce can be imported to NI, processed and labelled as "sourced in Northern Ireland". The local pig industry has suffered particularly severely with exceptionally high welfare standards not being promoted. What plans have retailers to clarify labelling procedures?

The current strength of sterling has seen more and more produce imported to Northern Ireland. Are retailers committed to Northern Ireland suppliers and the quality they can provide, or is price the key factor? Can they confirm that the quality and welfare standards of imported product matches local produce?

Costs of production for farmers in Northern Ireland are extremely high. Compliance to a whole range of quality assurance schemes has heaped extra cost on producers with little marketing advantage apparent and certainly no premium. Currently a farmer in Northern Ireland could spend over £600.00 registering with Quality Assurance Schemes. What future co-ordination can be introduced to maximise the benefit of these schemes and minimise the administration/cost/auditing involved?

Trust and confidence is at a very low ebb among producers in many commodities. What plans have retailers to instigate proper supply chain management and build up a more positive relationship with the primary producer?

We believe decisions taken by central policy makers, based in GB, do not always reflect the situation "on the ground" in Northern Ireland. We believe the major supermarket multiples should adopt a regional policy to better reflect market conditions in the Province.

We are very concerned that the cost of ad hoc promotions, particularly for fresh produce, appears to be passed back to the producer. We feel this is an unacceptable situation. Local farmers have invested heavily to meet the high standards demanded by the major multiples. Margins are now being squeezed to unsustainable levels and the impact of promotions exacerbates the problem.