COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT

APPENDIX 1 - Proceedings of the Committee relating to the report

APPENDIX 2 - Minutes of Evidence

APPENDIX 3 - Annexes to the Minutes of Evidence

Present: Dr IRK Paisley MP MEP MLA (Chairman)
Mr B Armstrong MLA
Mr PJ Bradley MLA
Mr J Dallat MLA
Mr B Douglas MLA
Mr D Ford MLA
Mr G Kane MLA
Mr G McHugh MLA
Mr I Paisley Jnr. MLA

Mr Nigel McLaughlin (Vice Chairman) and Mr Jim Carmichael (Development Officer), Northern Ireland Agricultural Producers' Association, called in and examined.

Mr Douglas Rowe (President), Mr Charlie Pogue (Chairman Pigs Committee) and Mr Kenneth Sharkey (Chairman Cattle and Sheep Committee), Ulster Farmers' Union, called in and examined.

Mr Harry Marquess (Chairman), Mr Tom O'Brien (Vice Chairman), Mr Arthur McKevitt (Secretary) and Mr Henry Gordon (Council Member), National Beef Association, called in and examined.

Mr Robert Overend MBE (Chairman), Ms Lynn Martin (Secretary), Ulster Pork and Bacon Forum, called in and examined.

Present: Dr IRK Paisley MP MEP MLA (Chairman)
Mr G Savage MLA (Deputy Chairman)
Mr B Armstrong MLA
Mr PJ Bradley MLA
Mr J Dallat MLA
Mr B Douglas MLA
Mr G Kane MLA
Mr I Paisley Jnr. MLA

(a) The Committee deliberated on the Minister's unavailability to give evidence on the three Fridays offered to her.

Resolved: that the Committee had a duty to meet with the Minister before finalising the reports and would therefore arrange an additional meeting on a day other than Friday, at which officials would also be invited to participate.

Resolved: that the Chairman to write to the Minister asking for her availability between 27 September and 5 October for this Inquiry and her availability on any Committee day of business over the next three months should her presence be thought necessary.

(b) The Committee deliberated on the progress of the Inquiry and the general principles being established which will form the basis of the report.

Resolved: that the Committee was satisfied with the Inquiry's general direction and that further evidence should be held on 8 September, 22 September and a date to be agreed with the Minister. Formal invitations should issue to the Ulster Farmers' Union, the NI Agricultural Producers' Association, the NI Meat Exporters Association, the Livestock and Meat Commission, the National Beef Association and the United Pig Producers Co-operative.

Resolved: that the meetings should be held in the Senate Chamber but that the Chairman should write to the Speaker regarding the provision of tables in the Chamber for members' papers.

Present: Dr IRK Paisley MP MEP MLA (Chairman)
Mr G Savage MLA (Deputy Chairman)
Mr B Armstrong MLA
Mr PJ Bradley MLA
Mr J Dallat MLA
Mr B Douglas MLA
Mr G Kane MLA
Mr G McHugh MLA
Mr I Paisley Jnr. MLA

Mr Trevor Shields (Chairman), Mr Charlie Pogue (Vice-Chairman), Mr Colum McGuikian (Director), Mr Edward Carson (Director) and Mr Seamus Crossey (Secretary) of the United Pig Producers' Co-operative called in and examined at 10.00.

Mr Douglas Rowe (President), Mr Wesley Aston (Commodities Director) and Mr Charlie Pogue (Chairman, Pigs Committee) of the Ulster Farmers' Union called in and examined at 11.00.

Mr Miceal McCoy (Chairman), Mr Nigel McLaughlin (Vice Chairman) and Mr Jim Carmichael (Development Officer) of the Northern Ireland Agricultural Producers' Association called in and examined at 12.00.

Present: Dr IRK Paisley MP MEP MLA (Chairman)
Mr G Savage MLA (Deputy Chairman)
Mr PJ Bradley MLA
Mr J Dallat MLA
Mr B Douglas MLA
Mr D Ford MLA
Mr G Kane MLA
Mr G McHugh MLA
Mr I Paisley Jnr. MLA

Mr Robert Foster (Chief Executive), Mr Harry Marquess (NI Chairman), Mr Tom O'Brien (Vice-Chairman) and Mr Arthur McKevitt (Secretary) of the National Beef Association (NBA) were called in and examined at 10.00.

The Chairman declared the meeting closed to the public at 10.45 and the Committee took further evidence in camera from the NBA. The NBA representatives left the meeting at 11.15.

The Chairman declared the meeting open to the public at 11.20 and Mr David Rutledge (Chief Executive), Dr Mike Tempest (Agricultural Manager) and Mr Phelim O'Neill (Marketing Manager) of the Livestock and Meat Commission (LMC) were called in and examined.

The representatives from the LMC left the meeting at 12.10 and the Chairman declared the meeting closed to the public.

The Committee deliberated.

Resolved: that the Committee should make contact with the Office of Fair Trading to establish whether or not they were currently undertaking an inquiry into allegations of a cartel among meat processing plants in Northern Ireland and, if so, to ascertain when a report could be expected.

Present: Dr IRK Paisley MP MEP MLA (Chairman)
Mr G Savage MLA (Deputy Chairman)
Mr B Armstrong MLA
Mr PJ Bradley MLA
Mr J Dallat MLA
Mr D Ford MLA
Mr G Kane MLA
Mr G McHugh MLA
Mr F Molloy MLA
Mr I Paisley Jnr. MLA

The Chairman distributed copies of the Minister's response to the Inquiry and draft questions for the Minister. The Committee deliberated.

Resolved: that the questions should be sent in advance to the Minister, inviting her to answer each in turn during the meeting on 4 October, with members to consider supplementary questions which they may wish to put. The meeting would begin at 08.30 and take place in Room 152.

The Chairman distributed copies of an e-mailed invitation from the Chief Executive of the NI Meat Exporters Association to visit a meat plant before the evidence session on 4 October.

Resolved: that a short reply should issue to Mr Mathers advising him that it would not be possible to undertake a group visit within the time available and that any member who wished to take up the invitation on a personal basis could do so and should make direct contact with Mr Mathers.

Present: Mr G Savage MLA (Deputy Chairman)
Mr B Armstrong MLA
Mr PJ Bradley MLA
Mr J Dallat MLA
Mr D Ford MLA
Mr G Kane MLA
Mr G McHugh MLA
Mr I Paisley Jnr. MLA

The Deputy Chairman declared the meeting open to the public at 09.00. Ms Brid Rodgers, Minister for Agriculture and Rural Development, Mr Peter Small, Permanent Secretary and Mr Pat Toal, Deputy Secretary were called in and examined.

The Deputy Chairman adjourned the meeting at 10.25. The Deputy Chairman resumed the chair at 10.40 in closed session.

The Deputy Chairman declared the meeting open to the public at 10.45. Mr Cecil Mathers (Chief Executive), Mr Colin Duffy (Chairman), Mr Richard Moore (joint Managing Director, Linden Foods) and Mr Campbell Tweedie (Director of Dungannon Meats) representing the Northern Ireland Meat Exporters Association (NIMEA) were called in and examined.

The NIMEA representatives left at 11.45.

Mr Hugh T Hamill (Chairman), Mr Anthony Forbes (Vice Chairman), Mr Ervine Hamill and Mr Brian Dynes, representing the Ulster Curers' Association (UCA), were called in and examined at 11.50.

The UCA representatives left the meeting at 12.25 when the Deputy Chairman brought the meeting to a close.

Present: Dr IRK Paisley MP MEP (Chairman)
Mr G Savage (Deputy Chairman)
Mr B Armstrong
Mr PJ Bradley
Mr J Dallat
Mr B Douglas
Mr D Ford
Mr G McHugh
Mr I Paisley Jnr.

Resolved: that the Committee should seek a briefing from its specialist advisor on 20 October, to include a summary of the evidence taken and a summary of proposed principles and recommendations for the two reports.

Resolved: that the Committee should seek further information from the National Beef Association in relation to evidence taken and then proceed with the letter to the Office of Fair Trading as resolved at the 22 September meeting.

Present: Dr IRK Paisley MP MEP (Chairman)
Mr G Savage (Deputy Chairman)
Mr B Armstrong
Mr PJ Bradley
Mr J Dallat
Mr B Douglas
Mr D Ford
Mr G Kane
Mr G McHugh
Mr I Paisley Jnr.

Resolved: that the draft Consideration of the Specialist Advisor's suggestions for first drafts of the pigs and beef reports conclusions and recommendations contained in the draft beef report were acceptable but that recommendations to other parts of the industry should also be included. The rationale behind the recommendations should be incorporated into the conclusions.

Resolved: that the draft conclusions and recommendations contained in the pigs report were acceptable but that the Advisor should consider additional recommendations to farmers. Once again the rationale behind recommendations should be incorporated into the conclusions.

Resolved: that the Advisor should provide additional material in time for issue to members on 7 November to allow further discussion on 10 November.

Present: Dr IRK Paisley MP MEP MLA (Chairman)
Mr G Savage MLA (Deputy Chairman)
Mr B Armstrong MLA
Mr PJ Bradley MLA
Mr J Dallat MLA
Mr B Douglas MLA
Mr D Ford MLA
Mr G Kane MLA
Mr G McHugh MLA

The Committee's Specialist Advisor joined the meeting at 12.10. The Committee deliberated.

Resolved: that the Committee would extend the Specialist Advisor's contract to enable him to incorporate a summary of DARD evidence into the draft report and to provide advice to the Committee as part of its line by line consideration of the two draft reports.

Resolved: that the Specialist Advisor would not attend further meetings but that issues raised during line-by-line consideration would be dealt with in correspondence with him.

The Specialist Advisor briefed members on the changes he had made to the draft conclusions and recommendations, for the beef report, following instructions received by members at the meeting on 20 October.

The Committee deliberated.

Resolved: that the Specialist Advisor should complete his further work on the two reports by 20 November and that the Committee would meet twice, on Thursday 23 November and Friday 24 November (both at 10.00), after which further correspondence with the Advisor would take place with a view to the Committee signing off the reports on Friday 1 December. Also resolved that the Minutes of Evidence taken on 22 September and 4 October should be published on the web-site.

Present: Mr G Savage MLA (Deputy Chairman)
Mr B Armstrong MLA
Mr J Dallat MLA
Mr B Douglas MLA
Mr G Kane MLA
Mr F Molloy MLA
Mr I Paisley Jnr. MLA

The draft Report was brought up and read, paragraph by paragraph.

Title page (including draft title for the Report), Contents page and preamble read and agreed.

Paragraphs 1.1 and 1.2 read and agreed.

Two new paragraphs drafted and agreed to be added as new 1.3 and 1.4.

Members agreed to refer to the draft Report's original numbering as further paragraphs were considered, regardless of the insertion of additional paragraphs.

Paragraph 1.3 read and agreed.

Paragraphs 2.1 to 2.4 read and agreed.

Paragraphs 3.1 to 3.3 read and agreed (subject to the inclusion of a relevant figure at 3.3).

Paragraphs 3.4 to 3.6 read, amended and agreed.

Paragraphs 3.7 to 3.9 read and agreed.

Paragraphs 4.1 to 4.3 read and agreed.

A new heading and three new paragraphs drafted and agreed to be added at the start of this section.

Paragraphs 5.1 to 5.6 read and agreed.

Paragraphs 6.1 and 6.2 read and agreed.

Paragraph 7.1 read and agreed.

Paragraph 8.1 read, amended and agreed.

Paragraph 9.1 read and agreed.

Paragraph 10.1 read, amended and agreed.

Paragraph 11.1 read and agreed.

Paragraph 12.1 read, amended and agreed.

Paragraph 13.1 read and agreed.

Paragraphs 14.1 and 14.2 read and agreed.

Paragraphs 14.3.1 to 14.3.5 read and agreed.

Paragraph 14.3.6 read and agreed to be split into two sub-paragraphs. Paragraph 14.3.7 read and agreed.

Paragraphs 14.4 to 14.6 read and agreed.

Paragraphs 15.1 to 15.3 read and agreed.

Paragraph 15.4 read and agreed.

Paragraphs 15.5.1 and 15.5.2 read and agreed. Paragraph 15.5.3 read, amended and agreed. Paragraphs 15.5.4 to 15.5.7 read and agreed subject to a check of the evidence referred to in 15.5.5.

Paragraph 15.6 read and agreed.

Paragraphs 16.1 to 16.3 read and agreed.

Paragraphs 17.1.1 and 17.1.2 read and agreed. Paragraphs 17.1.3 and 17.1.4 read, amended and agreed.

Paragraphs 17.2 to 17.6 read and agreed.

Paragraph 18.1.1 read and agreed. Paragraph 18.1.2 read, amended and agreed.

Paragraph 18.2 read and agreed.

Paragraphs 18.3.1 to 18.3.6 read and agreed. Paragraph 18.3.7 read, amended and agreed. paragraph 18.3.8 read and agreed.

Paragraphs 18.4 and 18.5 read and agreed.

Paragraph 19.1. read and agreed.

Paragraph 20 read and agreed to be subsumed into paragraph 19.

Resolved: that should numbers fall below quorum, members should continue line by line consideration, with their agreed action to be ratified once quorum was reached.

Paragraphs 21.1 to 21.9 read and agreed.

Paragraph 22.1 was read and not agreed. Resolved: that the Clerk should provide a form of words to accurately reflect the recent correspondence with the Office of Fair Trading.

Paragraphs 22.2 to 22.4 read and agreed.

Paragraphs 23.1 to 23.3 read and agreed.

Paragraphs 24.1 and 24.2 read and agreed.

Paragraph 24.3 read, amended and agreed.

Paragraph 25.1 read, amended and agreed.

Paragraph 25.2 read and agreed.

Paragraph 25.3 read, amended and agreed.

Paragraphs 26.1 to 26.4 read and agreed.

Paragraphs 27.1 to 27.3 read and agreed.

Paragraphs 28.1 and 28.2 read and agreed.

Paragraph 28.3 read, amended and agreed. Resolved: that the Clerk should check the draft for references to "Low Incidence BSE Status" and amend these to reflect the preferred wording "Beef Exports scheme".

Paragraphs 28.4 and 28.5 were read, amended and agreed.

Paragraph 28.6 read and agreed.

Paragraphs 28.7, 28.8 and 28.9 read, amended and agreed.

Paragraphs 28.10 and 28.11 read and agreed.

Paragraphs 29.1 to 29.3 read and agreed.

Paragraph 30.1 read and agreed.

Paragraph 30.2 read, amended and agreed.

Paragraphs 31.1 to 31.6 read and agreed.

Paragraphs 32.1 and 32.2 read and agreed.

Paragraph 33.1 read and agreed.

Paragraph 33.2 read, amended and agreed subject to any further input from the Specialist Advisor.

Paragraph 34.1 read and not agreed. Resolved: that the Clerks contact the Specialist Advisor to seek clarification on the wording used.

Paragraph 34.2 read, amended and agreed.

Paragraph 34.3 read, amended and agreed.

Paragraph 34.4 read and agreed.

Paragraph 35.1 read and agreed.

Paragraphs 36.1 and 36.2 read and agreed.

Paragraphs 37.1 and 37.2 read, amended and agreed.

Paragraphs 38.1 and 38.2 read and agreed.

Paragraph 38.3 read, amended and agreed that it should be inserted before Paragraph 38.2.

Paragraphs 39.1 to 39.4 read, amended and agreed that paragraphs 39.2 and 39.3 should be subsumed as bullet points within 39.1.

Paragraphs 40.1 to 40.4 read and agreed.

Paragraph 41.1 read and agreed.

Paragraph 42.1 read, amended and agreed.

Paragraph 43.1 read and agreed.

Paragraph 44.1 read, amended and agreed.

Paragraphs 45.1 and 45.2 read and agreed that these two paragraphs should be removed from the Recommendations section and inserted into the Conclusions section.

Resolved: that the agreed amendments should be made to the Report with a final draft to be presented to members on 1 December, highlighting the main changes made. If members are satisfied with these changes the Committee will order the Report to be printed.

Present: Dr IRK Paisley (Chairman)
Mr G Savage (Deputy Chairman)
Mr J Dallat
Mr B Douglas
Mr D Ford
Mr G Kane
Mr I Paisley Jnr.

The Committee deliberated.

Resolved: that the Chair and Deputy Chair would launch the report on Friday 15 December (a.m.) in the Assembly's press conference suite. Members would have copies of the Report and Press Release (under embargo) in order to brief their local journalists.

The Executive Summary of the Report was brought up, read and agreed for insertion at the beginning of the Report.

Resolved: that the recent statement to the Assembly by the Minister on the proposed beef exports scheme (and the discovery of new cases of BSE in European countries) made it necessary to amend the Report's recommendations on EU matters.

Recommendation 1 was amended to read:

"The Department should continue strenuous efforts to secure the successful introduction of the beef exports scheme. Northern Ireland's case for a relaxation of the export ban is made all the more valid in view of the recent events in Europe"

and agreed.

A new Recommendation was drafted as follows:

"The Minister of Agriculture and Rural Development should press the United Kingdom Government to introduce a ban on imports of foreign beef that presents a threat to the local agricultural industry and a risk to consumers".

The Clerk advised the Committee that the introduction of the proposed new recommendation was not supported by the conclusions reached through consideration of the evidence presented to the Committee.

Resolved: that the proposed additional recommendation be inserted as "Recommendation 2".

Resolved: that a series of amendments to Recommendations 4 and 5, paragraphs 3.3, 16.5.5, 23.1 and 34.2 were agreed.

Resolved: that written and oral evidence obtained from the following should be included in the Report:

Resolved: that the Report, as amended, be the Report of the Committee and that it should be printed.

TOP

Mr N McLaughlin - Vice-Chairman
Mr J Carmichael - Development Officer

Mr D Rowe - President
Mr C Pogue - Chairman-Pigs Committee
Mr K Sharkey - Chairman-Cattle and Sheep Committee

Mr H Marquess - N.I. Chairman
Mr T O'Brien - Vice-Chairman
Mr A McKevitt - Secretary
Mr W Gordon - Council Member

Mr D Rowe - President
Mr W Aston - Commodities Director
Mr C Pogue - Chairman-Pigs Committee

Mr M McCoy - Chairman
Mr N McLaughlin - Vice-Chairman
Mr J Carmichael - Development Officer

Mr R Foster - Chief Executive
Mr H Marquess - N.I. Chairman
Mr T O'Brien - Vice-Chairman
Mr A McKevitt - Secretary

Mr D Rutledge - Chief Executive
Dr M Tempest - Agriculture Manager
Mr P O'Neill - Marketing Manager

Ms B Rodgers - Minister for Agriculture and Rural Development
Mr P Small - Permanent Secretary
Mr P Toal - Deputy Secretary

Mr C Mathers - Chief Executive
Mr C Duffy - Chairman
Mr R Moore - Joint Managing Director of Linden Foods
Mr C Tweedie - Director of Dungannon Meats

Friday 30 June 2000

Rev Dr Ian Paisley (Chairman)

Mr Armstrong

Mr Bradley

Mr Douglas

Mr Dallat

Mr Ford

Mr Kane

Mr McHugh

Mr Paisley Jnr

Mr N McLaughlin ) NI Agricultural

Mr J Carmichael ) Producers' Association

1.

The Chairman: We would like to deal with the two matters separately - pigs first and then beef. We would like you to make a presentation on the pigs first bearing in mind that if you go for ten minutes with your presentation you will only have 20 minutes to hear the Committee. So we ask you to make your presentation as succinct as you can so we can at least have a full 20 minutes to hear questions from the Committee.

2.

Mr McLaughlin: Right, thank you, Mr Chairman. First of all, we would like to thank you and the Committee for welcoming us back here to make a presentation. Both the beef and pig industry as it stands you are all well aware of the crisis within the red meat industries in Northern Ireland. In our earlier presentation we made our proposals to you about how we would like to see things and we are aware of how sympathetic you were. Now at this stage here Jim would like to make a presentation on the pigs, to add to that we would like a two way dialogue.

3.

The Chairman: Right.

4.

Mr Carmichael: The presentations that we will make will be reasonably brief in order that you can question on them.

5.

The pig situation, as you know, in the province has been disastrous in returns for producers this past two or three years. We note that a few years back we were actually about half or less than half production that we had perhaps five years ago and the number of pig producers declined. We have, in our presentation to you, the paperwork we put to you before, given what we think or the main reasons for this: The strength of Sterling; the fire at the plant in Ballymoney; the effects of the world market, and; the health and welfare legislation. The returns to producers, we have noted before, you asked the question in your initial document about whether returns were fair, we have said that one can judge for themselves whether returns are fair. If you look at the price of production of pig meat at approximately 85 pence a kilo and the average price return in 1999 approximately 69 pence. You can see for yourself there that is a loss on each pig produced of maybe £12 to £15. The industry has had additional costs, partly due to BSE and dealing with offal disposal and complying with health and welfare legislation. The offal costs could have been approximately £5 to £6. As well as that the health and welfare legislation implemented in the UK, we seem to have all legislation more than well implemented throughout the UK for all different commodities. In relationship to pigs this has put an additional burden of cost on pig producers. Throughout the UK which was an exporter of pig meat we now find in the latest report that the UK is now, in the three months, January to March, imports were up, the UK is now actually an importer of pig meat. The imports have been up from the Netherlands, something similar from Denmark, slightly up from Germany. So we find now that pig meat is being imported, being imported at a lesser cost, partly the strength of Sterling has had an impact on this as well. Producers here and producers throughout the UK are, in fact, suffering.

6.

In the Blair document there were proposals for an outgoers scheme and an ongoers scheme. We would like to see the outgoers scheme implemented as soon as possible. Now, in order to have an ongoers scheme we must have an outgoers scheme which takes some 16% of sow places off the market, that is some 120,000 sows throughout the UK. If we don't have that scheme we can't have an ongoers scheme because then it could be described as being national aid. The Dutch have got the go ahead for measures to assist in complying with more stringent hygiene rules for pig assembly centres - they notified to this to the European Parliament in 1998. They have got the go ahead now for farms willing to adapt would get assistance, they will get compensation for the loss of income and assets. I would say here for the outgoers scheme we have to try and see - the outgoers scheme is part compensation for the number of sows, you take the number of sows that were there in June 1998 and we have to have a reduction from that. We would like to see that the people who have gone out and have reduced up until now being taken into the calculation for the reduction of pig numbers. We also have to be left, which I think is most important of all, with an industry which can stand and the people who have stayed thus far and are in some considerable debt, as this is what we are talking about here, the debt of the industry as a whole and debt in particular to the pigs industry, not only do they owe banks but they owe meal suppliers etc, that these people have to have support to have an industry for the future. We will leave it at that for questions.

7.

The Chairman: Thank you very much. There are four questions I want to put from the Chair to you. If you make your answers as brief as possible. We need these for the record because we have to prepare a report and we must have a concise statement of the evidence that you are putting to us so that we can comment. The first one is: We have heard in previous evidence sessions the argument that producing high quality produce for premium markets is the only way to secure the future of our industry, do you agree with that assessment?

8.

Mr Carmichael: There are premium markets and commodity markets which are all serviced by the industry. It is felt, I would say, throughout all commodities and we have heard this before, that producing a high quality product for a premium market is definitely the way forward, but there is a commodity market as well which takes other than premium parts of any livestock. So I would say the influence on any of these is the multi-nationals or the purchasers of the product who are dictating to the suppliers what they need to produce. So we are in a situation where producers, again to help welfare regulations and all the rest of this, but at the end of day the producers here aren't producing the best quality product, we would feel at present.

9.

The Chairman: Thank you. Do you support the idea of farmers joining Quality Assurance schemes and do you feel these are a necessary part of future marketing? If so, how can farmers be encouraged to participate particularly, as has been alleged to us, the numbers currently participating are poor?

10.

Mr McLaughlin: If I could take it further than that, the world is awash at the present time with commodity products. We are having to compete with pork products from the Middle East and from further afield. A lot of the product that is floating on the global market is not being produced to the welfare standards of the Northern Ireland product. It is not being produced to the veterinary and scientific standards that are set down and even legislated that our industries have to stand in. So the quality assurance marks, even the new proposed EM 4 50 11 regulations which are being developed throughout Northern Ireland as a whole, that we see them as a necessary bench mark that we can measure, that we can market. The flip side of that is that there's a production cost with attaining those standards and it needs to be reflected in the market place and also needs to be reflected back on a price that the retailers are paying back through the supply chain to the primary producer. We are told continually that quality product, niche product, high value product is what we have to produce, but whenever we go to market we are told New Zealand products costs this much, that pork products throughout the world, if there is a blip in Poland then through economics you have to compete with that. Now that, we feel, is unfair sharp practice and in any other business would be classed as sharp practice. Farming by its very nature is a long term business, there are many variables in agriculture outside of price fluctuations and currency fluctuations farmers - I didn't set out to have a remit as an international financier whenever I started out in my farming career - so I think that we have to take cognisance that there is a lot of products coming into the UK, especially pork from ROI, from Denmark, whichever, which is not meeting with the welfare standards which are set down in legislation in the UK. So I think that although the little red tractor logo is going to be interesting to see how far it travels, if it is going to mean anything real or if it is going to be yet another stamp on the packet.

11.

Mr Carmichael: Could I add to that just one thing? As far as quality assurance is concerned as well there seems to be bolt ons to quality assurance. If quality assurance is going to be a bench mark, you are going to be measured, meet a standard of quality assurance whereby others don't come in and say: Our standard is higher or different, because if producers try to achieve whatever is required as a bench mark for Quality Assurance to be told: No, that doesn't satisfy our individual needs, we would find out from people who are purchasing, that they are setting standards which are quite hard to attain when we have quite good, the best, in fact, we think, conditions for production of meat in this province.

12.

The Chairman: In what ways do you believe farming structures need to change to meet future demands and how can this change be brought about? You, in your presentation, have told us that the news - well it's not news to us round the table, but it is probably news to the general public - that we have lost half of our business already, that we have now become an importer of pig meat. That being so, what way do you think the pig farmers need to change?

13.

Mr Carmichael: Well producers, I suggest, it is not a lot different to other commodities. The difficulty, pig farming in itself is a specialised industry and people who are there have spent quite a lot of money to have farms to the best conditions possible for producing pig meat. The difficulty there is the expense already incurred, to try and maintain these farmers they must get an adequate return for their product. If you are producing less than production costs or if you are receiving less than production costs you will not stay in business. Though all commodities attaining what we call a critical mass of production is essential to try and obtain the best return, but the pig industry, as it is, is intensive, and there is quite a lot of pig meat produced by a lesser number of producers. It is a question of getting a chain whereby each part of the chain gets an adequate return. The primary producers themselves have no guarantee of what they will get, the product is taken from them, it has value added to it, it is sold to the consumer and there is a guaranteed mark-up right through the food chain after the primary producer. Unless people can get together and ensure that each link of the food chain gets an adequate return we aren't going to have a primary production facility, we aren't going to be fit to afford it, and the people who are there are going to be bankrupt. So we would want equality through the food chain. If there is no equality there we won't have primary production. As you rightly say the UK production has now gone down that much that we are importing, again the strength of Sterling, the world trade are affecting us there and the input costs in this province, as far as the regional, are higher than the rest. We have extra transport costs between bringing in inputs and taking out the final product.

14.

The Chairman: One final question from myself, the Department have talked about putting £400,000 into this to be made available for the purpose of marketing pig meat. Now this is a strange question to ask you, I think I know your answer, is this enough - we have to get this thing on the record - and how do you feel this £400,000 for marketing would be best spent?

15.

Mr McLaughlin: Well the money spent on marketing can never be enough, but I think the old adage is that you have to try and get value for money on whatever you spend. There is no point in putting notes into a hole and hope you are going to dry up the bottle. I think a lot of what has to be done is that again marketing, where do we target the money for marketing? Do we target into the retail sales? I think that the Department here, we have had an affiliation that they wish to develop marketing solely with multi-nationals. I think it has been a dangerous line to go down, that Northern Ireland products are being targeted towards the major multis. There are a lot of figures and percentages going round about meat sales in the UK as a whole. The multiples would claim 80% of meat sales. Other surveys have been done will put that at half the figure or even less. I think we are yet again getting back into targeting sales of commodity product and that again is the weakness, that you're selling the commodity product and you are at the mercy of competing on a commodity market with other commodity producers. There are specialisms, there are specialist markets in Germany or wherever for specialist pork products and other meat products. I think rather than having a broad brush approach and not trying to plug money, I think that source markets. I also think that there needs to be reality that people out there are researching the markets, there is no point an academic going out and saying: There is a market here for two legged snails, let's produce them in Northern Ireland if the people in the industry in Northern Ireland say we can't do that. So I think there needs to be realism. I think the people on the ground, the primary producers and the retailers, I think everybody needs to be involved in the market research and the market delivery and whether it can be done or whether it can't. I think that has been one of the failings in the past.

16.

The Chairman: Could I bring my friends in because we have now 15 minutes and we must get them in? Gardner Kane.

17.

Mr Kane: Thanks Chair. To yourself, Jim, you have mentioned in your submission about farmers trying to produce their way out of difficulties. Would you accept, as has been alleged to us on a previous evidence, that one of the factors causing the crisis in the industry was over-production in a buoyant market resulting in the beef crisis?

18.

Mr Carmichael: As a result of the beef crisis different types of meat for a time replaced beef on the consumers' list. Over-production has been stated as being the cause of quite a few problems to the industry. The situation at present is that in the UK there is not over- production. In fact, as we have stated before, we are now net importers. But from a producer's point of view, he is getting no more for his product even though we are.

19.

One other comment I would like to make, just to relate to the last question, if we are going to market a product the one thing about the moneys that have been allocated is that we can't talk about an indigenous product, a Northern Ireland product as far as I am aware, money is allocated through Brussels, we talk about pork product or whatever, and here we are trying to save our regional industry which is a Northern Ireland industry in pork or whatever. I would note too the estimates of average household expenditure for the first quarter of this year where pork per household, the amount spent on pork is actually down, so we have to target consumers. In reality we could have had over-production throughout the world of a lot of products, but within the United Kingdom and within this region now the situation is reversed where we now have less than half capacity. We talk about half, we have actually less and declining capacity. Even with that and the fact the UK is now net importers, the producer is seeing very little return for the product. It is going to take a long time, if they are in deficit, some of them have large amounts of money owing, to get back to a baseline, never mind make a profit.

20.

Mr Kane: Just one additional if I may, Chair? Jim, how do you foresee how we could overcome the price differential between the UK and the Province?

21.

Mr Carmichael: The difficulty is that we here have an export market. This is one of the major problems for us here. And in the UK as a whole with product being imported to there and us being an exporter we are going to have severe difficulties. I don't honestly know exactly how we could ....

22.

Mr McLaughlin: I think to add on to that, Gardner, that the developments we are having at present and the proposals that are being put forward for low BSE status for beef is going to have a knock on effect for pork in that hopefully if the regulations follow through that we are allowed to export, then our meat and bone meal is going to be accepted as a saleable product and benefit to the Northern Ireland pig industry which was unfairly penalised as an offshoot of the BSE crisis. In addition to that, the offal disposals, hopefully we will be able to salvage an economic benefit there for Northern Ireland as well, as well as having available export opportunities for the Northern Ireland pork industry. I think we are in very good position. The major problem we have is the variability of Sterling and the fact that we have a land border with a Euro state. This has been causing a lot of problems for our pork industry, that a lot of product is able to move throughout the border counties where a lot of the pork industry in ROI is located and is having severe supply problems for the Northern Ireland pork industry. Hopefully we can move out of that, but I think that is going to take several months yet.

23.

Mr Kane: Thanks Chair.

24.

TheChairman: We will have to limit this to one question because this clock is killing us today.

25.

Mr Ford: In your presentation, Jim, you talked about the need for an outgoers scheme, you talked about 120,000 places, 16% of the total. Where does that figure come from? Is it based on specific hard evidence? Is it likely to be acceptable in Europe? Is it not too late anyway?

26.

Mr Carmichael: I will take your question about whether it is too late anyway, any returns or anything that would help an industry has to be appreciated, that is number one. It is late in the day, it is very late in the day. With regard to the figures, those are taken from the June 1998 census which is the starting point for the outgoers scheme. The difficulty with trying to achieve the 120,000 or 16% is that if there is any slippage there we do not get an ongoers scheme which is really what this is all about. We are trying to retain what part of the industry we can, support that part of the industry. Therefore there will be two questions in relation to the statistics:

27.

In June 1998 the people who were returning census forms may have been more optimistic about moving forward than their actual situation, so the question of our baseline and where we come from 0% has to be addressed.

28.

The other question is that if we have 16% as a static figure and we come in half a per cent or 1% under that will we be fit to move. Those are some of things that have to be addressed along with other issues - valuations of farms and so on for our outgoers scheme. The outgoers scheme is hopefully going to announced perhaps for applications by October for people to reduce a pig herd for claims possibly by January. And there are also health and welfare questions about reduction of herds because it takes you quite a time to reduce a herd of sows, particularly if you have been managing them, they are in pig and so on. So it has to be welfare friendly, it has to be sufficiently funded and it has to have the uptake. That is why we would like consideration to be given to all the numbers of places which have disappeared, if you like, since 1998 to be taken into consideration. At the present moment with any other scheme you can't do anything until you get permission and then only that which you do from then is included in the numbers taken. But we have lost - it is on record the number of places we have lost, and those should be taken into consideration and therefore we shouldn't fall below. Every means at the disposal of the UK Government should be taken to ensure that we don't fall below because if we don't get an outgoers we don't get an ingoers. So how do we help the industry?

29.

Mr Bradley: You mentioned bankruptcies in the industry. Can you provide any figures that we can go on? What figures have you?

30.

Mr Carmichael: Well we have individual farmers - is this what you want - we would have to approach individual farmers to see if they are prepared to come forward and say the to the Committee on their own basis that they have been made bankrupt. I don't know whether a lot of them are prepared to do that. Anecdotal evidence, anyone who actually reads farming press will see the numbers of farm businesses, not alone in pigs, which are presently for sale. I have seen figures from individual pig producers, some of them quite young people, I would say, at the start of their career in agriculture which if any other business or industry had, quite honestly depression wouldn't be the only word I would use for the situation with them. If they would want to come, we can ask producers to come forward if they want to come forward with actual figures.

31.

Mr Bradley: (Inaudible) Have you any ballpark figure?

32.

Mr Carmichael: I don't honestly know, we can try and supply them for you.

33.

Mr Paisley Jnr: With regards to the stall and tether ban in the United Kingdom would you agree with me that has been a complete unmitigated disaster as far as the pig industry has been concerned? Tied in with the whole policy of welfare of the pig and indeed Quality Assurance schemes the whole policy has been misplaced. Your evidence today proves it has been misplaced because we have an industry that is practically dying on its feet in Northern Ireland and we are now importing more than we are currently buying from our local market. So all these policies have proved that the consumer really doesn't give a fiddler's about the welfare standard of the pig - as long the product is cheap enough she will buy it. The reality is therefore that what we are really doing is a pricing policy and nothing else. As long as we can produce a cheap product it appears to me the consumer is going to be prepared to buy it, would you not agree with that?

34.

Mr Carmichael: To be quite honest, I would have to agree, that at the end of the day it would appear to us, again from looking at supermarkets trends, purchasing trends from consumers, it would appear that the consumer is not overly concerned, definitely not about the farmer and the income of the farmer to be quite honest with you in all commodities. I don't know if there would be sufficient numbers, as we are led to believe, concerned about health and welfare of livestock. All the things you have mentioned, the stall and tether, have led to increased costs for the producer for which there has been no additional return. In fact, returns have gone down over this past number of years. The consumer, I would think with most commodities, their first concern is cost, convenience. We talked to consumers about different types of local farmer markets. Really one of the things that comes back to us is they aren't convenient enough because they can't purchase everything that they want to purchase at a one stop shop. So convenience and cost would appear to be two of the main things, as Nigel has said too, a lot of the commodity product there is going to people who perhaps can't afford to buy the type of premium product as in all commodities, therefore cost is very much an important factor there. But the additional costs that have to be born to the industry to produce a product which is getting less than before is ridiculous actually. Then we talk about the imports with other areas which I would doubt if they fulfil the regulations we have here.

35.

The Chairman: If you would like to come in just after, but we must get another member of the Committee in here.

36.

Mr McHugh: Jim, you have mentioned the difficulties in attaining the standards from the multiples. I would feel that some of that would be used as a method of suppressing prices to farmers.

37.

The other thing is the marketing. I get the notion that marketing seems very much confined to within the UK for those that are in the business of doing the marketing in the farming. The farmers are producing the product, but those beyond the farm gate who are in the business of actually marketing it should be looking to market it in Italy and in everywhere else in Europe, that isn't happening. They are confined and they are at the point now where we are importing from other places while other people are suffering in terms of sales.

38.

Mr McLaughlin: Right, going over into Jim's last answer, we tend to find that in European standards that if European directives was set there, that UK will go to their compliance and Northern Ireland will go further than that. But we tend to find that the variation within the application of European standards within the other member states tends not to or suggest would be that it tends not to be the standard that is set down in black and white. Now yet again we are back into the market and UK standards. Yes, supermarkets are setting down very stringent standards to Northern Ireland suppliers and it has been spiced up then that this is a Northern Ireland product, but we would find there is a debacle going in whereby we were having products sold in market shelves that has allegedly been produced in Northern Ireland, but there would be a lot of evidence that isn't, but it has been packaged in Northern Ireland. Yet at the same time we are having to produce to that standard but we are having to compete with commodity coming in from Poland, coming in from wherever which definitely does not meet that standard and does not meet the regulations set down in meat and bone and everything else.

39.

The Chairman: We are dead on time, we have to leave it there. We will have the presentation of beef now, if you would like to do that.

40.

Mr McLaughlin: Right. The Northern Ireland beef industry, I think the reflection on Northern Ireland farmers, they are tenacious, they actually will hang on to a piece of string, hang on out there as it stands. We are still in the situation in Northern Ireland where basically the primary producer is receiving approximately a third of the retail price of the product. That still has not changed significantly. The speculation would be that perhaps until we get into an export situation Northern Ireland producers are in the stranglehold of: A) the multiples; and, b) the primary processing industry of Northern Ireland because we don't have the possibility of live exports. That situation hopefully will change in the spring of next year. Again meat and bone the other cost advantages which may be paid back to the industry, they are not to be that significant in the form that they are probably going to amount to £5.00 a beast, but it is significant that it will be to the benefit to the primary processors yet again. If they are able to sell meat and bone into ROI, but if their end of industry in Northern Ireland are still confined or don't have a critical mass of BSE product to operate with, that is going to be an extra cost to their end of industry here. So the benefit is going to be very tenacious, if any, on the fifth quarter. So as it stands we are still basically involved here with the major multiples. Again, what we have been talking about before with the standards that are being set down, we have a plethora of standards being set down from the retail industry. One of the things we are working on in the LMC and the red meat industry is the EM 4 50 11 accreditation which is a European standard which we think, if it is brought down and set down in Northern Ireland and we can apply it to our farms, we have a European standard bench mark which is going to be internationally accepted as an add on to the FQA scheme. I think it is one of the good things we can have. As it stands we are still in the grip where we are still pedaling behind the rest of the UK in meat prices.

41.

The Chairman: Thank you very much. You know there is a big move to achieve low incidence BSE status for Northern Ireland. Say we did achieve this speedily, is the industry able to respond to market demands on the continent? If we are not ready, how can farmers get prepared to be ready? What can others such as processors, retailers and Government be doing to help towards this, keeping in mind of course that we have lost our market in Europe and keeping in mind we would have to start not from the first floor but from the basement to build it?

42.

Mr McLaughlin: Right, well I think there is a large sense of apathy there in Northern Ireland and that producers feel that whatever they do, they are not going to get an economic return anyway. If we get low BSE status, as it stands approximately 37% of our herd product meets export standard. I think if we get low BSE status we are going to move into the situation where a lot of the loss of BSE status and a lot of the traceability is because of late notification of calf births which is ridiculous because it doesn't happen anywhere else. That is to say a calf born on a Northern Ireland farm that doesn't move off it but hasn't been notified to the Department within the specified number of days it loses its traceability, which is ridiculous, it is not applied in any other European state except for the UK. However if we get low BSE status then that should cease to be. Overnight that would mean that approximately 80% of our calf births will then move to export status. So that is going to be a major significant move as it stands. It will be a benefit to the beef industry. I think the first beneficiary of it is going to be dairy industry. If we have a significant European market for our black and white calves, that is going to get a financial input into the Northern Ireland industry immediately and it is going to open up a market place. If we can get live cattle into Europe and on to European feed lots it is going to provide competition and the life of the trade is competition. That is a major impetus, we see, of low BSE as it stands. It is probably one of the best red meat markets in Europe because of the value of Sterling as it stands, but that value is not being paid back to the primary producer. If we have competition and competition is the life of the trade and to have competition is - I remember one person, a farmer himself: There is never going to be a market for Northern Ireland beef until we can get stuff out of here on the hoof. I think that is as true today as it has always been.

43.

The economic returns are going to be the biggest impetus. Farmers are economic animals and they do respond to a pound sign.

44.

The Chairman: Well then you would agree that if we are going to have "good times" with the Northern Ireland beef industry it has got to be export led, that that is really the key to getting us out of the mess we are in?

45.

Mr McLaughlin: Well prior to May 1996, 95% of Northern Ireland meat was export led. We had the highest price for red meat through Green Fields into Albert Heyjn that any part of the UK had. I think that to go from that after 26th May to getting the lowest price in the British Isles I think was a major blow to the Northern Ireland industry. It was one which Northern Ireland took the brunt of the BSE crisis. Scotland still had their premium for Scot beef, the English beef market still had their local butchery trade and domestic trade, so the brunt was born by Northern Ireland unfairly, but export is essential for the survival and even possibly the restructuring and re-development of the Northern Ireland meat industry.

46.

The Chairman: One complementary question I would like to put to you on that: We were competing well in the European market before the BSE thing, do you think that while we have been out of the market the other competitors have reached the standards that we were setting?

47.

Mr McLaughlin: I don't think they have. I think that the standards set down by Northern Ireland, the traceability we had, the farm assurance schemes that were in place through the producer clubs into Albert Heyjn have yet to be replicated anywhere else. I think the main or immediate competitors with Albert Heyje are ROI and the feeling would be that they haven't met our standards.

48.

The Chairman: What way do you think the production of beef on the farm structures need to alter to meet future changes and how can such changes be brought about?

49.

Mr McLaughlin: Well I think we are going to find that while we were dealing with major multiples we are dealing with a commodity product and that has been reflected in the carcass classification of beef throughout Northern Ireland as it has dropped. Two reasons for that was the breeding input, the influence of extremes of both types into beef production and the market returns for it was it wasn't just economically feasible to feed cattle to an aspired finish. If we can get back to having the sale product for a top quality weanling I think that what has happened in ROI through the (inaudible) clubs is that the standard of breeding has improved dramatically within two to three years where they are going from a situation of having maybe 50% meeting our standard to over 80% meeting our grade within two years. I think if the economic incentive is there that beef farmers are going to source beef from beef type animals and we are going to move into a two tier system where we have got prime beef product meeting a specific market be it two tier beef or prime type bull beef out of Northern Ireland, but it is going to meet all the market assurance standards that are required out of the niche and the high value markets. We are still going to hopefully have our beef from our dairy industry which is going to be farm assured, it is going to meet the highest welfare standards, it is going to hopefully attain a high value commodity type product.

50.

I think the opportunities for the Northern Ireland meat industry are immense if we can get back into the market place again. For the survival of the industry it is essential we get back in there within the next year.

51.

The Chairman: Thank you, right.

52.

Mr Armstrong: Just on the quality assurance, I did notice this week on the wee note that they weren't giving any extra money for quality assured beef, so there is no incentive to do that. What's the point if we do have these quality assurance schemes there and there is no incentive?

53.

Mr McLaughlin: Part of that is the standard, Billy, of Quality Assurance. For an animal to obtain a Quality Assurance standard if it is sourced on your farm or Boyd's it only has to be on my farm 70 days to get quality assurance standard. You don't have to be quality assured, nobody else has. One of the things being talked about in the industry is the move towards lifetime Quality Assurance. There's pluses and minuses with every development, but I think if we can move towards lifetime assurance standards for all meat product in Northern Ireland then we are going to have a major and very important marketing tool.

54.

Mr Armstrong: That wasn't my question, just an observation.

55.

Mr McLaughlin: Quality Assurance, well again as plants require meat to have critical mass they are operating mass. We are into a time now of low supply.

56.

Mr Armstrong: Farmers have no control over their marketing. I think that farmers do deserve some control but most of the control is there in the abattoirs and Live Meat Exporting Commission. What way would you suggest that meat should be marketed? How would it be marketed and what can you do with NIAPA to give encouragement to the farmer and to abattoirs and other people?

57.

Mr McLaughlin: To answer that question, Northern Ireland meat industry, farmers co-operatives has a share in one of the plants in Dungannon and it is a part sharing and the feeling I would have is that they haven't been doing enough. I think if we are going to go down the avenue of having live exports I would like to see the Northern Ireland meat industry having a feed into the power base and supplying prime Northern Ireland product solely through that. It is a very adventurous statement to make, but I think that if Northern Ireland meat industry can own similarly as what they are doing in New Zealand, the meat industry in New Zealand is owned by farmer co-operatives. They are not hoping to access the private meat processors like what we have done here. I think their success speaks for themselves. That is a major change in that I think there is going be to a lot of competing economic pressures against that statement. But I think it is something that Northern Ireland yet again, if we can use some of the marketing funds, if we can use some of the development funds and develop a scheme whereby farmers own the product from birth to retail and take out the cost that everybody else, and take out the processing costs and their development costs whatever else, their shelf space and everything else out of that, in between, but that chain needs to be owned by a farmer responsible co-operative or organisation. But yet again on that there, farmers are notoriously bad marketers, you are going to need and what has been reflected in the ROI where the co-operative movement has worked well, they have specialist marketing people and management people there, but I think they have to be responsible.

58.

The Chairman: We will have to move on because Billy has had an observation then he has had his question. We will have to ask to you try and make your answer a wee bit more succinct.

59.

Mr Douglas: Thanks Chair. We have heard that under Agenda 2000 beef prices are heading in the direction of world market prices with farmers being compensated for lower prices through increased subsidies - I suppose you might wonder where the subsidies are coming from - in your view will this lead to production to collect subsidy rather than production to meet market demands? I think where we are coming from, the emphasis seems to be on quality product so we could be five years down the line and not any further forward if we get don't get into quality production.

60.

Mr McLaughlin: Yes, definitely what you are saying, Boyd, is that the envelope is going to make a more and more important part of the farmers return. But then, on the flip side of that is that to justify produce there is no point in farming if the subsidy is more than 100% of the net return of the animal. If you are dipping into the subsidy package to produce a sub-standard product I think you are on the road to slippery ruin. What's happening now at the present time with the Hill proposals that are going on where we are having to move to an area base is the first major watershed we have had in the meat industry since May 1996. Although the farmers are still going to get that packet of money but it is not going to be tied to suckler cow or yield to get that, that means that animal has to sustain its own economic viability. So I think the only way that can be done is by producing a quality product that meets a market, a premium market. I think that is five years down the line. I think we are going to have a highly specialised beef industry and highly specialised dairy industry and sheep also meeting a variation of themes, be it organic, be it semi-organic or be it quality.

61.

The Chairman: Jim, do you want to add something?

62.

Mr Carmichael: Just fairly quickly in relation to premium there are two or three things to be taken in, one is European enlargement in relation to available funds which I would estimate will reduce the available funds for premium. We know that the Agenda 2000 discussions were 2005/2006, we now know they are for review in 2002. The other thing is the premium actually which is in place for this year, for example, I would estimate or we would estimate that it could be 10% lower than last years without agri-monetary compensation because we are only talking 60% as opposed to 100%. But I think for the industry to rely on premium payments over the next few years as being the way forward I think the industry itself will find out as it goes along finance might not be there, there is the possibility of reduced payments with enlargement and, as Nigel says, there are a lot of people now know the benefit or can see the benefit of a better quality of product perhaps in markets. So I would suggest that the improvement in quality in the marketing will take precedence over the premium.

63.

Mr Paisley Jnr: Are we in danger in Northern Ireland of winning the battle in terms of achieving low BSE status, but losing the war in terms of - I'm thinking particularly of beef labelling categorisation - that any benefits that we could accrue to the industry here in terms of getting our product out will then be lost on how we have to go through another process of standard and welfare in terms of labelling our product? Secondly, you mentioned New Zealand and the co-operative scheme, have you been out to New Zealand and looked at any particular projects there or have you more than just anecdotal evidence about the New Zealand co-operative scheme?

64.

Mr McLaughlin: No I haven't been to New Zealand unfortunately, if the offer stands I will take it certainly. It is largely anecdotal and it is coming through -.

65.

The Chairman: The whole Agriculture Committee may want to go to New Zealand.

66.

Mr McLaughlin: I have been to South Africa, I have observed marketing and meat production systems there. The whole South African meat industry is basically operated by four companies, its affiliations and it is economically driven that the feed lots own major shares in the meat processing industry. So it is co-operation but through an economic thing. Again, there's a lot of difference there in the type of product, the product that they are marketing. To move further than that, for Northern Ireland to lose out on labeling I think there is a possibility that there will be a lot of anecdotal evidence if we get low BSE we won't be seen as a British product any more. To my mind we are still there, we still have a part to play there, because we get low BSE is, I think, an upmark, a star in our picture that we have got a good product to sell, that we have traceability, we have got all the standards that are required through welfare. I think it will actually be a marketing benefit to us. There are threats on labeling on the way it is implemented. I think we have to develop new products. We would like labeling just basically to be endemic, that is UK product. We don't want differentiation between heifer beef, bull beef, steer beef and that having to be followed through the supply chain and through the processing chain where the product has to be done in three time separation and also been replicated in retailing where it is going to have to be stored and marketed separately. That is an impossible cost.

67.

Mr Carmichael: I think we did make representation to the MEP's at one stage there on the initial beef labelling, whenever the first drafts came out it was ridiculous the amount of labeling, as Nigel said, they required. As a matter of fact some of the butchers in local shops would have found it more than hard to comply with. The additional costs as we asked the industry at various meetings was who was going to take on the burden of additional costs, we know where that finished at. So the response back, I think they actually have reviewed it, it is going to be somewhat less than initially thought and to the batching and all the rest.

68.

The Chairman: The issue, of course, is you see the battle in Europe, there are people who want one label - European Union, well that doesn't suit us. I mean we need to have sourced here from Northern Ireland. That actually doesn't suit us but that could eventually come because it was a very strong debate in the House out in Strasbourg on that issue. It is coming up again this week but I think it is in the melting pot. There are some requirements in present proposals that the housewives are not going to ask about. The gender of a piece of meat, is the housewife going to say: Is this female or male? I think that is ridiculous. But, you see, there are people there whose meat is not up to our standard and they just want European Union on it so that covers a multitude of sins. I think that the debate is probably going on, but I don't think that we are going to be bothered with the amount of minutiae that originally was declared.

69.

Mr Carmichael: We talked about the labeling of product coming in here, whether it is packed in the UK or produced, it is back to this -

70.

The Chairman: Sourced, that's right.

71.

Mr Carmichael: Yes

72.

The Chairman: We have to move on. Gardner?

73.

Mr Kane: Just two brief matters, Chair, to Nigel and Jim here, what additional solutions, gentlemen, other than has been just mentioned does NIAPA have to the current difficulties? Your submission this morning alleges that the retail price of beef is not reduced, other evidence we have heard claims that the values obtained by retailers per animal have followed the same pattern as prices obtained by producers. Who has got it right?

74.

Mr McLaughlin: Well yet again I think the cost, everybody is maintaining their mark-up costs, Gardner, in the supply chain after the farmer after the marketplace. That share of cost has not varied, as you say, in Northern Ireland. The element of competition between those costs, between the plants in Northern Ireland I think is, I wouldn't say surprisingly, I would say amusingly similar in that there doesn't seem to be an awful lot of variation within their costs. So I think that speaks for itself, I can't talk about those things. Again, we are marketing yet again at the major multiples and we are targeting them as our major marketing source and our sole marketing source, namely two main supermarket groups have the Province carved up between them. Now there are other supermarket groups, other marketing areas in the UK that I think could be targeted. But I think through reluctance on both the part of the meat plants and on the part of DARD that they are not willing to look towards marketing anywhere other than the two major supermarket groups.

75.

Mr Kane: I would support that.

76.

Mr McLaughlin: I think that is reflected in all aspects of development of the food industry that is going on here. I think it is something that they are up for criticism.

77.

Mr Kane: Thanks Chair.

78.

Mr McHugh: Just in relation to our last sitting here, I had a difficulty with the meat exporters, they are supposed to be the experts in terms of selling the product beyond the farm gate and as you say the farmers are not good at that nature. What they actually said was that the farmers didn't bother getting into Quality Assurance and I made the point that you made yourself, you have to have returns, you have to have an incentive. How do you see them actually getting to the point where they start to give farmers a positive return in terms of going down the road of Quality Assurance or even taking the bother out of all the paper work in terms of sending in returns to the Department on time and so on? You have to get a return for this. The two parts of the industry, if we are to have an industry here at the end of day, not just those who can source the stuff or the product at any part of the world, if we are to have an industry that survives it has got to take the whole industry on, the whole industry and those involved in it; stakeholders are going to have to take it forward otherwise one is going to cut out the other. How do you see them inputting into that?

79.

Mr McLaughlin: I think, Gerry, in all fairness they will have that whenever they have to compete with a boat in (inaudible) harbour or wherever. I think that they are going to have to start then and do what they have been paid to do and that is market the product and obtain a market premium there that is going to ensure their viability. As it stands I think they will be prepared now to look towards the aspect of bringing in a commodity product and cutting it up and further processing and putting it out of Northern Ireland and forgetting about a Northern Ireland sourced product. I think they have to be tied into trying to source their product from Northern Ireland and market it. We have been a capital supply base, because of the difficulties we have in moving cattle across the water and getting markets in the rest of GB for meat I think that the fact that over 50% of the GB meat processing industry is controlled by three Irish companies. So if we have live exports I think we have got a major lever there that we can say: Right guys, unless you are giving us the right price on to the boat it goes. Whenever that happens they are going to have a major impetus there that they are going to have a traceable product, they are going to have to have all the bells and bobs on it to try and get a market premium. They are going to be out there actively trying to drive it on further. I think that DARD, the marketing groups - LMC, that we have to develop and actively pursue the live exporting of Northern Ireland product out of here. Now to me, there is a responsibility there, LMC are funded by the Northern Ireland farming industry primarily so I think the responsibility there to market that product to the most economic return that can be obtained, both in the long term and short term so there is a responsibility on their part, there is a responsibility there for DARD and a responsibility for everybody to do their part to get the best possible return from the market place wherever it may be, rather than just saying: Right, we just want to have a processing industry in Northern Ireland and farmers only supply part of that. So I think the impetus is going to have to come from you, you are political people, to say to the DARD people: There is going to be a market next year for Northern Ireland product, target it. They will say: No, we have the money in through from IDB or whoever into building up processing plants and we want that, we need Northern Ireland product for that. We want a fair share. I think there is a major opportunity in the spring of next year to do something.

80.

The Chairman: Well, Jim and Nigel, thank you for being with us and thank you for your contribution, we found it very helpful. The time always beats us on these things but at least we have probed into some things and we have got answers which will be useful to us when we make our report. Our first report will come out next Wednesday, but it is dealing with the chain from the farmer to the retailer - that is dealing with that - and then we are bringing one out on pigs and one on beef.

81.

We are going to have a break now for 15 minutes. There will be coffee and something to eat so you are welcome to join us.

82.

Mr McLaughlin: Mr Chairman, Committee, I would like to thank you for having us. We found this discussion very good and very thorough and the involvement of all of your Committee in that.

83.

The Chairman: We are looking forward to seeing you in the very near future.

84.

Mr McLaughlin: Thank you Dr Paisley.

85.

The Chairman: We are adjourned now until 11 o'clock.

Friday 30 June 2000

Rev Dr Ian Paisley (Chairman)

Mr Armstrong

Mr Bradley

Mr Douglas

Mr Dallat

Mr Ford

Mr Kane

Mr McHugh

Mr Paisley Jnr

Mr D Rowe )

Mr C Pogue ) Ulster Farmers Union

Mr K Sharkey )

86.

The Chairman: We would like to have a submission from you first of all on the pigs and then go for half an hour and then have a submission on the beef and go for half an hour.

87.

Mr Rowe: Mr Chairman, can I first of all thank you very much for inviting us along to this illustrious Committee? It is nice to be able to talk to those who are in the seat of power in our new dispensation. Can I start by introducing the team that we have brought along today? On my left is Mr Charlie Pogue, Chairman of our Pigs Committee - he will talk on the pigs; on my right is Mr Kenneth Sharkey, Chairman of our Cattle and Sheep Committee - he will deal with the cattle and sheep issues. We have also taken the liberty to bring along with us some of our other members and I will introduce them to you. Sitting in the public gallery is John Gilliland, Deputy President of Ulster Farmers' Union; Lynn Martin, who is Secretary to our Pigs and Poultry and Intensive Industry; Wesley Aston, who is the Director of Commodities; Moyra McMaster, in the second row, who looks after our legislation and commercial affairs in that department, and then Ian Stevenson who is Secretary to our Cattle and Sheep Committee.

88.

The Chairman: Mr President, I was telling them they were going to keep an eye on you fellows today.

89.

Mr Rowe: I'm glad you said it, because I thought it and I'm not allowed to say it, in case we step out of line today. But if we need technical backup they are there in the background to support us. There is no point in you gentlemen listening to me because you have already had the submission in writing from us. There is no point in listening to the monkey when you get the organ grinders along, I brought two organ grinders along to do the speaking. At your request, Mr Chairman, I will hand over to Charlie and start on the pigs, okay?

90.

The Chairman: Thank you very much. You are all very welcome. I'm glad you have your team behind you because it shows the importance that you men reckon that this matter has. It is a matter of the utmost importance to us, a matter of life or death for our industry.

91.

Mr Rowe: Mr Chairman, yes, we regard the matter as very important. We also regard the setting as important as well. So we would like to give at all times our best possible shot.

92.

Mr Pogue: Thank you, Mr Chairman, thank you for your welcome. As you are well aware and you have worked with us considerably closely for the last two years and we appreciate your help, pigs have suffered greatly especially since the fire at Lovell and Christmas which was in June 1998. Since then we have been in disaster and at the present point we are beginning to rise above that, put our head before the parapet and say we are now at break even point or almost there. Having said that, there is still the big debts created during that period as you know, there are high interests to be paid at the present time and there is no maintenance of farm buildings. In fact the average age of herd has gone up considerably and a lot of replacement stock needs to be bought. So it will be a long time yet before pig producers say they are back in profit, having to take all that into consideration. We have, as you have before you, made a joint submission with the Pork and Bacon Forum, it covers all aspects and we did not want to have duplications so we have moved together with them. I am a member of that Forum as well.

93.

The first item that we had on the report was the fairness of the Northern Ireland pig price. We felt there was unequal distribution of profits and throughout the whole time when we are in a loss situation we felt in the producer, processor and retail chain there was sufficient money if the cake had been divided more evenly, producers would not have suffered to the same extent. The Forum carried out at that time and quite recently an exercise to determine what a farmer was getting for the pig and what the retail outlet was getting. You can see from that the difference. I will leave it at that, if you don't mind, to Mr Overend who will go into it later - he was in charge of that exercise and knows exactly how it was carried out, but no doubt he will explain that to you.

94.

Moving on from that, there's the price differential between the Northern Ireland pig and the pig in GB. This has been traditional throughout the years, at times 8p/10p. We felt that because of the fire in Lovell and Christmas and the pigs were being exported to England it reduced the price over there as well as reducing the price here which plunged us into a far deeper crisis than the oversupply of pigs throughout the world created. We were brought into the crisis much earlier and much deeper than any other region or member state of the European Union. And we felt that we should have had some assistance from the Government in finding ourselves in the disaster that we were in because of the exceptional circumstances of the fire, but although we made representation, and you and many others made representation to them, nothing happened. We felt that throughout that period the Government had no vision or will to assist the pig farmers in Northern Ireland. Our pig industry has suffered to a great extent since that, as is indicated by the present number of sows in Northern Ireland which is now, we would estimate, at half what it was at that time. Apart from pig producers losing money -

95.

The Chairman: What would the figure approximately be now?

96.

Mr Pogue: We would estimate at a maximum 35,000 sows in Northern Ireland. That is a guess. The June census has not come out yet, the latest census we have is December 1999 which is 42,000. The number of producers are down to half what they were two years previously to that. A lot of other jobs and ancillary businesses were lost because of that and are still lost so it has created a lot of unemployment within Northern Ireland.

97.

The restrictions placed on us by Government with the stall and tether ban where we had additional welfare standards to meet with, those came into operation on 1st January 1999 at a time when we were at a very low ebb in the pig industry at a cost to the UK pig farmer of around £220 million. We had the BSE tax which added extra costs to our production of £5.26, we estimated, a pig. We had offal disposal, we have the disposal of fallen animals and that is another item which is relevant to the beef industry and all livestock industries in Northern Ireland. We feel that the Government, in order to keep the environment right, should be providing us with a free fallen animal collection service especially now with BSE and all that goes along with it.

98.

The strength of Sterling - what could one say about that? That it has hit us all especially in the pig industry, it has brought a great number of product coming into the market from other member states that are in Euro. We have a land boundary with Euroland which has added more to our difficulty here Northern Ireland because live pigs can be imported and bought in a currency which is a lot lower than ours; that keeps the lid on the prices that we get here in Northern Ireland. So the strength of the Sterling or the weakness of the Euro has added a lot to our problems in the pig industry.

99.

There was a general oversupply of pigs throughout Europe. We understand and we believe that this is now over and we are coming out of that. As I said the Northern Ireland pig herd has decreased much more than other member states - we have fallen by 50% possibly. Some member states might have fallen by 0.5% which is a big difference which, to me, shows how we were affected so much more than any place else.

100.

Factors that are specific to Northern Ireland we feel is, as I have mentioned, the fire at Lovell and Christmas, our additional feed costs, which are somewhere in the region of £10 to £15 per tonne higher in Northern Ireland than in GB - that roughly equates to somewhere in the region of £2.85 per pig. And as I have said earlier, the differential between the GB and the Northern Ireland price. At times we have come up even with the English price and we would like that to be maintained or indeed surpassed if we could to retain a business in Northern Ireland.

101.

Steps to ensure the survival of our pig industry in Northern Ireland. We would like to think that what we have left of a pig industry could be salvaged and a sustainable and viable pig industry could be created in Northern Ireland because it keeps a lot of the family farms going; it also provides other work in the rural communities with meal compounders, ancillary businesses connected with pigs, and we feel that the Government while they, I feel, lack vision and will to do something should, apart from what they have offered us at the Summit in March of this year, and have not yet delivered and may not for the ongoers deliver until this time next year, it is far too late and far too long for pig producers in Northern Ireland to wait. There is the possibility at the present time when prices of stock have gone up that a lot of farmers can now realise that their assets would clear their debt and may get out which may lower our pig numbers even more at the present time. If there was some influx of money into that pig producer's pocket, a supplement on a par with our colleagues on the Southern side of the border - Cavan, Monaghan and Donegal have got, £12,000 to a 100 sow unit, a maximum of that would be very, very useful and we feel that should be looked at and come to Northern Ireland.

102.

The Chairman: You could wind down now so that we get some time for questions because half an hour goes in very quick.

103.

Mr Pogue: Right, impact as I have mentioned, steps taken by the retailers. The first one would be to ensure that a fair price is paid to the processors so that we in return as producers can get a fair price. We would like the promotion at all times of local product. We feel that the processors should supply adequate slaughter capacity here in Northern Ireland. There is a pig industry review on an all Ireland basis going on at the minute. Hopefully there will be a report quite soon from that and we would await the outcome of that review and then state what we would like to see in the processing line in Northern Ireland.

104.

I think that the producers themselves can work together, possibly if we had more co-operation and between producer, processor and retailer we would be in a much better position to continue in the pig industry. I would ask this Committee, if at all possible now that pigs have got back into at least break even in some cases showing a bit of profit, to keep the banks from putting pressure on producers to clear their debt to allow them to get their maintenance back into shape again, get everything structurally sound to retain, as I have said before, a sustainable and viable pig industry for Northern Ireland.

105.

The Chairman: Thank you very much. I have three short questions, probably they have been dealt with in the evidence that you have already given us, but we want it for the record because when we draw up our report we will have to have the record of what happened here in this public session and why we drew certain conclusions because of certain evidence which was given us. The first question is this: In previous evidence, the argument that producing high quality produce for premium markets is the only way to secure the future of our industry; do you agree with that assessment or not?

106.

Mr Pogue: I agree, yes, that quality pig meat will sell and will provide us with a more stable industry in Northern Ireland. If we can work for quality that is what the producers will aim for and have been aiming for for a considerable time.

107.

The Chairman: In a market like ours, is it not also true that perhaps the housewife is prepared to buy meat that is not up to the highest standard, but is indeed a good standard of meat?

108.

Mr Pogue: There will be a market for that, but there is always sufficient, even if you strive for top performance you will always have stuff in the bottom layer to supply that market we feel.

109.

The Chairman: Thank you, that's a very honest answer I must say. Some farmers wouldn't like that. Do you support the idea of farmers joining Quality Assured schemes and do you feel these are a necessary part of future marketing? If so, how can farmers be encouraged to get into these schemes because we are told that numbers currently participating are actually poor in their percentage?

110.

Mr Pogue: I support Quality Assurance schemes, most farmers do, but the problem has been that we haven't been given the incentive to produce that quality. I think that we must have some incentive there to produce that quality and get the extra money that it costs us to put it up.

111.

The Chairman: You are actually saying if they were more beneficial to the farmer more would participate in them?

112.

Mr Pogue: No doubt. I mean the farmer will work if he is getting money in his pocket, there is no doubt about that.

113.

The Chairman: Now we have heard from the Department of £400,000 to be made available for marketing in pig meat - I have to ask this question, I already know your answer - is that enough? How do you feel that this money towards marketing should be used?

114.

Mr Pogue: A joint submission has been already been put to Government and I understand it has gone to Brussels for approval. Half of that money we have asked for to go towards the Forum for promotional activities. We know that we can't stress that it must be Ulster pork and bacon, that it is solely a generic promotion for pork and bacon. Part of the problem that I would see there is the 50% matching funding. Where do we get that in all cases that has been asked for? So if the Government gave us £400,000 the industry has to provide £400,000 as well for that. With the low number of pigs now and little income to the Forum, a lot less than there had been previously, that could be our difficulty. As well as that the PPDC, which, as I understand it, may be the only central testing station in the European Community - the only independent one and we feel honoured to have it here in Northern Ireland - has asked for some of the money for research for genetic improvement, as I mentioned before, to improve the quality of our pigs. I think that end will be financed where there is a statutory levy on producers to pay to the Forum. Producer groups, both farmer orientated and processor orientated, have asked for some of the money to assist them with marketing of their pigs rather than of pig meat. I think that as far as the farmer is concerned the marketing of pigs is as important as pig meat.

115.

The Chairman: Thank you. Just one other point that you had given in your submission, you say the Republic of Ireland Government announced an aid package in February to compensate pig producers in the border counties for losses incurred as a result of the fire at the Lovell & Christmas plant - that package was to provide up to £12,000 per unit. You say that we should have a similar scheme in Northern Ireland. You know what the argument of the Department was, that because they gave some money to pig farmers to get rid of pigs in the market that that was the same type of scheme? Would you agree with this Committee, because this Committee took an opinion that that was nonsense, it wasn't comparing like with like?

116.

Mr Pogue: Wholeheartedly. I think that scheme that the Government provided was very, very useful at the time. They provided it for the welfare of the pigs; it did not do an awful lot for the pig producer. We feel that being in the one marketing area with the three border counties supplying the same plants, the same factories, that they may have benefitted as much from that scheme as we did because it freed places in the processing plants. They have the added benefit now - and we don't think they shouldn't have got it, we believe they should have got it - but we would like to get it as well, something similar.

117.

The Chairman: Thank you very much. Now some of our members want to come in. Gardner?

118.

Mr Kane: Thanks Chair. Charlie, you have mentioned the need for some form of compensation for BSE charges. These charges are alleged to account for half of the losses pig producers were making in recent times; in your opinion is it realistic compensation? Assuming there will be none can the rules be used to any marketing advantage?

119.

Mr Pogue: Yes, there is a marketing advantage, we think. Not feeding meat and bone meal to pigs, we would not want to go back to feeding that to livestock in Northern Ireland. We think there is a marketing advantage there. There is a judicial review, as I am sure you are aware, taking place in England; Meryl Ward has submitted a case for the British Pig Industry Support Group against the Government because of lack of compensation. They are awaiting the outcome of that quite soon on whether the Government were right or wrong on what they did. We would hope when the result of that comes out we may be eligible for compensation and we all live in hope.

120.

The Chairman: That's the voice of the optimist.

121.

Mr Paisley Jnr: First of all, do you agree with me that the way in which the stall and tether ban was implemented in the UK, in particular in Northern Ireland, it was an unmitigated disaster as far the as the industry was concerned? Do you not think as well as accelerating the decline in the industry it also exposes the fact that the whole philosophy lying behind quality, welfare, that that whole philosophy is misplaced because the consumer seems to be interested in one thing and that is price on shelf. Despite your best intentions to meet all those standards, those exacting standards, at the end of the day if the product is too dear the consumer ain't going to buy it. Therefore should you not be trying to get away from that philosophy on to a more surefooted market based philosophy?

122.

Mr Pogue: Number one, I and many producers in Northern Ireland and, in fact, I would say in the UK, but more so in Northern Ireland, do not think that the ban on stalls especially was to benefit of the welfare of the animal. In fact, we think it was the other way - a pig in a stall was less abused than one put into loose housing and most of us who have changed over to loose housing would have found a difficulty in going back to that. In fact, when stalls were brought into being here in Northern Ireland 10/15 years ago we thought it was a Godsend to have them that way. We agree that the Government should not impose something on the producers here that is going to make that the production of anything more costly because the cheaper we can produce food, quality food, with reasonable welfare, the better.

123.

Mr Rowe: If I might just add to that, that's the view of the Union, that this was not something that we should have done when the other states in the EU were not willing to go down it. Our competitors didn't go into it, but this Government laid down the law and being law abiding people the pig producers of Northern Ireland had to follow suit. There was no way at any time and we said this all along, that we should wait until the rest of Europe at least was doing it so that the competition would be level across Europe because I would have doubted if the rest of Europe will ever do it.

124.

Mr Paisley Jnr: The general philosophy behind pushing for quality and pushing for welfare, is that misplaced then?

125.

Mr Rowe: The general philosophy of pushing for welfare standards, quality, yes. But then the quality, removing stalls and tethers does not produce a better quality of pig, it gives you a more welfare friendly pig according to those, but as Charlie said it doesn't actually do the job, it is a mistake.

126.

The Chairman: I'm sure you would agree with me a woman going to buy a piece of pork is not going to ask: Was that tethered or in a stall? It is absolutely ridiculous that should have been made and then to take us into this against everything that was running against it in Europe was adding fuel to the fire that was burning up our industry.

127.

Mr Rowe: It showed a lack of understanding, Mr Chairman, in the decision making process of what actually goes on on the ground, both in the retail marketing of what drives the retailer and what is suitable for the production side of the industry as well.

128.

Mr Bradley: Thank you Chairman. Can I say, Mr President, I share your view of a free fallen animal collection service so much so that I have written to the Minister this week with the EU regulations coming in in 2003 there will be no fallen animals buried on land, to investigate the system in France where it is a free service already.

129.

You mentioned the lack of maintenance on farms; can you assess what the long term result of this would be and have you any hope that funds for capital investment will be made available by the Department?

130.

Mr Pogue: It would be great if it could be. The Department haven't given us much help so far, but I think we should still keep lobbying to see if we could get something for structured funds like that. I think part of our problem may be the rules laid down in Brussels, but we would still like to think that we could get some help. Maybe there is the other case where saying we had to go out of stalls and tethers at a time when there was no money on farms and there was a very low ebb in the industry a lot of us made utility jobs for loose housing. And we feel now if the industry was back into the profit we may wish to do something which would be an improvement on what we have and would like to think that maybe grant aid could be brought to us to help us to do that. A lot was done just on a shoestring during 1999, at the end of 1998/1999 to keep within the law. If we had money there are other ways that they could be kept which would be better than what we have at the minute.

131.

The Chairman: We have to move on.

132.

Mr McHugh: Thank you, Mr Chairman. Firstly, can I congratulate Douglas as Chairman of the Ulster Farmers Union. We are both Fermanagh men, we have worked on this crisis in agriculture for quite some time now, I believe he has a good grasp of the difficulties. In relation to the funding that has been given by the package, the funding package, and in terms of the Government's commitments, the fact that they are leaving quite a lot of it off until next year before the farmers will gain anything from it, I would have great concern in relation to the point that was made of the 50% funding that has to come from the industry. That would be very, very difficult. What I'm saying is is there a possibility that we can lose that side of the £400,000 if the joint funding isn't able to be produced?

133.

Mr Pogue: The £400,000, it was not part of the Summit announcement in March that was previously there and I think will be available quite soon. I would hope that the matched funding could be found, that is one difficulty I can see in it. If it is not found I would like to think that our Government would look sympathetically on the situation.

134.

Mr McHugh: It is a very important part of their commitment in terms of marketing anyway. The other thing is: How do you see us getting to a point where we can avoid the peaks and troughs, especially the trough that we have found again which has been the history of the pig industry? We have to get to a point where the industry will be sustainable for the future in avoiding these troughs; is there anything in particular that can be done in terms of ourselves in relation to trying to make sure that it doesn't happen again?

135.

Mr Pogue: Pigs have always been cyclical, peaks and troughs, I think that is market led. It has to be that way. I don't think we, in Northern Ireland, would favour quotas for sow number or anything like that, but I think what's going to restrict us in the future is the environment situation. The numbers that we have in Northern Ireland are so small in relation to what is there throughout Europe, and Europe is such a small place now that bears no significance, I feel, on the overall picture. I think that would double our numbers and would have very little effect on the total picture within Europe.

136.

Mr Armstrong: Thank you Chairman. Would you agree with me that Government has a negative approach to agriculture and the pig industry and would more encourage diversification in other areas and then expect agriculture to pay for the diversification instead of the area that we go into and take the funding out of there? Also, the £5.26 per pig which is a BSE related issue, would that not be coming out of the budget for BSE related incidents? What way would you see that £5.26?

137.

Mr Pogue: The first point there in relation to the Government's position on diversification, farmers in this country have been brought up to produce food to the best of their ability, they are not hoteliers or bed and breakfast people, and I feel that farmers should be kept going on the production end of food for the community.

138.

BSE charges, we would like to think that some of those could be recouped. We understand, as I have said before, we don't want meat and bone meal back into the food stuff at all or into the food chain, we would be happy to do without that. We would like to think that other aspects of that like your offal disposal, fallen animals, everything related to that, assistance would come from the Government for that.

139.

The Chairman: We will have to leave it there and come to the beef.

140.

Mr Rowe: I have just two comments on that, fallen animals and that sort of thing are not, should be regarded as something, as disposal of meat-and-bone meal is regarded not just as a farming problem but as a human health problem and should be dealt with in the overall Government expenditure.

141.

Just one other thing to come back to Gerry, I thank him for his good wishes, but he talked about the £400,000, that is for the marketing grant. There is another scheme as well for the health of pigs announced in the Summit on 30th March of £66 million over three years. When Nick Brown was here on whatever day, Tuesday, we did ask him and that he said that £26 [sic] million of this will soon be coming on-line now. The administration has to come and all the rest of it, he hopes it will be through Brussels in a few days time. We did ask him to look sympathetically at some regionalisation or relaxation of the rules towards Northern Ireland to put it at its simplest, Mr Chairman.

142.

The Chairman: Thank you very much. We come to the beef. If you can make your submission as short as you can then we will have more time for the questions. I know you don't want to avoid questions. Some people getting at the table have a long preliminary because they don't want to hear questions, we know that is not so.

143.

Mr Sharkey: I think you have got the paper, no doubt you have read it or will read it. I would just like to highlight a few points and leave as much time as possible for questions.

144.

The main contributory factors to the whole beef crisis as we all know and we are all sick of hearing is the BSE issue. Basically what it has done to the market place in Northern Ireland, it took away our competition for cattle basically overnight, that has been the ruling factor since then. The other big problem is the currency exchange rate and it is a twofold prong. First of all, just like the pig sector, it is drawing in all the imported beef into the UK market and let's face it the UK market is the only market we have as our GB counterparts. So that market is being provided with a lot of cheaper beef, therefore making the differential with our prices against GB even greater than was normally the case. Indeed when we were exporting it was the opposite effect to that. I am pleased to say that of late the differential has narrowed somewhat but it is still a big issue and a very great concern to us. We would have to question the loyalty of some of the supermarkets, while very sympathetic to Northern Ireland and very loyal to purchasing our product we wonder if our prices were the same as the mainland, would the loyalty be as such.

145.

Secondly, the currency element on our direct payments is a very big issue as well. As you appreciate our payments - I will speak a wee bit more about them later on - are in Euros therefore as well as the price reduction with imported product we have the big reduction in our direct payments, that is a twofold attack basically on our livelihood.

146.

The cattle grading issue, we know a lot of people talk and there is a lot of discussion regarding that, we do realise that we must have a classification scheme within Europe. We must have and work towards the Europe grid. We believe and I strongly believe that the grading of cattle is not the main issue; it is the price that is paid for the various grades that is the issue. After all, the farmers are not particularly worried what grade is on the animal if he receives the same price or a fairly reasonable price. So that, we feel, is the main issue. I am pleased to say again, we have been working on this quite hard with the processors and we believe that maybe in the near future we will be able to get that price structure amended.

147.

Can I move on quickly to what action we believe could be taken to help some of these problems? First of all the BSE low incidence, we know you are all very familiar with that particular case, could we just ask you to reinforce the case, basically what we want is a workable, simple scheme so that we can export carcass beef and live animals and bring competition back into the situation. So that is basically what we are asking for, all the pressure we can to have a simple workable scheme. The regulations regarding all our schemes and premiums and whatnot are very complex, indeed the form filling exercise now is a very big worry and burden to some of our small farmers. I mean, we have the ICAS forms, we have all the premium forms and the there is a lot of documentation regarding this, it has to be very accurate and indeed we feel as farmers that we have no room for error whatsoever. If we do make an error, be it whatever type, there are penalties involved. The farming community feels very aggrieved that the Department, as infallible as they are, do make mistakes and there are no penalties there. We feel the penalty system is much too great for simple errors.

148.

As I mentioned the currency fluctuation, can I just come back and say one thing: We are part of Europe and we accept that, but if there is a mechanism in Europe for currency fluctuation, the agri-monetary system, we must have an undertaking by Government to fulfil their obligation there and pay that agri-monetary money. We believe strongly if this money had been drawn down and paid from the 1996 situation we certainly would never have been at the trough we were in because we all know a portion of money at the outset would have been a big benefit from saving us getting down so low. So we would like a firm commitment from Government that if this situation continues or increases or changes in the future that that mechanism is automatically there, that we don't have to go with a begging bowl begging for money rightly due to us.

149.

Agenda 2000, there are some issues in Agenda 2000, we do realise it is mainly European guided, but we do realise there are a couple of items that the UK Government has discretionary regard. One of the main issues or two of them that were discussed this time last year was the 90 head limit to claim BSP premium on. And we prefer that this limit be abolished simply because we have to have an upper stocking limit which we do feel is quite an adequate limit. It is even more detrimental to the Northern Ireland farmer than his GB counterparts for the simple reason a Scottish producer, for instance, he can finish his animal, he is getting £50 to £60 more on the market place for it, on a cereal base system his feed is some £15 a ton cheaper so he is saving about £20. In other words, the Scottish producer would have the equivalent of one of our premiums over and above us. So this is why the Northern Ireland farmer cannot finish cattle successfully with one premium, he needs two premiums. The 90 head limit is there, obviously that is holding back our finishers from being able to achieve the second premium.

150.

The other issue, just a quick one on the siphon of the transfers of quota, we have a 15% siphon from all quota transfers. We believe that is too high because that goes into the national reserve. We were never happy with the way the Department implemented the national reserve or distributed the national reserve so we believe the siphon should be reduced.

151.

Promptness of payment of direct payments is another very grave issue to farmers and all basically we would be asking you for is to have a system where the dates are known and abided to that, when the 16^th October comes, whenever payments are due, from that date onwards those payments will be prepared in advance, even could be put in the envelopes and could be made available to the farmer within that week or what not because each year this goes on. Each year there is a different reason why the payments are delayed, but it all results in the same thing - we, as farmers, have to finance overdrafts for those extra months each year. We want a specific date regime for payments, when we would expect them and keep to that date irrespective of the problems.

152.

Could I just finish off very briefly, the relationship between processors and retailers we believe have been very detrimental to the farmers' share and just as Charlie said on the pig issue we believe the retail prices are adequate to give everyone a reasonable return within the sector, but unfortunately we are at the bottom of that structure. We believe strongly, and I think we have evidence to support, we do not get a fair share of the chain. So we are asking that we could have some transparency there and get our fair share. We believe retail prices could remain something similar.

153.

Can I just finish off by saying we understand as producers we do need to cooperate better with one other, maybe that is something on the rural development front we believe more rural development money could go to agriculture to go to help us work together and strengthen our place in the market. So I will finish at that, gentlemen, and answer your questions.

154.

The Chairman: Thank you very much. This low incidence BSE status for Northern Ireland as you know there is great discussion in Europe, at the moment it is all over how this beef goes out of Northern Ireland and how it is going to be labelled and so on. Have you men any views on that?

155.

Mr Sharkey: Well the labelling issue is really a European issue at the moment on all the new labelling regime. Indeed it would be thought that when all the information that could or should be put on that the product would be no longer visible there is so much information. There are fors and against the labelling regime, it is difficult to say whether - certainly if we had a Northern Ireland image it would probably be okay. Probably as a UK image of beef may not be as good throughout Europe, so there are pluses and minuses, but it is something that is happening in Europe and it is slightly separate from the low incidence issue.

156.

The Chairman: But in the low incidence issue there's going to be a labeling that this came from Northern Ireland from a low incidence status. Then the argument from the Commissioner, whom I have talked to and who of course is a legal man, he sees it all the way from the legal man, he is a former Attorney General from the South, he feels that it leaves the way open for other meat to go in and pretend to have the status that this low incidence section of the European market has, because it is sort of a new departure, this low status incidence.

157.

Mr Sharkey: I appreciate that. I'm not exactly sure what you mean.

158.

The Chairman: I'm asking you what way do you think you can get your meat from a low incidence status area of Europe across Europe without giving opportunity for people in the smuggling racket to get stuff across the border, label it the same way and get it away?

159.

Mr Rowe: Mr Chairman, all the other 14 countries in Europe, sorry 13 of the 15 are low incidence areas and they do not have this problem to any great degree. We therefore do not see this as a problem for us as a region. All right we are a region of a country that is regarded as high incidence BSE. The only place this could come into any problem is meat that has been brought in from UK from a high risk area into the low risk area for further processing. This can be safeguarded, we believe, quite adequately, by what's technically known as reverse XAP scheme. In other words it comes out of England, comes to dedicated plants or plant, processed under supervision which will be done anyway because we have a high degree of supervision in the plants anyway, and then it is put back on the lorry and sent back to England. Whereas meat that comes from Northern Ireland, it will be coming from different plants, it can go to the market anywhere in the world hopefully after low BSE incidence status. Technically this should be able to be overcome without a great deal of bother. Now, I say technically, I see it as that way, that is what we are looking for, we have 15 member states to convince, and we have got to get the thing set up correctly. So there are a lot of hurdles to go over, but it is not impossible. And I believe that David Byrne at least knows it can be done if the will is there. It is making sure that the will is there, not only with him, but with SEAC, the committee who look after it and the 15 member states.

160.

The Chairman: It would be a terrible thing if because of legal technicalities and (inaudible) Minister we did not get it. I think that there are interests in Europe who do not want us to get it, that's the first thing, there is opposition to it. That being so, we must be able to say there is a scheme like the scheme that you are talking about which seems to be quite simple and you are not really adding to what has already been done. If we could get that and I think that we need to be lobbying in Europe along that line because what I'm getting out of Europe is that it is too difficult, we would love to do it. I mean we were told by Nick Brown there was going to be no quick fix in this anyway, it was going to be a long time. I'm not so sure about what the Department here is doing, I'm not so sure because we had a document before them when they said they were definitely - they only looked at it this morning - they were definitely supporting it, but they weren't saying it was their target. I put them over it today. So I think that we need now to get all the strength of agriculture on that one particular subject so that we don't fall by the wayside.

161.

Mr Rowe: Mr Chairman, we, as a union, totally agree with you. It is one of the biggest improvements that we see not alone, it may not be the biggest in financial improvement in agriculture, but it will be one of the biggest boosts for morale not only for agriculture but for Northern Ireland. I believe it will also be a big boost for moral for the rest of the UK, because it will show them that it can be done , that there is a way out of this position and that we are not producing, for want of a better expression which is not very good, a dirty product or contaminated product, but I believe it can be done. We will endeavour and are endeavouring in every corner we can to do what we can for it.

162.

The Chairman: We might need the agriculture interests ourselves to maybe go directly to Europe because I'm worried that this is going to fall by default because they are all the things that are said to me. I talked myself with Byrne, of course he is sympathetic I mean I confirmed that he is sympathetic because he says "I am in a position where I'm easily got at" because people are saying he is the Attorney General in the south of Ireland, he is not interested in getting anything for Northern Ireland. I said I quite understand that, he is sympathetic. At the beginning of this they were talking about impossible standards that they wanted to go through with which would be so expensive that, at the end of day, we were not getting a free market into Europe. So I think we might have to develop more a strength because I sort of thought that Nick Brown was putting off the awful day, I might have taken him up wrong, he wasn't saying that it was definitely coming. He said they are working on it. Now the officials are working on it. Sometimes I'm a bit afraid when officials get into the matter, especially European officials. At the end of day there is not much left so I think that we need to keep that in mind.

163.

The members want to ask you some questions.

164.

Mr Ford: Thank you Chair, I'm going to concentrate on your proposal and what action can be taken to overcome the crisis. I think it's very interesting reading down the number of things we have already said, but unfortunately also the things like agri- monetary compensation which are rather beyond our abilities to have much influence on the current policy of the MAFF Minister. Although I think this direct payment is something which we could take up rather further with DARD. Can we just follow through your point about low incidence BSE because that seems to be a crucial issue at the present stage; the Chairman has already hinted at it, do you believe the will is there within MAFF, official and Ministerial level to push forward our case as strongly as it should be pushed forward?

165.

Mr Sharkey: I appreciate we are dealing with our own Department and in Dundonald House they in turn work through MAFF, I suppose the best hope is that MAFF is on our side. It is a sort of a three pronged attack. We work through the Department, they go through MAFF so, as the Chairman rightly says, there is a lot of change working there and if we could have a more direct involvement with Europe that could be useful to cut out of some of that because the message can get watered down, as it were, when it goes through three different bodies, but we are reasonably assured that our Department along with MAFF are on board and do want to deliver on this.

166.

Mr Rowe: David, can I answer that question? I was at a meeting with Nick Brown on Tuesday, he came out at that meeting with us very strongly in support of it. He said that he would do everything and make sure that his staff did everything possible to deliver. Now he didn't come with a bit of paper in his hand saying: Here you are boys, export. But that was what he told us in that meeting.

167.

The Chairman: He told us that too, but then he was questioned when, when we came to the time factor, then we were running into difficulties.

168.

Mr Ford: I think, Chairman, we have got to continue with "shortly" is the answer to any question in relation to the time. In the meantime the issue about the build up of the Northern Ireland market within GB multiples for selling beef, your paper seems to be slightly confused, there is no justification for the differences in price and yet if we didn't have those differences in price we wouldn't be selling them to the GB supermarkets. Is there any prospect for any improvement in the marketing arrangements within GB on the presumption that we are not going to get low incidence BSE status tomorrow?

169.

Mr Sharkey: Well of recent times the price differential has narrowed for various reasons possibly. But we believe that the only time that our prices will come on par with GB is when we have competition and that will be as a result of exporting. I don't foresee us ever getting to a situation that will be equal to the GB prices without the ability to export or bring competition into the market.

170.

The Chairman: I need to bring you in now.

171.

Mr Douglas: Thanks Chairman, thanks for your presentation. If you just highlight the fact that farmers are the only ones I think who are not allowed to make mistakes. I think that is important and something that needs to be driven home. Your paper mentions a lack of competition which exists, can you tell us how you feel more competition would benefit the farmer and how can more competition be introduced?

172.

Mr Sharkey: Well I think you just touched on that. How it can be introduced is basically with more people in the market place, which is people buying to export or indeed live exports to some parts would bring more competition into it. The second question?

173.

Mr Douglas: I was just wondering how more competition could be introduced, I mean you are talking really about the live markets here.

174.

Mr Sharkey: The benefit of it? We all know in any free market or even any auction place one only pays what you have to pay to purchase something. So I mean if somebody else is prepared to pay more you pay more. That again is back to the thing of competition that meat processors in Northern Ireland will pay what they have to pay basically to buy a product from us, but if there is somebody out there prepared to pay more they are quite happy to pay more, so competition is the word.

175.

Mr Kane: Ken, with reference to the livestock grading, farmers are under the opinion that stocks are being downgraded at abattoirs, they are not too happy with the LMC operation in general. They also believe that there is a cartel being operated within the LMC, the meat exporters, abattoirs, meat processors and retailers. I personally feel if this is the case an urgent investigation should take place for the benefit of the producer and the meat industry. I have also experienced LMC staff making drastic errors in grading, I can assure you it doesn't go down well. Where do farmers stand in this respect and what initiative can they take, Ken?

176.

Mr Sharkey: Well grading has been an issue, a hot potato issue all down the years that I have been involved. I suppose the most up to date position on it is that LMC are now looking at the possibility and you know there has been some work done on the machines for looking at carcases and what not. I think that would probably be the way, it is probably a few years away as yet. So that will take the human element as it were, or some of the human element, out of grading. The question of whether LMC is fair or unfair at grading, when you do look at LMC and we did a review of LMC activities, there are not a whole lot of people wanting canto do grading or do classification in Northern Ireland. We as a union believe that LMC are still, if not perfect, are still the best body probably to look after that. There are fluctuations in grading. Human beings as they are have different opinions and different views so you do have some fluctuations. The last year or so we believe it has been more stable than prior to that. I still go back to the point why farmers are so unhappy with the grading is because of the price linkage to the grade. That is why he is so detrimental to the grading because it reflects the price he receives. We believe if the price structure was such that two or three grades made the same price then he wouldn't be as anxious which of those three grades his animal got and it probably wouldn't be as big a hot potato. We believe the machine route, automatic route will come and will take some of the human error out of it and that couldn't come probably too soon for that, but the price differential, the price structure is the main issue we feel.

177.

Mr Kane: I'm sorry, I would have to disagree on your comment about LMC, but that is neither here nor there. Thank you Chair.

178.

Mr Paisley Jnr: I think the union should be congratulated coming up with the low incidence BSE status initiative. I hope that it does go through with some success, it is one of your babies, that has to be acknowledged. But in part of your submission, Mr Sharkey, your oral submission, you said that there appears to be enough money in the market in terms of profit, it is just the percentage share out of that profit between the producer, the middle man and the retailer, it prompts the question: Who is screwing who here? You know, one of the things following on from that, if you can answer that, I have my suspicions who is screwing who here, following on from that has the UFU considered seriously addressing the issue of setting up co-operatives to cut out the middle man in all of this and make the farmer not only the main producer but also the man who sets the price?

179.

Mr Sharkey: Well the question of who is screwing who goes on. All we know we are at the bottom of the chain and the processors and retailers, everybody gets a margin out of our profit, it obviously comes out of our little pot as it were so we are at the bottom. Whether it is the processors or retailers that is a very debateable point and one can argue all various ways because we would have a view that probably both are sharing in that situation.

180.

The Chairman: Isn't it a fact that all these other people are doing well at the present time and the farmer is doing badly. We had all these people around the table, none of them are committing suicide, none of them are driving a poor car, none of them are doing anything, they are all doing well. But the farmer who is the primary producer he is doing very very badly.

181.

Mr Sharkey: That is quite correct. It is a known fact that we as farmers have been taken to the cleaners as it were over the last three or four years, but it goes back to the old position, I mean, what can we do, how do we force them to pay us more and nothing would force them to this competition, that's the only thing that will force them or change the situation. We are all human beings and who is to say I wouldn't do things that much different, but you must get a mechanism.

182.

The Chairman: We must move round the table.

183.

Mr McHugh: Thank you Chairman, in relation to committing suicide the only way that some of them might is if they are asked here often enough.

184.

In relation to the question of paper work, farmers are overrun by paper work at the minute. If you take a look at teaching at the present time teachers are no longer teaching, they are spending almost half their time in the business of paper work and they are under the very same pressures as farming, they have become very frustrated not to be able to do their job and it is affecting the whole thing. In terms of the other thing is that DARD are the people that negotiate more and more paperwork on behalf of the farmer and more regulations, some of it and quite a lot of it, I think could be done without. I asked Nick Brown the other day that we met him down in the Stormont Hotel, I asked him was there anything he could do in terms of putting some system in place such as tribunals or appeals system in order to address the situation where farmers who make unintentional errors have somewhere to go. I just wonder at the amount of money that is lost in terms of payments in terms of the community with 300 plus farmers each year being penalised and penalised very heavily at a time when they haven't any money at all. That is a very, very severe system which is not in any part of our outside industry.

185.

Mr Sharkey: I'm not sure of the exact figure. We have our own technical people working on these queries, a lot of them are resolved but it takes a lot of time, effort and money to do. Yes, if there was some mechanism that these errors could be easily rectified or at least get a fair hearing towards them that would be very useful.

186.

Mr McHugh: I find there is no hearing for farmers, that is my response from the Department, a brick wall.

187.

Mr Rowe: I must say we have a technical team in the Union who will take members or people's cases forward and we find that we do get a fair degree of results so we do. Not as many results as we would like, not as handy as we would like, but we do get a fair result.

188.

The Chairman: President, the trouble is the present day men were depending on money to be paid promptly, some of them got promises. A case recently where I have a letter saying it would be paid on a certain day then they never paid it for nearly three months and argued about the man didn't fill his form right. It was only when I intervened and made an issue of it the man got his money, but he was three months out, the bank manager was pushing him for he had said: "I have £8,000 coming to me" and the bank manager took him at his word. It didn't come, it threw him all astray.

189.

Mr Rowe: Chairman, you are looking at a man the same thing happened with. When somebody calls with an error and says: "I have a problem, we have a team who look into the problem".

190.

The Chairman: Right.

191.

Mr Armstrong: I will just ask half the question.

192.

The Chairman: One question.

193.

Mr Armstrong: Would you support the idea if farmers joined quality assured schemes and do you feel that these are a necessary part of future marketing and with quality assured would it be one way that we can see that the incidence of BSE would be eliminated and that we have give people the idea that BSE is not a problem in Northern Ireland?

194.

The Chairman: That isn't one question, it's actually two questions.

195.

Mr Sharkey: The quality assurance scheme in the beef sector has been running very successfully from the early 90's. We believe that prior BSE that it was a big influence, a big factor in getting into markets so we do believe it is necessary to have a farm quality assured scheme. What we don't agree with is and we touched on it earlier in getting members in the farm quality assurance scheme and to get people to join or to support it there has to be a differential between a farm quality assured animal and a non-farm quality assured animal. I think it has been the downfall scheme of late, the differential hasn't been always there. We do understand that the market place does require farm quality assured animals and will pay more for them against non-farm quality assured, so we would support it, yes, we believe it is necessary.

196.

The Chairman: We will leave it there gentlemen. Mr President and your colleagues and your back up team, thank you very much for coming. Thank you for the information you have given to us. It will certainly be helpful when we draw up our report.

197.

Mr Rowe: Mr Chairman, can I thank you for having us and just as a word of closing that other things may need to be watched in the world out there is if our supply chain, for example or feeding chain contracts into fewer hands it may be detrimental to us because there will be less competition. It is the same thing if those who are buying our product in any circumstance are reduced in number competition reduces and I would like the Committee to remember when they look at the general news and things that this does have an effect on us. Thank you very much gentlemen.

Friday 30 June 2000

Rev Dr Ian Paisley (Chairman)

Mr Armstrong

Mr Bradley

Mr Douglas

Mr Dallat

Mr Ford

Mr Kane

Mr McHugh

Mr Paisley Jnr

Mr H Marquess )

Mr T O'Brien ) National Beef

Mr A McKevitt ) Association

Mr W Gordon )

198.

The Chairman: ...for this is a very long stay session, we started at 8.30 this morning. We have been going hard at hammer and tongs. You are very welcome, thank you for coming. What we wish you to do is to make a submission to us for about ten minutes and no longer if you can keep to that. Then we will have questions from the members of the Committee and your response for a further half hour, we have 40 minute for the whole session.

199.

Mr Marquess: Well first of all we would to like to thank you from the NBA for inviting us here. I hope we can put forward points that will help our industry. You have all got copies I take it from the NBA of the submission so we will just deal very briefly for I'm sure you would like to ask us a lot of questions and I hope we have answers for you.

200.

The Chairman: We'll not be too hard on you, we are reasonable people.

201.

Mr Marquess: First of all, we need low incidence BSE for Northern Ireland. That is the main point and that is actually not on our summary. We have added quite a few points because that submission was made in a short space of time from GB from our Chief Executive. There is a lot of points that are in Northern Ireland that they don't realise the implications to be honest. The low incidence BSE, as we say, would be in all of our cases I suppose the prime objective, if we can get that it at least it gives us a market. We were told coming in here no mobile phones. I asked the fellow how did he expect us to buy mobile phones with the state the industry is in at the present time.

202.

Greater prime cattle price transparency is probably very high on the agenda. I think that the processors would have - I need to watch what we say here - we are not saying they have created a cartel, but they have made it fairly possible for them all to work under the same price scale. That would be a thing that we need to look at.

203.

Updated costs of production. I would think that not one in 20 farmers know the cost of production of an animal, to be honest, and I think it needs to be looked at closely where production costs should be based - now I have been to Hillsborough and Greenmount, they base them on their particular costs where they can buy feed stuffs at a discounted price, they can get their silage, they have everything at a discounted price as their budget is so high. They are not really showing the true picture to the farmer how much it costs to produce this animal. I think if we do base a cost on that and try and work out a system whereby we need say a 10p profit say and an animal costs £1.70 a kilo to produce, if we have any means of forcing the processors into paying say £1.80 to allow us to have a profit. I know it is going to be a hard thing to implement, but I think it is worth looking at.

204.

Encouragement for more prime cattle through the live auction marts. Now the Department of Agriculture, I think, and LMC have pushed us into a sense of security, lulled us into a sense of security whereby we send animals now to the processors, they can give us exactly whatever price they want where if they were forced to go out to the live cattle auctions to buy them and I know it is a bad time to do this because there is too many cattle and not enough markets, but I think that farmers need to go back and look at the system they were working on a few years back where they go to the live auction marts and that raises competition. If you allow the processors and they have got into the situation when the market is not there they can just give you whatever price they want. We met the Office of Fair Trading in Newcastle in November and tried to bring it to their attention and they are working on it at the minute, but it is hard building up a case because farmers are not wanting to come out openly against the processors because they could be blacklisted very easy. Northern Ireland is a very small community and it would be very easy for one plant to say "Don't take that man's cattle", and in that case they are afraid.

205.

Imports - the standards of imports are nothing up to the standards that we have to produce. Either the standards of imports should be raised or else imports should be stopped unless they come up to our standards. The price of Sterling is against us, no doubt and that lets imports come in.

206.

We need easier access to the GB market for live cattle for slaughter. I know some of our members who took cattle across, there is a 25% differential on some occasions where they were making £30 to £35 a head more when they took their cattle across after expenses were paid. They felt the Department hindered them going across by protocol, TB and Brucellosis testing where cattle were going to a plant across the water, if they were going directly to that plant we don't see any necessity for them to have a TB or Brucellosis test because they are tested at the plant anyway and this would show up.

207.

We need to raise the clean, green image of Northern Ireland. The resources has put into Northern Ireland farming. The little red tractor is a GB logo that in our instance, I think that we are lowering ourselves and I have stated this to LMC who don't agree with me. I think we are lowering our standard if we get low BSE incidence by accepting a logo of a country which is not up to the same health standards at present as what we are. I think we should be promoting Ulster beef or Northern Ireland beef or go under the name of Green Fields. I think we must look at our own brand.

208.

I would think if we could get quality of cattle improved we could have buyers from Spain and Italy which would, if they come across as they have done in the Southern Ireland, they could probably raise the prices of our finished cattle by making a scarcity. We need that, that all ties back into low BSE incidence.

209.

There is too much bureaucracy and paper work attached to farming. There are people making laws over in Europe at the present time who don't understand the practicability of implementing them, it is impossible in some cases. Labelling is one good instance at the present time.

210.

I think the Department has placed a lot of extra costs on us by health and safety towards cattle clipping and things like that where at the present time we have noticed that the Department are already looking for methods to protect their own vets from coming into close proximity with cattle because they have had one or two accidents. They don't seem to worry about the implications of the farmer getting kicked or hit up the face with a pair of clippers, they don't seem to worry about that, it is all one sided, too one sided, it doesn't seem to matter about the farmer any more. Tagging has been a failure which was thrust upon us too. Torn ears 30%, some farmers would tell you their cattle have lost tags, others 20%, some 10%. Things like that place an awful cost on the industry. Another thing which we could look at there maybe is punching by computer where it would mean that a farmer wouldn't need to bring his cattle into close proximity and have the chance of a Department official getting hurt or himself getting hurt. It is an extra cost to bring cattle in and extra time for punching. When computerisation is as good as they say I can't see any reason why they can't do it that way.

211.

Labelling is going to throw another extra cost on us, another £25 per head probably. That is a thing ongoing at the minute, we will not go into detail there.

212.

Semi-retirement scheme or an opt scheme as we talked about maybe four or five years ago. We suggested at that time that maybe a quota could be phased out over a period of three years where a man could get out of farming, still hold to get money from his quota for say three years. And a national reserve for quota the same as the milkmen have, his quota could be paced into that national reserve if he wanted to come back into beef farming after his three or five year period or whatever, his quota would be there for him to pick up again and it could be used meantime, if somebody else - the problem is no young farmers coming into the industry.

213.

90 head limit. Again another -

214.

The Chairman: If you could come to a conclusion now, we want time to ask you some questions.

215.

Mr Marquess: Coming near the end. The 90 head limit, again we will not go into detail on that there. Road signs are a thing, in farming diversification at the present time you can't put up a road sign, DOE won't let you put a sign up if you want to diversify, you can't tell people you are there. Another point I would like to see implemented would be to keep farms and farming families, there are too many developers coming in buying up lands to make new villages and things like that. I thought the proposal that was put forward was a very good one, by the way, of a house on the farm, I think you need to look at it and make sure it is kept near the roadway where you can sell it off without disturbing the farming activities.

216.

Scientists should not be allowed to speculate at the expense of the industry. I think that has cost us an awful amount of money, scientists speculating, telling us what's going to happen.

217.

On the last two now. Farmers have become the supermarkets slaves and Government has allowed them to become that too because supermarkets and customer wants are sometimes thrust upon us. Customer wants are not really always what the customer does want, it is a perception that is put into their heads.

218.

As regards DARD, the sooner farming pays out all subsidies should be paid so the banks can get their money sooner. There is has been a whole back in all of that. I think DARD should also show an example to farmers by reducing spending in colleges. There is a big percentage of the budget that goes to colleges at the present time and I'm a neighbour of a college and I notice when it comes to a certain time of the year it doesn't matter what the money is spent on it has to be spent, I think that's so they can get their budget topped up for the next year. I think that is wrong, if they have too much money it should be pulled back and put into something else. There is a perception now that DARD has turned from being helpful to farmers to hindering processes by bureaucracy and I think we should have a meeting like that here - that's the end of our submission - I think we should have a meeting like this here every three months or not as high up as that maybe, but with an Agricultural Committee of some standing, say over three months to bring us up to date. Thank you.

219.

The Chairman: Thank you very much. My colleagues will want to ask some questions, but you did start off with a matter that causes us great concern. I notice, of course, it is in your submission, the most common complaint levelled against the factories in Northern Ireland by the finishers who supply them is that they operate a purchasing cartel. I think that this is a matter that causes us all grave concern because there was a funeral undertaker in Belfast when I came here 54 years ago who had a big sign up: No ring, no combine, the Wiltons, but I tell you there is a ring and combine we feel in this matter. The man that primary produces and puts agriculture wheels in motion is the farmer, but everybody above that is getting out of him but he is not getting out enough to cover his costs. That is where we really are in this whole situation. So we would be pleased to have more information of what you know to be happening. You don't need to give it in public, but you can supply it to us, we can have an inquiry into it and look at it because I think that has to be done. I think there are many here around the table, I can't speak for this Committee, I speak for myself, but there is other members of this Committee who feel sore about this as well. I think that we need to keep that in mind. I want to try and get my friends in. Ian junior?

220.

Mr Paisley Jnr: First of all, you are all very welcome. One of the things that I would like you to consider because your submission has an awful lot of detail in it, is if we don't get low BSE status what is the fall back position? That is absolutely essential, that our minds are focused on that as well, that there are alternatives for the industry. Also this question of the cartel, has the Association put its mind to try to address that by way of establishing farm co-operatives where the farmer, the primary producer becomes the man in charge of all this and cut out the middle man who actually is doing an awful lot of damage to the profit margin that the farmer actually can make?

221.

Mr Marquess: Could I answer that second question first, maybe Henry would like to talk on the other one? The problem here is that there is five processors I think who own seven factories, now Ballymena was a good example as you know that was sold over to a private processor. That was a place where butchers had an opportunity to take their own cattle and get them slaughtered. It still can be done, but we feel that they have closed the gap completely and only for small abattoirs opening up - you talk about co-operative, where does a co-operative go to get their cattle killed? You know, they are in a trap, unless they build an abattoir there is no place really where they can go. So that leaves the cartel, if you want to call it that, that they have limited the farmer's capacity to get rid of his cattle.

222.

Mr Paisley Jnr: As a butcher, do you find that the consumer is actually interested in quality and welfare of the beast, or are they only really interested in the price?

223.

Mr Marquess: They are interested in price, a bit of quality. Yes, you need quality, price. They are not interested in health standards at all. Consumer council, to be honest, I think they have words put into their mouths by the supermarkets.

224.

Mr Paisley Jnr: Is that not an indictment on the whole agricultural policy that we are currently pursuing in this country? I mean, the Government is pushing standards, welfare and everything else on the industry, you are saying as a man who is there at the coal face that the consumer isn't interested in these things?

225.

Mr Marquess: No-one has ever asked me at any time did a sow come from a stall, is that an organic beast.

226.

TheChairman: They know the gender of a sow, but they don't ask when they go into bullock meat is it male or female, they don't ask those questions.

227.

Mr Marquess: They are not interested in that, I think it's a total waste of money doing that. I think you must have quality. You can sell on quality but you must have a sort of half decent price too. There is a big margin of people out there that haven't the money. In Northern Ireland at the present time it is get tighter and tighter all the time in the farming community because I was always told from I was a child that if a farmer had no money nobody in Northern Ireland had any money. It seems to be quite true apart from developers.

228.

The Chairman: Right, we come to Boyd?

229.

Mr Douglas: Thanks Chairman, one of your proposed solutions is to increase the sales of cattle through the auction system which seems difficult at this time when the auction markets are disappearing. Why is this a solution? Why is the current through put so low and how would authorities change so we could have more stock sold in the auction market?

230.

Mr Gordon: Again, it comes back to we are down to such a small number of factories here. On the mainland the auction market system works well and it actually gives a price guide to what the factories should be paying. Because our auction marts have got so low here and so few in numbers we actually have no idea what the price we are capable of demanding is, it is really what the factories decide to give us. That is why we would be keen to see a viable auction mart system going again.

231.

Mr Douglas: Those cattle sometimes are sold at the market and then they go to the meat plant. These people have a big influence really.

232.

Mr Gordon: Well we are sort of brought up in farming to get away from the markets because if somebody bought your bullock at market and took it to the factory he was getting a commission on it so you were better to go to the factory. But definitely on the ground farmers feel if they take it to the market and are not getting a fair price they can take it home again. Once the animal goes into the factory, with the price, you can't do anything with it.

233.

Mr Douglas: Basically you need markets to keep a fair price?

234.

Mr Gordon: You need both

235.

The Chairman: Thanks.

236.

Mr Marquess: Could I maybe add a wee bit there? A very interesting thing happened at Christmas at the fat stock sales. The supermarkets didn't - whenever Tesco's came in here and Sainsburys came in at the start they bought all the top cattle, they bought all the prize winners. Last year that didn't happen. And I saw that as they had got the processors into their grasp, got the farmers into their grasp, they didn't need to go out and give a price, those cattle were all bought by locals, by people that had been trading here for years, I don't want to say butchers because you will think I'm pushing it, but it was very evident at the fat stock sales.

237.

The Chairman: That's a strange side light on the whole situation isn't it, that first of all they were going for the prize beasts and then suddenly they were able to say "we have the market".

238.

Mr Marquess: That's right.

239.

The Chairman: It wouldn't at all surprise me, it wouldn't at all.

240.

Mr O'Brien : Could I add another bit to it?

241.

The Chairman: Yes.

242.

Mr O'Brien: I think the Agricultural Committee should support the auction mart in some shape or form. I don't know what way you would do it, but I think they should lend their weight and put their voice to it, it would be very useful.

243.

The Chairman: We will consider that.

244.

Mr O'Brien: Because we need everybody who can help this industry.

245.

The Chairman: Right. Gardner?

246.

Mr Kane: Thanks Chair. Firstly, I would commend the National Beef Association for their submission to the Agricultural Committee. A very frank insight into producer difficulties and, I believe, a very accurate account of the factors of trading organisations responsible. First Harry, in reference to livestock grading, farmers are under the opinion that stock are being downgraded as you have said, probably at abattoirs, and they are not too happy about the LMC operation in general. They also believe that there is, I must emphasise, that there is a cartel being operated within the LMC, the meat exporters, abattoirs, meat processors and retailers, and being the member that brought this issue up at the first instance I would call upon the Office of Fair Trading to investigate the issue immediately for the benefit of producers and the meat industry.

247.

I have also experienced LMC staff making drastic errors in grading and I can assure you it doesn't go down too well. Harry, where do farmers stand in this respect and what initiative can they take?

248.

Mr Gordon: If I could take that point? I think quite honestly we have got to the stage that farmers, it used to be if a farmer went into a cattle market and bought an animal he had a fair idea where it was going to grade, now he hasn't a clue, no idea at all. I think too farmers have got past the stage of trying to do anything about the grading because they see they are getting nowhere. If you do anything with LMC they tell you DARD are responsible and DARD are checking them. If you go to DARD they tell you it is LMC, they are only overseeing it. I think the way to fight it is get away from the pricing structure that we are under. As you all know before BSE, 82% or 83% of beef out of Northern Ireland was exported. Our factories tell us what a wonderful job they have done, that they are getting 80% into the English supermarkets. Why aren't we being paid the same price as the English? We are being paid in grades, the English farmer laughs at us. The cattle are graded in fat as you know, R3 for example is the average bullock. If we go to an R4 we are cut 6p. England, Scotland are given a penny more for it. We are all going into the same supermarkets, that is our gripe. We need to get a transparent pricing structure that a farmer knows, two or three prices. Over six prices were quoted by LMC last week in their bulletin. The Northern Ireland price varied 24p, the English price varied 9p and Scottish price 8p, that is what we are up against.

249.

I don't honestly think we have a chance of changing the grading structure because it is coming from Brussels through MAFF through DARD from through LMC it is just kicked about. You can't get at them to change that, but I do think we can change the price structure and that has to be our way forward, to try and fight that price structure.

250.

Mr Kane: You must agree, Henry, that the producer at the end of day is paying a dividend that no-one else is, he is paying the dividend to keep LMC there doing their work.

251.

Mr Gordon: The farmer pays for everything at the end of they day. Whether you say the factory pays anything is irrelevant, it comes off the farmer's bullock.

252.

Mr McKevitt: Could I make a comment here? The industry is looking for a Rolls Royce at the moment. They are only prepared to pay the price of a Rover. One of the reasons we went to the Office of Fair Trading about the meat plants is because there is more than them involved in this, we think the Government has a hand to play in this. Naturally the less we get at the farm gate the more the next people get, the meat processors (inaudible) corporation taxes should be paid to the Government. We prefer, rather than going to the Office of Fair Trading and these people, to marry the relationships that should exist within the industry to eliminate the exploitation that has taken place at the moment, because our products are worth less than cod in the North Sea that has become extinct because of exploitation. We try to get these people in to try to bring a bit of pressure to bear on the situation. The multiples will be able to say at the end of the day there is no real evidence because they can hide it. With the BSE we know the plants have the first tier of it, now they could be economic about the actual return, they could be of course totally inefficient in their conduct of their operations or the most likely one is they could be (inaudible) running a business in a tax friendly manner. We can't do anything about this, the Government must marry the relation in some way so we can exist.

253.

Mr Kane: Chairman, I must take this issue on board no doubt.

254.

Mr Marquess: Could I make a further comment?

255.

The Chairman: I want to bring Mr Ford in here please.

256.

Mr Ford: Thank you Chair. I was reading the piece in your paper about the price of export of live cattle to GB and specifically you say that in January because the GB price fell it became uneconomic to try it; do you think that there is a long term route there? Is it something that the Association should be seeking to organise? Should we be speaking to some other body to try and co-ordinate it if it seems to be the only way at the moment of getting past the meat plants in Northern Ireland to develop a better price for some cattle?

257.

Mr Marquess: A funny thing did happen at that particular time. I'm not saying this method was caused, cattle did drop slightly in GB and cattle rose slightly here, so the differential was no use. Now whether that was a manipulated rise here to keep people from going across with them or not I can't say, but it did appear to be that way.

258.

Mr Ford: Do you see the prospect of trying that again in the future?

259.

Mr Marquess: Yes we would at the minute, if it starts beef will maybe rise 5p here. Then it makes it worthwhile.

260.

Mr Ford: If that were to be the case then who should be organising it? Is there some scope for some co-op development or?

261.

Mr Marquess: We were in the process of organising it, a few of our members had taken cattle across to test the water as such and that is what happened. They had a few loads across, it was actually the fatter cattle that were making the better prices across the water, funny enough. They differential between the U grade cattle here and across there wasn't just so high, it was the fatter grade of cattle that the differential was between, there was as much as 25 pence in some instances.

262.

The Chairman: Could I bring Billy in?

263.

Mr Armstrong: Just on the same point my friend is on here. You advocate auction markets so is this where you are coming from in auction marts, that more cattle should be coming from Northern Ireland and going from Northern Ireland to the English market as live animals to be auctioned at livestock markets in GB or what way are you seeing auction markets being the way forward?

264.

Mr Marquess: Well the Troubles had a part to play in this too. Men are a bit afraid to come across from England. We have asked them on a few occasions to come across and buy cattle in the live marts here. They are a wee bit afraid, to be honest, to come across.

265.

Mr Armstrong: You are really looking for an extra customer from the mainland to come over and buy a lorry load of cattle and take them away home again?

266.

Mr Marquess: They are a wee bit afraid.

267.

The Chairman: Why are they afraid?

268.

Mr Marquess: They have a perception in England where a lot of people, they just wouldn't want to go into an auction mart and start to bid against other people.

269.

Mr Gordon: If I may add there, you also have the problem we had when we tried to talk to some of the abattoirs in England about sending cattle over direct for slaughter in England and Scotland, was that it was very hard to find an abattoir that hadn't a tie to Northern Ireland abattoirs or the South. We were told unofficially that the word was you don't buy anything out of Northern Ireland.

270.

Mr McKevitt: The other thing is we did have an ad in the Traders Journal in GB inviting them to come to Northern Ireland and I don't know that we had any benefit.

271.

Mr Marquess: We had a couple of applications then the price rose here. But of course, the processors get the Traders Journal so they saw this was going to happen. A point, Dr Paisley, before I forget about it, Gardner asked a question about grades in abattoirs. I would kill in a private abattoir mostly, nobody has ever said that they got the wrong grade, yet the same graders are grading cattle in that private abattoir as they would be, in a small public abattoir I'm talking about, the like of Robinsons of Lurgan. The same graders are grading those cattle as grading in ABP, Ballymena the rest of them. I hear quite a few farmers and a lot of people have said some of them have got their grades changed over the years, they have said to me: My grades weren't right. I brought in Kenny Hill, he is the top grader, I brought in Kenny, he looked at them the grades were wrong. I think it is very very easy if a man is on site and somebody is looking over his shoulder, I'm not saying he is getting paid, I'm not putting any devious points to it, I'm saying that if a man, if the proprietor or the manager of that boning hall is looking over that fellow's shoulder he can be slightly manipulated and steered into maybe producing a lower grade where it is going to benefit the processor an extra 6p, that's an extra £20. A dangerous thing to say, I have contacted the LMC on several different occasions and spoke to them about it. They say there is no way it can happen, it is visual assessment, one man's opinion against another's.

272.

The Chairman: LMC will not take any criticism against themselves. They get very, very enraged at anybody, whether he be politician or farmer or anybody else, or whoever condemns them. They think they sit in an ivory palace, they are not to be condemned. As far as this Committee is concerned I can assure you if there is something going wrong in this business we will get to the heart of it. I mean we have the power to summons people before us and papers, we intend to use this power and we have to do it because these matters are of a very serious importance today because of the state of our farming community. The farmer can't afford to have a lower grade, he must get the grade he is entitled to. We have got to see to that.

273.

Mr Kane: Chairman, my remarks have been supported by these gentlemen here today. I think it goes right across the board.

274.

The Chairman: I want to get PJ in.

275.

Mr Bradley: Thank you Chairman. I wanted to get a point across to these gentlemen on these toing and froing issues. You allege in bringing in GB beef, cutting and packing it here, returned for selling in GB as negative influence; do these activities not secure jobs in Northern Ireland? How do you see the cessation of this practice contributing to the industry?

276.

Mr Gordon: It does give jobs, yes, there is no doubt about it, but we see that it has got to the stage with one particular processor that it is virtually the major part of their business. So they are in the position now that they can supplement that business from the Northern Ireland market when it suits them as opposed to being in the Northern Ireland market to try and make a price for the Northern Ireland market unsupplemented from the mainland. Therefore, they are of no real benefit to the Northern Ireland industry, they are actually using it as a top up pool rather than helping our industry. That's the major problem with it coming in.

277.

The Chairman: Thank you. Well gentlemen, thank you very much, it has been a very interesting discussion and a grave discussion indeed because these things are matters that need to be got out into the open. They also need to be investigated. As far as this Committee is concerned, as long as I'm Chairman of it, we are here to see that all parts of the Agriculture Committee will get fair play, but we wouldn't tolerate anything that is detrimental to the industry. These things that have been mentioned are detrimental to the industry especially at a time when this industry is fighting for its life. Thank you very much for coming, we look forward to seeing you again. If you want to pay us a visit three months from today I'm sure we will be glad to welcome you again. Thank you. I see my friend Mr Overend is waiting patiently so we will have to get him into the chair.

Friday 8 September 2000

Rev Dr Ian Paisley (Chairman)

Mr Savage (Deputy Chairman)

Mr Armstrong

Mr Bradley

Mr Dallat

Mr Douglas

Mr Kane

Mr McHugh

Mr Paisley Jnr

Mr W Aston )

Mr C Pogue ) Ulster Farmers' Union

Mr D Rowe )

278.

The Chairman: Gentlemen, welcome. We have two things to discuss with you - pigs and beef. We will hear your opening statement first, Mr President. Could I ask you to be as brief as possible because we have already read your briefing, and then we will have questions. Each member wants to ask a question. I was very liberal this morning, but I would warn Members that we want questions and not pieces of advice or homilies. I notice two men smiling broadly because they transgressed wickedly this morning.

279.

Mr Rowe: Thank you for inviting us back. We regard this Committee very highly. Allow me to introduce Mr Pogue and Mr Aston.

280.

There is no point in my going into further discussion about our letters, which you have already read. The debt situation in the agriculture industry is probably not getting any better at present, although there is a little optimism. When God makes the sun shine, it helps us all feel better. That is definitely true in agriculture, where we are so dependent on the weather. As for the economic climate, things are making only a little headway. There is a lot of ground to be made up. The amount of debt with the banks and finance houses has not been reduced to any great extent. All of our efforts will be greatly needed to keep farming alive for the next five years.

281.

It is important that agriculture receives as much support as possible in the programme for government. Everybody should get a fair share, and agriculture needs a fair share, not just of finance but also in terms of recognition of the problem. It will have long- and short-term effects on the country at large and on the economics of agriculture and of the rest of the community.

282.

It is sometimes forgotten that we are a food- producing community. We have to remember that over 70% of the world does not have enough food, although it does not happen here. Those who think that they will forever be able to buy food from across the world and disregard their own agricultural enterprises are skating on very thin ice. I believe that you Gentlemen agree with me. If there is something else that needs to be drawn out, we will do it during the question session.

283.

The Chairman: I note in your submission reservations about the creation of a producer group covering 50% of production. Other Members may want to pick up on that. How strongly do you support the creation of a better-organised producer base in, for example, the pig industry?

284.

Mr Rowe: In general we support co-operation. The problem is that the analogy for co-operation in the farming world is two farmers getting together to screw the third one. That is an analogy that we must overcome, both as a perception in the minds of farmers and as the reality. If co-operation can help in any way then we are very keen on it, and we have cited a number of co-ops that work well. The problem is that co-operation and trust takes time to build. The issue we are currently looking at is debt and how to relieve it. Perhaps Mr Pogue, as our pig specialist, can answer on the specifics of the pig industry.

285.

The Chairman: We have already heard Mr Pogue and perhaps he can speak on that later. Is there not a difficulty with the men who prepare the meat for market? Are they not the people who are screwing the farmers, more than one farmer screwing another?

286.

Mr Rowe: Yes. I only used the other analogy as a joke. There is a degree of screwing - not just by the processing industry which is definitely living well off the backs of farmers, but right up the chain. We presently have many problems with the end customer - the supermarket that we are tied to. They are dictating what they will pay, whether they will pay it, what they will do, and saying "Take it or leave it". That is very wrong. They do not realise that sooner or later that will end, and they will have no one to talk to at the bottom of the chain.

287.

The Chairman: I take it that the remarks you have made are equally applicable to both the beef and pig meat industry?

288.

Mr Rowe: Yes.

289.

The Chairman: Secondly, what steps do you believe are necessary to bring about more co-operation - a better organised producer base? Evidence has been put before the Committee, even this morning, that the producers, the farmers, are crucified because there are big men with their eye on the big investors who are tyring to get every penny out of the business. You also mentioned the large multinational retailers, which adds another dimension. Those are two powerful forces, and the farmers, because they are divided, are a weak force. What steps could be taken to secure a fair price for producers and to help them negotiate their prices? What resources are the UFU prepared to devote to that end?

290.

Mr Rowe: That is a very large and complex question, and I will answer it as best I can without referring back to notes. There are a number of co-ops that have worked well in the past. One of the things that would help co-operation would be a definite move by the powers that be - whether by Government at a Northern Ireland or United Kingdom level - to assist co-operation by grant-aiding or significant financial help. Perhaps not totally in the form of money, because sometimes money cuts across state aids, but in the form of advice, secretarial work, market research and examination of the end product in order to understand what is produced and how to co-operate to produce it in a certain way.

291.

Many years ago a co-op called UFIL was set up and it is still active in the meat trade, although it is no longer a sole entity; it works in co-operation with a number of producers. I was only a small boy when that was established in 1974. The powers that be in this House granted £900,000 of Department money to help it get off the ground and that was one of the reasons why it was able to get off the ground and be successful, even at a time when beef farming was at a very low ebb - some people here may remember that. That was a great help, and that sort of thing would still be helpful to producers if they knew that there was institutional assistance to do this job which would not lead them up the garden path and drop them over the cliff at the far end into the jaws of the first waiting crocodile of commercialism.

292.

This would be applicable in every sector of agriculture. Sorry, I have forgotten the rest of your question.

293.

The Chairman: What steps do you believe are necessary to bring this about, and what resources would the UFU be prepared to devote to this end?

294.

Mr Rowe: The Ulster Farmers' Union is an organisation that lifts subscriptions from members to keep it running. It puts in a lot of work through its officers, paid staff and its unpaid volunteers. Co-ops, including United Dairy Farmers, which is running well at the moment, Ulster Farmers' Investment Limited (UFIL) and a number of others in the community are benefiting from the Ulster Farmers' Union putting in its time and effort for free. Few other people do that. If you bring in a Department person, a consultant, anybody from the business world, somebody is paying them, whereas the farming community, through the Ulster Farmers' Union, is putting in quite a lot in terms of time and resources.

295.

The Chairman: Such a co-operative would need leadership. Would the Ulster Farmers' Union be prepared to take a lead role?

296.

Mr Rowe: We have members who could be leaders. It must be considered as to whether the presidential team could give leadership or not. I have always been a keen supporter of UFIL. I am not a dairy farmer, but I am also keen to see that United Dairy Farmers succeeds. It has done great work for the dairy industry here, particularly when you compare it with England, Scotland and Wales where such a co-operative was not allowed to exist. We have members who would be capable of leading these sorts of organisations. Obviously when a co-op or business is set up it must not only be co-operative, but commercial as well. You must look for the best commercial brains to run any organisation, even a co-operative. Co-operation without commerciality will fail.

297.

The Chairman: Funding is the big question. Do you believe that farmers and processors should be prepared to make a contribution towards this? It seems, at the moment, that processors are not too happy about farmers getting more clout in regard to their produce. It seems to be that processors make money on what is produced but set the terms of the purchase price and refuse to negotiate. They can threaten to buy elsewhere, which is a very big threat, especially in the pig industry. We understand the plight of a farmer if he cannot get his pigs off the land.

298.

Should the Government be expected to contribute to the funding of such a development? You have partly answered that by saying there may be EEC reasons. The Department of Agriculture and Rural Development has some intelligent people and if they wanted to invest their brains in this organisation - I do not know any Government Department that has such a wealth of knowledge by the way it is tied in with education and relations with universities. What is your view on that?

299.

Mr Rowe: Mr Chairman, in business life the man with the money down will always react better than the outsider. Farmers with a stakehold in any co-operative are important. The problem is that this inquiry is also about debt and many of the farmers who could make the best contribution are unable because of financial restraints. There should be a shareholding base and some money, perhaps not a lot, but some from each of the players so they will all have a stake. To make these schemes work, it is important that everybody who gets involved has a stake.

300.

Mr Aston: Farmers are already investing financially in producer groups at a much lower level. For example, they may pay £25 to join a particular producer group. The extent of the investment is crucial in these cases. Producers are willing to invest, but to what extent, given that the present situation is so difficult?

301.

The Chairman: We all know farmers have debts, and they are not in a position to invest when they are in debt themselves. We wanted to seek a general opinion on this from the union, which is giving us an adequate reply.

302.

Mr Rowe: As Mr Aston said, there are quite a lot of small scale co-operative movements being formed among farmers.

303.

Mr Pogue: We mentioned the UPP earlier on when we talked about these schemes. It has have already been approved for grant aid from the Department under the marketing development scheme. When we were carrying out consultations about proposed marketing assistance, we made provision for possible funding for a PR marketing consultant to help get the co-op up and running. We hope to get funding for this from the marketing co-op.

304.

The Chairman: How much money will be coming from the Government?

305.

Mr Pogue: That will depend upon the throughput of pigs for which we get a 50% costs grant. The maximum grant approved over the three-year period, is £150,000. The provision made under the marketing assistance is £15,000 per two-year period. That can be left open. There is another £35,000, part of which may be transferred towards that. So we will be receiving in the region of £160,000 to £175,000 over a three-year period.

306.

The Chairman: Thank you very much. That is helpful.

307.

Mr Savage: In recent times, the pig-meat industry had a unified market on board. A farmer-owned processing plant and a strong farmer-owned brand. These have either disappeared or passed from the farmer's control. What can we do to try and bring these elements under farmers' control? The farmer must have a say. An outsider with no business interest does not have the same input as the man that has been involved at the coalface. How can we move back towards a situation like before?

308.

Mr Rowe: The marketing boards were also very successful for farming between 1947 and our entrance to the EU. The problem was that they were regarded as being in breach of competition laws and anti-state laws and many had to be removed. This is all well documented particularly in relation to pigs and milk. All co-operative schemes must be, to some extent, commercially led and the farmers involved must have a commercial involvement in order to make it pay. You cannot keep something going that is not making its payover, maybe not every year, but over a five-year averaging period. I can see farmers getting back into business in a number of ways - one of them would be if they were able to buy and produce for example, if they bought a factory particularly in the pig marketing world and went back into marketing.

309.

Considering the size of multinational companies that you will deal with on the retail end and those that you will be competing with, it would be very hard to achieve the necessary size and scale of operations. It is probably better if the farmers can co-operate to sell to the best outlet available. That might involve putting pigs or cattle on to a boat and having them slaughtered in Timbuktu to get more money. It is that sort of thing. It also involves making contracts with companies that will honour the contract through thick and thin. However, the farmer has got to remember that he must honour his side of the bargain as well. It is a two-way street when you go in to this business. It is very important that farmers get back into processing and that they market their product to the best processor.

310.

Mr Savage: It is important that we have another outlet for what we produce.

311.

Mr Rowe: It is important that we have as many outlets as possible for any product that we produce. It is interesting that in the apple world there is a firm in Clonmel, County Tipperary who are increasing their production of juice. In turn the price of apples has increased for everybody. As far away as that farmers are making a difference.

312.

The Chairman: We will reverse the order of the proceedings, because some people came in late and we are putting them in early.

313.

Mr Bradley: The pig-meat sector is not grant-aided by the EU, but remains totally exposed to the commercial sector. What steps does the industry need to take to become, and remain, globally competitive and thus be able to face competition from the US and other highly efficient producers in the future? How well equipped is the industry to face such competition, if and when it arises?

314.

Mr Pogue: The pig industry has suffered. Over the past two years there has been no investment made in that industry. There would need to be an injection of capital into it so that we could make our units more efficient. At one stage we were asked to go into loose housing and we had a loan for a wheen of years. However, the deadline was at the end of 1998, when we were at our lowest price for years. They were converted on a shoestring. There are a lot of units now, where the housing of sows is not very good. We need capital to improve this housing and to improve the welfare of sows in general. This would help to improve our industry. We do have very efficient pig farms in Northern Ireland, mostly family-run units which can keep operating. There is a scarcity of good trained pig men in other areas, especially in the South of Ireland. The bigger units have difficulties hiring labour to run their units efficiently. In Northern Ireland the family farms can keep running, while some of those bigger units can not.

315.

Mr Rowe: I regard with scepticism the idea of unsubsidised production in Europe. There is a similar situation in America, where the Secretary for Agriculture said "I will not let my farmers suffer" and produced $5 billion on one day to help out. He has been known to do little things..

316.

The Chairman: We would love to have him over here.

317.

Mr Rowe: We would love to have him but I presume -

318.

The Chairman: It would be better to keep the Secretary of Agriculture than getting Clinton back.

319.

Mr Rowe: I presume he will be out of a job when Clinton goes, so maybe he will be available for employment on a pig unit somewhere. The world stage on pig meat is not level so we need to be careful not to fall into the hole of expecting to get something when other areas receive help - an example at the moment is the age scheme which is in place in three counties in the Republic If the scheme proposed in the United Kingdom does not come to fruition, and it is looking increasingly unlikely, this House should consider a scheme in Northern Ireland similar to that in the Republic of Ireland.

320.

Mr Kane: Your submission states that the food supply chain and Government should provide meaningful support for smaller producers. Would legislation to protect primary producers help?

321.

Mr Rowe: Yes and no. Legislation to protect primary producers is always useful to any business. However, we would have to ensure that legislation did not keep small producers small. The industry must have freedom to evolve.

322.

A mechanism must be found to allow, first, the retailer to buy our product because it is of a certain standard and quality, which have been met, secondly, we must get our fair share of what the housewife puts in her basket. It is unfair that those who hold the product for the shortest time get the biggest profit. That is a problem across the industry.

323.

Mr Kane: That is a valid point.

324.

Mr Armstrong: Some supermarkets tell us that they only use Northern Ireland products. Could the farmers and some of the smaller processors not form a partnership to supply that market? That would provide a United Kingdom market, allowing our producers to supply Marks & Spencer with Northern Ireland brands and service both the Great Britain and Northern Ireland markets.

325.

Mr Rowe: A group of producers, and I must be careful in what I say as some of this may be confidential commercial information, is already trying this. The problem is, however, that they have to bat against a very large corporation, which wants to supply the supermarkets - and the better the supermarket, the greater their desire to supply it. They will use every method they can to ensure that they get the business. Competing against them is a massive problem.

326.

It is up to the supermarket to be loyal enough to say "We are willing to buy from the small guy and we are willing to charge the premium." It is up to their customers to pay the premium, and it is difficult to get people to do that.

327.

Mr Armstrong: Marks & Spencer likes to think that it has a niche product which could give its suppliers more of a premium price than, say, Safeway's.

328.

Mr Pogue: Some processors are already supplying Marks & Spencer and are looking to that market. It is difficult for some of the bigger supermarkets to get in because some of the bigger factories have distribution centres in England. It suits them to supply the English distribution centres. It is cheaper and more convenient than using Northern Ireland producers.

329.

We should look to the catering trade as well as to retailers for an outlet for our products. This is an area in which local producers could be scoring. They can guarantee food safety, which is much more important than animal welfare to the catering trade, hotels, restaurants and fast food outlets. We should also be developing product, especially in the pig sector, which is suitable for bacon, egg and soda fast food outlets.

330.

We need to look to the catering sector as well as to retail outlets.

331.

Mr McHugh: Which option aimed at the way forward are you prepared to give the most commitment to with regard to the idea of greater organisation of the farmer? That includes beef and, in particular, pigs. Is the long-term strategy for the way forward to start to organise now as a total group?

332.

Mr Rowe: Organising farmers into a total group would be difficult, but to organise a sizeable proportion of them is probably achievable. People in the pig industry are trying to work in that direction. We have been supportive in various ways and would be supportive of them going as far as possible down that route.

333.

Mr McHugh: If farmers look back at what has happened to them in the last 100 years, strengthening themselves can be their only option now for them to have a future.

334.

Mr Aston: It is ideal if we can jump from our present situation to controlling a big share of the market. However, that is not going to happen given our present situation and also given our history. It is important that these things evolve, and if the smaller groups are successful, they will grow in any case. Realistically that is the only way that we see it happening. There is more need for Government assistance and producer involvement in these types of things.

335.

Mr Pogue: In Great Britain, producer groups are affiliated to one body. We looked at this in the pig sector when we brought Scotlean over to assist us in the development of our co-op, but it did not work out. If we got our co-op going here we could be affiliated to the Great Britain body and many groups are incorporated into that body.

336.

Mr Paisley Jnr: The House of Commons Northern Ireland Parliamentary Affairs Select Committee, in its last report on agriculture, stated that it was essential for farmers and processors to work together to establish co-operative groups. In our first report, at the end of the last session, we made a similar suggestion that we would like to see the development of existing producer groups, new producer groups and also branding of products.

337.

With regard to your written submission, and with what you have said today, you seem to be reluctant to pick up on those suggestions. If you are reluctant to pick it up is there any other way to develop the industry to a successful outcome? Or is your reluctance one of not that it should happen, but how it happens?

338.

Mr Rowe: There are some ways this could happen but we are not as reluctant as we seem. We see the practicalities of it working on the ground at all times. So the practicalities have to be taken into account. If you do not take good enough cognizance of the practicalities, the theories do not really work. There is no point building up the theory that co-operation will solve our problems overnight. They will be useful in solving our problems and when the co-ops develop, and those who are successful continue, that will be a big help. Both sectors, but particularly the pig sector, need a commercial solution in the short term.

339.

If the price for the finished pig product in Northern Ireland stays at 85p much longer we will see those who are breaking even coming to a stage where they will not. They will have to continue putting money into the business to keep it going and that will bring them down. We will start to go down further. Critical mass will drop, and we will fall off the edge.

340.

Mr Paisley Jnr: As regards the commercial goal, how do we get there? What should the industry do? What should the Committee do? What should the Department of Agriculture and Rural Development do to get us there?

341.

Mr Rowe: We have got to keep pushing at why there is a 20p differential between Northern Ireland and Great Britain. Why is it there? Why is it that - and I do not want to say anything which could be sub judice and for which I could be hauled across the coals - there is seemingly a price slump even in the South for pig meat at the present? We have been told that it is a case of supply and demand. However, where will supply and demand end? Will someone say, in three months' time, that it will or will not have happened? Will someone give us direct guidance about where we are going?

342.

Mr Paisley Jnr: Are you saying that there is price fixing in the market?

343.

Mr Rowe: I did not say that. You are inferring that from what I have said.

344.

The Chairman: A pig, called by any other name, is still a pig. We are in a serious commercial war. The war is not to the farmers' advantage. The farmers are not even allowed to fight because their hands have been tied and their arms have been taken away. That is the trouble, and we are saying that a properly organised co-operative is the long-term solution. We are facing the short term, and the short-term solution is putting money into saving jobs and the industry. It is not putting £890 million into a dome. We need to insist - and keep insisting - that a massive cash injection is needed to save our industry. What about the debts? The debts are evidently forgotten by the Government. We are in difficulty, and I was rather grieved when I read the budget that was presented to the European Parliament this week. There is nothing in that budget that would adequately face up to the dire needs of Northern Ireland's agriculture. I see from the 'Financial Times' that the Scottish Farmers' Union is mad about the proposals that are going to put them into Queer Street. We need to accept that we must work towards a long-term solution. In the meantime, we must keep working at one of the most important things, which you mentioned, and that is to get the same money for our pigs that they get in England.

345.

Mr Pogue: Part of the problem with the differential in the pig industry is that we have a land border with "Euroland". Pigs are obtainable from the South at £1·05, which is the same as for those from England. I do not object to pigs coming from the South. There has to be two-way traffic, and the pig industry in Ireland, as a whole, has to be looked at in its entirety. As long as there is a differential in currency, I do not think it will be easy for us to achieve the price that they have in Great Britain.

346.

The Chairman: That war of money is going to increase because the whole basis of finance is shaky when one looks at the American and German stock markets. We get the German Chancellor speaking up for the euro one day, and the next day it plunges.

347.

Mr Pogue: In respect of the pig industry Ireland has to be considered as a whole. One of our problems with exporting live pigs to Great Britain, and I do not think that this has been made clear, is that neither Northern Ireland nor the South of Ireland are Aujeszkys-free. Now that our sow numbers are low it is an opportune moment to clear Ireland of Aujeszkys, and some assistance should be given to that.

348.

The Chairman: We will take that on board.

349.

We will now move on to the beef issue. The quality of the composition of the average beef herd in Northern Ireland appears to have deteriorated in recent years, yet we are being told that the best of Northern Ireland beef is good enough to command a premium price in discerning markets such as those in Holland. Do you agree that improving the quality of the total beef herd to be the best is an urgent industry objective? What proposals does the Ulster Farmers' Union make to the Committee in order to reach that objective and make a contribution to that important cause?

350.

Mr Rowe: Yes, the beef herd has deteriorated in quality over the last number of years but there are a number of reasons for this. One of these reasons is that we are comparing the quality of today's beef herd to that of the 1970s and 1980s. However, in the 1970s and 1980s we were legally allowed to use hormones which resulted in leaner, fitter cattle. Then we had the onset of BSE. When that happened people lost heart in breeding and a lot of us, myself included, decided to sell the best heifers and breed the worst ones because they were not worth anything anyway. Then when they came to be cows they were worth something under the 30-months scheme - and we are reaping the rewards of that.

351.

There are a number of ways out of this problem. But remember one thing - when we start to talk about beef quality we are looking at objective grading as a beef quality. Recently I was at a seminar given by the Australian Beef Board, and it was interesting to note that for some of their markets they are going away from objective grading and going on to the taste and eating quality of beef. It is very important that we do not lose sight of this. If the housewife buys a piece of beef - no matter if it is from an E steer or an O minus P - if it eats badly she will buy something else the following week. It is important that we look at the issue correctly and realise the importance of the eating quality.

352.

That is an overview. At the present time farmers and those in the meat industry trade are on the European grid with regard to beef. The European grid was used for intervention, and it has been allowed to carry over into the present time. How we improve cattle on that dead weight grid scale is a long-term position. A decision is made on the day of conception as to what the meat is going to be like - three years before it is on the plate. There is a number of things that we can do. One thing that could be done in the short term is the provision of a subsidy for the synchronisation of heat in cows in suckler herds and the use of good AI at a subsidised price. In 12 months time that would probably give a crop of calves of superior value and would immediately increase the quantity of quality cattle on the European grid until we get someone who can devise more tender beef. That would particularly help those farmers who are keen to do the job both on a part-time and full-time basis. They can then synchronise their herds to calve in a certain period, and they will know exactly what bulls they are going to use.

353.

They can lay out their plans. The best laid plans of mice and men come apart, but it would be a good starting point. It is something practical that can be suggested by the Committee and is not going to cost the earth.

354.

Mr Douglas: I am interested to hear you admit that the breeding policy needs to change. Unfortunately, most farmers will say that they are producing the best beef in the world and that someone has to buy it. That is a very poor way to go forward, and I am glad that you are prepared to admit that.

355.

Regarding the grading system, people do not mind a poor price for poor quality animals, but they would like a better price for the good ones. The problem with grading is that we do not get the price. We are aiming for quality. That admission is a start and that is what we need. Could that go down the line to the farmers or is it possible to get that throughout? Could we have this better quality grading?

356.

Mr Rowe: Yes. The present pricing and grading structures for animals - whatever we think about the grading structure - are tied together. The six-pence differential between grades was brought in to accommodate intervention when that made up the main market for beef before and during the times of the BSE crisis. Intervention is no longer a market for beef, and we need to be recompensed for what goes to the commercial market. During my time at the headquarters of the Ulster Farmers' Union, we have been trying to get the powers that be and the meat plants to pay on a more simplified classification system and to pay better for higher quality animals. It is very frustrating. I, and other union members, the chairmen of the Cattle and Sheep Committee, Mr Aston, and Mr Pogue, put a lot of time and effort into going round to meet the meat plants. They would not talk to us about pricing and grading together for fear of the Office of Fair Trading saying they were price fixing. The Ulster Farmers' Union had the Office of Fair Trading look into that situation in 1997. They reported back in late 1998 and early 1999 that there was no case to answer as far as collusion on price was concerned. Mark my words. Others think that they have introduced this into the community as a new idea, but it was already checked years ago.

357.

It is important that we, as farmers, manage to get the bands of grading brought closer together. Instead of having 42 bands - or 36 bands of pricing if one band is removed - we could get down to a four-band pricing system. That would ensure that good cattle are well paid for, medium cattle are reasonably well paid for, and poor cattle can be penalised or sold to the appropriate market. Do not get me wrong. There is a market for poor quality cattle. There is a market for the Holstein animal in the processing world. Cows, in the distant future, will fill that market. At this moment it is a developing market - the catering market. But the upper end of the market must be better recompensed.

358.

Mr Aston: Overall, in the longer term, it is about where we have come from in relation to how BSE has helped the deterioration of quality and the grading structure. How do you compare a piece of beef sitting on your plate to a grid system that somebody happened to devise? The bottom line is that if there is a proper reward for producing quality animals then farmers are the marketeers producing that animal. It is a combination of those factors.

359.

Mr Rowe: That is a much more precise answer.

360.

Mr Dallat: Earlier we made reference to co-operatives and, even earlier, we learnt how the pig industry has virtually lost control of itself. Co-operatives represent people power at its best. They are already in control of the large supermarkets who have shown no loyalty whatsoever to Northern Ireland or its distinctive rural community. Is there a need for the farming industry to be seen as part of the greater rural community? A rural community with farmers and no people, or vice versa, is useless. A number of independent butchers have survived the onslaught of the large supermarkets and have done it exceptionally well. Are there opportunities for help and co-operation from the Department of Agriculture and Rural Development to develop the relationship between the farmers and the independent butchers who are loyal to Northern Ireland?

361.

Mr Rowe: The farmers are members of the community and must be kept there. That is something that is very important for the future. Farming in general needs to be sure that it has a relationship with its nearest market which is its local market, because the cheapest place to sell any produce is locally. Farmers do have a relationship with the local butchers, and a number of local butchers buy beef from farmers, have it slaughtered on a contractual basis and then sell it to local people. You can go into your local butcher and in some cases, they can tell you who provided the produce. The older family butchers are keen to do this. I can think of a very renowned butcher in Enniskillen who still does this. There is an opening there for some products, but some may be different. We have to market these products on a wider scale to gain market share and sell the produce. We need a bigger market share, not only of the local market, but of the other retail market.

362.

As far as marketing in Northern Ireland is concerned, the Ulster Farmers Union has run a food initiative for the last two years, and are still looking at one for this year, to try to enhance the position of Northern Ireland agriculture in the home market. It was very successful in the last two years, and if we are able to run one in the future, we hope it will be successful also. As an organisation, we are trying to highlight this from our own headquarters in order to get the co-operation, not only of the local supermarkets, but also from the multi-nationals, so that their Northern Ireland branches will demonstrate what we have for sale and, it is to be hoped, increase sales of Northern Irish produce in their national areas also.

363.

The Chairman: We are now very short for time. Will you please keep your answers short, Mr President.

364.

Mr Savage: I have listened very carefully to what you were saying about quality. There are so many people living off the backs of farmers, and they have been doing for a long time. You said you wanted short-term solutions. What are these, and will they be compatible with the long-term requirements?

365.

Mr Rowe: I do not want to be a politician or move in political circles - we represent all political walks of life - but you mentioned one solution that would be of use in any industry, never mind agriculture. The subsidisation of interest payments by those who are in debt would be very useful in the short term, and everybody across the political scene in Northern Ireland would have to agree that this is something that should be looked at more carefully and brought into play. It is not unique across Europe, but I know that when I was at college over 30 years ago, it was a recognised fact that on the continent, some of the farmers did not get grants and subsidies, but they got cheap money, and that was a big help to them.

366.

That was a big help to them. We do not get grants and subsidies, and cheap money from any source would be useful.

367.

Mr Bradley: Whom do you think should be exploring the branding concept which you mentioned in your submission?

368.

Mr Rowe: Everybody in the industry needs to explore the branding concept. This industry has a big Department with a lot of expertise, and that sort of thing is in its remit. If one used a brand across Europe, one could get money to promote it. Sadly, Northern Ireland never had a brand that it could use. It had the Greenfields brand, but that is no longer unique, as it is used in Holland and Belgium - a firm there owns it now. We can use it in the rest of Europe, but Northern Ireland needs a brand of its own. It is a pity that the agriculture industry does not have a brand as distinctive as that of Bushmills whiskey.

369.

Mr Bradley: Who should lead it?

370.

Mr Rowe: The Department of Agriculture and Rural Development should lead it. It is recognised by all other Governments as part of our body. It should lead; it has the cash and the expertise.

371.

Mr Aston: There are two organisations which could lead. One is the Red Meat Industry Strategy Group; it works with all parts of the industry and with the Department to see what can be done with red meat. There is also the vision group set up by the Minister. It is to issue a report soon, and it is crucial that it tells us if it considers it worthwhile to pursue this.

372.

Mr Bradley: EU regulations 201 and 202 will mean that they probably will need a brand.

373.

Mr Rowe: If all Northern Ireland products are to be branded, it should be done by the Northern Ireland authority. If one particular sector is to be branded, the obvious one is the red meat sector.

374.

Mr Kane: Are the existing groupings too small to have any significant effect on prices or on the monitoring of the product? Why is a major co-operative, in your view, too big a leap?

375.

Mr Rowe: The small co-operatives do make a difference for those who are in them. They can help make substantial reductions in costs at the buying end of the business. The United Dairy Farmers' Co-operative has kept the milk price. Although it remains bottom of the league at every stage in Northern Ireland's pricing, it has ensured that Northern Ireland's milk prices have been much better than the United Kingdom's. It has handled 50% of the milk, so it is not impossible. It is something that we can aspire to; but we cannot aspire to it on 10 September 2000. This is where the problem is. We can aspire to those higher ideals, but we must do it in time; we must save the industry soon.

376.

The Chairman: Thank you very much. We are sorry for being so pressed for time, but we have a report to compile. When you have read the Hansard report, we will welcome feedback from you.

377.

Mr Rowe: Thank you very much.

Friday 8 September 2000

Rev Dr Ian Paisley (Chairman)

Mr Savage (Deputy Chairman)

Mr Armstrong

Mr Bradley

Mr Dallat

Mr Douglas

Mr Kane

Mr McHugh

Mr Paisley Jnr

Mr M McCoy ) Northern Ireland

Mr N McLaughlin ) Agricultural

Mr J Carmichael ) Producers' Association

378.

The Chairman: Thank you very much for coming here today. I have to leave at about 12.40 pm, and my Vice-Chairman will then take over. Could you give us a 10-minute introduction on pigs and meat together. Then we will go straight into questions - there are a lot we need answers to.

379.

Mr McCoy: Thank you for giving us the opportunity to speak about the debt situation and, particularly, thank you for the documentation we received, and to which we have responded. The debt has not gone away. There is a self-perpetuation of the debt, and it is not just in the beef and pig industry. We were worried about the small amount of investment into the agriculture industry. The reason that the pig sector is suffering excruciating pain now could be due to the present financial crisis. That could start to move across into other sectors. We would like to discuss the financing of the debt and also the possibility of putting micro-finance in place for the future development of farming families.

380.

Mr McLaughlin: I will try to target the main questions of co-operation and organisation, co-operatives and branding. Branding is of particular relevance to Northern Ireland. The Green Fields brand was undoubtedly a success while it ran. Hopefully it will be relaunched with a major effort from Northern Ireland, if we get the ban eased. Then other initiatives such as EM45011 and FQS can be beefed up and used more as a marketing tool. We will have to take the industry forward by doing that.

381.

We highlighted the pluses and minuses in developing beef products. We would like to focus on having it more market-orientated and targeting specific markets. The Livestock and Meat Commission has someone who researches markets and opportunities throughout the world which could possibly apply to a small producer region like ourselves. The fact that Northern Ireland is so small is also one of our strengths. We can carry an industry forward with the same production parameters and the most uniform product achievable. We can start the whole process next March. Hopefully there will also be a bit of competition, and we can inject that into the process via live shipping.

382.

Competition is essential in all aspects of meat production. One of the lessons learned through Malton is that when we put all our eggs in one basket we become very vulnerable. We need to take the initiative now. My colleague mentioned that debt is hampering a lot of development from farmers. This has been compounded by the increase in values and the strength of sterling which is making us very uncompetitive on the world stage, particularly in Europe.

383.

The Chairman: We have the short term and the long term to deal with. We are concerned that the whole farming industry in Northern Ireland will have to be changed because we need a table for the producer to meet, on an equal plane, with the meat plant man and also with the big international retailers. At the moment the farmer is not at that table and that is our big problem. There will be a lot of blood, sweat and tears to get us to that place. We have this crippling debt and the answer to this is that cheap money must be available, as it is on the Continent, to the farming community. Today we are interested in getting your views on the long-term strategy.

384.

It seems that you strongly support the creation of a better organised producer base for pig meat and beef. Presumably you have looked at the financial resources which could bring that about and you have also looked at how your organisation can contribute to that. Could you put on record that you support the creation of a better organised producer base for beef and pig meat? What could be done to bring that about? The first part is with regard to pigs and the second part with regard to beef.

385.

Mr Carmichael: I will be brief because not a lot has happened since we last addressed the Committee. At that time, we talked about the increasing debt and, as Mr McLaughlin said, that interest is still there. The income received by pig producers in comparison to the rest of the United Kingdom was one bone of contention. At that time, we talked about restructuring the scheme - having an out-goers and an on-goers scheme - and I am sure you are aware that there have been further delays. More questions have been asked from Brussels. We cannot have an on-goers scheme to assist those who want to stay in the industry if we do not have an out-goers scheme, because of state-aid measures and so forth. That is something that needs to be moved forward. The longer the situation stays as it is, the more difficult it is for people to stay in the industry.

386.

We have seen the possibility of another company taking on exports for pig meat. We are looking at all the possibilities and the returns to the producer compared to returns in other areas, and we have to ask the question - and it is the same for beef - why, out of the final product price, is the producer getting so little return? Apart from that, nothing has changed except that pig producers are getting into debt and prices are fluctuating. In fact, prices rose slightly and went down again. If something is not done in the short term in order to have an on-goers scheme - and then we can look at long-term measures - there is not going to be an industry to look at.

387.

The Chairman: That is very important because some people thought we were out of the quagmire we were in. We are far from that. Some of the Department of Agriculture and Rural Development's officials, and even the Minister, were trying to illustrate that there was great encouragement. That is not the same story I got from the pig producers. We are apt to forget about the terrible crippling debt, which means that the farmer cannot invest because he has no money. What is your organisation's attitude to the long-term co-operative scheme that we have been speaking about?

388.

Mr McCoy: We categorically state that we fully support a co-operative system. We have been involved in this issue over a long period since we took the matter to the meat plants and organised an orderly picket outside meat plants at the beginning of this year. We have been involved in a series of meetings with the Northern Ireland Meat Exporters Association (NIMEA) who represent the processors. We have also been involved in a wider industry forum comprised of the Ulster Farmers' Union and NIMEA looking at the Farm Quality Assured Scheme and how that is funded.

389.

Returning to some of the questions in your paper and the issues involving 50% of the beef producers, we have some concerns. Unless the primary producer, the suckler cow farmer, is involved in the whole process of providing quality and that involvement goes back down the line to hill farmers, we are not going to go forward with any unity as an industry. We need to put in place issues and funding that will involve suckler beef producers so that we are incorporating a total quality lifetime assurance throughout the industry.

390.

As far as long term strategy is concerned - and we have the task force and other different strategies - it is important to have strategies but not to get hung up on the issue of long term. In the short term, many things can happen. The meat processing industry must realise that it needs us as suppliers of product otherwise it cannot add any value to whatever is coming through. The processing industry must also be pragmatic. It cannot continue to eke out every last drop of financial return from the beef and pig industries without putting something back in.

391.

We cannot ignore the financial situation; you mentioned cheap money, and we talked about the self-perpetuation of debt in our opening remarks. We can look at lots of different initiatives and co-operative ideas. However, if we do not look past the debt, and the financing of the debt, we are eluding the real question.

392.

We have got to grapple with the issue. In one way, we are looking for a cure rather than at prevention. We need to make sure that the financial institutions are made more aware. They gave evidence to your Committee the last time we put forward proposals, and I think that was in closed session. There needs to be more openness about what is happening in the agriculture industry in Northern Ireland. The financial institutions have a big part to play, otherwise we are going to have a lot of people moving away from the industry and lots of other inherent problems emanating from that.

393.

We totally support a co-operative. However, there are issues about finance, operations and making the best use of other organisations - for example, the Livestock and Meat Commission and the Pig Forum. It is a matter of being able to come together to make sure we are all doing the same thing and working towards the same goal.

394.

The Chairman: To create a well organised and market responsive producer group would require leadership. Would your organisation be prepared to help in that leadership?

395.

Mr McLaughlin: We had a number of co-operative movements in the 1960s and 1970s and a lot of them failed due to the lack of having focussed individuals running them as a company. The classic example is Kerry Co-op, which has developed into a mega-business because it has been run on economic grounds. A lot of co-operative initiatives have lost pace because they are being run by people who were farmers or by people who are still trying to farm on a part-time basis.

396.

We would like a co-operative to work, and we would fully support that. However, we would also say that any major initiative is going to need suitable personnel who will be there to provide focus and achieve objectives. We need people who will look at the long term, as you mentioned, but who will also take cognisance from the players involved in the industry, representatives such as the LMC or UFU, and other farming clusters and consumer groups. We could not let a co-operative be run into the ground because of a very narrow-viewed aspect.

397.

The Chairman: You are telling us that a successful co-operative requires a brilliant commercial man at the top, not those with no experience of the commercial world because they have never lived in that world. Although such people might be practical farmers, there is a bailiwick into which they cannot enter because they have neither the knowledge nor experience. Therefore a co-operative would have to be run as a commercial undertaking and in such a way that confidence and trust could be placed in it. It would also need to be run in such a way that it carries with it the various organisations and people involved in farming.

398.

Mr McCoy: I do not think it would work without the farm organisations. They have been fully behind it. We do have a co-operative in Northern Ireland at the moment, although a lot of people are a little disappointed with what is coming forward. If you put a commercial head on any of these co-operative units, they must come back to the terms of reference on which they were built, and that would be to provide more income for farm families.

399.

The Chairman: We believe that there has been a deterioration in the average beef herd in recent years. We have to get quality beef on the market if we are going to contend on an even playing field. How can we do that?

400.

Mr McCoy: The first step is to decipher the word "quality". A lot of people, particularly the meat processors, bandy that word about. They mean the European EUROP classification. There is nothing in that about eating quality or about how it was reared and processed. If we are going to use the word "quality" in the way that the processors use it, then certainly the confirmation has come down. There is a Holstein influence. The percentage of dairy cows achieving EUR grades is 48%, as against 32% in Scotland. There is a massive differential, and a lot of that comes from the branding of Scotch beef and the suckler units and devolving a lot of new mechanisms and feeding regimes into that sort of product. That is the sort of thing we have to get to.

401.

Mr Carmichael: If we are going to have a beef industry, we have to start with suckler cows. As an organisation, we have worked with various groups, over a number of years, to improve quality and to make the producers understand that quality has to be improved. With reference to the organisations being involved in a co-operative, if we talk about a food chain, the start of the chain is the primary producer. I suggest that the farming organisations at the coalface could have quite an influence on producers, as opposed to those other people who they see making a living off them.

402.

The Chairman: The first questions will refer to the pig industry.

403.

Mr Savage: Recently there has been an attempt to create a strong producer group, which seems to have developed very slowly. The pig industry is in deep crisis, and the need for such a group seems to be widely accepted. Why has progress been so slow? Is it that Northern Ireland pig producers do not believe in co-operation, or is the concept itself flawed?

404.

Mr Carmichael: Since the introduction of additional funding, groups have applied for funding. The concept of groups is still alien to quite a few farmers, and not just pig farmers. In the pig industry, as in every other industry, there are individuals who have their own contracts which they might not be willing to share with others. We always believed that producers had to get together in some way. I have had meetings with pig industry people, and I know that there are various groupings. Having one co-operative group would improve the situation.

405.

I do not know why more people are not involved. Before now, we have had various people producing and supplying various plants. There are those in the industry who have their own contacts and contracts. Presumably they wish to stay with those at the moment. The concept of producer groups and larger-scale production should benefit the producer. The unfortunate thing is that a lot of farmers still regard their neighbours as the opposition. That is something that has to be sorted out throughout the whole industry, not just among pig farmers. Farmers must realise that unless they produce together in both quantity and quality, the way forward could be bleak.

406.

Mr Savage: All farmers are in it together.

407.

Mr McCoy: Farming and farming agricultural businesses are individual businesses. As such, economic factors come into play. They all want to develop themselves individually. There has not been that collective activity which has been seen to work really well in Northern Ireland over recent years. It is only in a time of crisis, such as now, that farmers will start to realise the net worth of putting some scope and scale together. It is very useful that the Committee is bringing that forward.

408.

Mr Carmichael: One thing that could be said against the formation of a single group is that many producers still see competition as providing more income for themselves. As Mr McLaughlin said, if you have all your eggs in one basket and something happens to that, you have difficulties. That problem has been highlighted in cases where other groups have tied themselves to one particular plant, for instance, where there would not be the same competition.

409.

Mr McLaughlin: In the pig industry, many of the producers were vulnerable after the fire at the Malton factory. They had major problems moving pigs after that. There would still be an inferred threat there from some of the processors. If farmers do anything to disenfranchise them or move toward any other influences in their marketing, they could have problems getting their pigs slaughtered.

410.

The Chairman: We are agreed on that. There is still a fear.

411.

Mr McLaughlin: I personally know farmers who have been told that if they move anywhere else, or even look to price anywhere else, they will not get their pigs slaughtered the next week.

412.

Mr McCoy: One issue that comes up all the time, and people say this is a strength, is the size of Northern Ireland. We are small enough to do things. We are also small enough to have that inference of "if you move, you will not be able to market this back here again". It is a double-edged sword.

413.

Mr McHugh: May I ask a question about beef? Will I have time to come in again later?

414.

The Chairman: That will depend on the generosity of the Deputy Chairman who will be in the Chair at that time. If you want to ask a question about beef now, go ahead. I am trying to give every party an opportunity.

415.

Mr McHugh: Considering the contribution of late payment by the Department of Agriculture and Rural Development to the debt situation and the new rural development plan in the next programme for Government, is the Department, with its vision group, going in the right direction to take farmers forward?

416.

Mr McCoy: That is a fair question. The local authority people were here on Wednesday to meet the Minister, lending their support to agriculture and the rural economy in this financial crisis.

417.

Business, whether it be farm business or any other economic enterprise, revolves around cash flow. That is the bottom line in economics. For too long, the Department has not been prepared to look at a ready rollout of programmes and the necessity to get the money out as quickly as possible. We have talked, both to the current Minister and to her predecessors prior to devolution, about a protocol whereby payments of whatever kind would be made in a timely way. There should be an imperative upon the civil service to get them out as quickly as possible. That is absolute. It should not be a once-and-for-all thing. We should continually revisit that table and make sure that once the Department sets out a standard, we see exactly how well it lives up to its obligations, and how well the expectations of farmers have been met in that process. It is a continuing thing.

418.

The Department's vision for the future is a long-term strategy. It looks at a lot of different things. There are real cash problems in Northern Ireland's agricultural economy at the moment. We need a cash injection; we need a stimulation of new enterprises within the agricultural and rural economy. Otherwise we will not have time to see the long-term strategy. It will be a book that will be written for the demise of agriculture. On one hand we have to look towards the long-term future, but we have to live in the present and try and get as much out of the present situation as possible. Timely payments are crucial at this point in time, because the marketplace is not giving back enough.

419.

The Chairman: We have taken that up with the Minister. We got an explanation, and in the case of one particular payment, we got quick movement. We told the Minister that it was intolerable. We are in such a debt situation that if people are entitled to their money, the Department should be paying it even before time. This idea of having two or three months while they draw the interest is not on. The farmers should be getting the money they are owed, and getting it promptly. We will be revisiting that.

420.

Mr Armstrong: One processor of great size dominates the pig sector in Northern Ireland. This processor has the market power to assess the best markets and the ability to build brands. One strategy for the pig producers would be to seek, by every means possible, to become such a high-quality supplier to the major customer as to earn preferential place in the range of supply options. Is there a better option for Northern Ireland pig producers? If not, what steps are needed to pursue the goal? We know that Malton's would have a monopoly.

421.

Mr Carmichael: We have been discussing this, in relation not only to pigs, but to other products. You talked about branded product. Again it is back to having all your eggs in one basket. One way that producers can look for a way forward is to try to source outlets for the product themselves. We produce a quality product. There are rules and regulations with regard to pigs - tether stalls, and so on - in the United Kingdom that are not adhered to in other parts of the European Union. That adds to our costs. Obtaining market share with large retailers would be quite difficult, because Malton's have the retail markets there. We produce a quality product. The only way to get a consistent market share of quality production is to show that you are able to produce what the market demands when it demands it, continually.

422.

Our ability to put together a brand and producers and go to the retailers to see if we could get a market share would have to be assessed. It would have to be quite a share, because we are facing imports from other regions. I do not like to use the words "dubious quality". However, because of the quality of our product - and we reckon we have the best quality product in the world - questions must be asked about the quality of the product being imported and sold because of lower production costs. I am referring to the quality of beef and bacon.

423.

Mr Armstrong: Some would say that quality is not the sole method for selling meat; there is also taste. Perhaps the meat coming from other places tastes better even though it is not as high in quality.

424.

Mr McCoy: That is the whole issue. There are misconceptions about quality and about the procedures through which animals are put. The situation with pigs in the United Kingdom is that we are trying to introduce a gold-plated industry and show that the other member states of the European Union have not followed our lead. There is no point in having a gold-plated regulated pig industry if everyone else does not follow suit and it is going to go down the tubes. We have been endowed with too many regulations over the years, and that is a major problem, especially in the pig industry, which has demonstrated this problem about quality and the need for having to put in new quality regimes and new tethering.

425.

Let me return to the monopoly situation as regards pig farmers, beef farmers and farmers in general. Unless they get the opportunity to speak to retailers from a position of power, there is no point. We are having to make do with people who have vested interests in their own financial bottom line as limited companies. Companies that have been deregulated, acting as sole traders and not having to pose public accounts are making enormous profits from the agriculture industry. It does not benefit them to allow farmers round the table with retailers or consumers so that they can talk about good product, eating quality, welfare systems and where the animals are coming from. As far as beef labelling is concerned, there is so many things coming in that will be utilised to disenfranchise the farmer even further. It is very timely that your debate is about moving forward as one - the co-operative issue. It will take a lot of time and development, but it will be well worth while.

426.

Mr Armstrong: It seems that these companies put their names forward. The farmer is only a minority in the production of the product in that he does not make a profit and they do.

427.

Mr McCoy: Absolutely.

428.

Mr Paisley Jnr: We are trying to explore the benefits of establishing strong producer groups and the branding of Northern Ireland products. One of the things in your paper, and I welcome it, is that you have suggested an audit and a strengths, weaknesses, opportunities and threats (SWOT) analysis and feasibility study, which I assume will be driven forward by the Department of Agriculture and Rural Development. However, has the development of groups and brands been stymied by the allegations - and I am sure you are aware of them, they have been quoted quite widely in the 'Sunday Times', in particular - of price fixing and supply rigging within the meat sector. A former executive of one of these meat plants has made dangerous allegations about a meat cartel's operating. Is there a meat cartel operating? Has it affected prices? Is it destroying the industry in Northern Ireland, and can these suggestions of branding and new co-operative groups deal with that?

429.

Mr McLaughlin: There is very strong incidental support to the issue of a cartel operating in Northern Ireland. We are looking at the possibility of live exports from next March injecting some competition. The cartel is even bigger than just Northern Ireland. Over 50% of the meat industry in the United Kingdom, including the Republic of Ireland, is operated and controlled by three Irish companies.

430.

If you want to expand the idea of a cartel or rename it as "focused buying and processor groups" and consider the amount of strength and muscle they have, then there is significant evidence that one exists. That is reflected in the profit levels those companies are enjoying, and, as Mr McCoy said, they have deregulated so that they do not have to disclose profit levels.

431.

If we go into the aspect of branding, the brand will have to be part owned by the producers to the extent that the processors will not be able to bring in produce from elsewhere and market that as branded product.

432.

Mr Paisley Jnr: What proportion of ownership should there be? Should it be 30%, or 50%?

433.

Mr McLaughlin: I am not familiar with the appropriate legislation. It would be whatever percentage share it requires. There would be a legal requirement that produce not sourced in Northern Ireland or that does not meet our standards, particularly if it is not sourced in Northern Ireland, could not be branded as Northern Ireland product.

434.

Mr McCoy: The IFA scheme is a tremendous tool, but it is one that we need to develop even further. We have to fine-tune it. One of the major things we have said about Northern Ireland produce is that it is fully traceable as regards quality, eating, and the environment from which it comes. I do not see many registered veterinary surgeons running private IT companies in the private sector, and I cannot understand why the IFA scheme in the Department of Agriculture and Rural Development has been totally controlled by veterinary surgeons.

435.

The IFA scheme was put in place to be more about veterinary issues. However, we have moved on in the last four or five years throughout the BSE crisis, and IFA should become more of a public health information service, which can be utilised more by a co-operative that would then have relevant information. It seems to be that if you want to access any information about the supply of product in Northern Ireland it is locked up in the Department's IFA scheme, and you cannot get near it. It is absolutely crucial in developing any co-operative programme, that there is access to information and market trends. More importantly, you need to know the market trends and availability of your own product otherwise you are not going to be in the market place.

436.

Mr Kane: Recently, the pig industry had a unified marketing board, a farmer owned processing plant and strong farmer owned brand. These have either gone to the wall or have passed from farmer control. What are the implications of this and what lessons can this Committee draw from what has happened in the past?

437.

Mr McLaughlin: They have gone to the wall. The pig industry has taken the same approach. When we had the Pigs Marketing Board we had a healthy pig industry in Northern Ireland. Since then, it has gone from difficulty to difficulty. If we draw an analogy with New Zealand lamb. All New Zealand lamb is processed through New Zealand co-operatives. Meat plants then tender for supply and processing facilities. However, that is statutory. The plants cannot compete for supply directly from farms, whereas the weakness with the Pigs Marketing Board was that meat plants were able to compete with it. Perhaps that is where the thin edge of the wedge drove in and leaner and meaner companies were more successful. Marketing in Northern Ireland in the 1970s was not as focused and we did not have individuals who were focused on where to drive the industry in the long term.

438.

You can compare that with milk marketing. Strathroy tackled the liquid milk market in England, while we kept to our agreement of working with milk powder. Strathroy got a premium, and that is where it came back to. Perhaps those who have been running companies should have been running our industry - but under our control.

439.

Mr Kane: It is a pity that some of the boards have been dissolved.

440.

Mr McLaughlin: When people join a board they have a vision. However, they become complacent with age. Boards should be rotated regularly, rather than have sitting members.

441.

The Deputy Chairman: We will move on to the beef market. The quality of the average beef herd in Northern Ireland appears to have deteriorated recently, yet we are told that the best of Northern Ireland's beef is good enough to command a premium price in the discerning markets, such as Holland. Have we improved the quality of the beef herd as an urgent industry objective? What does NIAPA propose to do about this urgent matter? What else needs to be done to reach this important goal?

442.

Mr McLaughlin: You will see in our paper that if in 1995 and 1996 I fed a bullock on, I could get a yield from feeding it on to a desired finish. However, for the last three years as soon as the beast has collected all the necessary premia, it starts to lose money. I cannot feed it for the return that I get from the marketplace; that will not pay to feed the animal. I know that I am pushing out underfinished cattle, but I cannot afford to carry them on to the desired finish.

443.

That is a major problem to emerge in the finishing industry, and it has been replicated in the pig and other industries. This is because the processing sector is taking a substantial chunk. It does not have to compete with the product or with meat plants in the South of Ireland. It has a captive supply base and has been milking it. Debt is compounding this problem for farmers. People have to earn a living; they cannot hold a product.

444.

There is evidence that farmers are substantially worse off now than five years ago. We have to address the debt problem. Every problem is interlinked, and they are feeding on themselves. Why does Malton pay a different price in Northern Ireland from the one it pays in England?

445.

The Deputy Chairman: There is a big question mark over that.

446.

Mr McCoy: The pig industry had no premia built into it, yet it was all orientated towards the end product. Consequently, pig producers had to prepare the product to the ultimate, and they were continually losing money as a result - no matter how much money was pumped in. We in the beef industry, however, have premia which are a sort of backup. It is another resource. Once the premia for an animal have been exhausted, it has to be slaughtered. There is no point in adding money to something which is reducing in value.

447.

One can see direct correlation between the beef industry and the pig industry; if we go down that road we are going to end up exactly where the pig industry is. It is vital that the premia are paid as quickly as possible so that we can be competitive and start to export calves. It is essential that we put competition back into meat plants. At the moment there is no competition at all.

448.

The choice is between the incinerator and the meat plant. If the meat plants are focused with buying and processing groups rather than cartels, where else will one get a return?

449.

Mr Carmichael: The primary producer is paying, whether there are cartels or not. The middlemen have a mark-up because they have to make a profit. The producer does not have control over the profit margin; he has no guaranteed profit margin, and this will affect meat plants in the long term. After all, if they cannot maintain primary production, they will not have a profit. We are discussing beef and pigs, but poultry, meat and dairy incomes are all depressed. The primary producers are paying for everything.

450.

The Deputy Chairman: There is no point in pumping cash into a product when the market is falling.

451.

Mr McCoy: In the past structural period we had a number of area-based incentives such as leader for Northern Ireland's rural economy. Many of them were orientated towards bull or heifer quality improvement schemes. Perhaps in the next structural period the Committee might try to introduce some sort of cohesion. If not, we are going to put more money into lots of little bits and pieces with absolutely no strategic aim.

452.

The Deputy Chairman: You said that we need another outlet for our produce. Outside buyers come to Northern Ireland to buy calves as soon as they are born from one of its top suckler herds - I will not mention any names. These are exported live at £1 per kilo plus £300 for the steers, and £1 a kilo plus £250 for the heifers. The cream of the cattle are leaving the country. The sooner the boats sail down Belfast Lough or out of Warrenpoint carrying live cattle, the better for the industry in Northern Ireland.

453.

Mr McCoy: A processor told me recently that we are going to be just a grazing area for the continent. I do not care as long as I get a proper return. If local processors cannot give me that return, I will go to the best market place - and that may well be the boat.

454.

The Deputy Chairman: Too many people have lived off the farmers for too long, and the sooner we stop it, the better.

455.

Mr McCoy: The producer pays for everything in the agricultural line, for processors, retailers, boxing, packaging - everything. It is about time that there was an equitable redistribution of profit back into the primary producer.

456.

Mr Douglas: All Northern Ireland's good bulls go to Perth to be sold - few return. That affects the quality of our suckler herd. The Chairman emphasised the long term. Surprisingly, you were reluctant to do that, despite farms' financial situation. You agreed, however, that there should be future co-operation. You mentioned collective action, while at the same time being reluctant to put all your eggs in one basket. There must be a balance.

457.

The Farmers' Union and this Committee could talk about co-operation for the next 10 years, but who can unite the remaining producers, and what part can you play?

458.

Mr McCoy: NIAPA and the Ulster Farmers' Union met the local authorities' crisis committee several times. Before the meeting Douglas Rowe and I signed a joint letter on behalf of the two organisations and sent it to all the chief executives, imploring them to continue the collective action. It tells the Civil Service and the Assembly that something needs to be done. That can be replicated for many different issues.

459.

There are differences of opinion in the agricultural sector, and we have our opinions on which we base policies. However, where it is in the common good to work together, we will not be found wanting. It is only in times of crisis that people come together to develop new ideas and ways of working. The new dispensation is allowing us to do that, otherwise we would not have been able to be present in the Chamber today.

460.

While we may not have instant answers for you, we are working solidly at developing methods and initiatives to allow us to examine the problem more deeply and broadly. We need an audit of the situation to help us form an opinion. We do not want to be ad hoc about this; we do not want to be fragmented. We want to drive the industry forward. Too many people are taking much needed revenue out of the industry, and our objective is to bring that back down the line.

461.

Mr Carmichael: One of the difficulties in uniting the industry is fragmentation. We are at one end of the food chain, while processors and retailers control the other. There must be a complete link through this food chain. We have more than one purchaser for pigs in the Province. Obviously, purchasers and processors have their own markets and niches and need their own producers and links. The poultry industry wants reliable quality producers. I do not know whether we are going to get one large co-operative.

462.

We talked about one co-operative in the pig sector. There is more than one group, and each has its identity. It is the same with the lamb producer groups. A number of those sprung up, each intent on getting its own deal. Mr McCoy alluded to this when he spoke about the leader groups and about trying to improve quality.

463.

We must get producers and processors to talk to find out what exactly we want and whether some kind of movement is possible.

464.

I return to what you said about competition. Unfortunately, if everyone goes the same way, you do not have competition. Today we are talking about processing. Perhaps the wrong word to use is "guilty", but where we talk about processing, instead of taking livestock out, we are talking about processing all product here, and that is in relation to the creation of jobs. Ultimately, the producer will pay for all this and he is not getting an adequate return. The reality is as Mr McCoy said "Where my product goes is irrelevant to me if I get a proper return".

465.

Northern Ireland producers, like those in other areas, have been reluctant to go further than the farm gate. We are now facing the results of that where producers, for example in the suckler area, produce a number of animals for their local market - it is the same for pigs - and that is as far as their interest in marketing goes. That is coming back to haunt the industry. People throughout the industry need to talk.

466.

Mr Dallat: The first successful co-operative in Britain was set up in 1844 by the Rochdale weavers. They put the education of workers, so that they understood the concept of co-operatives, at the top of their list. There have been too many failures in the agriculture industry in the past. There is an indication now that the Department of Agriculture and Rural Development may well play a helpful role in developing the agriculture industry. What can your organisation do to ensure that any co-operative set up will succeed and will not find itself in the private sector a few years down the road, or worse still lost altogether?

467.

Mr McCoy: We talked about an audit. If you are putting down new strictures about the way to move forward, you examine what has happened in the past and you look at those strengths, weaknesses, opportunities and threats, and you learn from past mistakes. At the same time, you have to be pragmatic. Past mistakes happened in a certain timeframe, and within a certain regime, which does not bear any resemblance to that existing now. It is not as simple as chalk and cheese; there are a lot of grey areas when it comes to co-operatives.

468.

One of the major issues regarding the co-operative movement has been the lack of turnover of boards of directors. Directors nearing 70 and 80 years of age are still sitting on boards, still having old ideas. It is good to have people of that age group to provide experience, but you also have to inject vitality and entrepreneurialism by introducing young blood. That is a nice balance to have. We have an opportunity to do something in that context. NIAPA would be more than willing to get involved and to move things forward. You mentioned that the Department is going to develop the agriculture industry. The Department should only assist development; it should not develop it. It is up to farm organisations and the farm population to do that. The Department should provide incentives for farmers and the farm population to develop it, and allow guidance from the perimeter. For too long, the Department has been putting us down one route. It was the old situation of putting trees in, taking them out, putting ditches in, taking ditches out. It was just a fluctuation backwards and forward. We do not need that. We need pragmatism in the industry.

469.

You talked about the education and training of the Rochdale weavers. That is absolutely imperative. How do we move older folk out in retirement in order to move younger people in to educate them and create the vitality? There is no point in educating the old dog to do new tricks.

470.

We want to educate and train young people to give them the opportunity to be pioneers. The Department has got to look at the process of agricultural education and how that is carried out. A lot of different issues need to be tackled. They lie within a wider forum and are perhaps for another day. The short reply is that we will do our utmost to provide for the farmers we represent. If that means the co-operative route, we will follow it.

471.

The Deputy Chairman: We are a vehicle that can bring both organisations together. We are very much involved. We have agriculture at heart, and it is the backbone of Northern Ireland. Nobody can dispute that. The reason you are here today is that we are very concerned about the future of the industry in the Province. We will do all in our power to try to get farming back into a profit-making situation.

472.

The agriculture industry in Northern Ireland needs an injection of finance. That is essential. If it does not come, there are going to be fewer people in the industry in a few months' time because they cannot survive.

473.

Thank you very much for your contribution. If there is something that arises from today's meeting that you want to add, get in touch with our Committee clerk. He will bring it to our attention.

474.

Mr McCoy: Thank you very much for the opportunity to relate this information to you. With the rubric of your political allegiances, would go back to your political parties and implore whoever is responsible for making decisions on a programme for Government to give the rural economy and agriculture priority over the next two weeks. That is essential for us as an industry.

475.

The Deputy Chairman: That is definitely not being overlooked.

Friday 22 September 2000

Rev Dr Ian Paisley (Chairman)

Mr Savage (Deputy Chairman)

Mr Bradley

Mr Douglas

Mr Dallat

Mr Ford

Mr Kane

Mr McHugh

Mr Paisley Jnr

Mr R Foster, Mr H Marquess ) National Beef

Mr A McKevitt, Mr T O'Brien ) Association

476.

The Chairman: This meeting is now in session. At 10.40am we will go into private session - as you have requested - to deal with the cartel question. We will have approximately 20 minutes for that. I will announce when we are beginning the private session, as the Galleries will have to be cleared. I hope that that suits you. Welcome, we are glad to have you.

477.

We now propose to hear your statement, and then I have some questions to put to you from the Chair. My colleagues will then be asking questions.

478.

Mr Foster: This is an exciting time as we set out to put more form and structure into the Northern Ireland agriculture industry, and I appreciate being able to take part in this. I am aware that our submission may be seen as negative, so I would like to assure you that the National Beef Association (NBA) is not a negative organisation. We really do try to examine things with an open and imaginative mind, but we do not want to get caught up in something without it being properly examined, and we feel that it will at times be necessary for us to record our reservations and basically "say it as we feel it".

479.

We feel that something must be done. The present climate between the producer and the processor is nearly corrosive. There are suspicions on both sides; there is a lack of trust; and, at the same time, there are very poor prices for prime cattle inside Northern Ireland compared with other areas of the UK.

480.

We accept that the formation of a co-operative is a legitimate subject for examination. I want to make that clear. But, we also believe in evolution, not imposition. Our summary of the present situation in Northern Ireland is that the ground on which the seed of this co-operative is to be sown is pretty stony.

481.

There is evidence of co-operative failure in Northern Ireland in the past. I have colleagues who are far more familiar with the detail of this than I am. Moy Meats is one example, and there was also a pig venture that did not work out as well as people had hoped.

482.

If a co-operative is to be effective it is more likely to happen through evolution. If facility was made for a number of small, tightly managed, not very costly groups to be established, each with a specific processor, each could work with that processor to market something that could be sold at a premium outside the commodity circle that is so necessary for Northern Ireland beef.

483.

A good example of this, in the sheep sector, is Strangford Down. It began as a group basically run by a secretary and an unpaid committee, and has been effective because of the people within it. It is now beginning to absorb others that have not performed as well and is therefore growing organically - the phrase used in business circles for this. When you look at co-operation on a world level in the industry you will find that the Danish Pig Co-operative is put forward as the model. It is the most effective and it grew and was not imposed. It began small, became big, and is now the model.

484.

We suggest that that approach is probably the best, but it requires a lot of discussion. For those looking for an immediate solution to the obvious problems that exist in the Northern Ireland beef industry, that might not be quickly achieved through a series of small co-operatives rather than the imposition of a national co-operative as you would like.

485.

We have outlined our basic reservations. We are very keen to take on the questions that we feel we are sure to face, but we are not being negative. We just feel that the current climate within the Northern Ireland beef industry does not lend itself easily to the imposition of a co-operative. If one is forced on the industry then some people may later regret it.

486.

The Chairman: Your submission has been full and frank and that is what we want. We want to hear the objections and try to analyse and see how we can make progress. It is not the intention of this committee to try to force anything on the farming community, because that would immediately destroy it - it would be self-destructive to do so.

487.

The beef and pig meat industries, among the livestock sectors in Northern Ireland, are characterised by a producer base that is badly fragmented and disconnected with the markets it serves. The milk sector, on the other hand, has strong producer groups that are well aligned in their markets and are currently receiving better market returns than any of their GB equivalents.

488.

In your submission you spoke about a co-operative being the answer, but you do not agree that fragmentation among producers results in weak price negotiations. Therefore, we would like to hear you on three simple points. How strongly do you support the creation of a better-organised producer base for beef? What steps do you believe must be taken to bring this about, particularly if a co-operative is not your preferred solution? What resources is the NBA prepared to devote to this end?.

489.

Mr Foster: We support it very strongly. We are very conscious of the fact that in the United Kingdom beef price league, Northern Ireland lags well behind. It produces the same type of beef, similarly bred. It is biologically indistinguishable from the product presented in other areas of the United Kingdom, yet its price is between 10% and 12% lower than the United Kingdom average.

490.

The Chairman: What steps do you believe must be taken to bring about a better-organised producer base for beef? In particular, if the co-operative is not your preferred solution, what would you put in its place?

491.

Mr Foster: I think, Dr Paisley, that the principle behind the co-operative is that a product be properly presented through it in an organised way. If a co-operative is working, it is more likely to be targeting the beef outside the commodity sector and putting it across a wider range of markets. This means that it can have a chance of securing the premium price and therefore of raising the income of the producer. The latter would be likely to happen if the beef export market were opened. There can be no doubt about that. We are looking forward to Northern Ireland's achieving low incidence status some time before June next year. As a result of that, more Northern Ireland beef will be presented to a wider range of consumers and, I hope, at higher prices.

492.

The Chairman: Mr Foster, what resources would the NBA be prepared to devote to this end?

493.

Mr Foster: We have not got many resources, Dr Paisley, but we would put them all behind it.

494.

The Chairman: These are points that I want to get on the record, because we have to look at them with our advisers. The creation of a well organised and market responsive producer group will undoubtedly require very significant leadership. Which of the many organisations involved should take that leadership? Is this something that the NBA ought properly to do? Would the NBA be minded to take the lead role in this matter?

495.

Mr Foster: I have to be frank. The NBA does not have the resources to be able to undertake that. A co-operative is a giant project. I have said that we would prefer it to start from small beginnings, but if the mood right across the beef industry in Northern Ireland was to go for a co-operative - and we have discussed this - we would stand behind it.

496.

The Chairman: If you had the financial resources, would you be prepared to take a lead role?

497.

Mr Foster: Yes.

498.

The Chairman: We hope the Government will be forthcoming with finances. If that were the case, would you be prepared to take a lead role?

499.

Mr Foster: We would.

500.

The Chairman: You have expressed caution about a co-operative whose members would invest only if their money was not to be wasted. If a strong producer group could be created, what would be a reasonable contribution to ask from the Government and the farmers?

501.

Mr Foster: It would not be possible to launch a successful co-operative in Northern Ireland until we are absolutely sure that competition for cattle is as clean and as open as we would like. There would be little point in putting any resources into a project that was designed to raise cattle prices if there were a system in place preventing the full market force - the proper collision between supply and demand - being demonstrated in the prices that farmers obtain. Although the cattle are similarly bred and sold in the same market, the prices over here are habitually 10% to 12% lower than the Great Britain average. That is far more than the cost of transporting them across to the mainland.

502.

The Chairman: You are saying that a fair playing field would be a prerequisite. There should be absolute cleanness and openness, and everyone would be sure of that.

503.

Mr Foster: Absolutely.

504.

The Chairman: You will have an opportunity when we get to that stage. Disturbing evidence has been put before us. I have two more questions. The quality of the composition of an average beef herd in Northern Ireland appears to have been deteriorating in recent years. Nevertheless, we are being told that the best of Northern Ireland beef is good enough to command a premium price in discerning markets such as Holland. You have given an excellent appraisal of what has gone wrong. Do you agree that improving the quality of the total beef herd to be of highest quality is an urgent industry objective? If you do, can you tell us what the NBA proposes should be done about this urgent matter? Who also needs to make a contribution to this goal?

505.

Mr Foster: We have just taken part with Northern Ireland organisations in an event called "Suckler 2000" at which this very problem was addressed. The contributions of the Livestock and Meat Commission and the Department of Agriculture and Rural Development were very evident on that day. I would have said that we already had a great deal of co-ordination of thought and of resource within the industry, and that this had already been demonstrated at "Suckler 2000".

506.

We may be confused about the difference between the quality of an animal and the quality of beef. The quality of the animal is what we concentrated on in our submission. We have to get past the influence of the Holstein and introduce more breeding to raise the shape of the animal, which means that after it is slaughtered, the carcass would yield more beef.

507.

If we are talking about beef quality, Northern Ireland and the rest of the UK are in a very good position to sell quality beef at premium prices on an export market. We are alone in the EU in producing beef from grass. The rest of the EU produces beef from grain. A great deal of the beef produced in Europe comes from dairy herds and Holstein bulls - pure dairy bulls.

508.

The British Isles, which of course includes Northern Ireland, have a natural niche product, capable of being sold at a premium price on world markets. In particular, the European Union would be a huge target market. We would have to produce a lot of good beef from an animal, and that requires an element of its breeding to be derived from British genes. These have a natural Hereford Shorthorn and Angus Shorthorn breeding. Both these have a natural ability to carry intramuscular fat - known as "marbling" - which adds to the taste, flavour and juiciness in a unique way. Therefore, we need to pay attention to both the weight of beef that we can take off a carcass, and the type of beef within that carcass. Attention ought to be paid to proper structures in which suckler cows possess at least half these British genes.

509.

The Chairman: Finally, your paper suggests that Department of Agriculture and Rural Development should encourage farmers to produce specialist beef heifer and suckler replacements. Could this be done now? What could the Department do to make this happen? And finally, how long would it be before the effect was felt on the herds?

510.

Mr Foster: It would take three years from today to produce a bulling heifer.

511.

The Chairman: It could start now?

512.

Mr Foster: Yes, if two animals were mated today and they had the proper breeding, there would be a bulling heifer available to a suckler calf breeder in three years' time.

513.

Mr Bradley: Your paper supports the prospect of a Northern Ireland brand label for beef, yet it also suggests that a variety of specialist brands should be pursued. Which is your preference and why?

514.

Mr Foster: We consider the establishment of the Greenfields brand to have been a huge success. Its failure because of the export ban would be a massive disappointment. The possibility to resurrect this from Northern Ireland sources would be welcomed. However, we consider the importance of this brand to be that it establishes regular income for the people producing these animals, people who qualify for that brand. A brand allows the beef that is sold beneath it to be offered at a premium, thereby offering the possibility, if it is properly managed, to raise farm income as well as the price of the animals.

515.

It is important that as much beef as possible be sold outside commodity circles in the sense of discount-led supermarket circles. At present, Northern Ireland beef is trapped. It can only be offered at a discount in supermarkets that are selling beef on the mainland. Should a variety of brands be created inside Northern Ireland, we would not consider that to undermine a national brand such as Greenfields. But if this wider range were offered, there would be a greater chance for Northern Irish beef to be sold outside commodity circles at a premium rather than a discount.

516.

Mr Bradley: Who should be exploring this branded concept? Also, would several brands not each incur high start-up costs?

517.

Mr Foster: They would. There have been some spectacular brand failures because of inability to sell a consistent product. People expect repeatability from branded products. Branding requires discipline. The Greenfields brand was successful because all that had to happen was that beef was red and the cattle were grass-fed. Those were the essential qualifications. If you are selling a brand in an area that is already familiar with that product, then you will have to be more specific.

518.

Mr Savage: Would there not be high start-up costs? Would we not be better with one single brand?

519.

Mr Foster: That might well be the case, but why fight with one hand? Why not fight with two? If you have a range of secondary brands then that would offer the opportunity for a number of farmers to form an alliance with an individual processor.

520.

Mr McHugh: I welcome you, the work you are doing, and the possibilities you can create in order to improve the industry. I agree with some of what you have been saying in the press over the weekend about systems working against improving the beef industry at farm level. Do you feel that the beef industry should be investing in creating strong brands and in selling its products only to outlets such as Albert Heijn in Holland, who are prepared to work in partnership to promote and strengthen the brand in markets they serve? Can there be sufficient trust between producers and processors to make this work in premium markets?

521.

Mr Foster: It is essential that there be trust between producer and processor. That is why I mentioned stony ground. I used the word corrosive. The current relationship between the two, in Northern Ireland, is disappointing. It is corrosive and does not lend itself to fresh green shoots, which is what we are looking for.

522.

The Chairman: Should the beef industry not be investing in creating these strong brands?

523.

Mr Foster: Yes, it should.

524.

Mr Paisley Jnr: I wish to put three points to you about branding, which is a very important part of your submission. The bulk of Northern Ireland beef produce is sold in British supermarkets as their own brand. What can prevent a very powerful customer such as the supermarkets changing its supply line?

525.

Mr Foster: Nothing.

526.

Mr Paisley Jnr: Following on from that, my other point is that you say that customers would be willing to pay a premium for what they are currently getting if they are reassured about the quality of the Northern Ireland product. Is it not true that as far as most consumers are concerned, price is God? Indeed, is it not the case that price and taste are God? Is it realistic to ask consumers to pay more just because a product is branded? How would you reassure the customer that the Northern Ireland brand is a better brand for which they should pay more?

527.

Finally, on page seven of your submission, you say it is better to try and establish a single Northern Ireland label or a variety of labels. I assume you are saying that if we continue to go down this road of branding and marketing, we should really be taking on a variety of Northern Ireland labels.

528.

Mr Foster: I think so. You would be selling in a variety of markets. That does not take away from what I said. I think you can do the two things together. There is nothing to stop the discount-led multiple selling a commodity moving on to a product from Argentina, Australia or America. If you sell your own label, which is the way the majority of beef in Northern Ireland is going, then you will be extremely vulnerable.

529.

What you have got is a product that is a genuine niche product in EU terms. It could be offered in a wide variety of markets within the EU, as a niche rather than a commodity product. There will always be a commodity sector led by price, but you could put a high proportion of Northern Ireland beef onto the niche market and generate premiums in that way. It comes from grass-fed steers and heifers, not from cereal-fed dairy bulls, which are the predominant source of beef within the EU.

530.

Mr Ford: There is evidence that the price the beef processors pay to the farmers does not reflect the differential value of the better carcasses. How serious do you think that problem is and what effect is it having on the industry?

531.

Mr Foster: That is a technical question about classification and carcass yield. There is strong evidence that the price schedules currently presented by the processors, in general, result in high yield carcasses being cheaper than they ought to be, and low yield carcasses more expensive. It suggests that something is being overlooked, rather than being a deliberate policy.

532.

Mr Ford: If the prices accurately reflected quality, what effect would it have on the industry? I refer in particular to some of the things you said earlier. If you have greater numbers of the Angus and Hereford crosses available, does that mean that you will end up filling the niche markets, and this creates a situation where the beef and the dairy herd would be almost valueless?

533.

Mr Foster: No. There are a wide variety of markets for all types of animals. I must stress that beef is not bought on quality by the processor at present, it is bought on carcass yield. The cattle that yield the most beef are the most economically attractive because they reduce the unit costs of the beef processors. The Angus and Hereford are animals that, in the view of anyone interested in the beef industry, increase the value of beef by making it more palatable and attractive. However, they would not hit the top classification grades, because they have a lighter back end or rump. There is nothing you can do about that. Payment on carcass yield, through the classification process, would not encourage the inclusion of those animals in the breeding system.

534.

There are one or two cases of specialist breed-led projects, in which animals that qualify under the Aberdeen Angus certified scheme or Hereford certified scheme can get a significant premium on the basis of the quality of their beef, rather than the yield. If there was a classification system that reflected meat yield more accurately than is currently the case, more farmers would be encouraged to breed animals that yield better quality meat than they do now, and the Holstein influence would be minimised.

535.

Mr Dallat: Your paper states that the National Beef Association is not convinced that a co-operative is the best or most effective solution. How else would you address this issue?

536.

Mr Foster: Greenfields, which was a success, was not a co-operative-based idea. It was led by people within the industry who saw it as a means of increasing their profit. Similarly, profit-led projects could result in a wide variety of brands being undertaken. It would not be impossible for a number of processors to form an alliance, on an individual basis, with a number of producers and produce their own brand to be sold in the markets that they have chosen. That is an alternative to a co-operative.

537.

Mr Dallat: Would it be worth pursuing different models of co-operatives, so that an alternative would exist, giving farmers across Northern Ireland an equal chance at getting the best price for their money? It is well known which co-operatives failed and why. However, there were ones that have been highly successful as a result of their particular model and structure. Would it be worth pursuing further the type of co-operative that may be appropriate rather than simply dismissing the generic term, claiming that it does not work?

538.

Mr Foster: If a formula for success were identified, we would be very interested in it.

539.

Mr Bradley: The paper refers to how producers would be more responsive if they owned the processing plant. Is this a possibility? Where would the finance be found, and how could such a facility compete with other world-leading companies?

540.

Mr Foster: There is a flaw here. We were of the opinion that having a co-operative in possession of a plant would be advantageous to us. It was not considered beneficial to sell to others who may not be doing as well as they ought to, particularly to ensure that the industry would get as much income as it ought to. There would be money pitfalls here. Furthermore, it is not a path that we would stand behind forcefully.

541.

Mr Douglas: Your paper mentions the historical position of the co-op member as one who could step outside the co-operative to obtain a short-term price advantage. Would this be an insurmountable problem?

542.

Mr Foster: This was discussed at a full meeting with the National Beef Association of Northern Ireland earlier, and the general impression was that the Northern Ireland beef farmer would not be confident about other beef farmers remaining loyal to his co-operative.

543.

Mr Kane: With further reference to question five. The NBA is not convinced that a co-operative is the most effective solution. Does the NBA believe that a co-operative is flawed from the outset? It concerns me how it requires the voluntary co-operation and participation of processors who have no vested interested in the promotion of producers' roles.

544.

Mr Foster: If a magic wand could be waved and suddenly Northern Ireland had a working co-operative, then it would be essential for the meat industry to greatly change their attitude, as well as the processing sector. If you are pragmatic, even cynical, you would not expect leopards to change their spots overnight.

545.

If you set up your own processing facility, it would remain necessary to recruit people from within that industry and maintain that culture. Without a complete change of attitude, you would be vulnerable to the bad elements in that culture existing in your own organisation.

546.

Mr Kane: Your correspondence suggests some sort of contract between our traditional production methods and the consistency of product produced. Would consistency be achieved if good practices were maintained?

547.

Mr Foster: The greatest consistency is to produce beef from grass. That is if you are selling into a niche market across the rest of the European Union, where such a product is not readily available. That would be achieving consistency. If you were selling into Britain, where there is already red meat from grass, it would be more difficult to achieve a consistent product.

548.

Consistency tends to depend on absolutely similar feeding methods being used across a large number of animals. That would only be possible if a small number of people were involved who were larger than usual businesses. There is a contradiction between establishing that, which is a good idea, and maintaining as many people as possible on the land within Northern Ireland, where the average settler herd is less than 20.

549.

The Chairman: The Department of Agriculture and Rural Development is currently involved in many aspects of the beef industry. How effective is this effort in driving the competitive position of the industry forward? What changes, if any, would you like to see in the nature and focus of the Department's inputs to the industry?

550.

Mr Foster: Dr Paisley, I am a relatively recent visitor to Northern Ireland, and I do not think that I can answer that beyond saying that I have been impressed with the relationship that your Department of Agriculture has with its producers. There are three producers on my right who I think could answer that better.

551.

The Chairman: It will have to be brief.

552.

Mr Marquess: There needs to be an improvement in the female section of the cattle so that they may have the ground for the rearing of these better calves. Nothing has been done by the Department to improve the female side. Its attitude is that a first class bull will rear a first class calf, which is wrong. They have the wrong concept and I think they need an improvement there, they need to do something. There is no subsidy on a heifer. Well, these past few months there has been, for example, when you slaughter them you get a premium. There is a subsidy on bull calves, and there is really no incentive to carry on your heifer and to rear a really good heifer. If you had some sort of incentive for a man to produce a good heifer, I think it could be done.

553.

Mr Foster: Dr Paisley, I did not answer a question that you raised earlier. There is a new EU lure that persuades farmers to carry cattle of a hill type, which would be of a British type, on higher ground. I think it is possible to establish a stratified production system of crossbreeding, in which several calf breeders are presented with a ready-made bulling heifer that had been bred on higher ground in Northern Ireland. I think that is possible.

554.

The Chairman: Thank you very much. This session is now closed.

Friday 22 September 2000

Rev Dr Ian Paisley (Chairman)

Mr Savage (Deputy Chairman)

Mr Bradley

Mr Douglas

Mr Dallat

Mr Ford

Mr Kane

Mr McHugh

Mr Paisley Jnr

Mr D Rutledge )

Dr M Tempest ) The Livestock and Meat

Mr P O'Neill ) Commission

555.

The Chairman: Gentlemen, I apologise for the delay.

556.

Perhaps you will make a statement, which will be followed by questions from Committee members and from the Chairman. We would like to have answers to all of our questions because those answers will be given to the Committee's adviser, who has responsibility for compiling the report. We want to go through this question and answer session as quickly as possible, but without curtailing you. Our time limit is 45 minutes.

557.

Mr Rutledge, Mr O'Neill and Mr Tempest, I welcome you to the Agriculture Committee.

558.

Mr Rutledge: Thank you, Mr Chairman. We are pleased to return to give evidence to this Committee to further your quest to explore the present circumstances of the beef and pig industries. In my opening remarks I will not attempt to deal with the schedule of enquiries attached to your letter of 10 August. Instead we have submitted a comprehensive response, and I hope all members have a copy.

559.

The Chairman: Yes, thank you.

560.

Mr Rutledge: I intend to introduce the responses briefly and make a few comments under the headings contained in your enquiry: co-operation and organisation of producers; high value niche markets; quality of Northern Ireland beef; and branding.

561.

With regard to the issue of the co-operation and organisation of producers, we believe that there is benefit in encouraging such an iniative. However, we are doubtful that the suggested level of participation is achievable. While we would not discourage ambitious targets for such a group, we do not believe that 50% of producers is a realistic figure.

562.

The main opportunity for such a group is to address seriously and aggressively the existing opportunity to improve the conformation quality of Northern Ireland cattle at slaughter. We believe that it should begin with a strict protocol in relation to the sought-after livestock characteristics and develop production regimes and genetics appropriate to delivering those carcass qualities.

563.

In our response relating to high-value niche markets, we have confirmed our continuing belief that further high-value niche markets would, under the current initiative, be opened to Northern Ireland beef once the export ban is lifted or relaxed. We highlighted our concern that perhaps the biggest problem is the small proportion of our cattle at slaughter which meet the requirements of these niche markets.

564.

It is appropriate to mention that there are a number of niche opportunities in addition to those past niches among premium retailers and caterers. The Livestock and Meat Commission (LMC) has assisted Aberdeen Angus and, laterly, Hereford producers in developing markets for these specialist traditional breeds at a significant premium.

565.

The structure within the bodies promoting these breeds is similar to the one suggested in your hypothesis. We are concerned about the implications of the beef- labelling regulations for those breeds, but we are continuing to support such developments fully.

566.

Organic production currently enjoys very positive press, and there is doubtless a significant premium available for producers in this niche. It is a niche that suits some extensive producers, but it is not a solution for everyone. For example, in the Iceland group there is increasing evidence of a desire for organic produce, but there is also a reluctance to pay a great premium for it. If production and demand become more balanced, organic prices will fall more into line with current market prices. Producers who opt for this niche must ensure that there is an adequate premium to cover the inevitable loss of production and premia.

567.

Even since our written submission, a small but useful niche for bull beef production from the suckler herd has emerged. We are holding discussions with a major processor to explore the possibility of creating a fairly tightly contracted group of producers to satisfy this niche, which will be an attractive opportunity. The Livestock and Meat Commission would be concerned if too many producers went down this road, but we will support this initiative because we believe it is well defined and sensibly profitable.

568.

On the issue of conformation quality of our beef herd, there is massive potential to enhance the value of our industry through beef herd improvement. In saying this, we do not want to imply that there are not many producers who are producing top quality cattle which are well matched to the market, but there has been an overall deterioration in cattle conformation in Northern Ireland. In some other European regions and member states, the average conformation quality of cattle at slaughter is well above the level we achieve. The improvement of conformation quality is a major strategic issue for the industry if we are to regain the export market for premium beef products.

569.

Northern Ireland is held in high regard by many present and past customers for the quality of its cattle identification and traceability systems, its farm quality assurance scheme and the high level of service provided by the processing industry. We would be well positioned to gain more business from these premium customers if a larger percentage of our cattle met the higher specifications demanded by these people.

570.

The issue of branding was discussed extensively when the red meat strategy was produced a couple of years ago. The beef and sheepmeat industries at both producer and processor level acknowledged that branding could increase the value of Northern Ireland red meat. The Scottish model demonstrates that a consistent 10% premium is available on Scottish beef in comparison with other unbranded UK produce. However, it was also acknowledged that branding and the promotion of a brand add to costs. We must be convinced that this cost will be outweighed by enhanced returns and that this revenue will be directed to those who fund the promotion of the brand. On a fundamental level, we must also be assured that the characteristics attributed to the brand, through promotion and advertisement, can be unfailingly delivered to consumers.

571.

LMC has had a prolonged, positive experience of the use of the Greenfields brand for the promotion of beef in Holland. Dutch consumers who bought Greenfields beef through the Albert Heijn group grew to appreciate the qualities of Northern Ireland steer beef, which was produced to a specification developed with the Albert Heijn group. The superior eating experience, allied to LMC's investment in promoting the brand to consumers with the supermarket group, has resulted in the Greenfields brand being recognised in Holland as a premium beef product.

572.

One possible out-turn is that consideration might be given to a broader branding of the Northern Ireland agrifood industry where the costs might be spread broader than simply in the beef industry.

573.

Finally, I would like to mention the sheep/meat industry. I want to highlight that sheep farmers have also experienced many of the difficulties experienced by the beef and pig sector. We would urge you in your consideration of the problems of Northern Ireland agriculture to remember that the output value of Northern Ireland's sheep production exceeds that of pigs, poultry, eggs, crops and horticulture, and in some instances by a considerable margin. Therefore we urge you not to forget that particular sector.

574.

The Chairman: Thank you very much. We now have some questions to put to you.

575.

Your paper supports the principle of a major co-operative, but suggests that it would be better to target 10% of producers initially. On that basis, I have three questions to put to you.

576.

First, what steps do you believe would be necessary to bring this about? Secondly, how would the remaining 90% be affected? Would there be an incentive to become a member, or would it be the end of the road for them? Thirdly, what resources would the LMC be prepared to devote to the establishment of such a co-operative?

577.

Mr Rutledge: We have not attempted to address in any serious way the mechanism for setting up such a group. We have taken your hypothesis, and we have responded to it. History suggests that it would be difficult to get this going. However, I believe that it might be helpful if the Government could put in some seed capital or moneys in order to incentivise people to come into such a group.

578.

In our paper we suggested very clearly that while the group initially might be exclusive, if it were to be successful others would be encouraged to join. We have said very clearly that we would want to leave it open for everybody to join the group as soon as they could meet the standards that were set in the initial phase - standards of genetics and carcass quality that are appropriate to a premium niche group.

579.

The resources of LMC are the resources of the industry. We do not have any resources other than what the industry gives to us, and, therefore, we would have to turn the question back to the industry and ask "What do you want us to have, and how do you want us to use it?"

580.

The Chairman: The creation of a well organised and market responsive producer group would undoubtedly require very significant leadership. If it were launched, it would be the leadership that would be tested and tried, and if it were going to move anywhere it would have to, at least, show some results.

581.

There are many organisations in the beef industry. Which one of them do you think should play the most major role? Is this something that LMC ought to do? As others have said, you should absolutely not remain an impartial servant of the industry, but you should give a lead to the industry.

582.

Mr Rutledge: That is an extraordinarily difficult question. We have toyed with this. We are willing to provide leadership, but we do not believe that we can lead people in a direction unless they are willing to travel in that direction. Regarding the whole issue of discussion at the red meat strategy level, the industry unanimously took the view that it was LMC's role to co-ordinate, to administer and to lead the activities associated with the red meat strategy. We are doing that. If the industry collectively came together and agreed that this initiative was something to be taken forward in a serious manner, and if the resources were made available to us, we certainly would be willing to take on this challenge.

583.

The Chairman: If a strong producer group could be created, how do you think it should be funded? Should it be by the farmers themselves; by the farmers and processors; or should Government be expected to contribute to the funding of such a development? Your paper refers to costs of several hundred pounds per year per producer if branding were involved. Is this realistic for Northern Ireland producers, who are now at such a low ebb?

584.

Mr Rutledge: You have a number of questions there. Funding is clearly important. One would hope that such a group, if it were at producer level, would be able to produce a return for its farmer members that would encourage them to provide a significant part of the funding. As I said earlier, I believe that it is unlikely to happen unless some seed money can be found to kick-start it and get it up and running.

585.

The biggest costs, as we said in our paper, are associated with getting an executive or team in place to provide the leadership that you described. We agree wholeheartedly that leadership will be the essence of the success of any such group.

586.

Mr O'Neill: It would be essential to ensure the commitment of farmer members, and there would have to be full consultation with producers beforehand. However, we feel that it would be necessary and essential for farmers to buy into, or invest in, it to ensure their commitment to the concept - while not failing to recognise the plight that they are in at the moment.

587.

The Chairman: The Committee members now have some questions. If you answer their questions as well as you answered mine - nice and cleanly - that will be helpful. I ask the Committee members not to make speeches, but to ask questions.

588.

Mr Savage: Is it your opinion that the beef industry should be investing in creating strong brands, and selling its products only to outlets such as Albert Heijn in Holland, which are prepared to work in partnership to promote and strengthen the brand in the markets they serve? Also, can there be sufficient trust between producers and processors here to make this work? That is important.

589.

Mr O'Neill: There is no doubt about the desirability of having a brand in any product that is produced. We look at colas and think of Coca Cola; we look at breakfast cereals and think of Kellogg's. If we could achieve the same for Northern Ireland beef there is no doubt that it would put it in an enhanced premium position. That will require huge investment. It will also require - and perhaps this is the most challenging bit for our industry - the definition of the brand promise of what the consumer can expect when they buy that brand. That is the first step.

590.

You referred to the Dutch supermarket. That is a fine example of a partnership working. We suspect that that could not happen on a United Kingdom basis, but, if we think of it in an investment context, I could not say conclusively that it would not happen in a United Kingdom context. I believe that all retailers are amenable to ideas in this area. The issue comes down to how well, and to what extent, we are prepared to support, and invest in, the brand. For example, no United Kingdom retailer would dream of leaving Coca Cola, or Kellogg's off its shelves. That is because those companies invest millions of pounds per annum to support them.

591.

Mr Savage: Would you agree that we are being led by consumers?

592.

Mr O'Neill: Absolutely.

593.

Mr Kane: Is the LMC setting standards of excellence for producers in Northern Ireland which are unrealistic and unachievable, as it is estimated that stricter grading by the LMC has pushed cattle grades down in the Province by a grade and a half? Also, changes in the LMC grading were implemented suddenly and failed to recognise the necessary time frame required by producers to apply changes in production. How does the LMC see this having an effect on the Province's average grades?

594.

Mr Rutledge: Grading is the bane of our lives. We do not have a choice on the grading standard. Everybody who is trying to assist and work with this industry has got to realise that. We do not have a choice in the grade that we put on animals, nor does any other Member State. It is a European regulation that we adhere to. The competent authority, the Department of Agriculture and Rural Development, supervises us; they in turn are supervised by the European Commission. Whatever standard they have dictated for all Europe is the standard that we have to adhere to. The LMC does not have that choice, we simply provide a service to the industry. Are the standards being set impossible or are they realistic? They are absolutely realistic. We have only got to look at other regions of the United Kingdom, and other member states, to see the quality of cattle. I do not mean to say that we are not producing good quality cattle. Many of the cattle coming forward for slaughter are superb and as good as anywhere else in Europe, but the average is not as good as we believe it could be. There are opportunities within the specialist beef sector to get away from the influence of the Holstein which has crept into improve the performance of both the male and female of the breeding herd. There are also opportunities for improvement of that part of our slaughtering which is coming from the dairy herd.

595.

Mr Kane: Our cattle, whether the chief executive likes it or not, are equal to any other cattle or stock within the United Kingdom. It is not being downgraded in any way, but our grades are being downgraded by one and a half grades. Could the LMC chief executive tell us why this is being done?

596.

Mr Rutledge: I do not think I have to repeat what I have already said.

597.

The Chairman: Therefore you do not want to make any further comment.

598.

Mr Rutledge: We grade to a standard that is laid down through that chain that I have mentioned. We do not have a choice in the standard of the classification that is applied.

599.

Mr Douglas: You have said today that markets will improve if the ban is lifted, but at the same time you are not enthusiastic about co-operatives or their success. There is no doubt that meat plants control the price the producer receives. Are the producers being asked to continue being monopolised by these purchasers if we do not have some change through a better organisation? We will soon have no industry left unless someone is prepared to step outside the defenceless position we are in at the minute. We seem to be hiding, and nobody is prepared to take the step forward. Our industry is failing by the day.

600.

Mr O'Neill: You have said that we are not enthusiastic. It is quite the contrary; we would be very enthusiastic if this could be achieved. In our submission, we have said that we have tried to deal with the practical difficulties with achieving what would be very desirable. There is evidence on the ground - not on a Northern Ireland-wide basis, but on a small scale for particular niches. We have mentioned the Aberdeen Angus, the Herefords and the bulls that are in the process of being developed. These are examples of groups of producers coming together to produce a very tightly defined specification for a meat plant and in the process achieving a very significant premium over the standard base price. We would be very enthusiastic if it could be delivered; it is delivering that is the difficulty.

601.

The Chairman: Could you apply yourself to what my Friend has said about the monopoly. We have a limited number of meat plants. It seems that they have a stranglehold on the industry, as we get complaints at this table from farmers who want to get rid of animals, but are in the grip and vice of the producer. By holding back and not taking their animals when they want to get rid of them, they are in a situation where they are tied-in to the whim of the meat plant.

602.

Mr Kane: That is a fact too, Chairman.

603.

Mr Rutledge: We have to be neutral in these matters, and we are.

604.

It is a fact, however, that if we see rushes of cattle coming forward in an unplanned manner, then the supply/demand goes out of balance. It may be the processors, the retailers or indeed the consumers who are not eating enough - but who do you blame for this? One of the possible benefits of a co-operative would be a better planned arrival of cattle in slaughter halls. That would prevent fluctuations in supply undermining and creating a situation that the market cannot absorb. There are currently a lot of cattle coming forward, more than is needed to satisfy the market that we have. Come November it may be the opposite.

605.

The Chairman: Do you get complaints from farmers?

606.

Mr Rutledge: Absolutely.

607.

The Chairman: Are farmers not complaining to you, as they are to us, that at times there seems to be a move to have a build-up or a backlog of cattle, and at other times there seems to be a move not to have that? Now five meat plants, in a very small area where there is a lot of cattle, have a very big influence.

608.

Dr Tempest: The one thing that we do not understand, is that there are meat plants in Great Britain that are offering what seems to be a higher price for cattle. Why is there not a massive movement cattle to those meat plants?

609.

The Chairman: Do you understand that transport is a difficulty?

610.

Dr Tempest: We understand, at the moment, that the prices being paid in Great Britain are about £75 more a head and the transport costs are about £30. That still leaves a substantial difference, so we can not explain why farmers are not shifting those cattle to those abattoirs.

611.

The Chairman: Let me put this to you as it has been put to me as Chairman of this Committee. The meat plants across there demand that those animals arrive at a certain time. If they do not arrive at that time then they are punished. All this major profit that you are talking about could be down the drain if your animals arrive late.

612.

Dr Tempest: That is all about planned intake and planned deliveries to factories.

613.

The Chairman: No. It rests with Almighty God what sort of weather we have, and what can be a very choppy sea crossing. These cattle are not going over in the sort of boats that have club class travel. They have to face the elements and, let there be no doubt, if there is a delay then they are punished.

614.

It is an interesting point and certainly needs further development, but we must move on.

615.

Mr Bradley: In section six your paper raises a worry regarding the production of bull beef. Is this reversible if there is no change in the way subsidies are paid out?

616.

Dr Tempest: There is, as our chief executive mentioned in his introduction, an apparent niche beginning to develop for continental bulls. There are two markets, one is for dairy-bred bulls, which is basically for manufacturing, and there appears to be one for continental bred bulls. We do not know what the size the market is yet, but we believe that it is a niche worth exploring.

617.

Mr Rutledge: Philosophically, we worry that too many people may be incentivised, by the Agenda 2000 Reforms, to move into bulls. The use of natural resources in Northern Ireland - our ability to produce grass - is where we should be concentrating. The extensively-produced steer should be the major feature of our industry.

618.

While we are supportive of niches, we believe that the better good of the industry is served by the steer.

619.

However, we do see a dilemma in the short-term, where the subsidy regime, and particularly the constraints imposed by the extensification rules on stocking rates, is moving people towards the bull, which can be finished at nearly half the age of a steer. That allows cattle to move through more quickly. We are worried about that.

620.

Mr Savage: The reason farmers went into bull beef is that they were getting it from their calves because they did not want to shoot them. That is the only reason that they have reared them, and now bull beef has come onto the -

621.

Mr Rutledge: That is essentially the Holstein.

622.

Mr Savage: I work with bull beef and mine comes from continental-bred Holstein. However, that is the reason why people went into it.

623.

Mr Rutledge: The combination of better feed conversion of the animal if it remains entire, and the subsidy regime, is drawing people down that road. However, we believe that from a branding or a marketing perspective, the uniqueness of what we can do with steers is better for our industry in the long-term.

624.

Mr Savage: This is a short-term.

625.

Mr Dallat: Your paper mentions the commissioning of a market researcher to investigate and quantify niche markets. When are they expected to report?

626.

Mr O'Neill: That person has been in place since late spring this year. Visits have already been made to three European countries, with one trip beyond Europe and another one planned for the autumn. Reports are compiled on an ongoing basis. Those are made available to interested parties in the industry. Reports of visits made have been disseminated to the industry.

627.

Mr Ford: I want to tease out what I took up with the National Beef Association - the evidence that beef processors are not reflecting the differential value of higher quality carcasses in the prices they pay. The references in your paper are different, but if the price more accurately reflected those values, what effect do you think that would have on the development of the industry?

628.

Mr Rutledge: From a strategic perspective it would be better in the long-term if the lower-grade cattle attracted a lower relative price to bring about a greater differentiation. However, it is not for us to determine where the average market level is going to be. Following the proposition in your paper for the highest quality and for a group to produce that, we believe that there ought to be a reward for them in the market place that reflects the meat yield. There are opportunities for improving the payment structures in that regard. However, it may mean that those with the lower-grade cattle may suffer if the top end goes up a little. That is unless the average goes up.

629.

Mr Ford: What will that do to the dairy-bred beef sector?

630.

Mr Rutledge: That there are two sides to that, and a long-term debate. There are opportunities for improving the output of calves from the dairy sector. If we get exports open up again, they will go to the veal trade. There are also opportunities for improving the quality of the beef from those that remain. There are opportunities for using technology to get a better and more productive animal. We are now seeing the opportunity of sexed semen coming in. Embryo transplantation, and associated technologies, may be harnessed in the future to allow us to get a prime and very valuable calf from a dairy cow, if we do the right sort of development work.

631.

Mr Paisley Jnr: Today, in camera, we heard evidence of a possible cartel operating in Northern Ireland. The allegations, which where explosive, indicated who was involved, when they were involved, why they were involved and how they were involved. Given those allegations, it seems improbable to me that your organisation is not aware of a possible cartel. Do you believe there has been a cartel or do you believe that price fixing is part of the standard marketing regulation in the industry.

632.

Mr Rutledge: First of all, we do not know whether there is a cartel as we are not privy to the evidence that may have been presented to you. If there were such evidence and wrongdoing, we would urge that it be sorted out - that it be brought out in the open and dealt with.

633.

The Office of Fair Trading has investigated it and found no evidence, although there is a lot of circumstantial evidence that might support such an allegation. If we can find hard evidence of wrong doing, certainly we will want that dealt with. However, if we examine price reporting and prices that are reported, there is also circumstantial evidence that would support an opposite view.

634.

The Chairman: The Office of Fair Trading has admitted that there was a time when there was a cartel working; it does not say that it is working now. Had you any evidence of that at that time?

635.

Mr Rutledge: We have no evidence. We have price reporting statistics so that we can see what is being paid for all of the animals - as is required to be reported under the European regulations. We can see that there is diversity in the prices paid for cattle. That diversity sometimes can be surprisingly wide.

636.

In recent weeks we have looked at some of the price reporting, and there is not a consistent price. A cartel would suggest that every animal be robustly paid at the same price - which is not happening. I emphasise again that we do not know whether there is a cartel. We can tell you that there is circumstantial evidence on both sides, but there is no hard evidence. If hard evidence comes forward and if there is wrongdoing it must be dealt with, because in the long-term it is not good for our industry to have such practices.

637.

The Chairman: The Office of Fair Trading has said that it is convinced that there was a cartel, but you are saying that to your knowledge you had no evidence of that.

638.

Mr Rutledge: We would not have such evidence. When the Office of Fair Trading examined this we provided them with price reporting information. We collect such information on behalf of the intervention board for European reporting. We sought the permission of our client, the intervention board, and we passed the entire price reporting data to them.

639.

The thing that causes me some consternation, however, is that at the time that you say that a cartel operated, Northern Ireland beef prices to farmers were in the top quartile in Europe. At the time before the export ban there was very intense competition for cattle. What has happened in the meantime may produce evidence to the contrary, but at this time we were saying "Let us stop and look at this sensibly". From time to time we were the highest price in Europe.

640.

Mr Paisley Jnr: You have suggested that if there were a cartel operating during that time it could have affected the grading system, and if it affected the grading system, it affected the prices. Surely that implicates your organisation, directly or indirectly, as being used by that cartel, whether you like it or not?

641.

Mr Rutledge: I do not follow your link to the grading system.

642.

Mr Paisley Jnr: It must affect the price paid to the farmer.

643.

Mr Rutledge: The grade of the animal affects the price paid for it. It is not the system.

644.

Mr Paisley Jnr: Therefore you do not think that it is the system -

645.

Mr Rutledge: The system, whether it is right or wrong, is determined by the European Commission and is under its supervision, and it is the competent authority supervising the standards that we apply. The grade of the animal is the grade of the animal, and the pricing structure has evolved around that.

646.

Mr Paisley Jnr: Could the cartel have affected that in any way?

647.

Mr Rutledge: I do not see the linkage between the grade that is put on the animal and cartel activity. There is a misconception, we are not influenced by meat plants or by farmers towards the grade we put on the animal. If we were, then we would be incompetent; we would not be able to do the job that is required under the law. We put the grade as honestly and genuinely as we can on every animal.

648.

Mr Paisley Jnr: If the supply line were being manipulated, surely that would affect the grade you are putting on it?

649.

Mr Rutledge: I am not exactly sure that I can make that link. The animal comes down the slaughter line and we put a grade on it.

650.

Mr Paisley Jnr: That supply line is the very thing that is being manipulated by the cartel in terms of price fixing and supply in the chain. Then you become implicated in that in someway, directly or indirectly. Do you not accept that? The grading system then becomes questioned.

651.

Mr Rutledge: I do not see that we are being manipulated; if we are it is without our knowledge - that is all I can say to you. I am not making the link that you are, I am obviously missing something in your argument.

652.

Mr Paisley Jnr: The grading system is directly affected and guided by the supply and quality of cattle that you receive.

653.

Mr Rutledge: The grade that is put on the animal is the determination of the conformation and fatness quality of the animal. That is the only thing that influences the grade that is put on it and the only thing that should influence it.

654.

Mr Paisley Jnr: It has nothing to do with the supply of cattle.

655.

Mr Rutledge: No.

656.

The Chairman: Let me just say - so we do not misunderstand - that this is all on record and can be checked. However, when you gave your first answer to that, you did not seem to know that the Office of Fair Trading had, in the past, thought that there was a cartel. Coming back to your answer, you implied that you did know.

657.

Mr Rutledge: Sorry, Chairman. We know that the Office of Fair Trading visited Northern Ireland, and I did refer to that. It took information - indeed, we supplied it with the information that I have described. I have to confess that I did not know the actual out-turn of that. If you say that it agreed that there was a cartel, I was unaware of that. Perhaps my colleagues were more aware of it than I was, but personally I was not aware of that.

658.

Dr Tempest: If there is a perception among your Committee that there is this alleged link. Can I remind you that we have invited, through yourself, the Committee to come and view grading in practice and we would welcome you taking up that opportunity so that we can bury this hatchet.

659.

The Chairman: You do not suggest that you want to downgrade us?

660.

Mr Rutledge: It is a very contentious issue and we would be very anxious to -

661.

The Chairman: We, as a Committee, have various farming organisations and other representatives which tell us these things and naturally we feel a responsibility under the present legislation of this Committee. We are supposed to be monitoring these things and looking at them, and therefore we have a sense of responsibility. It is only right that we have to do this, but what alarms me is that the Office of Fair Trading now admits that it was convinced that there was a cartel. That is a very serious thing which you know you gave information to, but you did not know the outcome, but you said that those with you might. Did Dr Tempest know the outcome?

662.

Dr Tempest: No.

663.

The Chairman: Did you?

664.

Mr O'Neill: No.

665.

Mr Rutledge: We were certainly not communicated to by it with the out-turn of that. Whether we were delinquent in not seeking the outcome, I do not know, but certainly it appears that none of us knew.

666.

The Chairman: It is quite amazing that it came and took all these facts and figures from you, and then it was all forgotten about.

667.

Mr Rutledge: It went on over a very prolonged period and we -

668.

The Chairman: It did come to that conclusion.

669.

Mr Rutledge: It did not advise us of that conclusion.

670.

The Chairman: We have to finish our session: Mr McHugh: Not only have we heard allegations of cartel, but we have also heard allegations in relation to the control of cattle into the factory gate. One of the things I would ask you is, how can we have a future industry, if the primary producer over decades is going to continue to be unfairly treated by those beyond the farm gate, and if he finds that there is no trust between the processor and the primary producer.

671.

How can we get into the branding that you were talking about earlier in terms of creating a better production system to enable us to sell a good product from this part of Ireland to the rest of the world? How can we deal with that with this mess of unfair treatment of the primary producer - the farmer? That is why we are here today. We are trying to find the reasons for that problem and to solve it.

672.

Mr Rutledge: The point which you raised about the need for better relationships is very relevant. If there is wrongdoing, if the allegations that are being made can be brought out in the open, substantiated and put to bed, then those responsible should be exposed. That is one of the ways of trying to begin to build better relationships. I agree with you wholeheartedly. We must try to get through this and build constructive relationships. For farmers to get their meat to market they need to have it slaughtered and processed. I would remind you that there is a farmer-owned meat plant. One of the big four operators in Northern Ireland is 70% farmer-owned. Is it participating in these poor relationships? Why can it not build better relationships?

673.

Mr O'Neill: The observation you make emphasises is how desirable your proposition is that cattle be marketed through a farmer group in an orderly and structured manner. We must remember that meat is a fresh product. If we get an excessive supply relative to demand at a particular time, that causes the problem and difficulty in relationships. This prize would be really worth winning because relationships would be improved. When we work with a number of small producer groups from niche markets we have very orderly marketing of cattle. Everything is planned weeks and even months ahead. If that could be achieved on a wider scale, it would go a considerable distance towards solving some of these problems. The prize would be really worth winning, but it will be difficult.

674.

Mr McHugh: The farmer-run factory is a precedent, but is it any better than the rest in what farmers have been up against? That is the crux of the matter. We have a system -

675.

Mr Rutledge: Is there some structural problem that prevents the farmer-owned plant from having better relationships? There is something wrong structurally if there cannot be a better relationship when they own it.

676.

Mr McHugh: The problem is the farmers have become individualised and remain so to their detriment.

677.

Mr Kane: The LMC remains condemned by its contract with the meat-processing plants in Northern Ireland. Its role in the establishment of the co-operatives is questionable, and its impartiality is questionable.

678.

Mr Savage: How many producer groups do you think there should be in Northern Ireland to cater for the cattle?

679.

Mr Rutledge: There are already a number of producer groups, and we have described some of them in our submission to you. Where niches grow and there are opportunities for Aberdeen Angus, or Hereford, or organic, they will have a group where there is a mutual and common interest in developing that particular niche. It is hard to know how many of those there may ultimately be, but probably between five and ten. For the rest, who are producing the majority of the cattle that are going to the major customers, the proposition is that they can improve their lot through co-operation. We are supportive of that concept, but sceptical that it can be achieved. We would encourage that development in any way we can.

680.

The Chairman: I have three questions. Perhaps you can give us quick answers. The LMC's involvement with the quality beef initiative is of interest to the Committee.

681.

Although it may be in its infancy, you appear to be keen on its expansion. How can this expansion take place? Are there difficulties in trying to introduce a strict production protocol when the organisation has developed without one?

682.

Dr Tempest: The organisation at the moment is a collection of like-minded producers who are attempting to improve the quality of beef through genetics and production, and it even aims to incorporate parameters on eating quality. The issue is whether, when it became formalised, farmers would sign up to a strict protocol. We believe a strict protocol is absolutely necessary because we are talking about quality improvement and quality product at a niche end of the market. Therefore, by definition, that is bound to be exclusive. It would start with the top end of forward-thinking producers, but if and when the benefits accrued, the remaining 90% would eventually come in.

683.

The Chairman: Your paper referred to the decline in interest in the Ulster Quality Livestock group. Can the short-term approach of farmers be addressed or is this likely to be a major problem facing every improvement scheme?

684.

Dr Tempest: The problem with many of these groups is that subsidies - by subsidies, I mean financial assistance - were given for the use of nominated bulls, improvement in management et cetera. It has reflected the difficulties that we all experience with these groups in that once the funding and the financial assistance began to dry up, the interest dried up. That would suggest that either the group was not properly formulated in the first place, or there was too much emphasis on financial assistance.

685.

The Chairman: You say the single greatest obstacle to exports will be the inadequate supply of local quality raw material to meet European markets. You also mentioned the livestock breeding initiative, the blueprint for quality beef and several rural development and council-operated livestock improvement schemes. Are there too many schemes? Is a more strategic approach necessary at this stage? Who should lead the genetic improvements issue, and how?

686.

Dr Tempest: The livestock breeding initiative is a specific scheme designed to improve genetics. The quality beef initiative is an initiative designed to draw like-minded people together who have used the improved genetics. There are probably not too many schemes; they are designed with different objectives in mind. The blueprint for beef was in draft form and was being prepared by the Department of Agriculture and Rural Development the last time we saw it.

687.

The Chairman: Thank you very much, Gentlemen.

Wednesday 4 October 2000

Mr Savage (Deputy Chairperson)

Mr Armstrong

Mr Bradley

Mr Dallat

Mr Ford

Mr Kane

Mr McHugh

Mr Paisley Jnr

Ms B Rodgers )

Mr P Small ) Department of Agriculture

Mr P Toal ) and Rural Development

688.

The Deputy Chairperson: Minister, I welcome you, Mr Toal and Mr Small here this morning. Before we start our meeting, is there anything you want to say?

689.

Ms Rodgers: Yes. I would appreciate setting out a few things at the beginning. Thank you for inviting me this morning to help with your inquiry into the circumstances facing the pigs and beef sector. I know you are interested in exploring the possibilities offered by producer co-operation as a means of addressing some of the problems in these sectors. We have had an exchange of correspondence on this matter, and it is clear that a misunderstanding has arisen in my approach to the issue of producer co-operation.

690.

I would like to foster a better understanding of the role and aims of my Department. We must work constructively together to resolve some of the problems affecting the industry. Therefore I would like to explore the Committee's thinking and its idea of a single large producer co-operative as a means of tackling the problems facing the industry.

691.

My Department is very supportive of producer co-operation and of encouraging collaboration in marketing initiatives within the food chain. When I say supportive, it is not just in terms of moral support, but also in practical and financial terms.

692.

My Department works extensively with the industry and provides substantial financial and advisory support to groups of producers who aim to improve their marketing performance and build links in the food chain. There are examples of this work in all sectors of the industry. In the past year officials from my Department have worked with over 100 groups of producers, 42 of which have included beef and sheep producers. In most cases the groups had the objective of improving both their technical competence and their market awareness. They also placed a strong emphasis on meeting the needs of the market and on the quality and continuity of supply. I strongly believe in this collaborative approach, which aims to build an integrated food chain. I am seeking to increase the resources that can be devoted to this, and I am willing to respond positively to coherent proposals from the industry in relation to co-operation.

693.

I would like to hear what evidence the Committee has found to show that a large single co-operative could work in practice. As I said in the Assembly last week, the Government should not impose co-operation, or any other structure, on the industry. Successful co-operation is a ground-up process with a clear view to meeting market demands. Our role is to work with the industry and to help it develop initiatives that will have a positive impact. To be truly successful producer co-operation must avoid engaging in a power struggle, which results in a stand-off situation between various parts of the food chain. Instead it must embrace the concept of partnership with processors and retailers and be more visionary in its goals. This is the approach of my Department, and I believe it is the right approach.

694.

Having clarified my position on co-operation, I will return to the main subject of your inquiry. We all know about the difficulties that beef and pig producers have faced in recent years. To a large extent these problems originated with the BSE crisis. The specific impact of BSE on beef consumption is now largely over, but we still have to live with the very stringent controls that were implemented to protect and reassure consumers. We still have to destroy cattle over the age of 30 months at the end of their working life, and we face the onerous conditions that currently apply to beef exports, which, if not met, result in bans.

695.

The pig sector has also been adversely affected by the BSE crisis. The surge in demand for pig meat in the aftermath of the initial panic meant that the industry expanded production. However, this high level of demand was not sustained and a market correction was inevitable. Unfortunately, just as the market was entering this period of adjustment there was a serious outbreak of swine fever on the Continent. This led to a temporary shortfall in pigs and encouraged further expansion. When the downturn came it was more severe and more prolonged than anyone had expected.

696.

The problems in both the pig and beef sectors were compounded by the strength of sterling, which made the UK market attractive for imports, in turn making our pig-meat exports uncompetitive. I am very concerned about the continuing poor prices that our pig producers are receiving, particularly the doubling of the already wide price differential in favour of GB producers. It has been suggested that carcass confirmation issues may account for part of the difference, but I have received no evidence to substantiate this. I suspect that the lack of local competition and the dominant position of one processor in the Northern Ireland market place is also a factor.

697.

You will be fully aware of the stringent EU constraints on our ability to provide direct help to the producers, but we remain hopeful that the pig industry restructuring scheme will soon be approved by the EU Commission after a frustratingly long delay. This will allow us to help those wishing to leave the industry, as well as those who need help to restructure their business. I also hope to have discussions with Unigate, Malton's parent company, to see whether it can do something to help improve the fortunes of the Northern Ireland pig producer. You will recall that a £400,000 package was announced in the special assistance for agriculture last October specifically to assist with the marketing of pig meat in Northern Ireland.

698.

My Department has fully consulted with the industry on how to best utilise this money, and we are currently awaiting EU state aid approval of the proposals that have been agreed. These include measures to improve quality and promotional activities.

699.

I will now move on to beef. You all know the efforts that my officials and I have been making to achieve a relaxation of the restrictions on beef and live cattle exports from Northern Ireland, in recognition of our very low incidence of BSE. Following intensive discussions with the EU Commission, our proposals went out to public consultation throughout the United Kingdom at the end of July, and the consultation period finishes at the end of this week. Once the response to this has been considered, my fellow United Kingdom Ministers and I will decide how to progress the case.

700.

I have discussed this issue personally with Commissioner Byrne, who is responsible for health and consumer protection, and who will take the lead in guiding our proposals through the EU decision-making process. He has indicated that he is sympathetic to the principle of relaxing the restrictions on Northern Ireland beef exports. I have also discussed the matter with Joe Walsh, and I know that he is also very supportive. However, we have a lot of hard work to do to secure the agreement of enough of the other member states to see our proposals succeed. Therefore I will be actively involved in lobbying their support in the months ahead.

701.

If we get over the hurdles of achieving a relaxation of the export restrictions, which is by no means a foregone conclusion at this stage, we then face the massive challenge of fighting our way back into the European Union market. Already, £2·5 million of public money has been provided to support the red meat marketing strategy developed by the industry to ensure that Northern Ireland was best placed to take advantage of the lifting of the ban. I was pleased to be able to secure an additional £500,000 under the Agenda for Government announcement at the beginning of the summer to assist the industry further. I am currently considering proposals from the industry as to how this might be used to best effect.

702.

This is by no means the only challenge facing the livestock sector. Those include changing consumer tastes and lifestyles, changing market structures and the need to strive for higher quality, to name a few. That is why, in addition to the recommendation of this Committee, I am looking forward to seeing the recommendations emerging from the Vision Group of industry experts. By now you will have seen their 'Emerging Themes' paper, outlining their suggested issues to be addressed under the forthcoming Agenda for Government. In that paper you will see recommendations relating to marketing, quality assurance, education, training, research and development. All of these are highly relevant to tackling the current and future problems of the industry, and I am pleased to note that the Committee has taken up my suggestion to meet with the chair of the Vision Steering Group and the four chairs of the sub-groups to discuss these issues: I understand a meeting is being scheduled for the near future.

703.

I believe there is a great opportunity for a cross-fertilisation of ideas and views between this Committee and the Vision Group. This could open up new avenues of thought and help generate a commonality of purpose in the industry and in political circles as to how we move forward and meet the challenges and opportunities that lie ahead. You have undertaken a challenging and very worthy project. I look forward to seeing your recommendations in due course.

704.

The Deputy Chairperson: May I apologise for the absence of the Chairman. He has other business. You made a number of points, but one thing that is on the mind of many people is when the outgoer scheme for the pigs will take place.

705.

Ms Rodgers: I hope by the end of October we will have got clearance from the European Union. After that we will begin with the outgoer scheme as soon as possible and then the ongoers will come after it. We have to achieve a 16% reduction in the United Kingdom in the pig production. That is one of the conditions.

706.

The Deputy Chairperson: I do not think you will have any problems getting a reduction of 16% - you probably have that at the minute.

707.

The Committee is concerned first to analyse the reasons why the beef and pig meat producers are in such difficulties at a time when the rest of the industry - the processors and the retailers - appear to be trading their commodities very profitably. All the evidence the Committee has seen so far points inexorably towards the exploitation of a weak producer base. If farmers were employees we would be driven to fixing a minimum wage or setting up of the equivalent of a wages council. This is not just the farmer's view. The Livestock and Meat Commission is clear about the situation too, and we know from informal contacts that many of your most able professional colleagues share this view. It is our belief that a major contributory factor to this state of affairs is the market weakness of the producers who are fragmented and lie at the bottom of a badly disjointed supply chain. They are, as a result, prey to exploitation by the immensely stronger players further up the chain. Do you share this macro-analysis of the situation? If not, then what is your analysis?

708.

Ms Rodgers: This relates to the belief that the major contributory factor to the state of weakness of the producers at the moment is the fragmentation within their own group. I am aware that farmers are experiencing great difficulties, that they have been for some time, and that there are many factors underlying this. There is the strength of sterling, the EU, global overproduction, the after-effects of the BSE crisis and the versatility of the world markets.

709.

The Committee seems also to be suggesting the exploitation of primary producers as another factor. I would be interested to hear what evidence there is of this. The Committee's earlier report into retailing pointed out that there was no evidence of excess profits among processors and retailers. I do not see how that can be compatible with the idea of exploitation.

710.

I do not know if the Committee has revised its earlier conclusion or not. I am not here to defend processors or retailers. However, you will be interested to know that the recent study in the Republic has been published. That has come to the conclusion that there is no evidence of exploitation of producers by processors. Work by economists has also shown that, in the United Kingdom, reductions in farm gate prices are reflected in reductions in retail prices- although with a bit of a time lag.

711.

Nevertheless, if there is exploitation, and if this is verified by the Office of Fair Trading, I would treat that as an extremely serious matter, and I will be pushing for immediate action to curtail it.

712.

I am acutely aware of the difficulties the primary producers are facing and of the huge fall in their incomes. When costs are incurred or things change, everybody else is in a position to respond to the market quickly, more quickly than the primary producers, who are at the bottom of the food chain, and who, very often, get the raw end of the deal.

713.

The answer to it is to find how to face those difficulties. I firmly believe that we can address those difficulties by creating partnerships throughout the food chain, but not just within one group because that can be counterproductive. You can create a partnership with primary producers on the basis of strengthening their position in the market, and you can have the processors on the other end, refusing to deal with it. This has happened once with the pig people.

714.

The real answer is to create partnership along the chain, to build a better understanding, to create an awareness of what the market requirements and demands are, and to help the primary producers meet those demands. I do not want to go into a big list, but the Department has been working on that with the lamb beef and pigs groups, and with the seed-potato industry. The lamb group is one very obvious example. We worked with 11 producer groups, helping them to understand the requirements of the processors and the market. At the end of this month, we are organising a visit to SIAL (Salon International de L'Alimentation) in Paris for those groups so that they can be exposed to the European Market as well, to see why they are there, and help them to meet the requirements of that market.

715.

The Deputy Chairperson: That is good news.

716.

Mr Ford: DARD's remit is primarily to ensure the efficiency and effectiveness of the agriculture industry into which massive public funds are being invested. Do you agree that this must primarily be focused on whether the producer sector is performing as it should? In other words, is your first loyalty as Minister of Agriculture to the farming community and the end consumer as opposed to being an advocate for the processors or the retailers, who are well able to look after themselves anyway?

717.

Do you share the view that the lack of profitability of farmers and their exploitation by more powerful partners is a matter of the most serious concern for your Department? Also what about the taxpayer whose inputs in the form of grants and subsidies are being harvested by those powerful enough to exploit the processing and retail possibilities of the farmers' work?

718.

Ms Rodgers: You are asking about how the producers are performing, and I am asked whether, as Minister of Agriculture, my loyalty is to the farming community or to the end consumers. I am Minister of Agriculture and Rural Development and my responsibilities are quite wide. I have responsibility for rural development, the rural community and the farming community and, of course, responsibilities to taxpayers and consumers.

719.

The Committee has accepted the interdependence of the links of the food chain. Consumer demand must be met, but at the same time there must be a fair return along every link of the chain. In recent years producers have received £200 million per annum in direct payments and £100 million in indirect payments. By comparison, the processors have received £5 million per annum. It is incorrect to claim that there is too much emphasis on one end of the chain and not enough emphasis on the other. As Minister of Agriculture, I have to make sure that the industry survives and thrives. This cannot happen if one link of the chain is focused on and the others are forgotten. As the Committee accepts, the links are interdependent, with individuals and companies depending on each other. If one body fails to deliver and the links do not work together in partnership, none of them will reach their true potential.

720.

My task is to build an integrated approach rather than pit one part of the chain against another in what could be a pointless and self-destructive battle for control. This would not work. The idea of building up a producer or one strong producer group with the view to strengthening its clout in the market can backfire. Indeed, this idea has backfired because the processors do not have to deal with the producers. I am not saying that this is acceptable, but the reality of the market place is that the processors can decide to source their produce from elsewhere.

721.

A partnership approach is needed right across the chain where each link recognises that it is dependent on another. I would also say to the processors that if they squeeze out the primary producers, they will not have a ready source of raw materials.

722.

Mr Ford: This Committee perceives part of the problem to be that the processors sometimes have alternative sources of primary produce, which in many cases is imported from outside the European Union. You referred to the "dominant position" of one pig processor in Northern Ireland. While you have talked about support for co-operation, the Committee has concerns about whether to discuss the issue of` partnership and what the ideal number of co-operatives is. The Ulster Agricultural Organisation Society (UAOS) receives less funding from the Department of Agriculture and Rural Development than comparable bodies in Scotland and the Republic receive. This does not demonstrate that you are supporting co-operation at the desired level, whether the Committee regards one co-operative rather than any assistance toward co-operation as the solution. The Committee is still uncertain about how prices are seen and whether the real support is being given at primary producer level rather than across the whole industry. The support sometimes appears to be being creamed off by the industry's processing sector.

723.

Ms Rodgers: I am going to ask the secretary to deal with the question of the Ulster Agricultural Organisation Society in a short time.

724.

This Committee would benefit from a visit to our colleges or Hillsborough to see the amount of work done on the ground by officials from the Department to help the industry and the primary producers in the area to increase their efficiency and co-operate with processors. We are also working with the processors to give them innovative new products.

725.

We are working with the primary producers to help them understand what the requirements are. There is a huge amount of work going on, and it is very impressive. I have been to the colleges, to various farms, and I have seen what is happening. I suggest that the Committee visits the colleges and Hillsborough to see the amount of work that is being done. I would be prepared to arrange the visits.

726.

I am sure that you are aware of the amount of work that has been done on the ground with the advisers who work with individual farmers. As I have already said, we are working with producer groups. I have mentioned a few of them in response to the first question. Therefore I do not accept that we are not assisting the co-operation among the primary producers. However, we cannot impose co-operation. Co-operation means working together and it cannot be forced, but in every sense possible we are encouraging, facilitating and helping the people to co-operate.

727.

Mr Small: I refer to the point made by Mr Ford regarding UAOS. We support UAOS and there is the frequent comparison between bodies in other parts of the UK and the Republic of Ireland which receive more cash support. However, we have the unique agri-food development service in the Department, and no one else in the UK has that. It does work on the ground with farmers and in support of UAOS. If you are trying to compare support in co-operation in Northern Ireland with other parts of the UK you must take into account the direct input from the Department, which is enormous.

728.

The Minister's idea is superb. If you see what is happening on the ground you will appreciate more the strength of the link between the grassroots of the industry and the people in the Department. That is over and above what UAOS does. Therefore it is not comparing like with like when you look at the equivalent Scottish body.

729.

The Deputy Chairperson: I was speaking to a number of people the other day and two of them in particular were critical of the Department of Agriculture and Rural Development regarding our processing plants. Apparently under EU regulations the Department has instructed that in Northern Ireland two or more officials are required down the killing line. That is all very well, but who covers the cost of this? As far as I am aware the cost has to be covered by the farmer. That is totally wrong. All these extra expenses are the start of the core of the problem. The farmer is the fall guy.

730.

If the EU introduces these regulations, does the farmer have to cover the cost? I am told that this particular cost would amount to as much as £40 a beast. This is the complaint that was put to me, and I said that I would put it to the Minister and her officials today.

731.

Mr Small: That point was made to us as well. I do not wish to be pedantic, but I want to explain exactly what our staff do. Our staff will not say that extra staff must be present. But they will tell the processors that if they wish to comply with EU regulations the Department recommends that they strengthen their checking. This is a debate we have with the processors all the time. We tell them that if they do not take these steps and then have an EU inspection visit, they run the risk of failing and all that flows from that. That is our role. Our people are there as advisers. You are correct that that does put an additional cost on the processor, but there is nothing that we can do about that.

732.

The Deputy Chairperson: The cost then comes down the line to the farmer.

733.

Mr Small: It is all part of the cost of the chain.

734.

Ms Rodgers: We charge the minimum rate which is recommended by the EU for our staff.

735.

The Deputy Chairperson: The costs are coming down to the farmer and, as far as I am concerned, that is a hidden cost.

736.

Mr Dallat: Chairman, before you go to that, may I say that the points made by the Minister and his officials should be taken up. This Committee has not had a run out since that day in Portavogie.

737.

Mr Small: And you enjoyed it so much.

738.

Mr Dallat: We are spending two days a week, almost full time, in here, and we talk about things in theory. We need to be out on the ground to see what is happening. That is my view.

739.

Mr Kane: I was not in Portavogie that day, John.

740.

Mr Dallat: I think you stayed in for the Public Accounts Committee meeting.

741.

Ms Rodgers: I assure you that you will get a better welcome in Greenmount, Loughry and Enniskillen. I have been in all of those places on several occasions, and they are well worth visiting. Very impressive.

742.

The Deputy Chairperson: Minister, we have a tight time schedule to keep. We have a number of questions, and we want answers to them today. I intend to take your point up at the end of the meeting.

743.

Mr Kane: If this major structural weakness in the beef and pig meat sectors is as fundamental as everyone in the industry knows it to be, then we should surely be seeking to remedy it. Your reply to our serious inquiry appears to imply that it is of little or no concern to your Department. You will understand that the Committee cannot agree with this. We have heard much evidence that there is a strategic weakness in the beef and pig meat supply chain which cannot simply be ignored because it is a difficult subject to tackle. Taking the example of the milk producers, the milk industry in Northern Ireland is performing well with rewards to all the major supply chain players. Do you agree that this would not be possible if the milk producers were as fragmented and unorganised as are those in pig meat and beef?

744.

Ms Rodgers: Question three is about structural weakness. I agree that if the milk producers can do it, why can everybody else not? I am concerned with any structural weakness in the beef and pig sector, and the perception that milk producers are doing extremely well has not been shared by those in the industry whom I have met over recent months.

745.

Yes, there is a milk producer co-operative, United Dairy Farmers. The majority of milk producers are members, but that body was established in very different circumstances to those which exist in the beef and pig sectors, given that around 85% of producers supplied the Milk Marketing Board for Northern Ireland, the predecessor of United Dairy Farmers.

746.

A significant number of Milk Marketing Board members chose not to join the successor co-operative. This illustrates my believe that co-operation must be a ground-up process and cannot be imposed. The demise of the pig marketing board may be a further example. The milk sector operates in very different markets, with much of Northern Ireland's product marketing being underpinned by EU export refunds. These do help Northern Ireland products to be competitive. When such refunds reduce, there will be price implications for Northern Ireland milk. The milk sector is actually different to the pig and beef sector.

747.

Mr Kane: In light of the assessment that the industry is in a severely weakened position and the Department of Agriculture and Rural Development is reluctant to intervene, how much longer will the sectors continue to be viable?

748.

Ms Rodgers: The Vision Group was set up because I recognised the dangers and difficulties of changing global markets for the agricultural industry. I hope they remain viable. The way to ensure that they remain viable is the way my Department is directing. By providing both advisory and financial assistance to the primary producers, it enables them to increase their efficiency, to buy co-operation along the chain which we are supporting, to be aware of what demands are on the market and to capably meet those demands, to improve the quality of their product and work with the processors to ensure that they are able to meet the demands of retailers and the supermarkets.

749.

My own officials have been working with processors through Loughry College, for instance, and have been able to assist them to produce products which are now being taken up by Tesco and other supermarkets. That is the way forward - working with all links in the chain to increase efficiency, competitiveness and market awareness. The Vision Group is looking at those areas, and I look forward to getting the result of their studies early next year.

750.

There is some disagreement about how to tackle the problem, but I am convinced that our way is the only way forward. If you create confrontations - blaming one sector of the food market by saying that is all the fault of the big bad wolf out there - you will get nowhere. The big bad wolf might be bad, but he is dealing with a bigger, badder wolf in the rest of the world. We must recognise that and ensure that we work in partnership to overcome it.

751.

Mr Paisley Jnr: The Committee is surprised that you appear to have swept aside any suggestion that your Department should assist producers to better organise themselves. In considering the beef sector for a moment, what we are talking about is the creation of real partnerships, measures to create a supply chain that is responsive to the market's requirements and the creation of sufficient scale through co-operation to offer a new deal to both processors and retailers.

752.

The Committee's concern is that the content and tone of your letter both appear to say very loudly "This is not the Department of Agriculture and Rural Development's business". Yet it is commonplace for Departments to assist in industry restructuring. Is not the All Ireland Pig Processing Study just that, albeit further up the supply chain? Surely almost every initiative taken by your Department is an intervention in the free market. Your programmes of education are one praiseworthy example of the state intervening to provide assistance which in its scale and impact is far beyond that normally provided to other sectors of industry. It could be argued that the major part of your Department's activity is, in one way or another, interventionist. Is it really your Department's stance that you will stand idly by even if the beef and pig meat producer structure is fundamentally flawed? Is this not to ignore market forces at your peril? Do you not agree that this is obviously to the detriment of the industry for which you are ultimately responsible?

753.

Ms Rodgers: Again, I will correct the misconception about my attitude to co-operation and collaboration between the producers. I am fully committed to the principle of building partnerships, both horizontally between the producers and vertically between the different stages of the food chain. There are many examples of this being put into practice, as the Chairman acknowledged in the letter. Support has been given to the United Pig Producers and various other producer groups, of which there are many. I could take up all the time allocated naming other groups that my Department is working with, but I do not want to waste time. That information is readily available to you.

754.

To assist, as my Department does, is one thing but to impose is another thing. Co-operation means working together. If we have learned anything in Northern Ireland, in the general sense, working together is a good thing. Unfortunately, if there are people who refuse to do it, you cannot impose it on them, and that is the reality of life. I want them to work together and co-operate. To create a co-operation between the producer groups, on one basis, in order to strengthen their marketing can backfire and is not the answer. We have to do it along the chain. If there is a demand for one large co-operative from the primary producers, and I am not aware of any evidence of that, then we will co-operate.

755.

Mr Paisley Jnr: I welcome what you have said about being fully committed to co-operation.

756.

When you wrote to the Committee on 7 September you said, "I would be extremely reluctant to have Government interfere in a free market which exists between producers, processors and retailers". We do not find that a consistent position with what the Department of Agriculture and Rural Development does in the other areas you mentioned. We are concerned that the Department is withdrawing from giving assistance.

757.

To clear up what you described as a misunderstanding, this morning you said that you work with over 100 co-operative groups - 42 involved in beef and sheep. Your involvement is to improve their market awareness, and you described this collaborative approach, which is not against EU regulations, and we welcome that. What direct help can farmers expect, in practical terms, from the Department of Agriculture and Rural Development to establish these co-operatives? What can we expect to see in the delivery of this collaborative approach?

758.

Ms Rodgers: If you speak to some of the farmers that have been working with my officials, they will be able to tell you the impact of the direct help. Talking about direct help, you will be aware of the problem of EU state aids. I presume that you are talking about advising, enabling and helping them to be more competitive and to compete in a changing market. I have seen farmers benefiting from the work that my departmental advisers are doing on the ground and the work in the colleges. There is a lot of evidence of that around, if you care to look. That is why this Committee should go and see what is happening on the ground.

759.

I do not know what you mean by intervention. If you call it intervention when my Department intervenes in recognising what is required to improve the industry and doing that through education, re-skilling training, assisting farmers to benchmark and learn from those who are more efficient, then I suppose that is good intervention, in one sense

760.

However I think we have to draw the line at telling people they must do something that they are really not prepared to do. We could have an argument here about the rights and wrongs of the free market, but the reality is that there is a market out there, and we have to deal with that. The best way to deal with it is to enable our farmers to meet that market's requirements. My Department is doing that, has been doing that and continues to do that. Indeed I am seeking more money in the spending review so that I will be able to increase the amount of work we do in that area.

761.

Mr Paisley Jnr: If the farming industry was to come to you and ask for assistance to organise itself on a co-operative basis in order to create a responsive and effective beef supply chain with its focus on superior quality for the end consumer, are you saying that there is nothing your Department could or would do to facilitate this? Are you saying that the Department, which has in the past been very pro-active in creating such co-operative market-focused groupings, has now decided to withdraw this kind of assistance?

762.

Would the Department be prepared to assist with feasibility studies in which groups of farmers show a desire to form well-organised producer co-operatives of the kind so badly needed? If such studies showed real benefit to the industry would your Department be willing to assist with their implementation?

763.

If you take questions, those five and six, together they really follow on quite neatly. It would save time and instead of asking a third supplementary, I could just come in with a second one after five and six.

764.

Ms Rodgers: Well, in relation to five I am afraid I am becoming repetitive, but a lot of the questions are pretty repetitive too.

765.

My Department and I are committed to working with the industry to create, as I have said, an efficient and effective supply chain for both beef and pork. The recent Suckler 2000 event- which was very worthwhile and was well received by the industry- is a good example of the practical steps that we have taken. I was at Enniskillen and I saw how much the farmers appreciated the benefits of the event and how it was enabling them to improve their own profitability.

766.

Far from withdrawing from assisting market focus groupings, I am seeking additional funds for a marketing development scheme. My officials are also developing proposals under the Peace II programme to provide training, mentoring and financial support for farmers to work together in groups to improve beef and sheep quality. They will continue to work with individual producers, groups of producers and industry organisations to create an integrated food chain.

767.

I have no evidence that a large single co-operative is the right approach, which the industry itself considers to be the most practical and effective way forward- indeed I would be grateful to know what evidence or analysis the Committee has to support that particular proposition.

768.

With regard to question six, we already assist feasibility studies through the marketing development scheme and this is an area which I hope we will be able to devote additional resources to. We have already spent £300,000 in market development, and I am seeking an extra £500,000. I am fully prepared to assist the implementation of the findings from these studies provided they satisfy the usual requirements in relation to value for money, affordability and compatibility with EU state aids, which is always one of our problems.

769.

Mr Paisley Jnr: If a producer group, or a prospective producer group, came to you with an idea of setting up a new co-operative, would the Department be prepared to assist them by providing a feasibility study and other resources? You said that the Department does give direct help to address flaws in the market place. The Committee believes there is a fundamental flaw in how the market operates and, therefore, it is in the interest of the Department of Agriculture and Rural Development and the agriculture sector to have that addressed. One way to do this is to look at assisting the establishment, in a practical way, of the group.

770.

In your letter of 7 September, you express extreme reluctance for the Government to interfere with the market. The way the Committee views it there is no reason why producers should not let themselves come together but, to go further than that as a Department, would involve the Government sponsoring funding of marketing organisations, which is against EU law. Your comments today are welcome because they are different to the stance you took in your letter.

771.

Will you put substance to your words by telling us the sort of resources you would give to prospective co-operative groups seeking direct assistance to get established? Would you be prepared to sponsor that?

772.

Ms Rodgers: That is a hypothetical question. There is no difference in anything I have said today to anything I have said in my response to the Committee's initial letter. Today the evidence that I have given of the work that we have been doing in supporting, assisting and enabling producer groups speaks for itself - for instance, there are 11 lamb groups working at the moment with processors. That is the way to go across the chain rather than just one link in the chain. We will look at everyone who comes to us on the basis of what ideas they are putting to us. Any producer group who comes to us with an idea will be helped by the Department and my officials, as they have been in the past.

773.

Mr Paisley Jnr: Would you be prepared to allow the direct assistance to address the fundamental flaw of the lack of these groups which the Committee feels could help to strengthen the whole industry? It has been demonstrated in the past that there was some reluctance to set them up.

774.

Ms Rodgers: Do you mean when people come asking for assistance or are you asking me to go looking for people to assist?

775.

Mr Paisley Jnr: I am talking about groups coming to you.

776.

Ms Rodgers: If a group comes to me or the Department with an idea seeking direct assistance, advice or finance, we will certainly look at that. We have done it in the past, and we will do it again. Our duty is to assist groups in strengthening their position to be able to meet the demands of the processors and to be able to improve the products. There has never been a problem with that.

777.

Mr Paisley Jnr: Is that not against EU regulations?

778.

Ms Rodgers: No it is not a direct financial assistance. It is about help in advising and training in education and assisting them to meet market requirements, which is not a direct aid. It is not against the EU rules.

779.

Mr Paisley Jnr: You could help to set up the management structure of those groups.

780.

Ms Rodgers: Of which groups?

781.

Mr Paisley Jnr: Of a co-operative group, if it came to you.

782.

Ms Rodgers: We would do everything possible with advice and assistance. I am not going to go into every single detail of what we do. It would be useful for Members if I let them know, as I have already offered, what the Department has been doing, for instance, with the lamb groups and the potato growers and to see what can be done. If other groups want to benefit in the same way we would be very happy to help them. It is impossible to go into every detail of all possible angles today.

783.

The Deputy Chairperson: As far as I am aware, that is available to the Committee at the moment.

784.

Ms Rodgers: There is a whole range of areas where people can be helped. If anybody in the Committee is aware of a producer group or anywhere where there is a demand, the Department will be willing, able and ready to help.

785.

The Deputy Chairperson: Is it available in the Rural Development Committee?

786.

Ms Rodgers: Yes it is.

787.

Mr Dallat: In the past your Department has seconded key staff to provide the intellectual impetus to get such ventures going. In the right circumstances would you be prepared to do so again?

788.

Ms Rodgers: I am not sure that the industry feels that it lacks the intellectual impetus. I do not know if it would be very flattered to know that there is a view in the Committee that there is a lack of intellectual capacity somewhere in the industry. I am happy to see my staff seconded from the Department, where it is possible and appropriate. It has happened in the past, and I am sure it will happen again in the future.

789.

We have seconded staff to Wilson's Country Ltd, to John Thompson and Sons, to The Food & Drink Industry Training Advisory Council and to the Livestock and Meat Commission. Indeed, the LMC helped to establish the extremely important farm quality assurance scheme, which has been taken up by the bulk of our producers. Seconding staff, where possible, is not a problem, although we do not have infinite resources. Departmental staff are stretched at the moment due to the demands of the new situation. But it will not be a problem.

790.

Mr Kane: Minister, your Department has grant-aided herd improvements and co-operative producer groups all across the country. Has your policy changed in this area?

791.

Ms Rodgers: No. My policy has most certainly not changed.

792.

Mr Kane: I detest harping on about this, but how does the Department believe it can best protect its financial stake in agriculture if it remains reluctant to intervene?

793.

Ms Rodgers: To intervene in what sense?

794.

Mr Kane: I believe that the Department should be doing more.

795.

Ms Rodgers: In what way? I have told you what the Department is doing. Do you mean do more to help the producers?

796.

Mr Kane: Yes.

797.

Ms Rodgers: It depends on what is meant by intervention. I have already answered Mr Paisley's question on the amount of work that my advisers are doing. I am sorry to keep repeating this, but I really do think that this Committee needs to go out to see for itself what is happening on the ground.

798.

I am not trying to insult you, as I know that some of you are farmers and may know more about it - I know that John Dallat is not a farmer.

799.

Perhaps it would help if you were to go out to see just how much work the Department is doing to help farmers and farmers' groups to better themselves by increasing their profitability and efficiency. If, however, you mean direct financial intervention, you should be aware that I am constrained by the EU state aid rule, which prevents me from giving farmers financial aid directly.

800.

Mr Kane: Minister, I am not being disrespectful, but a number of us work at the coalface.

801.

Ms Rodgers: Yes, I know that there are quite a number of farmers here, and that is why I sometimes feel a bit intimidated when I come before you.

802.

The Deputy Chairperson: You have left yourself wide open for a comment. If the Department's officials visited farms, they would get an education.

803.

Ms Rodgers: I can assure you that my advisers do that day and daily. When I visit a farm - and I have been to quite a few - I always find one or two advisers there, who deal directly with that particular farm, who know everything about it, and who can tell me what is being done. There is direct contact at all the times between the Department and the farmers.

804.

Mr Kane: Minister, I invite you and your Department to North Antrim.

805.

Ms Rodgers: I should be very pleased to accept.

806.

The Deputy Chairperson: The Committee simply does not have the time to accept all the invitations that it receives. We certainly will take up your invitation.

807.

Ms Rodgers: It is crucial that this Committee visit the colleges. I have formed the distinct impression, judging by the questions which I have been asked, that there is not sufficient awareness of what my Department is doing. If we are to work together, and I hope that we are, we need to understand one another perfectly. If you find that the colleges are falling short in some way, I would be very glad to hear about it. However, you need to visit them to see what is happening.

808.

Mr Kane: I think we should take up that invitation.

809.

The Deputy Chairperson: We will finish these questions first and have a five-minute discussion afterwards. Mr Dallat is next. I would ask him to keep his question brief.

810.

Mr Dallat: I am always very brief.

811.

The Deputy Chairperson: I know you are, but there are others who wish to ask questions and as some members were late arriving they missed the first round.

812.

Ms Rodgers: You are quite right, Mr Deputy Chairman. You may slap them across the knuckles.

813.

Mr Dallat: We would need to see another Minister about road congestion.

814.

Your reply states that your Department has very little evidence that producers see the need for more co-operatives. Can you advise the Committee how many producer groupings your officials were involved in helping last year? Were there not a significant number of suckler calf groups, for example, trying to work together to improve their herds and work more closely together? Would you agree that your Department was involved with facilitating these initiatives?

815.

Ms Rodgers: My officials have already worked with upwards of 100 groups of producers over the past year. Forty-two have consisted of beef and sheep farmers. In virtually every case, the group's objective is to enhance business performance by improved technical competence linked to market awareness with a strong emphasis on the needs of the market, the importance of quality and the continuity of supply, which is extremely important to the retailers.

816.

This is a further illustration of our commitment to supporting initiatives from the industry rather than seeking to impose any particular agenda such as one large single co-operative.

817.

Mr McHugh: I am not sure I take the reprimand for being slightly late. We insist on having meetings at 8.30am or 9.00am in Belfast, and that goes for all Departments. I wonder how many people would turn up if I asked them to Fermanagh for 8.30am.

818.

Even if we were to accept that demand for new co-operative structures is as weak as you allege, is it not fair to say that one of the Department of Agriculture and Rural Development's great strengths over the years has been to identify weaknesses not necessarily recognised by the farmers and then take steps to remedy the deficiency. Your role in developing the leading traceability system in Europe and your support for the setting up of the farm quality assurance systems are just two major moves that have arguably had a major effect on market forces at global level. Is not the creation of an efficient and well-organised supply chain at least as important as either of these two initiatives? Why then, are you so reluctant to address this issue which is at least as significant as the two mentioned above?

819.

I agree with some of what you have said about ecologists and the work they are doing, and some of the flag projects. They have been very useful in the rural areas and they have done a good job. I would not be so sure that the advisers are getting to all the places that are in need of them. I am fairly well in touch people at grass roots level. We know that there are major losses in the industry and that is as good an indicator as we need.

820.

Your letter mentions the risks associated with producers organising themselves to improve their bargaining position with processors and retailers. Such efforts will only be fully effective if those organisations have no other sources of supply.

821.

That vindicates our position from the point of view of the exploitation of farmers. The fact is that processors and retailers will go somewhere else, but they will only stay with the people who are here as long as they get the produce at the low price that will give them an adequate profit.

822.

I am not sure that position is a good one for farmers to leave themselves in. As regards organising amalgamation in the wider industry, if you look at the strategies of major industries such as BT you will see that they are all using amalgamation and getting-together techniques in order to strengthen their position worldwide. I cannot see why that cannot be applied to farmers. It is a widely used strategy, and it is a modern concept. Therefore, farmers and small industries - as long as they remain individual - are weaker in terms of competitiveness.

823.

Ms Rodgers: You are saying that the advisers are not getting to everyone who requires their advice. If you have any examples of that or if you have any problems in that area bring them to me or to the Department, and we will deal with them. We want to be able to help everyone that needs help. If we do not know about a problem we cannot do anything about it.

824.

In relation to what I said in my letter about the risks, you seem to be taking the view that if farmers organise themselves into a strong lobby to take on those who are "exploiting them" then that is the answer.

825.

I pointed out in my letter that in taking any action one has always to look at what the consequences might be. In reality if a huge farming co-operative ignores other issues, such as the need to meet market requirements and improve quality, for the sole purpose of strengthening its bargaining power and nothing else, it runs the risk of those who are buying from it threatening to go elsewhere. I am not saying that that is a good thing or that I agree with it, but that it is reality.

826.

As Minister of Agriculture I have to look at the consequences of everything that happens on the ground. The best way forward is not to create confrontation by saying that the primary producers are at the bottom of the pile and doing badly, although that may well be the case. How are we going to address that situation, and what are we going to do about it? We must try to have co-operation across the chain and emphasise the fact to the processors that if the primary producer goes out of business everyone will be hurt since they are all interdependent. Therefore the need for co-operation and partnership right across the chain, and recognition of the risk of failure to do so, is a reality in the market place.

827.

In relation to amalgamations, you are underlining my point that those were not a result of Government imposition but simply happened and can be supported.

828.

Mr McHugh: I am trying to say that there is an interdependence, of that there is no doubt. We want to see the whole industry working together. Until the Committee members, as elected representatives, decided to try to make a difference, it was a very "them and us" situation. We want to get this industry on a better footing than in the past. Unlike large food chains and processors, farmers do not have the option to sell outside to some other market, and perhaps this is something that should be looked at. At present there is a ban on live exports which puts them in an even more vulnerable position.

829.

My other question relates to pigs -

830.

The Deputy Chairperson: I am sorry, Mr McHugh, but I have got to cut in. Other members wish to ask questions. Please be brief.

831.

Mr McHugh: Other members have spoken twice.

832.

In relation to my question on pigs, you mentioned that there were two elements of help offered to pig producers in October last year. How soon can that come on stream? Farmers and farm organisations say that they have not received any of that money yet.

833.

Ms Rodgers: As I have already said, we are hoping for EU clearance by the end of the month and to implement the scheme immediately, but, realistically, payments will not be made until early next year. Am I correct, Mr Toal?

834.

Mr Toal: Yes, Minister.

835.

Ms Rodgers: The first of these payments will be made to the outgoers, before the ongoers. This relates to the restructuring of the industry and interest payments. I would have preferred it to happen four or five months ago after the agricultural summit, but unfortunately we have had to go through the EU hoops.

836.

Mr Ford: I want to ask a question and supplementary, Minister. You referred earlier to the pre-interim paper from the vision group, which was included in our papers today. I wonder whether the chairperson of that group could pass comment on theme 12, 'the industry factors', relating to communications and trust among other elements in the supply chain and organisation and collaboration among farmers, which is what question 11 is driving at. Perhaps I can ask a supplementary at the same time?

837.

Ms Rodgers: I will pass on that question to the permanent secretary and chairperson of the Vision Group.

838.

Mr Small: One of the things that we have been anxious about since the start of the Vision Group was that there was no focus solely on what Government could do to help the industry. While that is an element of the work, and you will see in the paper that there are a wide range of measures which the Vision Group believes that the Government should be involved in, we were anxious to tackle the very issue that this Committee is now identifying - that there has been mistrust in the chain. I do not think that either the primary producers or processors would deny that.

839.

We have tried to bring that into the open and encourage those representing the processors on the Vision Group and those representing primary producers to work together to achieve a higher level of trust. The processors do not totally accept the proposition that primary producers are not getting a fair share of the overall cake. They have their own issues and problems to deal with. However, through the Vision Group we probably, for the first time, have a sensible and open dialogue between these two very important components of the chain.

840.

On 27 October we are spending the day with a range of speakers from outside the Vision Group. Joanne Denny, who is one of the United Kingdom's experts in the area of relationships between the retail sector and the processors, will be speaking on the day. All of this is geared to bring into the open the very issue that you have identified. It is one which we saw very early on. No matter what the Department does, or what Ministers or even the Committee do, unless this chain works as a commercial chain it is going nowhere, and we should not delude ourselves. Getting that relationship right is crucial, and that is one of the focal points of the work we are doing. The Committee has already taken up the suggestion of a session with the four sub-group chairmen and myself, where there will be an opportunity to explore that in more depth.

841.

The Deputy Chairperson: It is about time the farmer was getting a fair slice of that cake as it revolves around that chain. Up until now he has not been getting it, and there have been too many people living off the farmers' backs.

842.

Mr Armstrong: The Committee has noted that you have been unable to address some of our questions because the analysis required would tie up your staff for months. It might be helpful to indicate that we were not seeking detailed economic analyses but responses, at the strategic level, from officials whose expertise is such that sound replies could have been made without the need for labour intensive analysis. Can you say whether your senior policy advisers are addressing these important issues and, if so, can you respond along the lines suggested above to the matters we have raised?

843.

Ms Rodgers: I would have been required to divert resources on a huge scale from the Department in order to have answered all those questions. I am not sure that investigating a proposal that has no evidence of any significant industry demand would have been justified. I do not have to spell out to you how scarce the resources are and how careful I have to be in using those resources. If you are suggesting that I address the question in a very general way my answers would be meaningless. I would add little to what you could have learnt from a casual look at any standard text on agricultural marketing. The real issues in the food chain are building trust, understanding and a common focus on meeting the needs of the consumer. The Chairman's last remarks would indicate that that is necessary.

844.

The problem is that the primary producers feel very hard-done-by. I sympathise with them because they are at the bottom of the pile and have nowhere to pass the costs to. We have to build a new understanding and common partnership approach. My officials are actively pursuing that agenda, and as I indicated earlier, the Vision Group is also looking it at.

845.

Some examples of my Department's work include the support of enhancement of marketing capabilities of primary producers through education and grant assistance towards non-capital costs involved in developing new industries and assisting the industry to develop new products, which I referred to earlier, and there has been some success in this. We also marry the retailers' understanding of consumer demand with the production expertise of farmers and processors, and we work with the industry and multiple retailers to improve the level and quality of business they undertake with each other. Mr McHugh referred earlier to getting produce out to other areas. We have worked with the retailers, and we are trying very hard to ensure that the retailers source local produce and suggest that they use that produce for their chains here as well as across the water.

846.

The chain can only do that by working together to ensure that we can produce the product that the consumer wants. The customer is always right, and if we cannot produce something that the consumer wants to buy, then we can shout from here to eternity but we are going nowhere. As a Department and as a Committee, with a real interest in helping the primary producer, we must make sure that, from the very beginning of the chain to the end, we are producing something of quality that will meet the customer demand, will be profitable and will be bought.

847.

Mr Armstrong: The problem is the legislation. The farmer has to pay for all legislation that comes forward and that comes out of the product at the very start and leaves no profit for the farmer. Everybody else in the chain has their profit but there is no profit at the start for the farmer. That has to be addressed.

848.

Ms Rodgers: I do not disagree with a word you have said. The Department and I are attempting to address this. We want to ensure that the farmer is in a position to produce a quality product which is marketable, sought after and profitable, and that he is able to do so in a competitive way and is able to increase his output and decrease his input. There are many things going on in the improvement of grass and feed, and how farmers can benchmark what they are doing against the best and improve their profitability. All of that is an attempt to ensure that the farmer - the primary producer - is profitable and can get his fair share. That is how I am approaching it; it is the only way to approach it.

849.

Mr Bradley: I was admiring the skill of Mr Paisley Jnr earlier when he managed to ask about 11 questions in one go, and then the skills of the Minister in giving him 13 replies.

850.

Mr Paisley Jnr: All eventualities covered.

851.

Mr Bradley: Indeed. There is something which I thought might have been touched upon in the supplementaries and has not been. On co-operation of another kind, a few sessions ago we heard serious allegations made by the National Beef Association regarding the cartel that once existed at our meat plants. I am sure you are aware, Minister, that names were named. What steps can the Department of Agriculture and Rural Development take to give an assurance that cartels will not be allowed to get off the ground in future?

852.

Ms Rodgers: I am not aware that names were named. We are back to the problem of pointing the finger and confrontation. The Office of Fair Trading is looking at this. The investigation that was carried out in the Republic has come forward with the conclusion that there is no exploitation or excess profitability. This Committee, in its report on retailing, concluded that there was no excess profit in the retail sector. Having said that, if the Office of Fair Trading finds that there is exploitation and unfair practices, I will push very hard to see that something is done about that. My Department has co-operated fully with the Office of Fair Trading, and I ask anyone who has any evidence of such practices to give it to the Office of Fair Trading to enable it to reach its conclusions. If there is any evidence of that, I will take it extremely seriously, and I will push hard for action to be taken.

853.

Mr Bradley: In particular, we asked for your view of the respective roles of your Department, the farmers' unions, the Livestock and Meat Commission, individual farmers, and the processors in tackling the herd quality issue. This was flagged up in the Red Meat Strategy, sponsored by your own Department nearly four years ago in 1996-97, as a major strategic issue that the industry needed to tackle. Why has there been so little progress in the meantime, and how much urgency is currently attached to the implementation of these strategies? Your earlier reply seems to indicate that the parties are still at the earliest stages of strategic planning and that very little is happening on the ground. Is that correct?

854.

The Deputy Chairperson: I know the questions are in reverse order.

855.

Ms Rodgers: You are being very kind. You are giving them all two or three questions and, as Mr Bradley said, you gave Ian Paisley 11 questions.

856.

The Deputy Chairperson: Minister, you do not need to be told that if you give some members of this Committee any leeway at all, they tend to pick three or four.

857.

Ms Rodgers: The Red Meat Strategy identified three main areas for action. One was market research, another was the development of promotional strategy, and the third was the expansion of focus on quality at both producer and processer levels. There has been progress in all areas, despite the fact that we have not been able to export beef in a commercially meaningful way. The Livestock and Meat Commission (LMC) has appointed a market researcher to research and identify future market opportunities. The number of producers in the Farm Quality Assured Scheme (FQAS) has significantly increased, with over 10,500 members and virtually 80% of all beef cattle qualifying for the FQAS status. We are committed to supporting the LMC and the industry in implementing the red meat strategy, but in the circumstances I am not clear as to what the Committee means by "lack of progress" in the question. It is not for the Department alone to secure an improvement in beef quality, but it is important that processors, the LMC, producer organisations and individual farmers take all possible steps to produce better quality livestock.

858.

There are a number of initiatives. The Livestock Breeding Initiative, for example, is already in operation. It involves the AI services, the LMC and the Department, and is designed to bring about an improvement in beef quality. I referred to Suckler 2000, which is a further contribution to this process. As I said, this was very well received and appreciated by the industry. Another attempt to improve the quality of our beef, and work on the development of a more strategic approach in integrating these various initiatives, and also involving all parts of the industry, has been commissioned. I expect that this will focus on securing a recognition by producers of the need to improve suckler herd genetics, as well as ensuring that producers clearly understand the market signals in relation to quality and have the ability to respond to these. I am not sure, therefore, what is meant by saying that somehow we are not making progress.

859.

Mr Dallat: It is important to say that there was no hard evidence given to the Committee that there was any cartel. Names were named, and the Office of Fair Trading was referred to, but other than that there was no hard evidence given.

860.

The Deputy Chairperson: The conclusion we arrived at that day was that we will not go into it in any depth until we hear the evidence and the report back from the Office of Fair Trading. We have to be fair to those people and not prejudge anything, but I know that in the minds of many people there is a suspicion, and it will take a lot of hard evidence before that suspicion is removed.

861.

Are the arrangements regarding the ongoing costs from inspection arrangements and inspection fees common to all other European countries?

862.

Ms Rodgers: Yes, they are. I am going to ask Pat Toal to deal with that.

863.

Mr Toal: As far as meat inspection costs are concerned, yes. Those are laid down in EC legislation, but there is an option for member states not to charge the full rate. There is a reference rate which is below the total full recovery cost, and that is what we charge here. The producer is not bearing the full cost of all of the Department's input into meat inspection and into all the activity. We do not charge for all the other activities that we do in the meat plants.

864.

The Deputy Chairperson: But the farmer is automatically paying for it, one way or the other.

865.

Mr Toal: The charge is levied at plant level, and how that finds its way back is really a matter for the chain and for how the processors operate, as far as the price that the farmers eventually pay is concerned.

866.

The Deputy Chairperson: I refer to the question I asked earlier in relation to factories and meat processors. The instructions have come from the Department that unless these inspectors are present the EC regulations are not being complied with. Am I right in that, Mr Small?

867.

Mr Small: There are rules laid down, and our job, in a sense, is to try to ensure that the plants are complying with what we know are EC regulations, which are audited frequently. If we fail in those audits the consequences are very considerable. We do not make these regulations up just as irritants. We are following European law to the degree that is necessary.

868.

Ms Rodgers: I understand how irritating these regulations must be, particularly at a time when farmers are struggling to make a living. However, we should not lose sight of the fact that the European Union pays £200 million in direct subsidies to the farming community in Northern Ireland every year, plus £100 million indirectly. That is not an inconsiderable sum. We sometimes emphasise the problems, but imagine the state that we would be in if we were not getting that support.

869.

The Deputy Chairperson: In spite of that big amount of money, farmers' incomes have still dropped right along the line. If the processors, and there are some of them represented here today, would give an extra 5p per kilo, it would make a powerful difference to cover the costs. The hidden costs are quite astronomical.

870.

Ms Rodgers: That is a commercial issue.

871.

The Deputy Chairperson: Those costs are there, and the farmer has to stump up the money at the end of the day.

872.

Mr Ford: Pat Toal said that the lower reference rate was charged here. Can you tell us how that compares with other regions in the United Kingdom, the Republic and possibly other European countries?

873.

Mr Toal: There are some differences between Northern Ireland and the rest of the United Kingdom as far as meat inspection charges for red meat are concerned. Not all plants in Great Britain are fully EC approved, whereas all of ours are. That has helped us considerably over the years, as you know. Different rates are paid, but we charge the minimum that we can get away with.

874.

As the Minister knows, we have been under pressure over the years from other quarters, such as the Treasury, to increase those rates.

875.

Mr Armstrong: The European Union makes legislation and then give us finances. Why does it not pay direct? If it wants things of a special standard, why does it not send in its inspectors and pay them direct, instead of making someone else pay for it? If the European Union paid direct then the expense would not be on the abattoir or the meat plant, and the farmer would be left with a more sensible profit.

876.

Ms Rodgers: That is a consummation devoutly to be wished for, but responsibility lies with the member state to conform. Unfortunately the price of conforming has to be paid in the member state - it would be lovely if it were otherwise, but that is the way it is.

877.

Mr McHugh: I want to raise the issue of beef producers and unintentional errors. The EU pays a lot of money to us, and the fraud levels here are very low. On the basis of that, should we not be renegotiating the regulations to give us some leeway to be able to have some system of redress for farmers making unintentional errors on the various forms? Nick Brown, on his visit here, intimated that it could be done along those lines.

878.

Ms Rodgers: It is a matter for member states. It is on MAFF's agenda, as Nick Brown has indicated.

879.

The Deputy Chairman: An outgoer scheme for pig farmers was also talked about. Many pig farmers are concerned. You indicated that it is going to be into the new year before they get any financial support. Is it possible in the interim period for their premises to be inspected to let them change, if they so wish, from pig production to something else?

880.

Ms Rodgers: It is difficult to answer that question at the moment. We will have to see exactly how the scheme is going to operate.

881.

The Deputy Chairperson: We will have to wait for the answer.

882.

Ms Rodgers: As soon as we get the go-ahead from Europe we will move as quickly as possible on the outgoer scheme. We will let the farmers know what is available.

883.

The Deputy Chairperson: We thank you, Minister, and your officials for your frank answers. I think you know the views of the Committee, and that we want to work with you and your Department. We are part of the chain, and it is only when the chain turns, and turns evenly, that we can all achieve our goals.

884.

Ms Rodgers: Thank you for your remarks. I also thank the members for their questions and interest. I agree, given the state of the industry, that it is extremely important that we continue to work together. I want to work with the Committee and to take your views on board. I have taken your views on board. When I take your views on board I am in danger of being accused of doing a U-turn, and when I do not I am in danger of being accused of not listening. Those are the joys of being a Minister. However, I want to listen to, and take on board, any serious matters that you want to discuss with me. If I do not, then the whole democratic exercise becomes a waste of time. I have found it to be very helpful, and I want to continue to work with you.

885.

The Deputy Chairperson: Thank you. We will take up your invitations to visit the various places.

Wednesday 4 October 2000

Mr Savage (Deputy Chairperson)

Mr Armstrong

Mr Bradley

Mr Dallat

Mr Ford

Mr Kane

Mr McHugh

Mr Paisley Jnr

Mr Cecil Mathers )

Mr Colin Duffy ) Northern Ireland Meat

Mr Richard Moore ) Exporters Association

Mr Campbell Tweedie )

886.

The Deputy Chairperson: You are all very welcome. We have allocated ten minutes for you if you wish to make a statement.

887.

Mr Mathers: I intend to make a short opening statement before questioning begins. It would be prudent for me to clear the air on some issues which were referred to in the Chamber previously. It has been reported that there is an Office of Fair Trading report that confirms conclusively that there is a cartel in the Northern Ireland meat industry. I would like to refute that; it is inaccurate. That sort of loose talk is causing the Northern Ireland beef industry embarrassment and damage and is further adding to the stress of an industry trying to struggle out from the BSE crisis. In our frequent formal and informal discussions with farmers, we do not detect that relationships have deteriorated to the extent that members of the Committee have sought to suggest.

888.

Last year we went through an investigation by the Office of Fair Trading and resolved a number of issues to their satisfaction. There was one issue on which the Office of Fair Trading asked us to take remedial action and that was done. Let me clarify that for you.

889.

In 1996, when the BSE crisis arose and the rendering industry here was prohibited from marketing its products, high costs were imposed on the meat industry. Following discussions with farmers' representatives, it was agreed that the industry would absorb part of these costs and that the farmers would absorb the remainder. Distances made those costs different for each plant, but, at the insistence of the farmers - and I must emphasise that - plants agreed to apply the same charges across Northern Ireland, so that it would not confuse pricing quotations.

890.

It was here that we made our mistake, in so far as we were not aware that such agreements should have been registered with the Office of Fair Trading. The Office of Fair Trading had no problem with the principle of a levy, but they ruled that a system in which the same amount was charged by each plant amounted to an agreement and was, therefore, a breach of the legislation. That agreement was immediately withdrawn and annulled and a press release issued accordingly. All sorts of inaccurate interpretations have been placed on that by individuals and the media, and it is obvious from last week's activity that further inaccurate interpretation of that is still being spewed out.

891.

The Committee's letter of invitation was entitled "Committee Inquiry into Debt - Circumstances Faced by the Pig and Beef Industries". Although we sympathise with the level of farm debt, we also recognise that the structure of rural farming will have to change. The food processing industry simply translates market forces facilitates, rather than organises the industry.

892.

I would now like to address some issues that are relevant to today's deliberations. Firstly, the highest-ever recorded price for Northern Ireland beef was 289·5 euros per 100 kilos, in 1995. The price of beef in Northern Ireland in 2000 has been as high as 281·9 euros per 100 kilos, which is 97% of the 1995 price. In 1995, that price equated to 225 pence per kilo but because of the exchange rate the price in 2000 is equated to 158 pence per kilo.

893.

The exchange rate mechanism is outside the control of anyone in this room. I hope that each member of the Committee fully understands the implications that the strength of the euro has for the price of beef and, indeed, for farm subsidies. I link those two things together because with the massive increase in subsidies the product price is now less than half of the farmer's return. That should be noted. Both have been affected by the unfavourable exchange rates. This week, the euro is still below 60p. If the beef ban had never been introduced, beef prices would be little higher today than they are, because of that.

894.

Secondly, given what has happened to sterling and the decisions of elected politicians that have closed 50% of our markets, the market penetration achieved in Great Britain and the current sterling price are very commendable. Professional farmers have played a large part in that success story by reacting quickly to market requirements: consider the beef prices to farmers in the Republic of Ireland, in sterling. They have full export access with little or no market restrictions. Yet, the industry here has delivered considerably higher prices to farmers in Northern Ireland. Over 350,000 Northern Ireland cattle have been marketed in a single market - the Great Britain market - without any public purchasing or export subsidisation since 1998. That is a fantastic turnaround, by anybody's standards.

895.

Thirdly, the questions in your consultation paper alluded to more protection for Northern Ireland produce. Were other regions of the United Kingdom to adopt that policy, and had European regions adopted that policy previously, the consequences for Northern Ireland, which markets 80% of its product outside the region, would have been disastrous. That is a dangerous route to go down when we have to find markets, as we are currently experiencing with the French.

896.

Fourthly, there is a wide range of production costs in the farming industry in Northern Ireland. For milk, they range from 9p to 18p per litre in the various farming enterprises. For beef, there is a 100% difference between the best and the worst. Production costs are a significant factor. I refer to last week's press reports on store cattle prices. According to one headline, a 398-kilo steer made £725: that equates to a dead weight price of around 325p per kilo. Another headline quoted £510 for a 400-kilo Charolais: that equates to a beef price of 240p per kilo.

897.

The current average beef price, according to the Department of Agriculture, is 158p per kilo. If that were to rise by 50p per kilo - I noticed that you mentioned a rise of 5p per kilo - it is still difficult to see how farmers would ever make a profit on those cattle. No doubt, the blame will be apportioned to someone else. No doubt, one section of the producers is very happy with those prices, but I would suggest that the finishers giving those prices are in some difficulty.

898.

With the price differentials between Northern Ireland and Great Britain, there is always the option of live exports to GB. Those who tried it found that, because of differences in grading and trimming specifications, they were as well off at home. Currently, Northern Ireland farmers are importing store cattle from Scotland. Where is the preference for local sourcing? That defies all logic when considered along with regional beef prices.

899.

The similar prices in meat plants, surely, are evidence of strong competition among the different bidders in the marketplace. Economists view the rapid convergence of prices as evidence of strong competition. As for co-operative ventures in the meat industry, it would appear that no recognition whatsoever has been granted to the one meat plant co-operative in Northern Ireland that took extreme risks, but did not get the backing of farmers.

900.

The main contributors to farm debt in the past four years are the politicians who have removed our export livelihood, and who have refused repeatedly to compensate producers on the currency issues as they are entitled. A report was published in the Republic of Ireland last week on the investigation into price fixing in the industry there, and, as the Minister said this morning, the conclusion was that there was no evidence to support that claim. The information is freely available on the worldwide web. There have been recent allegations too, in the Chamber that a cartel existed in the 1980s and continues to do so. Is the Committee aware that Northern Ireland steer and heifer prices became possibly the highest in the world outside Japan, in that period?

901.

In passing, I would like to comment on grading. Is the Committee aware that this is an EU scheme, paid for by farmers and operated by an independent body at the request of farmers, and agreed to by processors? The scheme is policed by the competent authority, which in our case is DARD, and audited periodically by Brussels. European criticism, so far, has been that the benefit of the doubt has been in the producers' favour. I hope the Committee realises the significance of that judgement and the implications of unsubstantiated criticism of the credibility of this system for Northern Ireland producers.

902.

The Deputy Chairperson: I would ask you, Mr Mathers, to draw your comments to a close.

903.

Mr Mathers: In a previous report, the Committee pointed out the value of the Livestock and Meat Commission. We are shocked that the integrity of this independent organisation is being called into question under the privilege of the House. Their schemes, which are the foundation of our quality assurance and traceability in Northern Ireland and are the envy of all our competitors, have been damaged by those remarks Again, loose talk has done untold damage to the image of Northern Ireland beef.

904.

Please realise what you are doing to the very industry that you are proposing to help. Consumers are already beginning to question the integrity of Northern Ireland beef, purely because of loose talk. It is very much a matter of regret to us that there appears to be a number of members of the Committee, who are more keen to twist the facts for political point scoring, than they are to attempt to improve the entire marketing of Northern Ireland produce. It is a matter of regret to us too, that none of the Committee Members responded to my invitation to learn about the complexities of the Northern Ireland industry by visiting a meat plant and seeing for himself what happens. You do not do that in five minutes.

905.

The Deputy Chairperson: The Committee has met on two days every week; we also have the Assembly downstairs, which takes up two days of the week; and we have our constituency businesses. The time that we have is very scarce, but we will take you up on that - I will, anyhow.

906.

Mr Mathers: In conclusion, I would like to compliment the Chairman of the Committee, Dr Paisley, on the robust way that he has represented the industry in past crisis. Such experience, we believe, is not shared by other members of this Committee. Things are moving so fast that regular update visits to the industry are essential, if you want to keep up with what is actually taking place.

907.

Our main aim is to ensure that there will be a viable industry in Northern Ireland. No part of the industry has any desire to see that diminished. Comments in this week's agricultural press suggest that Ireland should become the source of weanlings for the feedlands in the UK and the rest of Europe. However, until the Government take that decision, it is the intention of this industry to market the Northern Ireland product to the best advantage of everyone in the chain. Our presence at the World Food Fair in Paris in two weeks' time will be a demonstration of that commitment, even though the ban is still in place. Is the Committee aware of that food fair, and has it made arrangements to attend, in support of the Northern Ireland agri-food businesses, including the meat industry, and to see for itself the competition, not only in the beef world but in other aspects of the food industry?

908.

We welcome any investigation and when - not if - these allegations are shown to be unprovable, we expect that retractions will be made and that a fertile debating environment can be created. Thank you.

909.

The Deputy Chairperson: Thank you. The first time that we heard of the food fair was this morning, when the Minister was in. I have no doubt that representatives will attend. But we are tied to time. We need a quorum in the Committee at all times, and sometimes different things crop up for members, leaving them unable to attend. However, if at all possible, the Committee will be represented.

910.

Do members have any issues to raise? Please keep your questions brief because our time is short, and tightly scheduled.

911.

Mr Duffy: Most of the questions will probably be directed to me and I will endeavour to answer them. There may be some which I, as chairman of the organisation, may not be able to answer, so I shall direct them to Mr Moore and Mr Tweedie. We brought more people here today to give us the most representative view of the industry possible.

912.

Mr Kane: Mr Mathers, according to information that you provided in 'Foyle Valley Focus', a publication sent to all members of Foyle Valley Producers Club, UK consumption of beef has reached pre-BSE crisis levels. How does this correlate to meat plant figures showing a drop by two pence in the past week? Also, we have been unable to export beef over the last four years. Where has NIMEA been concentrating its efforts? I notice little, if any, difference between factory quotations for beef from week to week. What does this suggest to you, and - perhaps more importantly - what does it suggest to producers?

913.

Mr Duffy: If prices are competitive, there will never be a great difference, although there will be some. Meat prices at the various plants are reported in the LMC bulletin, and that is how things have been for as long as I have been in the industry. It is not the responsibility of the organisation to promote the produce of the Province directly; that is up to individual members of our organisation, who can tell you what efforts they have made over the past few years since the crisis.

914.

Mr Kane: Allow me to add to that. For a typical steer, what is the standard margin between the price paid cold weight to the producer and the price of the carcass leaving the factory? Given the status of the Republic of Ireland with regard to BSE, do you think that the procurement of cattle from the Republic for slaughter in the North disadvantages Northern Ireland in its attempts to achieve BSE low incidence status?

915.

Mr Mathers: It has no more effect than the importation of 5,000 cattle from Great Britain, which is an even higher BSE incidence region. Five thousand cattle have come from GB into Northern Ireland in the year 2000.

916.

Mr Duffy: It has been an integral part of the industry here that store cattle have traditionally come from the south and, particularly, the west of Ireland, to feed the units here. Those units have actually taken the cattle from our industry through the finishing stages.

917.

Mr Kane: If cattle supplies in the Province were to dry up, what action would processing plants here take? If Northern Ireland has low incidence status - in the near future, I hope - how would export orders be filled? Can we guarantee those markets that beef is sourced in, for example, the Republic of Ireland will not be used?

918.

Mr Duffy: Competition is the spice of life. Significant investments have been made here by a number of members and associations, and, obviously, if the raw material is not available because of increased competition - or whatever the case may be with live cattle - they will have to take whatever measures are deemed necessary.

919.

Mr Paisley Jnr: I agree with you that the allegations that have been made damage the entire industry. I hope that you will also agree with me that it is in the interest of the entire industry that the allegations be cleared up. Any allegation that is made to the Committee is examined, and, if it has no standing, it is knocked down quickly. If it does have standing, it is investigated. The Committee heard the allegations in camera. I agree with earlier comments around this table that they were allegations and not evidence, and that should be of some assistance.

920.

Are you aware of the Office of Fair Trading investigation? Will you, if asked by the Office of Fair Trading, co-operate with it in an investigation into the allegations? Have you already been asked by the Office of Fair Trading about the allegations that have been made? Have you or any of your associates been involved in the past in anything that could be regarded as a price-managing system?

921.

Mr Duffy: Neither Anglo Beef Processors (ABP) nor NIMEA has been asked directly to give a submission to the OFT about a cartel or about price-fixing in Northern Ireland. We will co-operate fully with the OFT to bring these matters to a close, because they are not in the interest of the industry. It was said earlier that names have been named; we wish to know those names so that the allegations can be refuted. To answer -

922.

Mr Paisley Jnr: The Committee had a session in camera because it did not want to fuel allegations that had not been substantiated or publish anything without evidence, which would be unfair to everyone.

923.

The Deputy Chairperson: You said that you had to qualify your responses to our questions because of doubt about our intentions. Let me clarify. What the Committee has in mind is the kind of responsive supply chain that is commonplace in all industries, a supply chain that delivers the correct quantities of raw material, at the required quality, at the right time. Long lead-in times are a problem, but the Committee thinks that there is room for improvement.

924.

Can we confirm what you are saying in your replies? Your answer to question 4A implies that the guaranteed Government payment to the farmers removes the incentive to produce what the market demands. The Committee finds this hard to believe, as that is the equivalent of saying that the subsidies your members receive from the IDB reduce their desire to make money. Is it not more likely that the pricing arrangements your members have in place do not motivate them to produce quality goods?

925.

Mr Tweedie: I addressed a meeting of south Tyrone farmers on Monday evening, and we discussed the issue of quality. Statistics have proved that the quality of beef cattle in Northern Ireland has dropped. Four years ago, our company made a large investment to get more supplies of British meat to supply one of the biggest retailers in Britain. To get supplies of British meat we had to buy a meat plant in the north of England. Ninety-one per cent of those cattle meet the specifications of that supermarket. Fifty percent of the cattle that we kill in Northern Ireland are eligible for that specification. I was speaking to farmers' groups last night. They acknowledged that, in Northern Ireland, we are not using the appropriate bulls. Holstein influence in Northern Ireland is too strong. Moreover, many farmers in England, feed concentrates to cattle from an early stage in life and throughout their whole existence. While many in Northern Ireland, feed concentrate only in the last six or eight weeks of the animals life.

926.

The south Tyrone farmers, at a constructive meeting last night, acknowledged that the quality of Northern Ireland cattle had been slipping. Farmers should be advised about improving their husbandry, through using better bulls and better concentrates. If they did that, more of the cattle would come up to the quality class. Fifty percent of the return is on subsidies. We feel that if subsidies were paid on quality, it would change things. There is so much subsidy around that farmers are not concentrating on quality, but on getting a quick return on the animal. We want the Northern Ireland producers to get the return. They get a good return on good quality animals, but unfortunately there is not a high enough percentage of those out there to meet the market demand.

927.

We would be happy to show you the whole process on your visit to our factory - animals slaughtered, boned, put into retail packs and yielded.

928.

The Deputy Chairperson: Would you rather see fewer cattle, but cattle of better quality?

929.

Mr Tweedie: Of course, but when the Government banned beef exports in 1996, they did not ban beef imports. Two hundred thousand tonnes of beef imports come into the UK - and it is cheap beef. We must produce top quality beef for our supermarkets. We should not be producing more lower quality beef, because it is at that level that we are competing with imported meat.

930.

The Deputy Chairperson: What is the price incentive for a farmer to deliver the quality of animal that you need for your most demanding customers? Does that reflect the added value to you as processors?

931.

Mr Tweedie: Each company has different bonus schemes; ours involves the payment of a bonus for cattle that fit into the specification at a particular supermarket. The bonus ranges from £10 down to £6 a beast. Also we pay on a grading system. But in general, in Northern Ireland, there is not a wide enough gap. Perhaps better cattle could attract a little more money and worse cattle a little less, but again, that weakens that principle. Most companies have policies on cattle quality, but add bonuses to get cattle to suit their specifications. That is why we cannot understand the allegations about a cartel. Each farmer, each plant, has different bonuses for different jobs. Even the Livestock and Meat Commission bulletin 'Prices Weekly' shows the variation in prices. That makes things difficult.

932.

Mr Duffy: Contrary to popular belief, a lot of work is going on to move value from the lower to the upper end of the scale and to put greater transparency into the chain. I am sitting on a working group with the unions on this matter, and a number of others, two of which we have successfully concluded.

933.

Mr Moore: Genetic changes do not take place quickly. Prior to the export ban, we were competing in a free market within Ireland for sourcing livestock. In many cases, the export subsidy regime - not the farmers direct subsidy but the subsidies for exporting to countries outside the EU - made cattle of inferior quality equally valuable to those of superior quality. In many cases, we were fighting a losing battle. Our own company is guilty - I am happy to say - of paying a flat rate export bonus to attract anything with four legs and a tail to our factory for nine months, in order to run an export scheme. We put a non quality incentive bonus into the market place. Farmers have received conflicting signals, but those are the signals that come from the market place.

934.

The Deputy Chairperson: The signal is that if you provide quality, you will get a good price for it.

935.

Mr Moore: In the long term, our industry has done more than any other in Europe to try and hold up standards in pricing.

936.

Mr Dallat: I am sure that the last thing that we need is bad blood - excuse the very bad pun - in any element of agriculture. That is not in the interest of farmers facing debts of £800 million. I took the opportunity to clarify that there was no evidence of a cartel, so I am not guilty of that. In relation to my failure to visit a meat plant, I would say that I have received any information I needed from your organisation by telephone. Although I have never gone in person to see cows being killed, I am happy with the information that your organisation gave me. Let us now begin to operate in the interests of those who matter most ¾ the farmers with their back against the wall.

937.

I found your document most interesting and well worth discussion. I have a particular interest in co-ops because I have been a member of the Credit Union for 30 years. I have seen how that organization has had a positive impact on the lives of thousands of people across Ireland, many of whom are farmers. The concept of co-operatives should not be dismissed and this has not been done in Question 4(b). The Committee does not dispute the main facts that you provide, but the picture is different for the other main meat production supply chain.

938.

The poultry industry may have its problems but the supply chain is not one of them. Would it be fair to say that poultry processors have invested heavily in setting up a stable and responsive supply chain that has stood them in good stead? I am not suggesting that a five week production cycle in controlled conditions should be applied to beef animals, but, the involvement of the processing sectors is necessary to create an effective co-operative producer supply chain. Is the Northern Ireland Meat Exporters Association enthusiastic about creating a modern supply chain or are you set against it?

939.

Mr Moore: I am happy to respond to your question, as I am a representative of what is possibly the last co-operative meat plant in Europe, which says something about the success of co-ops. However, I am not saying no to co-operative involvement in the industry. There has been no clear direction or strategy on co-operative involvement in meat processing across the three species.

940.

Unfortunately, we are frequently given examples of successes of co-operatives involving white meats and pig meat. The subsidy environment in those industries is entirely different. Poultry, in particular, is a free market commodity inside and outside Europe. This has allowed people to enter into contracts because they have been in control of most of the factors which bore down on the contract. The life cycle of the animal is also an important factor.

941.

The association has no aversion to the development of a supply chain relationship. However, primary producers must play a large part in the thought process and creativity involved in developing it. In meetings held throughout the country, we did not receive any substantial ideas to bring to the table. If we contract forward from birth to beef, how can the producer make an assessment of the market environment he is moving into, or of subsidies?

942.

In the past three years, there have been substantial changes in the architecture of subsidy provision, including the way a farmer receives his subsidies. The debate over area aid payment continues in Brussels. We are open to debate, but we are experts in meat processing, rather than in supply chain relationships of that length. Nevertheless, we would be very happy to bring to the table other ideas.

943.

Mr Dallat: If the Department of Agriculture and Rural Development were to accept this idea as a serious possibility, would you be a willing participant in the development of a suitable concept?

944.

Mr Duffy: Supply chain management has been discussed, particularly, in the sub-groups of the vision group. They have been exploring ways to tighten the chain and improve communication between the links. There has been a long-term focus on trying to educate producers about where the best returns are and also the quality demanded by the market place. Meat plants have done a lot of work, through partnerships with suppliers, but that is not a national effort, it is a local one. The situation can change overnight depending on the market, or the decisions taken in Brussels, which can be frustrating.

945.

Mr McHugh: We have certainly listened with interest to your robust defence of your position and, of course, you are entitled to do that. We have a number of questions that we need to ask on the debt situation, but there is not really time to answer all the questions posed. You said that there had been allegations and that we should visit your meat plant. I have been to meat plants before and I am not sure that I would get that much out of it by going again. I would welcome a visit to a plant, but we would probably find it difficult to fit another meeting of any description in. However, we will try to do that, if it helps to clarify the situation.

946.

We need clarification of the relationship between yourselves and the other vital part of the industry - the primary producer. The Minister has set out her view that if farmers organised themselves to any great extent, processors would go elsewhere - for example, Brazil - to source the product. That option is open to processors and meat plant operators. If the price gets too high locally, they could move to where it is lower. We have only limited time to come to any conclusions beyond just grasping the simple questions.

947.

In question eight, you eloquently set out the realities of fluctuating supplies. Is that not an equally eloquent argument for investment in fixing the supply chain to make it meet market needs - that includes all of what we have said about why farmers have not, as yet, fully integrated with the quality from their end?

948.

The Deputy Chairperson: Could I ask members of the Committee to keep their answers short? I have three more people to get in and I want them all to get a question in.

949.

Mr Tweedie: I think that the question is totally wrong. As far as we are concerned, 95% of farmers, while they are not happy with their return, find that their relationship with the industry has never been better - contrary to what the member says. We have 3,500 members in our producers club. Every week, 20 to 30 farmers visit our factory. We take them through our costing from start to finish; we have farm visits; we teach them how to rear cattle; and we offer farmers beef contract systems. The relationship has never been better. That does not mean that income is good, but only a minority says that there is conflict between the industries. I would like to say that the member is totally wrong; 95% of farmers have good relationships with their plants. I want to make that clear. As far as we are concerned, there is no antagonism. We have concerns - big concerns - but not antagonism.

950.

As far as the supply chain is concerned, I must point out that, in 1996, our market was cut off completely. In five years, we marketed 350,000 cattle into the major supermarkets in the United Kingdom. We did this in two ways. First, we invested in packaging meat to specification. We are committed to using Northern Ireland and British meat for the British supermarkets. Two years ago, when the ban was partially lifted in the United Kingdom and the database scheme allowed the United Kingdom to shift a small amount of beef into Europe, beef from the Republic of Ireland was prevented from going into Britain and our percentage of market share rose by 16%. In essence, while there was a meat export ban, there was also a protected market, because we were able to go into the United Kingdom. It has been proven by the Republic of Ireland that the United Kingdom is the best market in Europe and the North of Ireland farmer has been enjoying the benefits of that market for five years.

951.

The real crux is not the relationship between the farmer and the processor - it is Government policy sterling is so strong. Seven or eight years ago, the pound sterling was worth IR£0·90, now it is worth IR£1·30. These conditions are beyond our control. The Government are allowing import meat in, the pound is too strong and the situation is beyond the processors. I am not saying that we should not do the best we can. If we raised the price of the meat 5p, as you suggested, that would only be the tip of the iceberg for farmers' needs. The farmer needs Government intervention in this emergency situation. Sterling is overvalued and that is crippling the industry.

952.

I appreciate what is being said here today. Farmers are our lifeblood and we want to co-operate. We have spent millions on factories, to slaughter and bone cattle. The industry has got to work because we need it. Most of the meat plants owners are farmers themselves. There is no money in farming. Relationships have never been better, no matter what the minority of farmers say.

953.

Mr Ford: In paragraph 4(e) of your submission, you state that Northern Ireland is currently losing ground to neighbours, both in Scotland and the Republic. In the Republic of Ireland, Farm Quality Assurance Scheme legislation is in place and the voluntary standards conditions in Scotland are higher. Can you tell us why we have lost ground, what is the cause and how can we put it right? You have suggested that we need to look to the lifetime Farm Quality Assurance Scheme legislation here; could you explain that? Mr Moore referred to £6 to £10 bonus for better quality cattle. That is insufficient reward from the market to compensate farmers for meeting the higher standards that you say we need.

954.

Mr Duffy: I will make one point and then answer your question. There is an oversupply in the chain, much of which is down to the current subsidy system and the over 30-month scheme that we are obliged to operate. We do not want such volumes of cattle, but that is outside our control and we have to handle them. We would welcome a lot more in four or five weeks' time.

955.

With regard to the Farm Quality Assurance Scheme others have looked and learned and adopted many of the approaches that we have taken. There is a lot of work being done on funding a scheme that could go into lifetime assurance arranged jointly between the producer and processor. We are also looking towards updating and de-regularising the APHIS computer scheme and bringing it in as a major marketing tool in our export effort. We have lost ground in some areas, purely because others have copied what we have and improved their systems. The Government of the Republic of Ireland probably see farm legislation as the easiest way out; we are trying to do it on a voluntary basis in Northern Ireland with a market-led approach.

956.

Bonuses in the region of £10 to £15 are paid although I would still contend that that is not enough at the upper end and that too much is being paid at the lower end. We are endeavouring to address that. Unfortunately, although subsidies take up 50% of the value of the animal - and will continue to do so, according to Agenda 2000 - that bears no relation to the quality of the animal. That is a problem we have to live and work with.

957.

Mr Moore: Those bonuses are paid on top of the price already paid. The spread of price is as much as £100 per animal.

958.

Mr Bradley: The Committee's agenda from the beginning has been to address farmers debt and get a better deal for farmers. I assure you that you are not alone in facing these questions. We questioned the multi-national supermarkets and the banks on prices. For some reason, that did not get as much publicity as the meat trade. Do not feel that you are being singled out in any way. I also welcome your support for a possible enquiry that can deal with the allegations, once and for all.

959.

I looked at your reply to a question about whether NIMEA would be prepared to contribute financially to resolving the fragmentation at producer level. I am sure that the Committee appreciates your willingness to explore ways of overcoming the problem. You have not, however, answered our question: would NIMEA be prepared, in the right circumstances, to make a financial contribution to a move which would be of great benefit to the industry? We have put that question to the other players and we need your answer. Let me ask that again: are processors willing to make a significant financial investment in creating the kind of supply chain which a modern industry needs to be efficient?

960.

Mr Tweedie: We are willing to invest and have been investing. As I said earlier, there are 3,500 farmers in our producers club. We have invested a lot in that. We have four men on the road all the time, advising on Government grants and how to produce better beef. We are now getting computers onto farms, at subsidised rates, to help farmers do their books. We are really spending a lot of money in this fashion. If the Committee can come up with a system that is better than ours, we will be happy to look at it. We have invested hundreds of thousands of pounds annually on the relationship, making things better for farmers and getting them to produce better cattle. We are willing to get involved in anything that is better than what we have. Individual companies have individual needs for individual customers, so it is sometimes very hard to have a co-operative supply chain for everyone. We are willing to consider anything you can recommend to us.

961.

Mr Duffy: In these working groups the industry has come together with the LMC to co-fund promotional marketing issues regarding the levy for the LMC budget, the Farm Quality Assured Scheme and its funding, and the red meat strategy. That is the most effective way, until the reports are produced by the Agri-vision Group on how the money could best be spent, centrally or individually by the various plants on promoting Northern Ireland produce.

962.

Mr Armstrong: I am pleased to hear that the Northern Ireland Meat Export Association is not encouraging production of bull beef; I believe in naturally produced beef. We do not need any more beef than there already is. Dungannon Meats has a half page feature in the recent 'Farming Life' promoting the production of Holstein beef. I mention that simply to point out that at least one of your major members is forming a club for the purpose. Our concern is not that Holstein cows have bull calves or that farmers strive to maximise their profits. It is that bull beef, once it enters the processing chain, will be in danger of diluting product quality. What steps are your members taking to ensure that this does not happen? In my view, since we have meat coming from other sources and it is not farm quality assured, we do not know what it is really, and it is not of the same standard.

963.

I do not believe that the Farm Quality Assured Scheme in Northern Ireland is doing justice to the meat plant. There is a great differential between the price the farmer gets for his product and what the meat plant gets for it. Meat plants are always sure to have good profit. Nobody considers that the farmer needs a profit to provide the product for you at the quality that you expect.

964.

Mr Duffy: Unfortunately, yet again, the whole agenda has been driven by Agenda 2000 and the changing subsidy system. Part of the vision for the future of Northern Ireland agriculture is the creation of differences and niches. In Northern Ireland our strength is our size. With regard to the black and white bulls, there was and still is a niche there to replace the CPS scheme. In the past six months, and at present, it has been one of the most attractive schemes for producers and they will openly admit that. We have been a successful producing country in the past, and we should not lose sight of that.

965.

Our company is promoting a scheme which will be contractually binding on a small number of producers whom it suits to produce that meat. There is a market there and a certain premium for it, so there is nothing wrong. It is a commercial message with a commercial focus.

966.

Steer production is our main production portfolio - about that we cannot delude ourselves. Those animals, as well as the bulls, will be part of the chain. They will also have to have quality assurance and traceability for the consumer. One of the reasons why people look to us, even in the small niche markets, is that they know that we can give them assurance of quality. It may be of a different quality, but there is still a market for it.

967.

Mr Armstrong: Yes, but we do not want the number of farmers producing bull beef to increase.

968.

Mr Duffy: Hence the clear message that we have put through the LMC. Unless the producer has a contract for his produce in that area, he should definitely not get involved in the ad hoc production of young bulls. I know this from past experience, so I agree with you.

969.

Mr Tweedie: A year ago, when the calf schemes disappeared, young calves were being shot and buried in the ground; in fact, that was shown on television. Our company, along with other companies, approached the supermarkets and said that we would take these young bulls and feed them for manufacturing purposes. We then launched a bull scheme and people contracted to feed 10,000 bulls. Those bulls are coming to the market place now, so that was an alternative to shooting and burying the calves or the farmer receiving £10 to £15 for them.

970.

Ten thousand of those cattle are now coming to the market place and we give people a guaranteed price for them, a price based on the market price plus a bonus on the low graded cattle. Today, they are receiving £50 a head more for the cattle than anticipated. Everyone who entered the scheme is making a profit and we can bring you those members to show evidence that that is happening. Thus a lot of bull beef has been brought on for manufacturing purposes.

971.

Mr Duffy: The value of that calf now in comparison to what it was 12 months ago in itself justifies the returns that have been given.

972.

The Deputy Chairperson: As a bull producer, I congratulate you on seeing the niche in the market and taking the initiative. As Mr Tweedie said, it is better to keep the animals on and finish them rather than shooting them.

973.

Mr Paisley Jnr: I have visited a number of plants in the past and that has proved to be a useful learning exercise, although it does not get to the heart of what we are discussing today. It would assist if the invitation were open for us to look around the plants at any time.

974.

I do not think that the Committee is suggesting that co-operative groupings become involved in processing but rather that they be a means to creating the more responsive supply chain that the industry lacks.

975.

In your correspondence with us, you mentioned producer clubs. Will you explain how these clubs work? Are they contracts between the partners? Do club members enjoy price advantages over non-club members? What demands are made on club producers beyond those which would be to made on other suppliers? That would help us gauge the difference between beef producer clubs and the co-operatives that were mentioned earlier.

976.

There has been good co-operation around this table in the past. For instance, in the beef labelling categorisation scheme, we worked hard and actually achieved something. I also remember being in a meeting with the leader of the SDLP and, I think, Jim Nicholson. We made major progress on that issue and the entire industry welcomed that. It is important that co-operation continues.

977.

Mr Tweedie: In Ireland, we now have a retail packing plant, which takes beef from slaughter and brings it straight to the retail parks. In one visit, we can now do three or four things. We can identify the return to the farmer, the price of the meat and the retail price to the supermarket all in one place. Northern Ireland has the only packing plant in Ireland where this can be done. There is more transparency, which means that we can even show the retail price of meat in the supermarkets, and we can show you what we are charging them. We are happy to do that.

978.

My other point is about producers clubs. The life of a supermarket now depends on being able to trace where food products originated. Buyers want to be able to go to the plants and find out where the animals have come from. We need to be able to take that buyer directly to the farm. We have to ensure that the farmer has a Farm Quality Assurance Scheme, that he is feeding animals correctly and that his farm meets the necessary standards. We must do that for all of our animals. In order for this process to be more effective, we encourage people to join our producers club. The farmers do not guarantee a supply, but we have found that 90 per cent of those in the supply chain keep returning to same plant, because a relationship has developed. We need producers clubs so that we can inform the supermarkets about where the animals are coming from. We also have bonus schemes for different types of animal. We organise educational trips and computers, we arrange shows, and there are many other benefits. The function of a producers' club stems from the need to tell the customer where the animals originated. That is what a producers' club is for.

979.

The Deputy Chairperson: Thank you gentlemen.

980.

Mr Kane: Could I be provided with a list of memberships of the association, including occupations?

981.

Mr Moore: It is on the web.

982.

The Deputy Chairperson: On behalf of the Committee, I appreciate your contribution this morning. I can assure you that I want to see all loose talk put to bed. Nobody benefits from it. Gentlemen, we appreciate your contribution; it has been a learning exercise for many of us. There are several more questions that we had hoped to ask, but some people were a wee bit long- winded. We will send those questions to you in writing.

983.

Mr Duffy: We also appreciate the opportunity to come here. As the Minister said we are all part of the chain and have to work together.

984.

The Deputy Chairperson: We had a period in Northern Ireland when there was no Government, but things are gradually coming together. As you have said, we are all part of that chain and there must be more co-operation between everyone involved. Thank you all very much.

TOP

Northern Ireland Agricultural Producers' Association (NIAPA) Annex A

Ulster Farmers' Union (UFU) Annex B

National Beef Association (NBA) Annex C

Ulster Farmers' Union (UFU) Annex D

Northern Ireland Agricultural Producers' Association (NIAPA) Annex E

National Beef Association (NBA) Annex F

Livestock and Meat Commission (LMC) Annex G

Department of Agriculture and Rural Development (DARD) Annex H

Northern Ireland Meat Exporters' Association (NIMEA) Annex I

Livestock and Meat Commission (LMC) Annex J

One of the main issues to be considered in relation to price differentials between producers and retailers is that producers cannot ensure that the price they receive for a commodity will cover production costs plus a guaranteed profit margin

It is interesting to note that a brief summary of returns prepared by LMC over a year ago showed as follows:

The obvious point is that there is a vast difference in conformation of the two animals and the producer is being penalised for this. It should be noted however that in the case of the better quality animal the final supermarket and butchers prices were 238% and 275% respectively of the producer price. In the case of the poorer quality animal, there was an even greater differential, with the final prices being 296% and 339% respectively. Irrespective of the quality and price from a producer point of view the differential in money terms was the same. This takes us to the average producer prices for products, (DARD Statistical Review 1999).

The following table shows the drastic fall in prices for beef and pigs since 1995.

In the case of beef it is obvious that there has been a dramatic decline in price. In fact almost £300 per head or approximately 40%. This includes additional costs of over £30 associated with BSE. It is therefore quite difficult for a member of a farm family to comprehend the price of beef in the high street shop.

The fact is that there has been no significant reduction in retail price. In fact there would have been a gradual increase.

A combination of these factors has led disillusionment within the primary link in the food chain. There has been little significant reduction in input costs and farmers seem to have no control over a marketing strategy in relation to beef.

With regard to the pig industry, and whether the returns to the producers are fair, one only has to look at the production cost of 85p/kg and the average return/kg to producers for the past few years Fig.1. While there remained a small profit margin in 1997 the industry has been decimated in 1998/99. In fact losses per pig have been estimated at £12-15/pig produced.

In addition the industry has been subjected to additional costs in dealing with offal disposal and compliance with health and welfare legislation. There is no question with regard to the fairness of having to take less than production costs for a commodity nor is there any doubt of the fairness of not having a level playing field with regard to legislation particularly in relation to our competitors in the market place.

We have already lost a major part of our pig production and we cannot afford to let this continue. As with beef, the consumer is not benefiting from lower producer prices. In many cases, it is imported produce which is being given preference in our shops. Factors contributing to the crisis in the pig industry have been.

• The strength of Sterling
• The fire at a prominent plant
• The effects of the world market
• Health and welfare legislation etc.

The fact that the pig industry is specialised with substantial capital investment in production systems with not alternative use has meant that producers were locked in. In addition the amount of individual debt accrued has meant that farmers have been trying to produce their way out of difficulties. The inevitable result has been bankruptcies.

Within the beef industry the loss of export markets due to the well documented BSE crisis and the strength of sterling have contributed to the present crisis. We also have additional burdens in both sectors with the cost of inputs due to our location.

Government has to devise both a long and short-term strategy for the industry. (It is interesting to note the term deadweight in some of the discussion in relation to early retirement etc.).

One only has to look around the countryside to see the state of dilapidation and disrepair emerging in many farmyards. We talk of protecting and enhancing our environment yet we ignore the fact that producers have no capital to maintain the infrastructure of the main business. It has often been stated that there will be no need for a long-term strategy if we cannot survive short time. Unfortunately short-term measures require capital. The funding allocated in the "Blair Package" is anything but adventurous and must be viewed sceptically in relation to 1999 incomes, longer term, the vision group which has been set up would seem to have major role in strategy development.

Market share has been bought in UK since the onset of BSE and while much work has been done to procure this, it is felt that it has been at the producer's expense. We still feel strongly that there could be more of a return to the producer at current retail prices.

More promotional use of NI produce by retailers would also assist. With regard to all produce clear labeling is necessary to show country of origin etc. Questions have been asked regarding the production conditions and quality of imports in comparison with our commodities and it is incumbent on government to ensure that the consumer is protected from inferior produce.

The primary producer is already using the highest possible standards and incurring the associated additional costs. Differential in price for quality has been shown to be necessary so it is necessary to strive to produce the best possible quality stock. Input costs have been trimmed and there is little scope for movement here. Producer groups, co-ops and buying groups are all possibilities.

A co-ordinated food chain with all parties having equal responsibility and guaranteeing a decent return for each component part is perhaps over ambitious but all links are interdependent and each should realise this.

Thank you for your letter of 14 June 2000 seeking the views of the Ulster Farmers' Union on the particular circumstances faced in the beef sector in the Province. Prior to our meeting with the Committee for Agriculture and Rural Development on Friday 30 June 2000 to discuss the issues involved, the Union would like to take this opportunity to comment on the specific areas of detail which you outlined in your letter.

It is fair to say that the Northern Ireland beef sector has been subject to tremendous economic pressure and structural change in recent years, particularly in the four year period since the onset of the BSE crisis. The effects of the beef export ban, imposed as a direct result of BSE, have been more severely felt in Northern Ireland than any other region of the UK, largely due to the traditional dependence which Northern Ireland had on premium price beef export markets outside the UK.

The loss of these premium value markets and the re-concentration of Northern Ireland meat processors to capture as large a segment of UK beef trade as possible in the aftermath of the ban has put immense pressure on the level of financial returns to producers. It is this lack of available competition in the beef market, which the Union considers, is the single greatest price-controlling factor at present.

Within the UK there has been much variation in the level of returns to producers following the imposition of the beef export ban. Northern Ireland producers are clearly at the bottom of this price league. On the basis of margins and profitability in the meat supply chain there has been much detailed analysis carried out to examine the fluctuations in prices at producer and retail level. Indeed, a major inquiry by the Competition Commission has been ongoing for some time, and earlier reports by MAFF, MLC and the London School of Economics have analysed in depth the major factors involved in the economics of the producer to retailer supply chain.

Whilst the factors involved are complex, the Union has long argued that there could be no real justification for the wide differences in cattle prices which have been evident between Northern Ireland and mainland UK. Undoubtedly this price differential has played a key role in the significant capture of GB multiple retailer trade by Northern Ireland meat processors.

One area where Northern Ireland producers have been severely disadvantaged relative to their GB counterparts has been the payments structure for differing grades of cattle (in terms of conformation and fat class). Work by the Livestock and Meat Commission for Northern Ireland has shown that there can be no justification for the price differentials which exist between a number of these grades when analysis of the yields of saleable meat are taken into account. This is an area where the Union has been concentrating its efforts in recent years to try and achieve a more equitable and justifiable payment system for Northern Ireland produced cattle.

(i) BSE: Without doubt the main contributing factor to the current crisis in the beef sector has been the BSE associated beef export ban. Loss of premium price export markets coupled with hugely cost burdensome BSE control measures have combined to push producer prices to critically low levels.

(ii) Currency Exchange Rates: The recent strength of Sterling relative to other European and world currencies has greatly disadvantaged producers in two main areas:

(iii) Cattle Grading: It is the Union's view that payment differentials for cattle grades achieved under the current grading structure needs to be fundamentally overhauled. Producers in Northern Ireland have been penalised heavily in recent years by this unfair payments structure which clearly has not rewarded producers properly for the true value of their livestock.

(i) Government:

The Northern Ireland Council of the National Beef Association is grateful for the opportunity it has been given to present this submission to the Committee for Agriculture and Rural Development.

It regrets however that as a result of not receiving the letter of advice until June 16^th it has struggled to meet the June 20^{th deadline and that its submission is therefore not as detailed, comprehensive or as visionary as it would wish.}

History may show that the period immediately before the BSE crisis of March 1996 was a high tide mark for the Northern Ireland beef industry and that the combination of factors that encouraged the export led, premium winning market that sustained such comfortable contemporary prices for finishers selling prime cattle may never again be repeated.

It is also unfortunate that the narrowing of the beef market to UK-only outlets over the last four years has not only decimated farmers' incomes but also undermined the relationship between farmers and the beef factories to such a degree it can only be described as corrosive.

However there is hope that the widening of the delivery range for Northern Ireland beef through the Province eventually being allowed by the European Commission to operate under the same low incidence BSE trading conditions as the Republic of Ireland will lead to some recovery in both cattle prices and industry morale.

The National Beef Association would argue that if maximum advantage is to be seized from this development then every effort must be made by everyone in the Province with an interest in beef to place as much as possible on as many high priced EU and GB markets as possible.

And then for farmers to be reassured that their cattle really are being sold onto a competitive trading platform and that the prices they secure are transparent.

In our view this means measures must be taken by those able to act on behalf of farmers to counterbalance the overwhelming dominance of the five super-large slaughter companies in the Province by encouraging, and if necessary helping to establish, other competitive and effective means of placing significant volumes of either beef or cattle in front of alternative premium paying customers.

The initiators could be civil servants or entrepreneurs and there could be additional assistance through a range of marketing grants, clerical back up, secondary legislation or preferential loans.

The concentration in the Northern Ireland slaughter sector is without parallel elsewhere in the UK.

Our investigations have revealed that four companies operating out of eight factories account for 88 percent of prime cattle slaughterings and five companies working from nine sites have 97 per cent in their grip. (This contrasts with GB where the 22 largest plants account for just 48 per cent of throughput and over 100 others account for all but one per cent of the remainder.)

There is no single outstanding company - indeed the four biggest, and their factories, are all of roughly similar size.

The actual breakdown is as follows:

• ABP at Lurgan and Newry handle around 90,000 cattle a year, which is around 24 per cent of the kill.
• Linden Foods at Milltown and Granville handle 23 per cent which is around 23 per cent.
• Foyle Meats at Foyle and Omagh handles 79,000 head which is 21 per cent.
• Dungannon Meats at Dungannon and Ballymena processes 75,000 head which is 19.5 per cent.
• And WD Meats, which is the only single site operator kills 35,000 head which is about nine per cent.

It is also worth noting that ABP and Dungannon Meats are the most powerful slaughter operators in the UK.

ABP handles 227,000 cattle a year in total at its premises in Lurgan, and Newry and then Ellesmere, Shrewsbury, Perth and York on the mainland. Its overall share of the UK market is therefore around 12.5 per cent.

Dungannon Meats owns Rose County Foods at Clithero in Lancashire as well as its factories at Ballymena and Dungannon and handles 123,000 cattle a year - which is 5.5 per cent of the UK total and makes it the second largest beef processing company overall.

Significantly Dungannon Meats trucks in a very high tonnage of beef primals, the equivalent of at least of NI beef consumption, from GB for cutting and packing at its Dungannon plant before returning it to one of the mainland supermarkets. In our view this activity allows it to show less interest in NI cattle than it otherwise would do and therefore contributes to the low prime cattle averages recorded in NI compared with mainland GB.

If we use the R4L carcase classification as the point of comparison the gap between NI prices recorded in early June (154p) and those in GB (172p) is 10.5 per cent. A differential of 10-12 per cent was constant over 1999 and the first six months of 2000 too.

The NBA finds this discounting difficult to accept because prime cattle in Northern Ireland are similar in breeding and type to those in other parts of the UK, and are reared and finished in similar systems too, and so it would be difficult to differentiate between their beef.

One reason for low NI prices is the narrow range of markets imposed on the industry as a result of the export ban. In effect this means that the 80 per cent of production that cannot be sold inside the Province itself has to be sold into GB.

Total annual slaughterings within the Province are around 360,000 head - which is the equivalent of 17 per cent of UK production.

However, immediately before the export ban (when prime cattle prices were 2-3 per cent above the GB average) only 30 per cent of NI production was sold within GB and 50 per cent was traded on higher priced markets in Europe.

In current circumstances it is impossible to avoid concluding that it is convenient and immensely profitable for these companies, particularly Foyle, Dungannon and ABP Newry which have a long established relationship with GB supermarkets, to buy discounted beef in Northern Ireland to sell in GB and that the prices they pay for cattle are uncompetitive.

There is also evidence that suggests that when prime cattle supplies are thinning down in the North and ex-farm prices are lower in the South the majority of factories will truck in a tactically significant number of cattle from the South so that they can maintain throughput without hardening the price of Northern animals.

The NBA would argue that there is no single panacea. However if a range of options was tackled simultaneously there would be immediate positive results.

With no particular order of preference these would include:

• Greater prime cattle price transparency.
• The regular publication of updated costs of production.
• Encouragement for more prime cattle to be sold through the auction system.
• Easier access for cattle to mainland GB markets.

And then in anticipation of beef and cattle from NI soon being able to move onto export markets:

• More resources being put into raising the clean and green image of the NI product.
• Recognition that weaned suckled calves buyers from Spain and Italy will be anxious to buy Northern Irish animals as soon as export restraints are lifted.

The grid system used by slaughterers to define carcase quality is unnecessarily complicated and because of this allows them to obscure what should be simple pricing messages.

In this way they can make it more difficult than it should be for finishers to compare the likely value of their cattle if they were delivered to one particular factory instead of another and therefore identify which buyer is paying most money.

An effort should also be made to establish a simple coefficient by which the value of cattle of a particular type that are sold at auction can be compared easily and accurately with the value of animals of a similar type sold direct to factories.

In this way finishers selling at auction or direct to factories could work out which particular auction or factory is most interested in buying their type of animal and more competition than there is at present would be generated.

The specialist beef breeding sector in Northern Ireland has extremely fragmented structures with its 320,000 suckler cows being held in 17,500 separate herds with an average of just 19 cows apiece.

In addition to this the average farm size is only 35 hectares of which just 29 hectares is down to grass or cereal crops.

There is similar fragmentation in the feeding sector too and there are few finishing units that can guarantee to deliver more than three correctly finished animals over consecutive weeks.

In these circumstances it is virtually impossible to introduce economies of scale and extremely difficult for most farms to easily establish whether they are working within profit or loss by accurately identifying their costs of production.

It is the NBA's view that the Department of Agriculture and Rural Development could assist by furnishing the industry with a series of costings templates based on a typical style of enterprise.

In this way breeders and feeders could identify the template most closely resembling their own business profile and have a better chance of being able to assess their profitability - or to be brutally honest in the case of the majority their losses.

An official DARD cost of production template could perform another useful function by demonstrating to everyone, including the factories and mainland multiple retailers, just how expensive it is to produce beef in Northern Ireland.

In this way it may even be possible for the Northern Ireland Assembly to encourage factories never to pay less than the cost of production for cattle - especially if legislation was passed forbidding retailers, who sell more beef on discount promotions than they do at regular prices, to offer it to consumers at prices that are lower than the officially accepted production cost.

The most common complaint levelled against the factories in Northern Ireland by the finishers who supply them is that they operate a purchasing cartel - and the NBA has been in touch with the Office of Fair Trading about this.

However competition, the absence of which leads to repeated allegations that the factories act in consort over prices, can be generated by operating an alternative system through which finishers can choose, if they wish, to channel their cattle.

The auction system in Northern Ireland has been weakened in recent years by institutional encouragement for deadweight selling through large abattoirs.

However since March 1996 producers have paid the price because the slack market and the absence of an alternative route through which they could be channelled allowed the factories to tighten their grip.

At present the auction system in Northern Ireland is used mainly by factories as an occasional mechanism through which they can top up throughput levels if they find themselves unexpectedly short and as a conduit for poor cattle of a type which would incur huge price penalties if presented deadweight and therefore can make more money if sold live.

Nevertheless it may still account for say eight per cent of actual prime cattle sales and in the NBA's view could help to generate more, much needed, competition among buyers if it handled around 25 per cent. The authorities should note and encourage this.

The NBA has encouraged NI finishers to sell more cattle to factories on the British mainland. During this exercise it discovered it was possible to sell animals of a fatter type that are penalised in Northern Ireland (where lean cattle are most wanted) in Scotland for up to £78 gross a head more. After transport costs and TB testing costs were deducted the overall gain reduced by £33 to £45.

Cattle of a more standard type could net £30-£35 a head more (in some cases this represented the difference between profit and loss) up until the end of January this year when the GB price fell and there was no longer a positive margin for trucking slaughter cattle onto the mainland.

However the NBA believes that a more organised approach that allowed selected NI finishers to present their cattle to regular mainland customers on a planned basis would not only allow those who trucked out cattle to earn more much needed money - but also create a more competitive situation in NI itself because the factories would try to encourage finishers to keep more cattle in NI by paying more money for them.

With this in mind we believe farmers should be encouraged to establish a properly structured delivery system in which cattle to be sold on a regular basis to specific GB customers would be assembled at the same lairage and put on the same ferry at the same time each week - and not piecemeal as they have in the recent past.

It is possible this could be organised through an auction company (or companies) and concentrate on heavier, fatter (4H) cattle for Scotland or heifers of a type that is popular for wholesalers and secondary wholesalers operating throughout the North of England.

It could be argued that beef production costs in Northern Ireland are the highest in the world. This is not a fantasy.

It is recognised that costs in Europe are at least twice as high as those in competitive countries like the US, Australia and South America where land and labour costs are minimal and there is less emphasis on expensive welfare, transport, abattoir hygiene and environmental protocols - and that land prices and other costs faced by NI farmers are greater than those in other parts of the EU.

Indeed it appears that the only countries that produce more expensive beef than Northern Ireland are Japan, Switzerland and Norway - and none of these is a mainstream beef supplier.

The crucial issue facing the industry in Northern Ireland is therefore the recovery of its unusually high costs.

It is clear that this cannot be done by competing for market share through discount, as appears to be the case with beef sold into GB at present, and so NI beef must be sold at premium prices and made more attractive to wealthy and sophisticated EU customers who recognise its integrity and are willing to pay more for it.

This requires industry strategists at commercial and government level to anticipate the removal of the export ban and set in train a marketing programme in which NI beef is presented to the EU consumer as an exclusive, grass fed product that produced to the highest human and animal health protocols and deserves its high price.

It must be recognised that beef produced in mainland Europe is almost exclusively cereal fed, intensively reared, bull beef and beef of the type that is routinely produced within Northern Ireland is automatically recognised as a superior, niche product.

There is already pressure within the Northern Ireland beef industry for this advantageous marketing platform to be further developed and the NBA would say that the advantages to the beef industry and the general economy of so doing must be recognised by the Northern Ireland Assembly.

It is important to note that live feeding cattle from NI, particularly weaned suckled calves, will be in demand from feeders, not just in the ROI but from Italy and Spain too as soon as they are able to purchase them - and this is almost certain to harden prices and lift incomes on breeding farms.

The shortfall in the ROI is in fact due to large numbers of their own weanlings being despatched principally to Spain but also to Italy. Up until the end of May some 170,000 calves had been despatched from the ROI to these countries compared with 122,000 at the same stage last year.

And the NBA suspects that as soon as the European Commission approves the delivery of live cattle to other EU countries that feeders in the ROI will immediately begin looking to NI for weaned calves to make up for the large number sold to overseas buyers.

It also believes buyers representing Spanish and Italian finishers will attend store auction markets in Northern Ireland and bid for suitable cattle themselves. Unless the euro strengthens considerable over a short period the prices they pay will be substantially above those being paid by Northern Ireland's own finishers at present.

The overall impact of each of these activities is that less, good quality cattle will be available for finishing in NI and its factories will not be able to buy as many high yielding carcases as they would like.

This may persuade them that they have to pay more for cattle if they want to secure supplies. It should also confirm the need for all sections of the beef industry, including the government, to work together to add as much value as possible to beef from NI on a range of UK and EU markets.

However strategists must accept that the EU operates a single market and they would be doing suckled calf breeders no favours if they tried to minimise live cattle trading with the ROI, Spain and Italy without helping NI finishers secure equivalent prices from the sale of their prime cattle.

It will be impossible for beef farming to continue in Northern Ireland in the form that we recognise today unless prime cattle acquire a higher value.

This can be done by:

• Curbing the downward price pressure forced on farmers by NI factories by creating a more competitive trading environment for prime cattle.
• Widening the range of high priced markets on which premium quality NI prime beef can be sold.
• Helping NI suckled calf breeders improve their returns by selling their product to finishers operating in other EU countries.

The NBA hopes it has provided the Committee for Agriculture and Rural Development with sufficient information to support these assertions and wishes it well with its deliberations.

Thank you for your letter of 10 August on the above. The Ulster Farmers' Union welcomes the very obvious and continuous interest which the Committee is taking in this subject in that it reflects the genuine seriousness of the ongoing crisis within the agriculture industry in Northern Ireland and the beef and pig sectors in particular. In your letter, you pose a series of questions to the Union on which we are more than pleased to provide our views. Each of the three headings of your letter will be dealt with separately:

As we communicated to the Committee in our letters of 21 and 23 June for this ongoing Inquiry, we firmly believe that improved co-operation throughout the entire food supply chain is imperative and will provide benefits for all of the links within this chain. Indeed, this was one of the main recommendations contained within the Committee's recently published Report: 'Retailing in Northern Ireland' - a fair deal for the farmer?' Producers, processors and retailers have all an important role to play in the delivery of this objective, but it is the primary producer who ultimately faces the biggest challenge. While the vast majority of producers accept that their marketing strength in terms of both purchases and sales must be improved, the realisation of this key objective is not simplistic.

The general record of historic producer co-operation in the Province has not been good for a variety of reasons but mainly because long-term success has often been sacrificed for short-term gain. In the pig and beef sectors specifically, the Ulster Farmers' Union was instrumental in establishing both the Northern Ireland Pigs Marketing Board (PMB) and Ulster Farmers' Investments Limited (UFIL) which owned the Moy Meats beef processing plant. Neither of these now operate in their original form. However, the ongoing success of United Dairy Farmers', particularly with its involvement in processing, has illustrated what can be achieved.

Unfortunately, unlike the level of co-operation which exists within the Province's dairy sector, beef and pig producers are having to address this issue from a much lower base. While the Committee's proposal for the establishment of a producer co-operative(s), which accounts for 50% of both the Province's beef and pig production, is a very laudable objective, the Union believes that this is too big a leap under present circumstances. Instead, we would much prefer to see meaningful support from both the food supply chain and Government being provided to the existing, smaller producer groupings within these sectors. It is absolutely crucial that the principle of 'co-operation' is initially fostered at ground level with sufficient encouragement for interested, entrepreneurial producers to take the initiative forward. Ultimately, for any producer grouping to be successful it must be market oriented and commercially driven.

The Union fully accepts the rationale behind the Committee's proposals on 'branding' however, like the issue of co-operation, the realisation of this objective is complex. Certainly, the extension of 'green fields' could be readily achieved but beyond that the establishment of a 'Northern Ireland beef brand' would require very considerable expenditure to both develop and, more particularly, promote. That said, however, there is definite merit in exploring this proposal further and even extending consideration to the potential for a general 'Northern Ireland food brand'.

It is an accepted fact that the quality of the beef herd in Northern Ireland has deteriorated - mainly due to the influence of the dairy herd on the suckler cow population. This is, however, a problem which can be resolved by medium/longer term action. Already, the producer funded 'AgriSearch' group in the Province has commissioned a major research project which will examine, in depth, beef cow genotype and the quality of their progeny. Equally, it is essential that a system which provides producers with a proper return for the production of quality beef is established - the two main integral factors are the introduction of a system which accurately measures carcass meat yield and also a payment structure which rewards quality.

I trust that this response addresses your questions concisely. We will, however, be in a position to elaborate further when we provide oral evidence in September.

One further point which we would wish to make at this stage is that, while all of these proposals made by the Committee will undoubtedly prove to be beneficial in the medium to longer term, it is essential that short term measures to relieve the huge debt burden borne by the Providence's agriculture industry must also be pursued.

The British Pig Industry Support Group have lost their claim for compensation against the Government.

The judgement, given late this morning, was immediately described as being 'very, very disappointing' by Meryl Ward, leader of the Group's judicial review team.

"It's a fair and square loss," she told FOL Today, adding that there would be no appeal against the judgement.

"We don't have either the financial resources or manpower to mount an appeal," she said.

"On a positive note, our case for the cost to the pig sector of BSE at £5.26 a pig and £266m for the industry, wasn't challenged, so these figures are now established as fact. The judge, however, did not agree that we had been discriminated against."

Meryl Ward also said that the costs of the case, believed to be £50,000, 'would be sorted'.

The Group had argued during a judicial review at the Royal Courts of Justice in London in June that the Government had discriminated against pig farmers by not applying for additional aid in the light of BSE in cattle. That, they said, had inflicted a heavy financial burden on the sector in the light of losses to the pig sector since BSE of £266 million.

Pig producers 'shattered' by outcome of judicial review case

Losing their judicial review case against the government has left the British Pig Industry Support Group devastated.

"We are absolutely shattered," Meryl Ward, leader of the BPISG's judicial review team, told FOL Today. "It was a fair hearing. We have decided not to appeal, as we felt that the way the judgement was given made an appeal, as we felt that the way the judgement was given made an appeal much more difficult to lodge. Anyway we just haven't got the resources."

"It is hard to think positively at the moment. However, the judge did agree to the principle of non-discrimination, and this will help when other cases are brought to law in the future."

"The judge agreed on the principle that beef, sheep meat, and pig meat do compete. He also agreed that BSE regulations had imposed a disproportionate tax on the pig industry, but it wasn't sufficient to make it discriminatory."

"So our case that the ban on meat and bone meal due to BSE cost pig producers £5.26 per pig and £266m for the industry, and that this was a higher cost than the cost to the beef and sheep industries wasn't challenged. So that is now established, but the judge said it didn't make it discriminatory."

"Because there was no discrimination, there was, therefore, no onus on MAFF to apply for state aid. MAFF's action, the judge said, had been sufficient."

"The fact that the costs of £50,000 have been awarded against us is truly rubbing salt into our wounds, especially as MAFF had the option not to press for costs, and that their lawyer was a salaried member of MAFF staff."

"I suppose that this review has produced a lot of publicity, which has been good for the pig industry, and you could say that buying that amount of advertising would have cost a lot more than the judicial review costs. The media showed a lot of sympathy for our case, and highlighted the industry's high standards of production."

"That may galvanise MPs and the government into pushing for more positive buying policies. The announcement that the Ministry of Defence is now going to buy just British pork s a bit late. They could have done that several years ago."

"The result of the case doesn't get away from the fact that a third of the industry has now disappeared during this crisis, and it is still declining."

Ian Campbell, regional manager for the National Pig Association, told FOL Today that there was a positive side to the judicial review. "The cost has brought a lot of publicity, and we couldn't have bought that for the money that has been spent on this case."

"The high standards of the industry has received huge publicity. There is now far greater awareness among consumers, and buying institutions. The announcement by the Ministry of Defence that they are buying 100 percent British pork is, I believe, the beginning. Similar decisions by other major corporate players may follow."

Undoubtedly the trend of fragmentation will remain to be a major stumbling block in the development of agriculture in the future. However, major efforts are being made to develop clusters of producers for specific products and markets. Conversely the market is also developing rapidly in response to advances in retail and retail-supply technology, changing consumer trends, and changing political circumstances i.e. WTO, enlargement of Europe and GATT requirements. This would give the appearance of a stagnated industry, which is not the case.

However the industry has been going through an extremely turbulent period of years what with the effects of an inflated economy and the lack of marketing options for produce with the imposition of the export ban. Hopefully the easing of the ban will enable new markets and possibly old ones to be re-explored and a more product-specific system of production and whole chain management to be developed for definitive high market requirement and corresponding returns throughout the chain from primary-producer to secondary-processor e.g. the keenan-kepak arrangement in ROI.

This is a wonderful desire but generally any such body would require extremely focused and competent people to both fuel and drive such an idea.

It has also been tried before in the guise of UFIL, Granville, moy-meats, leckpatrick, to name but a few. Also a classical example would be the Kerry group in ROI which has been successful and grown to such a size that it is no longer recognisable as a farmer's co-op. Again, I do believe that clusters of producers being target specific is a desirable development as they would not have such a critical masse as to burden their members with excessive administrative costs and could possibly share these with a processing partner; one getting a secured supply closely matching outlet requirements and the other getting an enhanced return to justify the extra cost of producing a high quality product.

NIAPA would be in favour of such developments and has been actively involved in forming such groups and lobbying for funds through leader and other such rural development mechanisms so as to facilitate such developments. We would also try to get discussion and co-operation between clusters to develop marketing strength.

We are also acutely aware that the average hill farmer's income in NI was £200.00 for the last financial year and how difficult it would be for them to contribute significantly towards such a body.

With regards to pigs, the same applies except that NI does not have an advantage of being able to utilise high quality grass, cheap by-products for feed and has to endure a substantial overhead with regard to haulage of both feed in and product out of NI.

Therefore each product has differing production and marketing requirements and would probably require if not differing organisations, then differing arms within the body which would be product specific.

A feasibility study would be advantageous, as would an audit to specifically define what our strengths, weaknesses an possible opportunities would be. Hopefully, out of it we could identify niche markets that we could reasonably attain and would give a yield for the extra requirements. We do not wish to drop in to the slot of being the only European region without a substantial high market value market be it national or whatever. We would think that the more players involved in the strategy, the greater the chances of it's success and would warmly welcome all key players in NI to be involved in such an initiative.

Our role would be robust selling and pro-active support, but any financial support would be purely a token gesture as we are solely lobbying and representative organisation and do not have funds to give the amount of support that we would be necessary for any major initative.

Branding is the most consistent way of maintaining a market share and possibly giving an enhanced premium due to the customer being able to have confidence in the consistency of the product. Green fields was a classical example but as you are aware it was developed by all the partners in the supply chain and again this is necessary so that everyone can buy into it and their individual needs have been built into the product to everybody's maximum possible advantage.

Members feel that by contributing to the LMC that they are funding marketing and would actively desire consumer loyalty. If it could be demonstrated to be to financially beneficial to contribute more then I don't believe farmers would be unwilling to invest in their future as long as they would get a return for their efforts.

I would have no idea as to retailers positions with regards to branding, but would assume that if their customers could identify our product as being consistently a desirable item then that would be an advantageous point to achieving a market premium. Hopefully this would be one of the themes we would like to see reported in the audit/feasibility study.

Naturally, the ownership rights of a brand need to be jealously guarded so that anyone seen flouting the items of agreement of the brand would be unable to do so as to protect the integrity of the product and so rightfully no-one should be able to use the brand name without the support of all the partners in the supply chain.

As before producers have been the sole contributors to the LMC and would like to feel that any brand developed specifically aligned to NI product has already been paid for, and any additional costs will be reflective upon NI gaining a distinct market advantage and that other partners who gain a financial reward namely the processors will also be sharing the cost and not "piggy-backing" on the back of others efforts.

Herd quality has been deteriorating as a result of several factors.

The Holstein influence has been increasing due to the increasing level of extreme dairy-type genetics in the progeny of dairy herds away from the dual characteristics of the British Friesian type. This has had a subsequent effect upon the 3^{rd and further generation offspring which suckler farmers are now addressing through their breeding} replacement policies.

Sires selection has benefited through quality product initiatives in a number of the rural development programmes throughout the province.

However, beef breeding is a slow process and the yields are only starting to show through. But there is still as much if not more work to be done on the dam side of the herd as the sire only contributes 50% of the genetic composition.

Also we now need to be more target specific if we want to tackle the niche markets with both our beef types and our nutrition make-ups as all of an animals influences contribute towards the end product i.e. hopefully the steak in the expensive restaurant instead of the cheap pie filling.

Nutrition also has a big part to play as when beef was 240/kg then if we take a notional feed conversion ratio of 10:1 then there was a financial yield for feeding an animal on to achieve it's maximum potential both in conformation and carcass weight. However, nowadays, the average return price is 160p/kg and it is difficult to see a financial return for feeding an animal more than is necessary or longer than it takes to get retention periods for premia finished.

Two excessively wet seasons have compounded the problem with animals not performing as well off grass as formally and swards being heavily poached but farmers lacking the financial wherewithal to repair the damage.

But in my parents' words: there's no point in breeding without feeding and no point in feeding without breeding.

Consistency is the most vital component in securing and maintaining any premium market but we must also not be complacent if we do achieve any niche marketing advantage as our competition will also not be complacent and evolution is and will always be a continual process.

NI's size is cited as a weakness but it should also be seen as a strength as we do not have the variation in production circumstances as most of our competitors do and so should find it easier to homogenise our product throughout our region.

We are also located on the edge of the most affluent and discerning block of consumers on the planet and are ideally located to market our product cheaply and possibly use an embryonic tourism industry as a symbiotic partner.

We need to clearly define individual market requirements and produce to meet those niches rather than a broad- brush approach hoping to find markets for a variety of products.

Dairy types produce to be produced as quality enhanced type commodity beef and a premium obtained for consistency and consumer confidence.

5-7 years is a short time in beef terms, however, given access onto the export scene again, change will be rapid and farmers do respond quickly to an economic incentive if they didn't they would still be ploughing with horses.

I trust this addresses most of the questions fielded and would like to stress that NIAPA is available for consultation either formally or informally at all times and welcome the chance to make representation for NI farmers.

The Northern Ireland Council of the National Beef Association is once again grateful for the opportunity it has been given to present a further submission on future strategies for the beef industry to the Committee for Agriculture and Rural Development.

It agrees that the income position of beef farmers in Northern Ireland is undermined because they are a fragmented instrument of supply and therefore extremely weak price negotiators.

It also agrees that the formation of a strong beef producer's co-operative is a legitimate candidate for industry- wide examination.

However the NBA would strongly advise that discussion on the adoption of a national co-operative should be suspended until the Committee for Agriculture and Rural Development is reassured that anti-competitive malpractice is no longer present within Northern Ireland's red meat processing sector.

There are strong views in producer circles that such malpractice is endemic and that the unduly low prices they face compared with these elsewhere in the UK are largely the result of the existence of an extremely effective purchasing cartel operated on an each and several basis by participating prime cattle purchasers - and that the impact of the absence of co-operative structures within the beef production sector on the prices they receive runs very much secondary to this.

The NBA believes there is strong evidence that a successful purchasing cartel has operated inside Northern Ireland for almost 20 years and is still in operation now and that there would be little point in establishing new structures designed to put producers in a more competitive position until existing, and extremely effective, anti-competitive habits prevalent among processors have been rooted out.

Not to do so would be the metaphorical equivalent of building a grand castle of co-operative dreams on a corrupt foundation and as a result of being constructed on such a swamp the co-operative edifice that farmers and other investors might hope would be effective could never stand.

The NBA will respond to the questions on the benefits of co-operation that have been laid before it by the Committee for Agriculture and Rural Development but worries that in doing so the Committee will believe it has been persuaded to support, without reservation, the establishment of a national livestock producers co-operative within Northern Ireland.

It hopes that the Committee will understand that until its members can be reassured that the cartel that has dominated Northern Ireland's cattle pricing for so long has disappeared (and will not resurface) the NBA will not be in a position to give unqualified opinion on the legitimacy, or otherwise, of the adoption of a Northern Ireland Co-operative.

Having made such a strong statement the Committee will no doubt feel it necessary for the NBA to justify its position on the cartel with a brief summary.

The Association's comments are restrained because it is aware that the Office of Fair Trading may be following up complaints and it would not like to compromise any investigation that might be taking place. Nevertheless our views on the purchasing cartel situation among Northern Ireland's prime cattle buyers include these observations:

• There is strong evidence it has been operating since the early 1980's.
• It has been effective because consenting factories have agreed, on a weekly basis, on the proportion of the available all-Northern Ireland prime cattle supply they will buy, the geographical range of their purchasing operation (which may vary from week to week) and the maximum price they will pay for animals of a particular grade.
• In this way they have been able to collude to generate the impression there is oversupply (even in times when prime cattle supplies are short) by forcing deliberately contrived queues of finished cattle to back up on farms - which creates a situation in which finishers who are anxious to dispose of them (in the face of an artificially generated appearance of oversupply) will accept lower prices than would otherwise be the case.
• There is no evidence this system had been disbanded.

The NBA would like the Committee to know it is willing and ready to make wider observations on cartel activity, and the width of its influence, in camera and would urge the Committee to use its powers of examination to conduct its own enquiry into cartel activity among red meat factories.

It is impossible to deny that multiple retailers and large processors are in a stronger position than farmers. However the advantage currently enjoyed by the latter is largely through their cartel and the NBA would argue that at present processors are as much a victim of monopsonic retail purchasing power as producers (hence the defensive position of their cartel) and that price-fixing dominance of the major UK supermarkets on Northern Ireland's beef farmers will only be eased when beef from their cattle can be sold on a wider range of EU and world markets.

This means profit will only be re-introduced into NI beef finishing if the extraordinary high costs of production faced by NI beef farmers can be recovered through the sale of more of their beef at a retail premium elsewhere in the UK and on export markets.

There can be no doubt that this will be made much easier if NI beef is branded in a way that reflects the high integrity of the natural, grass based, suckled beef product and the challenge already being offered by lower cost imported beef into both Britain and the EU is countered by consumers feeling comfortable with paying more money for the reassurance offered by the NI brand or brands.

However the NBA is not convinced that the establishment of a national co-operative is the only means of securing, and maintaining, of a branded beef product or products.

It is impressed with the initiative and imagination demonstrated by Linden Foods in the establishment of the Greenfields label and the contract with the Albert Heijn retail chain and sees no reason why similar ventures could not be repeated to the advantage of the beef farmer by Linden or other, similarly minded, export based companies.

It is also aware of the recent (quite dismal) failure of the Department of Agriculture in Wales to find even minimal producer support for its proposed all-Wales co-operative and worries that this could be repeated in Northern Ireland - although it accepts that the different attitudes and conditions prevailing in each country means it would be misleading to draw too many different comparisons.

Nevertheless the NBA is attracted to the idea that producers (not Abattoirs) could control supplies as a result of co-ordination at co-operative level.

These are our specific response to the individual points out forward in the consultation document:

• The NBA is in favour of any development that would raise prices for NI beef cattle and help secure the livelihoods of NI beef farmers. However it must again stress that it believes the Committee would be unwise to establish any co-operative structures until it was sure there was no longer any price cartel activity among processors. It would also repeat that it is not convinced that the establishment of a national co-operative is the only effective solution.
• The NBA would only recommend that farmers make a significant investment into the creation of a co-operative if it felt their money would not be wasted. Clearly proof that there was no longer any cartel activity among prime cattle purchasers would be among the specific issues examined by the Association before it felt able to make such a statement.
• Should a co-operative be established it would be better if the beef and pig sectors were kept separate.
• The NBA hopes it has already outlined some of its reservations about the proposed project sufficiently well. Specifically these refer to continuing cartel activity and the possibility that private enterprise could generate equally effective branding schemes capable of making the market for NI beef more secure.
• It would also worry about whether producers have the funds on hand that would allow them to contribute to the establishment of a co-operative, or any other venture, and enjoy the benefits it may generate.
• A successfully run co-operative could raise the revenues and increase profits for beef farmers if is was able to secure premium paying markets not otherwise available to producers and more beef taken from their cattle was therefore sold for more money.

If the co-operative contained service structures that passed on advice on breeding and feeding the profitability of some businesses could be raised because the beef they sold could be produced at a lower cost per kilo.

The Committee will of course be aware that a similar function is already undertaken on a national basis by Departmental of Agriculture specialists at Greenmount, Hillsborough and other locations.

• Market prices are ultimately determined by the collision between supply and demand. If demand for a uniquely Northern Irish product could be generated across the EU markets then it is inevitable that NI producers would benefit because the cattle they breed and feed would be the sole source of supply.

However it must be acknowledged that this could be achieved through commercial partnerships between producers and specific factories without the intervention of a co-operative.

• If a market for a product specific to Northern Ireland was generated the NI farmer could have more influence over the distribution of the product and the methods under which it was marketed because they would be in control of the source - especially if they could be reassured that no cartel activity undermined this advantage.

The depth and effectiveness of this influence would depend on how many farmers were prepared to co-operate with each other on an agreed aim and in these circumstances it must be recognised that single producers operating as individuals would almost always enjoy some additional occasional benefit because they could move their product either inside or outside the co-operative according to the price advantage they could secure on the day.

This flaw in the co-operative system can only be countered if members of the co-operative agree to sell a given number of animals through the organisation each year and bonus payments (and penalties) are arranged which recognise the degree to which this commitment was met and the proportion of available cattle that have been specifically offered through the co-operative and not sold elsewhere.

It is possible that a group of farmers, and the larger the group the better, would be able to exercise more influence on the market and be more likely to look forward to securing the most advantageous returns - but the NBA must stress that this would depend on them being disciplined in their approach to maintaining a regular service to their established customers' supplies and it must again be noted that producers have in the past reserved the right to sell their prime cattle to the highest payer even though they may be contracted to , or be expected to, contribute to the supply security of another processor instead.

The NBA believes some producers would be more likely to accept their responsibility to maintain the even supplies necessary to secure regular deliveries to committed customers if they also owned the processing plant and were paid a dividend from its profits.

Participation within a co-operative is not therefore just about the benefits of being able to exercise some control it is also about responsibility and commitment - and before it made any decision on whether or not to encourage the establishment of a co-operative the Committee would have to make an assessment of the collective ability of Northern Ireland's beef farmers to recognise the latter and the depth of disinclination among other factories not to poach their cattle.

• The NBA would be prepared to co-operate fully with the UFU and NIAPA in a feasibility study for a national co-operative if it was sure a co-operative would not be launched while cartel activity still persisted among prime cattle buyers.
• The level of support and enthusiasm within the NBA for the co-operative project would depend on how convinced it was there was no cartel activity in the processing sector and how impressed it was with the conclusions of the feasibility study and the ideas put forward by other people in other beef industry organisations - including DARD advisors.
• It is impossible to make a firm statement at present but unless there is conclusive evidence to suggest it would be sensible to do otherwise the NBA would say that the NI Co-operative (should one develop) ought to be farmer owned.

The NBA believes that branding elevates beef and beef products from commodity status and makes it easier to secure non-commodity, premium prices.

It has argued since its inception that as much beef as possible should be sold outside the mainstream, mono-product, markets encouraged by the largest retailers and offered to a range of alternative outlets under the widest possible variety of labels. It has suggested that these should include brands based on special handling (such as extra-mature farmhouse bee), specific breeds or crosses (Traditional Shorthorn Beef) or regionally based - like Mourne Mountain Beef.

It accepts that an all-Northern Ireland label could serve the beef industry well on Continental markets because it would take advantage of the Province's grass fed, steer and heifer beef which cannot be obtained elsewhere in Europe and is therefore a genuine niche market product.

It is not sure whether Northern Ireland Beef could be easily marketed in mainland Britain where it would compete with Scotch, Welsh, North Country or West Country beef unless the Northern Ireland label was non-geographic in origin and was presented under attractive brand name of which "Greenfields" is an example.

The Association accepts that GB supermarket insistence on using their own label allows them to retain control of the product (own-label can cover anything the retailer would like it to) and believes it would be hard to persuade them to give this up in favour of selling NI beef under the NI label.

Nevertheless it would support any effort to develop a NI label that would allow NI beef to be sold at a premium and for NI beef farmers to have greater control over price.

One of the key areas in this debate would be whether it would be better to try to establish a single, all-NI label or sell NI beef under a variety of more specific brands or labels covering regional origin or specific added-value processes which British multiples find more acceptable.

Beef branding has been explored before. There was a failed attempt on the mainland ten years ago to launch an "Aristocrat" brand.

It failed partly because of the difficulty of ensuring consistent product quality (predictable leanness, tenderness, colour and taste - all of which means it is advisable that branded beef is processed the same factory using cattle finished on the same feed and feeding system) and because the discount culture that is embedded in the marketing of beef dissuaded retailers from committing themselves to the Aristocrat product in case it prevented them from taking advantage of cheaper beef supplies of similar quality should they be available.

Similar objections would have to be overcome now if a NI brand was launched successfully.

NBA members may be willing to invest in establishing a beef brand if they could be shown there would be a return on their money.

As mentioned above we believe GB supermarkets would find it difficult to accept NI branded beef - unless it could be presented as a genuine niche product.

It is true that any trader on a commodity market is vulnerable to cheaper supplies of similar quality product from alternative sources.

It is also true that it is easier to brand a niche product than a main line item. The NBA would once again argue that in Continental EU terms NI beef is already regarded as a niche product and could easily be branded and marketed as such. Before the BSE disaster of 1996 Continental exports accounted for 50 percent of NI production.

As already said the position in GB, where pre-1996 sales accounted for 30 percent of NI production, is different because of the dominance of large multiple retailers who are wedded to the use of their own labels. In these circumstances the offering of NI beef under a range of niche market may be the better option.

The NBA clearly endorses the sentiments expressed in this paragraph of the Committee's consultation paper.

We have addressed this point in earlier answers. We would only recommend that NBA members invest in developing a NI brand if there is no evidence of continuing cartel activity among NI processors and that on the basis of all available evidence they could reasonably expect a fair return for their money.

Carcass conformation (shape) is deteriorating in Northern Ireland's beef herd partly as a result of the overwhelming adoption of the super-skinny, massively rangy, Holstein cow in the dairy herd.

This means that the beef cross calves and pure bred male calves moving across from the dairy herd and into the beef system increasingly carry less beef in their hindquarters and the meat yield from the carcass is very low in proportion to their weight. They are also slower growers and it therefore costs more in feed and time to produce the beef.

It also means that beef cross heifers purchased by specialist suckled calf breeders have recently become much larger, much skinnier animals which cost more to feed, tend to breed less regularly and thrive less easily than those that were available in the recent past.

These female also breed calves, even after being put into specialist beef bulls, that carry more of the extreme Holstein traits than the beef industry is prepared to welcome. In plain language this means more suckled calves are leggier, taller, narrower and have sharper, more angular hindquarters with less muscle on them than anyone in the beef industry would like.

Another factor is a symptom of the pessimism that has developed in NI producer circles since the BSE crisis. In the mistaken view that it saves them money many breeders have stopped buying specialist bulls and have kept back uncastrated, three-quarter beef bred males (usually with one quarter Holstein blood) to use as herd sires instead. This not only results in more; poorer quality calves but lower prices for the breeder too.

The NBA is ready to co-operate with DARD and the LMC in the staging of winter evening meetings, or afternoon conferences, in which the value of using specially bed bulls backed with established genetic traits are explained to farmers.

It would also suggest that DARD tries to encourage the establishment of a stratified, beef female breeding system in which hardy, pure bred females kept on higher land to help farmers qualify for maximum Hill Farm Allowance payments through mixed cattle and sheep grazing are bred with a recognised maternal bull to produce specialist beef heifer suckler replacements that could be absorbed into the NI suckler herd instead of inferior Holstein crosses.

It would be impossible for NI to adopt the industrialised, feed lot systems that dominate beef production in the US and Australia without undermining existing rural structures which are underpinned by (increasingly part time) family farms and devaluing the clean and green image under which it would so obviously be sensible to market NI beef - which means that any thoughts that feed lots offer a solution to NI problems should be quickly dispelled.

The NBA accepts that a pre-requisite of successful beef branding is the provision of a product that is consistent in leanness, colour, tenderness, and taste but would argue that cross-NI templates that allow the provision of a reasonably consistent product are already in place although they could be further developed to ensure that an even better hit rate is achieved.

Our case is based on the fact that NI finishers already produce more Fat Class 3 carcasses, which are judged ideal in leanness terms by processors across the Province, than any other group in the UK and maintained exposure to fresh and preserved grass will continue to ensure that the dominant beef colour is red.

At the same time more animals are being killed younger which means their beef ismore likely to be tender and if this is backed up by consistent and disciplined pre-slaughter handling to reduce carcass pH levels and the post-slaughter beef is then tenderised through electronic stimulation and properly measured maturation through on the bone conditioning in the chill room then beef taken from anywhere across the Province already has a good chance of being consistent with other NI beef secured elsewhere.

We believe that the beef processed by any NI factory using a specific sourcing scheme could become more consistent if there was an organised attempt to standardise feeding and breeding within the confines of the branded product's procurement circle.

However we would repeat our caution against the adoption of industrialised techniques in which large numbers of animals were assembled in single units to dilute unit costs because this would undermine both existing farm structures and Northern Ireland's natural image.

It would also contradict the aim of the beef brand (or the co-operative) which would be to raise revenues across the entire beef production retail sector and not give retailers and processors more opportunity to maintain their margins while working under discount disciplines simply because producers had become more efficient and reduced their costs.

It may be that the reconciliation of these contrasting positions, its unique, existing traditional production style versus product consistency, will be the NI beef industry's most vexing medium term problem.

The NBA regards the formation of a Northern Ireland co-operative as a legitimate subject for examination but believes that the objective, which is to raise beef industry income levels through enhanced retail prices, may be more easily achieved through a range marketing initiatives using several brand labels adopted by a number of individual companies.

It would also argue very strongly that there would be no advantage in constructing a co-operative, or any other new marketing venture, unless there is clear evidence that cartel activity has ceased at factory level - and would need to have absolute reassurance that was indeed the case.

Thank you for your letter of 10 August. You do indeed raise a number of important strategic issues for the industry and we have attempted, in the attached schedule of responses, to deal with each and every issue which you raise in a comprehensive manner. Your questions are answered in the order and under the headings in which they are asked and although this leads to some repetition, we felt it important to make a comprehensive response.

There are a couple of attendant matters which it is felt appropriate to highlight:

1. The timescale within which you seek a response from us prohibits a debate at Commission level within LMC and it is of course the prerogative of Commission members jointly to determine policy issues in regard to LMC. A number of the issues which we address in the attached schedule are getting into fairly fundamental policy matters for LMC.

2. Your letter suggests that the Committee may wish to take further evidence from LMC and we are happy to respond positively if such is required. We would point out, however, that Friday 8 September is not a suitable date. This clashes with a major "Suckler 2000" event planned at Enniskillen and at which LMC is a major participant.

We are pleased to note your Committee's detailed interest in the beef (and sheepmeat) sector. We feel it appropriate to debate the issues raised and we hope that our responses will be helpful in the deliberations.

1. Imagine the situation where a strong beef producers' co-operative was in a position to discuss with the processing industry the regulated supply of quality finished animals coming ultimately from high quality suckler herds. Imagine too that members of this producer co-operative were as organised and disciplined in its approach as, say the members of United Dairy Farmers, albeit without any processing capacity. Imagine that the fifty per cent of top-quality producers at both levels (weanling production and finished cattle production) were co-operating together to create market advantage for themselves, the processors they serve and their retail customers.

The scenario which you have postulated of a co-operative involving 50% of top quality producers would represent a significant change as compared to where the beef (and sheepmeat) industry is currently positioned. As we mentioned in our earlier submissions, there are not many examples of the level of co-operation and co-ordination envisaged in your hypothesis. While you use the term "co-operative" throughout your letter, we are not convinced that the organisation described would function best as a "co-operative" in the strict legal sense. Our understanding is that a co-operative would be obliged to accept all of those producers who are involved in beef production and who apply for membership. The scenario postulated of a restriction to 50% of producers at the top end of the quality spectrum might require a different legal structure.

We would furthermore suggest that the involvement of 50% of beef producers might be over-optimistic. Our experience of running the Northern Ireland Farm Quality Assurance Scheme (FQAS) shows that after ten years of operation and with a minimal outlay on the part of the producers, only 50% of beef producers have become members. Of these members, 50% by definition are above the average in terms of quality of production (equivalent to 25% of total beef producers) and of those above average, we could assume that only 50% of these are producing the top quality of stock (now 12.5% of total beef producers). It would therefore seem realistic that a top quality beef producers organisation should be targeted initially at the top 10% of producers. These might of course account for 20% of production and the number would increase as others met the requirements for being in this top quality bracket.

United Dairy Farmers (UDF), with which you seek to make a comparison, has 3,000 members which represents just over 50% of Northern Ireland milk producers and is marketing commodity milk, whereas your postulated beef organisation will be targeted at the premium market and we would contend must be restricted in membership to those who will sign up to and follow a strict protocol.

UDF as a very recently formed organisation certainly shows some evidence that the price being obtained for commodity milk for its producers is at the top end of the spectrum available within the UK. The fact, however, that the dairy industry within Northern Ireland is so focussed on the production of commodity powdered milk for export to world markets, supported as we understand it by the European export refunds programme, must be of concern in the medium term. We are not familiar with the production competitiveness of our dairy sector but we have already indicated to your Committee our concern that the Northern Ireland beef (and sheepmeat) industry could not survive in its present form if forced to compete at world commodity prices. We know that the export refund support mechanisms for beef are undergoing change and are likely to be gradually eliminated over future years.

As we have already indicated to your Committee, it is our belief that differentiation of our red meat industry is vital if it is to survive in anything like its present form, and against this background we believe that it is indeed worthwhile to explore the concept which you raise.

LMC would support the type of development described and would comment that we have already lent support to groups operating within Northern Ireland which, although much smaller than that suggested in your letter, are seeking to enhance the return to producers through concentration on the quality of animal produced.

LMC is already involved with such a group under the Quality Beef Initiative, a partnership involving DARD Agri-food Development Service (Farm Technology & Business Systems Development Division). The group, under the name Quality Beef Northern Ireland (QBNI), is an amalgam of three local area initiatives and community groups in the north-west. It is co-ordinated by DARD Beef Development advisors and technologists, with LMC offering support and market awareness advice. The current membership is 85 beef producers finishing approximately 1,000 cattle per year. Its objectives are more market-focussed than earlier producer groups and it has contacted some of these earlier groups (South Armagh Quality Livestock, Tyrone Quality Livestock, Strangford Down Ltd, Ulster Quality Livestock) to determine the level of interest in creating one larger group. QBNI has also had discussions with the facilitator of the Ballyclo Suckler Calf Initiative and has initiated a cross-border link with the Donegal Quality Beef Producers Group.

The organisation of QBNI is still in its infancy and very informal. There are no conditions of production required for membership except a broad agreement to comply with its objectives. LMC believes that in due course, when formal arrangements are put in place, a strict production protocol will be needed detailing the conditions for membership, for example:

• The percentage of beef breeding in cows.
• The absence of Holstein genes.
• Sired by top 25% recorded bull.
• Etc.

These conditions would provide also a link to the Livestock Breeding Initiative, another partnership involving DARD, LMC and in this instance Ai Services.

LMC are closely involved with one of the aforementioned groups. Ulster Quality Livestock (UQL), having provided pump-priming funds and administrative support since its inception five years ago. It is disappointing that there has been a decline of interest in the members of this group, now that the funds are depleted. They were used to subsidise AI fees to nominate bulls, to subsidise the costs of oestrus synchronisation to enable AI to take place and to subsidise the costs of pneumonia vaccination to maintain viability of the improved calves so produced. Short-term financial gain to members from these subsidies outweighed any desire for longer-term investment to improve cattle quality. Discussions are currently ongoing to find a way of using the UQL company for the benefit of an expanded QBNI integrated with other groups.

Yes. We would suggest, however, that the investment in "creation" of the organisation is in fact not significant. The significant investment is likely to be in the funding of an Executive which can completely lead and develop the organisation, promote and market the livestock produced and, more importantly, to establish production protocols to warrant the quality of animals coming forward and to seriously address branding issues (as covered later).

The significance of the investment required will of course be determined by the numbers joining the organisation and the level of ambition of the group. Suffice to say that several hundreds of pounds per year per producer would be required if any serious consideration was being given to branding or promotion of the output in the years ahead.

LMC have not had an involvement in the pig sector and are not well-positioned to comment on this question, other than as dealt with in response to your next query.

This is again a difficult issue for LMC to deal with. We would comment that in the recent Review of LMC, Government officials queried the respective industries about the possibility of LMC seeking to represent and provide services to the pig sector as well as beef and sheepmeat. As we understand the consultation, the pig sector failed to respond to the inquiry and the beef and sheepmeat sector seemed fairly neutral on the inclusion of pigs.

The merits of the debate are finely balanced. On the one hand, the generic marketing activities are likely to be very similar and could be incorporated within one organisation as is evidenced by MLC in GB. On the other hand, pigmeat is a major competitor (in particular with the sheepmeat sector) and we are aware that tensions do exist within this competitive arena in MLC as they seek to properly represent competing species.

Looking specifically from the producers' perspective, we would comment that beef and sheepmeat production share in their use of the prime natural resource of Northern Ireland (grass). Pigs, however, other than in the requirement for land for the disposal of slurry, are not dependent on the natural resources of the Northern Ireland agricultural industry. Historically, pig production has represented a useful diversification on a mixed farm. In the current production environment, however, where increased volumes and specialisation have been necessary to be competitive in the pig sector, it would appear to us that pigmeat production is more likely to develop towards the factory production environment and vertical integration typical of the poultry sector.

There are one or two examples of organisations operating across the species but on balance we believe it would be better for the pigs sector to be separately organised.

• What stands in the way of creating such an organisation or organisations?

We believe that the main impediment to the success for such organisations lies in the culture of our farming community. Northern Ireland farmers tend to be strongly independent and, while happy to co-operate in ventures to collect subsidies and other benefits, prefer to retain their independence when it comes to running their businesses.

It would appear to us that there are two aspects where profitability of beef production might be enhanced:

(a) Greater emphasis on carcase quality, in particular conformation, we believe would be helpful in the production of a greater percentage of our output in the form of E, U and R grade cattle. There are many very competent farmers producing superb animals for beef. On the other hand, there are a vast number of very small producers who are not well-equipped in terms of either knowledge or facilities to improve the conformation quality of their production. We believe that joining together with an aspiration to serve the quality needs of processors and their premium customers would help to develop mechanisms to solve the production problems of these small (many part-time) farmers. In preparing for our producer meetings last autumn, we in LMC estimated that conformation grade deterioration over the last few years is now costing the Northern Ireland beef industry approximately £20 million per annum. Much of this may have been brought about by the non-specialist beef animal coming forward as a by-product of the development of extreme milk cow genetics in the dairy industry, but we believe there is immense value to our agricultural industry through addressing this definition of quality in a serious way.

(b) In the current market structure, it is undoubtedly true that producers, relative to processors and retailers, are very weak. It does seem likely that a powerful producer group as you describe could substantially close the gap between the Northern Ireland producer price for beef and that obtainable in England and Wales. There is good evidence within price reporting statistics that processors are already paying better prices to some producers. We believe that these extra rewards are negotiated for a consistent supply of good grading FQAS cattle. LMC has estimated that closing of the gap to achieve average England and Wales prices based on 1999 outturns would yield at least an additional £20 million to Northern Ireland producers per annum.

It is unlikely that the organisation you describe without a major initiative on branding Northern Ireland beef would have much influence on the end prices available from our existing customer base. What it might do, however, would be to influence positively for the producer (and at the expense of the processor and/or retailer) the distribution of the margin available from the chain. Undoubtedly, however, a significant increase in the price payable to the producer is already available if the conformation quality can be improved.

No direct influence on where and how product is marketed is likely. Indirectly, however, if producers can produce a greater percentage of E, U and R grade cattle, they are more likely to reach premium markets where they are needed.

It is LMC's role to seek to serve the industry and we would indeed co-operate with all bodies interested in the betterment of our industry.

LMC is willing to play whatever role the stakeholders of the industry require of us including, as appropriate, the leading or facilitation of the feasibility study.

It is our belief that such an organisation, if it is to have credibility with either processors or end customers, must set robust standards. It should seek to be inclusive of all who are willing and capable of meeting the standards set but it must also have the absolute capacity to ensure that only those who are willing and able (to achieve the quality standards) are accepted as part of the group. It is of course important to ensure that those who are willing but currently unable are rapidly trained and supported to allow them to achieve the standards set.

Having established the above, we would naturally assume that the organisation would be owned by its members, would be directed by a Board appointed by the members, and would be run by an Executive appointed by the Board.

We repeat that it is the role of LMC to serve the industry and to participate in a manner that is supported broadly by the industry. This body could be part of LMC, a subsidiary of LMC or, if the vision of the group were sufficiently innovative, it could eventually indeed supersede LMC (or own LMC) or replace parts of LMC.

It must be recognised, however, that some of these options are likely to entail changes in the current LMC founding legislation.

Models upon which such an organisation might be based are many and varied. The best of the Republic of Ireland co-operatives have long since shed their "co-operative" status and become public limited companies. Interestingly, however, the best of them have now also withdrawn from the beef industry. A good model, we believe, is that of Meadow Valley in central England which appears to be significant in both scale and ambition as well as being financially successful. In examining models for the organisation, it is important to look at not so successful organisations as well as successful ones.

LMC believes that this could represent a useful initiative for the Northern Ireland beef industry. We would reiterate the critical importance of, on the one hand, ensuring that the organisation was open to participation by all producers and yet ensuring that its credibility and success would not be undermined by the inclusion of producers who were not committed to producing only the highest quality of animals.

The evolution of our beef (and sheepmeat) industry at producer level represents a significant conundrum for all. It is our belief that there needs to evolve a clear understanding of the scale of a beef production unit which can be viable and that we attempt to restructure our industry to achieve this scale on each "farm". It would seem that the evolution of small farmer groupings needs to take place, for example, to achieve the viable acquisition of a top class bull or even the level of animal husbandry necessary to achieve successful artificial insemination of suckler cows. This needs to be facilitated by the development of more appropriate animal health controls by DARD which would, for example, allow a small group of producers to come to be regarded as a single unit for animal health purposes (all testing, record checking and DARD supervision to be carried out on this group on a simultaneous basis).

2. The Committee has heard from the LMC in a previous session the imperative of differentiating the beef industry to be able to access the discerning customers who will pay more for a top quality article. How many customers are there?

In every developed country in the world there is a percentage of affluent consumers prepared to pay a premium for virtually any product or service. Beef is no exception in this respect, and arising from the Red Meat Strategy produced by the industry and submitted to Government in 1998, a Market Researcher has been appointed to investigate and quantify this further.

It is the brief of the Market Researcher who has been in place since April this year to identify the routes to market. He has begun his task by taking a global view of the meat industry and will proceed to target individual regions on the basis of a "world-map" of the beef industry that he has drawn.

The purpose of this map is to select the most logical targets, and for the exercise the criteria used are:

• Ability to pay.
• Willingness to import.
• Size of market for import beef.
• Per capita beef consumption

Servicing such markets profitably will be determined by the ability of our industry to build the total value of the carcase from a mix of markets for the premium cuts, manufacturing cuts and by-products. LMC are currently in the process of investigating the markets for all parts of the animal, with the findings being disseminated to those involved in livestock processing in Northern Ireland. To date a number of countries have been investigated in detail (Denmark, Singapore, Malaysia, Japan and South Korea).

We anticipate that successful development of export markets will create the competitive environment necessary for producers to receive an equitable return.

The programme for opening markets has already been agreed in the Red Meat Strategy, and the funding for this is in place. Of course implementation of this strategy has been greatly frustrated by the continued export ban on our beef.

In the process of opening markets, it is important to recognise that the beef animal is made up from a multitude of individual component parts that can loosely be grouped into three categories:

• Premium cuts, e.g. Steaks, roasting cuts.
• Manufacturing cuts, e.g. Flanks, trimmings.
• By-products & offals e.g. Hides, hearts.

Promotional activity will depend on which of the three parts of the animal are being promoted. In the case of premium beef cuts, it is necessary to assist the retailer or caterer communicate the attributes of Northern Ireland Farm Quality Assured Beef to their customers.

In the case of the manufacturing cuts of beef, these will be sold either to the large manufacturers McKee Foods (McDonalds), Oakland (Burger King) or pie manufacturers such as Northern Foods. Alternatively, some of the cheaper cuts maybe sold to third countries with the aid of export refunds or possibly in the case of flanks without export refunds as their value is close to world price level.

The by-product or offal market is, like manufacturing, essentially a commodity area where little market support beyond the most basic is required. This is an area of opportunity for development, and certainly one Northern Ireland company was successfully making inroads in the French market prior to the export ban.

Dealing specifically with investment required for opening markets, there are a number of steps that must be taken:

(a) Lifting of Export ban. Responsibility - Government.

(b) Establishment of Veterinary protocols. Responsibility - DARD/MAFF Veterinary service.

(c) Identification of potential customers. Responsibility - LMC initially, supplemented by processors.

(d) Trade. Responsibility Meat Processors, supported where appropriate by LMC.

Additionally, before premium export markets can be pursued effectively, it will be necessary for more investment in the production of E, U and R grade cattle.

How long will it take providing the quality product is there to create strong positions in these markets?

The successful re-launch of Greenfields in the Netherlands in the summer of 1999 suggests that in principle there is no fundamental objection to Northern Ireland beef.

There are, however, a couple of major obstacles to re-engagement in export trade to premium customers, namely:

• The weakness of the Euro relative to Sterling has the effect of making Northern Ireland beef extremely expensive to our former trading partners in Europe.
• The lack of sufficient quality cattle will in the short to medium term also restrict our development of premium export markets. The graph below illustrates just how few cattle are available meeting the criteria required by premium European markets.

The lack of suitable cattle for premium export markets is the single greatest obstacle to our successful re-entry; the current Livestock Breeding Initiative, developed by DARD in conjunction with LMC is an attempt to address this.

3. Where on the spectrum of perceived quality does our beef stand in the various markets we currently serve?

Perceived quality of beef involves quality parameters throughout the supply chain. To the markets we serve this includes Farm Quality, Quality of Animal and Product Traceability, Cattle/Carcase Quality, Hygiene Quality, Service Quality and Eating Quality. In most of these aspects our major customers perceive and inform us that Northern Ireland beef is at the high end of the quality spectrum. The evidence that supports this is as follows:

• The Farm Quality Scheme is in its tenth year of operation. It is well established with fair standards created with the help of the major retailers that are within reach of the majority of producers. The scheme is highly regarded for its independent administration by LMC, its thorough application and the robust way of dealing with those who do not comply, with a proper appeal procedure for dealing with grievances. This has been identified as a major strength by an International Evaluation in 1999 in which FQAS achieved the greatest number of high ratings for the various elements of the scheme in comparison with RoI's Beef Quality Assurance Scheme (An Bord Bia) and the Dutch IKB scheme. FQAS is the core requirement for NI beef to supply Tesco, Safeway, Sainsbury, Marks & Spencer, the Co-op and Albert Heijn and most of these retailers have reverted from any of their own specific additional standards, relying entirely on FQAS to meet their due diligence needs.
• The Quality of Animal and Product Traceability using the longest established and most highly developed computer traceability system (now APHIS operated by DARD) has achieved wide respect and recognition as the world leader.
• Notwithstanding the earlier comments on cattle and carcase quality, and the fact that a high quality pool can be found in NI using tight specifications, on average the quality of carcase as determined from grading results is lower in Northern Ireland than in Scotland, a major competitor at the premium end of the market. There is a strong inverse relationship between grade quality and the proportion of dairy cows in the cattle population of each region as shown in the table below.

• In regard to Hygiene Quality, NI meat plants have the highest (best) HAAS scores in the UK, and their highly regarded Service Quality is indicated by the patience and maintenance of contact of the Dutch supermarket company Albert Heijn who want to do business with Northern Ireland.
• Eating Quality of our grass-fed steer beef ranks at the top end of perceived quality, evidenced by the acceptability and uptake by Dutch supermarket customers where it is readily distinguished by the Greenfields brand.

The best of our production will allow us to target the most discerning and affluent customers, and our ambition is to increase the proportion of our cattle which meet their standards.

5. Are the attributes of Northern Ireland Beef such that with good marketing we can expect to earn premium prices in these markets?

Historically Northern Ireland has traded successfully in premium markets on the basis of:

(a) Total traceability.

(b) Grass-fed beef.

(a) Whilst we have in the past achieved a competitive advantage through our system of traceability, it is unlikely this will be possible in future due to the fact that traceability has become a much abused term. All suppliers of beef refer to it in one guise or another and the concept has become somewhat devalued. It will however remain a cornerstone of the Northern Ireland industry and there is no doubt that the APHIS system has the potential to become an extremely useful management tool for the production and delivery of superior beef.

(b) The one natural resource used for beef production that Northern Ireland has an abundance of is grass. Grass-fed steer beef is not widely produced in the European Union outside of the British Isles, and this gives us something distinctive. Grass-fed steer beef is visually somewhat darker than intensively produced bull beef both because of diet and age at slaughter, but in research conducted in the Netherlands, it was found to have a much higher preference amongst Dutch consumers. Therefore the product has proved to be desirable, and the success of Greenfields supports this. Additionally, grass-fed steer beef production has an environmentally friendly image, although we must be careful not to over emphasise this as research also indicates environmental considerations are a low priority when consumers are making purchase decisions.

There is of course a limited opportunity for niche markets such as that for organic beef, Aberdeen Angus, Hereford etc. While development of niches is to be encouraged and will work for some producers, it is important to recognise that they will not be the remedy for the problems of the entire Northern Ireland industry.

There is an interesting further dimension in regard to grass-fed steer beef production; that is in the role of being a "healthy" food. In addition to beef now being recognised as an invaluable contributor to a balanced diet providing essential protein, iron, other minerals and vitamins recent research has identified a further positive attribute of grass-fed beef, namely that it has a healthier fatty acid profile. Furthermore, there is also emerging some scientific evidence to suggest that grass-fed beef may have anti-carcinogenic properties. We can reasonably conclude that there are features of our beef that can in future be used in marketing and promotion campaigns.

6. The Committee understands that in Holland part of the great success of NI beef was the superior eating quality of our grass-fed steer beef over the intensively reared bull beef hitherto offered to these same customers. Why, if this is so, are we moving into bull beef production in Northern Ireland?

Some NI producers have read the signals of Agenda 2000 in which the subsidy arrangements encourage bull beef production over steer production, and have indicated that they are moving into it. Agenda 2000 ended up in parts as a compromise between Member States, and in regard to factors which encourage bull beef production, the weight of opinion of those Member States which produce bulls (Germany, France, Italy, Holland) prevailed. Bull beef production is encouraged in two ways:

(a) By a greater increase in the bull premium.

(b) By exerting pressure on livestock numbers carried per farm through extensification payments, the criteria for which can be met by having young cattle continually moving through the farm. Bulls normally finish at half of the age of steers and therefore lend themselves to this.

The demand of all our major premium customers is for steer beef, including that of Albert Heijn in the Netherlands, who in the early days of business with NI removed all their own indigenous bull product from their shelves due to lack of consumer demand because of its inferior eating quality. Now, because of protests from Dutch producers, they retail it as a cheap alternative to our premium product. In our view the only system of bull beef production which should be practiced in NI is with Holstein bulls from the dairy herd. These can be marketed into relatively low value manufacturing outlets. Beef bred male calves are too valuable for the premium grass-fed steer market to contemplate leaving them entire.

There is evidence that some new NI bull production has materialised into a supply onto the market in the last two months, in which young bull slaughterings have increased to 3,000 per month compared to a previous average of 650 per month. The meat plants have indicated that they are having difficulty finding a market for it. LMC are advising that any bull beef producers secure forward contracts before entering into production.

The issue is a stark example of political interference in market signals, encouraging producers to produce something for which there is little market demand. It clearly demonstrates that the subsidy system is out of synchronisation with the market.

7. What else needs to be done to reverse the trend?

The following action points are suggested:

• Encouragement of Government to be supportive of quality production in the distribution of grants and subsidies.
• Improvement in the recognition that quality beef is derived from beef suckler cows, having been bred without crossing to dairy breeds, mated to high beef genetic merit sires.
• Encouragement for pedigree breeders to participate in Signet recording schemes, and commercial producers to increase their use of top recorded sires. Ideally this will be achieved through normal market forces if there is sufficient of a differential paid by the meat plants for the higher quality grades. This would encourage finishers to pay more for better quality stores and calves, which would encourage calf breeders to invest in better genetics, thus rewarding the pedigree breeder for his investment in recording.
• Acknowledgement that more producers will be forced to become part-time, thus making it more difficult to manage and finance the use of high genetic merit sires. This requires the development of management systems from research and extension work specifically for part-time producers.
• Acknowledgement that lack of profitability in the beef industry in the last few years has led to an inability to invest in improved genetics and that some financial assistance is necessary to kick-start the process.
• Establishment of disease control protocols by DARD Veterinary Services that would permit neighbour to neighbour herd association to facilitate the creation of viable scale units by co-operation on such matters as sharing high genetic merit bulls.
• Application of a condition by all Rural Development/Local Area Initiative/Local Council Community Group funders that grant aid for livestock initiatives will only be given when objectives for long-term cattle quality improvement are incorporated and resolutely controlled.
• Development of a mechanism for dealing with the 40% of our beef slaughterings which originate from the dairy herd to enhance the quality and value of beef from this part of the industry. We believe that there are solutions available through current technologies which may be approaching commercial viability that will allow the continuation of the lactation cycle of a dairy cow whilst producing a "designer" beef calf by embryo transfer. This would have real and significant value in utilising the natural grass resources of Northern Ireland in the process of producing a high quality, well-conformed beef carcase.

8. What roles, in bringing the NI beef herd to the forefront of quality, may be undertaken by UFU, DARD, LMC, individual farmers, processors or others?

• DARD should complete the development of a "Blueprint for Quality Beef", currently at the consultation stage, incorporating a united partnership approach from all sectors in the production chain.
• Research establishments should co-ordinate a programme of action to fill gaps in knowledge appropriate to the Blueprint.
• Farming organisations should encourage their members to subscribe to the philosophy and disciplines of the Blueprint.
• Individual farmers should take all possible steps to produce the best quality of livestock.
• Processors should establish proper differentiation of payments to reflect back to the producer in a transparent manner the market value of the carcase in terms of meat yield, FQAS status and suitability for their customers.
• LMC should pursue objective classification and the persuasion of the EU control committee to recognise that EUROP grid classification is beyond its sell-by date in the face of new technological developments.

9. Do you agree that it is necessary to match the consistency of quality in cattle supplied for processing achieved by competitors such as the US and Australian producers? If so, can this be achieved in a 5-7 year period and what steps are needed to ensure success?

• We would add to your list of competitors South America, and in particular Argentina. All of these countries are promoting beef that is "naturally produced, reared on the range" which is of course akin to NI's strength of "naturally produced grass-fed". They have one major advantage over us in the much larger size of production units and thereby economies of scale. They can afford a transport charge of £780/tonne (=78p/kg) and still remain competitive on European supermarket shelves. We therefore cannot compete by merely matching their quality of cattle, we have to surpass it. We have one major advantage over them in that our cattle genetics is further advanced if we would but harness it. The relatively lower level of nutrition afforded by natural range vegetation requires that they use easier kept cattle of smaller type such as Hereford and Aberdeen Angus. Whilst these have their own intrinsic qualities, they nevertheless produce carcases that are smaller (less than 250 kg) than the current European premium market demand for heavier (300-360 kg) continental types, which we can produce through the sire's genetics from our more nutritious grass systems.
• The steps needed are detailed in 8 above. Starting from scratch, it takes 9 months after selecting the pedigree parents to produce the new born improved genetic merit calf; 15 months to rear the male calf to breeding age, slightly longer for the female; a further 9 months for his offspring to be born and then up to 30 months to rear the offspring to beef. This is just over 5 years in total, a period that can be reduced to just over 3 years if currently available high genetic merit sires are used immediately. This period has an added 24-36 months if the pedigree source material is used to produce an intermediate stage beef suckler cow which then produces the finished beef animal. The lack of adoption of modern breeding principles in beef (and sheep) production is in stark contrast to the enormous progress that has been made in the dairy, pig and poultry industries, which would today be struggling even more than they are without improved genetics.

10. What is LMC's policy on this vital question?

There is a somewhat misguided belief that "branding" is simply a process of putting a name to a product or service and engaging in a high level of advertising, promotion and PR activity to enhance public awareness. This is a highly dangerous perception in regard to the branding of Northern Ireland red meat.

It is vital as a first step in any branding exercise to define the characteristics of the product or service and to define them in a way that will ensure customer satisfaction. It is essential that the use of the branded product by the consumer results in 100% satisfaction from the outset. Only by reinforcing the promotion and advertisement of the brand by consumer satisfaction will the branding project work in the long term.

The second step, once the characteristics (or specification) have been agreed and product/service availability is achieved, is to partake of a launch in the particular market with a sustained campaign of advertising and promotion. This second step does of course require funding. It is important to recognise that in engaging in such an exercise, we would move into a competitive environment with Coca-Cola, Kellogg's, Heinz, etc. These brands are supported and maintained through multi-million pound budgets for advertising and promotion in every market in which they are offered. In our earlier examination of branding, where the Red Meat Strategy was being formulated by the industry, we concluded that even a modest branding exercise for Northern Ireland beef in GB (akin to Scotch Beef, Danish Bacon, etc) would cost of the order of £3 million per annum.

Some of the characteristics which might attach to a Northern Ireland beef brand might include:

• Sex of the animal.
• Maximum age at slaughter.
• Percentage of beef breeding.
• FQAS (lifetime) membership.
• Maturation process.
• Maximum fat content.
• Grass-fed

It would also be our view that the brand would be supported by a consumer guarantee of a no-quibble refund on return of the product if the customer was dissatisfied in any way. There may be other characteristics which might be included, for example a number of alternative recipes or cooking instructions, but all should be designed to ensure an absolutely reliable eating experience by the end consumer.

The difficulty of course of writing a robust specification is that a significant proportion of Northern Ireland beef production would be excluded and this might be "unpalatable" for many in the processing sector and perhaps also your Committee. What needs to be recognised is that in parallel with the launch and promotion of the brand, we would need to work feverishly hard to generate an ever increasing percentage of eligible product on our farms.

Given the industry agreement on the above matters, LMC would be of the view that branding of NI beef in a number of markets is both possible and viable.

11. Why are there so few strong beef brands?

This may well be associated with the historical way in which beef has been retailed. The potential "Brander" has not been in control of presenting the product to the consumer in its finished state. Retailing beef has long been a specialist trade the preserve of the butcher. If we think of other consumer goods such as clothes and shoes, brands did not exist here either when shoes were made to order by a cobbler or clothes produced to order by a tailor or dressmaker. As retailing changed in this sector during the 20^th century, so also did the growth of brands and styles. Perhaps as beef retailing is now undergoing a major change to the large multiple retail sector away from the traditional high street butcher, the time is opportune for introduction of consumer branding. It is conceivable that the butcher of the future will be a particularly exclusive provider of meat much in the same way as the top fashion house today produce handmade clothes and footwear to a small elite group of consumers at a highly inflated price. There are already some examples of Northern Ireland independent retail butchers developing such specialities.

Additionally, consumer brands tend to be best developed in added value products. Beef for whatever reason has lagged behind other meats and foods in this area, and an additional challenge is for the industry to develop new value added lines from the most expensive of meats. This is a considerable challenge as the often cited example of poultry has the advantage of being both a more uniform product and more cheaply produced. It would be easy to add cost to beef without adding value yet this is something that needs to be achieved to keep beef relevant as a source of protein in today's consumer environment.

LMC are not aware of any fundamental objections to branding in the industry. There are, however, a number of practical issues which require consideration.

(a) Branding has a cost. Who will pay this cost, and who will benefit?

(b) Given the present structure of the industry, there is absolutely no need, and indeed it could be argued that it would be disadvantageous for the processing sector, to lumber itself with branding of Northern Ireland product irrespective of producers' enthusiasm. Processors are in the business of taking raw material and producing a product to retailers' specifications and in the process making a margin for their shareholders. They have no incentive to promote a Northern Ireland brand from a commercial perspective. The real issue is, can the producer have the confidence that he will receive a return if he makes the investment? This is the ultimate conflict of interest between producer and processor: the producer wants to increase the value of the cattle he supplies, while the processor needs to source his raw material, ie cattle, as cheaply as possible.

12. Do you believe that the major GB supermarkets would carry Northern Ireland branded beef either as an individual company brand or as a regional brand or is their store brand policy so firm to make this impossible?

If consumers want a particular branded product, large retailers will supply that product. There are numerous examples of the GB-based multiples reintroducing Northern Ireland consumer brands in the face of such demands.

Additionally the strength of any brand is the willingness of its sponsors or promoters to invest in it. No retailer would dare leave Coca-Cola or Heinz off their shelves or indeed smaller local brands such as Denny sausages or Ormo bread. In the event of the industry pursuing consumer brand for Northern Ireland beef, the industry commitment to promoting that brand would have to be on a scale and duration appropriate to the market.

13. When pigmeat prices moved against the GB producers, the supermarkets appeared to desert the UK producer in favour of cheaper continental pigmeat. Their ownership of the brand made this easy to achieve. Are not our beef producers in exactly the same position should the day ever come when the major retailers can source beef more cheaply from the UK, Australia or Argentina?

This has to be a very real concern for beef producers. There are, we believe, a number of obstacles to wholesale import of beef from outside the European Union in the immediate future.

(a) It is unlikely that the next round of world trade talks will totally expose European markets to the global beef industry.

(b) There are logistical difficulties in bringing fresh produce from the Southern Hemisphere, although these will be overcome in time.

(c) Although we have many concerns about the conformation quality of the Northern Ireland beef carcases, we have equal concerns in other major production areas of the world particularly in South America where it would take a number of years to introduce and develop European blood lines and achieve the average carcase size we currently produce.

14. In the dairy industry, consumers would notice if, say, Dromona butter was substituted by another brand and could demand its reinstatement. Does the absence of brand recognition leave NI beef vulnerable to substitution and what is to stop processors from substituting non-NI beef if the terms of trade move adversely, particularly if processors have no investment in a NI brand? Do you believe this is an issue of major strategic importance for the producer side of the industry? What are your views?

There is absolutely nothing to protect Northern Ireland beef within retailers other than the anxiety on the part of retailers to be seen to be supportive, in our case of Northern Ireland produce, in a GB context of "British Beef".

This policy is something retailers have pursued over the past two years, LMC are unsure if this will remain. The retailers' long term policy may indeed change, particularly with the arrival of Wal-Mart which is set to have a major impact on how the large GB retails run their businesses. All the evidence to date is that retailers will seek to reduce the cost of their product sourcing, and in this context it is easy to visualise in the interest of consumers, supplies from the lower cost beef producing regions of the world. As alluded to previously, this need not have major implications for the processing sector as Northern Ireland processors could quite easily utilise raw material from any part of the world. It has serious strategic implications for primary beef production in Northern Ireland, and how the industry addresses this will determine the long term viability of beef production in this particular region.

This is the fundamental reason for LMC supporting the concept of branding as a defence mechanism for Northern Ireland producers.

15. What are LMC's plans to extend the successful Dutch branding experience to other markets in Europe?

Before even considering extension to other European markets, LMC would have to be satisfied that there is an adequate supply of local quality raw material to meet such markets. Whilst we believe there are opportunities to do a similar job elsewhere, there are currently inadequate supplies of suitable livestock available.

16. What restrictions, in terms of EU policy standpoint, are there on the creation of a strong regional brand for NI beef?

At a policy level the EU restricts the use of Government or quasi Government funds in the promotion of agricultural products from designated regions to the benefit of member states or regions

The Assistant Clerk to the Committee for Agriculture and Rural Development wrote to my Department on 11 August 2000 asking for our views on a number of questions relating to the above Inquiry. It was suggested also that I should meet with the Committee on 22 September 2000 and that, in the meantime, my Department should provide a memorandum setting out its view on the subjects raised.

Turning now to the issue raised in the Clerk's earlier letter, my reaction is set out in the following paragraphs. The Committee appears to be suggesting that processors and retailers are capitalising unfairly on Northern Ireland producers' lack of organisation and that DARD, because of its heavy involvement with the farming sector, has a responsibility to organise producers in order to restore the balance.

I must say that I would be extremely reluctant to have Government interfere in the free market which exists between producers, processors and retailers. Previous experience with the various marketing boards has taught that Government involvement is seldom in anyone's long-term interests. There is, of course, no reason why producers should not themselves come together to strengthen their position vis-à-vis processors etc if they see benefits in doing so. My Department has had very few indications that producers do, in fact, see the need for more co-operatives and none at all that the industry wants a single one as is now suggested. There are agencies already in existence by whom such efforts could be facilitated and my Department would of course provide whatever help was within our power. To go further than that and involve Government in sponsoring or funding marketing organisations of the type apparently envisaged by the Committee would be to act in breach of EU law which specifically prohibits such involvement by Government.

I do have to say that there are other risks associated with producers organising themselves so as to improve their bargaining position with processors and retailers. Such efforts will only be fully effective if those organisations have no other sources of supply. The reality, of course, is that many of the major processors and retailers are players on the global stage and will source their producers wherever makes most business sense to them. Indeed, the willingness of processors and retailers to do just that by obtaining products outside Northern Ireland has been one of the main bones of contention I have heard expressed by producers' representatives since I took up post. What we all need to do is to see that local producers supply products which are of the quality demanded by processors etc at a competitive price, and my Department is concentrating on doing that.

The Committee's questions really revolve around the issue of fair returns to producers. They will be aware of the group of experts I have set up and charged with delivering a vision for agriculture in Northern Ireland. That Group is looking among other things, at new ways of doing business in the agriculture sector, the influence of the multiples and competitiveness and marketing throughout the food chain. The general issue of fair returns for all parts of the chain is one of the key principles being looked at by the Group.

For my part, I am very concerned to see returns to all sections of the industry - including pigs and beef - improving. There are steps which I can take to help such as trying to re-open beef and cattle exports as I am currently doing, but there are limits to what Government can or should do in this area. At the end of the day, we ignore or try to distort market forces at our peril. Moreover, I doubt the value of hypothetical speculation on what might be good for producers.

To be fully effective any new producer co-operative would need to be involved not just in selling primary produce but in processing and marketing as well. This would require massive investment for which Government would have no resources and would in any event only add to the existing over-capacity in processing in almost all sectors. Furthermore it would not necessarily lead to an increase in producer prices as pig, cattle and dairy prices south of the border adequately demonstrate.

You will recognise from the above that I have very real reservations about the value of pursuing the course which the Committee is considering. Leaving aside the point of principle, the work which you have asked the Department to undertake would have enormous resource requirements. To produce the type of analysis the Committee's request would require would tie up various sections of this Department, DETI and IDB for months. I could only staff this work by diverting people from other more necessary work. I would be very reluctant to do that.

The Committee also asked a number of questions about the Department's role in relation to the promotion of beef herd quality. The Department accepts that beef quality measured in terms of carcase classification has declined in the last 4/5 years. This is a matter of concern given the implications for producer returns, the marketing of Northern Ireland beef and the importance of this sector to the industry.

The Department, in consultation with the industry, has commenced work to develop a strategy for improving beef carcase quality. This exercise will now come within the scope of the Vision Group. In the interim, the Department in conjunction with AI Services and LMC has launched a Livestock Breeding Initiative which is aimed primarily at improving quality through the selection and use of genetically superior breeding stock.

I am sorry that I cannot be more positive towards the Committee's suggestions on producer co-operation but I trust that you will appreciate the reasons why that is so. I hope also that the Committee recognises the value of what we are doing on beef carcase quality. I stand ready to assist the Committee with any further work it wishes to conduct into this important topic.

I acknowledge receipt of your letter of 10^th August 2000, seeking answers and opinions to 25 questions by 23^rd August. I have to say that this is a very unrealistic deadline to set for such a demanding letter. Some of the questions are extremely complex and cannot be responded to without a great deal of research. Indeed most of the information you are seeking is all contained in "A Development Strategy for the Northern Ireland Red Meat Industry" [DSRI] which was presented by the industry to Government ministers in April 1998 and most of which is still current. [The index to this is attached at appendix 1 to show the detail of the strategy] However I will endeavour to make some form of response to each of the questions you ask and refer to them as numbered in your letter. As NIMEA's activities involve only the beef and sheep sectors there will be no input in this reply in respect of the pig industry.

By the way Friday 8^th September is unsuitable for the entire beef industry as an event "Suckler 2000" has been arranged for Enniskillen on that day.

1. Would NIMEA welcome such a development in principle?

NIMEA would welcome in principle any development that removes the fragmentation of the cattle and sheep chain in NI. Please see page 14 DSRI. Such a co-op already exists in the name of Ulster Farmers' Investments Ltd. Currently the largest shareholding in one major meat group in NI are farmer co-operatives. Looking over our shoulder we note that in the mid 1970s over 50% of the beef industry in the ROI was owned by farmer run co-ops which have all now disappeared and where less than 5% of the industry is now in co-op hands. It may be wise to look at these previous examples before trying to re-invent the wheel.

2. Would NIMEA or its members be ready to form meaningful partnerships with such a co-op or co-ops?

NIMEA members already have meaningful partnership producer "clubs" in place as this is currently a pre-requisite of doing business with major multiples and a development of DSRI recommendations. Any venture must be an improvement on what is already in place.

3. Would processors be prepared to contribute financially to such a development and if so how?

NIMEA members are already contributing commercially through various quality bonus schemes and year-end bonus payments. NIMEA members have consistently been involved in taking costs out of the industry where possible and streamlining the industry to its current state of efficiency. As already mentioned, if there is a system of more meaningful partnerships than referred to at 2 above then NIMEA members are willing to explore these. Those who are shouting loudest at the moment tend to be those who are not prepared to "co-operate" in producer groups, sign up to production processes or are not prepared to meet the detailed production specifications required by the premium market. They simply value their independence and it is beyond reason how this can ultimately be to their benefit.

4. What obstacles stand in the way of producing an efficient and effective supply chain of this sort.

The question assumes that we understand what you consider to be "this sort" which would be a wrong assumption to make. Therefore in making a reply to this it will be on broad terms.

(a) Perhaps the greatest single obstacle to achieving this is that around 45% of the animal's return comes from support systems which have no quality requirements. Market demands are therefore not seen as a major factor in production of marketing decisions.

(b) The NI farmer has never been willing to fully endorse the co-operative system and still wants to retain his independence. Take for example, the Pigs Marketing Board, The Seed Potato Marketing Board, and Ulster Beef Producers, which were all producer controlled bodies. Each one ceased to function due to the fact that producers chose to exercise their independence in selling their produce or wanted a flat price for everything irrespective of quality. Co-operation as a theory is excellent and makes sense, but at times the way markets fluctuate it demands dedication and loyalty to make it work. Producers have made it work well to their advantage in other parts of the world, but the principle, although tried on different occasions in NI never really caught on. That of course is no reason not to try again.

(c) Unwillingness to identify to a single market, even though this may ensure premium prices, is often perceived by farmers to be reducing his number of market outlets and thus his independence.

(d) The beef industry requires a more or less consistent supply of cattle 52 weeks of the year. A co-operative venture could well establish control of production to ensure a level of supply of raw material thus eliminating peaks and troughs from the cycle and thus ensuring more consistent returns to producers. However dates and ages of animals under the Agenda 2000 arrangements mean that production is currently focussed on ages and dates of birth, which in themselves have introduced artificial peaks and troughs to the marketing system.

(e) On Farm Quality Assurance, NI is currently losing ground to neighbours both in Scotland and ROI. In the ROI Farm Quality Assurance is in place by legislation and the voluntary conditions in Scotland are higher than those in the NI scheme. The Assembly should consider the introduction of lifetime FQAS to EN45011 standards by legislation, for all who keep livestock.

5. What role should DARD play in such a venture?

First of all what is the venture you are talking about? That has not been made clear in your letter.

There MUST be a co-ordinated central strategy, with everyone working towards a single aim. In view of the fact that DARD have the APHIS computer traceability information they must be the central co-ordinating body in such a venture. DARD MUST harness the efforts of all the other funding operations in Leader Groups, Rural Development, District Councils, etc and work together towards a central NI strategy. Your initial question mentioned a fragmented supply chain but there is also a seriously fragmented Government support chain which has spent serious money on many individual projects through the above-mentioned outlets with no co-ordination or single focussed marketing. The net benefit to NI and the NI Meat industry has been negligible.

6. What role should LMC play?

LMC should continue the role in which they currently operate. LMC are there to service the industry by promotion and to a degree, marketing and the investigation of new markets. LMC must NEVER become involved in commercial activity otherwise they lose a very important role of independence and acceptability from processor to retailer. They have an essential educational and communication role to play, and must be permitted to do that.

A recent Government Review of the LMC, which took over one year to complete, has already published, after widespread consultation, clear guidelines as to its role. NIMEA made a substantial contribution to the consultation and it is suggested that all the answers to this question have already been researched for that document.

Please see the contents index attached as appendix 7

7. Is this where our future lies with well chosen European Supermarkets who recognise our superior quality and will be prepared to pay a premium price which can then be shared back down the line.

The short answer to this question is "NO". The future for the NI beef industry lies in dealing with bigger supermarkets [in wherever] who can pay prices above the flat commodity prices. The GB supermarket trade is currently the highest priced supermarket trade in the EU for what we produce. The Dutch supermarket with whom NI traded in 1995 decided to take its beef exclusively from NI. When BSE hit they were in a very embarrassing situation and will never again place themselves in that position. They and others learnt a salutary lesson from that. Future business with that and other EU outlets will still pay a good price but it is currently equivalent to the Irish price. However the "good price" they are paying today is below what the NI industry is securing from the GB marketplace partly due to currency relationships. As is the case at the moment the price relevant to the market will continue to be reflected to the producer. It is evident from the wording of this question that the reality that 1995 has gone for ever, has still not sunk in. In EU market requirement terms, the volume of beef produced in NI is minimal, therefore NI will never be a "quantity" supplier. Indeed if one of the major EU supermarkets decided to buy all its beef in NI we could not supply the quantity. Market share will therefore not be a major factor to the industry here. With the relatively small quantity of beef produced in NI, the industry must concentrate in finding smaller niche premium markets. It should be noted that the Superior quality you mention is for grass-fed STEER beef.

Please see page 31 of DSRI.

Currently only 55% of all NI beef steers meet the demanding specifications for both GB and EU supermarkets and 100% of these steers are currently being marketed to GB retailers. Any niche markets developed in the EU will have to be supplied at the expense of premium niche markets in GB.

8. Do you believe that in the long term interests of the whole industry we should be finding and developing these high value market niches now ready for the day when the currency and cattle supply problems have been solved.

The question demonstrates an over-simplification and misunderstanding of the way in which current premium niche market procedures in the beef industry operate. The question is rooted in commodity selling like the milk industry, and that day has to be consigned to the past for good. The future can only be secured on a contractual basis throughout the chain, to supply a product, supply it consistently and supply it 52 weeks of the year. Over the past four years the NI meat processors have had to learn the lesson that producers still are unhappy to accept. The future is in constructed partnerships where each party is contracted in and is unable just to pull out and change market on a whim. The entire marketing systems today have changed immensely since 1995 and the new buzz-word is "globalisation".

Prior to 1996 NI meat plants had developed these very kind of markets [over 40 of them] both inside and outside the EU. That marketing process has never been let drop and continuous communication by phone, fax, and personal visits has been ongoing over the past 4 years. The difficulty in all this of course, and now even more so because of beef labelling legislation, is matching the NI production to the available niche markets. There is no bigger marketing blunder than to sell something that cannot be delivered, consistently 52 weeks of the year. That has been a weakness of production in the past that at times of the year there was a supply of cattle surplus to niche market contracts because marketing can only be done to the level of the minimum period of supply. For example if there is a supply of 5,000 cattle a week in April and a supply of 10,000 cattle a week in October, the optimum premium market sales can only be based on 5,000 cattle a week. If more than 5,000 per week are marketed then there is a time of the year when we cannot supply and that is the point at which another supply from elsewhere steps in and takes the niche from us. That is disastrous and to be avoided at all costs.

You state under this point in your letter that "now that the beef ban is lifted". This is a completely erroneous statement and even with Low Incidence Status for NI this will still not be the case. The ban will simply be eased further, and this is what makes those niche markets very nervous, but you assume correctly that the NI meat industry will engage in vigorous attack of those markets when the low incidence all clear is given.

9. What percentage of members' turnover have you spent this year in researching these critically important new markets for our beef? What is this in percentage of profits?

NIMEA as such cannot answer this question as NIMEA does not get involved in the commercial aspects of marketing. Each company individually develops their own markets and this information is "commercial in confidence". The NI perspective on this is contained in DSRI pages 56 to 61 and is currently being worked at.

10. How many now high value markets will be tested in the coming calendar year and what percentage of turnover will this represent?

As stated under 7 above the entire NI production of beef is relatively small. Last year there were 215,000 steers slaughtered in NI. Due to bureaucracy problems, around 40% of these were export eligible. By specification only 50% of the export eligible were niche market acceptable. Based on last years kill that means that a total of 43,000 steers were export eligible. Currently one GB multiple is taking that amount of cattle from NI annually. Given that these same steers are also those being demanded by the GB premium markets, the remaining pool of cattle available for export at the moment is minimal. Farm Quality Assurance is the minimum standard required for premium markets and yet after all the drive by industry 25% of beef farmers still choose to stay outside the scheme. In the ROI this is being made a statutory condition of farming livestock. Perhaps the NI Assembly should follow suit. It would therefore not be very wise to test markets for something that cannot be delivered. It is also impossible to test markets without samples of the product and under current export restrictions NO beef from NI can be exported, including samples. It may be recalled that the giant food fair at Anuga last year refused to permit samples of even cooked product to be brought to the fair.

11. What percentage of NI beef do you see being sold on export markets in 2000, 2001 and 2002?

No NI beef will be sold on export markets in 2000, as current conditions do not permit exporting from NI. It is not commercially viable for any NI meat plant to become dedicated under the legislation to export. As far as 2001 and 2002 are concerned that depends on the ultimate legislative conditions attached to Low Incidence Status. Under what we observe at the moment it is estimated that exports could soon be built up to 300 tonnes per week but this would mainly be offal as currency values would return lower prices for most cuts than is available on current UK trade.

12. Where on the spectrum of perceived quality does our beef stand in the various markets we currently serve.

From the integrity of FQAS production and the quality of service by processors the score is at the top of the scale. However for the carcass quality at present the score is around or below the mid point of any scale. The quality image of NI beef is perceived to be above Irish beef, similar to English beef but lower than Scotch beef. The current success is a combination of good animal welfare, environmentally friendly production, meeting customer demand [steers and heifers only] traceability, Farm Quality Assurance and a very high quality customer service. Quality of customer service is the main aspect of maintaining our premium market share t the moment. Please see appendix 2 attached.

13. Where can it be positioned in the niche markets you believe we ought to be serving in the future?

To position it in the rich niche markets NI beef will have to be grass fed and from steers and heifers. EU premium markets are not interested in bull beef from NI, they have all the quality bull beef they want at home. NI must therefore concentrate on the steer and heifer production to have any edge in the currently available markets in GB or the EU. Please see pages 39 to 44 of DSRI.

14. Are the attributes of NI beef such that with good marketing we can expect to earn premium prices in these markets.

Unfortunately NI does not have the quantity of desired quality or the strategy needed to serve EU premium markets at the moment. However provided NI produces steers and heifers from grass, these attributes along with our excellent customer service are what will differentiate NI beef on niche markets. Meat plants buy cattle and sell "pieces of meat" A carcass can sell in as many as 40 different pieces. Some of these pieces are sold far below the cost of production and others are sold at a premium. It is the balancing of all the sales that determines the end result. There is no specific direct correlation between the carcass price and the price of any one of the pieces.

15. The Committee understands that in Holland part of the great success of NI beef was the superior eating quality of our grass-fed steer beef over the intensively reared bull beef hitherto offered to these same customers. Why, if this is so are we moving into bull beef production in NI?

NIMEA has been drawing attention to this situation for some months now and is greatly concerned at the increasing trend of bull production. It is being driven hard by the arrangements of Agenda 2000, on extensification and a different "livestockunit" valuation if animals are held until more than 24 months of age. Indeed Meat Plants have come to the stage where they are asking producers to register bull numbers with them as the market is currently saturated. The current numbers being produced cannot all be marketed. We are back to point 1 above on producers doing what suits them or what maximises the benefits from the system rather than being market orientated. Bull beef prices here will be heavily discounted if more are produced. Currently there is only one of the major GB multiples who will take a very limited supply of bulls, less than 5%, and another GB multiple, has removed bull beef from their shelves three months ago. Even the quality is available Albert Heijn will not be taking bulls from NI. It is ironic that this political interference is doing producers a disservice, encouraging them to produce something for which there is a very limited market.

16. From evidence by the committee there seems little doubt that there has been a deterioration in herd quality on average. Why do you think this is and what needs to be done to reverse the trend?

(a) There is a massive amount of evidence that herd quality has deteriorated and there is no doubt that the start of this decline came in the mid 1980s. With the average age of farmers increasing they are looking for easier calving animals and easier systems as the main reason of the animal is a subsidy earner rather than a quality end product.

(b) Second is the reason of genetics. Over 40% of NI beef animals still emanate from the dairy herd and as the emphasis in the dairy sector has gone to extreme Holstein breeding this has had a major deterioration effect on the beef herd as many suckler replacements come from there.

(c) Feed prices has also been a factor in that due to the entire upset in the agriculture industry and the requisite dates under various EU support schemes, farmers adopted different management policies.

(d) Perhaps also a slow dissemination of market requirements from the customer back through to the producer, and then an unwillingness to react to these requirements.

(e) It is our opinion that market-led research and feedback information to producers can do much to counter the downward trend. That depends on the establishment of a strategy which addresses the following question. "In terms of size, vision and strategy where does the NI beef industry want to be." This aim must be established first and then subsequent decisions will relate to it. NIMEA has not changed it's opinion of the vision statement contained in page 29 of DSRI and which is attached as appendix 3. All DARD, Rural Development, Area initiatives, District Council ventures and other community-funded projects MUST be brought under one single NI Strategy.

The goal has to be set for everyone to buy into and to work towards. For example, there is no point in developing added value ventures if it is perceived that the long term future for the island of Ireland is simply to become the source of weanlings for the feed lots of Europe! Equally if 50% of the calves go to Europe then the supply base for finished beef in NI is too small on which to establish even premium niche markets. It is therefore essential that all interested parties sit down round the table and decide the vision for the future of the NI beef industry.

17. What roles in bringing the NI herd to the forefront of quality, may be undertaken by UFU, DARD, LMC, NIMEA individual farmers, processors and others.

The single most important factor is firstly the establishment of a ten-year strategy that is market led. Each of the above bodies and individuals will have determined roles to play in that.

18. Do you agree that it is necessary to match the consistency of cattle supplied for processing achieved by competitors such as the US and Australian producers? If so can this be achieved in a 5-7 year period and what steps are needed to ensure success?

Yes. Currently Australian 5 star beef carries a money-back guarantee anywhere in the world. We are a long way from there and we do not have the cattle numbers to be a major world player but we must be professional and expert at what we do supply, and work towards that sort of peak in the long term. The attainment of this will flow out of the strategy designed at 17 above.

19. Does NIMEA believe that brand identity is important or does it pay the processing industry better to sell NI beef as a commodity for others to brand?

Please see pages 39 to 45 of DSRI. One major NI drinks company employed world class consultants to examine this question and advise accordingly. Our understanding of the outcome was "it would be economic suicide". A NI brand was discussed at the Red Meat Strategy meetings and the cost of this was estimated 4 years ago at between £15 million and £25 million. Branding of NI beef can only become a possibility when 100% of the herd is export eligible and FQAS accredited to EN45011 standards. To think along these lines with anything less is purely pie in the sky. Please see the evidence of the efforts made along this line as outlined in pages 45 to 47 DSRI [attached as appendix 4]. The debate then is still the same today. Before the NI beef industry can establish a brand, the criteria for cattle quality, breed percentage, farm assurance levels and other production components would have to be established at much higher standards than exist today. That work must be done first. There is no point in adding cost without adding value. For very small quantities of extremely high quality this may be viable but it would be our opinion that we do not have the scale of quality criteria to brand our entire production.

20. What efforts have NIMEA or their members made to establish a brand on the GB supermarket shelves. Have you ever raised the possibility and if so what was the outcome of your discussions.

The consumer perception is that if Tesco, Sainbury, Safeway, M&S etc are prepared to put their name on a product then that gives considerable confidence to the consumer. NI Branded products carry no weight on the GB market and indeed if branded as such are perceived to be "Irish" and command lower premiums. On the other hand NI beef was perceived to be so far beyond Scotch beef and other competitors as to be demanded from every shelf, then generic branding is a feasibility and worth considering.

21. Do you believe that the major GB supermarkets would carry NI branded beef either as an individual company brand or as a regional brand or is their store brand policy so firm as to make this impossible?

Doing anything at the moment with a NI Brand would be counter productive. This raises the whole question of market protection which is unacceptable in a EU "Single Market". Please see DSRI pages 49 and 50 attached as appendix 5 for the kind of marketing strategy that will help ensure NI meat is the main choice.

22. Ownership of the brand made it easier for GB supermarkets to source pigmeat elsewhere. Are not our beef producers in exactly the same position should the day ever come when the major retailers can source beef more cheaply from the US, Australia or Argentina.

The day is already here. The Lidl and Wallmart effect of supplying "cheap food" from whatever source may very well force further change in retailers current sourcing policies in the next couple of years. Due to the good relations and investment by NI processors we have retained the loyalty of the GB multiples but globalisation is around to stay. Under the voluntary beef labelling legislation which has been around for the past few years all NI beef going to retail multiples has been clearly identified and has been validated by third party audit and is traceable through the APHIS computer. This factor becomes even strong from 1/9/2000 when the EU-wide beef labelling legislation comes into force. Further constraints will come into force in 2002 that will very clearly identify every aspect of an animal's life and the member states in which various aspects of its life history have occurred. The question is therefore somewhat superseded by events. Also do not be under any illusion, Argentinean and Australian beef is already available and they are quality products, and they are our competitors.

23. What is to stop you substituting NI beef if the terms of trade move adversely. [relevant part of question]

The question again displays how far from reality the questioner is. Beef labelling regulations which have been around for some years, EFSIS independent auditing, and trading standards, control this adequately. Further detailed labelling legislation becomes effective from 1/9/00.

24. What are NIMEA's plans to extend the successful Dutch branding experience to other markets in Europe?

As NIMEA does not own the brand-mark used for the branding in Holland and in fact it is a legal entity in its own right, NIMEA as such cannot propose any action on that front. Indeed NIMEA is not in any way involved in that brand name but individual companies were involved in the partnership. The owners of that trademark no doubt will become active again when the export ban is further eased and if it is even possible from a currency perspective to do business. The highest ever price that NI beef reached was during the week commencing 6/2/95 when the calculated R3 price was 289.9 Euros. On 1/5/2000 the R3 calculated price of NI beef was 281.9 Euros. From this it is clear that the NI problem is not the price of beef but the values of currency. NI Companies involved in the Greenfields brand have taken serious risks to keep the markets open. NI currently avails of an EU scheme which allows our expertise and customer service to operate in that market.

25. What restrictions in terms of EU policy standpoint, are there on the creation of a strong regional brand for NI beef.

Other than State Aids that prohibits central funding, we are not aware of any. Actually the EU has three schemes under which specific products can be registered. These schemes are outlined in appendix 6 attached.

Working group and Terms of Reference 12
Critical Exercise 12
Strategy Document 13

2.1 Fundamental Process Considerations 14
Teamwork Between Seven Key Players 14
Consensus 14
Unitary Nature of Strategy 14
An Implementable Industry Strategy 14
Step Change 15

2.2 Strategy Development Concepts 15
The Core Process 15
Step 1 Appraising the Starting Point 15
Step 2 The Creation of a Shared Vision 15
Step 3 Creating the Strategic Action Plan 15
Step 4 Implementing The Plan 16

2.3 Acknowledgements 16

4.1 Relative Perceived Quality 24
The Industry's Position Now 24
Reputational Risk 25
Legislation and Controls 25

STRATEGIC TARGET 25

4.2 Relative Perceived Quality and Value for Money Pricing 25

4.3 Quality Across the Price Range 26

4.4 Market Share, Prices and Profits 26

STRATEGIC POINTER-QUALITY DRIVEN MARKET LEADERSHIP 26

4.5 The Best and The Rest 26

4.6 The Significance of Market Focus 27

STRATEGIC POINTER-MARKET FOCUS 27

8.1 Introduction 56

8.2 General - Government Support 57
BSE related measures 57

8.3 Looking Forward - The Strategy in Action 57

8.4 Market Research and Market Focus 58
Funding Support for Market Research and Market Focus 60

8.5 Corporate Market Research 60
Opening Export Accounts 60
Funding Support to Accelerate Account Opening Programmes 61
A Real Example 61

8.6 Making and Keeping NI Beef Distinctively Superior in Customer' Eyes 62

8.7 Retaining Quality Supremacy for the NI Product 62

8.8 Harnessing FQAS and APHIS 63

8.9 The Marketing Platform 64

8.10 Competition at Customer Level, Retaking the High Ground 64

8.11 Implementation, Programme and Costs 67
Funding Costs for Redmeat Total Quality Assurance Scheme 68

8.12 Benefits of "The Red Meat Total Quality Assurance System NITQA" 68

8.13 Total Funding Required 70
Funding Support for Export Market Recovery Programme 70

8.14 Industry & Government Contributions 70
Funding Split Proposed £ 000 71

8.15 Managing The Strategy 72

1. The work already under way in the Quality Working Group to update the FQAS Should continue under the leadership and control of LMC. It should move immediately to complete the review of all aspects of FQAS by mid 1998. This review should embrace the following:

• future funding needs (on the recommendation of this Group that the scheme's administration remain in the hands of the LMC) including funding for developments beyond the current FQAS concept into areas where the NI industry can develop a strategic lead by creative use of APHIS or its equivalent.
• the steps needed to ensure closer working between DNAI veterinary service and FQAS staff
• steps to recruit the remaining farmers into the scheme and the same time to ensure compliance

2. As a first step all other key competing FQAS analogues should be surveyed to ascertain whether:

• Northern Ireland is in the forefront, and if so, by how much
• Plans to overtake NI are in place, and if so, in what ways, and how soon

3. FQAS should become a basic requirement for all partnership schemes by end 1998.

4. A major recruitment scheme should be designed under the guidance of the LMC and be launched by mid 1998.

5. Ninety percent of NI herds should be in the new FQAS scheme by end 1998 and ninety nine percent should be covered by end 1999.

6. These targets will be progressed aggressively by the full Steering Group starting in Q3 1998. The strategy group should proceed quickly to develop and implement the Advanced Quality Assurance concept set out in Sections 8.7 - 8.12.

7. An LMC led working group should be formed to devise, agree and implement a processor accreditation scheme to mirror the objectives of the FQAS at farm level. Accreditation will become a condition for use of the generic brand for NI meat.

NI Redmeat will be the first choice of customers, in target markets, who will recognise its product superiority from traceable quality assured suppliers. Farmers and processors will be perceived as delivering levels of service and a quality of trading relationship which is the best on offer.

All organisations forming part of the Northern Ireland Redmeat Industry will be, and be seen to be, working as the best focused, best co-ordinated and most efficient and effective Redmeat production, processing, support and marketing force in Europe.

The vision statement provides a unifying guiding mechanism for all that follows. It indicates not just goals to be met by end 2002 but the key areas where action will be needed to meet these intentions. It also rules out many inappropriate options.

The rest of this document is devoted to spelling out the various strands of action needed to take the industry from where it is today to the destination explicitly described in the vision statement

8. Northern Ireland beef should be perceived as superior in quality in all focused markets by end 1999. By end 1999 this should be yielding a price premium of at least one percent.

The industry has had one very impressive generic branding success in the Dutch market. It has also considered carefully the part generic branding might play in the current strategy. In the GB market, dominated by large retailers, the industry has made great strides by pursuing an own label strategy. NI redmeat has created a strong position in the two leading retail chains and in the leading volume food service chain by offering superior product, service and relationships to the retail customers. Generic branding is not a short run option in any of these cases.

In market segments where it is possible to aim for a dominant position, and particularly in export markets, the option of generically branding to maximise consumer loyalty and to secure and maintain a premium for genuinely superior product should be kept constantly open. It will only be when export markets are researched and opened or reopened that decisions on branding versus own label can be finally taken. The most successful competitors on the GB market (Scotch Beef and Welsh Lamb) are excellent examples of the power of branding. The extreme case is that of Angus Beef which is retailing in Northern Ireland in Marks and Spencers at over twice the price of prime NI beef in the same towns.

To keep the generic branding option open as export markets and new home channels are opened.

To choose with great care as between the own label and supplier brand routes to market by carefully researching and assessing the long term costs and benefits of building consumer as opposed to retailer loyalty for the NI product.

If it is decided that genetic branching is in the interests of the NI redmeat industry, the same level of support should be secured as has been made available in Scotland and Wales.

There is no doubt that the industry needs to accelerate the pace of development down the added value road. Together with quality, and branding it is the key to growing market share and profitability. It is also risky and needs significant investment. At both industry and firm level, care must be combined with boldness in devising the optimum added value strategy.

The ultimate form of added value strategy at corporate level is to have an array of leading brands each with sufficient consumer pull to dominate a segment. A food firm like HJ Heinz will have many such brands. Many consumer goods companies are roughly valued more in terms of their brands than their assets. Leading brands are priced by the producer, not the retailer (who will, of course seek a discount in line with his own market share as a retailer). A successful brand has a "right" to be listed because enough customers prefer it.

Building positions like this from scratch in today's grocery market is possible but it can also be very difficult for a number of reasons:

• creating a distinctive product is itself expensive and risky;
• launching such a product, even onto a regional market, can be very costly;
• creating a new brand on the back of a new untried product is doubly risky (the brand can die with a pioneering product failure);
• a successful product, aimed at the supermarket sector, unless it is absolutely unique (unlikely) is always in danger of own brand imitation as soon as its success is evident. If Sainsbury's can do it to Coke, few new product launches are safe. This is not such a problem in the food service sector.

A much less risky route than launching a solo brand is to combine new brand and product creation with a well matched partnership as follows:

1. Create an overall partnership relationship with a customer at the quality end of the market. The customer should be big enough to generate the scale needed to launch new products and a new brand, and small enough for market dominance to be realistic.

2. Use an existing superior quality commodity product range as the basis for the relationship. Playing from this position of strength, activate the partnership to agree on one or more added value products to be created to meet known demand.

3. Agree, if possible, that both the commodity range of products and the new added value items be sold under the supplier's brand, with the understanding that the brand and the products may be sold at lease on non competing markets.

4. Edge out from this partnership taking both the brand and the new products to non competing customers in other markets.

Implied (or perhaps better explicitly written into) the partnership agreement would be the undertaking not to imitate the added value products as own brand offerings.

Perhaps the best example of a business based on convenience based added value food product development is Marks and Spencer whose policy is almost exclusively own label. This has been a profitable source of added value business for their best suppliers. Not only have they a secure partnership with M&S they have, as a result, products which can be modified and sold elsewhere in branded form. Furthermore, the cachet of being a Marks and Spencer supplier (because M&S are universally regarded as being the quality leader) is very valuable in launching or promoting a brand. It is equally useful as a marketing tool in approaching other potential own label customers. Own label manufacturer is the easiest route for added value market penetration and, for most NI processors, at least in the short run, probably offers the best risk-reward ratio.

Moving from the supply of essentially butchered products into the added value field is not a natural development in that the skills base, the processes, the raw materials (all except meat), the equipment, the marketing and arguably the culture needed to be successful are all new.

It is, therefore, not surprising to find many companies who are very wary indeed of making a major strategic move in this direction. There have been significant failures in making this move. The decision to do so is not trivial. However neither are the implications of doing nothing (See Section 3.7). The market, especially the affluent thirty percent of the market, is demanding more and more value added as the underlying demand for convenience grows apace.

The industry has no option but to progress down the added value road, if it is to avoid being trapped in a cycle of low profitability and insecure supplies. The strategic choice is not whether to become involved in added value activities, but when, how and how fast.

Specially commissioned market research shows that there is a big mismatch between consumer's demands (ready to cook, ready to heat, ready to eat) and local capability to produce. Added value in food today, and especially in meat products, is all about convenience for a customer very ready to pay a premium price.

The key multiples are not currently interested in NI as a source of added value products because they believe there is neither the desire nor the capability to produce what is needed. Much of what has been produced has proved unsatisfactory. UK suppliers are seen as much better.

This is in stark contrast to the perception of the same industry when supplying primal cuts or basic portioned commodity meat.

There is an urgent need to close this perception gap by creating and disseminating the market knowledge needed to ensure the industry becomes as skilled in reading the added value market as it is in the commodity sector. This needs to be followed up by measures to create the capability to move sure footedly down the added value road.

There is no reason why Northern Ireland red meat marketing should not emerge as a role model in this segment. It all depends on highly professional marketing conducted in a context where roles are clear, co-ordination is good and entrepreneurial flair is tempered with discipline. The tasks and agreed roles are set out in two tables in the following section.

It is a function with a misleadingly simple definition comprising a complex array of interlocking tasks. It is perhaps not surprising to find a degree of confusion over roles between the various players involved in the NI red meat marketing task.

The roles and responsibilities set out in the table lead to several important conclusions:

1. The primary responsibility for the many faceted marketing task lies with the trading companies who decide what markets to address, what to sell, to whom and at what

On Friday 22 September, Officers of the Livestock and Meat Commission appeared before the Committee for Agricultural and Rural Development to contribute to the further consideration of "the particular circumstances faces by the pig and beef Industries". Specifically, LMC was invited to address the following issues:

• Co-operation and organisation of producers.
• High value niche markets.
• Quality of Northern Ireland beef and the beef herd.
• Branding.

During the course of the Evidence Session, two matters were raised by Committee members which were not specifically tabled for discussion:

1. The standard of classification within Northern Ireland slaughter plants.

2. The allegation of cartel activities by the Northern Ireland beef processing sector.

Following the receipt of a draft transcript of the evidence, we wish to contribute further comment as follows:

1. Classification

As clearly stated in the Minutes of Evidence, beef carcases offered for trade within Europe are required under European legislation to be classified according to the European grid system. The responsibility for the enforcement of the regulation is placed upon the competent authority and, in the case of Northern Ireland, supervision is carried out by the Department of Agriculture and Rural Development. A classification service is offered to the Northern Ireland industry on a commercial basis by LMC and this service, by agreement between the meat processors and the farming unions, is universally used throughout all slaughtering plants in the Province. LMC Officers in carrying out their duties are subjected to oversight and scrutiny on the interpretation of the standard by the competent authority and by periodic visits by European Union experts. We must advise that the allegation the LMC has "pushed cattle grades down in the Province by a grade and a half" is unfounded, unsupported by any evidence and blatantly untrue. If the Committee believes the contrary, we would urge that they instigate a further visit by the European experts for further adjudication of the classification standard within Northern Ireland.

While we recognise the urge for Northern Ireland politicians under current Government arrangements to participate in cheap electioneering, we would ask Committee members to consider the potential damage which these false allegations can do. Committee members should be aware that virtually all customers of the Northern Ireland industry are sourcing carcases in reliance upon the operation of the classification system. Allegations such as those made receive wide publicity and inevitably come to the attention of our customers. Furthermore, it is the policy of the European Commission to monitor development in regions and member states and we are aware that they monitor press reports and other sources of information which might highlight departures from proper standards of conduct under the regulations.

Against a background where the operation of the classification system in Northern Ireland by LMC is acknowledged to give benefit of doubt to the producer where carcases are on the margin between grades (and repeated supervision and inspection confirm this to be the case) we would highlight to Committee members that the conduct displayed by some members in dealing with classification can only serve to undermine the credibility of our industry in the eyes of both customers and regulators. We would suggest that votes bought from the producer community through sensationalising false allegations through your Committee activities only gives rise to expectations in the farming community that classification interpretation can be changed when it cannot. Such votes could be very dearly bought through a diminution of confidence in the ethics and standards of our industry.

2. Cartel Activity

The Chairman: "The Office of Fair Trading has admitted that there was a time when there was a cartel working; ."

Mr Paisley Jnr: "Could the cartel have affected that in any way?"

The Chairman: ". you did not seem to know that the Office of Fair Trading had, in the past, thought that there was a cartel."

The Chairman: ". The Office of Fair Trading now admits that it was convinced that there was a cartel. That is a very serious thing which you know you gave information to, but you did not know the outcome, ."

The Chairman: "It did come to that conclusion."

During the Evidence Session, considerable reference was made to the possible existence (present or past) of a price-fixing cartel in regard to Northern Ireland red meat processors. The record of the evidence highlights clearly that LMC is unaware of any hard evidence which might prove this matter one way or the other. We want, however, to specifically highlight the explicit statements of the Chairman and Committee that the Office of Fair Trading have drawn the conclusion that a price-fixing cartel has existed. The Chairman was highly critical of LMC Officers for their failure to be aware of such a conclusion by the Office of Fair Trading.

Following the Evidence Session, LMC has made immediate contact with the Office of Fair Trading, who have advised that they have in fact not "come to that conclusion". I attach herewith under Appendix 1 a copy of a letter received from the Director of Cartel Investigations at the Office of Fair Trading. You will note in the second paragraph of this letter the statement that "these enquiries failed to produce sufficient evidence to commence a formal investigation under the terms of the legislation dealing with price-fixing agreements at that time, the Restrictive Trade Practices Act 1976". The letter goes on to deal with the further and more current consideration of an allegation made by the National Beef Association. Committee members will wish to note that on neither occasion have the Office of Fair Trading yet found sufficient grounds to conduct an investigation, never mind to formally conclude the existence a price-fixing cartel.

We would wish again to highlight to Committee members the damage which is being done to our industry through the perpetual repetition of allegations of this nature. We would urge the Committee if evidence of cartel activity has been placed before them that they input this urgently to the Office of Fair Trading, who are the only body to our knowledge who can reach an authoritative conclusion on the matter. While such allegations remain unproven, it is difficult to contemplate how our industry can move forward in harmony to advance some of the very commendable actions being contemplated by the Committee.

D RUTLEDGE
Chief Executive

10 October 2000

Dear Mr Rutledge

Thank you for your letter of 3 October addressed to my colleague Mr McNabb enclosing the draft transcript of your appearance before the above Committee, during the course of which this Office's name was mentioned in relation to an alleged cartel within the Northern Ireland cattle slaughtering sector. You request an update regarding our considerations of the complaints we have received about this matter.

In 1997, following two separate complaints alleging that a group of slaughtering plants in Northern Ireland fixed the prices that they were prepared to pay producers for their cattle, we began to make informal enquiries to which you kindly provided pricing information. These enquiries failed to produce sufficient evidence to commence a formal investigation under the terms of the legislation dealing with price-fixing agreements at that time, the Restrictive Trade Practices Act 1976 (the RTPA). However, during the course of our enquiries documentary evidence was received that suggested the slaughtering plants had fixed charges for the removal and disposal of specified bovine offal from slaughtered cattle. A formal investigation was started in relation to this matter and as a result in August 1999 the Northern Ireland Meat Exporters Association, the trade body representing the slaughtering plants, gave undertakings to the Director General of Fair Trading on behalf of its members that they would terminate their fixed charge agreement and that they would not revive this agreement or enter into similar agreements in the future. A copy of the press release issued by the Office at the conclusion of this investigation is attached.

We are aware that the National Beef Association has recently made public the fact that it has complained to the Office about a price-fixing cartel in the cattle slaughtering sector. In order to ensure that the progress of our investigations is not hampered by premature publicity we do not discuss the progress of on-going complaints with external bodies including other government departments and agencies in the UK. We will in due course let you know the outcome of our consideration of the NBA's complaint. I should also point out that from 1 March 2000 the RTPA was replaced by the Competition Act 1998. For the Office to be able to use its formal powers of investigation under the Competition Act, we must have some evidence that an alleged cartel was operational after 1 March 2000.

I hope that this letter is helpful and I am happy for you to provide a copy of it to the Agricultural Committee. If you would like to discuss any aspect of the letter, please do not hesitate to contact Mr McNabb (direct line 020 7211 8943).

17 August 1999

Seven Northern Ireland slaughterhouses have ended a restrictive agreement that set the charge for the removal and disposal of specified bovine offal from slaughtered cattle.

Complaints from farmers led to an investigation by the OFT's Cartels Task Force of a fixed levy, currently £5, for each animal slaughtered in plants operated by the members of the Northern Ireland Meat Exporters Association. The levy had been deducted from the price that the plants paid farmers for their cattle.

John Bridgemen, Director General of Fair Trading said:

'Government regulations require that offal, which could be infected with BSE, is removed and disposed of by slaughtering plants.

In normal circumstances an agreement to fix charges would have been referred to the Restrictive Practices Court. In this case I have decided to accept undertakings from the operators because it became clear during our investigation that the agreement was made in ignorance of the law. Furthermore the slaughtering plants have now voluntarily terminated the agreement.

The members of the association have also given undertakings that they will not revive this agreement or enter into a similar agreement in the future.

Business in general should note that ignorance of the law will not be a protection against financial penalties once new competition legislation comes into force next year. My office will have greater powers after 1 March to obtain information and act against agreements to fix prices or charges. Businesses of any size may be liable to penalties if they enter into such an agreement.'

1. Under the Restrictive Trade Practices Act 1976 (the Act), particulars of agreements made before 9 November 1998, between persons carrying on business in the UK in the supply of goods and services, must be furnished to the Director General of Fair Trading for registration if two or more parties to the agreement accept certain kinds of restriction on their commercial freedom. In the case of agreements made on or after 9 November 1998, particulars must be furnished only when they contain price-fixing restriction. For this purpose, an agreement need not be contractually binding; oral and informal agreements may be caught Failure to furnish particulars of an agreement within the time limits specified by the Act render the restrictions void and unenforceable. In addition anyone adversely affected by the operation of such an agreement may have grounds for action in he civil courts.

2. Section 1 of the Act, subject to certain exceptions, requires the Director General to refer all registered agreements made before 9 November 1998 to the Restrictive Practices Court for a ruling as to whether the restrictions are against the public interest. The Court may order the parties not to enforce, or try to enforce, the restrictions and not to make any similar agreement.

3. Any breach of a court order, or of an undertaking accepted in lieu of an order, may constitute contempt of court.

4. The Competition Act 1998, which was enacted on 9 November 1998, will replace the Restrictive Trade Practices Act. This new Act prohibits anti-competitive agreements and behaviour - such as price fixing - and abusive conduct by dominant firms. These prohibitions will take effect on 1 March next year. The Act provides the Director General with new powers to investigate breaches of the prohibitions and to impose penalties of up to 10 percent of UK turnover. These powers should lead to a more efficient and effective competition law regime.

5. As part of the campaign to identify secret price-fixing and market-sharing cartels, the Office set up the Cartels Task Force. It can be contacted on a 24-hour telephone/fax hot-line number 0171 211 8888.

The OFT publishes a wide range of consumer leaflets which are available free from: OFT, PO Box 366, Hayes UB3 1XB 0870 6060321

Information about publications: http://www.oft.gov.uk