COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT

Report
Restoring Profit for the
Beef Producer

(Continued)

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.

MINUTES OF EVIDENCE

Wednesday 4 October 2000

Members present:

Mr Savage (Deputy Chairperson)

Mr Armstrong

Mr Bradley

Mr Dallat

Mr Ford

Mr Kane

Mr McHugh

Mr Paisley Jnr

Witnesses:

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.

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