COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT

Report
Restoring Profit for the
Beef Producer

(Continued)

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.

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:

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.

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