The Northern Ireland Assembly - Report Restoring Profit for the Beef Producer

The NBA would argue that there is no single panacea. However if a range of options was tackled simultaneously there would be immediate positive results.

And then in anticipation of beef and cattle from NI soon being able to move onto export markets:

The grid system used by slaughterers to define carcase quality is unnecessarily complicated and because of this allows them to obscure what should be simple pricing messages.

In this way they can make it more difficult than it should be for finishers to compare the likely value of their cattle if they were delivered to one particular factory instead of another and therefore identify which buyer is paying most money.

An effort should also be made to establish a simple coefficient by which the value of cattle of a particular type that are sold at auction can be compared easily and accurately with the value of animals of a similar type sold direct to factories.

In this way finishers selling at auction or direct to factories could work out which particular auction or factory is most interested in buying their type of animal and more competition than there is at present would be generated.

The specialist beef breeding sector in Northern Ireland has extremely fragmented structures with its 320,000 suckler cows being held in 17,500 separate herds with an average of just 19 cows apiece.

In addition to this the average farm size is only 35 hectares of which just 29 hectares is down to grass or cereal crops.

There is similar fragmentation in the feeding sector too and there are few finishing units that can guarantee to deliver more than three correctly finished animals over consecutive weeks.

In these circumstances it is virtually impossible to introduce economies of scale and extremely difficult for most farms to easily establish whether they are working within profit or loss by accurately identifying their costs of production.

It is the NBA’s view that the Department of Agriculture and Rural Development could assist by furnishing the industry with a series of costings templates based on a typical style of enterprise.

In this way breeders and feeders could identify the template most closely resembling their own business profile and have a better chance of being able to assess their profitability – or to be brutally honest in the case of the majority their losses.

An official DARD cost of production template could perform another useful function by demonstrating to everyone, including the factories and mainland multiple retailers, just how expensive it is to produce beef in Northern Ireland.

In this way it may even be possible for the Northern Ireland Assembly to encourage factories never to pay less than the cost of production for cattle – especially if legislation was passed forbidding retailers, who sell more beef on discount promotions than they do at regular prices, to offer it to consumers at prices that are lower than the officially accepted production cost.

Encouragement for More Prime Cattle to be Sold Through the Primestock Auction System:

The most common complaint levelled against the factories in Northern Ireland by the finishers who supply them is that they operate a purchasing cartel – and the NBA has been in touch with the Office of Fair Trading about this.

However competition, the absence of which leads to repeated allegations that the factories act in consort over prices, can be generated by operating an alternative system through which finishers can choose, if they wish, to channel their cattle.

The auction system in Northern Ireland has been weakened in recent years by institutional encouragement for deadweight selling through large abattoirs.

However since March 1996 producers have paid the price because the slack market and the absence of an alternative route through which they could be channelled allowed the factories to tighten their grip.

At present the auction system in Northern Ireland is used mainly by factories as an occasional mechanism through which they can top up throughput levels if they find themselves unexpectedly short and as a conduit for poor cattle of a type which would incur huge price penalties if presented deadweight and therefore can make more money if sold live.

Nevertheless it may still account for say eight per cent of actual prime cattle sales and in the NBA’s view could help to generate more, much needed, competition among buyers if it handled around 25 per cent. The authorities should note and encourage this.

The NBA has encouraged NI finishers to sell more cattle to factories on the British mainland. During this exercise it discovered it was possible to sell animals of a fatter type that are penalised in Northern Ireland (where lean cattle are most wanted) in Scotland for up to £78 gross a head more. After transport costs and TB testing costs were deducted the overall gain reduced by £33 to £45.

Cattle of a more standard type could net £30-£35 a head more (in some cases this represented the difference between profit and loss) up until the end of January this year when the GB price fell and there was no longer a positive margin for trucking slaughter cattle onto the mainland.

However the NBA believes that a more organised approach that allowed selected NI finishers to present their cattle to regular mainland customers on a planned basis would not only allow those who trucked out cattle to earn more much needed money – but also create a more competitive situation in NI itself because the factories would try to encourage finishers to keep more cattle in NI by paying more money for them.

With this in mind we believe farmers should be encouraged to establish a properly structured delivery system in which cattle to be sold on a regular basis to specific GB customers would be assembled at the same lairage and put on the same ferry at the same time each week – and not piecemeal as they have in the recent past.

It is possible this could be organised through an auction company (or companies) and concentrate on heavier, fatter (4H) cattle for Scotland or heifers of a type that is popular for wholesalers and secondary wholesalers operating throughout the North of England.

More Resources being put into Raising the Clean and Green Image of the Northern Irish Product:

It could be argued that beef production costs in Northern Ireland are the highest in the world. This is not a fantasy.

It is recognised that costs in Europe are at least twice as high as those in competitive countries like the US, Australia and South America where land and labour costs are minimal and there is less emphasis on expensive welfare, transport, abattoir hygiene and environmental protocols – and that land prices and other costs faced by NI farmers are greater than those in other parts of the EU.

Indeed it appears that the only countries that produce more expensive beef than Northern Ireland are Japan, Switzerland and Norway – and none of these is a mainstream beef supplier.

The crucial issue facing the industry in Northern Ireland is therefore the recovery of its unusually high costs.

It is clear that this cannot be done by competing for market share through discount, as appears to be the case with beef sold into GB at present, and so NI beef must be sold at premium prices and made more attractive to wealthy and sophisticated EU customers who recognise its integrity and are willing to pay more for it.

This requires industry strategists at commercial and government level to anticipate the removal of the export ban and set in train a marketing programme in which NI beef is presented to the EU consumer as an exclusive, grass fed product that produced to the highest human and animal health protocols and deserves its high price.

It must be recognised that beef produced in mainland Europe is almost exclusively cereal fed, intensively reared, bull beef and beef of the type that is routinely produced within Northern Ireland is automatically recognised as a superior, niche product.

There is already pressure within the Northern Ireland beef industry for this advantageous marketing platform to be further developed and the NBA would say that the advantages to the beef industry and the general economy of so doing must be recognised by the Northern Ireland Assembly.

Recognition that Suckled Calf Finishers from Spain and Italy will be Anxious to Purchase Northern Irish Animals as Soon as Export Restraints are Lifted

It is important to note that live feeding cattle from NI, particularly weaned suckled calves, will be in demand from feeders, not just in the ROI but from Italy and Spain too as soon as they are able to purchase them – and this is almost certain to harden prices and lift incomes on breeding farms.

The shortfall in the ROI is in fact due to large numbers of their own weanlings being despatched principally to Spain but also to Italy. Up until the end of May some 170,000 calves had been despatched from the ROI to these countries compared with 122,000 at the same stage last year.

And the NBA suspects that as soon as the European Commission approves the delivery of live cattle to other EU countries that feeders in the ROI will immediately begin looking to NI for weaned calves to make up for the large number sold to overseas buyers.

It also believes buyers representing Spanish and Italian finishers will attend store auction markets in Northern Ireland and bid for suitable cattle themselves. Unless the euro strengthens considerable over a short period the prices they pay will be substantially above those being paid by Northern Ireland’s own finishers at present.

The overall impact of each of these activities is that less, good quality cattle will be available for finishing in NI and its factories will not be able to buy as many high yielding carcases as they would like.

This may persuade them that they have to pay more for cattle if they want to secure supplies. It should also confirm the need for all sections of the beef industry, including the government, to work together to add as much value as possible to beef from NI on a range of UK and EU markets.

However strategists must accept that the EU operates a single market and they would be doing suckled calf breeders no favours if they tried to minimise live cattle trading with the ROI, Spain and Italy without helping NI finishers secure equivalent prices from the sale of their prime cattle.

It will be impossible for beef farming to continue in Northern Ireland in the form that we recognise today unless prime cattle acquire a higher value.

Curbing the downward price pressure forced on farmers by NI factories by creating a more competitive trading environment for prime cattle.
Widening the range of high priced markets on which premium quality NI prime beef can be sold.
Helping NI suckled calf breeders improve their returns by selling their product to finishers operating in other EU countries.

The NBA hopes it has provided the Committee for Agriculture and Rural Development with sufficient information to support these assertions and wishes it well with its deliberations.

Thank you for your letter of 10 August on the above. The Ulster Farmers’ Union welcomes the very obvious and continuous interest which the Committee is taking in this subject in that it reflects the genuine seriousness of the ongoing crisis within the agriculture industry in Northern Ireland and the beef and pig sectors in particular. In your letter, you pose a series of questions to the Union on which we are more than pleased to provide our views. Each of the three headings of your letter will be dealt with separately:

As we communicated to the Committee in our letters of 21 and 23 June for this ongoing Inquiry, we firmly believe that improved co-operation throughout the entire food supply chain is imperative and will provide benefits for all of the links within this chain. Indeed, this was one of the main recommendations contained within the Committee’s recently published Report: ‘Retailing in Northern Ireland’ – a fair deal for the farmer?’ Producers, processors and retailers have all an important role to play in the delivery of this objective, but it is the primary producer who ultimately faces the biggest challenge. While the vast majority of producers accept that their marketing strength in terms of both purchases and sales must be improved, the realisation of this key objective is not simplistic.

The general record of historic producer co-operation in the Province has not been good for a variety of reasons but mainly because long-term success has often been sacrificed for short-term gain. In the pig and beef sectors specifically, the Ulster Farmers’ Union was instrumental in establishing both the Northern Ireland Pigs Marketing Board (PMB) and Ulster Farmers’ Investments Limited (UFIL) which owned the Moy Meats beef processing plant. Neither of these now operate in their original form. However, the ongoing success of United Dairy Farmers’, particularly with its involvement in processing, has illustrated what can be achieved.

Unfortunately, unlike the level of co-operation which exists within the Province’s dairy sector, beef and pig producers are having to address this issue from a much lower base. While the Committee’s proposal for the establishment of a producer co-operative(s), which accounts for 50% of both the Province’s beef and pig production, is a very laudable objective, the Union believes that this is too big a leap under present circumstances. Instead, we would much prefer to see meaningful support from both the food supply chain and Government being provided to the existing, smaller producer groupings within these sectors. It is absolutely crucial that the principle of ‘co-operation’ is initially fostered at ground level with sufficient encouragement for interested, entrepreneurial producers to take the initiative forward. Ultimately, for any producer grouping to be successful it must be market oriented and commercially driven.

The Union fully accepts the rationale behind the Committee’s proposals on ‘branding’ however, like the issue of co-operation, the realisation of this objective is complex. Certainly, the extension of ‘green fields’ could be readily achieved but beyond that the establishment of a ‘Northern Ireland beef brand’ would require very considerable expenditure to both develop and, more particularly, promote. That said, however, there is definite merit in exploring this proposal further and even extending consideration to the potential for a general ‘Northern Ireland food brand’.

It is an accepted fact that the quality of the beef herd in Northern Ireland has deteriorated – mainly due to the influence of the dairy herd on the suckler cow population. This is, however, a problem which can be resolved by medium/longer term action. Already, the producer funded ‘AgriSearch’ group in the Province has commissioned a major research project which will examine, in depth, beef cow genotype and the quality of their progeny. Equally, it is essential that a system which provides producers with a proper return for the production of quality beef is established – the two main integral factors are the introduction of a system which accurately measures carcass meat yield and also a payment structure which rewards quality.

I trust that this response addresses your questions concisely. We will, however, be in a position to elaborate further when we provide oral evidence in September.

One further point which we would wish to make at this stage is that, while all of these proposals made by the Committee will undoubtedly prove to be beneficial in the medium to longer term, it is essential that short term measures to relieve the huge debt burden borne by the Providence’s agriculture industry must also be pursued.

The British Pig Industry Support Group have lost their claim for compensation against the Government.

The judgement, given late this morning, was immediately described as being ‘very, very disappointing’ by Meryl Ward, leader of the Group’s judicial review team.

"It’s a fair and square loss," she told FOL Today, adding that there would be no appeal against the judgement.

"We don’t have either the financial resources or manpower to mount an appeal," she said.

"On a positive note, our case for the cost to the pig sector of BSE at £5.26 a pig and £266m for the industry, wasn’t challenged, so these figures are now established as fact. The judge, however, did not agree that we had been discriminated against."

Meryl Ward also said that the costs of the case, believed to be £50,000, ‘would be sorted’.

The Group had argued during a judicial review at the Royal Courts of Justice in London in June that the Government had discriminated against pig farmers by not applying for additional aid in the light of BSE in cattle. That, they said, had inflicted a heavy financial burden on the sector in the light of losses to the pig sector since BSE of £266 million.

Losing their judicial review case against the government has left the British Pig Industry Support Group devastated.

"We are absolutely shattered," Meryl Ward, leader of the BPISG’s judicial review team, told FOL Today. "It was a fair hearing. We have decided not to appeal, as we felt that the way the judgement was given made an appeal, as we felt that the way the judgement was given made an appeal much more difficult to lodge. Anyway we just haven’t got the resources."

"It is hard to think positively at the moment. However, the judge did agree to the principle of non-discrimination, and this will help when other cases are brought to law in the future."

"The judge agreed on the principle that beef, sheep meat, and pig meat do compete. He also agreed that BSE regulations had imposed a disproportionate tax on the pig industry, but it wasn’t sufficient to make it discriminatory."

"So our case that the ban on meat and bone meal due to BSE cost pig producers £5.26 per pig and £266m for the industry, and that this was a higher cost than the cost to the beef and sheep industries wasn’t challenged. So that is now established, but the judge said it didn’t make it discriminatory."

"Because there was no discrimination, there was, therefore, no onus on MAFF to apply for state aid. MAFF’s action, the judge said, had been sufficient."

"The fact that the costs of £50,000 have been awarded against us is truly rubbing salt into our wounds, especially as MAFF had the option not to press for costs, and that their lawyer was a salaried member of MAFF staff."

"I suppose that this review has produced a lot of publicity, which has been good for the pig industry, and you could say that buying that amount of advertising would have cost a lot more than the judicial review costs. The media showed a lot of sympathy for our case, and highlighted the industry’s high standards of production."

"That may galvanise MPs and the government into pushing for more positive buying policies. The announcement that the Ministry of Defence is now going to buy just British pork s a bit late. They could have done that several years ago."

"The result of the case doesn’t get away from the fact that a third of the industry has now disappeared during this crisis, and it is still declining."

Ian Campbell, regional manager for the National Pig Association, told FOL Today that there was a positive side to the judicial review. "The cost has brought a lot of publicity, and we couldn’t have bought that for the money that has been spent on this case."

"The high standards of the industry has received huge publicity. There is now far greater awareness among consumers, and buying institutions. The announcement by the Ministry of Defence that they are buying 100 percent British pork is, I believe, the beginning. Similar decisions by other major corporate players may follow."

Undoubtedly the trend of fragmentation will remain to be a major stumbling block in the development of agriculture in the future. However, major efforts are being made to develop clusters of producers for specific products and markets. Conversely the market is also developing rapidly in response to advances in retail and retail-supply technology, changing consumer trends, and changing political circumstances i.e. WTO, enlargement of Europe and GATT requirements. This would give the appearance of a stagnated industry, which is not the case.

However the industry has been going through an extremely turbulent period of years what with the effects of an inflated economy and the lack of marketing options for produce with the imposition of the export ban. Hopefully the easing of the ban will enable new markets and possibly old ones to be re-explored and a more product-specific system of production and whole chain management to be developed for definitive high market requirement and corresponding returns throughout the chain from primary-producer to secondary-processor e.g. the keenan-kepak arrangement in ROI.

This is a wonderful desire but generally any such body would require extremely focused and competent people to both fuel and drive such an idea.

It has also been tried before in the guise of UFIL, Granville, moy-meats, leckpatrick, to name but a few. Also a classical example would be the Kerry group in ROI which has been successful and grown to such a size that it is no longer recognisable as a farmer’s co-op. Again, I do believe that clusters of producers being target specific is a desirable development as they would not have such a critical masse as to burden their members with excessive administrative costs and could possibly share these with a processing partner; one getting a secured supply closely matching outlet requirements and the other getting an enhanced return to justify the extra cost of producing a high quality product.

NIAPA would be in favour of such developments and has been actively involved in forming such groups and lobbying for funds through leader and other such rural development mechanisms so as to facilitate such developments. We would also try to get discussion and co-operation between clusters to develop marketing strength.

We are also acutely aware that the average hill farmer’s income in NI was £200.00 for the last financial year and how difficult it would be for them to contribute significantly towards such a body.

With regards to pigs, the same applies except that NI does not have an advantage of being able to utilise high quality grass, cheap by-products for feed and has to endure a substantial overhead with regard to haulage of both feed in and product out of NI.

Therefore each product has differing production and marketing requirements and would probably require if not differing organisations, then differing arms within the body which would be product specific.

A feasibility study would be advantageous, as would an audit to specifically define what our strengths, weaknesses an possible opportunities would be. Hopefully, out of it we could identify niche markets that we could reasonably attain and would give a yield for the extra requirements. We do not wish to drop in to the slot of being the only European region without a substantial high market value market be it national or whatever. We would think that the more players involved in the strategy, the greater the chances of it’s success and would warmly welcome all key players in NI to be involved in such an initiative.

Our role would be robust selling and pro-active support, but any financial support would be purely a token gesture as we are solely lobbying and representative organisation and do not have funds to give the amount of support that we would be necessary for any major initative.

Branding is the most consistent way of maintaining a market share and possibly giving an enhanced premium due to the customer being able to have confidence in the consistency of the product. Green fields was a classical example but as you are aware it was developed by all the partners in the supply chain and again this is necessary so that everyone can buy into it and their individual needs have been built into the product to everybody’s maximum possible advantage.

Members feel that by contributing to the LMC that they are funding marketing and would actively desire consumer loyalty. If it could be demonstrated to be to financially beneficial to contribute more then I don’t believe farmers would be unwilling to invest in their future as long as they would get a return for their efforts.

I would have no idea as to retailers positions with regards to branding, but would assume that if their customers could identify our product as being consistently a desirable item then that would be an advantageous point to achieving a market premium. Hopefully this would be one of the themes we would like to see reported in the audit/feasibility study.

Naturally, the ownership rights of a brand need to be jealously guarded so that anyone seen flouting the items of agreement of the brand would be unable to do so as to protect the integrity of the product and so rightfully no-one should be able to use the brand name without the support of all the partners in the supply chain.

As before producers have been the sole contributors to the LMC and would like to feel that any brand developed specifically aligned to NI product has already been paid for, and any additional costs will be reflective upon NI gaining a distinct market advantage and that other partners who gain a financial reward namely the processors will also be sharing the cost and not "piggy-backing" on the back of others efforts.

The Holstein influence has been increasing due to the increasing level of extreme dairy-type genetics in the progeny of dairy herds away from the dual characteristics of the British Friesian type. This has had a subsequent effect upon the 3^{rd and further generation offspring which suckler farmers are
now addressing through their breeding} replacement policies.

Sires selection has benefited through quality product initiatives in a number of the rural development programmes throughout the province.

However, beef breeding is a slow process and the yields are only starting to show through. But there is still as much if not more work to be done on the dam side of the herd as the sire only contributes 50% of the genetic composition.

Also we now need to be more target specific if we want to tackle the niche markets with both our beef types and our nutrition make-ups as all of an animals influences contribute towards the end product i.e. hopefully the steak in the expensive restaurant instead of the cheap pie filling.

Nutrition also has a big part to play as when beef was 240/kg then if we take a notional feed conversion ratio of 10:1 then there was a financial yield for feeding an animal on to achieve it’s maximum potential both in conformation and carcass weight. However, nowadays, the average return price is 160p/kg and it is difficult to see a financial return for feeding an animal more than is necessary or longer than it takes to get retention periods for premia finished.

Two excessively wet seasons have compounded the problem with animals not performing as well off grass as formally and swards being heavily poached but farmers lacking the financial wherewithal to repair the damage.

But in my parents’ words: there’s no point in breeding without feeding and no point in feeding without breeding.

Consistency is the most vital component in securing and maintaining any premium market but we must also not be complacent if we do achieve any niche marketing advantage as our competition will also not be complacent and evolution is and will always be a continual process.

NI’s size is cited as a weakness but it should also be seen as a strength as we do not have the variation in production circumstances as most of our competitors do and so should find it easier to homogenise our product throughout our region.

We are also located on the edge of the most affluent and discerning block of consumers on the planet and are ideally located to market our product cheaply and possibly use an embryonic tourism industry as a symbiotic partner.

We need to clearly define individual market requirements and produce to meet those niches rather than a broad- brush approach hoping to find markets for a variety of products.

Dairy types produce to be produced as quality enhanced type commodity beef and a premium obtained for consistency and consumer confidence.

5-7 years is a short time in beef terms, however, given access onto the export scene again, change will be rapid and farmers do respond quickly to an economic incentive if they didn’t they would still be ploughing with horses.

I trust this addresses most of the questions fielded and would like to stress that NIAPA is available for consultation either formally or informally at all times and welcome the chance to make representation for NI farmers.

The Northern Ireland Council of the National Beef Association is once again grateful for the opportunity it has been given to present a further submission on future strategies for the beef industry to the Committee for Agriculture and Rural Development.

It agrees that the income position of beef farmers in Northern Ireland is undermined because they are a fragmented instrument of supply and therefore extremely weak price negotiators.

It also agrees that the formation of a strong beef producer’s co-operative is a legitimate candidate for industry- wide examination.

However the NBA would strongly advise that discussion on the adoption of a national co-operative should be suspended until the Committee for Agriculture and Rural Development is reassured that anti-competitive malpractice is no longer present within Northern Ireland’s red meat processing sector.

There are strong views in producer circles that such malpractice is endemic and that the unduly low prices they face compared with these elsewhere in the UK are largely the result of the existence of an extremely effective purchasing cartel operated on an each and several basis by participating prime cattle purchasers – and that the impact of the absence of co-operative structures within the beef production sector on the prices they receive runs very much secondary to this.

The NBA believes there is strong evidence that a successful purchasing cartel has operated inside Northern Ireland for almost 20 years and is still in operation now and that there would be little point in establishing new structures designed to put producers in a more competitive position until existing, and extremely effective, anti-competitive habits prevalent among processors have been rooted out.

Not to do so would be the metaphorical equivalent of building a grand castle of co-operative dreams on a corrupt foundation and as a result of being constructed on such a swamp the co-operative edifice that farmers and other investors might hope would be effective could never stand.

The NBA will respond to the questions on the benefits of co-operation that have been laid before it by the Committee for Agriculture and Rural Development but worries that in doing so the Committee will believe it has been persuaded to support, without reservation, the establishment of a national livestock producers co-operative within Northern Ireland.

It hopes that the Committee will understand that until its members can be reassured that the cartel that has dominated Northern Ireland’s cattle pricing for so long has disappeared (and will not resurface) the NBA will not be in a position to give unqualified opinion on the legitimacy, or otherwise, of the adoption of a Northern Ireland Co-operative.

Having made such a strong statement the Committee will no doubt feel it necessary for the NBA to justify its position on the cartel with a brief summary.

The Association’s comments are restrained because it is aware that the Office of Fair Trading may be following up complaints and it would not like to compromise any investigation that might be taking place. Nevertheless our views on the purchasing cartel situation among Northern Ireland’s prime cattle buyers include these observations:

There is strong evidence it has been operating since the early 1980’s.
It has been effective because consenting factories have agreed, on a weekly basis, on the proportion of the available all-Northern Ireland prime cattle supply they will buy, the geographical range of their purchasing operation (which may vary from week to week) and the maximum price they will pay for animals of a particular grade.
In this way they have been able to collude to generate the impression there is oversupply (even in times when prime cattle supplies are short) by forcing deliberately contrived queues of finished cattle to back up on farms – which creates a situation in which finishers who are anxious to dispose of them (in the face of an artificially generated appearance of oversupply) will accept lower prices than would otherwise be the case.
There is no evidence this system had been disbanded.

The NBA would like the Committee to know it is willing and ready to make wider observations on cartel activity, and the width of its influence, in camera and would urge the Committee to use its powers of examination to conduct its own enquiry into cartel activity among red meat factories.

It is impossible to deny that multiple retailers and large processors are in a stronger position than farmers. However the advantage currently enjoyed by the latter is largely through their cartel and the NBA would argue that at present processors are as much a victim of monopsonic retail purchasing power as producers (hence the defensive position of their cartel) and that price-fixing dominance of the major UK supermarkets on Northern Ireland’s beef farmers will only be eased when beef from their cattle can be sold on a wider range of EU and world markets.

This means profit will only be re-introduced into NI beef finishing if the extraordinary high costs of production faced by NI beef farmers can be recovered through the sale of more of their beef at a retail premium elsewhere in the UK and on export markets.

There can be no doubt that this will be made much easier if NI beef is branded in a way that reflects the high integrity of the natural, grass based, suckled beef product and the challenge already being offered by lower cost imported beef into both Britain and the EU is countered by consumers feeling comfortable with paying more money for the reassurance offered by the NI brand or brands.

However the NBA is not convinced that the establishment of a national co-operative is the only means of securing, and maintaining, of a branded beef product or products.

It is impressed with the initiative and imagination demonstrated by Linden Foods in the establishment of the Greenfields label and the contract with the Albert Heijn retail chain and sees no reason why similar ventures could not be repeated to the advantage of the beef farmer by Linden or other, similarly minded, export based companies.

It is also aware of the recent (quite dismal) failure of the Department of Agriculture in Wales to find even minimal producer support for its proposed all-Wales co-operative and worries that this could be repeated in Northern Ireland – although it accepts that the different attitudes and conditions prevailing in each country means it would be misleading to draw too many different comparisons.

Nevertheless the NBA is attracted to the idea that producers (not Abattoirs) could control supplies as a result of co-ordination at co-operative level.

These are our specific response to the individual points out forward in the consultation document:

The NBA is in favour of any development that would raise prices for NI beef cattle and help secure the livelihoods of NI beef farmers. However it must again stress that it believes the Committee would be unwise to establish any co-operative structures until it was sure there was no longer any price cartel activity among processors. It would also repeat that it is not convinced that the establishment of a national co-operative is the only effective solution.
The NBA would only recommend that farmers make a significant investment into the creation of a co-operative if it felt their money would not be wasted. Clearly proof that there was no longer any cartel activity among prime cattle purchasers would be among the specific issues examined by the Association before it felt able to make such a statement.
Should a co-operative be established it would be better if the beef and pig sectors were kept separate.
The NBA hopes it has already outlined some of its reservations about the proposed project sufficiently well. Specifically these refer to continuing cartel activity and the possibility that private enterprise could generate equally effective branding schemes capable of making the market for NI beef more secure.
It would also worry about whether producers have the funds on hand that would allow them to contribute to the establishment of a co-operative, or any other venture, and enjoy the benefits it may generate.
A successfully run co-operative could raise the revenues and increase profits for beef farmers if is was able to secure premium paying markets not otherwise available to producers and more beef taken from their cattle was therefore sold for more money.

If the co-operative contained service structures that passed on advice on breeding and feeding the profitability of some businesses could be raised because the beef they sold could be produced at a lower cost per kilo.

The Committee will of course be aware that a similar function is already undertaken on a national basis by Departmental of Agriculture specialists at Greenmount, Hillsborough and other locations.

However it must be acknowledged that this could be achieved through commercial partnerships between producers and specific factories without the intervention of a co-operative.

The depth and effectiveness of this influence would depend on how many farmers were prepared to co-operate with each other on an agreed aim and in these circumstances it must be recognised that single producers operating as individuals would almost always enjoy some additional occasional benefit because they could move their product either inside or outside the co-operative according to the price advantage they could secure on the day.

This flaw in the co-operative system can only be countered if members of the co-operative agree to sell a given number of animals through the organisation each year and bonus payments (and penalties) are arranged which recognise the degree to which this commitment was met and the proportion of available cattle that have been specifically offered through the co-operative and not sold elsewhere.

It is possible that a group of farmers, and the larger the group the better, would be able to exercise more influence on the market and be more likely to look forward to securing the most advantageous returns – but the NBA must stress that this would depend on them being disciplined in their approach to maintaining a regular service to their established customers’ supplies and it must again be noted that producers have in the past reserved the right to sell their prime cattle to the highest payer even though they may be contracted to , or be expected to, contribute to the supply security of another processor instead.

The NBA believes some producers would be more likely to accept their responsibility to maintain the even supplies necessary to secure regular deliveries to committed customers if they also owned the processing plant and were paid a dividend from its profits.

Participation within a co-operative is not therefore just about the benefits of being able to exercise some control it is also about responsibility and commitment – and before it made any decision on whether or not to encourage the establishment of a co-operative the Committee would have to make an assessment of the collective ability of Northern Ireland’s beef farmers to recognise the latter and the depth of disinclination among other factories not to poach their cattle.

The NBA would be prepared to co-operate fully with the UFU and NIAPA in a feasibility study for a national co-operative if it was sure a co-operative would not be launched while cartel activity still persisted among prime cattle buyers.
The level of support and enthusiasm within the NBA for the co-operative project would depend on how convinced it was there was no cartel activity in the processing sector and how impressed it was with the conclusions of the feasibility study and the ideas put forward by other people in other beef industry organisations – including DARD advisors.
It is impossible to make a firm statement at present but unless there is conclusive evidence to suggest it would be sensible to do otherwise the NBA would say that the NI Co-operative (should one develop) ought to be farmer owned.

The NBA believes that branding elevates beef and beef products from commodity status and makes it easier to secure non-commodity, premium prices.

It has argued since its inception that as much beef as possible should be sold outside the mainstream, mono-product, markets encouraged by the largest retailers and offered to a range of alternative outlets under the widest possible variety of labels. It has suggested that these should include brands based on special handling (such as extra-mature farmhouse bee), specific breeds or crosses (Traditional Shorthorn Beef) or regionally based – like Mourne Mountain Beef.

It accepts that an all-Northern Ireland label could serve the beef industry well on Continental markets because it would take advantage of the Province’s grass fed, steer and heifer beef which cannot be obtained elsewhere in Europe and is therefore a genuine niche market product.

It is not sure whether Northern Ireland Beef could be easily marketed in mainland Britain where it would compete with Scotch, Welsh, North Country or West Country beef unless the Northern Ireland label was non-geographic in origin and was presented under attractive brand name of which "Greenfields" is an example.

The Association accepts that GB supermarket insistence on using their own label allows them to retain control of the product (own-label can cover anything the retailer would like it to) and believes it would be hard to persuade them to give this up in favour of selling NI beef under the NI label.

Nevertheless it would support any effort to develop a NI label that would allow NI beef to be sold at a premium and for NI beef farmers to have greater control over price.

One of the key areas in this debate would be whether it would be better to try to establish a single, all-NI label or sell NI beef under a variety of more specific brands or labels covering regional origin or specific added-value processes which British multiples find more acceptable.

Beef branding has been explored before. There was a failed attempt on the mainland ten years ago to launch an "Aristocrat" brand.

It failed partly because of the difficulty of ensuring consistent product quality (predictable leanness, tenderness, colour and taste – all of which means it is advisable that branded beef is processed the same factory using cattle finished on the same feed and feeding system) and because the discount culture that is embedded in the marketing of beef dissuaded retailers from committing themselves to the Aristocrat product in case it prevented them from taking advantage of cheaper beef supplies of similar quality should they be available.

Similar objections would have to be overcome now if a NI brand was launched successfully.

NBA members may be willing to invest in establishing a beef brand if they could be shown there would be a return on their money.

As mentioned above we believe GB supermarkets would find it difficult to accept NI branded beef – unless it could be presented as a genuine niche product.

It is true that any trader on a commodity market is vulnerable to cheaper supplies of similar quality product from alternative sources.

It is also true that it is easier to brand a niche product than a main line item. The NBA would once again argue that in Continental EU terms NI beef is already regarded as a niche product and could easily be branded and marketed as such. Before the BSE disaster of 1996 Continental exports accounted for 50 percent of NI production.

As already said the position in GB, where pre-1996 sales accounted for 30 percent of NI production, is different because of the dominance of large multiple retailers who are wedded to the use of their own labels. In these circumstances the offering of NI beef under a range of niche market may be the better option.

The NBA clearly endorses the sentiments expressed in this paragraph of the Committee’s consultation paper.

We have addressed this point in earlier answers. We would only recommend that NBA members invest in developing a NI brand if there is no evidence of continuing cartel activity among NI processors and that on the basis of all available evidence they could reasonably expect a fair return for their money.

Carcass conformation (shape) is deteriorating in Northern Ireland’s beef herd partly as a result of the overwhelming adoption of the super-skinny, massively rangy, Holstein cow in the dairy herd.

This means that the beef cross calves and pure bred male calves moving across from the dairy herd and into the beef system increasingly carry less beef in their hindquarters and the meat yield from the carcass is very low in proportion to their weight. They are also slower growers and it therefore costs more in feed and time to produce the beef.

It also means that beef cross heifers purchased by specialist suckled calf breeders have recently become much larger, much skinnier animals which cost more to feed, tend to breed less regularly and thrive less easily than those that were available in the recent past.

These female also breed calves, even after being put into specialist beef bulls, that carry more of the extreme Holstein traits than the beef industry is prepared to welcome. In plain language this means more suckled calves are leggier, taller, narrower and have sharper, more angular hindquarters with less muscle on them than anyone in the beef industry would like.

Another factor is a symptom of the pessimism that has developed in NI producer circles since the BSE crisis. In the mistaken view that it saves them money many breeders have stopped buying specialist bulls and have kept back uncastrated, three-quarter beef bred males (usually with one quarter Holstein blood) to use as herd sires instead. This not only results in more; poorer quality calves but lower prices for the breeder too.

The NBA is ready to co-operate with DARD and the LMC in the staging of winter evening meetings, or afternoon conferences, in which the value of using specially bed bulls backed with established genetic traits are explained to farmers.

It would also suggest that DARD tries to encourage the establishment of a stratified, beef female breeding system in which hardy, pure bred females kept on higher land to help farmers qualify for maximum Hill Farm Allowance payments through mixed cattle and sheep grazing are bred with a recognised maternal bull to produce specialist beef heifer suckler replacements that could be absorbed into the NI suckler herd instead of inferior Holstein crosses.

It would be impossible for NI to adopt the industrialised, feed lot systems that dominate beef production in the US and Australia without undermining existing rural structures which are underpinned by (increasingly part time) family farms and devaluing the clean and green image under which it would so obviously be sensible to market NI beef – which means that any thoughts that feed lots offer a solution to NI problems should be quickly dispelled.

The NBA accepts that a pre-requisite of successful beef branding is the provision of a product that is consistent in leanness, colour, tenderness, and taste but would argue that cross-NI templates that allow the provision of a reasonably consistent product are already in place although they could be further developed to ensure that an even better hit rate is achieved.

Our case is based on the fact that NI finishers already produce more Fat Class 3 carcasses, which are judged ideal in leanness terms by processors across the Province, than any other group in the UK and maintained exposure to fresh and preserved grass will continue to ensure that the dominant beef colour is red.

At the same time more animals are being killed younger which means their beef ismore likely to be tender and if this is backed up by consistent and disciplined pre-slaughter handling to reduce carcass pH levels and the post-slaughter beef is then tenderised through electronic stimulation and properly measured maturation through on the bone conditioning in the chill room then beef taken from anywhere across the Province already has a good chance of being consistent with other NI beef secured elsewhere.

We believe that the beef processed by any NI factory using a specific sourcing scheme could become more consistent if there was an organised attempt to standardise feeding and breeding within the confines of the branded product’s procurement circle.

However we would repeat our caution against the adoption of industrialised techniques in which large numbers of animals were assembled in single units to dilute unit costs because this would undermine both existing farm structures and Northern Ireland’s natural image.

It would also contradict the aim of the beef brand (or the co-operative) which would be to raise revenues across the entire beef production retail sector and not give retailers and processors more opportunity to maintain their margins while working under discount disciplines simply because producers had become more efficient and reduced their costs.

It may be that the reconciliation of these contrasting positions, its unique, existing traditional production style versus product consistency, will be the NI beef industry’s most vexing medium term problem.

The NBA regards the formation of a Northern Ireland co-operative as a legitimate subject for examination but believes that the objective, which is to raise beef industry income levels through enhanced retail prices, may be more easily achieved through a range marketing initiatives using several brand labels adopted by a number of individual companies.

It would also argue very strongly that there would be no advantage in constructing a co-operative, or any other new marketing venture, unless there is clear evidence that cartel activity has ceased at factory level – and would need to have absolute reassurance that was indeed the case.