Northern Ireland Assembly Flax Flower Logo

Report
Restoring Profit for the
Pig Producer

Committee for Agriculture and Rural Development:
 Membership and Powers

The Committee for Agriculture and Rural Development is a Statutory Departmental Committee established in accordance with paragraphs 8 and 9 of Strand One of the Belfast Agreement and under Assembly Standing Order No 46. The Committee has a scrutiny, policy development and consultation role with respect to the Department of Agriculture and Rural Development and has a role in the initiation of legislation. The Committee has 11 members including a Chairperson and Deputy Chairperson and a quorum of 5.

The Committee has power:

The membership of the Committee since its establishment on 29 November 1999 has been as follows:

Dr Ian Paisley (Chairperson)
Mr George Savage (Deputy Chairperson)
Mr Billy Armstrong
Mr PJ Bradley
Mr John Dallat*
Mr Boyd Douglas
Mr David Ford
Mr Gardiner Kane
Mr Gerry McHugh
Mr Francie Molloy
Mr Ian Paisley Jnr.

* Mr Dallat replaced Mr Denis Haughey on the latter's appointment as a Junior Minister.

TABLE OF CONTENTS

EXECUTIVE SUMMARY

RECOMMENDATIONS

SECTION 1: INTRODUCTION

SECTION 2: ISSUES CONSIDERED BY THE COMMITTEE

SECTION 3: EVIDENCE TAKEN ON THE ISSUES

SECTION 4: CONSIDERATION OF EVIDENCE

SECTION 5: CONCLUSIONS

APPENDICES

APPENDIX 1 Proceedings of the Committee relating to the Report

APPENDIX 2 Minutes of Evidence

APPENDIX 3 Annexes to the Minutes of Evidence

List of Unpublished Memoranda

EXECUTIVE SUMMARY

PURPOSE

The Northern Ireland Assembly Committee for Agriculture and Rural Development agreed the following revised Terms of Reference for its Inquiry into farm debt:

To investigate factors that may have contributed to farm debt or to difficulties in servicing this debt; and

To examine proposals for addressing farm debt, publish reports and make recommendations in the following areas:

The Committee's Report: 'Retailing in Northern Ireland - a fair deal for the farmer?' was launched on 5 July 2000 and the second Report in the series: 'Restoring Profit for the Beef Producer' was launched on 15 December 2000. This current Report relates to the particular circumstances faced by the pig industry.

THE MAIN ISSUES CONSIDERED

The main issues considered by the Committee were as follows:

THE COMMITTEE'S APPROACH

It is clear from everything known to the Committee that the supply chain from farm to consumer is giving consumers supplies of pork and bacon of the highest quality at attractive prices. Furthermore, it is also clear that of the three main participants in this supply chain the processors and retailers appear to have enjoyed good profits at a time when farmers have been suffering losses.

The Committee has therefore sought to examine a number of issues germane to the plight of the pig farmer and to recommend to the Department a course of action to deal with the present crisis and prevent its recurrence.

The Committee agreed a schedule of meetings with relevant industry organisations including farmers' representatives, a 'fledgling' farmers' co-operative group, processors (both large and small) and DARD. Organisations were invited to submit written evidence prior to these meetings. Transcripts of evidence and copies of the written submissions are reproduced as Appendices to this Report.

The body of evidence obtained by the Committee, together with evidence heard in preparation of the first two of this series of Reports, together with Members' direct experience of the industry, allowed the Committee to explore the issues identified above.

MAIN FINDINGS

Mismatch between Supply and Demand and the Effects of Currency Fluctuations

There is no doubt that the crisis in pig-meat was triggered by the joint effects of sudden global changes in supply and demand caused by the industry's over-correction following disease outbreaks. The increase in pork demand following the BSE crisis was compounded by the massive herd reductions in Taiwan and Holland as a result of disease in their respective herds. Locally this was exacerbated by the fire at Malton's Ballymoney plant. In turn this triggered a severe rationalisation of processing capacity and its concentration into the ownership of Unigate.

At the same time, the strengthening pound reduced the competitiveness of Northern Ireland pig-meat.

None of these impacts was remotely within the power of Northern Ireland pig producers to alter in any meaningful way. The result of these effects, and others dealt with below, has been to drive all pig processors into severe losses and to cause many to leave the industry. An important industry sector has been very badly damaged.

Dependence on Unigate and the Powerful UK Supermarkets

There is no doubt, from the evidence taken at the earlier stage in the Committee's Inquiry, and during the period since, that the Northern Ireland pig industry has been greatly affected by the market power of the UK supermarkets.

Pig farmers, like their beef counterparts, feel trapped in a market place which is unable to yield them a fair return for their investment and labour. Farmers are convinced by their own calculations that there is sufficient profit in the supply chain to remunerate them properly. The kind of relationship needed to make a healthy supply chain is currently denied to the industry because of the mistrust that is created by feelings of exploitation. Whether these feelings are well founded or not, the Committee is certain that they are genuinely held by those who have given evidence. The fact remains that the retailers have continued making good profits at a time when the producers have demonstrably been making disastrous losses.

Furthermore, the market power disparity between Malton Foods and farmer suppliers makes it possible for them to pass charges levied by supermarkets back to the farmer through the price paid for pigs.

Pricing Practices by Processors

In the Committee's view there is an unhealthy level of mistrust between producers and processors. There are a number of factors involved, including:

Fragmentation of the Producer Base and Limitations on the Sale of Pigs

All parties agree in their evidence to the Committee that improved co-operation throughout the food chain is a requirement for a successful industry. The UPP initiative is an important development in this regard. This initiative has been financially supported by the Department, although there has been little achieved in early discussions with Malton Foods who seem, to the Committee, to be stalling.

The Committee sought views on the formation of the co-operative and find strong support from the two main unions as well as verbal support from Malton and the Ulster Curers' Association. The latter body is openly cautious in its support, fearing a reversal of the market power equation.

BSE and Related Impacts

All of the industry participants are united in believing that the "BSE Tax", which is estimated at £5.26 per pig, is not only unfair but a potentially serious handicap in a low margin industry facing imports from European countries where this "tax" does not apply. The Committee agrees.

Equally the costs incurred in coping with the UK's other unilateral impositions in the field of welfare fall into the same category. This has been and remains a costly exercise.

Government Response to Crisis and Support Offered to Pig Farmers

It is clear to the Committee that in times of crisis the pig farmers looked to their Government for support. The evidence suggests that farmers have been very disappointed in the Government's response.

Of particular concern to farmers is what they see as a more favourable response from the Republic of Ireland government, and they look on enviously at the maximum payment of IR£12,000 per producer. The Ulster Farmers Union rejects the Department's assertion that a similar scheme could not be implemented in Northern Ireland because of similarities with the Department's original welfare scheme. The Committee believes that the schemes are very different and would support the farmers' position.

There has also been disappointment with the time it has taken to implement the restructuring scheme announced on 30 March 2000. Farmers who needed immediate assistance have, as this Report is written, still to receive a single penny.

The Committee also shares producers' concerns that a UK-wide scheme fails to address the difficulties faced by local producers.

The Role of DARD

The Committee noted that both producers and processors felt that DARD had a role to play in improving co-operation and communication between these two elements of the supply chain. This closer co-operation could lead to a reduction in the relatively high level of condemnations.

MAIN CONCLUSIONS

General Conclusions

It is clear to the Committee that the issue of farm debt in the pig sector has several fundamental causes, some outside the control of the parties in Northern Ireland and others capable of being remedied. The industry and the Department will have to continue to work together to create the improvement needed.

Global Impacts

The pig industry has a cyclical tendency which seems beyond the ability of participants to alter. Northern Ireland is a small part of this global equation.

This crisis has been caused by the coincidence of a number of major factors which severely disrupted and exaggerated the normal cyclical trend. As a result there was a severe demand surplus in Europe, at a time when currency movements affected the terms of trade adversely for UK producers. UK pig production was driven into severe loss making.

Reserved Matters

These losses were further exacerbated by the impact of the so called "BSE Tax", (the extra cost of protein to substitute for porcine meat and bone meal imposed by the UK Government as part of their response to BSE). This is reliably estimated as a cost penalty of £5.26 per pig. Although a judicial review against the UK government regarding BSE costs was lost, the Committee concludes that there was at least a moral obligation for compensation to be offered to producers who were suffering through no fault of their own.

Additionally, the industry was at the same time bearing the costs (estimated at £220 million for the UK) of altering housing to comply with UK husbandry regulations. Both of these costs were unilaterally applied by the UK Government and were not replicated in competitor countries.

Restructuring Processing

This was further aggravated in Northern Ireland by the destruction of the Malton plant at Ballymoney. Malton's response to this crisis resulted in their taking over the whole of the major processing capacity in Northern Ireland thus creating a virtual monopoly over the greater part of pig processing.

Additionally, having heard evidence from both sides, the Committee is persuaded that Malton Foods is paying considerably less for similar pigs in Northern Ireland than it pays in GB. In the context of the major pigs crisis, this differential has almost certainly been a serious cause of damage to an already beleaguered producer sector. In the Committee's view, if the difference is what we believe it to be, this amounts to an abuse of a dominant slaughtering position, a position which has been achieved with considerable Government assistance.

There is an undoubted imbalance of market power in this situation which brings us to conclude that it would be proper for the Department to become involved. Government has invested heavily in the processing capacity being used and cannot stand idly by if the producers' case, as put to this Committee, is proven.

The Committee concludes that the then Northern Ireland administration's response to the Ballymoney fire was not wholly adequate. The Committee recognises that the Department moved to protect the welfare of pigs through the introduction of a slaughter scheme and farmers agree that this was welcome at the time. However, the scheme appears to have done little to resolve the longer-term difficulties which local producers faced as a result of the fire. The Committee believes that the Department has not demonstrated a willingness to 'go the extra mile' beyond acceptance of, and rigid adherence to, the UK-wide scheme. As a consequence of this, the Northern Ireland pig farmers are at a disadvantage to their neighbours across the border.

Nor can the Committee overlook the length of time taken to implement the UK-wide restructuring scheme. That a scheme designed to restructure the industry, and to provide support to those struggling to remain within it, should take so long to implement cannot be justified. Hope given to farmers in March 2000 remains unfulfilled almost 10 months later. While the blame for this cannot be laid entirely at the door of the local Department, the Committee concludes that it is incumbent upon the local Minister to urge her counterparts in England, Scotland, Wales and the European Union to avoid such delays in future.

However, the Committee also concludes that the Northern Ireland pig industry may have an opportunity to benefit from the restructuring scheme which is now on offer. It is important that the out-goers scheme attracts sufficient uptake to allow the on-goers scheme to come into effect. Northern Ireland pig producers should look closely at this scheme. In particular, those farmers who have been forced out of business should investigate their eligibility for assistance under this scheme.

The Department must also play its part by ensuring that all producers and ex-producers have access to clear and concise information to enable them to make sound judgements about what is on offer.

Retailer Market Power

The market power of retailers, no less for pork than for beef, is likewise being used in the self interest of the retailers concerned with no apparent regard to the protection of UK or Northern Ireland supply capacity. Their prices were fixed with reference to the wider market including cheaper imports resulting in severe losses across the pig-producing sector.

A Producer Side Endangered

The Committee is persuaded that the Northern Ireland pig industry is now being dangerously starved of profits. It has already been driven deeply into losses with bank indebtedness of £40 million.

Producers have seen the need to strengthen the base of the supply system by creating a co-operative producer organisation (United Pig Producers) and have been given financial assistance by DARD to develop this concept into reality. If successful, this organisation should go far to redress the fragmentation which characterises the supply side of the industry. However, the Committee is persuaded that Malton Foods has set its face against this development and has successfully stood in the way of its development. Individual pig producers are at the same time fearful that joining such a collective enterprise will count against them with Malton Foods and the other processors.

The Committee sees this as a classic example of the struggle by the individual against the large corporate organisations. The resistance by processors speaks more eloquently to the Committee than their oral evidence and indicates that there is a strong prima facie case that the producers are currently being exploited for their gain.

It is clear to the Committee that acting alone, pig producers are unlikely to achieve the kind of partnership which is necessary for the re-development of a healthy pig industry in Northern Ireland.

The Department should become more proactive in its stance towards the discussions going on between the pig producers and Malton Foods and in the process of encouraging farmers to co-operate.

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RECOMMENDATIONS

Reserved Matters

1. The Department should, without delay, seek and gain agreement with MAFF to compensate pig farmers for the costs of replacing meat and bone meal with alternative and more expensive proteins (the 'BSE Tax').

2. The Department should make strong representations to the UK Government about the effects on the Northern Ireland pig industry of the current position of the UK currency in relation to Europe.

DARD's Strategic Involvement in the Industry

3. The Department should respond immediately to the industry-wide call for it to encourage better communication and co-operation between all sectors of the supply chain, particularly in the areas of pig quality, disease control and reduction of condemnations. The Committee would wish to see a strategy, embracing these areas, developed by the Department for implementation from 1 April 2001.

4. The Department should become more pro-active in its stance towards the discussions going on between the pig producers and Malton Foods and in the process of encouraging farmers to co-operate.

5. The Department, likewise, should assist producers in their efforts quickly to secure parity of price for pig-meat with GB. The Committee welcomes the conformation investigation announced by the Minister on 20 November 2000 and urges the Department to follow through its findings with vigour should they confirm the evidence presented to the Committee in this regard. This might include consultation with the Office of Fair Trading.

Response to Crisis

6. The Minister should lobby colleagues in Great Britain and Europe to ensure that future schemes which are designed to alleviate suffering are implemented within a time-scale which will allow them to achieve their purpose.

7. The Minister should direct her Department to develop an additional aid scheme, along the lines of that implemented in the Republic of Ireland but designed to be consistent with the UK-wide scheme, in order to ensure that Northern Ireland pig producers are not disadvantaged compared to their neighbours in the Republic of Ireland.

Producer-Processor Partnerships

8. Pig producers should continue their efforts to create a market responsive co-operative, focused on creating continuity of the supply of quality pigs to their customers and offering long-term arrangements upon which processors can depend.

9. The processors, and especially the dominant processor, Malton Foods, (in accordance with their evidence to this Committee) should do everything in their power to facilitate the creation of an equal partnership with this co-operative.

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INTRODUCTION

1. Background to the Report

1.1 On 13 December 1999 the Northern Ireland Assembly Committee for Agriculture and Rural Development announced that it would undertake a major inquiry into debt within the agriculture and fisheries sectors.

The Terms of Reference for the inquiry were:

1.2 At its first meeting following suspension of the Assembly the Committee agreed to review its Inquiry and to concentrate on three major issues in the Agriculture industry, issuing separate reports on each.

Revised Terms of Reference were agreed as follows:

To investigate factors that may have contributed to farm debt or to difficulties in servicing this debt; and

To examine proposals for addressing farm debt, publish reports and make recommendations in the following areas:

1.3 In reviewing the Terms of Reference the Committee was (and remains) conscious that it embarked on an Inquiry into debt. The informal evidence heard by the Committee, as it debated on the need for an inquiry, was that over £500m was owed to banks and over £50m to the grain traders. The Committee then conducted a 'straw poll' of finance companies and discovered that a further £18m was owed to the banks' leasing and hire purchase arms and another £14m to two of the major agricultural finance houses. The Committee believes that the total amount of farm debt at the outset of its Inquiry was at least £650m.

1.4 What was clear to the Committee, however, was that while these levels of indebtedness were undoubtedly high, there was a historical repayment capacity within the agriculture industry to service and repay such borrowings. The concerns, shared by banks, grain companies and farmers alike, were related to the reduction in farmers' incomes and the consequent pressures on this repayment capacity. This was amply demonstrated by the grain traders' estimate that bank interest as a percentage of farm income had risen from just over twenty percent in 1997 to eighty percent in 1999. For this reason the Committee believed it was appropriate to concentrate on recommendations aimed at improving farmers' capacity to generate additional income, thus relieving the pressures of indebtedness.

1.5 The Committee published the first Report, entitled "Retailing in Northern Ireland - a fair deal for the farmer?" on 5 July 2000. The Report was the subject of an Assembly debate on 25 September and the following motion was agreed without division:

"That this Assembly accepts and endorses the findings and recommendations contained in the Agriculture Committee' report 'Retailing in Northern Ireland - a fair deal for the farmer?' and urges the Minister of Agriculture and Rural Development and everyone associated with the industry to take all necessary steps to implement the recommendations"

2. The Competition Commission's Findings on Retailers' Practices

2.1 The concerns raised in the Committee's Volume 1 Report have been investigated in great detail and on a wider canvas by the Competition Commission. It has investigated pricing practices and a range of practices in relation to suppliers and its findings are as follows:

2.2 These findings are important and highly relevant to the plight of the Northern Ireland pig farmer.

2.3 In the view of the Committee the Commission has confirmed the Committee's belief that all of the adverse effects of the recent shocks to the pigs system have been allowed to fall on the producer sector. Neither the retailers nor the processors has paid heed to the fact that the result has been to severely damage:

2.4 The clear implication of this is that, contrary to what has been said to this Committee in evidence, there is no evidence of a genuine partnership between the producer sector and the rest of the supply chain.

3. The Committee's Approach

3.1 Whilst the retailer plays a crucial role in farmer incomes, being the arbiter of final selling prices to the consumer and of prices paid to the processors and thence to the farmer, the Committee wanted to look more broadly at the range of issues affecting returns to the pig farmers.

3.2 It is clear from everything known to the Committee that the supply chain from farm to consumer is giving consumers supplies of pork and bacon of the highest quality at attractive prices. Furthermore, it is also clear that of the three main participants in this supply chain the processors and retailers appear to have enjoyed good profits at a time when farmers have been suffering losses.

3.3 The Committee has therefore sought to examine a number of issues germane to the plight of the pig farmer and to recommend to the Department a course of action to deal with the present crisis and prevent its recurrence.

3.4 The pig sector has long been the subject of swings of fortune across the world. The "hog cycle" is a classic business cycle which has been used as a case study by economics students for decades. Part of this is due to the fact that, unlike milk or beef, pig-meat is unregulated and farmers are free to enter or leave the market at will. It is this relative ease of entry and departure that causes much of the problems facing serious full time pig farmers.

3.5 However, the current crisis has been affected by economic impacts of an altogether more massive kind than these normal cyclical trends.

3.6 There are three major events lying at the root of the current problem. The first is the persistently adverse Sterling/Euro exchange rate which has made imported pig-meat extremely competitive. The second is a series of events which had the effect of causing massive European oversupply of pig-meat. The third more local impact was the disastrous fire at Malton's Ballymoney plant and the ultimate consequence of this, which was that all of Northern Ireland's major pig processing capacity was concentrated in the hands of Unigate.

4. Acknowledgements

4.1 The Committee would like to thank all those who participated in its Inquiry through written and oral evidence. This participation enabled the Committee to address a wide range of issues and ensure that differing viewpoints on these issues were heard.

4.2 The Committee would also like to thank those organisations that took the time to make written submissions to the Committee at the outset of the Inquiry (i.e. under its original Terms of Reference). When the Terms of Reference were revised a number of these submissions were found not to be relevant to the new Inquiry and they have not been published with this Report.

4.3 A list of unpublished memoranda has been included with the Report and the memoranda themselves have been lodged in the Assembly's library and are available for inspection.

4.4 The Committee also thanks the Competition Commission for its permission to publish extracts of its report.

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ISSUES CONSIDERED BY THE COMMITTEE

5. Assistance Available to Farmers Facing Debt

5.1 An early response from the Department to the original Inquiry stated that indebtedness was concentrated on a relatively small number of farms. According to DARD, in 1998/99 forty-four percent of farms had no bank borrowings and nine percent of those who did had borrowings of £50,000 or more. The Committee realises, however, that this still equates to a significant (and growing) number of people who are facing genuine hardship as their ability to repay loans decreases.

5.2 Although not explored as a main issue in this Report, the Committee firmly believes that there is a need to offer financial guidance and information to those who are unused to such hardship and suffering problems as a result. With DARD's network of offices and staff there must be opportunities for the Department to play a role in offering this guidance. The Committee, therefore, welcomed the announcement by the Minister on 20 November that up to £150,000 was to be spent in offering information, guidance and counselling for farmers and their families. The Committee also welcomes the further announcement of £150,000 to facilitate the provision of supplies of vaccine to farmers to help eradicate Aujesky's Disease in pigs.

5.3 Both the bankers and farmers groups highlighted the importance of farmers being able to access appropriate support in terms of available benefits. The Committee believes that there must be a realistic understanding of rural needs on the part of the Social Security Agency (SSA). It is the Committee's opinion that DARD should offer its close co-operation and knowledge of rural areas to the SSA in an attempt to ensure the uptake of available benefits by those most in need.

6. Mismatch between Supply and Demand and the Effects of Currency Fluctuations

6.1 Pig-meat, being unregulated, moves freely to meet market demand and prices move quickly to reflect the supply/demand balance. It is, therefore, not possible for a given producer, or a given regional grouping of producers, to influence pig-meat prices. When there is a major exchange rate discontinuity as between the UK and the rest of Europe this effect can be greatly exacerbated.

7. Dependence on Unigate and the Powerful UK Supermarkets

7.1 The second issue relates to the role of Unigate (Malton Foods) and the supermarkets. The first in the series of three Committee Reports on this Inquiry dealt with a number of the key issues in relation to the retailers. However, retailers are an integral and crucial part of the supply chain and we need to examine the impact they have beyond those issues dealt with earlier.

7.2 In the competitive arena all organisations seek to create superior market power. In the case of the UK supermarkets the leading players demonstrate success in this quest perhaps better than any sector. A small number of retailers now dominate the market for the nations' groceries and their market power is immense. As a result they are, as organisations, in a position to dictate to their suppliers on every aspect of supply, whether it be in the specification of the product, the conditions under which it is grown and manufactured or its price. This is, in turn, driven by the needs and wants of the mass of consumers they supply. Most of Northern Ireland's quality pork is currently sold to a few of these powerful leading supermarkets. Consequently their impact on the industry is great. Conversely the industry is greatly dependent upon them.

7.3 The most powerful member of the Northern Ireland pork supply chain is a major public company - Unigate (and their subsidiary Malton Foods). However, the supermarkets are more powerful still and their first allegiance is to their shareholders who have supplied the capital to fund the company. To satisfy the shareholders they must trade profitably. The same profitable trading requires them to sell competitively to their customers. In the case of the supermarkets almost all of these customers can shop elsewhere if they choose. Supermarkets are therefore driven by both market price and the need to make a profit.

7.4 It is not surprising that both the supermarkets and Unigate will use their market power to demand in terms of both quality and price exactly what they want from their suppliers. The Committee had no power to investigate whether the UK supermarkets are profiteering at the expense of the pig farmers. We will rely on the Competition Commission's Report on The Supply of Groceries published on 10 October 2000.

7.5 End prices for the bulk of Northern Ireland pork are, therefore, set ultimately by the UK retailers. They are very large organisations relative to even the largest Northern Ireland pork processor.

8. Pricing Practices by Processors

8.1 A major issue, which we examined in our earlier report, is the pricing policy of the major pig processor and in particular the prices paid for Northern Ireland pig-meat as opposed to similar livestock purchased in GB.

9. Partnerships and the Fragmentation of the Producer Base

9.1 Pig producers are a fragmented and disorganised producer base in an era when supply chain management has never been more important. The creation of well functioning partnerships is a key to the industry's future at every level. The Committee believes that there are probably excellent partnerships between the processor and retail sectors. The key issue is the apparent absence of partnerships which function in a meaningful way between farmers and processors.

10. BSE Impacts and the Effect of Differential UK Welfare Regulations

10.1 In a low margin industry facing such fierce competition both across a land border and from nearby Europe this issue of extra costs is of major importance.

10.2 The British Pig Industry Support Group went so far as to instigate a court case, against the UK Government, for discrimination against the UK pig industry. Producers hoped that this would force a change of policy.

11. Government Response to Crisis and Support Offered to Pig Farmers

11.1 The Committee was in no doubt that the pig industry was in crisis and that this was caused by several factors outside the control of farmers. The Government has come in for criticism over its response to the various factors that have led to the present crisis. In particular, a comparison of the response of the Northern Ireland Department with that of its Republic of Ireland counterpart, following the disastrous fire at the Ballymoney processing plant, appeared to be of importance to farmers and their representatives.

11.2 The UK Government's proposed pig industry restructuring scheme, announced in March 2000 but still awaited at the conclusion of the Committee's evidence-taking, was also of crucial importance to pig farmers.

12. The Role of DARD

12.1 This is an issue of first order importance. The centrality and pervasiveness of DARD's role as it is currently exemplified is not in question. The issue is, rather, about DARD's stance in relation to the farmers as a trading sub sector and, in particular, in relation to assisting farmers to better organise their own part of the supply chain in terms of responsiveness and ability to deal with the two higher levels of the chain. The underlying issue, as the Committee see it, is the creation of balanced partnerships and a supply chain that is operating effectively and efficiently. The issue in respect of DARD is what its vision goals and involvement should be in this regard.

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RESPONSE TO ISSUES BY GROUPS GIVING EVIDENCE

13. Malton Foods states that:

13.1 Recent severe losses in pig production and processing stem from over-production, stemming in turn from the profitable years in the mid to late nineties. This in turn stemmed from BSE related demand because of consumers switching from beef. That was followed by disease problems around the world, particularly foot-and-mouth in Taiwan, a major exporter to Japan, and then swine fever in Holland. This caused another period of supply driven inflation. In response, in the UK and across Europe, many new entrants appeared including the low cost arrival of outdoor rearers. Just as the supply side geared up, the Russian market closed to what had been a third of all European exports. At the same time the pound was strengthening.

13.2 Added to this was the UK welfare legislation banning stalls and tethers, causing heavy investment by UK farmers, some of whom increased herd size at the same time. Since then the Danes and the Dutch have turned over small proportions of their herds to meet these regulations and so be able to export qualifying material to the UK.

13.3 The meat and bone meal ban has cost UK pig farmers an estimated £5.25 per animal. More than half the losses that the British pig farmer has sustained has been down to . the unfair banning of . meat and bone meal within feed.I do not mind how the playing field is levelled but it needs to be levelled.

13.4 The weak Euro has made exporting very difficult. Britain is only seventy percent self sufficient in pork and plentiful supplies of cheap European pork served to cheapen imports. The result was a fifteen percent fall in UK slaughterings in the year to June 2000.

13.5 NI producers' net returns are similar to producer returns in England. At the time of the Inquiry, the "five pence premium" principally related to transport, slaughterhouse deductions and carcass grading. Haulage from farm to slaughterhouse is borne wholly by the pig producer in Britain but subsidised by the slaughterhouse in Ireland. The remaining amount of less than 2p/Kg reflects the lower net meat value arising from poorer carcass conformation.

13.6 The price gap has grown since July (2000). This reflects greater downsizing in the British herd compared to the Irish herd . a move towards AAPP contracting in Britain compared to weekly spot pricing in Ireland . the impact of swine fever (in) Britain artificially supporting higher British pig prices.

13.7 It has had three meetings with the United Pig Producers' Co-operative (UPP) and most recently has invited them to Malton to.. see what the company is looking for as a product. They have seen Irish material going down the slicing line and the complications it is causing Malton. The company is genuinely working towards contract supplies coming into Malton. The Managing Director certainly envisages working with (UPP) .and sees great synergies in it being set up.

14. Ulster Curers' Association (UCA) states that:

14.1 The smaller processors have consistently made the highest bids in Ireland and buy direct from farms, and have supported schemes to help farmers. UCA companies grant aid pedigree boars and pay for the ultrasonic testing of sows as well as helping some farmers who were in serious financial difficulties.

14.2 The curers would welcome the opportunity to talk to local pig groups .there must be ground rules to safeguard the interests of both sides. There are some very strong farmers who want to pick us off against each other. That is not fair and the curers will not wear it.

14.3 Some farmers were told to have nothing to do with the group and some warned a member firm off. (from dealing with UPP)

14.4 Local curers cannot match English prices because they buy only NI pigs as opposed to mixing in large quantities of cheaper pigs brought over the currency boundary from the ROI, Holland and Denmark. Malton purchase 50% of their product from Denmark and Holland, enabling them to pay more for their locally purchased pigs.

14.5 When one representative started in this industry there were 60-70 curers. Pig numbers have fallen from 45,000 a week to 25,000. If Malton goes, that number will fall further. The curers are up against the wall.

14.6 Major local orders are being lost to suppliers from ROI, where the currency advantage is impossible to combat.

14.7 Local curers have lost many local small customers themselves, closed by the arrival of the big supermarkets. Gaining this lost business from the supermarkets themselves is very difficult.

14.8 Pig processors are not currently making money, including the big players like Malton and Glanbia.

14.9 (DARD should) improve communication between producer and processor i.e. quality of pigs, disease control, to reduce high level of condemnation.

14.10 A level playing field for sterling would help the industry most. If we were able to bring grain directly into our ports, and avoid the levy in Rotterdam, this would certainly help.

14.11 Since the BSE crisis, we have gone from a positive position as regards payment for disposal to a negative one. It cost over £300,000 to dispose of our waste material in the past 12 months. Help with BSE costs (is a step for the survival of the industry).

15. The UFU and Ulster Pork and Bacon Forum state that:

15.1 There is sufficient money in the producer-processor-retailer chain for all parties to make a reasonable profit. This has not happened and pig producers have been losing money for three years. At the height of the crisis following the Ballymoney fire, when producers were losing £30 per pig the retail price did not reflect this fall.

15.2 Dissection exercises carried out by the Ulster Pork and Bacon Forum in November 1998 and June 2000 showed mark ups of £140 (338%) and £126 (207%) between farm gate and retail. This is proof of the allegation that farmers are being starved of their profit.

15.3 The Union has failed to get a satisfactory explanation of the average 9p/Kg deadweight differential between the NI price quoted by DARD and the GB average (Eurospec Adjusted Price)

15.4 The stall and tether ban and the BSE related controls on the use of meat and bone meal have placed an unacceptable burden on the competitiveness of UK pig producers. Government should compensate pig producers for this £5.26 per pig added cost. The pig industry, although never associated with BSE in any way, is the only agricultural commodity not to receive compensation for extra costs associated with its control . we await the outcome of the recent court case against the Government.

15.5 Government must ensure that the aid package for the UK pig industry, announced on 30 March 2000, is implemented as soon as possible . it must be ensured that Northern Ireland receives its fair share of the total money available, irrespective of the uptake via the out-goers component.

15.6 A similar scheme (to that in the ROI) must be introduced for Northern Ireland producers who suffered lower prices as a direct result of the fire . the UK aid package . is welcome but is designed to address UK-wide problems and will therefore only have a minor impact on the Northern Ireland industry. The financial incentives within it are less than half of those provided through the ROI scheme . We need an on-goers scheme that is separate and to which we could maybe key in right away and get some money . our primary responsibility at this point in time should be the people who want to continue.

15.7 The Government, while they . lack vision and will to do something, should, apart from what they have offered us at the summit in March . it is far too late and far too long for pig producers in Northern Ireland to wait . a supplement on a par with our colleagues on the southern side of the border . would be very, very useful.

15.8 We agree wholeheartedly (that the Department's argument, that the original scheme in Northern Ireland was the same type of scheme as the new one offered in the Republic of Ireland, was wrong) . the scheme that the Government provided (after the fire in the processing plant) was very useful at the time. They provided it for the welfare of the pigs; it did not do an awful lot for the pig producer. We feel that (the pig producers in the border counties of the ROI) may have benefited as much from the scheme as we did because it freed places in the processing plants . they have the added benefit now.

15.9 The strength of sterling makes NI pork less competitive than that produced across the border.

15.10 UPP have been offered a £150,000 grant over three years to help set up a producer co-operative. In relation to entering processing, it is better that farmers co-operate to sell to the best (processing) outlet available.

15.11 Over the past two years there has been no investment in the pig (production) industry. There is a shortage of capital. Northern Ireland's mostly family run pig farms are very efficient.

15.12 A mechanism must be found to allow the producer to get a fair share of the retail price. It is unfair that those who hold the product for the least time get the biggest profit.

15.13 The pig industry needs to look to the catering sector for easier access than the big supermarkets.

15.14 It is probably achievable to organise a sizeable proportion of producers into a co-operative. The organisations have been and will be supportive in various ways. There is more need for government assistance. In Great Britain producer groups are affiliated to one body. If we get our Co-op going here, it could be affiliated to the Great Britain body.

15.15 (DARD should) encourage better communication and co-operation between all sectors of the supply chain.

15.16 If the finished pig price does not rise, critical mass will drop and we will fall off the edge. We have to keep pushing why there is a 20p differential between Northern Ireland and Great Britain.

15.17 A large part of the problem relates to currency.

16. NIAPA states that:

16.1 Having one co-operative group would improve the situation. The Association has always believed that pig producers had to get together in some way. The unfortunate thing is that many farmers regard their neighbours as opposition. That is something that has to be sorted out. And there is fear of reaction from the processors. NIAPA has examples of that.

16.2 We would like to see the out-goers scheme implemented as soon as possible . if we don't have that scheme we can't have an on-goers scheme . we have to be left . with an industry which can stand and the people who have stayed thus far are in some considerable debt . these people have to have support to have an industry for the future.

17. UPP (United Pig Producers) states that:

17.1 UPP was formed in 1995 with ten members, had 35 at its peak and now has 32 members marketing 1,300 pigs per week and buying 550 tonnes of feed. About 40% of the industry has (disappeared) in two years.

17.2 In the beginning no Northern Ireland processor would buy UPP pigs. Once the Co-op sold in Scotland this changed. The local factory boycotted UPP. Malton were paying 106p in GB as a base price and 85p a kilo in NI. UPP started to sell pigs in England in August (2000) and are getting good money there. Since then, the processor who had been buying most of our pigs has dropped the price. We feel we are being blackmailed. Northern Ireland is subsidising UK pig prices.

17.3 In 1998, a five man steering group formed UPP. With the aid of Department Marketing Grant aid a feasibility study was done. Malton refused to deal with UPP, at the time working with Scotlean as marketing agents. They then withdrew. In May 1999, Malton then agreed to take UPP pigs but only if they paid individual farmers. Local processors continued to ignore UPP and refused to take their pigs. After a positive meeting in February 2000, Malton offered to discuss all aspects with UPP. UPP representatives visited Malton's factory in April 2000 to see the quality differential between GB and NI pigs which accounted for the price differential. No Irish delegate could see the difference. We have grading evidence (to back this up).

17.4 UPP and Malton met again in June to discuss contracts, and again in July but nothing has materialised. After forty meetings (for various purposes) and two years work we feel as pig producers that the processing industry is not giving us a fair crack of the whip.

17.5 The other processors are sitting on the back of Malton and are doing very well.

17.6 If we could work closely in partnership with the processors there is no reason why the pig industry not being a lucrative business and adding to the economy of the country.

17.7 There is a difference of between £14 and £15 per pig between Great Britain and Northern Ireland. We need that to pay debts and build up some fat for the next downturn. The situation is like that when nineteenth century landlords told tenants what to do and take what he got.

17.8 There is a fear amongst producers that they will have no outlet for their pigs if they step out of line. That fear has to be broken.

17.9 Malton definitely does not want producer groups. There is no question about that. It wants to keep us as individuals and it wants to keep us weak. The week after Mr Somerfield said (at a meeting with producers) Malton had no problem with producer groups, UPP booked pigs into Cookstown and into other NI processors. Not one of them would accept pigs through UPP. That suggests one thing. They are scared of producers coming together.

17.10 Selling pigs to England is not easy. Processors there want them when there is under-supply but not on a continuing basis. Weather is a big problem, when compounded by the disease regulations which mean that returning pigs to farm can be prohibited. Storms affect UPP's ability to offer continuity of supply.

17.11 Malton will not give pig producers written contracts in Ireland. The company gives contracts in England because there is opposition there.

17.12 DARD could join with us in getting the processor and producer together to solve these problems (2-3 percent of condemnations).

18. Ulster Agricultural Organisation Society (UAOS) states that:

18.1 The UPP business plan, which resulted in a £150,000 grant from the Department, has not proceeded because no arrangement has been possible with Malton. The Co-operative's long term viability is based on a 30p per pig levy deducted by the processor and paid to the co-operative. This has worked exceptionally well with the five lamb co-operatives. Some of that lamb is now being sold by WD Meats branded as Strangford Down.

18.2 The equivalent body, SAOS in Scotland, receives £300,000 of state funding for co-operative development.

18.3 If agreement could be reached the Co-operative could initially supply 2,000 pigs per week. But the Co-op needs a firm contractual agreement with the processors, built on mutual trust and fair pricing.

18.4 Branding is not a good option because all pork is from the same type of pig.

19.DARD states that: (note that many of DARD's comments were made in the context of the beef industry but the ones of a general nature have been assumed as also relating to the pig sector)

19.1 The pig sector has been adversely affected by the BSE crisis, the consequent surge in demand for pig-meat and the ensuing market correction, the swine fever on the continent (and the market impacts of the temporary shortfall it caused) all led to a more prolonged downturn than anyone expected.

19.2 The problem was compounded by the strength of sterling. The Minister is also concerned by the doubling of the already wide price differential in favour of GB. DARD has no evidence to substantiate the claims that this is due to inferior conformation.

19.3 The Pig Industry Restructuring Scheme will allow DARD to help those wishing to leave the industry and the Department hopes to have discussions with Unigate about helping the position of the NI pig producer. DARD has consulted about the use of the £400,000 package announced for assistance with the marketing of pig-meat in Northern Ireland.

19.4 Direct comparisons in support for UAOS and comparable bodies in the ROI need to take account of the direct input from the Department which is enormous.

19.4.1 The Department does not see how there can be exploitation of primary producers if excess profits are not being made by the retailers. The Minister is, however, acutely aware of the difficulties that primary producers are facing and the huge fall in their incomes. Those at the bottom of the food chain very often get the raw end of the deal when conditions deteriorate.

19.4.2 The Department has no evidence of exploitation of primary producers by processors. A recent study in the Republic came to the same conclusion and economists in the UK have found retail prices reflecting farm gate prices. Nevertheless, if there is exploitation properly verified by the Office of Fair Trading, the Department would treat it as an extremely serious matter.

19.4.3 The Department is very supportive (in moral, practical and financial terms) of producer co-operation and of encouraging collaboration in marketing initiatives within the food chain and works extensively with the industry in this field. This applies to all sectors of the industry. The Minister is seeking to increase the resources which can be devoted to this and will respond positively to coherent proposals from the industry in relation to co-operation.

19.4.4 The Government should not impose co-operation. DARD's role is to help develop initiatives that will have a positive impact. Truly successful producer co-operation must avoid engaging in a power struggle, but embrace the concept of partnership with processors and retailers. This is the Department's approach.

19.4.5 The Department is fully committed to the principle of building partnerships both vertically and horizontally and there are many examples of this in practice. The Department will not impose co-operation and does not favour creation of co-operation between producer groups to strengthen their marketing as this could backfire. However, if there is a demand from the producers for one producer group the department would co-operate.

19.4.6 The real answer is to build a partnership along the chain to create an awareness of market requirements. This is what DARD is currently doing. Each link must recognise that it is dependent on another. The Minister would also say to the processors that if they squeeze out the primary producers they will not have a ready source of raw materials.

CONSIDERATION OF EVIDENCE

In considering the evidence before it the Committee addressed each of the main issues as outlined in Section 2 above.

20. Mismatch between Supply and Demand and the Effects of Currency Fluctuations

20.1 There is no doubt that the crisis in pig-meat was triggered by the joint effects of sudden global changes in supply and demand caused by the industry's over-correction following disease outbreaks. The increase in pork demand following the BSE crisis was compounded by the massive herd reductions in Taiwan and Holland as a result of disease in their respective herds. Locally this was exacerbated by the fire at Malton's Ballymoney plant. In turn this triggered a severe rationalisation of processing capacity and its concentration into the ownership of Unigate.

20.2 At the same time, the strengthening pound reduced the competitiveness of Northern Ireland pig-meat.

20.3 None of these impacts was remotely within the power of Northern Ireland pig producers to alter in any meaningful way. The result of these effects, and others dealt with below, has been to drive all pig processors into severe losses and to cause many to leave the industry. An important industry sector has been very badly damaged.

21. Dependence on Unigate and the Powerful UK Supermarkets

21.1 There is no doubt, from the evidence taken at the earlier stage in the Committee's Inquiry, and during the period since, that the Northern Ireland pig industry has been greatly affected by the market power of the UK supermarkets.

21.2 Pig farmers, like their beef counterparts, feel trapped in a market place which is unable to yield them a fair return for their investment and labour. Farmers are convinced by their own calculations that there is sufficient profit in the supply chain to remunerate them properly. The kind of relationship needed to make a healthy supply chain is currently denied to the industry because of the mistrust that is created by feelings of exploitation. Whether these feelings are well founded or not, the Committee is certain that they are genuinely held by those who have given evidence.

21.3 This evidence is, in a general way, strongly corroborated by the findings of the Competition Commission when they say:

"There appeared to us to be a climate of apprehension among many suppliers in their relationships with the (supermarkets). We therefore put a list of 52 alleged practices to the main parties and asked them to tell us which of them they had engaged in during the last five years. We found that a majority of these practices were carried out by many of the main parties. They included requiring or requesting from some of their suppliers non cost-related payments or discounts, sometime retrospectively; imposing charges and making changes to contractual arrangements without notice; and unreasonably transferring risks from the main party to the supplier. We believed that where the request came from the main party with buyer power it amounted to the same thing as a requirement. We conclude that five Multiples (Asda, Safeway, Sainsbury, Somerfield, and Tesco) each having at least an 8 percent share (of the market) have sufficient buyer power that 30 of the practices identified .adversely affect the competitiveness of some of their suppliers and distort competition in the supplier market for the supply of groceries."

21.4 Furthermore, the market power disparity between Malton Foods and farmer suppliers makes it possible for them to pass such charges back to the farmer through the price paid for pigs. While producers have suffered severe financial losses there is some evidence that pig processors have taken a proportion of the financial pain themselves.

21.5 Thus the market power of the supermarkets is not only plain for all to see, it is also, according to the Competition Commission, being used systematically to add to the benefits gained by the normal terms of trade.

21.6 Given that the large supermarkets not only dominate their suppliers but also collectively dominate the UK retail pork and bacon market, they have the power collectively either to raise or lower the retail price at will. They could, if they were so minded, take account of the effects of current pricing regimes on the pig farmer's ability to survive and would have the power to act. This has already begun to happen with milk production in GB. The Committee accepts that in a free market where a very significant proportion of supplies has to be imported across a favourable currency boundary this may be easier said than done. The fact remains that the retailers have continued making good profits at a time when the producers have demonstrably been making disastrous losses.

22. Pricing Practices by Processors

22.1 In the Committee's view there is an unhealthy level of mistrust between producers and processors. There are a number of factors involved:

22.2 The Committee noted the explanation, provided by Malton, of the difference in prices paid for pig-meat between Northern Ireland and Great Britain. While the reasons given may indeed have some effect on the price, the Committee is not convinced by the arguments made. Indeed the company's own admission that contracts, rather than spot pricing, in Britain accounted for part of the price difference, speaks volumes about what appears to be the real reason for avoiding such contracts in Northern Ireland.

23. Fragmentation of the Producer Base and Limitations on the Sale of Pigs

23.1 All parties agree in their evidence to the Committee that improved co-operation throughout the food chain is a requirement for a successful industry. The UPP initiative is an important development in this regard. This initiative has been financially supported by the Department although there has been little achieved in early discussions with Malton Foods who seem, to the Committee, to be stalling.

23.2 The Committee sought views on the formation of the co-operative and find strong support from the two main unions as well as verbal support from Malton and the Ulster Curers' Association. The latter body is openly cautious in its support, fearing a reversal of the market power equation.

24. BSE and Related Impacts

24.1 All of the industry participants are united in believing that the "BSE Tax", which is estimated at £5.26 per pig, is not only unfair but a potentially serious handicap in a low margin industry facing imports from European countries where this "tax" does not apply. The Committee agrees.

24.2 During the Inquiry the Committee learned that the British Pig Industry Support Group had lost their claim for compensation against the government alleging discrimination against the pig industry. This was an unfortunate, if not unexpected, outcome from the producers' point of view.

24.3 Equally the costs incurred in coping with the UK's other unilateral impositions in the field of welfare fall into the same category. This has been and remains a costly exercise.

25. Government Response to Crisis and Support Offered to Pig Farmers

25.1 It is clear to the Committee that in times of crisis the pig farmers looked to their Government for support. The evidence suggests that farmers have been very disappointed in the Government's response.

25.2 Of particular concern to farmers is what they see as a more favourable response from the Republic of Ireland Government, and they look on enviously at the maximum payment of IR£12,000 per producer. The Ulster Farmers' Union rejects the Department's assertion that a similar scheme could not be implemented in Northern Ireland because of similarities with the Department's original welfare scheme. The Committee believes that the schemes are very different and would support the farmers' position.

25.3 There has also been disappointment with the time it has taken to implement the restructuring scheme announced on 30 March 2000. Farmers who needed immediate assistance have, as this Report is written, still to receive a single penny.

25.4 The Committee also shares producers' concerns that a UK-wide scheme fails to address the difficulties faced by local producers.

26. The Role of DARD

26.1 The Committee noted that both producers and processors felt that DARD had a role to play in improving co-operation and communication between these two elements of the supply chain. This closer co-operation could lead to a reduction in the relatively high level of condemnations.

TOP

CONCLUSIONS

27. General Conclusions

27.1 It is clear to the Committee that the issue of farm debt in the pig sector has several fundamental causes, some outside the control of the parties in Northern Ireland and others capable of being remedied.

27.2 The industry and the Department will have to continue to work together to create the improvement needed. One potential outcome could be the resolution of the problem of relatively high condemnations in Northern Ireland processing plants.

28. Global Impacts

28.1 The pig industry, global in its reach and unfettered by other than the normal regulations applying to trade in food products, has a cyclical tendency which seems beyond the ability of participants to alter. Northern Ireland is a small part of this global equation.

28.2 This crisis has been caused by the coincidence of a number of major factors which severely disrupted and exaggerated the normal cyclical trend. As a result there was a severe demand surplus in Europe, at a time when currency movements affected the terms of trade adversely for UK producers. UK pig production was driven into severe loss making.

29. Reserved Matters

29.1 These losses were further exacerbated by the impact of the so called "BSE Tax", (the extra cost of protein to substitute for porcine meat and bone meal imposed by the UK Government as part of their response to BSE). This is reliably estimated as a cost penalty of £5.26 per pig. Although the judicial review against the UK government regarding BSE costs was lost, the Committee concludes that there was at least a moral obligation for compensation to be offered to producers who were suffering through no fault of their own.

29.2 The Committee hopes that the (albeit temporary) European-wide ban on the use of meat and bone meal will at least help to 'level the playing field' with competitors. This was considered as essential by almost all of the industry. The Committee would ask the UK Government to lobby other member states to ensure that the ban is as rigorously enforced as it is in Northern Ireland.

29.3 Additionally, the industry was at the same time bearing the costs (estimated at £220 million for the UK) of altering housing to comply with UK husbandry regulations. Both of these costs were unilaterally applied by the UK Government and were not replicated in competitor countries.

30. Restructuring Processing

30.1 This was further aggravated in Northern Ireland by the destruction of the Malton plant at Ballymoney. Malton's response to this crisis resulted in their taking over the whole of the major processing capacity in Northern Ireland thus creating a virtual monopoly over the greater part of pig processing.

30.2 Additionally, having heard evidence from both sides, the Committee is persuaded that Malton Foods is paying considerably less for similar pigs in Northern Ireland than it pays in GB. The difference is not trivial given the narrow margins faced by pig producers and the extra costs of feed in Northern Ireland. In the context of the major pigs crisis, this differential has almost certainly been a serious cause of damage to an already beleaguered producer sector. In the Committee's view, if the difference is what we believe it to be, this amounts to an abuse of a dominant slaughtering position, a position which has been achieved with considerable Government assistance.

30.3 There is an undoubted imbalance of market power in this situation which brings us to conclude that it would be proper for the Department to become involved. Government has invested heavily in the processing capacity being used and cannot stand idly by if the producers' case, as put to this Committee, is proven.

30.4 The Committee concludes that the then Northern Ireland administration's response to the Ballymoney fire was not wholly adequate. The Committee recognises that the Department moved to protect the welfare of pigs through the introduction of a slaughter scheme and farmers agree that this was welcome at the time. However, the scheme appears to have done little to resolve the longer-term difficulties which local producers faced as a result of the fire. The Committee believes that the Department has not demonstrated a willingness to 'go the extra mile' beyond acceptance of, and rigid adherence to, the UK-wide scheme. As a consequence of this, the Northern Ireland pig farmers are at a disadvantage to their neighbours across the border.

30.5 Nor can the Committee overlook the length of time taken to implement the UK-wide restructuring scheme. That a scheme designed to restructure the industry, and to provide support to those struggling to remain within it, should take so long to implement cannot be justified. Hope given to farmers in March 2000 remains unfulfilled almost 10 months later. While the blame for this cannot be laid entirely at the door of the Department of Agriculture and Rural Development, the Committee concludes that it is incumbent upon the Minister to urge her counterparts in England, Scotland, Wales and the European Union to avoid such delays in future.

30.6 However, the Committee also concludes that the Northern Ireland pig industry may have an opportunity to benefit from the restructuring scheme which is now on offer. It is important that the out-goers scheme attracts sufficient uptake to allow the on-goers scheme to come into effect. Northern Ireland pig producers should look closely at this scheme. In particular those farmers who have been forced out of business should investigate their eligibility for assistance under this scheme.

30.7 The Department must also play its part by ensuring that all producers and ex-producers have access to clear and concise information to enable them to make sound judgements about what is on offer.

31. Retailer Market Power

31.1 The market power of retailers, no less for pork than for beef, is likewise being used in the self interest of the retailers concerned with no apparent regard to the protection of UK or Northern Ireland supply capacity. Their prices were fixed with reference to the wider market including cheaper imports resulting in severe losses across the pig-producing sector.

32. A Producer Side Endangered

32.1 The net result of all these effects is to create a situation where the Committee is persuaded that the Northern Ireland pig industry is now being dangerously starved of profits. It has already been driven deeply into losses with bank indebtedness of £40 million. Producers are vulnerable to exploitation of their geographical position. Other outlets for finished pigs are at the mercy of the uncertainties of a sea journey. The future of the industry now lies largely in the hands of Malton Foods who are by far the dominant player on the processing side. Farmers are, for their part, disorganised.

32.2 Producers have seen the need to strengthen the base of the supply system by creating a co-operative producer organisation (United Pig Producers) and have been given financial assistance by DARD to develop this concept into reality. If successful, this organisation should go far to redress the fragmentation which characterises the supply side of the industry. However, the Committee is persuaded that Malton Foods has set its face against this development and has successfully stood in the way of its development. Individual pig producers are at the same time fearful that joining such a collective enterprise will count against them with Malton Foods and the other processors.

32.3 The Committee sees this as a classic example of the struggle by the individual against the large corporate organisations. The resistance by processors speaks more eloquently to the Committee than their oral evidence and indicates that there is a strong prima facie case that the producers are currently being exploited for their gain.

32.4 It is clear to the Committee that acting alone, pig producers are unlikely to achieve the kind of partnership which is necessary for the re-development of a healthy pig industry in Northern Ireland.

32.5 The Department should become more proactive in its stance towards the discussions going on between the pig producers and Malton Foods and in the process of encouraging farmers to co-operate.

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APPENDIX 1

PROCEEDINGS OF THE COMMITTEE
RELATING TO THE REPORT
MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE
AND RURAL DEVELOPMENT

FRIDAY 9 JUNE 2000
HELD IN THE SENATE CHAMBER, PARLIAMENT BUILDINGS

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

Inquiry into Debt - First Report

The Chairman opened the meeting to the public at 14.30.

Mr Max Hilliard (Managing Director), Malton Bacon Factory Ltd. called in and examined.

[EXTRACT]

MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE
AND RURAL DEVELOPMENT

FRIDAY 30 JUNE 2000
HELD IN ROOM 144 AND THE SENATE CHAMBER, PARLIAMENT BUILDINGS

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

Committee Inquiries: Circumstances faced by Pig Farmers

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

Mr John Dallat left at 10.05am. Mr David Ford left at 10.10am.

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

Mr David Ford re-joined the meeting at 11.25am.

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

Mr McHugh, Mr Ford and Mr Bradley left the meeting at 12.05pm.

Mr Ford re-joined the meeting at 12.15pm.

Mr Bradley re-joined the meeting at 12.20pm.

Mr Douglas left the meeting at 12.35pm.

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

Mr Ford left the meeting at 1.10pm.

The Chairman declared the meeting closed to the public at 1.20pm.

[EXTRACT]

MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE
AND RURAL DEVELOPMENT

TUESDAY 29 AUGUST 2000
HELD IN ROOM 152, PARLIAMENT BUILDINGS

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

Inquiry - The Particular Circumstances Faced by the Pig Industry

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

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

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

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

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

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

(c) The Chairman advised the Committee that a letter had issued to Malton Bacon Factory Ltd. seeking the additional information promised by Max Hilliard during evidence taken on 9 June but that no reply had been received.

Resolved: That the information was important in the context of the Inquiry and that the Chairman should issue a strongly worded reminder to Mr Hilliard.

[EXTRACT]

MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE
AND RURAL DEVELOPMENT

FRIDAY 8 SEPTEMBER 2000
HELD IN THE SENATE CHAMBER AND ROOM 135, PARLIAMENT BUILDINGS

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

Committee Inquiry into pigs and beef - Evidence

Resolved: That the Committee would meet the Minister at 09.00 on Wednesday 4 October for one and a half hours and that the Northern Ireland Meat Exporters Association should be invited on the same day at 10.45.

Evidence Session for the Pigs and Beef Inquiry

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

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

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

Mr Paisley Jnr. and Mr Bradley left the meeting at 12.15.

Mr Paisley Jnr. rejoined the meeting at 12.35.

Dr Paisley, Mr Kane and Mr Paisley Jnr. left the meeting at 12.45 and Mr Savage assumed the Chair.

Mr Savage adjourned the meeting at 13.10.

[EXTRACT]

MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE
AND RURAL DEVELOPMENT

FRIDAY 29 SEPTEMBER 2000
HELD IN ROOM 135, PARLIAMENT BUILDINGS

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

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

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

Response Received From Malton Bacon Factory Ltd.

The Committee deliberated.

Resolved: that the information contained in the letter should be taken into consideration when the report on the Pig Industry was being prepared.

[EXTRACT]

MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE
AND RURAL DEVELOPMENT

4 OCTOBER 2000
HELD IN ROOM 152, PARLIAMENT BUILDINGS

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

The Deputy Chairman assumed the chair and brought the meeting to order at 08.50 in closed session.

Mr Armstrong attended the meeting at 09.00.

Committee Inquiry into debt - the particular circumstances faced by the pig industry

The Deputy Chairman declared the meeting open to the public at 09.00.

Ms Brid Rodgers, Minister for Agriculture and Rural Development, Mr Peter Small, Permanent Secretary and Mr Pat Toal, Deputy Secretary were called in and examined.

Mr McHugh and Mr Bradley attended the meeting at 09.05.

Mr Armstrong left the meeting at 10.20.

The Deputy Chairman adjourned the meeting at 10.25.

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

Mr Armstrong left the meeting at 12.10. Mr Paisley Jnr. left the meeting at 12.15.

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

[EXTRACT]

MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE
AND RURAL DEVELOPMENT

THURSDAY 23 NOVEMBER 2000
HELD IN ROOMS 152 AND 135, PARLIAMENT BUILDINGS

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

Committee Inquiry into debt - the particular circumstances faced by the pig industry

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

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

Introduction

Resolved: that amendments due to minor typographical errors found in the Beef Report Paragraphs 1 and 2 should be replicated in this Report.

Resolved: that the two additional paragraphs, agreed for inclusion after paragraph 1.2 in the Beef Report, should be included at the same point in this Report.

Resolved: that, subject to the changes outlined above, paragraphs 1 and 2 were agreed.

Paragraph 3.1 read and agreed.

Paragraph 3.2 read, amended and agreed.

Paragraphs 3.3 to 3.5 read and agreed.

Paragraph 3.6 read, amended and agreed.

Paragraphs 4.1 and 4.2 read and agreed.

Resolved: that the acknowledgement contained in the draft Beef Report (to those who submitted evidence which is not printed in the report) should be included in this Report.

Resolved: that should numbers fall below quorum, the remaining members should continue line by line consideration of the draft Pigs Report to its conclusion, with their agreed action to be ratified by the full Committee when it met the following day.

Mr Paisley left the meeting at 15.30.

Issues considered by the Committee

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

Paragraph 5.1 read, amended and agreed.

Paragraph 6.1 read and agreed.

Paragraph 6.2 to 6.5 read, amended and agreed.

Paragraph 7.1 read and agreed.

Paragraph 8.1 read, amended and agreed.

Paragraph 9.1 read and agreed.

Paragraph 10.1 read and agreed.

Response to issues by groups giving evidence

Resolved: that paragraphs 11 to 17 inclusive reflected accurately the evidence heard by the Committee in relation to the issues considered and that the Clerks should identify and amend all typographical and grammatical errors.

Mr Armstrong left the meeting at 15.50.

Paragraphs 18.1 to 18.3 read and agreed.

Paragraphs 19.1 to 19.3 read and agreed.

Paragraph 19.4 read, amended and agreed

Paragraphs 19.5 and 19.6 read and agreed.

Paragraph 19.7 read, amended and agreed should be subsumed into paragraph 19.6.

Paragraph 20.1 read, amended and agreed.

Paragraph 21.1 read, amended and agreed.

Paragraph 21.2 read and agreed.

Paragraphs 22.1 and 22.2 read, amended and agreed.

Conclusions

Paragraphs 23.1 and 23.2 read and agreed.

Paragraphs 24.1 and 24.2 read and agreed.

Paragraphs 25.1 and 25.2 read and agreed.

Paragraph 26.1 read and agreed.

Paragraphs 26.2 and 26.3 read, amended and agreed.

Paragraph 27.1 read and agreed.

Paragraph 28.1 read, amended and agreed, provided that the figure shown was quoted accurately from the evidence - Clerks to check this point.

Paragraph 28.2 read and agreed.

Paragraphs 28 .3 and 28.4 read, amended and agreed.

Paragraph 28.5 read and agreed.

Recommendations

Paragraphs 29.1 and 29.2 read, amended and agreed.

Paragraph 30.1 read and agreed.

Paragraph 30.2 read, amended and agreed.

Paragraph 30.3 read and agreed for insertion before paragraph 30.2.

Paragraphs 31.1 and 31.2 read, amended and agreed.

Additional work required on the report

Resolved: that the current draft did not address the issues of the proposed on-goers and out-goers schemes, the scheme to assist pig producers in the Republic of Ireland following the fire at Agivey or the outcome of the GB court case regarding the 'BSE tax' and that the Clerks should draft additional paragraphs to ensure that these were covered in the Report.

Resolved: that the Committee would consider a further draft Report.

The Deputy Chairman called the meeting to a close at 16.40.

[EXTRACT]

MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE
AND RURAL DEVELOPMENT

FRIDAY 24 NOVEMBER 2000
HELD IN ROOM 135, PARLIAMENT BUILDINGS

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

In the Chairman's absence, the Deputy Chairman called the meeting to order at 10.25 and declared the meeting open to the public.

Consideration of the draft Inquiry Report on pigs

Resolved: that the decisions taken on 23 November by the sub group, regarding sections 5.1 to 31.2 inclusive of the pigs report, were approved and that relevant sections were agreed, agreed as amended or subject to additional input as recorded.

Messrs. Bradley and Armstrong attended the meeting at 10.30

[EXTRACT]

MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE
AND RURAL DEVELOPMENT

FRIDAY 19 JANUARY 2001
HELD IN ROOM 135, PARLIAMENT BUILDINGS

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

Committee Inquiry into Debt - The Particular Circumstances Faced by the Pig Industry - Consideration of the Pigs Report

The Committee considered a letter dated 8 December 2000 from the National Pig Association which referred to the UK-wide Pig Industry Re-structuring Scheme. The letter sought assistance from the Committee Chairman in "making a success of the scheme.

Resolved: that the Committee should refer to the Scheme in its Report and suggest that producers give it careful consideration. However, the Committee could not fully endorse the Scheme without being certain of what was on offer to producers. The Committee would, in the Report, ask the Department to ensure producers were in the position to make sound judgements about what the Scheme offered.

The second draft report, incorporating additional paragraphs as ordered by members at their meeting on 23 November 2000, was brought up and read, paragraph by paragraph.

Issues considered by the Committee

Paragraph 9.2 read and agreed.

Paragraph 14.2 read and agreed.

Paragraphs 15.1 and 15.2 read and agreed.

Response to Issues by Groups Giving Evidence

Paragraph 17.3 read and agreed.

Paragraphs 17.5 and 17.6 read and agreed.

Paragraph 18.9 read and agreed.

Paragraph 18.11 read and agreed.

Paragraphs 19.4 - 19.8 read and agreed.

Paragraph 19.15 read and agreed.

Paragraph 20.2 read and agreed.

Paragraph 21.12 read and agreed.

Consideration of Evidence

Paragraph 26.2 read and agreed.

Paragraph 28.2 read and agreed.

Paragraphs 29.1 - 29.3 read, amended and agreed.

Paragraph 30.1 read and agreed.

Conclusions

Paragraph 33.1 read and agreed.

Paragraph 33.2 read, amended and agreed.

Paragraphs 34.4 - 34.7 read, amended and agreed.

Recommendations

Paragraph 38.1 read and agreed.

Paragraph 38.3 read and agreed.

Paragraph 39.1 read and agreed.

Paragraph 39.2 read, amended and agreed.

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

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

Resolved: that the written and oral evidence obtained from the following should be printed along with the Report:

Malton Bacon Factory Ltd.;

Ulster Farmers' Union;

Ulster Pork and Bacon Forum;

Northern Ireland Agricultural Producers' Association;

United Pig Producers' Co-operative;

Ulster Curers' Association; and

Department of Agriculture and Rural Development.

Resolved: that a launch date for the Report be agreed between the Chairman and Deputy Chairman

[EXTRACT]

TOP

APPENDIX 2

MINUTES OF EVIDENCE

FRIDAY 9 JUNE 2000

Members Present:

Rev Dr Ian Paisley (Chairman)
Mr Savage (Deputy Chairman)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Ford
Mr Kane
Mr McHugh
Mr Molloy

Witnesses:

Mr M Hilliard, (Malton Bacon Factory Ltd)

1.

The Chairman: Well, I declare this Agriculture Committee meeting of the Northern Ireland Assembly duly opened to continue the business that we commenced this morning. Welcome, Mr Hilliard. Could I say to you that the format we have been taking is a simple one, you make to us an opening presentation for ten minutes or so. We do not want to go longer because we have 40 minutes for each interview and then myself and my colleagues would like to ask questions. We will not have time for everybody, possibly we may have, but we have appointed three of our company to lead off in this. If we have more time, as we hope we will have because if we make it questions and not semi- speeches and you give us answers and not semi- speeches, we will go through a bit more. It is better for both sides to have that. So, if you would like to commence your presentation now.

2.

Mr Hilliard: Okay, good afternoon, if I can just make the first point that I was actually contacted last Friday with a view to attending here today and I have actually been away on holiday, but I felt therefore it is still important for me to come and make myself available so perhaps a shorter speech to start off with and perhaps more questions later on.

3.

The Chairman: We are sorry about that, but we felt we needed to have you here.

4.

Mr Hilliard: It is no problem.

5.

The Chairman: Thanks for facilitating us. We would remind you that we would have powers to draw you in, but we would not think of using that on a nice man like you.

6.

Mr Hilliard: If I can introduce myself and my business. I am Chief Executive of Malton Foods which is the pig meet processing subsidiary of Unigate PLC. We operate across ten sites employing 7,000 people. One of those sites is based at Cookstown which slaughters pigs and employs 360 people. The total size of the business, £600 million turnover of which over £500 million goes to the major UK retailers. The remaining trading sales are made of manufacturing meats and offals generated through the slaughtering and boning operations, about half of which we export around the world to America, Europe and the Far East. That is really presenting the business that I look after. A few words about the state of the UK pig industry: I feel it is important to focus on what were the causes of the losses that have been borne by pig production and pig processing over the last 2 years. It effectively started on the back of over-production, the oversupply of pigs. I think one could identify that that arose from profitable years of pig production in the mid-'90s to late -'90s particularly influenced by the outbreak of BSE. We had demand driven price inflation for raw material on the back of the consumer switching out of beef and switching into other proteins. Certainly the pig industry benefited from that and there was extra demand which pushed the price up and gave producers better returns. That was followed quite shortly afterwards in 1997 by disease problems around the world - outbreaks of Foot & Mouth in the Far East in Taiwan, a major exporter to Japan; and perhaps more recently Swine Fever in Holland. That effectively created a period of time where we had supply driven inflation again. On the world markets suppliers disappeared, an entire herd was destroyed by the Army in Taiwan, to put it into perspective, and that obviously buoyed the prices around. Against just as farmers were putting more product down, difficulties elsewhere within the industry, an opportunity particularly in the UK to enter pig production with local capital investment compared with previously because of outdoor pig production where people could rent land and put pigs out there, we saw more pigs coming through, not just in the UK but across the whole of Europe. We ought not to kid ourselves that it was other EU countries that brought this upon us, we saw the same herd expansion at home. All these extra pigs came on to the market when we started to experience problems in the export markets, Russia effectively closed down. We have to remember that a third of all the exports outside of the EU went to Russia. We saw a slowly strengthening pound. The expanded herds, just to put it into perspective, we would typically expect the EU herd to be 285,000 pigs per week - it rose to 325,000. Denmark, typically averaging 360,000 pigs per week rose to 425,000. When we started to really experience problems that were particular to the UK, we had the welfare legislation that banned domestic production systems incorporating stalls and tethers. The UK industry invested over £200 million of their own money, farmers, to take those systems out to meet the unique UK legislation. So it certainly caused them a problem that when the losses came along their financial status had already been undermined by having to make that investment. It was also on the back of reports that a lot of farmers might not make the investment to go out of business that when farmers did make that investment they actually took the opportunity to increase their herd size. It became a bit of a vicious circle that people invested into the new system, not as many people did go out of business on the back of good times therefore that added to the increased number of pigs coming through to the UK. The second and major problem that we face today within the industry is the exclusion of meet and bone meal from our ability to further process that into animal feed. If we put into context the losses that the British pig farmer has suffered, on average I would calculate that a farmer has lost over £10, just over £10 on every pig that he has sold for the last 2 years. The cost of the BSE taxes, as we referred to it, with no connection between BSE and pigs we have the banning of porcine meet and bone meal from further use in animal feed. That is calculated to cost the industry £5.25 per animal. So to put it into context, more than half of the losses that the British pig farmer has sustained have been down to just one element and that unfair banning of the inclusion of meet and bone meal within feed. Then we have seen up until recently, the Pound gaining strength against the week Euro and that has made it doubly difficult for processors and producers making it very difficult to export. But in a country where we are only 70% self-sufficient and with plentiful supplies of European pork it has only served to cheapen imports. The impact of that has been today that we see the UK herd falling away quite critically very far, very quickly and we are currently down to below 240,000 pigs a week being slaughtered. That is 15% down on last year's weekly average. If we look at what is happening on the Continent we see the Dutch herd down only 2% and absolutely no change in the Danish herd, if anything it is going to rise. The situation we find ourselves in as an industry now is that farmers are returning back to profitability as the supply of UK pigs falls away. The losses now are shifting on to the processing industry once again. We have a situation now where abattoirs are fighting for the pigs. Most abattoirs are now down to the equivalent of 4 day working and a British pig today commands at least 20% premium over its Dutch and Danish equivalent.

7.

The Chairman: Thank you very much. We, of course in Northern Ireland, are interested in the future of your firm in Northern Ireland because more or less now apart from smaller firms you are in the monopoly situation. What we have asked you to tell us, what is your idea of the future of the pig industry in Northern Ireland as concerns your own firm and what is the likelihood of your firm leaving Northern Ireland - you will excuse me, I must put these questions - your firm leaving Northern Ireland. Those are the things because as you have said we really are in a different ball game now. The news that you are giving us from the Continent is not helpful news nor the news in the global sphere is not helpful. Could you help us on those two issues? We have to do a report for our Assembly and the report is interested in getting us out of the mess that we are in, but it is also looking for recommendations. There is no use us being strong on diagnosis, which we all are, and not strong on proposals and prescriptions. So we need some prescription to say this is the way we should go in the future. Could you help us on that?

8.

Mr Hilliard: I think the one line, coming to the particular point secondly on our position because I think it is fundamental on the profitability, we have got to address the profitability essentially of the industry and what millstones we carry that make us uncompetitive against the Dutch and the Danes. Malton's history, coming back to Malton, is that as a company we are primarily set up to supply added value pork, bacon and ham products to the major UK retailers and some sales in Europe. Consistently up until 2 years ago for the preceding 15 years, we have demonstrated that the efficiency of British pig farmers combined with our efficiency as a processor meant that we could source domestic pigs, slaughter them and that material enter our further processing chain cost-effectively against imported material. Now, I almost feel as if we have got one hand tied behind our back with meat and bone meal, we have got one hand tied behind our back in terms of currency rates and not only do we have both hands tied behind our backs, we are almost in a strait jacket, we have just got everything going against us as an industry. I believe as an industry we can compete with Europe as currency is starting to come back in our favour, but fundamentally the main change that has got to be effected to put us on a level playing field is we have got to see either compensation for the £5.25 BSE impact on the pig industry or we have got to see that restriction lifted so that we can be adding value back into that fifth quarter, as we would refer it to, because without that one has to be concerned about the size of the cake, if I can put it like that, because all we are seeing at the moment is the unprofitability that has been experienced by the producer for a period of time now switching to the processor. What we have got to do is create a status quo where the cake is large enough for both facets of the industry, the producer and processor, to have enough money and make that cake large enough to divide between the two parties. If there is one thing we could change on a wish list it would be addressing the impact of this meat and bone meal exclusion. I believe that without that millstone around our neck then effectively we will still continue to have a British pig industry without doubt.

9.

The Chairman: Now, you are talking about the British pig industry, we want to talk about the Northern Ireland pig industry because what farmers are saying to us, Mr Hilliard, is very simple, they produce a high class commodity which your firm has been buying for years, we know that, but they do not get an equal price here for that pig as their colleagues across the water get for that pig, that is the big thing that they say. Now, I do not want now to go into the past, the water is under the bridge and there are many things that could be said, we are trying to get something to save our pig industry. Now our pig industry cannot be saved except we have a levelling of the playing field, that is how we feel. So we would like you to give us your comments on that, why is it that the farmer, the pig farmer in Northern Ireland, produces an equally good pig - he will say of course it is even better and I, being the representative for Ballymoney, would say the Ballymoney pig is a special pig, but the situation is this, and it is very important, he does not get the same value as a man producing a similar pig and maybe in his opinion maybe if Malton were going to be absolutely honest we would have to say in some ways: You are right, your pig is better, but he does not get the price. Now the other matters, the strength of the Pound, is something beyond us and having sat for 20 years in Europe I cannot see the British Government now having a push in their economy prepared to do what Wilson did or Callaghan did and devalue the Pound, that is not going to come. If the slight change that has taken place goes on perhaps fairly far away, not near hand, there may be some equalisation on this matter, but that is not going to come. The other one that you are mentioning which you say ties your hand is the meal. That is getting more and more difficult with what is happening now, a campaign in Europe, which is going to, I think, swing the green lobby against that completely.

10.

Mr Hilliard: A chance to answers those points you have made?

11.

The Chairman: Yes.

12.

Mr Hilliard: First of all, I would sit here and say that net net a producer over here returns a similar price as a producer returns in England.

13.

The Chairman: I think the figures, Max, I think you need to look at those figures again. Of course, I haven't the figures before me, but I think that I could produce figures that would show that they are at a disadvantage.

14.

Mr Hilliard: I think, with respect, at a top line figure you would identify that there is about a 5p premium that we have in England compared with here. I think what you then have to do is compare apples with apples. First of all, the contract that we pay, we measure pigs on millimetres of back fat, so we are grading the carcass in terms of quality. The top line price that is referred to, what we pay in the UK, actually equates to a tighter grading than the grading of pig that we purchase here. The second point would be here there are contributions made to the transport from farm to slaughter house, that is not made in the UK. There are then deductions that are made in the factories for grading animals and antemortem inspection. Those deductions are greater than the deductions that we make at the Cookstown factory. So I could certainly put in writing to you following this meeting how the 5p is made up so that I am able to say to you net net it is similar.

15.

The Chairman: Well I am afraid around this table we would not agree with you. I would like to see those figures, they would be useful for us.

16.

Mr Hilliard: I can understand how the misunderstanding arises because we are talking about a top price in England and top price in Northern Ireland. When we bring it down net net, because effectively that is the way we have got to look at it, if historically transport costs have been contributed to here and historically there have been higher deductions in English plants, you have still got to bring it to net net. Effectively there is no difference.

17.

The Chairman: Well, I do not think that would convince farmers here but never the less we would like to see your figures, it would be helpful to us.

18.

Mr Hilliard: Yes.

19.

The Chairman: The other one, just on the Pound, would you not agree that it is hardly likely that we are going to see a movement on that?

20.

Mr Hilliard: I totally agree, but I think with the efficiency of producers and the efficiency certainly of our business then I believe that we can hold our own, even if currency is going against us. What we cannot do is fight that battle and also have the meat and bone meal. We have to see the £5.50 which equates to half the losses that producers have sustained over 2 years, that is the playing field that we have got to have levelled off. If that is not levelled and we still have a hardship with the Pound then one has to worry how low the UK figures are going to go.

21.

The Chairman: Right, thank you very much. Mr Gardiner Kane?

22.

Mr Kane: Yes Chairman. Mr Hilliard, what outlets are available to pig farmers who do not have access to the local bacon factories? Does Malton intend to re-establish the premises at Agivey, Ballymoney for the future of the Northern Ireland pig industry and agriculture in general? You appear to have written off the pig industry, sir, do you see a viable future for pig farming in Northern Ireland? If so, how can this be secured?

23.

Mr Hilliard: Well I do not know what evidence there is to say we have written off. We have invested in our processing facilities and having a viable pig farming supply base is essential, fundamental to the structure of our business. I would make the point that we have only just finished an investment, albeit for only half a million pounds to actually increase the slaughtering capacity at Cookstown, to make sure that we are actually able to take more pigs into the plant. So for a factory that was slaughtering around 12,000 pigs a week on average when we took it over less than two years ago we have increased the running capacity to 18,000 pigs a week plus, we are steadily increasing the kill. We are actually making investments in the Cookstown plant to be actually able to handle more pigs and make the plant more efficient. The prices that we pay, I still maintain, are consistent with the prices that we are paying in England. They are very much subject to the supply and demand and the competition threat of imported material. I think if we can almost forget looking in the past and actually look at prices today, prices today are at break even for most producers and with a forecast from myself because of the tightening supply basis then we are actually going to see prices continue to move up over the next weeks. That is clearly going to be a welcome relief to producers who have sustained substantial losses. But the issue will be, and I predict that more people will start to increase their herds as profitability returns, the status quo in terms of a viable industry can only be achieved if we sort out the meat and bone meal cost to the industry.

24.

The Chairman: Those pigs that you are slaughtering in Cookstown, how many of them are from the Irish Republic?

25.

Mr Hilliard: Answering the question quite openly, three weeks ago we would have found ourselves slaughtering about 14,000 from the North and 2,000 or 3,000 from the other side of the border. What we actually have seen is a drop-off in the availability of Northern Irish producers. Whether that is producers going out of business or whether it is taking advantage of a great demand from down South I do not know, but what is interesting now is that we are seeing a few more pigs re-appearing from North of the border because of the way Sterling has moved against the Punt. So it is quite difficult, pigs were travelling South up until quite recently with the exchange rates and I expect more pigs to stay in the North and that will increase the percentage of Northern Irish pigs we are putting through our Cookstown plant.

26.

Mr Kane: Just to add on to that, Chair, if I may, my understanding from pig farmers is that there was one week, Mr Hilliard, that you did not have an in-take at all from Northern Ireland, that it was from Southern Ireland that the pigs came in on that particular week. Also you have not answered my question, sir, in relation to Ballymoney. Thank you.

27.

Mr Hilliard: To answer the first part of that question, that is absolutely incorrect and utter rubbish, total misinformation.

28.

Mr Kane: There may be an opportunity for me at a later date to supply you that information.

29.

Mr Hilliard: I can tell you that information is totally wrong, absolutely utter rubbish.

30.

The Chairman: Right. Could you answer the other question about the future of Ballymoney?

31.

Mr Hilliard: With regards to Ballymoney, first of all, any investment decisions that we make have got to be premised on where we arrive at in terms of believing that there is a viable Northern Irish pig industry going forward and what numbers there are going to be. It is unlikely in the short term that we will be recreating a green field site, whether that is at Ballymoney or anywhere else. We have sat down and had discussions with the IDB, it's important to test the water. On the face of it somebody might say it is putting money in the wrong place by investing into the chilling capacity at Cookstown, but it is a good example of being well positioned so that if there are more pigs to kill we will kill them. So at the moment our short term to medium term investment will be increasing the capacity at Cookstown to accommodate greater numbers of Northern Irish pigs rather than creating a second site against the uncertainty of what pig numbers are going forward with another set of site overheads. It has got to be more cost effective to stick with one site short term and see what comes out of next year.

32.

The Chairman: Mr Hilliard, we had the Ulster Agriculture Organisation Society with us this morning, and they said they had a series of meetings with you, but no real outcome came from those meetings. Would you care to comment on that? That was they had meetings with you and others concerning the future of the pig industry and what should be done now and proposals made, but there was really no response from your side of the table.

33.

Mr Hilliard: Well I happen to attend many meetings and forgive me, in terms of exactly what banner I have been having various meetings, but I am not aware of having any meetings recently. The closest communication we have been having with Northern Irish producers is about setting up a large co-operative to try and get the synergies between a co-operative group marketing pigs and our own working more together.

34.

The Chairman: That would probably be the meeting.

35.

Mr Hilliard: First we have had, I think one might say, three meetings, one was quite a while ago to cover the groundwork, to establish whether they could apply for a marketing grant to set up the system. It went quite quiet for quite a while. We have had a second meeting and at our cost we have invited all the leading players of that organisation over to Malton. It has been very much focused on us telling them what we are looking for as a product. I do not want to bore this meeting with the facts and contest that perhaps the Ballymoney pig might not be the best pig around, we have paid for about --

36.

The Chairman: It might not satisfy the Chinese or Japanese.

37.

Mr Kane: Closer to Southern Ireland.

38.

Mr Hilliard: We have invited eight or 10 people of that Association across to Malton, we have shown them Irish material going down the slicing line and the complications it is causing us, we are genuinely working towards contract supplies of pigs coming into Malton. It was not more of the macro about what we have to do within the industry, almost along these conversations.

39.

The Chairman: Right. Mr Ford?

40.

Mr Ford: Yes, Mr. Chairman. Just following up, could we ask whether you expect to be engaging in any contract with the United Pig Producers Co-op in the near future on the basis of those discussions, or whether you think it has merely been a demonstration of the product you are looking for and you are leaving it to them to carry on and do things.

41.

Mr Hilliard: No, I certainly envisage working closely with that organisation. I see great synergies in it being set up. We have known several of the individuals for the few years that we have been over here, we can work well with them. We have identified common targets. I am sure if we were revisiting the topic in a year's time, then one would find in place working contracts securing pigs and giving a consistent price for consistent deliveries.

42.

Mr Ford: Can I turn to two of the problems that you raised. You mentioned a number of times the meat and bone meal ban. You also talked about higher welfare standards in the UK. I think I would probably share the Chairman's concerns that the meat and bone meal ban is likely to be intensified across Europe on a scale and not removed, or perhaps if it was equally applied across Europe that might reduce your differential. Also can you tell us in terms of the higher welfare standards, have you sought to use that in any way in your marketing to ordinary consumers, or have you merely addressed the concept that you are marketing a bulk commodity, rather than marketing a superior commodity because of the higher standards it is produced to.

43.

Mr Hilliard: To answer the first question, to a certain extent I do not mind which way the playing field is levelled but it needs to be levelled because we cannot sustain eight pence a kilo difference between our costs and those in Denmark and Holland. In terms of the welfare, I think really the pig meat industry was slow in taking up the opportunity of marketing the improved welfare that the unique legislation forced upon it. The marketing gurus of organisations like the LMC tell us that you should not communicate directly to the consumer aspects of what happened on the farm in terms of extolling the better virtues of a pork chop or a rasher of bacon. When the legislation took effect and had an impact on UK supplies from 1st January 1999, if we had had the sort of campaigns that are currently running then I think we would have been in a stronger position to maintain the price differentials of British material over and above the EU's. That was not the case and really what happened over the first year to 18 months was we gave the opportunity to the Danes and the Dutch to turn over small percentages of their herds to meet those standards. Quite frankly, there is a plentiful supply of Danish material, 15% of their herd, and a similar equipment percentage within the Dutch herd that meets those two UK legislations. The argument now is no longer necessarily on nationality; those countries are producing the same product. Therefore the difference is welfare rather than just nationality, and it is very hard to communicate welfare to somebody who does not really want to be reminded of what happened on a farm when she makes her purchase and eats a pork chop.

44.

Mr Ford: Are you satisfied with the current marketing campaign or do you think it is leaning in the wrong direction.

45.

Mr Hilliard: The current one in terms of the pictures?

46.

Mr Ford: She is feeding them and now she will be fed to them.

47.

Mr Hilliard: I think I share the concerns of our customers, the major retailers, that it could very easily have a negative impact on total pig meat sales. I think it is the sort of thing quite frankly that we ought to have had in our armoury just over two years ago, and it is the sort of thing that ought to have been a veiled threat to the retailers - that unless they had lots of British material on the counter then this is the sort of the thing that our industry would have hit the ground with. The problem is that we have given the Danes and the Dutch time to catch up. There is a sufficient supply of the equivalent standard, the scaremongery might run the risk that it dampens demand on the whole pork category.

48.

Mr Armstrong: Would you be willing to enter into contracts with pig farmers in Northern Ireland that had pigs of the right sort of quality that you require to keep a viable pig industry in Northern Ireland and recover for those farmers a price for the pigs that they would be in a profitable situation, since you are an international company and we do not have a company in Northern Ireland that is known to us and identifies what Northern Ireland needs. We would like to have some company in Northern Ireland that would think of the Northern Ireland farmer instead of thinking of making profit on a worldwide base, because the Northern Ireland farmer would be there to produce a profit and have a viable industry in our area.

49.

Mr Hilliard: The short answer to that is we will be offering the same contracts over here that we have in England.

50.

Mr Armstrong: We do not have an industry or a person of your calibre in Northern Ireland to look after the pig industry, to make sure there is a pig industry here. In other words, the pigs could be got somewhere else, it is not priority to have a pig industry in Northern Ireland.

51.

Mr Hilliard: No, we are making investments into the Cookstown plant, and as an operational manager I want that plant to be running at full capacity. We will be looking to do everything that we can to make sure that those pigs are procured in a consistent number week in, week out. It will be more on a contractual basis.

52.

Mr Armstrong: Is there any way that you can encourage those farmers to do that and then be in a profitable situation.

53.

Mr Hilliard: Sorry?

54.

Mr Armstrong: Is there any way that you can encourage the farmers to enter the contract with you so that they are in a profitable situation instead of non-profitable.

55.

Mr Hilliard: I think it is pretty up-to-date information, but I think if we are looking at the prices that are around this week or next week the pig industry here is returning back to break even. One has to remember that there is quite a wide range of break even points according to the levels of efficiency of farms. Therefore, it is quite difficult for me to say every farmer would be back into profit. That is not quite the point this week and next week. But I would certainly forecast against the falling herd size and the rise in price of the simple supply and demand equation. I would anticipate that almost every pig producer will be enjoying a profitable situation in the following weeks.

56.

The Chairman: PJ.

57.

Mr Bradley: Thank you. It is nearly on the same lines as the last question. If the pig industry here never recovers, what do you honestly believe that would mean in economic terms as far as Unigate, your parent company, is concerned.

58.

Mr Hilliard: I just don't think along those lines. As long as the politicians can make sure that we can operate on a level playing field, I know that I can process material just as efficiently as any Dutch and Danish plant. I know that the pig farmer here and in England is just as good as his Dane and Dutch counterpart and putting the two together there is no reason to have negative talk like that. What we have to do is address how many hands and how many straightjackets we are in as an industry at this point in time. It should not come down to that. We have been thorough a crisis and an enormous amount of money has been lost. We are currently handicapped because of the £5.25 meat and bone meal, but we are coming through it. Regrettably, and I do mean that, regrettably a lot of farmers have gone out of business. We have seen the downsizing of the herd. But those people who remain in the pig industry have come through it. Clearly they have got large debts behind them, but at least we have got to that crossroads where we are back to a break even and the price is continuing to rise because of the reduction in number. When more pigs come to the table, if I can put it like that, because profitability is returned what you must do is make sure that we have got the opportunity to fight on a level playing field.

59.

Mr Bradley: You are confident that you can keep it on board.

60.

Mr Hilliard: Yes. I do not think I particularly answered that. I did not dodge that first question, I guess there were so many points to answer. We have got no intention of pulling out. We had that crossroads of the decision-making process when we had the disastrous fire at Ballymoney. We had the insurance money; it would have been very easy to take that money and run. We pledged our presence to the Province; we made a pretty high investment expenditure into acquiring Unipork, and we are currently investing into the Cookstown operation to be able to process more pigs.

61.

The Chairman: Mr. Dallat was not able to be with us this morning so we must get him in.

62.

Mr Dallat: Mr. Hilliard, you made reference to your working closely with the IDB earlier, many of my constituents lost their jobs when the Ahoghill plant was closed. What notice was the IDB given before that closure was announced.

63.

Mr Hilliard: 24 hours.

64.

Mr Dallat: Two hours, but I do not want to be accused of talking rubbish. Really my main question in terms of adding value to pork product, is your company investing in research and development to improve the quality of material offered to the consumer (and I am thinking in particular of dry cured, things like that) which would put your product well ahead of the rather inferior stuff that comes in from other places.

65.

Mr Hilliard: The company at the moment produces the full range from pre-packed pork chops, marinated and barbecued rib steaks; when we talk about bacon rashers we do dry cure, we do sweet cure. At the end of the day we have to supply what our customers want, and people are very much cost conscious and there are price points to be hit. Therefore we will be serving the major UK retailers with a whole range of the products on the shelf. Somebody can chose between a value economy packet all the way through to a finest range and a value range incorporating dry cure. We already do that. But I think to answer your question with an industry hat on, what we have to do is try and put resource into balancing the carcass better. If you were to ask me what you would have changed in our industry had you known what was going to happen, the thing that hit us with the greatest impact was the fact that we relied on so much of that material going not to the UK retailer but to foreign processors. Over here we have such a demand for the leg for gammon joints and hams, the loin part of the animal for pork chops and bacon, and yet we rely alone on exporting bellies to lardon manufacturers in France or to processing factories in Japan, shoulders going out onto the continent. What we lack is a traditional charcuiterie type demand from the consumers from all those things that complete the balance of the carcass.

66.

Self criticism would say what we have got to do is NPD work in finding new products for those parts of the pig. The pig in lean meat protein is just as cost effective and can stand up against poultry or any other protein. We have to stop looking at it as almost Victorian categories of pork, bacon and ham, and just see it as a processible protein. The NPD work I referred to has got to go into creating new products for the parts of the pig that we don't traditionally eat over here.

67.

Mr Dallat: Is that taking place in Cookstown?

68.

Mr Hilliard: Our central NPD resource is actually in Malta. Cookstown is very much focused on slaughtering pigs, doing it well over here and getting the material into our other plants.

69.

The Chairman: My Deputy Chairman, Mr. Savage.

70.

Mr Savage: Mr. Hilliard, now we have got a commitment from you that you are here and you are going to stay, there is one question I would like to ask you and it is the basic down-to-earth question that everybody wants to know: How can we get our pig industry back into a situation where the farmers are getting a profit and you are getting a profit. What do you say is the way forward?

71.

Mr Hilliard: We have accepted that we can't do anything about currency. If you can sort out meat and bone meal for us, that £5.25, quite genuinely the farmer and processor can sort the rest out. If there is just one request on the wish list to put us on the right road again it is sorting the £5.25 out.

72.

The Chairman: Well, there will be a bit of controversy over that, but that brings us to the end. We could have done with another hour but I am sure you are glad you don't have to sit here. Thank you for coming, we are grateful to you and we would welcome any correspondence that you would like to give us, especially on price figures. That would be helpful to our final report.

73.

Mr Hilliard: Thank you very much, thank you.

MINUTES OF EVIDENCE

FRIDAY 30 JUNE 2000

Members Present:
Rev Dr Ian Paisley (Chairman)
Mr Armstrong
Mr Bradley
Mr Douglas
Mr Dallat
Mr Ford
Mr Kane
Mr McHugh
Mr Paisley Jnr

Witnesses:

Mr N McLaughlin ) NI Agricultural
Mr J Carmichael ) Producers' Association

74.

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

75.

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

76.

The Chairman: Right.

77.

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

78.

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

79.

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

80.

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

81.

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

82.

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

83.

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

84.

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

85.

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

86.

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

87.

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

88.

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

89.

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

90.

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

91.

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

92.

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

93.

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

94.

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

95.

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

96.

Mr Kane: Thanks Chair.

97.

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

98.

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

99.

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

100.

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

101.

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

102.

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

103.

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

104.

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

105.

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

106.

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

107.

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

108.

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

109.

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

110.

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

111.

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

112.

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

113.

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

114.

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

115.

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

116.

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

117.

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

118.

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

119.

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

120.

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

121.

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

122.

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

123.

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

124.

The Chairman: Thank you, right.

125.

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

126.

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

127.

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

128.

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

129.

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

130.

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

131.

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

132.

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

133.

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

134.

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

135.

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

136.

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

137.

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

138.

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

139.

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

140.

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

141.

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

142.

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

143.

The Chairman: Sourced, that's right.

144.

Mr Carmichael: Yes

145.

The Chairman: We have to move on. Gardner?

146.

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

147.

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

148.

Mr Kane: I would support that.

149.

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

150.

Mr Kane: Thanks Chair.

151.

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

152.

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

153.

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

154.

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

155.

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

156.

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

157.

Mr McLaughlin: Thank you Dr Paisley.

158.

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

MINUTES OF EVIDENCE

FRIDAY 30 JUNE 2000

Members Present:
Rev Dr Ian Paisley (Chairman)
Mr Armstrong
Mr Bradley
Mr Douglas
Mr Dallat
Mr Ford
Mr Kane
Mr McHugh
Mr Paisley Jnr

Witnesses:

Mr D Rowe )
Mr C Pogue ) Ulster Farmers Union
Mr K Sharkey )

159.

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

160.

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

161.

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

162.

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

163.

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

164.

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

165.

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

166.

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

167.

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

168.

The Chairman: What would the figure approximately be now?

169.

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

170.

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

171.

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

172.

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

173.

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

174.

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

175.

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

176.

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

177.

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

178.

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

179.

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

180.

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

181.

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

182.

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

183.

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

184.

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

185.

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

186.

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

187.

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

188.

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

189.

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

190.

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

191.

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

192.

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

193.

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

194.

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

195.

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

196.

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

197.

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

198.

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

199.

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

200.

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

201.

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

202.

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

203.

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

204.

The Chairman: We have to move on.

205.

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

206.

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

207.

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

208.

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

209.

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

210.

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

211.

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

212.

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

213.

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

214.

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

215.

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

216.

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

217.

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

218.

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

219.

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

220.

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

221.

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

222.

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

223.

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

224.

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

225.

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

226.

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

227.

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

228.

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

229.

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

230.

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

231.

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

232.

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

233.

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

234.

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

235.

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

236.

The members want to ask you some questions.

237.

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

238.

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

239.

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

240.

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

241.

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

242.

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

243.

The Chairman: I need to bring you in now.

244.

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

245.

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

246.

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

247.

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

248.

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

249.

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

250.

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

251.

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

252.

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

253.

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

254.

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

255.

The Chairman: We must move round the table.

256.

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

257.

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

258.

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

259.

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

260.

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

261.

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

262.

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

263.

The Chairman: Right.

264.

Mr Armstrong: I will just ask half the question.

265.

The Chairman: One question.

266.

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

267.

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

268.

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

269.

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

270.

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

MINUTES OF EVIDENCE

FRIDAY 30 JUNE 2000

Members Present:
Rev Dr Ian Paisley (Chairman)
Mr Armstrong
Mr Bradley
Mr Douglas
Mr Dallat
Mr Ford
Mr Kane
Mr McHugh
Mr Paisley Jnr

Witnesses:

Mr R Overend, Ulster Pork and Bacon Forum

271.

The Chairman: Mr Overend, you are very welcome to our Committee, I am glad you were able to come. We can give you ten minutes to make a submission to us and then we would like to use the other minutes that we have, 30 minutes, for questions because we probably learn more by question and answer than we do - we have already had a submission really, partly from you and from the Ulster Farmer's Union anyway which has already been referred to, but it is all yours and very welcome.

272.

Mr Overend: Thank you very much, Mr Chairman. Now first of all could I say thank you to yourself and to the Agricultural Committee for the opportunity to speak to you on behalf of pigs. I do know that the Union have been in this morning. Regrettably I wasn't aware that they were coming in to speak on pigs specifically. So I don't want to take up your time with going over some of the ground that they have probably covered. I would like to pay tribute to Lynn Martin here on behalf of the Pork and Bacon Forum for preparing this for us. Lynn is secretary to the Pork and Bacon Forum and does a tremendously good job.

273.

Could I just briefly at the start, Chairman, draw your attention to this graph which I hope you have all received. You can see right across there that is estimated break even. That would be taken on the basis of a reasonably good herd producing reasonably good pigs and getting a reasonably good price for them. You can see that while the UK price is well below that break even then Northern Ireland is in the disastrous position. So it is from that point of view that I speak to you today and I'm grateful that you have given me an opportunity. Now if you haven't got those then we will have to see about why they haven't come through to you and we will get copies to you

274.

TheChairman: Thank you very much.

275.

Mr Bradley: Is it a birth to bacon graph?

276.

Mr Overend: That's a birth to bacon graph, yes.

277.

The Chairman: Birth to Ulster fry?

278.

Mr Overend: Yes. I understand that immediately after you break up that you will be going for your lunch, so could you take pity on the poor pig man and eat some good Ulster pork or Ulster bacon having your lunch.

279.

The Chairman: I had Ulster pork yesterday Robert, I'm glad to be able tell to you.

280.

Mr Overend: The Chinese are our best customers for pork and they make a point of eating it every day.

281.

The Chairman: It is as well they are not Jews.

282.

Mr Overend: Actually they do keep quite a lot of pigs in Israel, I understand they eat the pork as the alternative white meat. Just on the bottom of the first page that you have got there, in 1998 November we did a dissection exercise on behalf of the Pork and Bacon Forum. What we did was we sent off a pig for slaughter and then that pig was brought back and it was dissected in the various cuts and if you would be interested in following it right through I can give you a breakdown of all the different cuts that the pig went into. Now, we would accept the fact that it is always difficult to sell some of the less popular parts of the pig, but on that particular occasion we priced it on an average price based on about eight different outlets that were selling pork. And the thing at that particular time which gave us so much annoyance was that the farmer was really in a very very serious loss making position. Although he had improved from £32 right up to £42 for his pig. But when that pig was cut up and presented in a proper way by the supermarkets and the private butchers then the price of the pig rocketed from it left the farmer at £42 until it came right up to about £181. Now, at that time you remember the farmers were really in distress and suffered a lot of hardship. We did the same exercise in June this year, now the farmer was into a situation where he was just on break even at £61 and that was for his top grade pig at the top price. And we found then that the retail price went into £187. Now it is an excessive mark up, I would accept but the differential between the farmer was getting in '98 and what he was getting now had increased by 50%. In other words, the pig had gone up from £42 to £61, yet the price in the shops that the customer was paying had merely gone up by £5.00. Now there are only three people who are really involved in the exercise, there is the primary producer who does what I would say is most of the work, produces the ideal raw material for the processor to slaughter and cut and pack; then there is the retailer. Now, our argument still is that there is excessive profit being made by the people post farm gate and we would appreciate if you, sir, and general your Committee could look seriously at this point.

283.

The second point that I would like to make is that I was over in England recently, there were 16 people at the meeting, one of them was fortunate enough not to be a pig farmer, but the other 15 people are employed in producing pigs. I was the only person at that particular meeting who had sons coming after me, all the other people who were there would be going to a dead end. That's in the pedigree sector which has suffered considerably, but not to the same extent as a commercial person. So that is another serious thing which you have to look at. Just this week I talked to a barrister and an accountant and a school teacher, they were all coming originally from farming backgrounds. All three of those people had started in their life producing pigs. So the primary consideration of a lot of farmers' sons over the years was: How do I get some pocket money for myself and be independent of the old fellow who was still controlling the purse strings? And 99% of them kept a few pigs, now that's changed all over and those same three people told me, and they come from three different areas in Northern Ireland, that the young farmers in their area at the moment are 50 plus and that most the farmers would be 70 plus. (So we face a situation where we are producing the worlds most popular meat). Thanks to our Chinese and our friends out in the South-east Asia, pork is the most popular meat in the world. In 1998 it was estimated that the world produced about 88 million tonnes of pork and there are people who are saying to me: The pork industry in Northern Ireland is so small that it is not worth bothering about. Really, if you look at it you would have to accept that on a world view. If you take what we are now producing in Northern Ireland you would eat it in about 6 hours in a year, but you have to take into consideration just how important the pigs are to the people who farm in Northern Ireland. If you are producing milk you have a quota, if you process beef you have a quota, if you are producing sheep you have a quota, if you are producing grain you get some subsidies.

284.

Nobody knows how hard I fought to keep Northern Ireland out of the Common Market and there will be a lot of other people who supported me because my argument was that as an offshore island we couldn't compete with the continentals who had the cheap raw materials. We are now in a situation where we are competing occasionally, for example, directly against Spain. Now Spain in their wisdom when they joined the common market got a derogation and their grain price is based on the world price. They can produce pigs, they tell me, for the equivalent of 62p a kilo whereas we need 95p to break even.

285.

Now I won't bore you with the fact that we owe millions of pounds to the banks and to the feed companies. And I would like to pay tribute to the banks but especially tribute to feed companies who have carried us through this severe crisis and are continuing to carry us at the present time. I would hope that there is something, although I know that there is great difficulty what you can do to help and sustain an industry, that to me should be considered a primary important industry in Northern Ireland.

286.

Thank you.

287.

The Chairman: Thank you. Well if I could just say on behalf of my Committee I know we are all agreed on this, we want to retain the pig industry in Northern Ireland. Any time we have met DARD and met the Minister we have emphasised and especially when we were under the Direct Rule Ministries we asked them very bluntly and frankly: Do you want to destroy our pig industry, please tell us what your objective is because you have gone the right way about it. And also when we see the sort of grants that eventually came to pig farmers in the Irish Republic and came to pig farmers elsewhere in Europe and yet they said because they took a few pigs off the hands of people that that was all we were going to get. So I think that the pig industry has been very shabbily treated by the Government. In fact, I never was at a meeting, I say this with great regret, I never was at a meeting where I ever witnessed among the officials of the Department any real gravity or concern about our pig industry. The meetings were far too hilarious, they were far too taken as a matter of fact, there never seemed to have got home to them the crisis that we were in and we are in a terrible crisis. The trouble is that if there is any rise again the debt is still there and that debt has to be met. So that is what we are actually engaged in at the present time, to find ways, to apply our minds and any talent God almighty has given us, to find a way out of the impasse that we are still in. We hear talk about this pig industry breaking even. Well it might be breaking even, but that doesn't deal with the debt that still hangs around the people. So we can assure you, we have an interest in the pig industry, we want to preserve the pig industry and we want to keep the pig industry.

288.

Now, my friends here would like to put some questions to you. Gardner Kane?

289.

Mr Kane: Thanks Chair. Welcome once again, Bobby. Is it not the case there was a general oversupply of pigs within Europe? Is it not also the case that there was an oversupply of pigs in Northern Ireland that created the whole situation in the first instance?

290.

Mr Overend: Chairman, there has never been an oversupply of pigs in Northern Ireland because we are part of the United Kingdom and the United Kingdom has never been self sufficient in pork and bacon. Now it arrived at the point where it was quite close to being self sufficient in the amount of pork that it required, but it was always under supplied in the amount of bacon that it eats. Our main market was the south east corner of England and we would have specialised in producing back bacon and breakfast bacon and that was the main source of our income over the years. And for a number of years I was a Director of the Cookstown plant but when it was still owned by the pig industry in Northern Ireland and that is where our main market was.

291.

I accept that in Europe a glut of pigs came about simply because of the serious money crisis in Russia. Russia's was always a main market for the cheaper cuts of pork and bacon out of Europe and whenever our strong Pound against the weak Euro then that sucked in all the surplus.

292.

Mr Kane: Chairman, I welcome the comments here from Bobby. A prior organisation stated that there was an oversupply of pigs in Northern Ireland that contributed to the current crisis. I welcome your point on that.

293.

Mr Overend: We have never been oversupplied with pigs here in Northern Ireland if you base it on a UK demand. Currently at the moment we are seriously undersupplied. If it wasn't for the fact that the strong Pound was sucking in somewhere in the region of 8,000 to 10,000 pigs a week from our neighbour then some of the factories would be in such a serious position that they would have to close.

294.

Now those of you who have a long memory can remember the time when we were forced to shut the bacon factory in Enniskillen which caused a major problem at that time. We had to close the slaughter line for the simple reason that we couldn't get enough pigs in Northern Ireland to keep that line going. The Newry plant used to kill somewhere in the region of 4000 to 6000 pigs a week and it also closed for a shortage of pigs.

295.

The Chairman: We have evidence today that the UK is now importing pig meat to a very large extent.

296.

Mr Overend: Well England always imported quite a lot of pig meat, but it normally imported it in the shape of processed product which was coming in primarily from Denmark and Holland. It is now in the position where it is undersupplied with the amount of pork it takes and fresh pork is coming in. I personally am against the importation of fresh pork because it could bring some of the serious diseases that are prevalent on the continent.

297.

The Chairman: Right. Mr Ford?

298.

Mr Ford: Thank you Chairman. You make the point in the paper that you prepared with the Union on the need for an aid package, this is a comparison between the aid package which was announced earlier this year in the Republic and what is happening on UK basis; what are the inadequacies, as you see it, with the UK package insofar as we know exactly what's going on? What would you like added from the Republic's package to produce a Northern Ireland top up if that were possible?

299.

Mr Overend: Well the main problem I have with the UK package is that, first of all, it is based on the UK and doesn't take into consideration any of the regional problems that we would have that are over and above the normal problem that has been faced during the crisis.

300.

The second thing is that they have what they term as an outgoers scheme and then they have an ongoers scheme. The ongoers scheme will only kick into place after the outgoers scheme has been finalised. If we are going to continue to produce pigs we need an ongoers scheme that is separate and to which we could maybe key in right away and get some money. If you come out of a sharp short shower of rain and you are wet there is no point in somebody reaching you an umbrella, you need it before you get wet. By the time you get your clothes changed then you don't need the umbrella. I would like to see that there would be something coming through right away to try and sustain the industry rather than to look and see how can we help the people who have gone. I mean, I have great sympathy with the people who have been forced out of the industry, but our primary responsibility at this point in time should be the people who want to continue.

301.

The Chairman: Well we can't do very much for people who have been forced out because that is beyond us. It is also beyond the whole technique of the European common market which I also opposed as you will remember. But the point is this here, that we should be able to do something to help those who have clung on and are now in a position of seeing a little light coming to them. But what worries us as a Committee is the heavy debt and we are grateful for the banks, this Committee, the predecessors of it, we did put a lot of pressure on the banks, we believe that the representations were taken seriously by the banks. We did raise certain producers who were having big, big pressure put on them by the banks and there was a bit of relief on that. We hope that will continue of course, because too many voices raising saying the pig farmers are out of their trouble is very bad because they are not out of their trouble because their debts are still there and have to be accounted for. Because a man is breaking even doesn't mean he is paying his debts, he is not going very far. That is a very important thing. But what I would say, if you were asked today, say you were made the Minister of Agriculture today, we are only a Committee, say you were the Minister of Agriculture today, what would be the first thing you would do about the pig industry?

302.

Mr Overend: Well, Chairman, thank you for that question, what I would do is follow the guideline that has been put out by the National Pig Association and I have the honour to represent all the pedigree breeders in the United Kingdom on that particular Committee. They are now pushing and they have headed their statement: Prime Minister's Promise to Pig Farmers. He could immediately indicate that he is going to accept the BSE tax which is equivalent to £5.26 per pig since 1996. Now if he was to accept that and I know there is a Court case going through across on the mainland about that, but I mean instead of fighting that Court case if he had accepted yes, the pig people have a very good case and they have received no help at all, they should be getting that, it is estimated that that would have cost the pig farmers in the UK about £270 million. So if I was made Minister of Agriculture, which is extremely unlikely, then I would go right way to the Prime Minister and say: Honour your commitment. This indicates that in his speech to the farmers of the National Farmer's Union at their general meeting the Prime Minister promised pig farmers he was prepared to sit down and work it out. He also promised in his visit to the West Country cash to alleviate the BSE tax. Now there are those who sometimes doubt that he does keep his word, but on this case wouldn't it be nice if I was the Agriculture Minister and went over and said: Now my friend, you have an opportunity for once to keep your word.

303.

The Chairman: Well it is, I'm sure you will agree with me, it is instant money to the pig man, not to producers, not to anybody in the ancillary industry, but right down to where it is needed.

304.

Mr Overend: Yes.

305.

The Chairman: Right. Thank you. Ian?

306.

Mr Paisley Jnr: You say we have the best product, that we are pushing it out into a market where there is popular demand for it, that unfortunately, we are now an importer of that product, where unfortunately the consumer doesn't seem to realise the benefit of our product, where has it all gone wrong? That is the key question, where it has it all gone wrong for us, is the Department forcing on us the wrong philosophy with regards to how we develop our product here, where we are pushing welfare and quality when in reality everyone else across Europe indeed our competitors in wider field are pushing market forces and market prices? When I'm sitting in this chamber I'm always drawn to these three representations up here of three key industries representative of Northern Ireland: Textiles, shipbuilding and agriculture. Textiles and shipbuilding have been defeated by market forces, is agriculture next?

307.

Mr Overend: This is a very good point. I appreciate, Chairman, we are not the best of marketers, I would accept that having been right through from the primary producer right through to sitting in Marks and Spencers place across in England in their Head Office and trying to convince them that we should eat our pork chops. They were amazed I was able to identify my pork chops on the plate from a pig that I produced, but it was quite simple because we have specialised here in producing lean pigs with a high percentage of lean in the right place. That gives you a big eye muscle and the eye muscle on the pork chop that was mine was about 30% larger than the other one. That is beside the point, I would accept that there is that difficulty. The same thing also applies in that some of the big major supermarkets prefer to deal only with big people. That is why I welcomed the fact that Malton stayed in Northern Ireland because the supermarkets tend to work with big people.

308.

But there is something that I think we could do and we could impress upon the supermarkets that they are being unfair to us here in Northern Ireland. If you go into a shop and buy a packet of cigarettes there is a Government health warning on it. Now if you go into a supermarket there is no way of clear identification which would indicate that this is a product of Northern Ireland which meets the welfare regulations imposed upon us by the Government but at the request the supermarkets, the supermarkets are the people who initially identify the welfare that they wanted the product they sell to meet. Yet they are then trying to push us down in price by putting our product on the shelf right beside a cheaper product produced not to the same high standard as us, and probably, most probably fed on meat and bone which we are not allowed to use. If you are not allowed to use meat and bone then the only real substitute you can put forward for that could be something like expensive soya. So you are on a hiding to nothing if your friends are able to use cheaper products to produce pigs which are then sold on a comparative basis.

309.

Mr Armstrong: Would you agree with me that Government has a negative approach to agriculture and if pig producers would they come to a profitable state that the depressing prices which would even come back again and that Government then would be encouraged to diversify into other areas?

310.

Mr Overend: The problem, Chairman, is that when I was young and you were allowed to go on a deputation up to meet the top brass at Dundonald House, then the person who had the authority and who wielded the big stick was actually the person who was in charge, the Chief Livestock Officer was the person who made the final decision. That has now changed in Dundonald house and it is the admin. people who rule the roost. Admin. people, with the greatest respect, have no practical knowledge or practical thoughts in their head. All they are interested in is running a successful team of civil servants and you can't do that in agriculture. There are times when you have to make decisions that may not sound to meet every requirement, but are what's required if you are going to stay in business. Certainly, the amount of people that work in Dundonald House would lead me to believe that there could be substantial savings there and passed down some way or other through some pipeline to the primary producer.

311.

Mr Armstrong: That whenever pigs were maybe over produced again the price could drop and Government then would be encouraging farmers to diversify out of pigs?

312.

Mr Overend: All my lifetime I have heard this, that you should diversify, I have looked at the people who went into rabbits and then some people went into chinchillas and some people went into mink and some people went into goats, there were all sorts of different things that people have tried, but the thing that would encourage me to stay with pigs is that it is the most popular meat in the world and Northern Ireland should surely be in a position where they can hold their own with anyone and given the level playing field then we probably could.

313.

Mr Bradley: Thank you Chairman. I think you mentioned 99% of people who had pigs at one time, I was one of those 99%. I think it was through Robert Overend's breeding that helped me rear my family and build my home, so you are very welcome. To say that as pig producers return to profitability, as follows on from Billy's question, the danger from increased production and profitability again that the market will be depressed once again from over producing?

314.

Mr Overend: I wouldn't see that to be the case because there would be quite a number of people that I know and once the situation would change and they could sell their herd at a reasonable price then they would be out as quickly as they could because they would be scared that we are too small to compete on the world market. There is always the problem, and I looked, the Chairman would understand it, but I understand it, there is an early day motion that has been put forward over in Westminster by some group of misguided people that we should take away the farrowing crate from the use of the pig farmer. Now for those who don't know, a farrowing crate came into being during my lifetime. I can remember when you had to sit with a sow when she was farrowing her piglets. Now if you don't know what that means it is not like lambing a sheep or calving a cow or even foaling a mare because immediately it is out then the mother can successfully look after it. But it you take away the farrowing crate then you are going to be forcing the pig farmer to supervise for a minimum of 36 hours and some of them could be 48 hours before you can leave them. Now that would be total disaster and I welcome the fact Roy Beggs has put in an amendment to that. I would hope that our good Chairman here would look into that and see that goes no further because we must remember that initially it was an early day motion that came from Sir Richard Body that took the sows out the of the stalls, yet 99% of all the sows in the world are in stalls because they are the best welfare means of keeping sows.

315.

The Chairman: When is that coming up in the House Bobby, do you know?

316.

Mr Overend: It just came through on e-mail to me from the MPA a couple of days ago.

317.

The Chairman: It must be something quite recent, it is important.

318.

Mr Overend: Yes.

319.

The Chairman: Very important.

320.

Mr Bradley: Can I just ask, could you ever see a return to the day when the small 10/12 herd would be back in the north of Ireland again?

321.

Mr Overend: I would like to see that and there is a way where these people could get back right away. The Japanese are the people who import the most expensive pork in the world because Japan is the most expensive country to produce pork. The Emperor of Japan likes to eat pork from rare breed pigs, either Middle White or preferably Berkshire. Now there is a Japanese person who had been in contact with us through the British Pig Association. He would like to import about a thousand carcasses of Berkshire pork each week into Japan. Now Berkshires are a minority breed, they are suited for the man who wants to keep eight or ten or 12 sows, they only farrow twice a year, they normally rear about eight piglets to the litter, commercially they are not viable, that is why they have gone down in numbers and are now known as minority breeds. So if there is anyone who is interested then they should perhaps consider that. It might be a good exercise for the members of the Agriculture Committee, you know, it would keep them occupied when they would go home at night then they could look after a few sows.

322.

The Chairman: PJ, go thou and do thou likewise.

323.

Mr Bradley: Certainly if the Assembly collapses I'm trying to plan what I should be doing.

324.

The Chairman: PJ, I think we are going to be successful.

325.

Mr Overend: There is a thing that has been put out by Lloyds TSB: A Future for the Pig Sector. That might be something that would be interesting reading for the members of the Agriculture Committee. They would consider that pork being a very versatile product suits the four different people that they would have identified, that's the smaller household who is demanding cheap and convenient meals to meet their lifestyle; and then there is the ageing population like myself who is demanding food that meets their health and nutritional requirements; then there is the informed customers like civil servants who are demanding information and assurance about their food purchased; then there is the members of the Agriculture Committee who would be the affluent customers and they are demanding new experiences in tastes and products. Pork can meet every single one of them.

326.

The Chairman: What is that booklet that you are referring to?

327.

Mr Overend: It has come along to me. Challenges and Prospects, a Future for the Pig Sector, sponsored by Lloyds TSB.

328.

The Chairman: Clerk, would you see every member of our Committee gets a copy?

329.

Mr Overend: Would you encourage them to read it when they get it?

330.

Mr Paisley Jnr: Could I ask another question? You will be aware, Mr Overend, of the marketing campaign that recently took place identifying the fact that other producers outside of Northern Ireland will actually end up feeding the sow to the piglets at some point; what was your view of that strategy, that marketing strategy?

331.

Mr Overend: That was sold to the NPA and to the MLC people by some high powered people who do marketing only. I wouldn't be terribly happy with that. One of the reasons I wouldn't be terribly happy with that is that if we could get a species designated place to process our fallen animals and all the offal products that are coming from the pig through the factories - a pig is an animal that can eat, process animals products and therefore that could be fed back. At one time, I think it is still probably a regulation, in Denmark that the pig industry must use all its fallen animals and at the moment we are having to pay £1 because of this BSE tax, every pig that we put through the factory, the offal from that pig, we have to pay to get it taken away. Now when I was a non-executive director in Cookstown the people who processed that actually came and made us a good offer for all the product because there were two or three people looking for it at that time, now there is just the one group who do that. So because of the BSE it moved from being a valuable product to being a product that we had to pay to dispose of.

332.

Mr Paisley Jr: If you were writing a marketing campaign for the industry, I mean obviously that campaign that you spoke about there, that was really to focus on, in fact, a scare campaign: By local or else. If you were writing a marketing campaign what would be included in your marketing plan?

333.

Mr Overend: I think the best way to look at it is to look at pork. Over the years we have taken practically all the fat from the pig and by using the central pig test station at Antrim we have increased the amount of lean and the amount of fat that is left there is known as a healthy fat. In other words it is quite possible that you could get all the nutrients you want from eating pork. We have also made it possible for the pig to be produced and reach the slaughter weight that is the optimum slaughter weight at about four and a half months instead of seven and a half months. So you are looking at a younger more succulent pig and that is the line that I would like the marketing strategy to go down, to say to the housewife: Look, we are going to spend money, we are going to bring you out a lot of new products, we are going to give you something not only good for you but good for your children, that is the way you should encourage them to eat it.

334.

Mr Paisley Jr: At the right price?

335.

Mr Overend: At the right price.

336.

Mr Paisley Jr: Thank you.

337.

The Chairman: Thank you very much. Thank you, Robert, for being with us. You have certainly given us a lot of food for thought. We will take on board matters that you have brought before us. You will probably see some of the them referred to in our report when we get our report out. I might just say that the first part of our report will be out on Wednesday and we have been dealing with the chain from the farmer that produces it right through what happens. You have a good illustration of that in your own submission. Then we are going on to the pigs and going on to the beef. There will be two other reports coming out.

338.

We feel that we have all been very strong on diagnoses, now we need to get strong on our prescription so that we can remedy what has taken place in the past.

339.

We thank you very much for coming. We wish you well in your business. We wish you well in those lean pork chops that you were talking about.

340.

I must ask the members of the Committee just to wait for five minutes, we have business that we have to do while we have a quorum.

341.

Mr Overend: Thank you again Chairman, if there is any help you think I can give you then I'm only glad to help.

342.

The Chairman: We are glad to have your help and support.

343.

Mr Overend: Thank you.

344.

The Chairman: We will read about you in the farm journals.

MINUTES OF EVIDENCE

FRIDAY 8 SEPTEMBER 2000

Members Present:
Rev Dr Ian Paisley (Chairman)
Mr Savage (Deputy Chairman)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Kane
Mr McHugh
Mr Paisley Jnr

Witnesses:

Mr E Carson )
Mr S Crossey )
Mr C McGuikian ) United Pig Producers
Mr C Pogue )
Mr T Shields )

345.

The Chairman: Gentlemen, time is tight. We want to finish this session 10.45am sharp. We ask you for a 10-minute presentation and then we will ask questions. We would like you to answer the questions rather than have a discussion, because this meeting is to elicit information to help us draw up the recommendations in our report. I would like to welcome you all, but especially Edward Carson. I declare the meeting formally open.

346.

Mr Shields: Mr Chairman, Ladies and Gentlemen, we are very glad to be here to put our case to you. In 1995 we set up a group of 10 members which we called Propork. We marketed 500 pigs a week and got compound feed for those members. That group has grown from 10 members to 35 members at its peak. We presently have 32 members and we are marketing 1,300 pigs per week and buying 550 tonnes of compound feed per month. This has kept this group of producers well intact. Probably 40% of Northern Ireland's pig industry has collapsed owing to the crisis over the last two years' and we have had an 8% drop in our members, from 35 to 32.

347.

When we first set this group up there was not one processor in Northern Ireland who would buy our pigs, so we visited quite a number of processors in Southern Ireland and managed to get a home for them. Once we had this home for our pigs the Northern Ireland processors quickly showed interest. We were there for real, and they did want to buy our pigs. For quite a time they were not prepared to give us even the price that we were getting farther away, and that did disappoint us. Our group was based in South Down and South Armagh, and it did disappoint us that we had to drive by the local factory that was boycotting our pigs because the processor there did not want farmers to come together and work together.

348.

We are now marketing 1,300 pigs per week and at the end of July we went to the largest processor in Northern Ireland and had a meeting with people there. We were very concerned about the differential in pig prices between here and the rest of the UK. We voiced our concern that we would have to send our pigs elsewhere if they did not narrow the gap. The base price in Cookstown was 85p a kilo, yet Malton's base price in England is 106p. This week they said that that was entirely our business. From our point of view it was good business to get the best price for our pigs so we started to sell pigs to England on 3 August. This week we sent 600 pigs to England and are getting considerably more money for the pigs there. The processor who was getting most of our pigs came to us yesterday and said that he was no longer going to give us the price that he had quoted for our pigs, but a base price which is considerably less than we are achieving. Since we are still sending them probably more pigs than most, between 350 and 400 pigs a week, they really want to crucify us, and in some cases I would call it blackmail. They do not want us to sell our pigs for the best price we can get. In Great Britain Malton's price is 106p a kilo. They are certainly the highest buyer of pigs in the British market., and the Northern Ireland pig industry is subsidising that, which leads me to what we are here to talk about today, United Pig Producers.

349.

It was in the spring of 1998 that the South Down co-operative Propork Ltd, got together with the Department of Agriculture and Rural Development (DARD) representing sellers to discuss the possibility of creating a large pig producer co-operative. In the summer of 1998 Propork succeeded in obtaining grant aid towards the cost of a feasibility study, which was entitled 'A Review of the Current Policy for the Marketing of Pigs and Recommendations for a Future Marketing Strategy'. The main recommendation to emerge from the study was that an application should be submitted to the marketing development scheme run by DARD to assist in the establishment and operation of a large pig marketing co-operative. Further discussions were held in August 1998 when 20 representatives of pig producers from across Northern Ireland came together. This was after the fire at Ballymoney, and there was a need for some stability and leadership within the pig industry. At the instigation of DARD, the Ulster Agricultural Organisation Society (UAOS) and the Scottish based pig marketing co-operative of Scotlean were invited to speak with the producers.

350.

After a series of meetings in the autumn of 1998 a five-man steering group was established. Following the first official meeting of the steering group held in December 1998 it was agreed that that structure should be legalised and go under the name of United Pig Producers Co-operative Ltd (UPP). It was also agreed that the UAOS should act as secretary to the co-operative and that Scotlean would fulfil the role of its marketing agents.

351.

At that early stage a questionnaire was circulated to pig producers to try to ascertain the number of producers who were committed to joining the co-operative and the number of pigs involved. A total of 97 questionnaires were returned accounting for 14,904 sows and an average of 6,783 pig sales per week.

352.

Following the recommendations of the feasibility study an application was made to the Marketing Development Scheme for £150,000, which was passed in March 1999. During the first few months of 1999, Scotlean, acting as marketing agents, had tried to establish a marketing relationship with Malton and other local pig processors, but they refused to take pigs under the UPP name. In April 1999, at the first meeting of the co-operative with Mr Hilliard of Malton, he confirmed that he would not deal with UPP on a marketing front, and that was with Scotlean on board.

353.

During a public meeting of pig producers held in Dungannon in March 1999, Mr Sommerfield, chief executive of Unigate plc - Malton's parent company - stated quite categorically that he would have no hesitation in dealing with UPP.

354.

Following that impasse, Scotlean withdrew its marketing agents for UPP. After consultation with DARD and the UFU, UPP made the decision to act as its own marketing agent. As a result the MDS grant proposal had to be resubmitted. Both the UAOS and the DARD were extremely helpful in that process.

355.

Following a second meeting with Malton in May 1999, it was agreed that they would take UPP pigs but that they would pay individual farmers rather than the co-operative. Local processors continued to ignore the UPP and refused to take their pigs.

356.

Nothing more could be done until the resubmitted MDS grant application was approved in October 1999. A letter was then sent to Mr Hilliard seeking a meeting, but no such meeting was held until February 2000. After a positive meeting Mr Hilliard indicated that he would now be prepared to work with the UPP and that everything was up for discussion, for example, contracts, prices, et cetera.

357.

An invitation was extended to the UPP Committee to visit the Malton plant in England to witness at first hand the superior quality of the English pigs that merited higher prices. Accompanied by representatives of the UAOS and the DARD, the visit took place in April 2000. Despite seeing a very impressive and well-run operation, all those on the visit were in agreement that there was no difference in quality between the Great Britain and the Northern Ireland pig cuts that were displayed. I have the evidence to show that: grading results on pigs to date that have been supplied to England.

358.

Following on from that two-day visit, a meeting between the UPP and Malton was held in June 2000 at which contracts were discussed. Despite the promise of contract details and another meeting in July, nothing has ever materialised, and the pig industry continues to progress towards an uncertain future.

359.

Over the past two years the committee has attended more than 40 meetings. Lots of time, effort and expense have been invested by the directors in the pursuit of co-operation and supply-chain development within the pig industry. However, because of its experience, the UPP is now left asking itself if it is the only willing partner in an industry where structured producer, processor and retailer partnerships are long overdue.

360.

We feel as pig producers that the processing industry is not giving us a fair crack of the whip.

361.

The Chairman: Thank you very much. That has been very helpful. How strong is the industry support for the creation of a better producer base for pig-meat?

362.

Mr Shields: You can see from our questionnaire that we had a very promising response. At the moment Northern Ireland pig producers are the most feasible anywhere in Europe as far as saving money and efficiency are concerned. If we were getting the same prices as our competitors in Great Britain, we would certainly not be in crisis.

363.

The Chairman: We have crossed swords with Mr Hillard. He made an appalling statement which was a colossal falsehood. He said that producers were not paying any more across the water than they are in Northern Ireland. We have written to him demanding proof of that. If he does not reply, this Committee has the power to summon him here. You are being crucified because of their fear of demands from the pig producers for a fair price. If you make a move, they are afraid that they will have to move too. What steps should the Department of Agriculture and Rural Development now take to strengthen the union of pig producers?

364.

Mr Shields: The Department of Agriculture and Rural Development has been supportive of our trying to co-operate and bring producers together. There are some things we would like the Department to do. For instance, since we started sending pigs to England we have not had one condemnation, but two or three per cent of condemnations are going into factories in Northern Ireland. That is where the Department of Agriculture and Rural Development could join with us in getting the processor and producer closer together to solve these problems.

365.

The Chairman: This is such a broad co-operative in which the pig producer would have a real say in the negotiations. What steps do you think the Government should take on ongoing support for such a move and what are the contingencies if you do not achieve the levy which is forecast?

366.

Mr Shields: We are very much in their hands. There is no competition for pigs in Northern Ireland and, until we can create competition, we will not have many outlets.

367.

The Chairman: The creation of a well-organised market response to it would require significant leadership. How can this leadership be provided in your co-operative? Is Mr Murray's departure going to have an effect?

368.

Mr Shields: No. Mr Crossey has now taken over Mr Murray's role.

369.

Mr Crossey: At one stage we talked about furthering the relationship with Malton. The committee would be broadened to take in other sorts of prospective pig producers, and this would add more strength and depth to the committee.

370.

The Chairman: Your application to the Department of Agriculture and Rural Development identified the need for grant aid for a marketing manager, quality- control staff and a non-executive director. Assuming you can proceed with the venture, is the necessary expertise in marketing and quality control available? How can you be sure your co-operative will secure this expertise?

371.

Mr Shields: We need to have some sort of relationship with Malton to buy our pigs. It is the largest processor in Northern Ireland and we need to bring something on board to take in the whole of Northern Ireland. With regard to employing staff to run a successful co-operative, I think we have a track record with Propork, which has been done in a small scale.

372.

The Chairman: You are saying that there must be a cross for Malton and that it must feel some of the nails, because it has been crucifying you. We are coming to a decision about the future of the pig industry. If you do not get this, you are finished.

373.

Mr Shields: Yes, that is right

374.

The Chairman: This Committee has already decided that we need a radical change to position you to get the right price to clear your production costs and a fair profit.

375.

Mr Savage: I have listened very carefully to what has been said and our Chairman has asked the question that I was going to ask. We are thinking of the future, and I know exactly what the situation is. You do not get a fair price for the pigs, and it is very clear that there is one big company in Northern Ireland that dominates the whole market. Have you any future plans to start up a processing plant of your own, or do you not think that is viable in opposition to this? Competition is the life of trade, and the pig industry is a very important aspect of the Northern Irish agricultural sector. No firm or business can operate unless it is getting a fair price for its produce. I know you can produce the goods, but when it comes to selling the goods and you are not getting a fair price, this cannot go on. What steps would you advise the Committee to take to assist you?

376.

Mr Shields: Any further competition in the marketplace is very welcome. We have discussed whether we can get involved in the processing end at committee level. A number of us were in the Republic last week looking at research and we visited a very large pig unit with 2,000 sows in Mitchelstown which were going into the Galtee chain. It is owned by Dairy Gold. This is a farmers' co-operative which has grown from strength to strength.

377.

Mr Savage: It is not exporting into America, but I want to know what assistance we can give you to capitalise on that?

378.

Mr McGuikian: Although Malton is the main player here, there are two other processors who are sitting on the back of Malton and they are doing well, but they are playing a very low profile.

379.

A Member: They are quite happy to sit behind the smoke screen.

380.

The Chairman: Oh yes, let Malton, the big men take the stick.

381.

Mr Pogue: Presently, our problem is that pig farmers have no capital. Two years have bled them completely, and the capital is not there for further investment. We had talked about a future processing plant, but where now could we get the shareholders and build up the amount of capital that would be necessary? Presently, there are adequate killing and processing facilities in Northern Ireland. There is a study being done on Ireland as a whole and we do not want to pre-empt the judgement of that study, which we will look closely at later. If we could work closely in partnership with local processors, and indeed Malton, there is no reason for a pig industry's not being a lucrative business in Northern Ireland and adding to the economy of the country. Pig production was high in the economy of Northern Ireland.

382.

Mr Dallat: We all know some fine stories of gombeen men down through the years and how they won their battles and survived through the whole principle of co-operatives. In developing your organisation and in creating links with the Republic of Ireland and Britain could more be done to make your organisation stronger so that it develops enough muscle power to ensure that it is not always the victim of one large company? I applaud the principle of the co-operative that you are involved in, but how can that be developed so that you can benefit from the support of other co-operatives in Britain and the rest of Ireland?

383.

Mr Shields: At the outset we wanted to get a Scotlean pig producer group with a track record on board - one of the larger marketers of pigs in Great Britain - but Malton was not interested. It did not want to work with us.

384.

Mr Dallat: The Government should be aware that this type of sharp practice is taking place. There is an urgent need for the Department and the Assembly to pay heed to that because it is the crucifixion of the working-class person trying to make a living.

385.

Mr Shields: That is true.

386.

The Chairman: We do not know how much money Malton received from the Government in getting their hands on Cookstown and in compensation for the factory that was burned down. We are sitting in darkness and nobody will tell us anything. Malton's power must be broken so that the producer has some say in what he is going to get for his meat.

387.

Mr Carson: We are looking for funding to develop in Northern Ireland and we should think twice before handing out any more money to the Malton group because it is not acting responsibly. If the Government are handing out money to the Malton group, they have to accept the responsibility for looking after the producers, but they are not doing that. There is a difference of about £14 or £15 per pig between Great Britain and Northern Ireland. We need that to pay debts and to build up some fat for the next downturn because the industry is supposed to be making a slight recovery at the moment on the mainland. So if we do not get that, the Northern Ireland pig industry is slowly going to crumble away. So the Government and the Assembly have to apply more pressure to make the main processors more responsible to the suppliers. The situation which exists is similar to what was prevalent in the nineteenth century when the landlord told the tenant what he was going to do, what he told him to do and take what he got. We are fed up with this. It is time that the people had the power and influence to stand up and fight harder for the Northern Ireland pig industry.

388.

The Chairman: We are getting that message.

389.

Mr Douglas: All sectors in farming have lost out because they have not been prepared to work together, so I commend you for trying to bring your group together. I do not know a lot about the pig industry but you say that there are three processors. Do you feel that you can unite enough of the producers to get some control and talk to Malton properly, or will there be other producers working behind your back supplying other processors.

390.

Mr Pogue: There has been a problem subsequent to the fire in Ballymoney. The number of pigs had built up on the farms because producers had no outlet. There is now a fear among producers that if they step out of line they will have no outlet for their pigs and they will not know what to do with them. One could be left with pigs on his farm. Producers feel that they have the thumb on them. That fear has to be broken. We want the producers to be confident that they will have an outlet for their pigs.

391.

At present in East Anglia there is swine fever and pigs are building up on the farms because there is no outlet. Pigs are only a saleable item up to a certain time. They are of no value once they get overweight.

392.

Mr Paisley Jnr: I want to ask a straight question. Are you telling us today that Northern Ireland's pig industry has been undermined by Malton? If so, is it part of Malton's strategy to undermine the development of strong producer groups?

393.

Mr Shields: Malton definitely does not want producer groups; there is no question about that. It wants to keep us as individuals and keep us weak.

394.

The Chairman: According to your paper, Hilliard says one thing and Somerfield says the opposite.

395.

Mr Shields: Correct. Somerfield said that he had absolutely no bother in working with the United Pig Producers.

396.

Mr Carson: I do not think that Somerfield is there anymore.

397.

The Chairman: He has gone.

398.

Mr Shields: The week after, when we said there was no problem, we booked the pigs into Cookstown as United Pig Producers' pigs. We also booked pigs into other processors in Northern Ireland and not one of them would accept our pigs through United Pig Producers. That tells me only one thing; they are scared of our coming together. Coming together is the only future for the Northern Ireland pig industry. Divided we are going to fall, and we are crumbling fast.

399.

Mr Carson: That applies to all the processors. No processor has the support of this, so it cannot all be put on Malton.

400.

Mr Shields: That is right down to some processors who do not even slaughter pigs. They just buy product and reprocess it.

401.

Mr McHugh: I understand your situation, and it relates very much to the beef and various other farming situations. There is enough in the total kitty to keep everyone right The difficulty is that it is the people beyond the farm gate who are winning and have done for hundreds of years. Is there any way that pig producers as a whole can move directly into the global markets you are talking about? Are the farmers right across the North prepared to sell outside? What are the obstacles in selling to England and cutting out the local processors entirely, or at least having that threat there? I suppose that going down South is not an option because of a difference in the price. Your long-term strategy for the next five or 10 years has to be to try to find a way of cutting out people, such as Malton, who have a noose round your neck.

402.

You need to get into a position where you can have a say over the added value of your pigs. You are selling the raw product, but you have no say over the added value - which should be through a farmer co-operative. Malton and others now have a massive hold in terms of money, so you are in difficulties.

403.

If Malton or anyone else were to get any money from the Government, they should be held accountable to allow the base of the industry to thrive as well. What are the major obstacles to cutting out the processors? Is it possible to do that?

404.

The Chairman: We have to get to this question now.

405.

Mr McGuikian: Historically, some of the producers in Northern Ireland have sent live pigs to England. In 1995 I started selling live pigs to England. Propork Ltd is currently selling pigs to England, but it is not always easy to get a processor over there to take pigs on a weekly basis. He will take pigs if he is short. He will only take pigs if there is a hole for them. It is not always possible to have a hole for those pigs in a one-off situation.

406.

The other big problem with selling pigs to England is our inclement weather. We might go to Larne with a couple of loads of pigs, but if there is a gale blowing, those pigs cannot sail. They have to come back to the farm again. They are not supposed to come back to farm once they have gone off farm. If they are from an Aujeszky's disease-free farm, you cannot bring them back to the farm - that is a big problem.

407.

We have endeavoured to sell pigs to England and have done it.

408.

Mr Shields: We are presently selling pigs in England and are building up a relationship with the processor over there. He likes our pigs - they are very good quality pigs. However, he is not prepared to take too many of them because, if there is a storm, we cannot get them over. He has a killing line waiting for pigs and no pigs to supply it, that is the problem.

409.

The Chairman: They have a marketing difficulty.

410.

Mr McGuikian: Yes, although they are happy with our product.

411.

Mr Armstrong: I spoke to Max Hilliard in September 1998 and suggested that he contact all the pig producers who would be willing to supply pigs to him and get them to make a commitment to him. He did not seem to like the idea of farmers in a co-operative or of having commitment to any particular farmer. He wanted to keep every farmer at arm's length. He does not need them, but they need him. Your way forward, in my view, is to form a co-operative and leave Malton behind because it is no good to you. You will need finance so we will have to speak to our financial departments to see if they will support you.

412.

The Chairman: Can you, under these circumstances, let Malton go? I think, personally, that it is impossible at the moment. How far can we take Malton on without a proper organisation? You cannot take it on until you have that. Do you agree?

413.

Mr Shields: We can hold pigs on the farm for one to two weeks, but after that they have to go. Malton knows that. Malton always said "Why should I buy your pigs, I am getting them anyway? Why should I negotiate with you?"

414.

The Chairman: As long as Malton has the supply it does not care.

415.

Mr McGuikian: It will not give us written contracts. In 1997 Max Hilliard stated that there was no such thing as contract pigs in Northern Ireland. All pigs in Northern Ireland are spot pigs. That means that they can be bought on a weekly basis and he was not prepared to give anybody contracts. He gives contracts in England because there is opposition there.

416.

Mr Armstrong: You have to work to try to leave Malton behind; I do not know how but you have to keep working at it.

417.

The Chairman: We have got to use the Government as a lever. There should be no more money to employers who are not prepared to abide by the proper standards and ethics. The clear message must come from the Government that that cannot be tolerated.

418.

Gardiner, I know you are dying to get in and I want you to live!

419.

Mr Kane: How do United Pig Producers intend to maintain producer loyalty to the co-operative in the short term or until there is a financial incentive for co-operative members?

420.

Mr Shields: In the past, in Propork, we held back one pound per pig for every pig that was brought through the system, and we paid it back at the end of three months. If a producer did not keep loyalty he did not get it. We have now built up our present 32 members. We have a good relationship, we work well together and there is no problem. We do not even collect that pound because every pound is needed.

421.

Mr Pogue: Could we also say at this stage that Propork, with 32 members, will be the base for the new co-operative and they have agreed to that at the AGM. So we already have the base there to work on. We have

422.

32 to35 members already there as a base for a co-operative.

423.

Mr McGuikian: You asked what incentive there is for farmers to join our co-operative. The big incentive is to be part of a bigger organisation, and we would be selling more pigs to the factories here in Northern Ireland. That will definitely get us a better price because there are different prices being paid by Malton in Cookstown at present. The bigger producer gets more. That is a fact. No one is supposed to know that, but that is the way it is. If we were in the position where we were selling, say, 6,000 to 7,000 I can assure you they would have to pay more.

424.

Mr Armstrong: Do you have confirmation of that?

425.

Mr McGuikian: Yes.

426.

Mr Bradley: In recent times, the pig meat industry has had unified marketing, farmer-owned processing, and farmer own brands. All of those have either gone, or have been moved out of farmer control. What are the implications of this, and what lessons can the Committee learn from what has happened?

427.

Mr Shields: I would like to think that I am still a relatively young pig farmer. However, I have been in the pig industry for over 20 years. In the early days they used to tell us that when they got Cookstown going right, the pig industry in Northern Ireland would be very profitable. The lesson to be learned is that you do not put a farmer in to run a processing plant. You hire the appropriate expertise. I have always been critical of how the Unipork plants in Cookstown, Enniskillen and Newry were run. It was diabolical. If they had introduced a hatchet man to sort out the business we would not have this problem today.

428.

Mr Paisley Jnr: Could I return to what you said earlier about getting some of your pigs to England. Does every cloud have a silver lining? Has the fact that there has been a swine fever problem affected Malton's market and their source of pigs there? Could Northern Ireland benefit if that swine fever problem is not resolved sooner rather than later?

429.

Mr Sheilds: I suppose there is no ill wind that does not blow somebody good. We would not wish ill on anyone. However, the pigs that were held within a region were not being released so -

430.

Mr Paisley Jnr: Have you noticed an upturn since swine fever was reported?

431.

Mr Shields: No, we have not seen an upturn.

432.

Mr McGuckian: I do not think that it will do us any good at all. If it had occurred in Denmark or Holland perhaps the answer would be yes. As it happened in the south of England, the answer is no.

433.

Mr Paisley Jnr: You are pro-European then?

434.

Mr Pogue: It could have an effect on the exports from England to a certain extent. Some countries have stopped taking pig meat from England.

435.

Mr Shields: It may have made our case for getting pigs on to the mainland easier.

436.

Mr Pogue: Generally, it has not given us an upturn in pig meat prices.

437.

The Chairman: This has been most helpful. It confirms a lot of things that we have already been persuaded about. We need to consider - and you will also need to consider - the way we can take steps to strengthen the power of the farmer through as wide a co-operative as can be achieved. That will mean that farmers can actually be at the negotiating table. You fellows are not actually at the table; other people make decisions on these matters. They make those decisions purely on a commercial basis, and they are keeping their eyes on their investors.

438.

Eventually, we will break the Malton stranglehold. However, it is not just a question of his stranglehold. There are others behind him and they are all together. All of the producers are at it. We will be pressing strongly that the pig producers must be in a position where they can negotiate the future of the industry - not the big man with the big factory, the big money and the big investors who are not really interested whether or not pig farmers go to the wall.

439.

You will get copies of this evidence and please feel free to put in writing to the Clerk of the Committee any comments you might have which have come out of today's session. We would be grateful for that. Thank you very much.

440.

Mr Shields: Thank you for taking the time, and we hope that in the near future you will be able to do something positive for the industry.

441.

The Chairman: We will always have a friendly ear for your case.

442.

Mr Shields: As far as we are concerned we are in this together. It is the Northern Ireland economy which is suffering.

MINUTES OF EVIDENCE

FRIDAY 8 SEPTEMBER 2000

Members Present:
Rev Dr Ian Paisley (Chairman)
Mr Savage (Deputy Chairman)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Kane
Mr McHugh
Mr Paisley Jnr

Witnesses:

Mr W Aston )
Mr C Pogue ) Ulster Farmers' Union
Mr D Rowe )

443.

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

444.

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

445.

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

446.

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

447.

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

448.

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

449.

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

450.

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

451.

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

452.

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

453.

Mr Rowe: Yes.

454.

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

455.

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

456.

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

457.

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

458.

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

459.

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

460.

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

461.

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

462.

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

463.

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

464.

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

465.

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

466.

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

467.

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

468.

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

469.

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

470.

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

471.

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

472.

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

473.

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

474.

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

475.

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

476.

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

477.

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

478.

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

479.

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

480.

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

481.

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

482.

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

483.

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

484.

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

485.

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

486.

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

487.

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

488.

Mr Kane: That is a valid point.

489.

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

490.

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

491.

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

492.

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

493.

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

494.

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

495.

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

496.

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

497.

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

498.

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

499.

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

500.

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

501.

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

502.

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

503.

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

504.

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

505.

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

506.

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

507.

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

508.

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

509.

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

510.

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

511.

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

512.

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

513.

The Chairman: We will take that on board.

514.

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

515.

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

516.

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

517.

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

518.

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

519.

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

520.

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

521.

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

522.

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

523.

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

524.

Mr Rowe: That is a much more precise answer.

525.

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

526.

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

527.

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

528.

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

529.

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

530.

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

531.

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

532.

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

533.

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

534.

Mr Bradley: Who should lead it?

535.

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

536.

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

537.

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

538.

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

539.

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

540.

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

541.

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

542.

Mr Rowe: Thank you very much.

MINUTES OF EVIDENCE

FRIDAY 8 SEPTEMBER 2000

Members Present:
Rev Dr Ian Paisley (Chairman)
Mr Savage (Deputy Chairman)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Kane
Mr McHugh
Mr Paisley Jnr

Witnesses:

Mr M McCoy ) Northern Ireland
Mr N McLaughlin ) Agricultural Producers'
Mr J Carmichael ) Association

543.

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

544.

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

545.

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

546.

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

547.

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

548.

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

549.

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

550.

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

551.

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

552.

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

553.

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

554.

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

555.

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

556.

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

557.

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

558.

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

559.

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

560.

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

561.

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

562.

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

563.

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

564.

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

565.

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

566.

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

567.

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

568.

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

569.

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

570.

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

571.

Mr Savage: All farmers are in it together.

572.

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

573.

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

574.

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

575.

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

576.

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

577.

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

578.

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

579.

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

580.

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

581.

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

582.

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

583.

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

584.

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

585.

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

586.

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

587.

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

588.

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

589.

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

590.

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

591.

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

592.

Mr McCoy: Absolutely.

593.

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

594.

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

595.

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

596.

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

597.

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

598.

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

599.

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

600.

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

601.

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

602.

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

603.

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

604.

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

605.

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

606.

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

607.

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

608.

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

609.

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

610.

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

611.

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

612.

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

613.

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

614.

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

615.

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

616.

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

617.

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

618.

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

619.

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

620.

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

621.

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

622.

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

623.

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

624.

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

625.

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

626.

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

627.

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

628.

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

629.

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

630.

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

631.

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

632.

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

633.

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

634.

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

635.

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

636.

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

637.

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

638.

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

639.

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

640.

The Deputy Chairman: That is definitely not being overlooked.

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 B Dynes )
Mr H Hamill ) Ulster Curers'
Mr I Hamill ) Association
Mr A Forbes )

641.

The Deputy Chairperson: I declare this morning's meeting open and formally welcome you. I am sorry that we are running slightly behind time, but I am sure you understand that such things can happen when one gets into a discussion. I did not want to be sharp with anyone; I wanted to give everyone an equal opportunity to speak. That is how we stand at the moment. Do some of you wish to make an opening statement?

642.

Mr Hamill: I should like to thank you for asking us along here today to state the case for the much-maligned pig processors.

643.

The Deputy Chairperson: You may have 10 minutes, if you wish.

644.

Mr Hamill: My company and the smaller processors have, for a number of years, consistently paid the highest prices in Ireland. At the moment, the pig price we are paying is the third-highest in Europe when converted back to punts. We were foremost in pushing for and paying a £1 quality-assurance bonus, which was introduced to Northern Ireland in 1992. We stopped that late last year, because we could not afford it. However, we still pay farmers' costs for quality- assurance inspections.

645.

We buy pigs direct from the farms. I speak for ourselves and smaller processors. We do not use dealers or auctions; all pigs being bought direct. We arrange open days for farmers to visit the factory and meet the veterinary people, allowing them to see condemnations and so on. This helps to reduce the cost of condemnations to ourselves and the farmers. We have supported schemes to help pig farmers. We pay a grant for farmers buying pedigree boars. We pay for the ultrasonic testing of sows. We have also helped some farmers who were in serious financial trouble. We work closely with Greenmount College regarding student visits.

646.

We are Northern Ireland companies committed to local farmers. I come from a farming background. My sisters are married to farmers. We understand and think like farmers. Records show that the selling price of pork and bacon is reflected in the pig price. At the moment, the industry is Europe-wide and market-driven. Pig processors would like to pay more for pigs, but they do not have the funds to do so. All processors have spent millions over the last few years upgrading their plants to meet new hygiene regulations demanded by supermarkets and veterinary people.

647.

We all have had to employ additional staff, keep daily records and record temperatures and hygiene standards. These things were not required a few years ago. In addition to that we have had to pay for a full-time veterinary officer and four meat inspectors.

648.

The Deputy Chairperson: A recent attempt to create a strong producer group seems to have developed very slowly. Yet the pig industry is in deep crisis, and the need for such a group seems to have been widely accepted. Why has progress been so slow? Do Northern Ireland pig producers not believe in co-operation, or is the concept beneath them?

649.

Mr Forbes: The curers would welcome the opportunity to talk to local pig groups, however, there must be accommodation and ground rules to safeguard the interests of curers and pig groups. In a very strong market a group moving from curer to curer could do very well, but in a weak market, that group may have difficulty moving their pigs. Curers need to be assured of a steady supply of pigs, so that they do not let their customers down. If any of your wives go out to buy the bacon for breakfast in the morning, they want to be assured that the bacon is in the shop. If curers do not get a steady flow of pigs because a group is selling to somebody who can afford better price, the smaller curers have no chance. For years there was only one group in Northern Ireland which was the Pig Marketing Board, and for some people, it worked very well. We want to accommodate everybody, but we need pigs. I come from a farming background which is a homespun company.

650.

We appreciate that you have asked the small people to come here today and that you were good enough to bring your Colleagues along to a small company in Mid Ulster when this Committee was first established. We also appreciate the hard work that you are putting in to this. We are happy to talk to groups as long as it is fair. The problem is, however, that there are some very strong farmers who want to pick us off against each other. That is not fair, and we will not wear it. We have had a very rough playing field as a result of the sterling crisis, the BSE crisis, the overproduction of pigs and all that we have come through. In 1993, the Departments gave us grants, but we still had to spend £1·5 million to bring our factory up to EU standards. My boss and I had to pay out everything we had ever earned just in order to survive. When I started in this industry, there were 60 or 70 curers, and the number of pigs has been depleted from 45,000 to 25,000 a week. If the English-based company, Maltons, goes tomorrow, that number will be reduced further. We are up against the wall.

651.

Mr Hamill: Farmers approached me and told me not to buy pigs from the group and not to join it. I met the group, and then news got out that I had been talking to them. Some farmers phoned my pig procurement manager and told me not to have anything to do with the group.

652.

I can give you the names of those farmers, if you want them. We were told to have nothing to do with that group.

653.

The Deputy Chairperson: Members, I ask you to keep your questions brief and to the point. I also ask the Gentlemen at the bottom of the table to keep their answers brief, as it gives everyone a chance to speak.

654.

Mr Kane: You are welcome, Gentlemen. It is good to see you here, and we will try to work with you as much as we can.

655.

Your submission has interesting price comparisons over the 19-year period, and these appear to suggest that the retailer has done very well in respect of the price of pork. Assuming your average selling price is that paid by the retailer, the pig price has, however, reduced by twice as much in percentage terms as, for example, the price of loins. Can you account for this, and has the price reduction been passed on to the consumer?

656.

Mr Hamill: The prices I quoted to you are wholesale prices. These can be verified if you want to visit the plant. The prices to wholesalers that I quoted for September are current today - some current prices are, in fact, lower. We could not sell legs last week; we were offered 57p, and another three or four pence on top of that for shipping to England. We had to put the legs into cold storage, for there was no demand.

657.

The fact that we are not paying a similar price to that in England is often cast up to us. I could pay more for pigs if I cut down on my throughput and bought product from the Republic and Denmark as Maltons is doing. Maltons is purchasing 50% of their product from Denmark and Holland. They can afford to pay more for their pigs, as that product is cheaper. It would pay me not to handle Northern Ireland pigs at all and import the product and sell it, but I have a commitment to the Northern Ireland pig producers and I will not take that course of action.

658.

That is the predicament we are in, and through no fault of pig producers or processors, the main costs have resulted from the BSE problem. My financial year finished in September, and I am paying £300,000 to get rid of waste material, but three years ago, we were receiving money for bones. Who pays for that? The pig farmer - he has to pay for everything. Water has gone up; the price of getting rid of sewage is rising; the price of electricity has increased; wages, everything is going up. At the end of the day, the pig farmer has to bear the cost. Processors are losing and have lost money over the last two years, and their accounts will show that. We are on a sticky wicket.

659.

Mr Kane: I welcome Mr Hamill's response and his commitment and honesty.

660.

Mr Bradley: To be honest, I was not aware of your role, and I must express admiration in respect of your effort to support the local industry.

661.

Your submission paints a very bleak picture of cheaper imports from the Republic of Ireland, Denmark and Holland forcing the price of Northern Ireland pig meat down. Is it not possible to market our pig meat on the strength of the additional welfare and hygiene standards here?

662.

Mr Hamill: We do that already - our pigs are 100% quality-assured. That is why we have paid a bonus since 1992 to encourage the farmer. We got business from Sainsbury's because we could prove to them that our pigs were all quality-assured. We had another company with us a few weeks ago, who had to go to a farm to see for themselves that the pigs were quality-assured. If that is not the case nowadays, you cannot sell, especially across the water.

663.

We are asked for quality-assured pork, not Ulster pork, Irish pork or Stevenson's pork, what the customer across the water is asking for is British quality-assured pork, and that is the standard our farmers are aiming for and that some of them have reached.

664.

Mr Bradley: Do Sainsbury's dictate to you in relation to the price?

665.

Mr Forbes: Unfortunately, it was the multiples that pushed for this quality assurance, and we were quite prepared to go along with it, but they have not come up with the price. They buy foreign stuff which defeats the whole thing.

666.

The Deputy Chairperson: That defeats the object of the whole exercise.

667.

Mr Armstrong: You have suggested a number of steps to ensure the survival of the industry. However, you must accept that the currency situation is not going to change, and there is not likely to be compensation for the so-called BSE tax. How achievable are your other suggestions, and who must do what to achieve them? We used to have a steady supply of pigs, and there would be a steady supply of pigs again if it were profitable.

668.

Mr Forbes: I have no doubt about what Mr Armstrong is saying. I was listening to some of the remarks made to the previous witnesses - that you were filling the vacuum that has been going for so long. I hear and read about what the French, Danish, and German Governments, amongst others, have done for their own people, and, unfortunately, we are not doing enough for our own home produce. I have said it time and time again, and you have seen the posters which say "Home Produced". Think of the number of people employed in Government, in the Health Service, and the schools. If you could persuade them all to buy British, to buy home-produced products, think what you could do for your own people. We have to look to ourselves for help; nobody else is going to help us. We have brought in foreign companies, and we have fed them with IDB money. What do they do? In a few years, they are up and away, and you are left with the likes of us wee fellers - homespun companies. Please, Gentlemen, support us, and we will repay you. That is all we are asking. Support home-produced products.

669.

Mr Hamill: For 10 or 12 years, we had a contract to supply hospitals with pork and bacon. Three years ago, we lost it to a smaller company in the north-west which was importing produce from the Republic to Northern Ireland. Bríd Rodgers opened Pork Produced Ltd three weeks ago. We supplied them with pork, until they were taken over by Dairygold Food Products Ltd. All its products are imported, and it was all blown up to be of benefit to Northern Ireland farmers. We have not sold them a sausage since then. Practically all of their produce is imported from the South of Ireland.

670.

Mr Forbes: Before the multiples came in I had a portfolio of about 300 customers. Now they are all closing as the multiples take over their business. We are trying to get some of that business back, but it is a hard fight.

671.

The Deputy Chairperson: It is a hard slog?

672.

Mr Forbes: It is.

673.

Mr McHugh: You listened to what we were asking the other groups. I agree with what you say about the awful costs associated with BSE, and how the British Government did not take their responsibilities seriously. What do you think of what we are doing as a Committee, in terms of trying to reach the bottom of the debt situation? What is your own relationship, as a curer, with the processors as opposed to the retailers? Where are the profit levels? The retailers tell us that they are not making much profit, so we need to be able to find out who is telling us the truth.

674.

You heard allegations and counter-allegations earlier. What is your perspective on how we are dealing with the situation as a Committee, and what would you like us to do to help your situation, or that of small groups or small industry?

675.

Mr Hamill: We are telling you the truth. My business has been built through reputation, not high-flying advertising. It has been growing steadily over the years through my reputation. My word is my bond; it has always been. What we are telling you is the truth. Pig processors are not currently making money, and that is the case even for the Maltons of this world, and Glanbia. There will be a massive shakeout across the water in the next few months. I do not know what the future holds; I do not think anybody does. I think the Committee is doing a good job. Something should be done to help those industries that are in dire straits, but I cannot see the Government doing anything.

676.

Mr Forbes: I should once again like to add that I am full of admiration for the Committee, both for the way you came into my factory and before that when you were being established. You are all most welcome to come and visit at any time. We will be only too glad to see you, and we will show you everything and work with you in every way you wish.

677.

Mr Paisley Jnr: How do you respond to the trading and commercial regulations? We can do absolutely nothing for you, since, at the end of the day, this has to do with the very weak Euro and strong pound. Little can be done to help the industry until that rectifies itself, if it ever can. If you had the ability to take a blank sheet of paper to the Minister at the Department of Agriculture and Rural Development, what changes, within the bounds of EU regulations, would you ask her to make for the industry?

678.

Mr Hamill: A level playing field for sterling would assist the industry most. There is no doubt about that. On a level playing field, we can compete with the continentals and the Irish Republic. Things started to go bad for processors because of the difference in sterling when Britain did not join the Euro. Before that, we made reasonable money, paying a fairly good price for pigs, but it is mainly since the big difference between sterling and -

679.

Mr Paisley Jnr: If we joined the Euro now, would that change?

680.

Mr Hamill: It would make Republic of Ireland and continental produce more expensive.

681.

Mr Paisley Jnr: There would be a disadvantage if there were a flip in the market and the Euro suddenly became too strong, and the pound were weak.

682.

Mr Hamill: A strong Euro would undoubtedly help UK and Northern Ireland producers. Agriculture would have done much better had we not gone into the European Community. Pig farmers, in particular, and intensive farmers, in general, could then have bought cheaper American and Canadian grain.

683.

Mr Paisley Jnr: What are the changes you would like the Department of Agriculture and Rural Development to put in place to assist your industry?

684.

Mr Hamill: We met the Department of Agriculture and Rural Development and came up against a brick wall. Their hands are tied by Brussels and the Ministry of Agriculture, Fisheries and Food.

685.

Mr Forbes: Perhaps I can answer part of Mr Paisley Jnr's question. If we were allowed to bring grain into the ports directly, the way we used to do - and I believe the poultry people have also said this to you - instead of having to go to Rotterdam and pay the levy over there, it would certainly help us. We are on the periphery of Europe. We are an island out on our own, and if we were able to bring grain directly into Derry - or Londonderry, if you prefer - and Belfast, that would save us money. Everything has to be brought in and out of the country, and transportation and fuel costs are a problem.

686.

Mr Paisley Jnr: But what could the Department of Agriculture and Rural Development do specifically?

687.

Mr Forbes: We could persuade Brussels that we should be allowed to bring our grain in direct from our English-speaking American friends.

688.

Mr Dallat: I should declare immediately that I am not a farmer at all.

689.

The Deputy Chairperson: But he eats a power of bacon.

690.

Mr Dallat: Despite everything that was said in the Assembly on Monday, I do go into supermarkets occasionally. My eyesight is not bad, but I find it virtually impossible to identify where a product is made, and I get extremely angry at seeing labels which say "sourced in Northern Ireland", a phrase which we now know means nothing.

691.

Can anything more be done? I cannot resist asking you if the existence of a strong, independent retail sector is important for you in your industry? I want to hear that. Also, on the issue of importing - and this is not political - I am aware that lorryloads of bacon come in from Denmark are labelled in Northern Ireland and sent off to the South. I suspect, therefore, that farmers are being penalised on both sides of the border. There is a need for a collective approach to a very serious problem, and you do not have to tell us any more about that. There are pig farmers who are selling sites to try to survive.

692.

These are things that immediately come to my mind, as a consumer. I have seen the difficulty in identifying Northern Ireland products, because the writing on the labels is so small. There are deceptive signs on them about sourcing. When I have the choice, I shop in independent shops. How important is that? We take evidence here from all sorts of groups, but there seems to be no collective approach, no Northern Ireland loyalty to anything. We are all on our own, hanging by our own tails. When I go to France it is a culture shock for me to see how people there can stick together. They even organise their diet around what farmers produce locally, for whatever reason. We do not do that. We almost go out of our way to do something different.

693.

Mr Forbes: I have been a member of the Pig and Bacon Forum since the demise of the Pig Marketing Board (PMB), and I believe that the present chairman has done a great job for the Pig Forum and the promotion of pork and bacon. That organisation is made up of millers, processors, and farmers. In a very small way it is trying to promote home produce, and any money it can get will be welcome. It involves homespun companies trying to sell directly to local people.

694.

Mr Dallat: With regard to home industry, I once heard a very clear message from grain producers, and I have never forgotten it. If half of the people in the UK could be encouraged to take a cereal breakfast twice a week, it would eliminate all the grain mountains in the UK. Just two cereal breakfasts in the week.

695.

The Deputy Chairperson: That would be good for them, as well.

696.

Gentlemen, one processor of great size appears to dominate the pigmeat sector in Northern Ireland. Others which you represent are also important players. The biggest processer appears to have the market power to assess the best markets and the ability to build brands. One strategy for pig producers would be to try, by every means possible, to become such a high-quality supplier to this major customer as to earn a preferential place in the range of supply options. Is there a better option for the Northern Ireland pig producers?

697.

Mr Hamill: It is a very difficult question. I have a long list of pig suppliers to the Malton Bacon Factory Ltd, who want to leave and come to me. I cannot take them, because I am frightened of upsetting Maltons. Maltons are powerful enough to put my light out overnight, if they so decided. There is no rush of people going to Maltons. They are going, because they have no option. I think we are going to see changes there. It is widely known that it is for sale. There are rumours of different groups' being involved in it. I do not know what will happen in the Northern Ireland plant. I just trust that it does not close. If it closes, we, as an industry, are in dire straits.

698.

The Deputy Chairperson: If the trading losses and the increasing costs you outline for processors are to be believed - and I do not disbelieve what you have told me - is there any realistic hope for the pig industry here?

699.

Mr Hamill: That is what concerns us. If I have no pigs, I have no business. It is the same with the rest of us. You could depend on imported product for a while, but once the currencies levelled up, you would be squeezed out altogether. As far as we are concerned, we need pigs. I know pig farmers have found it very difficult in recent years, but there are still pig farmers who pay their bills every month. The millers will tell you that. There are still pig farmers who say they are breaking even, maybe making a shilling or two. Others are in deep debt, and I have helped them. I may never get the money back again. I have guaranteed them a price that allows them to pay their bills in the form of a loan. If the pig price were to go up above a certain figure, I would hope to get my money back again. If not, I would not get my money back. If they were to go bust, or if the bank were to foreclose, I would be in difficulty. We are doing our level best to assist producers to stay in business.

700.

Mr Forbes: Yesterday at the Forum we were asking the same question of farmers around the table. There is no doubt that there are very efficient pig farmers, and it is all about economies of scale. If they can up their numbers of sows and if they can get their compounds and things sorted out - buy them at the right price, mix their own, or whatever - there is no doubt that the efficiency of the Ulster Northern Ireland pig farmer will keep us in business, to some extent. There is an economic circle which is going round, and it will come round again in time.

701.

Mr Hamill: Feeding costs have come down during the last couple of years and have been a big help to farmers.

702.

The Deputy Chairperson: The pig meat industry, in recent times, had a unified marketing board, a farmer-owned processing plant, and, as you referred to earlier today, a strong farmer-owned brand. All of these have either gone or have passed out of farmers control. What are the implications of this, and what lessons can this Committee draw from what has happened?

703.

Mr Hamill: The largest pig processor in Northern Ireland was the Pig Marketing Board, which had, at one time, five factories slaughtering 40,000 pigs a week. They could not make it pay, and they closed one factory after another. In the end, they had to sell the offices in Newforge Lane to keep Unipork going. PMB sold for £3 with £3 million or £4 million of debt to Willie Wilson. He is the only man who has made money out of this, when he sold to Malton.

704.

The Deputy Chairperson: He knew, and there was no doubt about it. I am used to working with pigs myself, and I remember the time when the Pig Marketing Board was going and you had to put your card in to give so many pigs away. Can you, Gentlemen, in your wisdom, see that situation coming back again? If it was getting Government support, do you think we could make it a viable situation?

705.

Mr Hamill: Can the farmers run it to make a profit? I do not think they can; I think it needs to be in private industry. They were not able to run it in the past. If farmers come up with enough money, I will sell them my business.

706.

The Deputy Chairperson: Supposing some individual person took this on board as another outlet to Maltons, could that person be guaranteed to supply pigs to make a viable situation?

707.

Mr Hamill: I do not know, Mr Chairman. As you know, there were three large pig farmers brought together, and are telling me they are struggling and have not made any money since they started up two or three years ago.

708.

The Deputy Chairperson: Are there any other points you would like our Committee to take up with the Department on your behalf? This Committee genuinely wants to support you people. We do genuinely want to support you. I am telling you this, because industries like yourselves and small groups like yourselves are the backbone of this country, whether we like it or not. We will do all in our power to support you in any way that is possible.

709.

If you have any ideas that you want to put forward to us that we can take to the Department, please let us have them.

710.

Mr Hamill: I have a friend who retired a year ago, and he went to the north of France on holiday this year. He got talking to someone in the pig processing business, and they were comparing notes. Here, we have meat inspectors - I have one all the time, and we have to pay these people - but the man in France told my friend that there is one meat inspector in Normandy. He lives in the south of France, so it does not cost them anything. We pay money every month to keep these people, whereas our French counterparts do not pay anything.

711.

The Deputy Chairperson: I am a member of the Committee of Regions in Brussels. I see the groups that started up in France get a lot of support from their Government. I am convinced that our Government are trying to run the agriculture industry down in Northern Ireland. If I were to sell my farm here and move over to France, the support that I would get there is unbelievable. A number of years ago the French Government neglected the farmers, and the farmers started to leave the land. If our Government does not start to support the farmers here, they will have to turn around and do the same. The farmers cannot work for nothing. I am glad that you have come in today to give us another side to this story.

712.

Mr Forbes: I have left some history of the industry with the Committee members so that they may have a browse. If any of you can put forward suggestions for us, we would be glad to hear from you. Thank you for having us.

713.

The Deputy Chairperson: On behalf of the Committee, I thank you for coming here today.

MINUTES OF EVIDENCE

WEDNESDAY 4 OCTOBER 2000

Members present:
Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Ford
Mr Kane
Mr McHugh
Mr Paisley Jnr

Witnesses:

Ms B Rodgers ) Department of
Mr P Small ) Agriculture and
Mr P Toal ) Rural Development

714.

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

715.

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

716.

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

717.

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

718.

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

719.

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

720.

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

721.

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

722.

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

723.

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

724.

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

725.

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

726.

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

727.

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

728.

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

729.

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

730.

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

731.

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

732.

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

733.

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

734.

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

735.

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

736.

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

737.

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

738.

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

739.

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

740.

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

741.

The Deputy Chairperson: That is good news.

742.

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

743.

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

744.

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

745.

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

746.

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

747.

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

748.

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

749.

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

750.

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

751.

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

752.

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

753.

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

754.

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

755.

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

756.

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

757.

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

758.

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

759.

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

760.

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

761.

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

762.

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

763.

Mr Small: And you enjoyed it so much.

764.

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

765.

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

766.

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

767.

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

768.

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

769.

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

770.

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

771.

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

772.

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

773.

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

774.

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

775.

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

776.

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

777.

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

778.

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

779.

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

780.

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

781.

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

782.

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

783.

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

784.

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

785.

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

786.

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

787.

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

788.

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

789.

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

790.

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

791.

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

792.

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

793.

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

794.

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

795.

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

796.

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

797.

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

798.

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

799.

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

800.

Ms Rodgers: Do you mean when people come asking for assistance or are you asking me to go looking for people to assist?

801.

Mr Paisley Jnr: I am talking about groups coming to you.

802.

Ms Rodgers: If a group comes to me or the Department with an idea seeking direct assistance, advice or finance, we will certainly look at that. We have done it in the past, and we will do it again. Our duty is to assist groups in strengthening their position to be able to meet the demands of the processors and to be able to improve the products. There has never been a problem with that.

803.

Mr Paisley Jnr: Is that not against EU regulations?

804.

Ms Rodgers: No it is not a direct financial assistance. It is about help in advising and training in education and assisting them to meet market requirements, which is not a direct aid. It is not against the EU rules.

805.

Mr Paisley Jnr: You could help to set up the management structure of those groups.

806.

Ms Rodgers: Of which groups?

807.

Mr Paisley Jnr: Of a co-operative group, if it came to you.

808.

Ms Rodgers: We would do everything possible with advice and assistance. I am not going to go into every single detail of what we do. It would be useful for Members if I let them know, as I have already offered, what the Department has been doing, for instance, with the lamb groups and the potato growers and to see what can be done. If other groups want to benefit in the same way we would be very happy to help them. It is impossible to go into every detail of all possible angles today.

809.

The Deputy Chairperson: As far as I am aware, that is available to the Committee at the moment.

810.

Ms Rodgers: There is a whole range of areas where people can be helped. If anybody in the Committee is aware of a producer group or anywhere where there is a demand, the Department will be willing, able and ready to help.

811.

The Deputy Chairperson: Is it available in the Rural Development Committee?

812.

Ms Rodgers: Yes it is.

813.

Mr Dallat: In the past your Department has seconded key staff to provide the intellectual impetus to get such ventures going. In the right circumstances would you be prepared to do so again?

814.

Ms Rodgers: I am not sure that the industry feels that it lacks the intellectual impetus. I do not know if it would be very flattered to know that there is a view in the Committee that there is a lack of intellectual capacity somewhere in the industry. I am happy to see my staff seconded from the Department, where it is possible and appropriate. It has happened in the past, and I am sure it will happen again in the future.

815.

We have seconded staff to Wilson's Country Ltd, to John Thompson and Sons, to The Food & Drink Industry Training Advisory Council and to the Livestock and Meat Commission. Indeed, the LMC helped to establish the extremely important farm quality assurance scheme, which has been taken up by the bulk of our producers. Seconding staff, where possible, is not a problem, although we do not have infinite resources. Departmental staff are stretched at the moment due to the demands of the new situation. But it will not be a problem.

816.

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?

817.

Ms Rodgers: No. My policy has most certainly not changed.

818.

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?

819.

Ms Rodgers: To intervene in what sense?

820.

Mr Kane: I believe that the Department should be doing more.

821.

Ms Rodgers: In what way? I have told you what the Department is doing. Do you mean do more to help the producers?

822.

Mr Kane: Yes.

823.

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.

824.

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.

825.

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.

826.

Mr Kane: Minister, I am not being disrespectful, but a number of us work at the coalface.

827.

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.

828.

The Deputy Chairperson: You have left yourself wide open for a comment. If the Department's officials visited farms, they would get an education.

829.

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.

830.

Mr Kane: Minister, I invite you and your Department to North Antrim.

831.

Ms Rodgers: I should be very pleased to accept.

832.

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.

833.

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.

834.

Mr Kane: I think we should take up that invitation.

835.

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.

836.

Mr Dallat: I am always very brief.

837.

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.

838.

Ms Rodgers: You are quite right, Mr Deputy Chairman. You may slap them across the knuckles.

839.

Mr Dallat: We would need to see another Minister about road congestion.

840.

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?

841.

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.

842.

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.

843.

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.

844.

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?

845.

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.

846.

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.

847.

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.

848.

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.

849.

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.

850.

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.

851.

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.

852.

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.

853.

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.

854.

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.

855.

My other question relates to pigs -

856.

The Deputy Chairperson: I am sorry, Mr McHugh, but I have got to cut in. Other members wish to ask questions. Please be brief.

857.

Mr McHugh: Other members have spoken twice.

858.

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.

859.

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?

860.

Mr Toal: Yes, Minister.

861.

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.

862.

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?

863.

Ms Rodgers: I will pass on that question to the permanent secretary and chairperson of the Vision Group.

864.

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.

865.

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.

866.

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.

867.

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.

868.

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?

869.

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.

870.

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.

871.

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.

872.

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.

873.

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.

874.

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.

875.

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.

876.

Mr Paisley Jnr: All eventualities covered.

877.

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?

878.

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.

879.

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?

880.

The Deputy Chairperson: I know the questions are in reverse order.

881.

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.

882.

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.

883.

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.

884.

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.

885.

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.

886.

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.

887.

Are the arrangements regarding the ongoing costs from inspection arrangements and inspection fees common to all other European countries?

888.

Ms Rodgers: Yes, they are. I am going to ask Pat Toal to deal with that.

889.

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.

890.

The Deputy Chairperson: But the farmer is automatically paying for it, one way or the other.

891.

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.

892.

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?

893.

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.

894.

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.

895.

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.

896.

Ms Rodgers: That is a commercial issue.

897.

The Deputy Chairperson: Those costs are there, and the farmer has to stump up the money at the end of the day.

898.

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?

899.

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.

900.

As the Minister knows, we have been under pressure over the years from other quarters, such as the Treasury, to increase those rates.

901.

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.

902.

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.

903.

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.

904.

Ms Rodgers: It is a matter for member states. It is on MAFF's agenda, as Nick Brown has indicated.

905.

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?

906.

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.

907.

The Deputy Chairperson: We will have to wait for the answer.

908.

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.

909.

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.

910.

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.

911.

The Deputy Chairperson: Thank you. We will take up your invitations to visit the various places.

TOP

APPENDIX 3

ANNEXES TO THE MINUTES OF EVIDENCE

LIST OF PUBLISHED MEMORANDA

Malton Bacon Factory Ltd ANNEX A

Northern Ireland Agricultural Producers' Association (NIAPA) ANNEX B

Ulster Farmers' Union & Ulster Pork and Bacon Forum ANNEX C

Ulster Agricultural Organisation Society (UAOS) ANNEX D

Ulster Farmers' Union (UFU) ANNEX E

Northern Ireland Agricultural Producers' Association (NIAPA) ANNEX F

Department of Agriculture and Rural Development (DARD) ANNEX G

Ulster Curers' Association ANNEX H

ANNEX A

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

WRITTEN SUBMISSION BY:
MALTON BACON FACTORY LTD

Committee Inquiry in Debt - Pig Industry

At the time of the inquiry the "five pence premium" principally related to transport, slaughterhouse deductions and carcase grading. Haulage from farm to slaughterhouse is borne wholly by the pig producer in Britain but subsidised by the slaughterhouse in Ireland. The average haulage subsidy paid by Cookstown is just over [figure withheld]. I must stress this figure differs slightly group to group and I must insist this information remains confidential. The service of grading the leanness and weighing the carcase to determine payment to the producer is a free service in Cookstown whereas a deduction of 0.65/kg is made elsewhere in the Company. The remaining amount of less than two pence/kg reflects the lower net meat value arising from poorer carcase conformation.

I would also point out that the price gap has grown since July. This reflects:-

i. Greater down sizing in the British herd compared to the Irish herd. Northern Irish pig prices reflect the supply/demand equation of Ireland as opposed to the supply/demand situation in Britain.

ii. A move towards AAPP contracting in Britain compared to weekly spot pricing in Ireland.

iii. The impact of swine-fever Britain artificially supporting higher British pig prices.

We have advised the United Pig Producers Co-operative that due to the market changes and uncertainties that we will be delaying the introduction of new contracts for the moment.

For information we have spent a full day discussing the above with Mr B Gallagher (DARD-Farm Policy), Mr G McCracken (DARD-Food Policy) and Ms R Carson (IDB). If you have any further queries please do not hesitate to contact me.

ANNEX B

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

WRITTEN SUBMISSION BY:
NORTHERN IRELAND AGRICULTURAL PRODUCERS' ASSOCIATION

FUNDAMENTAL AND STRATEGIC ISSUES RELATING TO THE PIG AND BEEF INDUSTRIES

Co-operation and Organisation:

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.

A Beef Producer's Co-operative:

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 initiative.

Branding

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

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

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

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

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

Herd Quality

Herd quality has been deteriorating as a result of several factors.

The Holstein influence has been increasing due to the increasing level of extreme dairy-type genetics in the progeny of dairy herds away from the dual characteristics of the British Friesian type. This has had a subsequent effect upon the 3rd 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.

ANNEX C

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

WRITTEN SUBMISSION BY:
ULSTER FARMERS' UNION & ULSTER PORK and BACON FORUM

The Ulster Farmers' Union and the Ulster Pork and Bacon Forum welcomes the opportunity to provide evidence on the pig crisis in Northern Ireland to the Committee for Agriculture and Rural Development. In order to avoid unnecessary duplication, the Union and Forum have agreed the following joint response:

(1) FAIRNESS OF THE NORTHERN IRELAND PIG PRICE

We have long maintained that the price paid for Northern Ireland pigs is unacceptably low. There are several possible reasons for this:

(a) Unequal Distribution of Profits:

We feel that there has always been sufficient money within the producer-processor-retailer chain for all parties to make a reasonable profit. Unfortunately, this has not been happening and pig producers have been losing money for almost three years. The attached graph shows that local pig prices fell dramatically following the fire at the Lovell & Christmas processing plant in June 1998. At the height of the crisis, they were incurring losses of over £30 on every pig produced. However, the price paid by the consumer did not drop to a corresponding level. We therefore await with interest the outcome of the Competition Commission's inquiry into the "Supply of groceries from multiple stores".

A dissection exercise conducted by the Ulster Pork and Bacon Forum revealed that in November 1998, a local pig producer received an average net price of £42 for a top grade, 95kg live pig. The same pig sold for an average of £182 in retail outlets. This constitutes an enormous and wholly unacceptable mark-up of £140 per pig or 338%.

The Forum repeated the excerise on June 17 2000. The producer then received on average £61 for a similar pig, which would retail in the shops for around £187. This constitutes a mark-up of £126 or 207%. Whilst still unacceptably high, the fact that the mark-up is now significantly lower than in November 1998, appears to confirm that throughout the crisis, excessive profits were being accrued post farmgate at the expense of the producer.

(b) Differential between the Northern Ireland and GB Pig Price:

Prices paid to pig producers in Northern Ireland are historically lower than prices in the rest of the UK. For example, since January 2000, the GB (Average Eurospec Adjusted Price) has been on average 9p per kg deadweight higher than the NI price (as reported by DARD).

To-date, despite sustained lobbying, no satisfactory explanation has been provided for the differential. A significant proportion of Northern Ireland pigmeat is exported, mainly to GB. However, even if 100% were exported, we believe that the maximum cost of shipment and refrigeration would be 5p/kg. We welcome that fact that the Committee recently discussed this anomaly with Mr M Hilliard (Malton) and urges the Committee to pursue the issue until it is satisfactorily resolved.

(2) MAIN FACTORS CONTRIBUTING TO THE CURRENT PIG CRISIS

(a) Unilateral restrictions:

The UK Government has unilaterally imposed many restrictions, which place UK pig producers at a competitive disadvantage compared to their EU counterparts:

(i) Stall and tether ban: This was implemented in the UK on 1 January 1999 at a cost to UK pig farmers of around £220 million. The UK Government claim to be striving to secure an EU-wide agreement on welfare standards of pigs to mirror our own high standards. However, given that the rest of the EU is not scheduled to review the situation until 2005 when tethers will be banned but no reference has been made to stalls, this seems unlikely.

(ii) 'BSE Tax': Extra costs of around £5.26 per pig arising from BSE related controls put UK pig producers at a severe disadvantage. The pig industry, although never associated with BSE in any way, are the only agricultural commodity not to receive compensation for extra costs associated with its control. The UK Government claims that to offer compensation would contravene EU legislation on State Aids. We therefore await the outcome of the recent court case against the UK Government instigated by The British Pig Industry Support Group for discrimination against the UK pig industry.

The main priority of UK pig producers has always been the health and welfare of their animals. They were therefore willing to comply with all relevant legislation, despite significantly increased production costs. However, no safeguards were put in place to protect producers from cheap, inferior quality imports. In addition, producers have never received a price premium for their efforts. This situation is clearly untenable.

(b) The Strength of Sterling:

This has reduced competitiveness of the UK pig industry, thereby encouraging imports. This has been further exacerbated in Northern Ireland by the land border with a Euro zone.

(c) A General Oversupply of Pigs Throughout Europe:

There has been an oversupply of pigs throughout Europe over recent years. However, pig numbers in Northern Ireland have fallen steadily. Between June 1997 and December 1999, the Northern Ireland pig breeding herd decreased by 42% to 42,200 sows. The number of producers fell by 55% during the same period to 960. These figures are believed to significantly under estimate the seriousness of the current situation.

In comparison however, pig numbers in the rest of the EU are only now beginning to show signs of a decrease. In 1998, total EU pig numbers increased by 5.5%, thereby prolonging the oversupply situation. Some countries such as Spain increased by up to 14%. Pig numbers then fell by a mere 0.8% in 1999, with many countries continuing to increase. It is predicted that the EU gross domestic production of pigs will fall by 1% in 2000. In theory therefore, the market situation across Europe should continue to improve.

(d) The large farm gate/retail price gap

(e) Factors which are specific to Northern Ireland

Northern Ireland has been more seriously affected by the pig crisis than any other Member State or Great Britain for the following reasons.

(i) Northern Ireland entered the crisis earlier and to a much deeper extent due to the fire at the Lovell & Christmas processing plant in Ballymoney in June 1998 which destroyed 40% of the Provinces pig slaughter capacity. This created a glut of pigs, causing a total market collapse and a rapid and dramatic decrease in pig numbers.

(ii) Feed costs are £10 to £15 per tonne higher in Northern Ireland than in GB or the rest of Europe. This roughly equates to an extra £2.85 per pig.

(iii) The unacceptable GB/NI pig price differential

(3) STEPS TO ENSURE THE SURVIVAL OF THE NI PIG INDUSTRY

(a) Steps to be taken by Government:

(i) Provide compensation for BSE related charges.

(ii) Ensure that adequate slaughter capacity exists on the island of Ireland. This must be sufficient to allow the Northern Ireland pig herd to increase to a more sustainable level. We support the ongoing cross border 'Review of the pig industry in Ireland'.

(iii) Investigate and reduce the NI/GB price differential.

(iv) Facilitate whenever possible the ongoing investigation into supermarkets.

(v) Ensure that the aid package for the UK pig industry, announced on 30 March 2000, is implemented as soon as possible. It must be simple and flexible to maximise uptake. It must be ensured that Northern Ireland receives its fair percentage of the total money available, irrespective of the uptake via the outgoers component.

(vi) The RoI Government announced an aid package in February 2000, to compensate pig producers in the border counties of RoI for losses incurred as a result of the fire at the Lovell & Christmas plant. The package will provide aid of up to IR £12,000 per unit.

A similar scheme must be introduced for Northern Ireland producers who suffered lower prices as a direct result of the fire. For example, the GB pig price was on average 8.1p higher than the Northern Ireland price in the 6 months prior to the fire but this increased to 10.2p in the 6 months after the fire. The UK aid package discussed in (v) above is welcome but is designed to address UK wide problems and will therefore only have a minor impact on the Northern Ireland industry. The financial incentives within it are less than half of those provided through the RoI scheme, which was implemented for reasons, which also apply specifically to Northern Ireland.

(vii) Ensure clearer, more accurate labelling of pigmeat in retail outlets. Consumers must be able to easily identify local produce and make an informed purchasing choice.

(viii) Ensure that Government departments, hospitals, schools and the military all source local wherever possible.

(ix) Encourage better communication and co-operation between all sectors of the supply chain.

(b) Steps to be taken by retailers

(i) Ensure that a fair price is paid to processors.

(ii) Purchase and promote local produce wherever possible.

(iii) Improve communication and co-operation between all sectors of the supply chain.

(iv) Ensure that product of Northern Ireland is clearly identified and that the pig has been born and reared in the Province. Continually check the traceability of all pigmeat. A verbal or even written guarantee from their processor appears to be insufficient.

(c) Steps to be taken by processors

(i) Ensure that adequate slaughter capacity exists in Northern Ireland.

(ii) Ensure that all processors pay a fair price to producers.

(iii) Improve communication and co-operation between all sectors of the supply chain.

(iv) Ensure that product of Northern Ireland is clearly identified and that the pig has been born and reared in the Province, rather than merely slaughtered or processed here.

(v) Develop new markets for local pigmeat, especially for the less popular cuts.

(vi) Develop new value added products.

(d) Steps to be taken by primary producers

Local producers have already done everything in their power to comply with legislation, produce according to consumer and supermarket preferences and to supply market demand. However, further developments should include:

(i) Working together through producer groups to improve their market position, reduce costs through bulk buying and improve communication between all sectors of the industry.

(ii) Increase efficiency wherever possible.

(iii) Work closely with processors to supply quality pigmeat in line with consumer and market demand.

(iv) Continue to abide by quality assurances guidelines.

(v) Continue to improve the health status and genetics of their herd.

We hope that the Committee finds this information of use. We are not requesting unreasonable assistance for the local pig industry. We merely want a level playing field for local producers, to enable them to compete fairly with their European and world counterparts. This is far from being the case at present.

Pig prices have improved significantly over recent months with most producers approaching the break-even point. However, it must be emphasised that the crisis is not yet over. As a direct result of the last three years, local pig producers now owe £45 million to banks and grain companies. In addition, virtually no maintenance has been carried out on farms for at least two years. It will take several years of reasonable prices before producers can even begin to recoup their losses.

ANNEX D

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

WRITTEN SUBMISSION BY:
ULSTER AGRICULTURAL ORGANISATION SOCIETY (UAOS)

COMMITTEE INQUIRY - PIG INDUSTRY

Further to your letter of 10 August 2000 and my subsequent telephone conversation with Paul Moore I am responding to your queries.

While I am currently Secretary to United Pig Producers Ltd I will be leaving UAOS Ltd at the end of August to take up another post and will therefore no longer be able to act as Secretary or indeed mentor to the UPP Ltd. I very much regret the lack of progress, which I believe to be largely due to the attitude of the Malton Bacon Co and our local processors.

(a) Response

1&7 Please find enclosed the proposal, vision and business plan/strategy submitted to DARD which resulted in the award of £150,000 grant at 50% to establish and operate UPP Ltd including the appointment of staff and the recruitment of members neither of which has proceeded because no arrangement has been set up with Malton Bacon or our local processors.

2&3 Currently the Society has five members (details attached) who are the five founding directors and major players in the Northern Ireland pig industry.

In addition Mr Shields is also Chairman of Propork Ltd which has 32 members committed to joining UPP Ltd when operations begin. UPP Ltd is in no doubt that if agreement can be reached it could initially supply in excess of 2000 pigs per week increasing as per the strategy document.

4. It is the wish of UPP Ltd to have a firm contractual agreement with Malton and indeed other processors built on mutual trust and fair pricing to develop the pig industry in Northern Ireland to the benefit of producers, producers and consumer.

5. The response to this question is, I would stress, a personal viewpoint. I do not believe there is an opportunity to brand and market NI pork as basically all pork in Europe comes from the same large white/landrace pigs. I do, however, believe that there is a huge opportunity for processors to learn from the poultry industry in producing new and innovative products which are easily prepared and cooked.

6. The Co-operatives long-term viability is based on a 30p levy per pig deducted by the processor and paid to the Co-operative. This procedure has worked exceptionally well with the five lamb marketing co-operatives established by UAOS Ltd through the early nineties.

One of these, Strangford Down Ltd, of which I was also Secretary started with 24-30 members and now has over 160 from all parts of Co Down marketing 20,000+ top quality lambs to WD Meats. Some lamb is now being sold in Supervalu stores branded as Strangford Down.

(b) Additional Information

1. UAOS Ltd, at DARD's request became involved with the pig producer in March 1999. Since that time some 40 meetings have been held. In terms of staff time they have cost UAOS Ltd some £9,000 and considerable personal expenses to the five directors none of which is reimbursable from any sources.

SAOS LTD in Scotland receive some £300,000 of state funding for co-operative development and the NI Co-operative Development Agency receive £180,000 from LEDU for urban co-operative development and I believe Welsh Quality Beef & Lamb Ltd's development was funded by the Welsh Development Agency.

2. The last meeting with Mr Hilliard was held at UFU Headquarters on 26th June 2000 at which he verbally discussed contract details.

My final notes of that day refer to the 'next step'. Mr Hilliard committed himself to providing written details of the contract and suggested a meeting on a suitable date 'the week after next' ie w/c 10th July. Despite repeated phone calls to Malton during July I could never speak to Mr Hilliard and he never responded to my calls or those of the Chairman Trevor Shields.

3. Mr Hilliard has for some time claimed NI Pigs were inferior to those on the mainland.

Four of the directors, Dr Violet Beattie of the Agriculture Research Institute of NI, Ms Liz Donnelly, DARD, visited Malton on 4/5th April 2000.

On our visit to Malton Harris, Cheshire we were shown the factory lines packing bacon for Marks & Spencers and another supermarket. We were not shown the 'Cookstown' line but by acute observation by one of the party we saw the NI product and the quality was equal to the others. There were a few red faces.

Incidentally while Malton paid for our meals and hotel accommodation the directors met the cost of their travel.

I have copied your letter to all the directors so they are aware that they may be called on 8th September.

I will be in my new post at this stage and believe I will be in London on that day. If I can, in the meantime be of any further assistance please do not hesitate to contact me.

I sincerely believe that by now UPP Ltd should have completed one year's trading with Malton had that company shown greater flexibility.

I am sure the directors will also wish to comment on the 'no price differential' statements made by Malton.

DIRECTORS OF UNITED PIG PRODUCERS AND NUMBER OF SOWS

(Addresses and telephone numbers wee supplied to the Committee.)

1. Mr Trevor Shields (Chairman) No of Sows: 200

2. Mr Charles Pogue (Vice-Chairman) No of Sows: 140

3. Mr Cyril Millar No of Sows: 700

4. Mr Colum McGuikian No of Sows: 1200

5. Mr Edward Carson No of Sows: 180

8 August 1999
Mr G McCracken

Department of Agriculture for NI

Food Policy Division
Dundonald House
Upper Newtownards Road
BELFAST
BT4 3SB

RE: APPLICATION FOR FUNDING UNDER THE MARKETING AND DEVELOPMENT SCHEME

Please find enclosed additional information in support of United Pig Producers application for funding under the above scheme.

Our discussions with Michael Gould have proved most useful and his assistance has been greatly appreciated. I hope that this information will answer any outstanding issues or concerns that you may have about the proposal. We now look forward to a rapid and positive decision.

I look forward to hearing from you.

Ian Murray
Chief Executive
UAOS Ltd

Additional Information required by DANI

Contents

Page No

1.

Benefits to the Industry, the Co-operative and individuals

2.

Quality control measures, their implementation and monitoring

3.

Training

4.

Appointment of Outside Director

5.

Conclusion

 

Projected Marketing Budget

 

Graph 1 - Number of pigs supplied over a four-year period

 

Graph 2 - Comparison of pig meat quality over a four-year period

 

Appendix One - Financial Details

 

Appendix Two - Job Descriptions

[Note that only sections 1-5 are reproduced in this report, by agreement with Mr Shields, Chairman of UPP]

1. Benefits to the Industry, the Co-operative and individuals

UPP Ltd will be first and foremost marketing co-operative and as such it is the belief of the steering committee that all staff employed are, as per the MDS, 'key' marketing personnel.

It will bring the following benefits to the industry, which, because of the continuing crisis and uncertainty, cannot be financially quantified.

(i) The UPP group will develop co-ordination in the supply of pigs to slaughter plants, processors in response to the needs of retailers, added-value and niche outlets. Supplies will be of consistent quantity and quality as demanded by customers and consumers.

(ii) Improved standards of supplies will result from traceability systems, quality assurance, food safety procedures, high production and welfare standards. This will further the groups ability to secure premium market outlets.

(iii) This co-ordinated approach will allow the NI pig industry to exploit market potential in both new and existing markets with new products and promotion. Contracts can be secured and negotiated and competitive advantages realised for the improvement made in product quality and safety. Greater demand for products - existing or niche eg organic - can also be created.

Key to achieving these benefits to the industry in totality will be the appointment of suitably qualified marketing manager and Quality Control personnel. The manager will develop the whole concept of the improved supply chain while qualified control staff will ensure the product leaving farm fulfils the requirements to meet consumer demands.

The co-operative will benefit by:

(i) Producing a co-ordinated and increasing supply of quality product for the industry. This volume of quality will allow a degree of negotiations with processors and create the opportunity to seek new, innovative and possibly niche markets eg organic which would be beyond the resources of an individual.

(ii) With the appointment of a marketing manager and quality control staff the co-operative will introduce the concept of supply chain development discipline particularly in relation to the production of quality produce by members - members failing to meet aspects of quality assurance would, after adequate warning, be expelled to ensure standards do not lapse.

(iii) The management of transport and haulage facilities for co-operative members will reduce costs both financially and in regard to man-hours, (ie individuals will no longer have to travel to and from the factory, allowing them the opportunity to take on additional employment).

Case Study - Costs of arranging own haulage

(iv) The greater degree of effective communication between processor, producer and retailer should result in a more even distribution of money within the chain, (ie retailers are sure of what the consumer wants in terms of texture and taste, so by using different breeds and crosses of breeds the pig producer should then be able to supply what the market demands).

(v) Achieving greater stability in the market through forward pricing contracts and quantifying potential revenues from supplying premium market outlets.

(vi) The co-operative will offer a security particularly to the smaller producers by allowing them to access the best available market price. The united marketing aspect of the co-operative will mean that producers will be able to keep their options open and supply different markets, unlike the situation at Malton's Ballymoney plant where individuals were left with no alternative market outlet after the fire.

Individual members of the co-operative will benefit by:

(i) Having a professional marketing manager and quality control staff in place to fulfil the marketing and quality control functions which are not within the capacity of an individual in terms of both skills, knowledge and volume of co-ordinated supply, will add a new supply chain development perspective to an individual farm enterprise.

(ii) This co-ordinated approach to supply chain delivery will relieve individuals from booking procedures, haulage etc. This will permit the individual more time to concentrate on what he does best, ie produce high quality pigs in a welfare friendly system to meet the stringent quality requirements of today's consumer. This attention to detail will allow the individual to improve efficiency and quality supported by quality control staff to maximise his returns from the factory.

(iii) The appointment by the co-operative of a Quality Control expert offering technical knowledge and advice will allow pig producers to obtain greater efficiencies in production and therefore increase their margin of return (ie maximising the use of existing housing as well as finding the right feed ration for the best results).

(iv) As the co-operative develops and increases its membership, there will be the opportunity for the bulk purchase of inputs (ie meal, diesel etc) therefore reducing the costs of individual pig producers (ie the discounted purchase of meal at £10.00 a tonne would save £2.00/£2.50 per pig. This is based on 5 tonnes of meal per sow per annum with the sow producing 22 piglets per year.

2. Quality control measures, their implementation and monitoring

Central to any quality control measures will be 'supply chain' communications. The co-operative will be very dependent on retailers/processors providing information on quality requirements.

A practical example of this is the current suggestion that a fatter pig is more healthy, easier to grow, can be trimmed as a carcass, and cooks better. This is in contradiction to years of demanding a very lean pig with a probe (back fat etc) of less than 10 mm.

GRADING

Current grading standards are based on fat probes.
Top price paid on < 13 mm
2nd grade 14 - 15 mm
3rd grade > 16 mm

The current steering committee members would average in excess of 90% in the top grade and it is estimated that those producers who have declared an interest in membership would average 85% in grade 1.

Assuming these grade standards remain through the quality control staff, the co-operative would seek to achieve a 1% improvement per annum ie by year five the average in top grade would be 90% with some members achieving 93 - 94%.

We would reiterate, however, that as technology consumer demand, and new niche markets develop, these grades could become redundant. This confirms the importance of supply chain communication which will allow the Industry to adapt to these changes more rapidly.

The steering committee has welcomed Maltons commitment to regular dialogue with the co-operative and its members. This should lead to the kind of industry partnership that has been lacking.

QUALITY ASSURANCE

All members of the co-operative will have to meet the commitments required by an quality assurance scheme entered into on their behalf by the Society.

The use of antibiotics as a growth promoter will be prohibited and steps will be taken in the control and avoidance of drug residues in pig meat. The Quality Assurance Officer could also make real progress in ensuring all pigs produced by the group are managed at farm level to minimise food safety risks to consumers and to maintain welfare legislation.

In addition the Society intend to progress its member to Salmonella free status, ie level 1: < 10 - low prevalence.

Salmonella-free status is still in its infancy in Northern Ireland (ie there are currently only 12 herds in Northern Ireland that have attained this status). The procedure is for blood samples to be collected from a random-selected number of sows/finished pigs at quarterly intervals. A Hygiene Index is drawn up and herds are placed in one of 3 levels, eg:

Level 1: < 10-low sero-prevalence - acceptable.

Level 2: 10-50 - moderate sero-prevalence - action required, consult vet.

Level 3: > 50 - high sero-prevalence - urgent action required - consult vet.

The Co-operative would welcome the support of the Veterinary Services Division of DANI in determining the levels and occurrence of Salmonella in its members' herds and advice on 'best practice' to achieve level 1 status.

A similar programme in Denmark resulted in the following achievements over a 3 year period ending in 1998.

Danish Herds Level 1 96.3%

2 2.7%

3 1.0%

This estimated a reduction in the prevalence of Salmonella of 50% 22.4% 1994 11.4% 1998.

Having determined the levels on member herds, the Society would aspire to compare favourably with the Danes within 3 years of the initial survey.

This drive towards quality and salmonella free status will have costs with no promise of additional sales/revenue, but is a necessary strategy to meet likely future demands of customers and consumers. Investments now will place the group in a competitive position for the future (ie Danish and Swedish producers and producers in Britain & Republic of Ireland).

Potential members will have to show a commitment to these quality assurances and through its employees the co-operative will ensure that producers meet and maintain the required standards.

In relation to other quality aspects all members will have to be farm quality assured, ie British Quality Mark, and meet the various criteria of this scheme.

Processors involved, namely Malton Foods, have already shown their commitment to quality with the introduction of the 'Malton Code', but have also indicated their support for these numerous other proactive steps in regards to quality which the co-operative is proposing.

The management of Malton has indicated their willingness to meet on a regular basis to discuss innovative ways to improve the pig industry.

Achievement of and adherence to these quality parameters will be key to the Society's success. This emphasised the necessity of high calibre quality control staff to advise and monitor members' performance.

Failure to achieve or maintain these parameters would result in exclusion from membership.

It is vital that those in the supply chain realise these are standards that will be rigorously maintained to give the guarantees the consumer now demands.

The Society will continually review all aspects of quality and will react as rapidly as possible to changes demanded by the consumer.

The Society will also implement any quality measures it believes will give access to new markets and/or innovative products. This will be the responsibility of the Marketing Manager.

3. Training

Directors - duties and legal responsibilities;

- financial management to provide ability to understand all aspects of managing the co-operatives finances for which ultimate responsibility lies with the directors - £1,300;

- marketing - to be able to assess best practice and understand its role in seeking new markets, innovative production systems and product development, travel to food fairs etc - £2,000;

- co-operative development - to provide the necessary skills to develop 'best practice' so as to emulate or indeed improve upon performance of continental co-operatives - £1,200;

- 'brain storming' with facilitator to develop new thought processes for development - £1,000.

Year 1

Year 2

Year 3

Total

3,300

1,200

1,000

5,500

Staff - Training Needs Analysis to determine areas of skills to be developed - £1,000

- likely areas: Marketing Manager

- team management

- budgeting control

- business development

- marketing/negotiations - £3,000

- Quality Control Staff (2)

- technical training re quality control strategies, eg Salmonella free

- communication/presentation

- organisational skills - £3,000

4. Appointment of Outside Director

The Co-operative wishes to appoint a non-executive director to the board of UPP Ltd.

The person appointed will bring a broad knowledge of business management, development and especially marketing from outside the pig industry.

For a full outline of the duties and responsibilities see attached job description - annual fee £3,000.

5. Conclusion

If the co-operative operate as they should they, as farmers, will be in a better and stronger position to examine the issues which face the industry (medium/long term), propose their own solutions and then seek consensus with the processing sector implement solutions for the benefit of all.

ANNEX E

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

WRITTEN SUBMISSION BY:
ULSTER FARMERS' UNION

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:

Co-operation and Organisation

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.

BRANDING

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'.

HERD QUALITY

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.

PIG PRODUCERS LOSE JUDICIAL REVIEW CASE

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

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

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

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

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

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

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

Pig producers 'shattered' by outcome of judicial review case

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

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

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

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

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

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

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

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

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

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

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

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

ANNEX F

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

WRITTEN SUBMISSION BY:
NORTHERN IRELAND AGRICULTURAL PRODUCERS' ASSOCIATION

One of the main issues to be considered in relation to price differentials between producers and retailers is that producers cannot ensure that the price they receive for a commodity will cover production costs plus a guaranteed profit margin

It is interesting to note that a brief summary of returns prepared by LMC over a year ago showed as follows:

Grade

Producer

Supermarket

Butcher

R3

£460

£1,095

£1,267

P3

£337

£999

£1,145

The obvious point is that there is a vast difference in conformation of the two animals and the producer is being penalised for this. It should be noted however that in the case of the better quality animal the final supermarket and butchers prices were 238% and 275% respectively of the producer price. In the case of the poorer quality animal, there was an even greater differential, with the final prices being 296% and 339% respectively. Irrespective of the quality and price from a producer point of view the differential in money terms was the same. This takes us to the average producer prices for products, (DARD Statistical Review 1999).

The following table shows the drastic fall in prices for beef and pigs since 1995.

Figure 1. Average producer prices of agricultural products
 

Unit

1995

1996

1997

1998

1999
(provisional)

Finished steers & young bulls

Head

718

615

509

418

429

Finished steers, heifers & young bulls

Kg dwt

2.22

1.86

1.61

1.37

1.46

Calves slaughtered or exported

Head

154

89

69

62

46

Culled cows and bulls

Head

518

442

331

247

238

Culled cows and bulls

Kg dwt

1.77

1.62

1.34

1.10

1.07

Store cattle exported

Head

528

456

417

327

336

Finished clean pigs

Head

78.92

95.27

73.75

50.52

49.70

Finished clean pigs

Kg dwt

1.11

1.31

1.03

0.71

0.69

Culled sows & boars

Head

119

130

100

49

50

In the case of beef it is obvious that there has been a dramatic decline in price. In fact almost £300 per head or approximately 40%. This includes additional costs of over £30 associated with BSE. It is therefore quite difficult for a member of a farm family to comprehend the price of beef in the high street shop.

The fact is that there has been no significant reduction in retail price. In fact there would have been a gradual increase.

A combination of these factors has led disillusionment within the primary link in the food chain. There has been little significant reduction in input costs and farmers seem to have no control over a marketing strategy in relation to beef.

With regard to the pig industry, and whether the returns to the producers are fair, one only has to look at the production cost of 85p/kg and the average return/kg to producers for the past few years Fig.1. While there remained a small profit margin in 1997 the industry has been decimated in 1998/99. In fact losses per pig have been estimated at £12-15/pig produced.

In addition the industry has been subjected to additional costs in dealing with offal disposal and compliance with health and welfare legislation. There is no question with regard to the fairness of having to take less than production costs for a commodity nor is there any doubt of the fairness of not having a level playing field with regard to legislation particularly in relation to our competitors in the market place.

We have already lost a major part of our pig production and we cannot afford to let this continue. As with beef, the consumer is not benefiting from lower producer prices. In many cases, it is imported produce which is being given preference in our shops. Factors contributing to the crisis in the pig industry have been.

The fact that the pig industry is specialised with substantial capital investment in production systems with not alternative use has meant that producers were locked in. In addition the amount of individual debt accrued has meant that farmers have been trying to produce their way out of difficulties. The inevitable result has been bankruptcies.

Within the beef industry the loss of export markets due to the well documented BSE crisis and the strength of sterling have contributed to the present crisis. We also have additional burdens in both sectors with the cost of inputs due to our location.

Government has to devise both a long and short-term strategy for the industry. (It is interesting to note the term deadweight in some of the discussion in relation to early retirement etc.).

One only has to look around the countryside to see the state of dilapidation and disrepair emerging in many farmyards. We talk of protecting and enhancing our environment yet we ignore the fact that producers have no capital to maintain the infrastructure of the main business. It has often been stated that there will be no need for a long-term strategy if we cannot survive short time. Unfortunately short-term measures require capital. The funding allocated in the "Blair Package" is anything but adventurous and must be viewed sceptically in relation to 1999 incomes, longer term, the vision group which has been set up would seem to have major role in strategy development.

Market share has been bought in UK since the onset of BSE and while much work has been done to procure this, it is felt that it has been at the producer's expense. We still feel strongly that there could be more of a return to the producer at current retail prices.

More promotional use of NI produce by retailers would also assist. With regard to all produce clear labeling is necessary to show country of origin etc. Questions have been asked regarding the production conditions and quality of imports in comparison with our commodities and it is incumbent on government to ensure that the consumer is protected from inferior produce.

The primary producer is already using the highest possible standards and incurring the associated additional costs. Differential in price for quality has been shown to be necessary so it is necessary to strive to produce the best possible quality stock. Input costs have been trimmed and there is little scope for movement here. Producer groups, co-ops and buying groups are all possibilities.

A co-ordinated food chain with all parties having equal responsibility and guaranteeing a decent return for each component part is perhaps over ambitious but all links are interdependent and each should realise this.

ANNEX G

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

WRITTEN SUBMISSION BY:
DEPARTMENT of AGRICULTURE & RURAL DEVELOPMENT

The Assistant Clerk to the Committee for Agriculture and Rural Development wrote to my Department on 11 August 2000 asking for our views on a number of questions relating to the above Inquiry. It was suggested also that I should meet with the Committee on 22 September 2000 and that, in the meantime, my Department should provide a memorandum setting out its view on the subjects raised.

Turning now to the issue raised in the Clerk's earlier letter, my reaction is set out in the following paragraphs. The Committee appears to be suggesting that processors and retailers are capitalising unfairly on Northern Ireland producers' lack of organisation and that DARD, because of its heavy involvement with the farming sector, has a responsibility to organise producers in order to restore the balance.

I must say that I would be extremely reluctant to have Government interfere in the free market which exists between producers, processors and retailers. Previous experience with the various marketing boards has taught that Government involvement is seldom in anyone's long-term interests. There is, of course, no reason why producers should not themselves come together to strengthen their position vis-à-vis processors etc if they see benefits in doing so. My Department has had very few indications that producers do, in fact, see the need for more co-operatives and none at all that the industry wants a single one as is now suggested. There are agencies already in existence by whom such efforts could be facilitated and my Department would of course provide whatever help was within our power. To go further than that and involve Government in sponsoring or funding marketing organisations of the type apparently envisaged by the Committee would be to act in breach of EU law which specifically prohibits such involvement by Government.

I do have to say that there are other risks associated with producers organising themselves so as to improve their bargaining position with processors and retailers. Such efforts will only be fully effective if those organisations have no other sources of supply. The reality, of course, is that many of the major processors and retailers are players on the global stage and will source their producers wherever makes most business sense to them. Indeed, the willingness of processors and retailers to do just that by obtaining products outside Northern Ireland has been one of the main bones of contention I have heard expressed by producers' representatives since I took up post. What we all need to do is to see that local producers supply products which are of the quality demanded by processors etc at a competitive price, and my Department is concentrating on doing that.

The Committee's questions really revolve around the issue of fair returns to producers. They will be aware of the group of experts I have set up and charged with delivering a vision for agriculture in Northern Ireland. That Group is looking among other things, at new ways of doing business in the agriculture sector, the influence of the multiples and competitiveness and marketing throughout the food chain. The general issue of fair returns for all parts of the chain is one of the key principles being looked at by the Group.

For my part, I am very concerned to see returns to all sections of the industry - including pigs and beef - improving. There are steps which I can take to help such as trying to re-open beef and cattle exports as I am currently doing, but there are limits to what Government can or should do in this area. At the end of the day, we ignore or try to distort market forces at our peril. Moreover, I doubt the value of hypothetical speculation on what might be good for producers.

To be fully effective any new producer co-operative would need to be involved not just in selling primary produce but in processing and marketing as well. This would require massive investment for which Government would have no resources and would in any event only add to the existing over-capacity in processing in almost all sectors. Furthermore it would not necessarily lead to an increase in producer prices as pig, cattle and dairy prices south of the border adequately demonstrate.

You will recognise from the above that I have very real reservations about the value of pursuing the course which the Committee is considering. Leaving aside the point of principle, the work which you have asked the Department to undertake would have enormous resource requirements. To produce the type of analysis the Committee's request would require would tie up various sections of this Department, DETI and IDB for months. I could only staff this work by diverting people from other more necessary work. I would be very reluctant to do that.

Beef Herd Quality

The Committee also asked a number of questions about the Department's role in relation to the promotion of beef herd quality. The Department accepts that beef quality measured in terms of carcase classification has declined in the last 4/5 years. This is a matter of concern given the implications for producer returns, the marketing of Northern Ireland beef and the importance of this sector to the industry.

The Department, in consultation with the industry, has commenced work to develop a strategy for improving beef carcase quality. This exercise will now come within the scope of the Vision Group. In the interim, the Department in conjunction with AI Services and LMC has launched a Livestock Breeding Initiative which is aimed primarily at improving quality through the selection and use of genetically superior breeding stock.

I am sorry that I cannot be more positive towards the Committee's suggestions on producer co-operation but I trust that you will appreciate the reasons why that is so. I hope also that the Committee recognises the value of what we are doing on beef carcase quality. I stand ready to assist the Committee with any further work it wishes to conduct into this important topic.

ANNEX H

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

WRITTEN SUBMISSION BY:
ULSTER CURERS' ASSOCIATION

Pig processors are very concerned at the continuing depression in the pig meat industry. All companies have made substantial trading loses in the last 2 years, mostly caused by the value of sterling against Euro. We cannot get a reasonable price for our product because of low cost imports from Irish Republic, Denmark and Holland.

If we put our selling price up 1-2p/lb we lose the business to someone selling imported product.

Many of our costs have increased over the past 2-3 years.

1. BSE cost:-

Since the BSE crisis, we have gone from a positive position as regards payment for disposal to a negative one. It cost over £300,000 to dispose of our waste material in the past 12 months.

2. Packaging materials:-

Packaging material prices have all risen because of the cartel of world-wide packaging material manufacturers. We get notices of increases from several suppliers all within a few weeks of each other. Another additional cost is the Waste Package Material Levy. This is paid to the Government and Heritage Agency.

3. Oil Prices:-

Oil has risen by 150% over 15 months. A load of gas oil of 30,000 litres delivered last year cost £2700, the same load delivered 2 weeks ago cost £72000 = 40p per pig. Transport costs have also risen because of higher oil and wages costs.

4. Wages:-

Employee wages up 6% over two years.

5. Meat Inspection Charges:-

We have been advised of higher Meat Inspection charges by the Food Standards Agency who are taking over control of meat inspection from DARD. The UCA is concerned at the possibility that these proposals will cause increased costs and bureaucracy. It is also concerned about actual costs being proposed for smaller companies.

6. Climate Change Levy:-

Increased energy cost because of Climate Change Levy next April.

Steps to ensure survival of Industry

1. A level playing field especially regarding implementation of Rules and Regulations should be EC wide i.e., stall and tether regulations, higher hygiene regulation in NI and UK including HAS.

2. Currency situation need to be addressed nation-wide by government.

3. Help with BSE related costs.

4. Continue to try to develop new products that would help processor to pay a higher pig price.

5. Develop new markets for products depending on value of sterling

6. Try to persuade government to address problem of supermarket monopoly situation.

7. Improve communication between producer and processor i.e. quality of pigs, disease control to reduce high level of condemnation.

N Ireland Price

When considering any differences between N Ireland and English prices, it must be understood that deductions are much higher in GB than in NI. Also lower prices are paid for heavier, lighter and fatter pigs. Malton are importing 50% of their pork from Denmark and Holland because it is cheaper than home produced, this gives them an advantage and allows them to pay a higher price for English pigs i.e., imports subsidise the English pig prices.

There is much comment in the press regarding Malton prices and Malton hope that it will knock out some of the competition. It is rumoured that Grampian Meats Scotland's largest meat processor has Bank Borrowings of £120M.

Malton has just announced a profit warning. Unigate are doing their best to dispose of Malton.

In comparison with the Irish Republic, NI processors are paying the third highest price in EC. It is little wonder that processors are losing money.

TOP

LIST OF UNPUBLISHED MEMORANDA

MEMORANDA WERE RECEIVED FROM THE FOLLOWING ORGANISATIONS PRIOR TO THE REVIEW OF THE INQUIRY'S TERMS OF REFERENCE

THE MEMORANDA HAVE BEEN LODGED IN THE ASSEMBLY'S LIBRARY

Northern Ireland Fish Producers' Organisation Ltd (NIFPO) 5 January 2000

Farmers Action 7 January 2000

Fermanagh Citizens Advice Bureau 12 January 2000

Northern Ireland Dairy Association (NIDA) 13 January 2000

Moy Park Ltd 15 January 2000

Northern Ireland Bankers' Association (NIBA) 16 January 2000

Department of Agriculture & Rural Development (DARD) 19 January 2000

Agri Plan Finance - NIIB Group Ltd. 19 January 2000

Agricredit Ltd. 19 January 2000

Anglo-North Irish Fish Producers Organisation Ltd (ANIFPO) 19 January 2000

Northern Ireland Scallop Fisherman's Association (NISFA) 21 January 2000

Northern Ireland Aquaculture Council 21 January 2000

HSBC Equipment Finance (UK) Ltd 25 January 2000

Northern Ireland Bankers' Association (NIBA) 4 February 2000

Moy Park Ltd 9 February 2000

National Sheep Association (NSA) 29 February 2000