COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT

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?

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