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

The Deputy Chairperson: But the farmer is automatically paying for it, one way or the other.

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.

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?

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.

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.

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.

The Deputy Chairperson: Those costs are there, and the farmer has to stump up the money at the end of the day.

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?

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.

As the Minister knows, we have been under pressure over the years from other quarters, such as the Treasury, to increase those rates.

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.

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.

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.

Ms Rodgers: It is a matter for member states. It is on MAFF’s agenda, as Nick Brown has indicated.

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?

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.

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.

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.

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.

The Deputy Chairperson: Thank you. We will take up your invitations to visit the various places.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE 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. 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.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE PIG INDUSTRY

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:

We have long maintained that the price paid for Northern Ireland pigs is unacceptably low. There are several possible reasons for this:

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.

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.

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.

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.

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.

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.

(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’.

(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.

(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.

(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.

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.

(iii) Work closely with processors to supply quality pigmeat in line with consumer and market demand.

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.

COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
THE PARTICULAR CIRCUMSTANCES FACED BY THE 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.

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.

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 8^th 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.

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.

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]

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.

(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).

A pig producer with an average of 40 pigs a week.
To transport them to the factory the producer has, on average, a round trip of 80 miles.
Pigs are booked in for 10.00 am.
Producer leaves home at 8.30 am for the 1½ hour journey.
Spends 1 hour in the factory and then has a 1½ hour journey home.
8.30 am – 12.30 pm (4 hours out of the working day have been lost).
Using a vehicle at 20 miles to the gallon.
1 gallon would cost £3.18 to purchase (4 gallons x £3.18 = £12.72).
Also allowing for £0.50 a mile for wear and tear, (vehicle and trailer) over 80 miles would cost £40.00.
If the producer was able to take a full-time job, averaging a 40 hour week at £8 an hour, they would have the potential to earn £16,000 a year.
However, if the producer had to arrange their own haulage, they may not be able to take up the employment position.
Therefore they would be losing out on £8 x 4 = £32.
Total cost of arranging one’s own haulage is then £84.72.
The pig producers’ form of transport only carried 20 finished pigs at a time, which will entail another trip, therefore doubling the costs to £169.44.
However, the co-operative members will have their pigs collected either on-farm or at a designated lairage at a cost of £1.50 per pig. The transportation of 40 pigs would cost the producer £60.00 – saving of £109.44 or £2.73 per pig.

(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.

(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.

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.

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.

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 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.

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.

- 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

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.

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.