Mr. Cormac Healy:

I will try to go through all the questions. First, Deputy Heydon made some comments about the interaction between farm gate price movements and the retail price and asked me whether I felt, from an industry perspective, that farm gate prices had to fall further because of the aforementioned disconnect. I showed the trend on both price lines in the context that we are in a difficult climate. There are difficult economic situations, austerity measures, etc., within many of the marketplaces in Europe into which we are selling and consequently, there is pressure on price. It is not that market prices can increase indefinitely, as one must bear in mind the external factors. In response to the Deputy's question, I do not believe that farm gate price must come back but it is a factor that market price cannot continue to increase without taking account of marketplace realities. Apart from the economic downturn, the other major pressure one meets going into the marketplace - this has been discussed at length previously - is retail power. One of our strong points, in terms of future sustainability for our current market reach, is that we are servicing the retail sector, that is, to consumers and the top retailers. Nevertheless, as this joint committee has heard, there are challenges in dealing with retailers and in trying to press through price increases that are needed.

In touching on some of Senator O'Neill's points, I do not for one moment discount or ignore the fact that input costs have increased. Equally, my brief at this meeting is to outline what has happened in the beef processing sector over the years. It is very easy to throw mud at something but it is important to note - as I tried to encapsulate in some of the slides - there has been a significant transformation in the sector over the past decade. It has moved from a lower-priced commodity frozen base to one of which we now should be proud, involving top-quality fresh Irish beef going to European consumers. Moreover, this is a sustainable transformation because that market exists and in the context of so doing, although one does not often hear about it, there has been significant price movement. While I accept that input costs have also unquestionably increased for producers, in response I note we also must focus on on-farm productivity and technical efficiency. There are areas in this regard where progress can be made. Several of the larger processors in the industry have been involved in a scheme with Teagasc and the Irish Farmers' Journal, namely, the Better Beef Farms programme. These farms have shown the kind of improved gross margin that can be achieved by a focus on usage, on maximising the usage of grass, by increasing output and keeping a handle on cost. It is also in our interest that farmers make such progress and improve the bottom line.

A point was made about the target and whether the 40% was achievable. One point I wish to clarify is the target is in respect of growth in value output and not purely in terms of volume growth. It does not suggest a 40% growth in volume. Mr. Michael Barry can come in on this but the dairy sector is contemplating a volume increase of 50%, while the beef sector targets pertains to a value of output increase. Consequently, it is a combination of price increase, the value of our actual product, as well as the premiumisation of Irish beef sales, in addition to some increase in volume. This leads me to Senator O'Neill's observations on the 100,000 dairy male calves. There will be that number, if not more. I believe Mr. Michael Barry referred to approximately 200,000 extra cows and there probably will be that increase in any event. Processors are already working with Teagasc and farmer groups to study different production systems to identify what will best fit an increased volume of black-and-white animals in the country and what will best get those to market. The aim is to identify at what age and what will work for us in terms of a sustainable production system in the future with a view to retaining those animals in Ireland, to processing them here and to providing the jobs required to process them.

Mr. Michael Barry can intervene in this regard but not every farmer in Ireland will be milking cows after 2015 and not every acre of land in Ireland will be suitable for dairying. The Senator made the point that every piece of land that comes up will go the dairy route. However, there are logistical issues in this regard in respect of fragmentation of land and land parcels. The dairy man will want the land next door, as opposed to several miles down the road. In that context, we are confident there is and will continue to be a significant beef sector in Ireland. Moreover, we believe there can be significant suckler cow numbers. There will be a challenge and we must see how this all plays out. There will be an increase in dairy cow numbers but equally, we believe this does not need to be at the expense of suckler beef output.

I again refer to some of the progress regarding efficiency that can be made on farms. If I may take up another point, the Irish finished cattle beef price is not the lowest or indeed one of the lowest in Europe, it is one of the highest. For much of this year, the Irish finished cattle beef price was running in excess of 100% and up to 107% or 108% of the European average beef price.

That is European Commission data, which is on the record. That is important to point out. It is important to highlight that Irish beef prices have moved on to a new platform, driven by opportunity and demand in the marketplace, the positioning of Irish beef and the work which has been done over the past decade in positioning Irish beef in Europe.

There was a question on why EU beef production is falling. As one moves to southern Europe, one sees it is not a grass based but a feed and a feedlot based system, so they have felt price pressures in their system. The actual change in CAP structures and decoupling in many member states has driven an exodus from the beef sector. Another factor, which will always be at play, is that in Europe, two thirds of the beef produced comes from the dairy herd. It is not like in Ireland where we have a 50-50 split at the moment between dairy cows and suckler beef cows. In Europe, 66% of overall beef production comes from the dairy herd. One will have seen a continual decline in dairy cow numbers with the improvement in productivity, etc., over the years. That always has an in-built impact on the dairy herd.

I did not mention imports. We have addressed them before, so one is right to ask what has happened but I am not sure whether that is from an Irish or an EU perspective. In Ireland, there is not a major beef import issue. As I said, of the beef we produce, we export 90% of it. Beef imports into the European Union have declined in recent years and that has been a factor in the price movement. The price movement in Ireland would not have been possible without movement in other parts of Europe as well. Imports of beef into Europe from South America, in particular, have dropped considerably over the past two to three years partly because of veterinary and disease restrictions but equally because of tightening in supply from supply states in South America. At this point in time, it is less of a factor in the trade.