Mr. Joe Healy:

I thank the Vice Chairman and members for inviting the Irish Farmers Association, IFA, to address them today. As stated by the Vice Chairman, I am joined by the chairman of IFA's farm forestry committee, Mr. Pat Collins, and Mr. Nicholas Sweetman, our Wexford representative on the IFA farm forestry committee, as well as by Mr. Damian McDonald, director general of the IFA. Before discussing the Coillte farm partnerships, it would be useful to give a brief overview of farmers' involvement in the forest sector.

Farmers began planting their land in the mid-1980s. Following the introduction of improved grants and premiums in the early 1990s, farmers became the driving force of the afforestation programme, surpassing the public afforestation programme. Today, they continue to be the dominant player in the programme.

It is estimated that 18,000 farmers have planted land and manage in excess of 170,000 ha. The age profile of farmers who plant tends to be older as forestry is less labour intensive than other agricultural commodities. Forestry is a long-term crop, with rotations of over 30 years for fast growing conifers and up to 100 years for slower growing broadleaf species. Many farm forests have only recently reached the stage where further management is required. However, timber production is expected to increase rapidly in the coming years as these forests reach maturity. Timber production is forecast to grow from 3.1 million cu. m in 2015 to 7.9 million cu. m by 2035, with almost all the increased volume expected to come from farm forests.

Forestry is a relatively new crop for farmers and as a result they have limited knowledge about the crop. Many lack an understanding of the management requirements of their forests as to when it should be thinned, the volumes that need to be harvested, the product types and the value and market for the products.

When Coillte introduced its first farm partnership scheme in 1992, many farmers were attracted to the scheme, as Coillte was viewed as a safe pair of hands to manage their forest. Coillte, as well as being a State-owned company, is Ireland’s largest and most experienced forest company. Coillte has the management and marketing experience, as well as economies of scale, to maximise the value of the timber crop.

Many of the features of the schemes appealed to farmers. Coillte was viewed as an extension of the State and, therefore, a trusted partner. Coillte took full responsibility for the management of the crop, including thinning, pruning, building of roads where necessary, maintenance, harvesting and sale of the crop. There was continuity in income after the expiry of the 20 year forest premium and farmers retained ownership of the land.

A total of 630 farmers entered into partnerships with Coillte from 1993 to 2012 to manage in excess of 12,000 ha of forests. There are seven different farm partnership schemes in operation. However, modifications to the agreements were negotiated by individual farmers and, therefore, agreements vary from farmer to farmer.

As stated to previously, forestry is a relatively new crop for farmers. Many of them entered into the farm partnership agreements without a full understanding of the future value of the crop and the methodologies used by Coillte to determine the annuity payments. The information provided to farmers was unacceptably vague in relation to how payments were calculated, timber valuations, management and marketing costs as well as insurance cover. Even when farmers received legal advice on the contract, there was limited expertise on forestry, particularly in the early years of the partnerships.

Many of the issues today are a direct result of the vacuum of information provided to partners. This has led to concerns that the contracts are one-sided in favour of Coillte and that farmers are not getting their fair share of the thinning and clearfell profits.

It was a condition of all schemes that annual meetings would take place with partners. Unfortunately, it is my understanding that in many instances they did not take place. Even when meetings occurred, limited information was provided to partners on the condition of the crop, how the crop was progressing or when operations were planned to ensure effective management of the crop. The lack of meaningful communication with partners on the management of their forest has led to concerns that the forests are being mismanaged, resulting in a decrease in forecasted revenue. Of particular concern is the lack of communication with farmers whose forests have entered into active management.

In some instances, farmers were not contacted in advance of harvesting operations. When harvesting operations were completed, they were not provided with documentation on the volumes of timber harvested or timber sales invoices. Farmers were provided with no analysis on the progress of the crop following thinning to compare forecasted thinning profits with actual thinning profits, or the implication of higher than predicted growth rates on rotation lengths and annuity payments. Farmers understood that the contract was for 40 years. However, in most cases, due to higher than predicted growth rates, the rotation length is being shortened by Coillte. This is causing concern as many farmers made plans based on receiving an annuity payment for 40 years and clarity needs to be provided on this.

The IFA met with Coillte recently to voice concerns on behalf of farmers regarding the lack of transparency on how annuity payments and profit share are calculated, as well as the distress being caused as a result of poor communication. It was a constructive meeting where it was agreed that Coillte and the IFA would work to try to address farmers concerns by developing principles and guidelines for engaging with partners to strengthen communication and to rebuild trust between partners.

Coillte has a duty of care as the dominant partner with the experience and knowledge of the sector to ensure that partners have a clear understanding of the agreement, particularly the timber revenue models and the distribution of the profits. We are very much at the early stages of developing these principles, but I look forward to working with Coillte to improve communication and transparency with partners.