Mr. Tim Cullinan:

Absolutely. I thank the committee for inviting the IFA to address it on the issues facing the pig sector. The Irish pig sector is in the midst of a crisis the likes of which it has never experienced before. As losses mount, which Teagasc estimates will be as much as €160 million, many pig farmers are facing an uncertain future. Without State intervention and support, many farmers will exit the sector, leading to job losses and a substantial impact on the rural economies that these farmers heavily support.

The challenges that the pig sector is experiencing are numerous but centre around a massive increase in the overall cost of production, along with a decline in farm gate pig price. Feed and energy bills are overwhelming for farm families that are trying to run their businesses. A combination of factors, all of which are outside the control of pig farmers, have resulted in all pig farmers incurring heavy losses.

I will list some of the factors that have caused the current crisis. Brexit has had a significant negative impact on pig prices. Since the start of 2021, the volume and value of pig output exported to the UK has fallen by 50%. This output was sold onto other markets that were of lower value and incurred had higher transport costs to access. The Covid-19 outbreak caused substantial market disruption, leading to downward price pressure. Processing capacity, in particular in Northern Ireland, was curtailed, leading to a backlog of pigs on Irish pig units, which continues to be the case today. The African swine fever, ASF, also had a negative impact on the pig market. Thankfully, Ireland has avoided direct contact with ASF, but the outbreak in mainland Europe has led to a collapse in European prices and has had a direct impact on Irish prices. In addition, the increase in feed prices since mid-2021 has aggravated the crisis. This has been made all the more serious by the recent geopolitical events in Ukraine. The pig sector is one of the most exposed to feed price increases, as it constitutes the majority of the cost base of a pig farm.

Farmers are being squeezed from all sides and are also facing the added actions of retailers in the domestic market, which are relentlessly pushing down the retail price of their products and embarking on unsustainable discounting to encourage store footfall. The pig sector, while generating significant export value of close to €1 billion annually, is reliant on the home market, predominantly the retail trade, for 50% of all sales.

Our pig industry is one of the most significant sectors of Ireland's agricultural economy, ranking third in size after the dairy and beef sectors. The sector supports more than 8,000 jobs domestically, generating €1.7 billion in output when the primary and value added sectors are accounted for. Based on the most recent national pig census, there are 1.7 million pigs in Ireland, predominantly on fully integrated pig units. The sector has undergone significant consolidation in recent years, with Bord Bia estimating that there are 270 farmers participating in its quality assurance scheme.

The pig sector, unlike the other large livestock sectors, is based on a constant year-round production model. It is a major consumer of Irish-produced compound feed and is a significant contributor to the rural economy, particularly in the four largest pig producing counties of Cavan, Cork, Tipperary and Waterford. It is also one of the few sectors within Irish agriculture that does not receive any direct funding from the Common Agricultural Policy, CAP.

Teagasc estimates that pig farmers are losing an average of €56,000 per month and rising, and that 7% of pig farmers have already been forced into a decision to exit, with a further 20% to 30% at serious risk of failure due to the unprecedented and rapid escalation of feed costs since the Russian invasion of Ukraine. Producers have already incurred exceptional losses and it is expected that, in total, these will exceed €160 million from late 2021 to early 2023.

To prevent the demise of the sector, the IFA, MII and the Irish Grain and Feed Association, IGFA, are jointly proposing the immediate establishment of a pig stability fund. I will outline the key aspects of the proposal, the first of which is to establish, without delay, a State-administered fund to provide an immediate cash injection to pig farmers to avoid the demise of the sector at primary and processing level. This fund would be jointly funded by a State contribution along with a long-term fund sourced by way of a new statutory levy. We should introduce a statutory levy of 90 cent per pig - equivalent to 1 cent per kilogram - on all pigs slaughtered in the Republic of Ireland or exported to Northern Ireland. Based on the 2021 output of 4 million pigs per annum, this would generate a revenue stream of €3.6 million per annum. Over a 14-year payback period, this would constitute a direct farmer contribution of €50 million. The State should commit to fund the farmer contribution of €50 million initially, along with an additional upfront fund from the State of €50 million. The former would be repaid by the revenue from the newly established statutory levy. The levy would be compulsory on all farmers producing finished pigs in the sector. While we acknowledge that this fund would require sizeable State support, the importance and economic value of the sector merits this intervention because, without it, the sector's long-term future and its contribution to the economy are in jeopardy.

Volatility is a constant challenge for pig farmers across the world. The hog cycle, first coined by US economists in the 1920s, outlined the challenges that volatility presented to pig farmers in particular. Due to a shorter production cycle compared with beef, price volatility, while evident in all sectors, tends to be more pronounced in pig farming. However, the current pig crisis is unprecedented in the scale of losses. Teagasc estimates that the industry will incur losses of €160 million at farm level over the 18-month period from September 2021 to March 2023 and that an average 600-sow pig unit will incur losses of €663,000 during this period. This is unsustainable, and without significant State intervention, the sector faces possible collapse.

Since Harvest 2020, cereal prices have more than doubled. Wheat has risen from €185 per tonne to in excess of €430 per tonne, an increase of 132%. Similarly, maize has risen from €175 per tonne to €390 per tonne, an increase of 122%. Initial increases were based on lower world closing stocks and increases in freight prices, but more recently the war in Ukraine has caused significant additional price hikes. Teagasc estimates that feed credit per average pig farm for quarter 1 of 2022 will amount to €497,000. For quarter 2, this is estimated to increase to €594,000. In 2020, this figure averaged at €388,875 for the average-sized pig farm. Therefore, feed credit has increased by 52% over the past two years.

To date, State intervention has amounted to a €7 million support package for the sector.

While welcome, this is in no way sufficient to address the €160 million losses that the sector has identified.

The pig sector is one of the most important sectors in the Irish agricultural economy, supporting 8,000 jobs and making a substantial contribution to the rural Irish economy. The challenge facing the Irish pig sector is unprecedented in scale with Teagasc estimating that 30% of Irish pig farmers are at risk of closure. Closures of anywhere close to this level will have major implications for the sector, both at primary and processing levels. In addition, destocking at this scale could prove difficult to manage from a logistical perspective because it cannot be implemented in a rapid manner. Teagasc estimates that farms with a total of 10,135 sows are now in the process of destocking. The estimated economic impact of this is that: 69 people will lose direct employment; 550 people will lose indirect employment; and 619 people will totally lose their employment. There will be an annual loss of payroll to the tune of €22.3 million. The loss of weekly pig throughput will be more than 5,000 pigs and there will be an export loss of €67 million. The proposed stability fund sets out to address both the short-term and long-term challenges the sector faces. The fund will be part-financed by a substantial contribution from pig farmers and offers a volatility management mechanism to support the long-term sustainability of the sector. Most importantly, this intervention is needed to secure the survival of the sector; without it Irish pig farmers face an uncertain future.

As I said at the start and as the Chairman mentioned, there is speculation this morning that a proposal is coming from the Minister that is nothing near the proposal we put on the table to the Government. I want to state clearly again in these Houses that the pig farmers of Ireland are concerned and want to work with the industry to put €50 million of their money on the table to ensure the viability of the sector going forward, albeit I appreciate that funding has to be provided upfront by the Government. A clear commitment with a statutory levy to pay that back is being proposed. We are hearing speculation that a direct fund of €13 million is being proposed for pig farmers. I welcome the funding and I acknowledge in my statement the €7 million that was put forward by the Minister recently, even though €5 million of that will be paid to farmers and there €2 million will be left. What is more worrying for me is the speculation that there is a proposal that for a farmer to be able to access the €13 million or €70,000 per farmer, he or she would have to reduce stock on his or her farm by 10%. This is totally unsustainable, particularly because a farmer might have a chance of surviving by maintaining the stock he or she has. We are at a point where the market is starting to improve. If a farmer made that decision today, those pigs would not be available on the market for another ten months. That is the point at which we believe the market will have stabilised and when there will be a margin in the system for farmers again. We have seen schemes in the past such as the beef exceptional aid measure, BEAM, scheme in 2018 and 2019, which ended up as a mess that the Department is still dealing with. The last thing I want to see happening in the pig sector is something similar to that scheme. It is totally unjustified and I want to clearly put it on record that we will not support any reduction in the sector.