Mr. Philip Carroll:

We can probably address all the issues the Chairman mentioned during the course of the exchanges we will have this afternoon. First, I thank the committee for inviting us to the meeting. We are very happy to be here. MII welcomes this opportunity to contribute to the discussion on the current severe crisis facing the Irish pig meat sector. We have strongly advocated for a Government support package in response to the sector’s submission to the Government in recent weeks. While acknowledging that the Government has sought to support the sector, the package brought to the Cabinet today, insofar as we are aware of the details, falls well short of current losses being incurred. In our view, the Government will have to be open to reviewing supports as circumstances in the markets evolve.

MII is a trade association within IBEC. We represent primary meat processors; we do not represent the secondary meat processing sector. Our members’ processing facilities are located throughout rural Ireland. The primary pig meat processors employ more than 2,000 people directly and many thousands more through linked employment.

The pig sector is facing an unprecedented challenge, with unsustainable losses being experienced due to a major escalation of feed costs. Fuel price inflation is also driving on-farm costs, as well as at processing level, in terms of energy, packaging, transport and deep-sea shipping rates. Over recent years, the sector has faced a series of challenges, including Brexit, ASF, outbreaks in the EU, the Covid-19 pandemic and a turbulent Chinese market. In the fourth quarter of 2021 producers were already contending with rising feed costs pushing them into a loss-making position. However, since the onset of the Russia-Ukraine conflict, we have witnessed an unprecedented and rapid escalation in grain and protein prices, which has crippled the sector. Additional shipping costs further increase feed prices in Ireland compared with those on the Continent. These losses were well documented in the joint IFA, MII and Irish Grain and Feed Association, IGFA, submission to the Minister for Agriculture, Food and the Marine, Deputy McConalogue. Based on independent Teagasc analysis, the pig production sector is currently losing €15 million per month. It is estimated that in the period of October 2021 to March 2022, pig producers will have incurred losses totalling €160 million. While this sector has always endured cyclical economic fortunes, the sector cannot withstand the level of losses it is now encountering. Significant stabilisation and liquidity support is urgently required from the Government.

The sector, although concentrated in structure, is a major employer supporting some 8,000 jobs throughout rural Ireland. It is the third largest agrifood sector after dairy and beef and contributes €1.7 billion in annual output value and almost €1 billion in export earnings to the economy. It is a sector that does not benefit from CAP supports, but if it is to survive, assistance is urgently needed to get producers through this period and to maintain critical mass of the sector so it can recover and continue to contribute positively to the economy in the future, as it has done for decades.

From a market perspective, pig prices have been at a low cyclical level for 18 months now, due principally to the impact of ASF arriving in Germany and significant volatility in the Chinese market, which is a major global importer of pig meat. Despite the challenging market environment, the processing industry has delivered prices to Irish producers that are well ahead of the EU average and the prices in the main EU pig producing member states over the last year. Depressed prices were exacerbated by rising feed costs over last autumn. Since September, the Irish pig price has been 10% above the EU average price and, overall, has been 15% ahead of the price across the seven member states that account for 80% of total EU pig meat production. Processors have done everything possible to support their producer suppliers over this period, something which I believe is recognised by all in the sector. This was acknowledged by Mr. Cullinan earlier.

The pig price in recent weeks has increased by approximately 20 cent per kilogram to 170 cent per kilogram. Unfortunately, this does not bridge the gap between feed costs and market price. More support is needed to help bridge this gap through an unprecedented price cost squeeze. We believe that further improvement in market returns will come, but markets take time to adjust, especially across our export markets globally. Processors have worked to secure price increases here on the home market with secondary processors and with retailers. Some progress has been made, but more is needed. However, the home market only accounts for approximately one third of overall output so we are also reliant on export markets to improve, albeit our influence there is obviously lower than on the domestic market. While we believe that the gap between production costs and pig price, largely driven by feed costs, will close over the coming months, the scale of current losses needs urgent external support from the Government to get producers through this period. Producers have already incurred significant losses and face more in the months ahead. They are being forced to exit the sector because of the unprecedented hike in feed costs. Irreparable damage will be done to a sector that is a key element of the Irish agrifood economy.

A comprehensive submission to the Government seeking a stabilisation fund was made in March. This proposed a combination of direct aid from the Government or the EU and an additional element that would be repaid through a producer levy over time. We believe that this is a progressive approach. It needs to be acted upon now.

Again, I thank members of the committee for the opportunity to present here today and call for their support for the pig meat sector.