Mr. Philip Carroll:

I am chair of Meat Industry Ireland, MII, and I am joined this evening by my colleague, Mr. Dale Crammond, who is the director of MII.

The primary sheepmeat processing sector in Ireland is an important indigenous industry with widespread production throughout the country. The value of sheepmeat exports increased last year by 17% to €475 million, and we exported 75,000 tonnes into some 30 markets. This is the third consecutive year in which Irish sheepmeat recorded value and volume growth. The processing sector supports in excess of 34,000 sheep farmers and a further 2,000 jobs in processing and related industry services. Our industry has a strong customer focus. This has enabled significant added-value sales in many of the leading retail markets on the Continent, which has been a key driver of market returns.

In meeting market demand, a key requirement has been our responsiveness to providing the domestic and international retail and food service sectors with lamb products that best fit the demands of the customer. Unless we fulfil these requirements customers will look elsewhere. The growth in sales values in recent years is proof of our responsiveness to the demand of the marketplace.

In its invitation, the committee asked us to provide some background information on why the industry applies market specifications associated with the weight and suitability of lambs for processing. The weights paid for lambs at the factory gate are specification dependent and are driven by the requirements of the marketplace. The lamb trade is composed of two separate markets. These are the carcase trade and the retail market. The lamb carcase export trade is driven towards grade 1 lambs. These are animals in the weight range of 18 kg to 21 kg and this applies to all export markets. A much lower level demand exists for heavier lambs. The consequence of participation in this market with regard to heavier lambs is an overall loss of market value, which delivers diminished returns. It is much more challenging for processors to market these heavier carcases when the returns from a carcase that falls within the specifications are more valuable overall to the sector.

At the retail level the requirements are clear, driven in the main by retailers and how they can best market this high-value protein to their customers. The cuts and boned business is continuously driven towards fixed weight, fixed price cuts of meat. For example, full legs in stores are generally sold at weights of between 2 kg and 3 kg. With retailers charging around €10 per kilogramme for legs, this is equivalent to a €20 to €30 purchase. Compared with other proteins, this is an expensive meal option. With leg specifications ranging from a 25% to 28% yield from a carcase, a 3 kg leg will come off a carcase of just 21.4 kg. The same principle applies for racks or loin products. When they get too big in size, the cost to the consumer becomes prohibitive and they simply will not sell at the level required to sustain profitability. As a result, overall returns at all levels of the supply chain are negatively impacted.

Moreover, the processing of heavier carcases invariably involves removal of the bone from the meat and thereby reduces the yield and increases the input costs. Some extra meat ends up being minced at a lower sales price. There is little demand for lambs of more than 21 kg at this time of the year. Most suppliers are responsive to this and fully understand the differential available in the market between those animals within the specifications and heavier animals.

As the season progresses and we go into 2024, for example, processors will pay for slightly heavier carcases as the bone structure of the animal becomes heavier. However, the meat yield increases at a disproportionately lower percentage. Therefore, what they pay the farmer for a higher weight reflects the meat yield versus bone yield. Nevertheless, this does not reduce the challenge faced at retail level where consumer sentiment remains focused on affordability.

The industry has experienced some significant challenges in terms of the cost-of-living crisis over the past year. Consumption levels have fallen, alongside beef and pork, with only poultry showing any sort of consumption uplift in recent months. We acknowledge the difficulties some producers are facing as a direct consequence of the impact of higher input costs associated with the illegal Russian war in Ukraine and the consequential impact on global inflation, including energy costs, for example. This is why it is so important we continue to work towards marketing lamb products that return the best value to Irish producers from the international marketplace.

We must always remember that consumer behaviour influences the retailers, and this has an impact on the specifications demanded by processors. Together with the Department of Agriculture, Food and the Marine and Bord Bia, we remain focused on driving further international market opportunities. We are actively engaged with the Government on securing access to the Chinese and US markets for sheepmeat, given the scale of demand from these two giants of international trade. I thank the committee and we are opening to taking questions.