Andrew Doyle (Wicklow, Fine Gael)
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I welcome Mr. Ruairí Cunningham and Mr. Cormac Cunningham, directors of Strathroy Dairy, to the committee today. Before I begin, I bring to the attention of witnesses the matter of privilege. Witnesses are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice that where possible they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that Members should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I now call on Mr. Cormac Cunningham to make his opening statement.

Mr. Cormac Cunningham:

It is a great honour to be here in front of the committee to present our case. I will give some background. Mr. Ruairí Cunningham and I are brothers and members of the Cunningham family which has been in the milk business on the island of Ireland for 150 years.

As members can see from our presentation, we are Ireland's oldest family dairy. Wherever one is in Ireland, one will find Strathroy fresh milk and dairy products. We supply milk and dairy products sourced directly from Irish farms. Our distribution network covers every county in Ireland. Being deeply involved in the dairy industry, the issue we wish to raise is an urgent one. If it not addressed, it will be bad for consumers, farmers and employment in Ireland. In our presentation today, we outline the potential impacts of this issue and some potential solutions we would respectfully suggest to the committee.

It may seem a bit obvious for the committee but we feel we need to say that we are an Irish business. We source Irish milk directly from Irish farms and contribute to strong prices for Irish farmers because we actively compete for their milk. We provide over 250 jobs throughout the island of Ireland and milk and dairy products of the highest quality to Irish consumers. The "Guaranteed Irish" mark is one of the oldest and most recognisable origin labelling campaigns in Ireland and one of the most trusted symbols for Irish manufactured goods and services. We carry this symbol.

I will move on to the National Dairy Council, NDC, and its mark. Despite everything I have just said, we do not qualify for the NDC's packaging mark "Farmed in the Republic of Ireland" simply because the milk we buy is processed in Omagh.

Mr. Ruairí Cunningham:

If I could interject, the NDC purports to educate the consumer and reassure them of the origin of the milk. The strapline on its logo contains the term "Farmed in the Republic of Ireland". Even though we are an Irish company and supply Irish milk, we cannot carry the NDC logo. In a way, the NDC is being disingenuous and is misinforming the consumer.

Mr. Cormac Cunningham:

The NDC mark says "Farmed in the Republic of Ireland" but it does not say that in order to qualify to carry the mark, the milk must be farmed and processed in the Republic of Ireland. We source Irish milk directly from Irish farms all over the island. We have depots and distribution facilities all over Ireland and employ more than 250 people but because we process this Irish milk in Omagh, we cannot use the words "Farmed in the Republic of Ireland". Making any distinction between cows North and South is not only bad for us but bad for the entire dairy industry on the island.

Having been in the dairy industry for so long, we fully recognise the importance of issues such as quality, origin and traceability. Consumers want to know that the products they buy have these guarantees and retailers want to know these things as well. We can guarantee all these things to consumers. We guarantee the quality, the origin from Irish farmers and the traceability of all of our milk and milk products. This graphic from our presentation shows the craziness of the entire situation. One sees the cow on the left and a map of Ireland on the right. There is no change in what happens to the milk or where it ends up if the cow stands on the upper side. If the cow stands in the Republic, it can carry the mark as long as the milk is processed in the Republic. As I said at the outset, I am a dairy farmer. I bought a group of high EBI heifers from a farmer in the South only six or eight months ago. They crossed the Border to go to our farm. Is anyone going to tell me there is something completely different about those cows so that they cannot carry the mark "Farmed in the Republic of Ireland", which they could have if they had stayed at home? If they come to me, they cannot carry it. It seems ridiculous.

We also had a strange situation because of the confusion around this mark at the National Ploughing Championships. Cows were brought down from a farm in County Derry to demonstrate how a robot milker works. As a result of the confusion, they could not decide whether the cows were Northern or Southern cows and as a result, the milk was almost thrown out. We came down and picked up the milk. We made a donation to Our Lady's Children's Hospital, Crumlin from the money we generated from the milk rather than let the milk be wasted but members can see the confusion this mark can cause. The dairies that were there were worried that if they bought the milk, it might be seen as Northern milk. Looking at where the cow is from is not the way to run a business.

Our processing facilities have been audited by all the key retailers. They have satisfied themselves beyond any doubt about the rigour and the integrity of our processes we carry out but despite all of those measures, the NDC will not allow us to carry the mark. This will impact our business. As previously stated, if it is bad for our business, it is bad for consumers because we actively compete to get into shops and competition keeps prices competitive for the consumer. It is bad for farmers because we buy milk directly from farmers and are actively competing to get farmers to supply milk to us. They do not supply the milk to us to get a worse price. The only reason they supply us is because we pay a better price. We bring competition to the market base for farmers as well. If we, farmers and consumers are lose out, it will have an effect on employment.

The NDC is not a State agency or a semi-State body. This mark is not Government policy. The NDC is an industry-financed organisation. However, there is no denying the impact this promotional mark is having. Some retailers, some of whom we are already doing business with, want it but we are precluded from having it simply because of the location of our processing plant.

The NDC was set up in 2009 and in 2011, the NDC mark was launched on milk products. The council based the rationale for its existence on research. The survey it quotes states that consumers have become engaged in the jobs debate since the recession with 31% saying they are buying more Irish food and drink brands. When asked why, 90% say they want to support the economy and jobs.

However, if one digs into the report, it also states consumers are not interested in a North versus South conversation. The NDC believes its mark gives consumers the opportunity to show their support for local jobs on dairy farms and in the dairy sector in an active way when deciding what milk or cream to buy. The mark jeopardises that but the NDC believes it gives consumers in the Republic the reassurance of knowing that if they buy milk or cream with the council's guarantee, it is both farmed and processed locally. We can give the guarantee it is farmed locally but the provision of the mark at plants where it is processed for chains is bad for competition, farmers, consumers and employment. We support local jobs and local dairy farmers and we complete robust assurance of traceability and origin. We understand the motive of retailers for such a mark because they can show the mark to consumers and say, "It is safe. It is local and we know its origin". However, there are ways of achieving that outcome that do not result in processors being excluded. Some retailers may also have a sense that this mark demotes higher quality but it does not. The NDC does not carry out quality audits on the farms and because the word "National" is in the title, it may confuse people into thinking it is national policy when it is not.

Mr. Ruairí Cunningham:

With regard to the issue of the NDC's promise that all milk is local, one could lift milk in Wexford, process it in a plant in Kilkenny and have it on a shop floor in Donegal with the NDC mark saying it is local whereas when we lift milk from a farm in Donegal, take it to Omagh, 20 miles down the road, process it and take it back to Donegal, it is not regarded as local.

Mr. Cormac Cunningham:

That is a local issue but if we broaden it, we must consider the impact this mark could have and the image it portrays of Ireland internationally. With 90% of our farmers being manufacturing farmers, the majority of milk generated on the island is exported into important markets all around the world. We would have to come against this sort of competition in other markets. This packaging mark is anti-competitive and contravenes EU legislation. It uses country of origin labelling in an anti-competitive way and it has implications for vital trade between Ireland and the UK and the wider EU. It is inconsistent with national policy on food and drink, the wishes of consumers and the island of Ireland approach to animal health. The mark is anti-competitive because it is in breach of EU legislation, the Single Market and Article 101 of the treaty on the functioning of the EU. We received independent legal opinion, which states, "The NDC mark has the effect of restricting parallel import and impeding free movement of goods throughout the EU, which will adversely affect the promotion of a single European market ... There is a clear, prima facie breach of Article 101".

With regard to country of origin labelling, a report by Deloitte and the Dairy Council of Northern Ireland stated, "COOL is intended to clarify the origin of food products for the consumer helping them to make an informed choice on whether to buy a local product over an alternative sourced from another part of the EU or elsewhere". Other factors such as price and quality will form part of the consumer's decision but this labelling is not supposed to be used to interfere with the free movement of goods between member states. The Deloitte report states in this regard: "Denying Northern Ireland dairy products the opportunity to compete for a place on ROI supermarket shelves through the abuse of COOL means that consumers in the Republic are being denied freedom of choice. This has knock-on effects potentially for vital Irish trade". Other markets in the EU are vital for us given so much of the milk produced on the island is exported. We do not want to do anything that could affect that negatively.

I refer to a number of quotes in this regard. Arlene Forster, the Stormont trade Minister, is exercised about this but the comments Ian Potter, an agricultural commodities trader, particularly milk quota, wrote on his blog about his reaction to hearing about the NDC are more telling. He said:

Meanwhile, we sit back and allow Irish cheese to flood into our market at retail, catering and government procurement levels much of it coming via the IDB/Adams Foods ... if Southern Ireland can exclude our dairy products we should follow their lead instead of continually rolling over and hiding behind competition issues.

The tonnages of cheese and butter sold into the UK from the RoI far outweigh the value of the entire southern Irish Liquid Milk supply ... The irony is that the money to support the NDC campaign and liquid milk producers is coming from those most in danger if there is a backlash against Irish dairy products in the UK.

The red tractor mark is often brought up as the UK has a similar scheme but if one looks at it closely, one will realise that this is a food assurance scheme that covers production standards developed by experts on safety, hygiene, animal welfare, the environment among others. The logo on a pack means the food or drink has met these responsible production standards and is fully traceable back to the farm but it is not used to deny products from other member states access to shelf space.

One could take any number of dairy products but I will use Kerrygold butter as an example. If the Irish Dairy Board was to depend on the NDC mark for trading, this butter could not carry it as the board sources its milk is from the entire island. It has more than 15% of the German market where it has been trading for 40 years. It sells the butter at a premium and it is doing a superb job for Irish exports and the brand of Food Ireland. The board is blazing a trail and the butter is seen as high quality.

I refer to national policy that was agreed at meetings such as this. It refers to Ireland, the food island, and an all-Ireland approach with no divide between North and South. Bord Bia's Food Harvest 2020 strategy, which was produced in conjunction with the Department of Agriculture, Food and the Marine, outlines that our national strategy for agriculture, food and fisheries is about Ireland, the food island, and there is no differentiation between North and South. Bord Bia is the State body responsible for the commercial success of world class Irish food and drink. It takes an all-Ireland approach and has national quality assurance marks. The board addressed all the issues I outlined earlier relating to quality, origin, traceability and Strathroy Dairy would qualify for the Bord Bia quality assurance mark but the only problem is its remit does not cover milk. The next slide demonstrates how the board has addressed the nuances of what lies before us. There are three different marks. The first states "Origin-Ireland", the next "Origin Northern Ireland" and the final one "Produced & Processed Ireland & Northern Ireland". One could argue NDC is bringing nothing new to the party. There are enough good strong labels in the market that cover the issues that need to be covered to give consumers the reassurance they need.

This is not consistent with what the consumer wants. Bord Bia's approach is grounded in its own consumer research.

Bord Bia's report states:

The importance of heritage and tradition – brands that we are familiar with over years – appears to have become more prominent in consumers’ definition of an Irish brand. Loyalty towards Irish brands today is down to the fact that consumers have become more aware that buying Irish is a step towards economic recovery. Consumers are not interested in a north v south conversation.

I come to possible solutions, the first of which is the legal route. The next slide in my presentation outlines Mr. Justin McCarthy's view on the legal route. I agree with him that it represents time, money and effort wasted that would be better spent exploring other avenues. Do we need a new quality mark? There are a plethora of quality marks in Ireland which guarantee quality and provenance. Some are more stringent than others in terms of auditing for quality. There is confusion among consumers about what those marks are telling them and what they represent. It is possible to buy Gem sugar carrying the "Love Irish Food" mark. To the best of my knowledge we do not produce any sugar beet to turn into sugar. Barry's tea carries the "Love Irish Food" mark. Whereas I love Barry's tea, I do not know where the tea plantations are on the island. There is confusion among retailers about what the marks mean. The Bord Bia approach we mentioned earlier provides a potential approach to solving the problem.

In an ideal world I would recommend ending the NDC packaging mark for the reasons outlined on the slide. We favour an all-island approach. We do not need all these, sometimes competing, food labels as its confusing for consumers.

Andrew Doyle (Wicklow, Fine Gael)
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I thank Mr. Cunningham.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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I thank the witnesses for their presentations. It is annoying and embarrassing that it is possible to buy milk in this part of our island that has been processed in the other part of the island without the same legal entitlements from the NDC. It is effectively cementing partition for want of a better word and is an indictment.

Mr. Cunningham said his company provided 250 jobs. How many of them are in this jurisdiction?

Andrew Doyle (Wicklow, Fine Gael)
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Rather than Mr. Cunningham replying now, we will bank questions and he can then reply to them together.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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The Strathroy processing plant is in Omagh and five other counties were mentioned in the presentation. Mr. Cunningham mentioned that he bought heifers or cows in the South, brought them back, milked them there, brought them back down to the South and yet the company is being discriminated against. Mr. Cunningham mentioned that it is anti-competitive and contravenes EU legislation. Whereas he does not want to go down the legal route, it is an option. If this cannot be resolved in a competitive way, will that option become a reality?

Mr. Cunningham mentioned the Bord Bia proposal that produce, regardless of where on the island of Ireland it originated, should carry the Irish brand, and I believe that is the way to go. Did Mr. Cunningham ever consider taking action through the Equality Authority? This seems like discrimination. The Equality Authority was established following the Good Friday Agreement. It may represent an avenue for moving this issue forward.

Is there potential for Strathroy to grow in terms of jobs? Is there potential to establish another processing plant, perhaps in a different part of the island? What are the options for progress other than through a legal test? How can we help to try to resolve this?

Andrew Doyle (Wicklow, Fine Gael)
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I will call Senator O'Keeffe and Deputy Heydon and then come back to the witnesses.

Susan O'Keeffe (Labour)
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I thank both witnesses for the presentation. Mr. Cunningham said that Strathroy products can be found throughout Ireland. Does Strathroy also supply own-brand products? Obviously in such circumstances consumers would not see the Strathroy label. Is that the reason Mr. Cunningham is saying we cannot see the Strathroy label?

The National Dairy Council is financed by private industry. It has been in existence since 1964 and was set up long before the sort of co-operation we would expect now and also before the advent of EU legislation on discriminatory practice. In all the quotes Mr. Cunningham provided, I do not see any from the NDC. What relationship does Strathroy have with the NDC and what conversations has Mr. Cunningham had with the NDC? I must conclude that the witnesses are here because they are unable to make any progress with the NDC. Will Mr. Cunningham to elaborate on what has happened with the NDC?

The NDC is not a Government or semi-State organisation. It is entitled to include the word "national" in its title because it has been around since 1964. When it was established it would have been a national dairy council - exactly what it said on the tin. I am not sure we can level any criticism at it for using the term "national" - many organisations do so. Given what was going on at the time and now, it is not a crime, as far as I know, to use that term. I have never been confused by its identity as being anything other than a privately financed industry organisation.

I will cut to the chase. Strathroy has been in business for a long time and is very successful. It has a very good product. As it has been in business for 150 years, that is an extremely sound reputation. Do the witnesses feel others in the industry here are effectively protecting themselves and making it clear they do not want Strathroy as part of their club, because if it is part of their club, it may take their business, including that of Glanbia and others? Is that at the heart of this? Do the witnesses feel those companies are protecting themselves and Strathroy has been cut out, thereby preventing it from expanding its business?

I do not deny the huge confusion over the various marks. Mr. Cunningham mentioned Barry's tea. Everybody knows Barry's tea is packaged in Cork and has been around for a very long time. Nobody disputes that the tea itself, obviously, did not come from here. Those labels have been in existence for a long time and they have different meanings. We have raised the issue here and elsewhere that there is extraordinary confusion for consumers because those marks do not mean what they appear to mean. Is there another trade group mark that Strathroy can use either in the UK or in Northern Ireland? What is it about the National Dairy Council mark that is so precious, apart from the obvious reasons Mr. Cunningham has stated about the quality of Ireland's food, Irish milk and so on, which I do not denigrate in any way? Does Strathroy feel it is being pushed out and that it would like to take a greater share of that business?

Martin Heydon (Kildare South, Fine Gael)
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I thank the witnesses for their presentation. What price is paid to Northern Ireland farmers for a litre of milk?

Notwithstanding the presentation, I reconcile our guests' very obvious frustration with the concerns expressed by some of my constituents who are liquid milk producers. They believe that the significant investment in the Republic of hundreds of millions of euro in the development of new liquid milk product lines and the exploration of new export markets is not being matched north of the Border. Liquid milk producers in the Republic are concerned about the future. Two weeks ago, our groceries order report flagged a concern that there may come a time when liquid milk is not produced in this country due to downward pressure on prices. Do our guests wish to comment in this regard?

I accept their point that there should not be a distinction between North and South. The example was given of the distance between Donegal and Omagh only being 20 miles there and back. Is a part of the difficulty the uncertainty about whether the milk that returns to Donegal is the original Donegal milk? Is this the perspective of the National Dairy Council, NDC, which has been established for a long time?

Mr. Ruairí Cunningham:

To reply to Deputy Ferris on the number of jobs in the South, I am writing cheques for 50 people, but there are north of 25 indirect jobs when one considers self-employed agents, mechanics, etc. It is a significant number. If the NDC campaign is as successful as it wants to be, Strathroy Dairy Limited would be out of the Southern market altogether and those 75 jobs would be gone. I imagine that the three large processors in the South would be able to take up the slack of the small amount of milk that we are providing, but they would not replace any of the 75 lost jobs.

The Deputy asked about another processing plant. The answer is "Yes and No". For years, there have been calls for rationalisation in the dairy industry, in that there are too many plants. We agree. Our plant is the best and most efficient on the island, which is the reason that we are the size that we are. We do it better. It is not that we have an advantage in price terms, a subject that Cormac will probably cover. Setting up another liquid milk plant would essentially double costs. Someone must pay. Ultimately, that would be the consumer or the farmer if the money was taken back from him or her. We prefer to leave our plant where it is and get the maximum out of it. That would be more beneficial for us, the consumer and the farmer.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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If Strathroy Dairy Limited had a plant in the South and sourced its milk on both sides of the Border, it could buy most of its milk in the North and sell it in the South under the NDC brand.

Mr. Ruairí Cunningham:

If it is was sourced in the North, the NDC would say "No". The milk must be-----

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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Not all of the milk. If a portion was from the North and a portion was from the South.

Mr. Cormac Cunningham:

Yes, as long as one could show that the two streams had not been mixed. The Deputy may laugh, but we have gone to considerable lengths. Our processing plant must be able to produce different types of milk, for example, organic milk. We all have opinions on organics, but anyone producing organic milk must be able to certify 100% that it has not been mixed with or contaminated by conventional milk. The same applies to goat's milk. If one produces semi-skimmed milk, one must ensure that semi-skimmed goes into the semi-skimmed jar, not whole milk. The separation of whole milk, semi-skimmed and skimmed is easy. It costs a great deal of money, but we have done that. We have been audited to show that organic or Republic of Ireland milk can be traced right through our plant from the start to when it is put on a lorry and delivered. It is not that we do not want to make an investment or cannot do it. We have the facilities to segregate milk if that is what people want, but that is not enough. Unfortunately, this does not answer the question.

Mr. Ruairí Cunningham:

To finish, the legal route is open to us. If the NDC's campaign was successful and we were excluded from the Southern market, we would definitely go down the legal route. I first came to Dublin to start building this business in 1995 and I would be sore if something like this took that bit of business away from us. The problem is that a non-government body is industry funded, in that it is taking €2.4 million per year out of farmers' pockets. Only 10% of farmers can hope to gain, as 90% are manufacturing farmers. If we went to Europe or wherever and were found to be in the right and received damages, the farmer would pay them. We have no interest in taking money out of farmers' pockets. Cormac would probably never forgive me. They work long and hard enough without us doing that. This is why we are in attendance today. If we believed that the legal route was the way to go, we would have already taken it.

Mr. Cormac Cunningham:

That may answer one of Deputy Haydon's questions, but I will elaborate. As Ruairí stated, the NDC is indirectly taking money out of farmers' pockets. Farmers provide that money voluntarily in the misguided belief that it is to their advantage. The majority of farmers are manufacturing farmers. To date, the money has been spent on the NDC campaign. It gets money for generic milk advertising, but that is supplied by Europe. The majority of the €2.4 million has been collected from the 90% of farmers, including liquid milk farmers. Who will gain? I would argue that the liquid milk farmers cannot gain. There are in or around 2,000 registered liquid milk producers in the Republic. All of that milk has been paid the full liquid premium, yet only half of it is being used for the liquid market. The rest of it ends up in manufacturing products. Obviously, that side is being subsidised.

Let us not worry about that, as I have no problem with farmers getting a good price for their milk, but the downside of this campaign is the question of who wins. Liquid milk farmers cannot. Even if the market for liquid milk improved significantly, it would not create more liquid milk farmers, quota or licensed liquid producers. There is no upside for the farmer despite having spent €2.4 million. Internationally speaking, the downside is for manufacturing farmers who are giving money hand over fist. Their milk is being used to make cheese, butter, etc. Per head, Ireland's level of consumption of liquid milk is the third highest in the EU. People cannot be made to drink much more of the stuff. The market cannot really grow, although there will be some population growth. Would it not be better to use the money to try to find other markets? Research was mentioned. Some €2.4 million would fund a great deal of research into various products. This would benefit manufacturing farmers, as it would move milk from whole milk powder, skimmed powder or butter into higher value products. Derry has one of the lowest consumption levels in Europe of desserts, yoghurts and cheese. There is considerable scope for a marketing campaign.

No matter how the campaign turns out, there is no upside from the liquid milk farmer's point of view. I cannot see how such farmers will gain, even if they only fund approximately 10% of it.

Mr. Ruairí Cunningham:

To address Senator O'Keeffe, the majority of Strathroy Dairy Limited's business is own-label business. If anyone is searching for our products, turn a jar upside down and "Strathroy" will be written there.

Our gripe is not with the NDC. It does a great deal of good work. It educates the consumer about the benefits of dairy products, cheese, etc.

They have a place but this campaign is misguided. It is not doing what it says on the tin and is taking money out of farmers' pockets. We are not against the NDC but are against this particular campaign. We do not have any issue with the name.

As regards membership, the campaign commenced in 2009. In early 2010 I contacted the NDC and asked if Strathroy Dairy Limited could join but was told in no uncertain terms that it could not do so. Mr. Cunningham has been in correspondence with the NDC more recently.

Mr. Cormac Cunningham:

It is stated on the NDC website that it wishes to reassure consumers about the origin and traceability of milk. I contacted the NDC and informed them we would like to do the same and requested that it audit us to provide our customers with the same reassurance. I was told that because Strathroy Diary Limited is not a member, the NDC could not audit it. We have since applied for membership and are told the application is being considered. I understand it has been forwarded to a membership committee. The NDC has stated that Strathroy Dairy Limited would never be able to utilise the trademark because its milk, irrespective of from where it is purchased, is processed in its plant in Omagh.

Susan O'Keeffe (Labour)
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I can appreciate NDC's opening position. The negotiation position in any negotiations is usually: "No, we are not doing that." Clearly, there is scope for further conversation.

Mr. Cormac Cunningham:

Yes. There is huge scope.

Susan O'Keeffe (Labour)
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Is that not where the battle needs to be had rather than with the committee?

Mr. Cormac Cunningham:

I refer to its trademark, which states "farmed in the Republic of Ireland". I am happy enough to use that. I have no problem doing so. If were to use it, the issue would then disappear. We were asked why in our view the campaign was launched. I do not know because I do not have the NDC's ear. In my view the reason the NDC campaign was launched was to try to force us out of the market and to give others an unfair competitive advantage over the major liquid milk processor on the island.

I will provide some background. Strathroy Dairy Limited, which was established by my father who is in the Visitors Gallery, has grown to be the second largest liquid milk processor on this island We started out as dairy farmers and remain so. Obviously, it is one of the main competitors. We all know the largest competitor. In terms of how growth in Strathroy Diary Limited can be prevented or how others can compete against it, this can be done in the area of price, quality and service. We have no problem with that and will take them on on that basis every time. The NDC had to come up with something with which we could not compete.

In response to Deputy Heydon, I would say the NDC came under pressure from liquid milk producers in the South who believed they were under pressure from milk producers in the North. In this regard, milk price was mentioned. Prices North and South are virtually identical. As I said, farmers do not come to us to get less for their milk in the South. We also have southern suppliers, who get more than their neighbours. We do not buy milk cheap and sell it cheap. We buy it expensively, sell it and make a profit on it because we are very good at our jobs. Obviously, farmers were coming under pressure from their processors who were going to cut the milk price because of milk coming in from the North.

In a meeting similar to this, I met farmers and discussed their supplying us with milk. A man sitting beside me at that meeting asked me if it was true that we dump milk in the South, which took me back. My response was to ask him from where I would get milk so cheaply I could afford to dump it and if he thought the farmers who supplied me with milk were stupid. Those farmers supply Strathroy Dairy Limited with milk because it gives them competitive advantage and pays them a good price for it. There is no cheap milk to be bought. There is certainly no milk to be dumped anywhere, not if one wants to remain in business.

Susan O'Keeffe (Labour)
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Is the purpose of this campaign, in effect, is to allow the NDC to take from Strathroy Dairy Limited the only remaining thing it could take from it? As Strathroy Dairy Limited is the main competitor in the South, the campaign is targeted at it.

Mr. Cormac Cunningham:

There are others.

Susan O'Keeffe (Labour)
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Yes, but Strathroy Diary Limited, by the witnesses' admission, is the largest.

Mr. Cormac Cunningham:

Yes.

Susan O'Keeffe (Labour)
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Therefore, it is the biggest target.

Mr. Cormac Cunningham:

Strathroy Dairy Limited is the most successful. Obviously, the NDC was going to direct its fire at the most successful.

Susan O'Keeffe (Labour)
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The purpose of the NDC campaign is, in effect, to ensure Strathroy Diary Limited cannot utilise the trademark and everybody in the Republic can.

Mr. Cormac Cunningham:

Yes, regardless of what hoop we decided to jump through, be it separate processing lines, purchasing more milk in the South and so on.

Susan O'Keeffe (Labour)
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Will the NDC not allow Strathroy Diary Limited to become a member?

Mr. Cormac Cunningham:

It remains to be seen. Perhaps following this publicity it will. We would be delighted if it agreed to audit the company and award us the trademark. It may audit us and not give us the trademark. We will have to wait and see.

Mr. Ruairí Cunningham:

The NDC may just be a vehicle in this instance. It may be being used. I know from talking to retailers we supply that they have come under sustained pressure from the IFA to support the NDC logo. One could ask why the IFA would do this. The IFA should be looking after the interests of every farmer and not just the 2,000 liquid milk farmers. What would happen if this type of protectionist policy were to be introduced in other countries? The volume of beef, pork, chicken and dairy products exported from Ireland is huge. Why would the IFA support this campaign which jeopardises all these exports and affects all farmers in the country? It is madness. As regards whether only Strathroy Dairy is being targeted, that is possible. Much will depend on what view the IFA takes on the matter now.

Andrew Doyle (Wicklow, Fine Gael)
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Mr. Cunningham is into summation. Deputy Heydon asked about price, investment and traceability.

Mr. Ruairí Cunningham:

On price, this week's Irish Farmers' Journal included an analysis of the price paid to liquid farmers in the South for the 12 months up to August. The price in respect of the largest producer, Glanbia, was 34.78 cent. Our average price over the same period was 36.7 cent. We are paying a very good price to farmers. They would not come to us if we were not doing so. What is more, they would not stay with us unless we paid them a proper price. The fallacy that Strathroy Diary Limited provides cheap milk and is dumping it in the South is wrong. We pay our farmers top price. We do it better. We are more competitive. That is why we have increased in size. It would appear that processors in the South could not, perhaps, get their ships in order and do things the way we are doing them, and for this reason this campaign was launched.

Martin Heydon (Kildare South, Fine Gael)
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Mr. Ruairí Cunningham referred to milk bought in the Republic. How much do farmers in the North get paid for a litre of milk?

Mr. Cormac Cunningham:

We make no differentiation between liquid or manufactured milk.

Martin Heydon (Kildare South, Fine Gael)
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The witnesses made the point that they have to compete with Glanbia in the South. I do not like making distinctions between companies operating either side of the Border. The Border is a fact of life.

Mr. Cormac Cunningham:

We pay farmers approximately 34 pence per litre. I am not sure what that amounts to in euro when converted. VAT must then be added. When our price is converted and VAT is taken away, there is very little difference in price.

As I said, the NDC campaign has been targeted at the liquid milk end of the sector. Since the commencement of that campaign, the famous poem, "An Irish Airman Foresees his Death" has been running through my mind, with one particular line, in terms of liquid farmers, coming constantly to mind, namely, "No likely end could bring them loss/Or leave them happier than before". These lads have nothing to gain or lose with this campaign but manufacturing farmers are stumping out the money for it.

Andrew Doyle (Wicklow, Fine Gael)
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Perhaps the witnesses would respond to the questions regarding investment and traceability.

Mr. Cormac Cunningham:

I have responded to the question on traceability.

Martin Heydon (Kildare South, Fine Gael)
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It was suggested that hundreds of millions of euro is being pumped into the development in the Republic of new product lines for the export market and that the same level of investment is not happening in the North.

Mr. Cormac Cunningham:

I disagree. There is no evidence of that. A huge amount of the investment in the Republic has been in plant and machinery. The Irish Government provided huge grants to develop the industry, and rightly so, but an awful lot of it went into the creation of more powder and butter plants. It is what we are going to need. Let us honest, we are a net exporting nation.

Martin Heydon (Kildare South, Fine Gael)
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Surely it is a positive for milk producers if more baby food markets and so on are being developed.

Mr. Cormac Cunningham:

Yes. To suggest that there is no investment in the North is wrong.

Martin Heydon (Kildare South, Fine Gael)
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I am not saying there is no investment there rather that in comparison with investment in the South-----

Mr. Cormac Cunningham:

Unfortunately, it is no more than a suggestion. If one examines the facts, one will find that it is not correct. The investment levels are very high. We can attest to that. I am happy to invite the Deputy to see our plant. He is more than welcome, as is any member of the committee who wants to see the investment we have made to supply high-quality milk, the origin of which can be traced, to Irish consumers.

Andrew Doyle (Wicklow, Fine Gael)
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I would like to clarify something before I call Senator O'Neill. Senator O'Keeffe said that the National Dairy Council was established in 1964, but Mr. Cunningham said it was established in 2009. I assume he was speaking about the campaign.

Mr. Cormac Cunningham:

Yes, I was referring to the campaign.

Andrew Doyle (Wicklow, Fine Gael)
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It was originally established as a semi-State organisation. When we acceded to the EU, it became an industry-led group. It is no longer a semi-State body. Is that correct?

Mr. Cormac Cunningham:

Yes.

Andrew Doyle (Wicklow, Fine Gael)
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It is a little confusing. I presume the council has the name it has because it was established by the Minister for Agriculture of the day.

Mr. Cormac Cunningham:

We highlighted the name because we feel it contributes to the confusion on labels. I think the committee agrees with that point. We must be careful about what is meant by "national". How broad is it? A farmer in County Donegal, which is part of this nation, cannot carry the National Dairy Council mark even though he has farmed there for his entire lifetime, as did four or five generations of his family before him.

Andrew Doyle (Wicklow, Fine Gael)
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I suppose that is how it has evolved.

Mr. Cormac Cunningham:

I accept that.

Susan O'Keeffe (Labour)
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I suppose I was pointing out that they had not done that for any other-----

Andrew Doyle (Wicklow, Fine Gael)
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Okay. I call Senator O'Neill.

Pat O'Neill (Fine Gael)
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I thank Mr. Cormac Cunningham and Mr. Ruairí Cunningham for coming before this committee. I congratulate them because it is great to see a family-run business surviving in the world of multinationals. They have come before this committee because we want to establish the facts and get everything on the table. If we take a certain line of questioning when we are dealing with people, that does not mean we are for or against what they are saying. I would like to get a "Yes" or "No" answer to a question before I continue. Does Strathroy Dairy use any milk that is imported from mainland Britain?

Mr. Cormac Cunningham:

No.

Mr. Ruairí Cunningham:

No.

Pat O'Neill (Fine Gael)
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Okay, that is good. Senator O'Keeffe mentioned that the largest percentage of Strathroy Dairy's product goes into own-brand. I think this was confirmed by Mr. Ruairí Cunningham. What percentage of the dairy's product goes into own-brand? What retailers are being supplied with their own-brand product by Strathroy Dairy? The witnesses can answer those questions later on. It has been confirmed that the dairy is not processing anything from the mainland UK. I suppose most of my other questions have been asked by other members.

The liquid milk suppliers in this country supply the co-ops here. One of the main co-ops is supposed to have 2,000 liquid milk producers. The suppliers have to guarantee their co-ops a certain level of quality. They have to give an assurance with regard to quality of milk, etc. They have to ensure the cows coming into their herds are professionally calved. I have seen Strathroy Dairy's advertisements in the Irish Farmers' Journal and all the farming publications actively canvassing for milk from the Republic. I suppose they are taking manufacturing milk from the Republic and using it as a liquid milk product. As Mr. Ruairí Cunningham said, some 50% of the liquid milk in this country goes into manufacturing anyway. If Strathroy Dairy is actually using manufacturing milk as a liquid milk product, what quality assurance can it give this committee and the general public with regard to its product?

Andrew Doyle (Wicklow, Fine Gael)
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We will bank the Senator's questions.

Pat O'Neill (Fine Gael)
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I have asked about the retailers that are being supplied with own-brand product and about the quality assurance levels that apply to the milk being taken in from the Republic.

Andrew Doyle (Wicklow, Fine Gael)
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Perhaps Senator O'Neill's questions can be banked with those to be asked by Deputies Deering and Barry and Senator Comiskey. I ask whoever owns the mobile phone that is causing interference to switch it off.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I welcome Mr. Cormac Cunningham and Mr. Ruairí Cunningham. As a long-suffering liquid milk producer in the South - I was one of the 2,000 hard-pressed producers for a long time - I find today's debate very interesting. I would like to ask a couple of straightforward questions. How much money has Strathroy Dairy invested in its processing plant over the last ten years? What is the average farm size, measured by reference to the number of cows, of the dairy's suppliers? How does that compare to what we have in the South? I would like to ask about the dairy's producers. The witnesses mentioned that their company has made inroads into every county in the South. Does it have suppliers in every county?

I would like to pick up on the point made by Deputy Heydon about price. There is a contention that those of us in the South are not operating on a level playing field, compared to those in the North. I do not mean to keep differentiating between one and the other, as I do not think that is the whole purpose of the exercise. We all want to get to the bottom of the whole issue. How is it possible for Strathroy Dairy to be successful and productive if it is travelling to collect milk in counties Carlow or Kildare, bringing it back to Omagh and bringing it back down again to put it on shelves in some of the large multiples? I will not mention any particular examples. How is the dairy making a profit from such activity when its produce is being sold at a similar price to that produced by farmers in County Carlow who supply milk to Glanbia, which is just down the road, to be sold from a shelf just over the road? How can that be done?

There is a fear about what will happen if we open the floodgates and a large amount of milk starts to come from the South. The fact that 25% of the milk in the North is coming down into the Southern market has been debated here over a period of time. If the floodgates are opened, will that put more and more pressure on producers in the South? The witnesses have said that Strathroy Dairy pays its suppliers well for their milk. I would contend that nobody pays their suppliers well. This issue has been discussed at this forum for a while. The percentage the farmer is getting today is less than the percentage the farmer was getting 20 years ago. I would not call that paying well. How can that be achieved?

Michael Comiskey (Fine Gael)
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Most of the points have been covered. I thank both witnesses for coming here and making a presentation. I suppose it is all about how much milk is sourced in the South, and the number of jobs that Strathroy Dairy is creating in the South. Senator O'Neill asked whether the dairy buys milk from mainland Britain. There is a fear among Southern farmers with regard to Northern milk coming in, flooding the market and reducing the price. There were problems in the past when the price was reduced. Farmers, producers and farm organisations are afraid that the prices achieved by producers in the South will be reduced. I think nearly everything else I wanted to ask has been covered.

Tom Barry (Cork East, Fine Gael)
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I thank the witnesses. I do not know where to start. I will try to start somewhere. I grew up on a dairy farm. I must admit my loyalties lie with dairy farmers. When I buy milk with the National Dairy Council label on it, it always strikes me that such milk is a little more expensive than the milk without the label. I am not sure why that is - the witnesses obviously know - but I can make assumptions. Page 12 of the Strathroy Dairy submission suggests that the current system "is bad for competition, farmers, consumers and employment". I presume it is bad for the dairy as well.

Mr. Cormac Cunningham:

Of course.

Tom Barry (Cork East, Fine Gael)
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I just wanted to clarify that. I would prioritise the suggestion that it is bad for farmers. My first concern is for farmers, my second concern is for security of supply, my next concern is for jobs and my last concern is for the multiples. The witnesses have spoken about getting this label. I do not think about quality when I see the label. I just assume the quality is there. There is no question mark with regard to quality. When I look at other types of milk, I do not know how much of it is sourced from third countries. I just prefer to buy Irish milk. When I cannot see a National Dairy Council label on a bottle of milk, I sometimes pick it up only to see a UK label on it. I do not see anybody complaining about the fact that it already has a UK label on it. This label indicates that the product was farmed in Ireland. There has to be an "IRL" label or some label pertaining to Ireland. It is just that this label is a little bigger. I wonder whether the problem with this label is that it is actually working. I have no problem buying things that are labelled with the red tractor.

I would like to pick up on a few other things that were mentioned by the witnesses. I might be jumping around a bit. Page 20 of their submission refers to parallel imports. I have engaged in parallel imports. They are not the be-all and end-all of everything. When parallel imports take place with other products, it is sometimes the case that the product is not exactly the same. There are abuses of the parallel imports system. I do not think it is a great argument to make.

Mr. Cunningham quotes a Mr. Ian Potter. His comments are not great. He is bringing up North-South issues which we should leave behind. On his website he states that he spends a good deal of time and effort on legislation and political matters relating to quota and entitlements within the United Kingdom and Europe. He refers to himself as a quota broker. Does that strike Mr. Cunningham as a biased opinion, as a person running a business? I believe it is an inappropriate argument to make.

Do the representatives of Strathroy Dairy believe they are in the middle of a milk war in Northern Ireland? Mr. Cunningham should correct me if I am wrong but from what I gather, Strathroy Dairy is advertising for milk from the South from producers in counties Meath and Louth and offering them 3 cent per litre extra to bring them up to the North.

I am unsure of the business model. I have been in business for many years and I understand one thing, that is, when a person aggressively looks for business this way, it can be a short-term or a long-term strategy. We all know what happened in the gas market some years ago. There was strong competition for gas customers through cheap prices. However, they have dissipated now and there is no longer cheap gas. I would be interested to hear the witnesses' comments on that.

I am still farming actively, thanks be to God, although not in milk. However, many milk farmers I know have put it to me that they do not mind paying the levy to the National Dairy Council. Clearly they see value in it. They are concerned about cheap milk coming into the South in large quantities because they are not making money at the moment. In fact, they are going out of business. It is not the fault of Strathroy Dairy, but they are going out of business and they are concerned about it. What advantage is it to us to increase their fear that they go out of business?

Let us consider it from a consumer point of view. When I pick up milk with an NDC label, it is more expensive than other milk. I am hoping that whoever produced it got a few cent more for the milk because they are not getting nearly enough, as Deputy Deering stated. I got out of milk in 1991. At that stage the price of milk was £1 per gallon which translates to approximately 26 cent per litre. If we consider the increases in today's world, that is appalling. It is hardly enough to allow these people to invest in their business and keep producing profitably, but that is what we must do.

I fear there is a milk war on at the moment. Is Strathroy Dairy having a battle within business that we should not be involved in? Sometimes business battles take place. Are we being drawn into this? I am a little uncomfortable that we might become drawn into something that we should not be involved in too much. I have gone through some issues and I am sorry if I was a little scattered, but the witnesses might try to get through the points as best they can.

Mr. Ruairí Cunningham:

We will start off with Senator O'Neill, who asked about our own-label split. Approximately 90% of the product we produce is own-label. That goes back to the early 1980s when we looked at the trends that came from the United States and which then moved across the water. They came in to the North and the South subsequently. One can see it in the increases. It used to be the case that every drop sold down here was home milk. Low-fat milk is now sneaking into the market. Between 70% and 75% of milk being sold in the North is low-fat or semi-skimmed milk. That will trickle down. At that time, we looked at it and saw the increase in the own-label sales. We figured we could spend a fortune growing a brand but it would die a death anyway. It is possible to see that with Glanbia's liquid sales at the moment. The branded sales have fallen off a cliff. I am unsure whether that has any relevance here but that is why we have stuck with the own-label route. If a retailer has sufficient volume and asks us for own-label milk, we will do it.

Pat O'Neill (Fine Gael)
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Who are the retailers that the dairy is supplying?

Mr. Ruairí Cunningham:

It is easier to say which ones we are not supplying. We do not supply any liquid to the Musgrave Group own-brands. We supply our own Strathroy brand. We do not supply anything to Tesco or to Dunnes Stores in the South. We supply to everyone else.

Pat O'Neill (Fine Gael)
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Basically it is the German multiples, Aldi and Lidl.

Mr. Ruairí Cunningham:

There is also Londis, Gala and Spar. There are many other retailers.

Pat O'Neill (Fine Gael)
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However, the major ones are the German multiples.

Mr. Ruairí Cunningham:

Yes, we do a good deal of business with them.

Pat O'Neill (Fine Gael)
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I asked a question about quality assurance and manufacturing milk going north.

Mr. Cormac Cunningham:

That is interesting. We have been in the dairy business for years, from cow right through to helping to pour milk into a person's cup. I am not referring to the committee members but I have a difficulty with the people who call into question milk and who say there is liquid milk and manufacturing milk. All milk produced on this island is of a very high standard and all of it is fit to go into any dairy product anywhere in the European Union, whether it is designated as liquid or manufacturing milk. It is all of the same high standard.

Pat O'Neill (Fine Gael)
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I never said it was not. I simply said some 2,000 liquid milk producers in this country are supplying the major co-operatives. They must provide a certain quality assurance for the co-operatives. Therefore, Strathroy Dairy is not competing on a level playing pitch to get that badge.

Mr. Cormac Cunningham:

No, that is not the case.

Pat O'Neill (Fine Gael)
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I am referring to quality and quality assurance.

Mr. Cormac Cunningham:

Is that to say I do not carry out a quality assurance audit on my farms?

Pat O'Neill (Fine Gael)
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I am not saying that.

Mr. Cormac Cunningham:

We do. We carry out a quality assurance audit on our farmers. There are minimum standards within the EU and they are rather high. The same minimum standards apply to liquid milk. If one were to go to a manufacturing milk farmer one would find in the majority of cases that the set-up is just as good and the standards are just as high. Do we insist on the same high standards of manufacturing farmers? Of course we do. The milk those farmers get to us cannot be shoddy in any way. We cannot accept that claim. Given the shelf-life we put on our product, we have to get high-quality milk. If there was any differentiation between the quality of the milk been produced by manufacturing milk farmers in the South, obviously we would not want to use it, but there is no difference.

This relates to the question from Deputy Barry about liquid milk farmers and how they are very concerned about liquid milk and all the supposedly cheap liquid milk coming from the North that is affecting their market. I have pointed out that already, a significant number of them are being paid the full liquid premium, which I am perfectly happy about and I do not have a problem with that. However, the milk is not being used for liquid at all. The idea that there could be a scarcity of milk makes no sense when the country is awash with the stuff. There is loads of milk that can be used for liquid. Will there be a scarcity in the winter months? If they want to pay a liquid premium to the manufacturers farmers, they will have more milk than they will know what to do with. Even if they do not, the milk is still here and it is of the right quality. It is available and it can be used to go into any market anywhere in the EU.

There were a number of questions about herd size. Was the first question about how much we pay?

Andrew Doyle (Wicklow, Fine Gael)
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No. The first question from Deputy Deering was the amount invested in processing plant. The second question was about the average size of the cow herd and the number of producers.

Mr. Cormac Cunningham:

Investment in plant is an ongoing thing. It is not that we simply decided to put up the facility we have now. During the past ten years, to replace what we have-----

Pat Deering (Carlow-Kilkenny, Fine Gael)
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The point I was getting at was that there has been ongoing serious investment in processing plants in the South. They are planning for the Harvest 2020 initiative, the ending of quotas and so on. There does not seem to be the same type of investment elsewhere, in Strathroy Dairy and other processing plants in the North, although perhaps I am wrong to say that. That would lead to a rather uneven playing field.

Mr. Cormac Cunningham:

It is not an uneven playing field. As Deputy Deering stated, there is a good deal of investment going on down here and much of that has been financed by the Government. There is also a good deal of investment by us as well. I invite anyone in the committee to come to see the investment we have made in our plant. The extra investment and expansion we have made over the years guarantees for our customers the quality and origin of the milk we are processing.

The other question was about herd size. Was the question about the herd size of the farmers supplying us or the herd size on average in the North?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I asked about the herd size of farmers supplying Strathroy Dairy.

Mr. Cormac Cunningham:

I am guessing off the top of my head but I suppose the biggest herd would be approximately 600 cows and the smallest would be approximately between 90 and 100 cows. The average is probably 200. That is only a guess, I have not worked it out.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Is it fair to say that Strathroy Dairy is dealing more with the factory-type farmer?

Mr. Cormac Cunningham:

No, I completely disagree with the use of that term. I am a dairy farmer myself. I milk a couple of hundred cows. The last word I would use to describe the system I run on my farm is "factory". It is the furthest thing from it. Deputy Deering is a farmer himself. It is not a word I would bandy about pejoratively.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I use that phrase because of the size involved.

Mr. Cormac Cunningham:

There is an idea that with scale comes a fall-off in welfare. I do not accept it. In theory it can happen but I could take the Deputy onto some small farms that I have visited. In the past I was an inspector and went on to do quality audits on farms for a company in Monaghan Co-op. I was on farms where the quality standards were far from those on some of the bigger farms. Size is not an indication of quality, as the Deputy well knows.

People who win the quality prizes are often very small farmers but people who have won the national quality prizes-----

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I am not questioning the quality. There is no question about that. My point is that where there is scale size, the bigger numbers one has, the better one is able to take a knock, literally.

Mr. Cormac Cunningham:

In the past 12 months one farmer told me that every four legs on the ground, including the dog, is costing his money. There was no money to be made. That was not because of Strathroy or the imports that the Deputy spoke about. He asked if we have suppliers in every county. Not directly but we buy milk from Lakeland and Aurivo whose networks stretch away into the South and they supply milk to us. It used to be Connacht Gold. We buy milk from many counties, some directly, some indirectly. At the moment we buy directly from Donegal. There are farmers who have sent in notice and hopefully that milk will be supplied to us on 1 January. That is if they go through with their applications to supply milk.

Mr. Ruairí Cunningham:

We placed advertisements in the Irish Farmers' Journal and got a massive response. I think many of the Deputy’s constituents wrote in to see if they could move their supplies to us. There was a huge response from Cork and we wondered how this would work. I said ultimately the farmer will pay for the haulage. Despite that they came back saying, “What if we put the tanker on the road and get the milk to Omagh will you take it off us?” There is scaremongering and people say they are worried about Strathroy, that we are going to thrash the market. If we do not pay farmers a decent price they will not come to us in the first place or will not stay. We have not been in the milk business for 150 years by taking short-term measures or cutting corners. We do not do that. We do the job right. In response to the question about how we do it. We do it better. It is as simple as that.

Mr. Cormac Cunningham:

I would turn that question on its head and say how come there is so much scope in the price that Glanbia cannot take it from the man next door and compete with us? How can we come all the way down, lift this milk, bring it up, process it and cart it the whole way down again and still manage to make a margin on it? I can assure the Deputy we can. We did not come up the Strule in a bubble as they say in Omagh. We are serious businessmen. We take our job and the livelihoods of our families and farmers very seriously. We do not want to put any of that at risk. We are in business and of course there are risks but we are very good at what we do. For the third time I invite the committee to come to see what we do. A huge number of farmers from the South have come through because of the advertisement. One of the first things they ask when they walk through the offices and the plant is where are all the people. We have a very happy contented staff, who work very well. There are very few of them.

I have walked around many dairy plants. Day and daily I walk through other dairy farms and there is huge scope in all of them, including our own, to be more efficient. At the minute, we believe that we have the most efficient plant on the island when it comes to processing liquid milk. That brings it back to the idea of investment and whether we should build another plant. We all know that the dairy industry will change when quotas go and in theory there could be an awful lot more milk but at the same time there are too many plants. For everybody’s benefit it is better to have fewer plants because it brings obvious efficiencies of scale, which is where I would use the word factory. Is it not more sensible on the island to have a significant manufacturing plant in the north and another in the south to manufacture liquid milk? This is not something that I alone propose but it has been proposed before now by independent industry commentators.

Mr. Ruairí Cunningham:

I agree with Deputy Deering that the percentage of the ultimate retail price that the farmer gets has fallen off. Cormac sits in the board room and shouts, “More money for the farmer”. We agree with that and we pay a better price than many other co-ops in the South or anywhere on the island but we are businessmen. The Deputy asked about retailer power. That is why the White Paper produced by this committee was very interesting reading. We agree with that. The retailers have too much power. They make too much margin. I am not going to sit here and knife myself by saying something silly. Everyone knows that is a fact. If the White Paper offered a way to wrest some power from the retailer and bringing more back to the producer and maybe a bit to the processor we would be all for it.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Would some retailers regularly use Strathroy milk as a loss leader?

Mr. Cormac Cunningham:

No is the first answer but the second answer is that we have no control over that. Quite often when we sell milk we sell it on an annual basis and the price is fixed. Unfortunately, we have no control over what the retailer does with it after he gets it. It creates serious havoc for us because as the Deputy says one can lift the label and see the UK mark. Every dairy product processing plant anywhere in Europe has its individual stamp. Ours says UK but it also says NI. If the Deputy looks closely he will know that it comes from that region so it can be traced back to us.

The retailers can make whatever decision they want. Quite often they say that they will run three or four promotions a year, each of which will last a week or a fortnight. They do not come back to us to say they are running a promotion for two weeks and ask us to give them the milk cheaper. It does not work that way. It is their product. They bought it at a price, and can do what they want with it. Unfortunately, that is the control they have over it, which is fair enough. If one buys a car and wants to drive it into a tree one can do so.

Andrew Doyle (Wicklow, Fine Gael)
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There was a question from Senator Comiskey about the percentage of the overall supply sourced from the Republic of Ireland.

Mr. Cormac Cunningham:

That is a good question. In total between Lakeland-----

Mr. Ruairí Cunningham:

I will work it out.

Mr. Cormac Cunningham:

We will come back to the Senator on that one.

Andrew Doyle (Wicklow, Fine Gael)
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I have a batch of questions. Deputy Barry asked about the price differential between NDC and non-NDC labelled milk. He made the comment, I am not sure if it was a question.

Mr. Cormac Cunningham:

The question was why is it dearer. I am not sure. If the money went back to the farmer I could understand but it is not. I do not think that it is dearer. The Senator must be unfortunate in the shops in which he buys it.

Tom Barry (Cork East, Fine Gael)
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Not particularly.

Mr. Ruairí Cunningham:

Tesco's own brand carries the NDC logo. It charges €1.49 for 2 litres. That is as low as one will get here. All own label milk is sold at €1.49.

Mr. Cormac Cunningham:

Liquid milk premium is fixed, irrespective of what happens to the milk. As I said before, half of it does not go into liquid it goes into manufacturing. If there was a direct connection between the price the farmer received and the label I could see a reason for farmers wanting to support it but there is no guarantee. There is nothing set in stone that says if one puts NDC on the label one must sell it at a fixed price or a premium and return it to the farmer. I have often, as a dairy farmer, had the idea of a "fair price for farmers" stamp to go on a carton, no matter where it was produced. It would guarantee to the consumer that a fair price was being returned to the primary producer. We are singing off the same hymn sheet.

Tom Barry (Cork East, Fine Gael)
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We would all like to see the price going back to the primary producer. Other tricks are being played now. Two litre cartons are being reduced to 1.75 litres but the price is the same. There is a lot of jiggery-pokery going on.

Mr. Ruairí Cunningham:

I totally agree. They have reduced the volume but are trying to hit the price point.

If, say, a brand was retailing at €2.19, the decision might be taken take a quarter of a litre out and see how the product does at the €1.99 price point. It is a question of trying to hit a specific price point rather than seeking to pull the wool over anybody's eyes. However, we all must acknowledge that consumers are smart. With that in mind, we have chosen not to go down that particular road; we give consumers the credit they deserve.

Andrew Doyle (Wicklow, Fine Gael)
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Deputy Tom Barry asked whether there is a milk war going on in Northern Ireland.

Mr. Cormac Cunningham:

Not that I aware of anything like that. Certainly, there is no milk war in the shops. On the supply side, on the other hand, there is something of a war going on to secure direct supply. Several new buyers have come into the market, including Finn Valley Co-op and others. Competition is good for everybody and farmers are gaining from it.

Tom Barry (Cork East, Fine Gael)
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In regard to competition for supply, it occurs to me that Strathroy Dairy needs a secure supply if it is to remain the most efficient plant in the country. Without throughput, one cannot be the most efficient. My concern is that the current milk war on the supply side is merely a temporary schmozzle that could well settle down, after which farmers might be left high and dry.

Mr. Cormac Cunningham:

The first point to make is that there is no shortage of milk on this island.

Tom Barry (Cork East, Fine Gael)
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We have been told differently, namely, that this is an issue at certain times of the year. Perhaps the Chairman will offer clarification on that point?

Andrew Doyle (Wicklow, Fine Gael)
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The concern has been expressed that in the months of January and February, because of the cost of production, the security of fresh milk supply would not be certain.

Mr. Cormac Cunningham:

In the South there is certainly an element of summertime production outweighing production in the winter; the ration is as high as 40:1 on certain farms. In our case, by comparison, it is fairly flat, the average ratio being probably 1.3:1 or something like that. In short, we are producing milk in the winter. Taking the island as a whole, it might be the case that farmers in the South see that the fellows in the North have decided to invest in the plant and machinery that are required to produce milk in the wintertime as well as the summertime and decided to let them tear away at it while they concentrate on specialising in other areas, such as maximising the output of grass for grazing in the summertime.

My argument is that if quotas go then milk production will rise, in which case the difficulty we will have is not a shortage of milk but how to get it processed in the summertime. What I foresee is that processors will put in incentives to encourage more milk to be produced in the shoulders of the year, because that will ensure the best utilisation of their plants. As a businessman, Deputy Barry will understood that. There will be incentives to produce milk in the shoulders of the year, which will get over - if it ever did become an issue - any shortage milk in the wintertime. We supply the same amount of milk, summer and winter, 12 months of the year. We are obliged to ensure the supplies are there. I have never seen a situation where there was a scarcity of milk for us to buy, anywhere on the island, in January or February.

Tom Barry (Cork East, Fine Gael)
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I would not describe January or February as the shoulders of the year.

Mr. Cormac Cunningham:

I am saying that those months represent the lowest point for production.

Tom Barry (Cork East, Fine Gael)
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I am aware that co-operatives are maximising their processing plants and looking to spill out from the peaks in May right into September.

Mr. Cormac Cunningham:

Yes. My point is that if we look at the island as a whole, rather than narrowing our vision to just the Republic, we cannot really say there is a scarcity of milk. The reality, as we see it, is that there is no scarcity of milk on the island and, moreover, the product is very easily transported.

Tom Barry (Cork East, Fine Gael)
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Would the delegates support a system whereby farmers would received a fixed percentage for their product?

Mr. Cormac Cunningham:

I would be delighted to see that type of system introduced. For us, it would level the playing field in that everybody would be buying milk at the same price. It would be very clear in that situation which plants are the most competitive and efficient.

Mr. Ruairí Cunningham:

Senator Michael Comiskey asked about the percentage of our suppliers who are form the South. At the moment it is 25%. We have been advertising to get farmers, but they have to give their three months notice. We expect more to come on-stream on 1 January and I see the percentage rising to 35% by the start of January. Others have told us they will move once the quota year is over, that is, they will put their notice in for 1 January and move on 1 April. We expect to see the percentage getting up to 50% or so quite quickly. It could go on to rise even higher in future because we are offering a good price.

Andrew Doyle (Wicklow, Fine Gael)
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Is Mr. Cunningham referring specifically to his plant?

Mr. Ruairí Cunningham:

Yes. Deputy Tom Barry referred to comments made by Ian Potter. I agree that what he said was slightly sensationalist, but it was put out there in order to show the risks. That is not what we are saying; it is what he is saying. There is probably an element of scaremongering in it, but it should be taken in the context of what others are saying that on beef and chicken blogs and so on. It all points to a potentially huge risk there to the entire agricultural export industry. It is certainly too great a risk to take for the benefit of what is a very small group of farmers. The industry is too large to make that type of risk worthy it. A significant portion of the recovery this island badly needs will be based on exports, particularly from the food industry, as has been well documented. The National Dairy Council campaign could jeopardise that and, on that basis, it is misguided and wrong.

Mr. Cormac Cunningham:

There have been references to opening the floodgates, milk flooding in and so on. In actuality, the floodgates are open in both directions. For instance, some 10,000 pigs which come from the South are processed every week in the North. Any barrier to trade creates huge difficulties for everybody. I am primarily a dairy farmer but I also have bull calves which I sell. For the past three years a farmer in Donegal has come and bought every single bull calf born on my farm. It was a great relationship. I telephoned him in October when the cow started to calve to ask him how he was fixed. He told me he had a difficulty in that, because the calves from my farm were now classed as nomads, there would be a problem with getting them slaughtered. Farmers in the west of Ireland will be aware that the numbers of Northern buyers around the mart rings have gone way down because of this nomads issue.

Farmers in the Republic are worried about milk from the North flooding the market in the South. The reality, however, is that agricultural trade on this island does not pay any cognisance to the Border. I have two Dairymaster milking parlours which are manufactured in Kerry. I am on my fourth Keenan feeding wagon, also manufactured in the South. Keenan does not have a difficulty with its feeding wagons being sold to buyers in the North. So many products can potentially be impacted if we take a small, narrow-minded view on the way in which agricultural products are produced, processed and marketed on this island, to the detriment of everybody.

Susan O'Keeffe (Labour)
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Can the delegates put a price on the financial loss arising to their business as a result of the NDC campaign? Given that the council is funded by industry, what do they envisage the committee doing for them, apart from grilling them to pieces?

Pat O'Neill (Fine Gael)
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Do the delegates supply British retailers from their plant in Northern Ireland?

Mr. Cormac Cunningham:

No.

Pat O'Neill (Fine Gael)
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I understand Mr. Cormac Cunningham is an active farmer, while Mr. Ruairí Cunningham seems to be less active. Can they tell us what margins the supermarkets are taking from both suppliers and manufacturers? That information would be very useful to the committee.

Their claim that farmers, even in Cork, are prepared to hire a tanker to bring the milk to the North is interesting. Is this milk that would be over quota in the Republic?

Mr. Cormac Cunningham:

No, it is completely legal.

Pat O'Neill (Fine Gael)
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In that case, the milk will still count towards the farmer's quota in the Republic. Is Strathroy Dairy fulfilling the registration requirements in that regard?

Mr. Cormac Cunningham:

Yes, we are registered milk purchasers in the Republic.

Pat O'Neill (Fine Gael)
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I acknowledge that. However, we are hearing stories of milk being transported at night to Northern Ireland.

Mr. Cormac Cunningham:

I can assure the Senator they are not just stories; I am also hearing about such happenings.

Pat O'Neill (Fine Gael)
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Is it true?

Mr. Cormac Cunningham:

I can show the Senator a text I sent to my farmers warning them about it.

Pat O'Neill (Fine Gael)
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Is it true?

Mr. Cormac Cunningham:

Of course it is happening.

Andrew Doyle (Wicklow, Fine Gael)
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I gave the notice regarding privilege. An allegation has been made and Mr. Cormac Cunningham has said, "Of course it is happening" but nobody has categoric evidence of that. Therefore that is a matter for another day.

Pat O'Neill (Fine Gael)
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We can take Mr. Cormac's Cunningham's word on that.

Andrew Doyle (Wicklow, Fine Gael)
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No. The point was made. That is an illegal activity. Unless people have proof they would be better off keeping their opinions to themselves.

Pat O'Neill (Fine Gael)
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I just asked the question. Can Mr. Cormac Cunningham give us the margin that the supermarkets are taking?

Andrew Doyle (Wicklow, Fine Gael)
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I will come back to the Senator. Questions have already been banked to the witnesses and it is now over to them.

Mr. Ruairí Cunningham:

To which question should I respond first?

Susan O'Keeffe (Labour)
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I asked if there is a price tag on the loss of business to the witnesses, if there has been such a loss.

Mr. Ruairí Cunningham:

We have not gone down that route because, as we said earlier, if the NDC campaign is ultimately successful and we are kicked out of the market, it will be definitely and we will go down the legal route. We are not down here to ask the committee to help us. We are big enough, long enough in the business and good enough at it to look after ourselves. Admittedly, it has cost us millions but that is the cost of doing business. We are going to move on but all we want is a level playing field.

Susan O'Keeffe (Labour)
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So it has cost the witnesses millions.

Mr. Ruairí Cunningham:

It has.

Susan O'Keeffe (Labour)
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Is the figure €4 million or €24 million? I am not being smart, it is just that I do not know the figure.

Mr. Ruairí Cunningham:

I would think it is at the lower end of the scale. If I had a cigarette box I could do the calculation. It is not €24 million.

Susan O'Keeffe (Labour)
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On the face of it-----

Mr. Ruairí Cunningham:

We have not calculated it but it is a substantial sum of money.

Susan O'Keeffe (Labour)
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My second question was-----

Mr. Cormac Cunningham:

The Senator's second question was why are we here.

Susan O'Keeffe (Labour)
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Yes.

Mr. Cormac Cunningham:

Looking at it from the outside, we considered how successful the Bord Bia campaigns have been. I was at a recent Alltech conference in Dublin at which the Bord Bia representative talked about the different campaigns Bord Bia has launched, how successful they have been and the image that portrays. The dairy product Bord Bia does not cover, unfortunately, is milk. Bord Bia's ideas have been well thought through and very well implemented because there has been a consensus of opinion. The Government and the committee have clearly been included in how it runs its affairs. The NDC, on the other hand, does not come under those controls and as a result it is causing great difficulties in terms of the milk market. It is running roughshod around the place and causing the difficulties we are experiencing now. The committee might not want to take Ian Potter as a good example but what he has said are the kinds of things that have been written about Irish milk and Irish dairy products; this is creating confusion and it could be doing serious harm to the good work being done by Bord Bia. If it brought milk in under the same banner perhaps it would solve the problem and the NDC would be able to go off and spend its money on something else.

Andrew Doyle (Wicklow, Fine Gael)
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Senator O'Neill asked about the margins.

Mr. Cormac Cunningham:

I will give a one word answer to that question, it is "No".

Pat O'Neill (Fine Gael)
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Mr. Cormac Cunningham will not give us the margins.

Mr. Cormac Cunningham:

Would the Senator expect me to do so?

Pat O'Neill (Fine Gael)
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We have asked everybody.

Mr. Ruairí Cunningham:

In the context of the "white paper" referred to in the committee, I can understand that it would do a lot of good. As I stated, I would be delighted if a little bit of power was wrestled from the retailers and the producer got more and the processor also got a little bit more.

As regards the percentage-----

Pat O'Neill (Fine Gael)
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The witnesses said that the retailers are getting the biggest margin.

Mr. Cormac Cunningham:

Without the shadow of a doubt.

Pat O'Neill (Fine Gael)
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We will get there yet.

Andrew Doyle (Wicklow, Fine Gael)
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I have been at this since 2008.

Susan O'Keeffe (Labour)
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I have never known anything to give a margin.

Andrew Doyle (Wicklow, Fine Gael)
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I want to bring the discussion to a conclusion. It was Deputy Ferris who requested that we invite the witnesses to make a presentation before the committee. Another member asked where are we going with this to which I replied that we are not quite sure until we start to delve into it, which is probably dangerous. One of concerns following on from the report - or "white paper" as witnesses called it - we published was that there is so much unknown and so much that seems to be going on with regard to the milk market on the island. First, there was a concern as to whether there would be an all year round supply of fresh milk. That may have been an invalid argument or concern, but it was a concern. The second concern related to the producers of winter milk where the price being paid for manufactured milk was equal. Some farmers are set up for winter milk production and such production suits less grass intensive farmland and highland areas that have a colder climate. Notwithstanding Deputy Deering's good farm in Carlow, the perception is that a significant number of fresh milk producers have that type of farm set up. There was a concern about the dairy herd size in that the only way farmers have been able to compete has been to consolidate and have bigger operations to achieve efficiencies in production but that does not suit all farmers because of a milking platform and so on. That is where we started off.

The witnesses put up a robust case here today and I would say everybody would agree with it. We will facilitate others, in the way we have facilitated the witnesses, to come before the committee, and the witnesses are welcome to attend the committee again as visitors or watch the proceedings on the lifestream or after the meeting. There will be people who will have a counter argument. The committee will then decide what we want to do in terms of our consideration of this issue but that will be a matter for another day rather than today.

This has been a useful discussion. It is only fair that this committee, as a forum for public discussion, would allow people to give their point of view and it is up to others to make a counter argument if they so wish. I note Deputy Ferris wishes to make a brief comment before I conclude.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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I would like to find out why the National Dairy Council refused to allow its logo be used on the witnesses' product given that it was farmed in the Republic of Ireland.

Andrew Doyle (Wicklow, Fine Gael)
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We will have that discussion internally in our time but the discussion today was more of an exploratory exercise on our own behalf and, in fairness, everybody is entitled to make their case. I thank the witnesses for putting forward their case and in so doing for putting up challenges to the committee and beyond it. I am not an expert in this area but it is fascinating to hear the different arguments.

The term "price war" was mentioned. Senator O'Neill, perhaps tongue in cheek, made a point about milk that is over quota. If any of that is going on it is illegal and people should report it. It is as simple as that. There is a great deal of confusion. We mentioned the report we published that we would favour the idea of a fair trade logo for everybody engaged in production in the food chain. Some small processors and producers are being squeezed in other segments of agrifood production, although not necessarily in milk production because those processors are not generally that small. We will see where we go from here. I thank the members. I am sure the witnesses will have found they were asked fair questions. People are trying to get to the bottom of this. I thank the witnesses for coming down.

The Department of Agriculture, Food and the Marine has to confirm a date to brief us on the Common Agricultural Policy.