Mr. Cormac Healy:

I thank the committee for the invitation to present here. Members have copies of my presentation. Given the time, I will try to proceed through it as quickly as possible, but I would like to cover it all. I will look at where we are now, the performance of the industry over recent years, the market situation, market specifications - particularly the young bull issue, which has already been discussed here - some of the real threats and challenges facing the sector, about which we need to talk, and some conclusions.

There has been much talk about Food Harvest 2020. We firmly believe much has been done in moving towards achieving those targets. As Mr. Fitzgerald said, finished cattle prices in Ireland have increased by approximately 40% over the last four years. That is a significant delivery on price from the market. Cumulatively, it is worth an additional €1.5 billion to Irish beef finishers over the last number of years. Today, despite weakening in the market due to market conditions, overall prices in Ireland remain over the European average price. When one takes all categories, including steers, heifers, cows and young bulls, and the mix of slaughters, we are at approximately 107% of the European average price.

We have the third highest steer and cow prices in Europe and we are at the top end of the price table. The heifer price in Ireland is fifth highest in Europe. As Mr. Fitzgerald stated, our exports last year topped €2.1 billion, which represents a 35% increase in export values since 2010 in year-on-year growth. Another important parameter is that we have built and expanded the quality assurance scheme to a stage at which it now covers 87% of all animals slaughtered.
We are in a good and strong position. There are issues, which I will deal with later, but overall this is a business in the economy which has functioned well in recent years. The graph on this slide shows exports, and I do not need to dwell on it because I have spoken about them. Ireland exports 90% of what the beef sector produces. Our export dependency is a far different dynamic from any other beef market in Europe and poses a challenge in terms of delivering on price, as we do not have a substantial domestic market to underpin prices.
It is important that we set out again the performance in recent years. The industry has achieved much in the past decade. Irish beef is now listed with more retail chains than beef of any other origin in the world. This is stated by Bord Bia and is delivered by an industry that has invested heavily in marketing, feet on the streets, doing business with retail chains and delivering the business. The sector has developed into a fresh chilled supplier of beef throughout the European market, which has taken a significant amount of investment. It involves a significant number of jobs in the Irish economy.
The graph on this slide shows the continuous growth in sale penetration to retail chains throughout Europe over the past decade. This has been happening since early 2000 and has meant a continuous increase in price over the past decade. There were ups and downs along the way. At one point in 2005 and 2006, imported meat from South America had a significant impact on the market. There was also a major sterling shock to the system, which affected many aspects of the economy, but the overall Irish food economy was affected by its heavy reliance on the UK market. The sector has delivered on price and in the past three or four years the price has gone from €3 per kilo to €4 per kilo. This Bord Bia graph shows a stepped movement of prices on a continuous upward trend in recent years.
That said, prices have weakened since Christmas, and we need to examine the reasons behind this. I hope committee members have a copy of my presentation document because the text on the slides is small from this distance. I will run through some of the key factors at play in the European beef marketplace. In recent years, consumption has been under pressure throughout Europe and in some of the key markets. We must remember that in many of the markets we serve there is still an economic downturn, and economic crisis is not just an Irish phenomenon. This has had an impact on consumer spending decisions.
In recent weeks there has been little promotional activity in beef retail because of its relative price versus other meats. The manufacturing beef trade throughout Europe continues to be quite weak. The committee may not be familiar with the fact that for the past six weeks no pork or pigmeat has been exported from Europe to Russia because of a ban imposed on 26 January. We are starting to see greater volumes of pigmeat in the European market because of this overnight ban and restriction on exports to Russia. This means beef processing companies have rising stock levels. The processing of cattle on a weekly basis does not result in all of the product moving, because of these difficulties in the marketplace. That said, Irish cattle slaughtering has increased by approximately 7% in the year to date. Last year European production declined but this year it has increased. This does not just affect Ireland; information from the UK beef marketing organisation shows a continuous decline in UK cattle prices in October.
The next slide shows the production levels and forecasts for beef throughout Europe. Last year beef production declined by just over 2% in Europe, which was a help in the overall market as there was less beef in the system. A 1.1% increase is forecast in beef this year in the European market. As I stated, the economic crisis has had an impact on consumption in many member states. After a significant fall last year a stabilisation in consumption has been forecast. I will go through some of the individual markets which are important to us. In 2013, consumption at retail level in the Irish market fell by 5%; the British market decreased by 3%; the French market decreased by 4%; the German market decreased by 1.5%; the Spanish market decreased by 4%; and the Italian market decreased by almost 4%. This is the reality of retail beef sales. Since Christmas there has been significant pressure on consumption levels.
The next slide shows the UK retail market. The overall volume of sales decreased by approximately 3% last year. This varied across the various categories of meat. The next slide shows information from the beef marketing agency in the UK on mince sales. More than 50% of beef sold at retail in the UK is in mince form. The graph shows a decline in consumption up to January. A comment published in the UK Farmers Weeklyat the end of February stated that low consumer demand for beef was holding back the market, as rising beef prices in recent years had turned some people to other meats. This is a factor in what is happening in the marketplace. As Mr. Fitzgerald stated, the Irish industry has delivered price increases. This graph shows an Irish steer price versus the continental price. It excludes the British price, but this information is in the documentation provided to committee members. The UK price is above the Irish price and the Irish price is above European prices. As I stated earlier, we export 90% of the beef we produce.
There has been considerable talk about market specification in recent weeks. Steer heifer grass-fed beef is our unique selling point. It is what our largest market, the UK, requires and what gives us our point of difference in European markets. This has been the clear message not only from the industry but from consumers and our key customers throughout Europe.

These issues were highlighted in the Food Harvest 2020 report and the subsequent report of the beef activation group. It was clearly stated in these reports that the industry saw itself developing and moving forward on the basis of steer heifer beef and comments to the effect that the industry has driven a bull beef production system in Ireland are inaccurate.
After the publication of the Food Harvest 2020 report, the industry introduced a quality payments system, about which we talked to the committee several years ago. It is a system that offers bonuses and tries to reward quality beef production from the suckler herd. At the time, an in-spec bonus was introduced, which was increased last year, ultimately to drive a focus on specification and producer take-up of the quality assurance scheme which the marketplace was demanding.
The UK specification at retail level for young bulls is less than 16 months. That is the requirement. There are limited opportunities to engage in young bull production above that age for supply to certain customers in the European market. It is processor-specific, depending on their customer portfolio. Therefore, our consistent message on bull beef production has been and continues to be that if producing outside the generic specification, one must do so in conjunction with a processor. That has always been the case and many producers are doing this successfully.
The final point on specification is that the industry will publish in the near future further confirmation of what it believes is the best way forward for the beef sector. Delivery on price, securing retail markets and the achievement of a premium in the European market for Irish beef will not be achieved unless we deliver what the consumer requires. We intend to publish further clarification about what the specifications are, but they do not include anything that is significantly different from what has been said.
With regard to young bulls, the industry met the new IFA president and his team at the end of January and we discussed issues that were of concern at the time. One of the main issues was young bulls and young bull slaughterings, on which the industry has responded. The young bull kill has increased from 4,000 head per week in the early weeks of January to 5,500 and in the past four weeks to 6,500. Last week there were 18% more young bulls killed than in the same week last year. The industry has responded to the calls from farm leaders and subsequent to our meeting with the Minister, Deputy Simon Coveney.
Obviously, there are concerns about current market challenges. That is understandable and accepted, but we must base them on what is happening and also be cognisant that there has been a very good performance. However, there are challenges and threats to the sector, to which we hope the committee will turn its attention very soon, as it has done in the past. The key one is the ongoing discussions at EU level on bilateral trade deals. They include the trade deal concluded with Canada at the end of last year, although there are outstanding issues and we are working with the Department and our European colleagues to try to address them. There is an ongoing discussion with the United States and there is talk that the Mercosur talks will be back on track. All of these present a significant threat and the farm organisations will have referred to them also. They present a real threat because of the potential for significant volumes of beef to come onto the market at considerably lower prices than European prices. We have spoken to the committee previously about that issue, but we believe our attention must be focused on it at present because there are many movements in that regard.
The other challenge we would highlight is the continual drive for on-farm efficiency. The industry has delivered and will stand by its record in delivering on price. It has had to meet very significant challenges. I referred to the sterling crisis, in which the currency changed against us by 30%. The industry has had to take serious measures in terms of its efficiency in processing and the delivery of product to the market and there is still more ground to be made up at farm level. The industry has been involved in work with Teagasc and other organisations, including the Irish Farmers' Journal, to examine what can be achieved from beef enterprises. Some very good results have been achieved, including some significant gross margins per hectare, through a focus on output, costs and grass utilisation, on which more progress can be made.
Overall, the beef processing industry has delivered strongly on marketing and marketing performance in the past decade. It has transformed from a frozen commodity business to a fresh chill business and delivered on price. The price has moved from approximately €2.30 per kg at the beginning of the decade to €4 per kg now; therefore, it is undeniable that there has been delivery on price. There is a weakening in the market, but that is due to market conditions which are largely driven by weaker demand. In-spec and producing animals to specification are essential and will be the single way to deliver the best returns. The industry has responded to concerns raised about the backlog in the processing of young bulls and acted on them. Given the platform that has been built and the penetration of Irish beef across UK and European markets and, I hope, in ensuring no significantly damaging trade deals are made, the future is positive and the industry and the sector will deliver on their Food Harvest 2020 targets. We also welcome the fact that the Minister has announced a genomics programme with support targeted towards the beef suckler herd and that matters regarding the CAP have been concluded. The industry would also state it has delivered in terms of a cumulative figure of €1.5 billion for beef producers in recent years in higher prices. Working from this, there is a positive future, although we must be conscious of the threats in respect of trade deals and the challenges in terms of on-farm productivity levels.