Mr. Eddie Downey:

In the coming years I look forward to working with the Chairman and members of the joint committee. It was good to see so many of the members outside when we held a protest earlier. There were 3,000 farmers on the streets, which demonstrates the real extent of anger and frustration among them about what is happening in the beef sector and what has happened since the beginning of the year.

Beef price cuts and specification changes at factory level are seriously eroding confidence in the sector and threatening to derail the Government’s Food Harvest 2020 plan for the €2 billion beef and livestock sector. At farm level, the price cuts and specification changes will hit all livestock producers over time. Winter finishers, particularly bull beef finishers, are in the eye of the storm. Some bull beef finishers are at their wit’s end and unable to have cattle killed. When cattle are killed, farmers are facing price cuts of over 50 cent per kilogram, which can amount to between €200 and €300 per head. Some producers are facing very real and substantial financial losses this spring.

I would like to go through some of the details of what has happened in the beef sector and how circumstances have changed in the past year. First, cattle prices are well down, at levels at which winter finishers cannot make a margin. Based on official Bord Bia data, compared to this time last year steer prices are down 21 cent per kilogram, or €77 per head. Heifer prices are down 26 cent per kilogram, or €80 per head. Bull beef and cow prices have taken much larger hits. Cow prices are back 56 cent per kilogram, or €174 per head. Bull beef prices have decreased by an average of 55 cent per kilogram, or €204 per head.

Let me put the magnitude of these price cuts in perspective. If they were to be maintained for a full year, the losses to the beef sector would be in the order of €172 million per annum. In addition to the price cuts, the factories have moved very substantially on specification changes without giving producers adequate notice or time to make adjustments to their stock.

On bulls, the factories have introduced age and weight limits. Bulls over 16 months of age or over 400 kg, or both, are now hit with price penalties. Most of the factories have stated they do not really want bulls. They would prefer to take steers or heifers, considering that the kill moved from just over 100,000 head in 2007-08 to over 200,000 in 2012. It was the factories that developed this trade with the producers. In 2011 factories strongly encouraged farmers not to export their dairy calves and to keep them for bull beef. Farmers responded and now they cannot have their bulls killed, let alone get a viable price.

Farmers have been let down and believe the factories have reneged on their commitments. Farmers increased their production of bull beef as part of the Food Harvest 2020 plan and in conjunction with the State advisory service, Teagasc. Bull beef production was promoted based on efficiency and performance. The Derrypatrick suckler herd in Grange, County Meath was developed using an 18 month old bull beef system, with the meat factories involved. A key element of the Food Harvest 2020 plan was to increase the beef kill from 30,000 per week to 40,000. The kill is 31,000 to 32,000 per week and factories are telling farmers they are not able to kill their cattle and are pushing stock intake back several weeks. In many cases, because of these delays, farmers are getting caught by age and weight limits and incurring very severe financial penalties of another 20 cent to 50 cent per kilogram.

The most recent move by the factories to target prime in-spec steers and heifers with new price and weight cuts, following their meeting with the Minister, Deputy Simon Coveney, was a step too far and shows disregard for both the Minister and farmer suppliers. The steer and heifer price was reasonably stable since Christmas, at €4 per kilogram for steers and €4.10 per kilogram for heifers. Prices have now been cut to €3.95 per kilogram for steers and €4 per kilogram for heifers. In addition, some factories have introduced a weight penalty of 20 cent per kilogram on any animal over 400 kg. Others are using dual base prices using the quality payment system for stock over 30 months. None of these conditions was part of the quality payment system. Winter finishers simply cannot endure such losses. The time has come for the Minister to stand up for farmers and reject the factories’ tactics. He must insist on stability and confidence being restored in the beef sector.

The reality is that there is good market demand for in-spec steers and heifers. There is no excuse for factories not maintaining the base prices of €4 per kilogram for steers and €4.10 per kilogram for heifers. In our main export market for steers and heifers in the United Kingdom, Bord Bia reports the R grade steer price is the equivalent of €4.69 per kg and that the R grade heifer price is at €4.66 per kg. For the average steer, UK prices are €250 per head over Irish prices. For heifers, the gap is €163 per head. The gap between prices in Ireland and those in our main export market where half of all our beef is sold is way too large and must be narrowed. At these price levels, in our largest export market it is very difficult for farmers to understand why prices have come back so much in Ireland.

In our main European markets cattle prices are reasonably stable. In Italy R grade male animals are making the equivalent of €4.24 per kilogram, including VAT, which is down 1.5% on last year. In France R grade male animals are making €4.12 per kilogram, including VAT, which is the same price as last year. In Germany R grade male animals are making €4.02 per kilogram, including VAT, which is down just 7% on last year. In Spain R grade bulls are making €4.10 per kilogram, including VAT, which represents the same level as last year. In general, cattle prices across the main European markets are stable, at slightly over €4 per kilogram.

Since problems first began to emerge with beef prices last December, the IFA moved and met representatives of the meat plants at local level in early January, outlining the losses at farm level, demanding price stability and a move on the backlog of bulls. In late January, after our AGM, the IFA met Meat Industry Ireland and senior factory management to demand a halt in the price cuts and an increase in the kill to shift any backlog of bulls. Following that meeting, the bull kill increased slightly, but the continuing price drops and specification changes were totally unacceptable. In mid-February 1,500 farmers protested on the cattle price issue outside a number of the main processing plants in counties Meath, Waterford and Tipperary. The IFA subsequently called on the Minister to call in representatives of the factories and challenge them on their commitment to pay a viable cattle price to farmers.

The IFA met the Minister, Deputy Coveney, and made it clear that if cattle prices are not stabilised, the current crisis has the potential to totally derail the Food Harvest 2020 plan for the €2 billion beef and livestock sector. We also made it clear that it is not acceptable to farmers that the Minister would consider he had little or no role with regard to factories on cattle prices, as he had outlined in the Dáil.
The Minister met the representatives of the factories on Thursday, 20 February. On Monday, 24 February, the factories reduced the price for steers, heifers, bulls and cows again. This is clear from the official Department of Agriculture, Food and the Marine price reports printed in last week's Irish Farmers’ Journal. These figures show that the price of all four categories of stock came back by between 1 cent and 7 cent per kilo on the week.
IFA is demanding that the Minister take immediate action to restore some confidence in the beef trade at farm level. The Minister needs to challenge the factories head-on, on the price and specification issues. He must stand up for farmers and make it crystal clear to the factories that the price cuts must stop. The factories need to send a positive signal that beef prices have bottomed out and will not fall further. In addition, the factories have to send a clear signal to their suppliers that the price of in-spec steers and heifers will not come under further attack and will improve over the spring period.
The factories and their supermarket clients cannot change the goalposts with new specifications in the middle of the production season. At this point, farmers calving cows or buying cattle this spring are at a loss as to the direction they should take. There needs to be real debate and analysis on the specification and the direction in which we want to take our grass-based beef production in Ireland.
The Minister must bring Teagasc, An Bord Bia, the ICBF, the factories and, most importantly, the farmers around the table on this issue. Under-16-month bull beef production does not work in a grass-based system. Tight carcass weights will leave our already under-pressure suckler cow sector uneconomical. The Minister must also tackle the lack of competition in the beef sector and take action to close the large price gap between Irish beef prices and those of our main export market in Great Britain.
We have worked hard to secure a new ferry route for live cattle to the United Kingdom. We now need the Minister to remove the artificial blocks preventing the expansion of the live trade to the United Kingdom, including addressing the labelling difficulties. This is a market access issue which is preventing the proper operation of the EU Single Market.
It has also hit the important store trade with Northern Ireland, affecting the mart trade and suckler farmers all across the west and the midlands. The Minister and Bord Bia need go to the United Kingdom and meet the supermarket bosses and their Government and agency counterparts to resolve these difficulties. Doing nothing is no longer acceptable. The large price gap between Irish and United Kingdom cattle prices must be closed. It is not acceptable that Irish cattle are being blocked out of part of the EU Single Market. The Minister must also become an advocate for the live export trade to European and other markets. By doing so, he will improve price competition and increase market outlets. Farmers believe a strong live export trade for Friesian calves to Spain and Holland, weanlings to continental EU markets and stores to North Africa are essential to keep a competitive balance in the trade.
Farmers are concerned that factories are being allowed use the Department of Agriculture, Food and the Marine animal identification and movement, AIM, system database to monitor livestock numbers for individual farmers. The IFA wants a guarantee from the Minister that the AIM system is absolutely confidential and that factories do not have access to the herd profiles of individual farmers.
Action from the Minister to restore confidence in the beef sector is urgent and essential. If the problems in the beef market are not addressed and prices are not stabilised quickly, the sector faces wider implications, particularly regarding the targets set down in Food Harvest 2020, including exports and jobs. As previously outlined, the price cuts alone will cost €172 million over a full year. The suckler herd is under severe pressure and the price cuts and specification limits will ultimately hit weanling and store prices, and compound this situation. The Minister made a positive investment of €52 million per annum with the new €80-per-cow beef genomics scheme for sucklers. We cannot allow the benefits of this investment to be totally undermined by price cuts and specification changes. Our suckler herd must be maintained and the factories must invest in this also. The fallout from the current difficulties has left winter finishers in a difficult position financially. Winter finishing and year-round beef production is essential to service the higher-priced retail contracts.
The recent market developments have left farmers sceptical about the industry's expansion plans for beef. The minute the beef kill goes over 30,000 head per week, the price seems to collapse. Any further expansion in the sector must be fully planned.
Factories have to be prepared to provide viable price contracts if there is to be growth in the sector. Otherwise, farmers must be strongly encouraged to export any additional dairy calves live in order to avoid damage to the beef price, as is happening this spring.
We are also demanding that the Minister take action on a number of other important issues affecting the beef sector in the future. The Minister and the Government must strongly defend the beef sector in the current trade negotiations of Transatlantic Trade and Investment Partnership, TTIP, and Mercosur, with the US and Brazil, respectively. He cannot allow beef into our markets from production systems that do not meet European standards. He and the Government must also introduce retail regulation to restore some balance and fairness in the food chain.
The IFA acknowledges the work of the Minister, Deputy Coveney, on opening new markets all around the world. He has driven our Origin Green sustainability programme with Bord Bia. However, the benefits of this work cannot be enjoyed only by a small number of processors and retailers. The development of the sector requires that the benefits of expansion to be shared throughout the entire sector. This must start with a viable cattle price being delivered for farmers.
Over the past while, we have seen the effect of this. The committee should at least listen to farmers this morning on the stress associated with it. It is shocking to see their incomes being decimated and the pressure that they are under. Mr. Henry Burns, our livestock chairman, who is present, has seen at first hand the effect of that and might comment on it.