Mr. Aidan Cotter:

I thank the committee for the invitation to discuss the performance of the Irish beef and livestock sector and the current market environment. I am joined by my colleagues, Mr. Jim O'Toole, director of our meat and livestock division and Mr. Joe Burke, sector manager for beef and livestock.

With the agreement of the committee I will focus in my statement on the recent export performance of the Irish beef and livestock sector and I hope to address some of the issues being experienced as a result of the current more difficult market conditions.

The value of Irish food and drink exports reached nearly €10 billion in 2013. Beef exports accounted for €2.1 billion, representing a 10% increase in value compared with the previous year, following a rise of 5% in output and a similar increase in prices. Bord Bia's marketing strategy for Irish beef is one of repositioning and differentiation by targeting the best customers across Europe. In recent years a growing proportion of Ireland's exports have been destined for higher value retail and food service channels. Irish beef is listed with more than 75 multiple retail chains across EU markets, a higher number than beef from any other origin. Since 2007 this strategy has helped to increase the Irish R3 steer prices as a percentage of the European average, from 92% to 99% to date in 2014. For the year 2013 the Irish price was equivalent to 104% of the EU average price.

Finished cattle supplies in Ireland increased by 7% in 2013 and a similar increase in availability is likely to arise this year. This is a reflection of higher calf registrations in 2012 and no live exports in that year. In recent times beef production across Europe has declined consecutively each year. The volume produced by the EU was estimated to have fallen by 2.2% in 2013 which followed a 4.8% drop in 2012. However, it is envisaged that EU beef availability will recover this year to 2012 levels on account of higher cattle output in several member states. On average, finished cattle prices in Ireland recorded a 5.5% increase in 2013 but this performance was in the main the result of the strong uplift during the first half of last year. After reaching record high levels in June, Irish beef producer prices declined steadily until October. Since then, the average price being paid for steers has remained relatively static.

In general across continental Europe, finished cattle prices in the major beef producing countries deteriorated steadily throughout 2013. As a result, the Irish steer price exceeded the equivalent young bull prices in France, Germany, Spain and even in Italy, for most of the year. Most recently, the weighted average R3 young bull price for continental Europe has been more than 20 cent a kilo below the price in the same period last year.

By contrast, cattle prices in the UK performed strongly throughout 2013, increasing by an average of 7.5%. As a result, British beef producers received the highest prices in the EU for their finished animals. However, since December, UK steer prices have declined by more than 20 cent a kilo as a result of weaker consumer demand combined with some recovery in beef supplies.

Overall consumption of beef in the EU is estimated to have fallen by 2.1% last year, following similar declines in previous years. Sales were impacted by the challenging economic situation in general. Beef consumption decreased most significantly in southern Europe. The volumes of beef sold at retail in France, Italy and Spain each recorded declines of between 3.7% and 4% during 2013. Even in the more affluent UK market there was a reduction of 2.9% in the volume of beef sold by retailers.

Over recent months demand from processors has been strongly focused on prime cattle which meet the desired specifications for the UK retail sector and other high value customers. Other cattle such as young bulls aged over 16 months and poorly finished stock are selling for significantly lower prices. As shown earlier, the United Kingdom has effectively become the highest priced beef market in the EU. The prices achieved are well ahead of equivalent beef prices across most of the continental EU markets.

The UK market accounted for 250,000 tonnes, or 53%, of Irish beef exports in 2013. Most of that volume was purchased by retail customers, including Tesco, Asda and Sainsbury's. These supermarket groups have rigorous purchasing specifications. These specifications are the same for both Irish and UK suppliers and, contrary to recent reports, have not changed in recent years.
Typically, retail specifications require that suppliers deliver beef from steers or heifers of less than 30 months of age, or young bulls of less than 16 months of age, produced by quality assured farms, of carcass weights between 280 kg and 380 kg, having a carcass conformation of "O=" or better, and a fat class of between “2+” and “4=” on the European classification scale. Cattle which do not meet these parameters, such as young bulls of more than 16 months of age, are less valuable to meat plants. When such carcasses are deboned, processors have to sell the resulting cuts into other market segments, at a lower price.
Around continental Europe, recent producer prices for R3 young bulls have been averaging in the region of €3.70 per kilogram, excluding VAT. Given this background, Bord Bia endeavours, together with Irish exporters, through successive marketing campaigns, to persuade customers of the positive attributes of Irish beef in order to gain a premium over domestic product. As already mentioned, the portfolio of EU retail and premium food service customers buying Irish beef has grown substantially in recent years. Feedback from our customer meetings is that they put a higher value on our prime, grass-based, steer beef. Young bull beef is seen as more of a commodity and therefore it tends to sell for a lower price, since it is competing directly with bull beef from France, Germany, Poland and so on.
Bord Bia communicates regularly with primary producers at farmer meetings, through quality assurance newsletters, agricultural media articles and our exhibits at the national ploughing championships. Our advice to beef farmers has been consistent and in line with what our most valuable customers demand. Market requirements regarding young bull production have been clearly portrayed, as demonstrated by an exhibit from 2009, which I will hand out afterwards. Another area of focus has been on growing the membership of Bord Bia’s beef and lamb quality assurance scheme, which now includes some 43,000 producers who collectively account for over 87% of our national beef production.
The popularity of young bull production has already declined. In 2013, there was a 10% drop in young bull slaughterings, coupled with a 13% increase in steer throughput. While there will continue to be markets for some young bulls, these need to be produced to a tight specification in terms of age, weight and classification. Producers intending to finish young bulls need to consult well in advance with their intended meat plant, to ensure they meet customer requirements. Along with the finished animals which are sold to Irish meat companies for processing, Ireland also exports a significant number of live cattle each year. Live exports represent an important source of competition, as well as a valuable market for certain classes of animals, including male calves from the dairy herd and high quality suckler-bred weanlings. Cattle exports increased by more than 30% in 2013, and reached almost 210,000 head, with an overall value of €157 million. The principal drivers of this increase were that Irish calf prices became more competitive than previous years and that exports to Libya resumed for the first time since 1996.
Live exports have increased by a further 7% to date this year. Exports of calves have gotten off to a strong start, with weekly shipments to the Netherlands, Belgium and Spain all ahead of 2013 levels. Weanling exports are also performing well, with some recovery in traditional markets in Italy and Spain, as well as good prospects for further consignments to north Africa. The other major category of live cattle exports relates to the UK market, and focuses mainly on forward store animals and finished cattle. Exports to Northern Ireland declined by 13% in 2013, to almost 55,000 head, while just over 11,000 Irish cattle were exported to Britain. This slowdown collectively in exports to the UK was in spite of a widening in the price differential between Irish cattle and their counterparts in Northern Ireland and Britain. The average price paid for R3 grade steers in Northern Ireland was 6.5% higher last year than in the South, compared to having been 4% higher the previous year. Similarly, the differential between the prices paid in Ireland and Britain increased from 10% to 12%. Historically, the higher beef prices might have made Irish store cattle more attractive to UK buyers. However, in practice the prospect of selling finished cattle which were born in the Republic of Ireland to the processing companies in the UK has become less viable in recent times. This is largely a consequence of the fact that the beef from these animals does not meet the buying specifications of the major supermarket chains in that market, which is for either British beef - born, reared and slaughtered in UK - or else Irish beef, which is born, reared and slaughtered in the Republic of Ireland. Bord Bia has been in close discussion with all of the multiple retailers about the possibility of stocking beef from Irish-born animals, which had been finished and slaughtered in the UK. The response in each case was uniform and unequivocal that they are unwilling to change from their current supply arrangement.
By way of background and clarification, on this issue, EU law states that in the case of beef, the national origin of the product must be identified to consumers. The law specifies that each stage of the production process must be identified, that is, specifically, where the animal was born, where it was reared, and where it was slaughtered. In the event that all three stages take place in the same member state, then more straight-forward wording can be used to communicate the origin, namely, “Irish beef” or “British beef”. For example, the beef specification of one of the leading UK retailers states the following:

Cattle from the UK (England, Scotland, Wales and Northern Ireland) or Ireland may only be used.
British - Cattle must have been born and raised exclusively in England, Wales, Scotland or Northern Ireland and have been slaughtered in an abattoir located in England, Wales, Scotland or Northern Ireland. It is permissible to have a combination of the above e.g. born in England and slaughtered in Wales etc.
Irish - Cattle must have been born and reared exclusively in the Republic of Ireland and slaughtered in an abattoir located in the Republic of Ireland.

In some countries in continental Europe, particularly those with a significant deficit in cattle production, it is acceptable to retailers to stock beef from animals which were imported from other member states. For example, much of the beef in the Italian market is labelled “Born in France, Reared in Italy, Slaughtered in Italy”. However, this is not something which the major customers are willing to consider in the UK market.
Bord Bia is an organisation that is dedicated to assisting and securing business for the Irish beef and livestock sector. We are working to a strategy to reposition and differentiate Irish beef and livestock so as to optimise market returns. We continue to work closely with our key stakeholders - farmers, meat processors, live exporters and our parent department, the Department of Agriculture, Food and the Marine - to add value to this important sector of the economy.
Notwithstanding the current difficulties being experienced, Bord Bia believes there is a positive future for beef production in this country. Ireland is well positioned to capitalise on opportunities which will arise as European demand recovers, and as access develops to new markets further afield, such as China, Japan and the United States. We need to deliver consistently what the market wants, in terms of specification, quality assurance and grass-based farming methods which are also looking after the environment and the animals’ welfare. Irish beef consistently scores top marks for eating quality in international taste tests. The origin green sustainability programme is now central in Bord Bia’s overseas promotion of Irish beef as a natural and premium product. For example, in the Netherlands and Germany, recent promotional campaigns have been successful in driving consumer awareness and building the position of Irish beef as the premium beef of choice at retail and food service level. The Chefs' Irish Beef Club is a further promotional initiative, involving more than 70 chefs of Michelin Star standard or equivalent across six of our most valuable markets: Britain, France, Germany, Netherlands, Belgium and Switzerland. These chefs passionately endorse and promote Irish beef as a world-class premium product. Further promotions are planned throughout the year with key customers across European markets. Although recent demand has been weak, and the market challenging for farmers and processors, we believe that the future prospects for the Irish beef and livestock sector are positive, and that the sector will continue to make a significant contribution to the economy.
I thank the Chairman and the members of the committee for affording me the opportunity to address them this afternoon. My colleagues and I are happy to address any questions they may wish to ask at this time.