Professor Gerry Boyle:

Thank you Chairman. I thank you and the committee for the invitation to address the topic of the current difficulties in the beef sector, specifically relating to the production of bull beef. I am joined by Mr. Pearse Kelly, who is head of our drystock knowledge transfer department. He works very closely with our advisory and research colleagues, and with farmers of course.

The first point I would like to make is to clarify Teagasc's role on support for the farm sector and farm enterprises. Our remit is provide and information for decision making, largely in respect of the technical challenges associated with production systems on farms. Farmers ultimately make their own choices based on their own resources, knowledge of markets and so on.

My presentation includes a table that sets out the relative prices of young bulls and steers of different qualities since 2008. It is very evident from that chart, which goes to the crux of the challenges facing the sector right now, that between 2008 and 2012 there was a clear premium on the production of young bulls, defined here as bulls under 24 months of age, as well as steers.

This was the price signal that farmers would have followed in recent years in respect of their production choices, and no doubt it had a major influence in their decision to produce bulls. As members will see from the slide, the average price differential for 2013 and especially in the year to date has seen a substantial reversal, which is quite extraordinary. There has been a slippage also in the steer prices, but they are still back at their 2012 levels. The really surprising feature, as we are all aware, is what is effectively a price penalty for the production of bulls.
I wish to refer briefly to the fundamental efficiency of bull beef production versus steers. I will say a little about the research Teagasc is doing and has done in regard to bull beef and also from where the motivation for that research comes. Finally, I will conclude with the advice our advisers on the ground are giving and have given to farmers in relation to the production of bull beef.
I mentioned the price differential in the past year or so which has turned against bulls. Members will see in one of the slides I have reproduced what we called a bull beef budget. This is produced by Teagasc around the National Ploughing Championship every year just to give farmers some guidance as to the prices required in the marketplace to give them a reasonable margin. When we produced that guide last September, the price required to break even was €4.64 per kg, whereas the current price is €3.70 per kg, so there is a substantial difference of almost €1. On a per head basis, one can see the catastrophic implications for margins.
Why would farmers consider producing bull beef at all? Clearly, the price differential is very important and there was a premium for several years up until recently. The most important aspect is the simple fact that I have set out in a couple of pages, which is that there is a major efficiency advantage from the production of bulls. Bulls are more efficient meat producers, providing in the range of 15% to 20% additional meat relative to steers or heifers. They have a better carcass confirmation in terms of meat yield and lower fat content and, of course, this is driven by the natural male hormone testosterone. That bulls can be slaughtered at a young age - 13 to 18 months versus 22 to 26 months for steers or heifers - is a significant advantage and means that much greater throughput is possible on farms where for the production per hectare can be increased substantially. There are two advantages of which farmers have become very conscious in recent years. There is the advantage on a per head basis and the advantage in terms of the amount of output that can be produced per hectare.
Mr. Aidan Cotter referred earlier to the issue of sustainability. Bulls have a lower carbon footprint because they are slaughtered earlier which is an increasingly important consideration. Of course, there are significant drawbacks. There can be adverse behavioural and safety issues in the production of bulls. Lower age animals, in particular those under the age of 16 months, require significant and higher amounts of concentrate feed input, and getting adequate fat at the younger age and with lighter carcases is a challenge. There can be the perception at least of quality issues with older bulls in taste terms but also in terms of market specification in regard to the size of cuts and so on. As Mr. Aidan Cotter has said, the UK market, which is hugely important to us being 50% of our market, is primarily a market that values steer and heifer beef. Therefore, there is an inherent challenge in exporting bull beef into that market.
The graph shows the basic reality of the efficiency of bull beef production whether in a suckler system or in a dairy beef system. Clearly, bulls attain finish weights at a much younger age than the steer. That applies both to suckler beef and dairy beef systems. From the farmers' point of view, Teagasc advises the farmer on the technical challenges in regard to the different systems of production. The farmer's concern is what system is best for him. Clearly, there are two overriding considerations: what the market requires and the cost of production in that system. If the anticipated price of bulls and steers is equal and if there is a market for the bull output, the efficiency advantage of bulls is a very significant consideration in the decision of some farmers. The international evidence is presented in summary form which again supports very strongly the technical advantages that the production of bulls have over steers.
I wish to mention briefly the work Teagasc has been doing on the production of bull beef. The majority of our research is concerned with the production of steer and heifer beef, but we have a number of projects under way in regard to bull beef, and the rationale for being engaged in this work was to provide basic information to farmers to help them decide on the systems of production that would be most advantageous from a cost and competitiveness point of view, assuming always that the market was in place for their product. In 2010, we commenced a major project at Johnstown Castle on the production of dairy bull beef. That was motivated largely by the huge increase in dairy bulls in anticipation of the abolition of the dairy quota. For example, in 2008 the number of dairy bull calves produced was 320,000. In 2012, the number had increased to 380,000. As the quota is abolished, we anticipate that significantly more of these animals will be produced. Naturally, farmers are concerned to find a good system to produce these animals onwards.
In recent years, as we have undertaken research projects, we have also tried to have a parallel commercial farm development. Linked in with the dairy bull beef project at Johnstown Castle we have had associated bull beef research on four commercial demonstration farms. We have had long-term research on suckler beef production and on sensory analysis where we compare the eating quality of bulls versus steers and heifers. This is being conducted primarily at the Teagasc centre in Grange, but also at our site at Ashtown for the sensory analysis. In recent years we have established a major project at the Teagasc centre in Grange on suckler beef production, known as the Derrypatrick herd.
The Chairman and members will be aware of the very successful Teagasc-Irish Farmers' Journalbetter farm beef programme, based on commercial farms. We have tried to match the work conducted in a research context and all the protocols attached to that with parallel activity on commercial farms.

I will now summarise the main findings from the different research projects, starting with dairy bull beef. We must remember the objective of the programme. Farmers who may have wanted to get into bull beef were asking us about the economics of producing bulls of different ages. We put in the 24 month dairy beef and steer beef, which is the control. We compared 16 month and 19 month bull beef. One can see that on the cost of production per kilo of dead weight, 19 month dairy bull beef emerges as the most cost-effective or competitive of the systems. One can see that the 16 month bull beef has a substantially higher cost of production. Essentially, the reason the 19 month bull beef emerges as the most cost-effective is because at the lower age, too much meal is being consumed and the steer beef has a second winter. There is another point that is not obvious from these data, but I referred to it a few minutes ago. The other big advantage of killing the animals young at 19 months is that the throughput on the farm is increased significantly so there can be much higher production per acre. That is the gist of the principal research findings on dairy beef from Johnstown Castle.
Turning to the next slide, we had a parallel project on commercial farms. There were only four farms involved here. Initially, in 2010, these farms were mainly finishing steers but they switched to bull production over that period. One can see the increase both in output per hectare and in gross margin per hectare. Most of these farms are producing bulls between 16 and 20 months, and one farm was producing bulls in or around 16 months, but this is the average performance. Therefore, a significant lift is evident up to 2013 both in gross margin, which admittedly is a limited indicator of profit, and the level of output. Basically, the research was indicating that the dairy bull in or around 18 or 19 months is the optimum from a cost effectiveness viewpoint. That was then mirrored in the commercial farming context, certainly up to 2013.
I will now move to the suckler bull beef research which has been ongoing at Grange for a long period. Essentially, the same key messages emerge with regard to the optimum system. One can see that the 16 month suckler bull beef costs a lot to produce. For comparison purposes we had the 24 month suckler steer beef. The evidence from the Grange research is that a bull in or around 18 months provides the most competitive system for farmers. It is largely consistent with the dairy beef finding.
I will now look overleaf at the commercial evidence based on the Teagasc Irish Farmers' Journalbetter beef farm. This is primarily based on suckler animals. We have given the various results in terms of gross margin per hectare for a number of different systems. As members of the committee can see, the suckling to bull beef clearly emerges as the most profitable activity.
I want to address an important question that has been raised at this committee, which is what motivates Teagasc to undertake this research. I want to emphasise strongly that we have an elaborate system in place to advise us on how we should allocate scarce resources. We have established a number of stakeholder consultation groups, including a very active one in the beef sector. We do not always succeed but we strive to be responsive to industry needs. The stakeholders are all chaired by a non-Teagasc person and are representative of all aspects of industry, both farmers and processors. They advise us on our programmes.
As far as the Derrypatrick herd was concerned, there was a long-established view in industry that we needed to put in place a demonstration herd for suckler beef that matched the world famous Curtin's farm dairy herd at Teagasc's Moorepark facility. That was the motivation behind establishing the Derrypatrick herd. The set-up of this project was established with the close co-operation of the beef stakeholder group in 2010. That group identified 18 month bull beef as being the type of production that was the most opportune or most competitive for suckler producers, given the price differentials that existed at the time.
According to the minutes of 2010, it was clearly understood and it was discussed at great length that young bulls less than 24 months are the EU standard, but they recognised that the market is increasingly requiring that bulls are finished at younger ages - less than 20 months of age. There was never any issue that older bulls would in any way attain the required market specification. Based on market information, however, it was the understanding that a young bull in or around 18 months would have a reasonable market outlet. The 18-month system emerged from the analysis that was done on the competitiveness of the different systems. We saw earlier that the 16-month system was not competitive under Irish conditions. That was pretty well established both by the dairy and suckler research.
The stakeholder group is very active. It watches markets and tries to react and adapt. The Derrypatrick herd is very much designed to present the best of commercial farming practice, so it is worth noting that from 2012 onwards the group recommended that we should hedge our bets, so to speak. Half the male calves are being slaughtered as 24-month steer and the remainder as 18-month bulls. That was a good hedging strategy because concern was emerging that the differential that existed for a long time might be reversed.
I have included a chart which illustrates a couple of important points concerning the breakdown of slaughtering between bulls and steers. Clearly the dominant system, as Mr. Cotter said, is the steer one. One can see that from 2007 onwards, there has been a noticeable increase in the percentage of young bulls that are being slaughtered. In 2004, for example, one in ten of all slaughterings were young bulls. By 2012, that had risen to 31% and it is back this year to about one in four. There is no doubt that the significant driver behind that steady increase from 2007 to 2012 was the signal coming from the marketplace, which was the clear premium. That is what our stakeholders responded to and they told us in Teagasc that we were not doing enough research on bull beef. They said farmers were ahead of us and they needed information on the optimum system. There was a lot of debate, for example, as to whether 16 month bulls could be produced profitably. Our research demonstrated that they could not be.
I want to conclude with the advice we are giving to farmers. I have two pages covering advice. One is what I might call the traditional, long-standing advice.

The second set of advices is more relevant to the current circumstances. The traditional advice has always been that bull beef is a very specialised activity for a whole range of reasons, and farmers engaging in this practice - Mr. Cotter made the same point - need to talk to their meat processor before finishing bulls. We have always repeated that advice, but farmers are perfectly entitled to follow their own judgment. We communicate with 40,000 farmers every month through our newsletter. In September last year we warned farmers that the eight-month and 20-month finishing system for bulls is coming under increasing pressure and processors are no longer accepting bulls over 16 months of age. In our beef budgets every September we caution against farmers running off to produce bulls without having consulted with their processors.
That is the traditional advice. In the current context, our advice is very clear. We are saying that provided one talks to a processor first, there may be circumstances where well-grown suckler yearling bulls have the potential to finish profitably under 16 months. Suckler yearling bulls over 430 kg can be finished under 18 months but, again, we are saying that the processor needs to be consulted. Yearling Friesian bulls can be finished, but the same caveat applies in terms of consulting the processor. Friesian bulls under 16 months, under current price and meal concentrate conditions, are not profitable unless there is a contract in place. There may be a limited option to castrate animals and finish them as steers.
An obvious but important point to make by way of summarising is that bull beef systems are significantly more efficient than steer beef systems. Based on the long history of a positive price deferential, it is understandable that farmers might have opted to produce bulls. Many saw an opportunity in recent years when there was no price disadvantage vis-à-vissteer beef and, indeed, a small advantage. The potential was there to produce more meat per animal and the more efficient farmers saw the opportunity to produce more meat per hectare.
In regard to Teagasc's work on bull beef production, we work very closely with the industry. The research points clearly to the 18-month system as being optimal, which is why we chose that system in the Derrypatrick context and for the purposes of our better farms programme. Our advice always has been and continues to be that farmers who are considering finishing bulls should first establish that they have a market outlet.