Chairman:

I welcome from Bord Bia Mr. Aidan Cotter, CEO, and Mr. Padraig Brennan, director of marketing, and thank them for coming before the joint committee to discuss the impact of Brexit on the Irish agrifood sector.

Witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an 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 they 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 ask Mr. Cotter to make his opening statement.

Mr. Aidan Cotter:

I thank the Chairman and members of the committee for the invitation to discuss the potential impact of the UK referendum vote result on the Irish agrifood sector. I am joined by my colleague, Mr. Padraig Brennan, director of marketing.

The links between the British and Irish agrifood sectors have been built over many centuries and helped to secure a mutually beneficial relationship between the two countries. The result of the referendum in June has created an environment of uncertainty as to how this relationship may change in coming years. The United Kingdom is Ireland's largest food customer for food and drink, with trade valued at €4.5 billion in 2015, representing 41% of Ireland's food and drink exports.

While the sector has recorded strong growth in food and drink exports to non-EU markets in recent years, the United Kingdom remains the core market with the value of trade growing by more than €1 billion in the last six years. The UK market is the leading destination for all product categories, accounting for 54% of total meat and livestock exports, 30% of dairy exports, 70% of prepared consumer foods exports, 30% of beverage exports and 90% of our edible horticulture exports, principally mushrooms.

Similarly, Ireland remains the main export market for UK food and drink products, accounting for almost one fifth of trade in 2015, at €3.1 billion. The importance of Ireland to UK exporters is demonstrated by the fact that trade was worth more than the cumulative exports to the next two largest markets, France and the Netherlands. Since 2010, UK exports to Ireland have grown by €700 million.

The result of the UK referendum in June has led to a period of considerable uncertainty. To date, the impact of this uncertainty has been most visible in the level of exchange rate volatility that has been evident. While there has been some relief in recent weeks as sterling recovered, it remains 11% weaker against the euro than prior to the result of the referendum vote in June and 15% lower than the start of 2016. This is severely affecting the competitiveness of Irish exports destined for the UK, as highlighted most starkly by the difficulties faced by the mushroom sector over recent months. The potential impact of exchange rate volatility is highlighted through analysis undertaken by Food and Drink Industry Ireland, which suggests that a 1% weakening in sterling results in a 0.7% drop in Irish exports to the United Kingdom.

While exchange rate volatility is not uncommon, the current volatility may also reflect a structural shift. It follows a period in which the Irish industry has focused strongly on efficiency improvement, which means the sector is not in a position to absorb the exchange rate movements evident in recent months. In this regard, there is only so much slack in efficiency to be made up. The challenge facing the sector is the extent and speed at which higher costs can be recovered from the UK market and the level of resistance from buyers to price inflation.

Aside from exchange rate volatility, the other potential implications facing the Irish food and drinks sector are the trade and regulatory policy and the UK macroeconomic performance following Brexit. Industry experts have forecast a rise in the cost of doing trade. An increase in regulatory and administrative costs due to the UK becoming a non-EU country and increased complexity of trading and restrictions in transit through the UK have the potential to add to the cost of doing business. Some experts have informally estimated a 5% rise in trade costs following Brexit.

The terms of trade agreements following Brexit will have a major bearing on trade between Ireland and the United Kingdom. In the event of favourable trade agreements being reached with international partners, it would greatly increase the level of competition on the UK market. Taking the example of beef, many Mercusor countries have cattle prices some 30% lower than those prevailing in the European Union.

Border controls following Brexit have the potential to cause disruption. Following Brexit, the Republic of Ireland’s Border with Northern Ireland could, by definition, be an external EU border which would lead to increased regulatory requirements and trading costs and result in a potential rise in travel costs between the United Kingdom and Ireland.

A considerable amount of trade takes place between the Republic and Northern Ireland. In 2015, more than €525 million worth of Irish food and drink was exported to Northern Ireland, with imports into the Republic of Ireland from Northern Ireland reaching €428 million. Every year up to 750 million litres of milk are imported from Northern Ireland by milk processors based in the Republic of Ireland. In terms of live animals, more than 1,000 bovines and 10,000 pigs are exported live to Northern Ireland each week, with around 5,000 lambs per week imported into the Republic of Ireland.

A number of Irish food and drink companies have processing facilities in Northern Ireland and parts of Britain. With regard to Northern Ireland in particular, there tends to be close synergies between operations in the Republic on a day to day basis in terms of further processing and final packaging. Any restrictions on access or new Border controls could significantly impact on the potential for such synergies to remain in place.

The Irish food and drink sector has consistently highlighted its resilience in recent years in the face of economic, regulatory and food safety issues by continuing to grow the value of food and drink exports, which today are more than 50% higher than 2009 levels. Food Wise 2025 highlights the sector's growth ambitions, with a target of €19 billion worth of exports by 2025. This requires growth of €8 billion over the next ten years.

The United Kingdom is currently slightly more than 60% self-sufficient in most food categories and the position is not likely to change post-Brexit, which means the UK will need to import. The long established links between Ireland and the UK combined with the language, cultural and taste similarities make Ireland an obvious natural trading partner for the UK. However, much will depend on the shape of any future trade agreements.

Bord Bia is undertaking consumer research in the UK to evaluate the opportunity to consolidate the market position of Irish beef and other sectors, including dairy and mushrooms. This involves testing the potential for a consumer focused campaign to highlight the strengths of Ireland as a food producer and our sustainability credentials, with a view to protecting us from the threat of lower priced competitors in the UK market post-Brexit.

Since the results of the referendum, Bord Bia has been implementing a strategy for supporting the Irish food and drink industry through the Brexit process based on five pillars. These are to assist companies to ease market volatility impacts; provide consumer and market insight; deepen customer engagement; extend market reach; and address risks to the Irish market. Activities under these headings have been boosted by increased funding provided by the Department of Agriculture, Food and the Marine in 2016 and 2017. This will allow Bord Bia to increase its investment in key areas, including retail promotions, market prioritisation studies, export marketing strategy programmes, image building activities, industry talent development and direct support to client companies. This includes increased beef promotional activities in markets such as the UK where spend will be doubled in 2017 and the roll-out of a new promotional campaign for Irish beef in Germany. In addition, Bord Bia has successfully secured €3 million in EU promotional funds for beef and lamb campaigns in China and south east Asia over the next three years.

A survey of more than 200 Bord Bia client companies in the immediate aftermath of the referendum showed that exchange rate volatility was their number one concern and around half of them had limited or no plans in place to deal with it. In recent months, Bord Bia has held four currency workshops that have focused on helping companies access the right information and manage volatility through negotiation as well as financial and contractual considerations.

Bord Bia is rolling out a market intensification programme to provide targeted marketing supports to companies with a high dependency on the UK market. The support assists companies to strengthen their position in the UK market and in their efforts at market diversification. A total of 41 applications were received and 32 companies were approved grants totalling €655,000 in a specific new programme instituted in October.

Bord Bia runs a number programmes to help companies develop business in the UK and best position themselves in the market. These programmes have been reviewed to strengthen their financial, competitive, contractual and regulatory modules. We have doubled our one-to-one mentoring with UK food service and retail experts since the referendum result.

Bord Bia is also increasing the number of market and consumer insight projects being undertaken by our insights team in our new dedicated insights centre, The Thinking House. Examples of project currently under way or planned include a market prioritisation study to identify opportunities in emerging regions; deep dive category analysis of European private label opportunities; dairy opportunities in south east Asia and west Africa; prepared consumer foods in the Middle East; alcohol in the United States; and seafood in south east Asia.

Utilising its long-term, strong relationships with UK trade customers, Bord Bia is enhancing existing trade events and pursuing opportunities to promote Irish products in the retail and food service environment. The Bord Bia London team was recently boosted with a new dedicated member of staff to Brexit support measures for Irish companies in the market. Later this week, we will hold a Brexit seminar in London at which we expect more than 100 attendees from Irish food and drink companies to engage with UK market experts on the issue. This will be followed by a trade reception, an annual event at the Irish Embassy in London, which will be attended by 400 representatives of UK and Irish food and drink businesses.

Bord Bia is also continuing to support client companies to overcome barriers for market diversification through the provision of market and consumer insight and brand guidance, while enhancing market and trade visits, particularly to emerging markets. The latter has included trade missions to Asia and north Africa led by the Minister for Agriculture, Food and the Marine, Deputy Creed, and participation at leading trade fairs ranging from CIMIE and China Fisheries in China to SIAL in Paris in October. Bord Bia’s strategic priority of developing new routes to market is underlined by the opening of two new offices this year, in Warsaw to expand our support in eastern Europe, and in Singapore to service eight emerging markets in south east Asia.

The weakening of sterling relative to the euro has the potential to significantly increase competition on the Irish market. Bord Bia is undertaking shopper mission research across key categories on the Irish market to help client companies better understand consumer needs and position themselves on the market in a way that can enhance their ability to withstand the threat posed by lower priced competition.

The decision by the United Kingdom to leave the European Union has led to a large degree of uncertainty around the future trading relationship for Ireland with the UK and the competitive environment likely to be faced by Irish exporters. However, the Irish agrifood sector has proven its resilience in overcoming serious challenges previously and, with the right supports and guidance, can do so again.

I thank the Chairman and members affording me and my colleague, Mr. Padraig Brennan, the opportunity to address the joint committee today. We will be pleased to answer any questions members may have.

Chairman:

I understand Mr. Cotter and Mr. Brennan are under time constraints. We will try to have the questions completed as quickly as possible. I ask members to keep their questions focused.

Charlie McConalogue (Donegal, Fianna Fail)
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I welcome Mr. Cotter and Mr. Brennan and thank them for their thorough presentation. As Mr. Cotter's term as chief executive of Bord Bia will conclude in the near future, I take this opportunity to acknowledge the significant contribution he has made to the food industry.

Mr. Cotter identified some additional resources that have been received with a focus on the London office. In terms of the current challenge and the exceptional additional challenges posed by Brexit, is that allocation sufficient to ensure that Bord Bia can work to address the issues arising in particular in relation to developing new markets and reinforcing our efforts in the UK market where we are going to come under significant pressure? If it is not sufficient, how much more is required to allow Bord Bia to meet the challenge?

In terms of the impact of the weakness of sterling on currency markets, I have seen recent figures which indicate that beef exports in the last number of months have been down compared to the same period last year. What figures does Bord Bia have on that and what feedback does it have on current export figures across the sector? On the development of new markets, what potential exists and where are the key markets? How soon can those markets be grown? When we are so dependent on the UK market, moving away from that and sourcing new markets presents a significant challenge. Can Mr. Cotter flesh out the viability of that approach and set out the efforts being made in that regard? What additional supports are needed to take on this very substantial challenge to ensure that alternative markets are available should exports to the UK decrease?

Chairman:

We will take two more questioners before reverting to Mr. Cotter.

Jackie Cahill (Tipperary, Fianna Fail)
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I welcome Mr. Cotter and Mr. Brennan. I served on the board of Bord Bia for six years and saw up close the work it does. Brexit probably presents the greatest challenge Bord Bia has faced in Mr. Cotter's time if not over the life of the board. We saw predictions in the media today that cattle prices for 2017 will be 10% lower than they were in 2016, which was a poor year itself. The UK is our biggest market for beef with roughly half our beef going there. We have seen live exports starting in the last couple of months with a few thousand cattle going to Turkey, but how much of Bord Bia's budget for beef is spent to promote live exports? How much is done to secure new markets for live exports? We saw live export levels for calves drop off very significantly this year and it will be an ongoing problem in 2017 with a far greater number of cattle coming on-stream to be killed. It is going to create huge difficulties. That is why I want to know how much of the budget is being spent to promote live exports and secure new markets.

The Red Tractor scheme has been problematic for us for a number of years. Under this British decision, I assume Red Tractor will get greater prominence in the UK as will protection of its own farmers. How much potential to expand exists in the dairy industry in the UK? It went through a long period of decline over a number of years but in 2013 and 2014 milk output increased before it dropped dramatically in 2015 and 2016. There has been a serious decline in production in the UK. If they circle the wagons in the UK, how much potential is there to increase milk production and how much damage would that do to us? I note that 65% of our cheddar cheese goes to the UK and one will simply not find another market for it. Of the milk produced in the UK, 50% is consumed in the liquid trade for fresh milk. Has there been any analysis of what will happen if the UK introduces a protectionist policy for its own farmers? What potential does it have to grow? Against all predictions, we saw growth two or three years ago and that worries me. If they use the Red Tractor concept for their dairy products, what potential do they have to grow their output?

We are six months on from the UK's vote to leave the EU and we saw immediate casualties in the horticulture industry, especially on the mushroom side. In my own county, two growers went out of business a month to six weeks after the decision. Has that situation stabilised and have contracts been renewed to allow the mushroom industry in particular to continue to compete going forward? Currency has always fluctuated and it is the access to markets and the risk of barriers being put in front of us that is the greatest issue.

We have made a great play of quality assurance over the years and Bord Bia has been a serious promoter of that to give us an edge in the marketplace. In that regard, I note the amount of product that comes down from Northern Ireland into the Republic for processing. They may now be on a completely different standard than we will have as EU farmers. How are we going to marry the product coming from outside the EU for processing here before being sold on into EU member states? That is going to be seriously problematic for processors here in terms of how that quality assurance is going to work with the potential to work with different standards to EU farmers here. It could cause great difficulties.

We are still looking into a crystal ball and we do not know what conditions will come out of this. On the beef side, we have fought for a generation to keep South American imports out of the EU but if the UK invokes Article 50, it will have that decision in its own hands and we will have no control over it. On the dairy side, I do not see a threat from imports with milk on a very level price across the world. My question is whether there is a protectionist policy there and whether there has been any analysis of the potential of the UK to increase production.

Willie Penrose (Longford-Westmeath, Labour)
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At the outset, I pay tribute to Mr. Aidan Cotter for his excellent stewardship as chief executive officer of Bord Bia. I do not say that lightly. He was a year or two ahead of me in college and I was not surprised to see him reach the pinnacle he has. I wish him well in future with his family. No one knows the work Aidan Cotter and the staff of Bord Bia have done for well over three decades. They have served this country well and I have always defended them notwithstanding what were often cutting remarks from people who were certainly not as knowledgeable as they should have been.

I want to ask him a couple of questions now. One is always nice and then one asks the questions. Does Mr. Cotter agree from his economics background, and as Professor Sheehy would certainly advise him, that we are all engaged in guesstimate work? We are all going around shooting in the dark and the only certainty we have about Brexit is the uncertainty it has generated. Does he also agree that a two-year period is also optimistic by any standard? I have been saying this process will take five years or more with transitional arrangements and I notice that others have joined that chorus. I said it last April in the vacuum as we waited for the Dáil to return. It is on the record so I am not being wise after the event.

There has been a great deal of grandstanding but what one needs to do is the type of pre-emptive and preliminary work in which Bord Bia has engaged. It has done practical work to penetrate various markets. Away from that practical work, others are going around pretending they are soothsayers who know what is happening. Nobody knows what is happening and to say otherwise is only to mislead people. People are getting into a bit of a huff. It will depend on the level of market access, the type of market and whether it is a Norway situation, a Swiss situation or a WTO situation. People are trying to pretend they know in order to fill columns in newspapers when they do not have a bull's clue. A first year student of economics has a better clue. It irritates me to see that type of thing.

Does Mr. Cotter have any projections or guesstimates as to how the UK's agriculture industry will be affected by the Brexit decision, because that is a very important issue? It is the starting point. I will expand on it. Is there any assessment of the impact of the loss of the UK's significant payment of €10 billion to €11 billion to the agriculture budget?

When that falls away what will be the impact on the CAP budget and on us? The volatility of currency and the impact of exchange rates is especially noticeable in the context of the mushroom industry, which is almost totally dependent on access to the UK market for sales. I think in excess of 80% of its produce goes there. I would be worried about cattle given where I live.

Bord Bia has expressed considerable concerns about increased trade costs. These can arise due to increased regulation and administrative costs if the UK follows through and moves outside the EU. Has Bord Bia given any thought to the tariff regime that could be in place in respect of hard borders and so on, especially if we become the outer border? I know the witnesses will be only speculating.

The UK will remain in food deficit for a considerable period. It will get its food from elsewhere. Brazil and other South American countries will be in the market if the UK triggers Article 50 and leaves as it says it will, to sell beef and it will be cheaper because 20% of the beef in the UK was from Brazil in 2005 but it is now at less than 10%, so it is waiting. The Mercosur agreement countries will be in like a shot. It is an opportunity for them which will represent a significant challenge for the Irish agrifood industry as prices will be threatened. Has Bord Bia come up with any alternative scenarios in that event? Canada, New Zealand and Australia are waiting with milk, which will affect the dairy industry.

The Border and the common travel area is a question that arises in the context of so much trade back and forth, the co-location of processing units across the Border and approximately 600,000 litres of milk coming down here. That also raises the question of phytosanitary and veterinary controls. Does Bord Bia have any view to offer on that? I predicate that on the basis that the best the witnesses can do is answer from a position of lack of knowledge and they can only speculate on what might happen in the event of Brexit. Whether it is hard or soft it will affect Bord Bia's projections and the scenarios the witnesses will outline. I appreciate they cannot be held to anything.

Mr. Aidan Cotter:

Undoubtedly there is a major challenge ahead. Before Brexit this industry faced a challenge from the ambitious targets in Foodwise 2025 to grow exports from €11 billion to €19 billion. We have estimated that in almost any scenario we can consider, even post-Brexit, and even if it is a soft Brexit, there is a huge challenge to grow our exports to continental Europe and in particular to international markets outside the European Union. We have estimated that almost irrespective of Brexit we would have to grow our exports to continental Europe by between 40% and 70% over the next ten years. We would have to create at least three €1 billion markets in France, the Netherlands and Germany. Our exports to international markets would have to grow considerably, fourfold to China and south-east Asia; threefold to north Africa and the Middle East and double to North America and Africa. There is a huge challenge in any event to achieve our Foodwise 2025 targets. The industry was conscious of the level of ambition there, irrespective of Brexit. It was gearing itself up for that.

In any of those scenarios achieving our export targets would mean reducing our share of dependence on the UK market from its current 41% to 32% in a soft Brexit or to 23% in a hard Brexit. We will have to develop markets outside the UK. Inevitably, to achieve those hugely ambitious goals there will have to be corresponding investment and transformational initiatives to help the industry achieve those targets. We reckon that 50% of the €8 billion will have to come from the dairy sector and approximately €4 billion extra in exports over the next ten years, with the balance of €4 billion coming from the meat and livestock sector, prepared foods, beverages, seafood and horticulture in that order. With so much growth set to come from international markets outside Europe corresponding extra resources will have to be dedicated to our markets in Asia, China, the Middle East and Africa.

On the question of whether we have enough resources, our organisation expanded its head count by 20 over the past 12 months, which is the first time we have started to recover it since the contraction during the period of the public sector embargo. We had got back to a situation where we felt we were resourced to address the task in hand, then Brexit came along and now there are new challenges. It was almost one step forward and two steps backward. The Department of Agriculture, Food and the Marine and the Minister are very supportive of our re-examination of our resources to ensure we are properly equipped for the period ahead. Given the challenges, it would be difficult for me to say truthfully we have enough resources. That would be to completely understate the challenge the industry is facing. We are working through the resources that might be necessary and the kind of initiatives to be undertaken to establish what level of resources will be required.

To answer the question on our beef exports for the current year, we expect them to be up 5% in volume given the number of extra cattle that have come forward. A total of 97% of our exports are going into an EU market where production grew by 3.5% or 0.25 million tonnes this year, in other words, by half the amount of our exports. It has been quite a challenging time in the market place across all the EU.

We were asked about key target markets, they are the Continent of Europe and international markets outside the European Union. Dairy is very important in China, south-east Asia, the Middle East and Africa. It is also important to get access for our beef industry into the Chinese market and we want to further develop our position in the United States.

On the issue of live exports, there is no limitation on the resources we are prepared to allocate to live exports. We spend all the funding we receive in the levies and more to support them. At the beginning of the year we meet with the live exporters and consider the challenges ahead and what initiatives need to be undertaken. We continually work towards funding any new initiatives that might help strengthen the live export trade. The recent trade missions to north Africa, Morocco and Algeria, focused on live exports and on the dairy sector. Some benefits will come out of that in time.

On the question of the UK and the retractor, there is a real challenge in our single biggest market, the UK, for the primary commodities, such as beef but our competition is primarily the potential threat from South America, Oceania or parts of North America.

Our challenge is to be ready if that threat materialises. We have perhaps two, three or four years, and it will probably take longer than two years, but that is a window of opportunity we need to use. In two or three years time, we do not want to look back and ask whether we did everything that was necessary and whether we took the right initiatives or made the right investments in the UK market to ensure we had bedded down our beef and dairy sectors so they were ready to withstand the competition that will come from low-price countries. It is a challenge that all of us in the industry, including Bord Bia and all the other stakeholders, must focus on.

I was asked whether horticulture has stabilised. I believe it is in a better situation now than it has been. There is some prospect that price increases are on their way, if they are not coming through already. From our discussions with UK retailers, there is an acute awareness of the difficulties the mushroom sector has been undergoing in recent times and that the supply base needs to be protected for the future. It is also in the interests of our customers that the supply base is protected. We are hopeful things will begin to improve in that sector.

We have invested significantly over many years in quality assurance and, more recently, in sustainability through the Origin Green programme. We have to have a point of difference from everyone else in the marketplace, given we export up to 90% of what we produce into markets that are other people's home markets. We have to have a point of difference, whether it is compared with the incumbent player or with competition from South America, South-East Asia, China or elsewhere. The Origin Green sustainability programme is unique. There is nothing like it anywhere in the world and it is our best prospect for the future. This is brand Ireland and it is something that is really valued. The feedback we are getting from the markets is extremely encouraging, and others are coming to Ireland to see how they might replicate it in their own countries. Irrespective of the challenges of quality assurance and the difficulties farmers might sometimes have about it, it is our best prospect for achieving a high return from those international markets in the future, and this applies to the Origin Green programme in particular.

Uncertainty is the only certainty, of that there is no doubt, and we are facing two or three more years of it. However, this is an industry that has, in a sense, been used to uncertainty. Some 70% of or exports go outside the eurozone, and they have always been at that level or higher. We have been exporting in a context of country volatility on an ongoing basis, although we are clearly going through a particularly acute period. Nonetheless, this is an industry that has experience in managing volatility and I am sure it will manage this as well. Undoubtedly, we have no choice but to learn to live with the volatility, for however long it lasts.

There was a question on whether the UK industry will be able to cope with this. There must be a challenge to UK farmers in terms of the direct payment levels they are currently in receipt of, and there must also be a challenge in terms of the return from the markets. They get their income from two sources: direct payments and the markets. If low price competition comes in from South America, that means their market returns will fall as well, and there will be a double whammy for the UK agriculture industry.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I thank both witnesses for attending and for giving such a comprehensive presentation. The issue of Brexit is facing everyone and all sectors, but for the agriculture sector and farmers in particular, it is the big scare factor.

Someone wrote a long time ago how trouble was only opportunity in work clothes. Is there an opportunity here for Ireland to start to look again at how we market our product and set it apart? Mr. Cotter mentioned the work that is being done on origin tracing and all of the measures around traceability and so on. In regard to the dairy sector, I often think of Kerrygold butter and the fact every pound of butter that leaves Ireland is exported under the one brand everywhere in the world, where it is recognised as being the crème de la crèmeof butter produce and has been very successful. Mention was made of the Red Tractor scheme in Britain. Is there any way we could replicate that type of very high quality assurance for our meat products? While the witnesses are correct in regard to traceability, the one thing we have in Ireland, that none of the other producers have, is the concept of the family farm - our product comes from a family farm and the animals are grass-fed. This is something we could and should be using to greater effect in order to go for the high end of the market and to set our product apart.

Mr. Cotter is correct that we are competing with Latin America and other places which have at least 30% lower costs of production than we do. It is worth noting that beef produced on these huge feed lots is being sold in the same packaging and the same places as beef from animals that comes solely from a grass-fed production system. What are the witnesses comments on this? Is there an opportunity for Bord Bia to look again at how our meat products are marketed? I am just throwing this out there, given the product is grass-fed, fully traceable and free from all hormones and antibiotics. The GM factor is also something that could offer a niche for us.

I believe this is where we need to be going. We need to go to the niche on the top shelf, where our product, exported throughout the world, is seen as the best. I recently spoke to tourists from Germany, who talked of how Ireland has this image of being clean and green, with all of its rain. It is something the world recognises us for. I think we should try to use it to greater effect. The target of increasing the value of our output by such a large amount by 2025 can only be achieved by increasing the value of what we export, rather than increasing the volume. I believe this is the area we need to look at. I would be interested to hear the comments of the witnesses on that and on the work that Bord Bia, as the marketing agency for Irish agricultural produce, could do in regard to making it happen.

Pádraig Mac Lochlainn (Sinn Fein)
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I thank Mr. Cotter for his presentation. I thought it was one of the best assessments of the state of play. He clearly outlined the work of Bord Bia and the assistance it is giving the sector in dealing with the challenges, and I commend it for that.

I would like to have elaboration and clarification on a number of points. Page 5 of the presentation states that a significant number of the companies among the 200 Bord Bia client companies were not prepared for the devaluation of sterling. Teagasc came before the committee recently. It put together a very comprehensive report earlier this year in anticipation of a potential Brexit vote. There seems to be some failure to prepare or some gap, considering economic modelling was done which looked at different scenarios, but the sector was not prepared and did not factor in that this could happen. I want to get some sense of that issue.

On page 3 the presentation referred to the issue of trade agreements and stated that Brexit will have a major bearing on trade. I agree. If we listen to the language from some of the Brexiteers in the Tory party, they are very fervent that Britain needs to pull out of the Single Market and engage the world in its own right, which means trade agreements. This would obviously pose a threat.

I agree with the analysis on page 3. Where does that leave the Government's strategy in terms of supporting CETA, TTIP and other trade agreements? Mr. Cotter is acknowledging the serious threat to our sector from Britain engaging in trade agreement with major blocs that will displace our industry, but our Government is supporting trade agreements at European level. I would like to hear Mr. Cotter's view on that.

Page 3 of the report outlined concisely and clearly the real challenge from an all-Ireland perspective. In terms of the numbers, €525 million is exported to the North and €428 million is exported elsewhere. We are very dependent on each other, some sectors more so than others. What work is Bord Bia doing on an all-Ireland basis? What is happening from the Northern end? Are the relevant bodies and the Executive in contact with Bord Bia? Is the relevant Department in the North in contact with Bord Bia? Are they working in partnership to address these issues?

Thomas Pringle (Donegal, Independent)
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I thank Mr. Cotter for the presentation. It referred to exchange rate volatility and that there could be a structural shift in the exchange rate which means that it will settle into a permanent negative rate for us. Given that the Irish food sector has focused on competitiveness and efficiencies over the past number of years, its ability to absorb that structural change will be greatly affected. Is Mr. Cotter sure it is a structural shift? Is there some chance of a recovery in the exchange rate? What will that mean into the future?

The report refers to focusing on developing emerging markets. I presume those markets are already in competition with other markets. How will Ireland perform in those emerging markets?

Is there potential for mainland Europe to offset some of the difficulties? This UK exports significant amounts of food to mainland Europe. Is there potential to replace UK exports into mainland Europe with our own in order to offset some of the potential losses in the UK market? What is the potential for development there? Are Ireland and the UK producing different products for which there is no direct match?

Mr. Aidan Cotter:

In regard to presenting products from Ireland in the successful Kerrygold format, when seeking to apply that to the beef industry one finds there are significant differences between the way beef and dairy products are marketed. Dairy products are branded categories. Fresh meat is an own-label category. Retail outlets almost anywhere in the world have the name of the retailer on packs of meat. They have the power to market fresh meat. It is incumbent on us to work with retailers to build a brand image.

All of the features Deputy Kenny mentioned in regard to brands are those we agree resonate most with consumers and can best differentiate Irish beef in the international marketplace. Reference was made to the family farm structure, the care that goes with that and its uniqueness in terms of sustainability whereby farms are handed down from generation to generation. Therefore, special care is taken in producing beef in such situations.

Grass fed beef is a major issue, in particular outside of these islands. The beef in many of the markets in which we compete does not come from grass fed environments.

On beef being mixed from feedlots and so on, this comes back to the issue and importance of traceability. This country has an extraordinarily good traceability system, which needs to be protected in any new environment post Brexit.

Anything that comes out of this country in terms of beef, for example, is clearly traceable back to the farm in every respect back. We know more about our animals and where they are at any one time than we do about almost anything else in this country. Direct traceability is something on which we can build. It is a fundamental part of our brand in terms of food safety. We have a very good story to tell in terms of building on all of the grass fed and family farm credentials.

I referred to Origin Green. We have built a new programme of sustainability on the quality assurance programme so that every quality assurance audit that is undertaken also carbon footprints every farm. No other country anywhere in the world carbon footprints its farms every 18 months on a routine basis and feeds information back to the farm on how the carbon footprint and efficiency can be improved and the profitability of the farm increase at the same time. It is a win-win for farmers and the industry. It resonates in the marketplace and creates a point of difference like never before.

It is on that platform that I believe the brand image to which members have referred can be built and succeed. The Origin Green programme is generating feedback from international markets, as I said, like no other and is the envy of many other countries. We have some way to go in terms of investing in and communicating the programme so that it is more widely known.

The German perception of Ireland as clean and green was regularly mentioned, as was the importance of increasing value rather than volume. I completely agree because if we do not get more value from the market the value cannot come back, in terms of higher prices, to producers which need a better return in order to keep producing. The German market is the most successful for Irish beef at the current time. It is the fastest growing market, at 24,000 tonnes, having grown from about 10,000 tonnes four or five years ago.

On how we are prepared for Brexit, it did not happen on 24 June. Rather, it will happen in two or three years time. The question is whether we were prepared for the kind of volatility that would be triggered by the vote. Very few people were prepared for that. In terms of whether anything could have been done about it, quite a number of companies would have hedged forward when currencies were in a favourable place at the beginning of this year or the autumn of 2015 when the currency rate was about 25p, which is the best protection one could have taken against the vote that materialised. The vote took many people unawares. In fairness to those who thought about the vote, it was not at all clear what they could do about it. Even today, how can one do anything about the uncertainty that has been generated other than learn to live with and manage it? Perhaps those who will win will be those who can manage through uncertainty in the future.

On trade agreements, as a country we export food and drink to 175 markets around the world. It is in our interests to have the maximum access that we can get to markets around the world. In principle, one must argue that we should be in favour of free trade in order for us to have that access. Clearly, we have to have defensive interests as well because there are, it could be argued, unfair threats coming from low-priced markets that have different standards to us.

Therefore, in any trade agreement that we need to negotiate, or if we are part of a EU negotiation process, it is absolutely critical that the standards that are part of that agreement are equivalent to the standards that farmers and producers are expected to adhere to in this country.

I understand that next week there will be a visit from a counterpart committee from the Northern Ireland Assembly. As the committee may know, it is establishing an agrifood and marketing body in Northern Ireland and will visit Bord Bia and the committee next week to share its plans with us.

It is an opportunity for us to share our experiences with them. Bord Bia is prepared to work closely with the new Northern Ireland body in that context.

One of the questions was whether a structural shift will take place. We will have to wait and see. If there is a soft Brexit there probably will not be a structural shift. If there is a hard Brexit there will be a structural shift as new trade barriers will be put in place and a new economic paradigm will exist between the UK and the rest of Europe, including Ireland. At the moment it is too early to say. When we wrote the paper we deliberately said there may be a structural shift because we are conscious that it may not take place. We hope there is no structural shift.

I noted the questions but now I find it difficult to read my writing. Another question was whether there is potential to replace UK exports to continental Europe. There is some potential but not a great deal. Clearly, the UK is a significant lamb exporter into France but there is a New Zealand angle.

I was asked about the repercussions generated by a change in trading arrangements between New Zealand and the European Union and between the UK and Ireland. It might be a situation of swings and roundabouts. The UK is not a significant beef exporter. It has exported cow beef but that is at a relatively low level of trade at this stage. Our industry will pursue the opportunities that exist and we will help them. However, I do not regard them as major opportunities.

Chairman:

Mr. Cotter has covered all of the questions. I will now call the final three questioners and I call Senator Conway-Walsh to commence.

Rose Conway Walsh (Sinn Fein)
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I thank Mr. Cotter for his presentation and welcome Mr. Brennan.

Does Bord Bia plan to promote the seaweed industry? The industry is growing and could create employment along the western seaboard. In 2012 as much as 25 million tonnes of seaweed was harvested as a food product and component of other products. What practical supports can Bord Bia give to people who are interested in developing a business that uses seaweed as the raw product? What supports are available to people who want to research the properties or the potential of certain species of seaweed? How proactively does Bord Bia encourage the innovative use of seaweed?

Bord Bia used EU funds to promote beef and lamb in China and south-east Asia. Can such a fund be used to promote seaweed and seaweed products from this country?

Michael Fitzmaurice (Roscommon-Galway, Independent)
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I thank Mr. Cotter for his presentation. Earlier he said there has been a lot of speculation about Brexit but nobody knows what will happen over the next three or four years. Is it fair to say that for beef, and for next year and probably the year after, that we can handle 27,000 or 28,000 killing cattle a week? In general, when production goes higher than that the price drops. People have speculated about the sterling exchange rate. Three years ago €1 was worth 74p sterling and today it is worth 85p sterling and cattle were €3.50 per lb. We can get beef into Britain at a higher price. When Irish cattle are sent to factories in England they are 10p per lb less because of the red tractor. Part of Bord Bia's job is to attract more market but I would like to hear the opinion of the witnesses on the following. There has been a large increase in cow numbers in the dairy sector. Will that place more pressure on the beef sector? One of the largest exporters in the South of Ireland, and I am thinking of Cork Co-operative Marts, has announced that it may not enter the market next year. Is that a worrying trend? Factories in the west have killed heavier Friesian cattle but they have said that they are not fond of doing so. Is there anything that we can do to export more Friesian sucklers at a younger age?

I agree with the comments made by previous speakers that animals reared on grass are superior. Is there anything that we can do to simplify the system for farmers to ensure their animals are kept in the Bord Bia system?

The witnesses mentioned staff earlier. In the past few days I read the announcement that Bord Bia will get a fund from Europe to attract new markets. Is that correct? How much staff does Bord Bia need in order for Irish products to reach all of the markets? The Chinese market has been mentioned. We are moving a step closer to the Chinese market. We must ensure that we nail down the available markets. The wind has blown with us this year because there has been an outbreak of Blue Tongue disease in Turkey and it has also caused problems in France. Does Bord Bia envisage there will be a problem with the extra amount of Friesians in the dairy sector? Does Bord Bia envisage that the extra Friesians will have an impact on the beef sector in Ireland? I presume Bord Bia would recommend an increase in the number of live exports since we have not increased the capacity of our kills of beef cattle.

Grace O'Sullivan (Green Party)
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I thank Mr. Cotter for his presentation. Even though I am not a committee member I wanted to attend here today because I have huge respect for the work of Bord Bia, including its sustainability programme called Origin Green, its work to meet the targets of FoodWise 2025 and the farm to fork initiative.

Can we add value here at home before we export? Is there anything that Bord Bia can do to increase employability from exports? My colleague, Senator Conway-Walsh, has given the good example of seaweed. One of the reasons I am in the Seanad is because I have a particular interest in the sector. The seaweed industry is an area that we can add value before we move the product to Asian markets. The industry has huge potential. Can we create more employment in the sector before we export the product abroad?

Chairman:

I call on Mr. Cotter to conclude.

Mr. Aidan Cotter:

Let me answer the question on seaweed and then I shall pass some of the remaining questions to my colleague.

In the middle of this year Bord Bia established an insight centre or what we call the Thinking House because we passionately believe that success in the marketplace only comes from a deep understanding of consumer needs. Our research team or insight team has travelled the world. They undertook ethnographic work where they stayed with people in their homes, shop with them, eat with them, look in their fridges and go to school with their children to see how they use dairy products, for example. Our research people have done this work in China, Indonesia, Vietnam, Senegal in Africa and last week in India. I have given an example of the kind of investment we make into insight. We can help the seaweed sector by undertaking and searching for insights into where the markets might be and identify the needs of consumers. In the Thinking House we translate all of that data into how we can help businesses develop a concept, brand, design and product to meet those needs. We can help a company or entrepreneur to start up a business and successfully take them into the market through the work of the insight centre. I invite members to visit the insight centre that is located nearby on the end of Mount Street. The centre is an innovative and stimulating work space that any person can benefit from and it should be promoted to companies.

It is something that companies that want to build successful new businesses can use in future.

We are strongly supportive of people who want to start new food businesses. With Enterprise Ireland and Teagasc, we have developed the Food Works programme, which helps startups to bring their ideas to market. A structured series of activities helps people to develop and test their ideas, undertake the necessary research, source production locations and take their ideas to market. Full supports are available for anyone in the seaweed sector. If people come to Bord Bia's insight centre, we will help them to develop a position in the market.

Rose Conway Walsh (Sinn Fein)
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Besides Enterprise Ireland, does Bord Bia work with Údarás na Gaeltachta in respect of Gaeltacht areas?

Mr. Aidan Cotter:

There is no reason that we would not work with Údarás na Gaeltachta or anyone. Our mission statement is to drive, through market insight and in partnership with industry, the commercial success of a world class food industry. We will partner with anyone who can advance the interests of this industry. We place no limits on that. We are prepared to work with anyone so that people can fulfil their ambitions and take their opportunities.

Rose Conway Walsh (Sinn Fein)
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Is there any possibility of an EU promotional fund for seaweed in the same way as there was for beef and lamb?

Mr. Aidan Cotter:

There is a €200 million fund for a range of areas. We submitted six applications to the EU for the three-year fund and were successful in one. It is highly competitive because we are competing with 27 - possibly 26 soon - other member states. It is challenging. We could explore whether there is a fund that would accommodate seaweed.

Mr. Padraig Brennan:

In response to Deputy Fitzmaurice's query on growth in the dairy sector and the challenge it poses to the beef sector, the increased number of beef animals coming through from dairy herds is presenting a different challenge to the beef processing sector. However, not all of these animals need to be Friesians. Two thirds of calf registrations in recent years have been for Angus and Hereford calves. Focusing more on these breeds in terms of dairy animals that are turned into beef presents the beef sector with an opportunity to find better markets for that type of product.

As to the question of additional animals, live exports form part of the necessary mix. The Deputy is probably aware that the Irish cattle price, be it for a calf or a weanling, is not as competitive in markets in the Netherlands, Spain and so on as it was two or three years ago.

Regarding the limit of the weekly kill, we have been averaging at 32,000 or 33,000 head of cattle at this time of year for a number of years. It has not been a problem. What we have seen in the past year or two is more a reflection of the weakness in the European market. There is not consumer demand, whereas poultry and pigmeat have been more competitive, leading to a lower demand for beef. As the Deputy mentioned, this highlights the importance of new markets like China, if and when it comes on board. The US is now open to us. It will be a slower burn and a longer-term project than we envisaged initially but the more options we have available to us, the better the industry's position to handle extra animals. The industry has made considerable progress in recent years trying to find niche customers that can keep the average value higher than it would have been traditionally. There are challenges but we are in a better position than we were five years ago.

Chairman:

I thank Mr. Brennan. Does Mr. Cotter wish to conclude?

Mr. Aidan Cotter:

No. I hope that we have-----

Chairman:

I am sorry. Senator Mulherin was late arriving, so we will take her now.

Michelle Mulherin (Fine Gael)
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I apologise, as I was speaking in the Seanad. Many questions have been asked, but I have a brief question about the issue of food. Would Bord Bia work with a company on developing food supplements? I am not necessarily referring to pharmaceuticals but to an Irish company that uses, for example, seaweed or takes an organic or natural health approach. Are there such companies on Bord Bia's books?

Mr. Aidan Cotter:

Yes. Our remit is for food and drink, which includes food supplements.

Michelle Mulherin (Fine Gael)
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Is the situation for such companies up and coming? Is it export driven? What are the prospects?

Mr. Aidan Cotter:

There are great prospects for people with differentiated offers that will compete in the marketplace. Under the Food Works programme, our principal focus is on helping businesses that have something unique to offer in the marketplace. Obviously, I refer to something that is not another "me too" product that would have difficulty in finding shelf space and in competing. However, the purpose of our insight centre, the Thinking House, is to help businesses - no matter what area they are in - to find a point of differentiation that will help to set them apart and to compete in their chosen marketplaces.

Michelle Mulherin (Fine Gael)
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Does Bord Bia work with Enterprise Ireland where appropriate?

Mr. Aidan Cotter:

Yes.

Michelle Mulherin (Fine Gael)
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I frequently drive past the house to which Mr. Cotter referred, although I have never been inside. Do individuals visit the centre?

Mr. Aidan Cotter:

It is a meeting and working place for our insight team to interact with producers, manufacturers and consumers and help them to develop new concepts. It has a significant range of facilities that will stimulate and help businesses to develop.

Chairman:

I thank Mr. Cotter. At some stage in the new year, we might take him up on his invitation to Mount Street. It sounds interesting.

Michelle Mulherin (Fine Gael)
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It is only up the road.

Chairman:

Yes. I thank Mr. Cotter and Mr. Brennan for attending. As they know, we have started a process of dealing with the stakeholders involved in Brexit. It is a wide-ranging issue. Teagasc appeared before us last week and the witnesses today gave an informative presentation. The situation will be ongoing for a number of years.

On behalf of the committee, I thank Mr. Cotter for his contribution to agriculture in recent years and wish him every success in his new career, if I can put it as such, in the new year.

Mr. Aidan Cotter:

I thank the Chairman and members of the committee.