Oireachtas Joint and Select Committees
Tuesday, 3 October 2017
Joint Oireachtas Committee on Agriculture, Food and the Marine
Future of Tillage Sector in Ireland: Discussion
I welcome the delegation from Teagasc and apologise for the change of time earlier and for keeping them waiting. I ask members and witnesses to ensure their mobile phones are turned completely off. There are two sessions today, the first of which is on the future of the tillage sector. I welcome from Teagasc Professor Gerry Boyle, director, Mr. John Spink, head of crops research, and Mr. Michael Hennesy, head of crops knowledge transfer, and thank them for attending before the committee today.
Before we begin, I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a 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 they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or 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 invite Professor Boyle to make his opening statement.
Professor Gerry Boyle:
The slides summarise our presentation. I will first talk briefly about the trends in the sector and current performance, go on to look at some opportunities and, finally, document for the committee the Teagasc response to the situation in which the tillage sector finds itself.
I start with an arresting chart on which we show average family farm income across the main Irish enterprises for the period 2013 to 2016. The most recent data available from the national farm survey is from 2016. This is the chart to which I come back time and time again because it points to the huge challenge faced by the tillage sector, albeit not only by that sector. That said, the contrast between an average family farm income, which includes direct payments, of €55,000 for dairying and €30,000 for tillage highlights the gap that exists now but which, traditionally, was much narrower. On top of that, members will of course be aware that the single farm payment has become increasingly important to the incomes of tillage farmers. On average over the period, it came to approximately 75%. As such, that graph is the one which is of most concern to us and, I am sure, to tillage farmers.
I move on to some other facts about the sector. It is a relatively small sector, accounting for approximately 9% of farm land. The area under tillage has been decreasing over the last five years as members will see from the chart setting out the trend at the bottom of page 2 of the slides document. It has declined by just over 14% over the last five years. We estimate that there are currently 3,000 specialised tillage farmers. Production is between 2.2 million to 2.5 million tonnes per annum and the product is used predominantly for animal feed but also for malting for brewing, some food grade oats and oils and some milling wheat. From the point of the view of the agronomics of the sector, it is classified very much as high input, high output. One of the paradoxes to some extent and something which often interests people from outside the country in particular is the fact that we have some of the highest yields in the world. As against that, however, we have very high costs of production. Of course, the other distinguishing feature of the sector, which has given rise to some difficulty in recent years with the competition for land, is the large area which is leased. It is of the order of 50% of the area sown.
Overleaf on page 3, our document provides some favour of what has been happening at county level. Members will see that between 2007 and 2016 most counties experienced significant declines in area, notably Cork, Kilkenny and Wexford, albeit with some exceptions on the other side of the graph, in particular in County Meath. The diagram at the bottom of page 3 emphasises the point that we are substantial net importers of product. Members will see that the gap set out in the final bar for 2015 is between a use of approximately 6 million tonnes and a production level of between 2 million and 2.5 million tonnes. The graph at the top of page 4 shows that we are price takers when it comes to cereals. The world market dictates the price situation, especially having regard to the issue of stocks, which have been on the increase. That has put tremendous price pressure on an already tight world demand and supply situation.
As far as the current harvest is concerned, Teagasc advisors have kept a constant watch over the season. This year, we consider that yields have been relatively good, but not exceptional. The cereal harvest is, we are happy to say, almost complete. There is approximately 5% left to be harvested. In some parts of the country, however, there are significant areas which still face difficulties, in particular Donegal, the west and some parts of the midlands.
Trafficability and crop breakdown are emerging issues. We estimate about 30% of beans are left to be harvested and 20% of straw is still to be baled nationally. Of course, we are all aware of the price of straw, and some quality issues have also been reported.
In summary, while this sector has faced and is facing severe challenges, there are also opportunities. I would emphasise that these opportunities are largely emerging in niche areas and we are endeavouring to identify premium markets. For example, there may well be a development around “Irish only” product, which is something Teagasc has been looking at. In the drink sector, there are opportunities in distilling, although that gives raise to particular technical challenges for the producer, and also around craft beers. Increasingly, as the committee is aware, in markets for some of our main export products, for example, the German market, consumers are looking for genetic modification-free, GM-free products, which presents an opportunity for the grain sector. I am happy to say there are opportunities emerging around human food grade markets, such as oats and cold-pressed oils. We include the potato sector within the overall tillage sector and opportunities are emerging around chipping and salad potatoes. Certified seed crops also present opportunities.
Looking to the future, there are certainly opportunities around organic products. We consider this to be a niche area but there is definitely a market for some crops. Unfortunately, we are all too aware that when price pressure emerges, in particular during economic downturns, there tends to be a convergence between the organic and the conventionally produced. I have mentioned the issue around genetically modified, GM, crops. As the committee is aware, imported GM products continue to be fed to animals but no GM crops are grown in Ireland. As I said, a consumer issue is emerging in some of our main markets regarding GM-free produce. We certainly foresee that the dairy sector will have to respond to this demand for GM-free.
The Teagasc response is to work with partners in the industry, particularly with our producer clients and the processing sector. From a research perspective, we are of course looking at yield and sustainability of cereal crops in all their dimensions, not just economic or environmental. We are looking at the opportunities that might exist for alternative crops for import substitution and higher value markets. We are looking to develop higher value end uses for cereals, and I have already mentioned the opportunities that exist for distilling. Of course, we are always striving to produce better and more robust varieties, and there are some very exciting approaches in the molecular sciences that will assist this process. Of course, one can have the best research in the world, but without good advice it will not be effective. Again, the emphasis is continuously on increasing adoption of best technology to reduce costs, to produce more sustainably and to produce product that the market requires. We are working closely with industry to target programmes around areas that are emerging and growing in importance, such as malting barley, potatoes and distilling.
We would emphasise the importance of training our young farmers. It is a very demanding sector and education is essential. We want to develop the role of new technologies. Again, I want to emphasise the great potential we see for improving the breeding of new varieties through marker assisted and genomic selection, which is now being used to increase the rate of varietal improvement.
There is huge interest among scientists all over the world in the potential that the novel technology of gene editing offers, and we believe it has the potential to increase significantly the rate of varietal improvement. The role of GIS technology is being investigated. We have produced the so-called nutrient management planning online tool, which is allowing us to focus on the extraordinary variability that exists in yields and in the application of nutrients at field level. That will enable us not only to improve average yields but also to improve the costs in terms of chemical application of fertilisers. We are going to see much more precision in the application of nutrients, which will have positive environmental and economic effects. We are even seeing the use of handheld devices to detect unseen diseases to target early responses better.
We think it is important to emphasise the potential for the bio-economy, although this will depend hugely on the appropriate incentives being in place. After a number of years when this sector was somewhat in the doldrums, we hope the impending renewable heat incentive will provide a new fillip to the opportunities that exist. There is no doubt that, without support, the industry will continue to stagnate due to a lack of investment and the opportunities that exist in this important sector may not be fully realised.
That is a summary of our presentation. My two colleagues will answer all the hard questions.
I thank Professor Boyle for a very thought-provoking presentation. As he knows, this is a challenging area and that is why we decided to start the work programme with it. We had a number of delegations in last week and there are more in today. What we intend to do is get the ball rolling on a discussion about the tillage sector, which I think needed to be done, and we intend to produce a report in due course on this matter. We move to questions. I call Deputy Cahill.
I thank Professor Boyle for a comprehensive presentation. I have a number of questions. First, with regard to the single farm payment, we are going into another review of the Common Agricultural Policy, CAP. Has any analysis been done of, say, the Irish experience with a 10% or 15% reduction in premia and the impact this would have on the future of the sector? We had a number of groups in here last week and they were extremely pessimistic about where the whole industry is going. We talked about niche markets, Jameson and all the different craft beers that we are now producing, but the tonnage that is needed for that is probably very low in the overall context. How much would that industry need in terms of market share to have a significant impact on the tonnage we are producing? Flahavan's are paying a serious premium price for oats. What kind of tonnage can that market absorb?
While it might not be fair to ask Teagasc about this, I have a question about barley. When I was young, to have a malting contract was a prized possession but the value of that seems to have gone out the window, as it were. To link malting barley with feed barley as regards price seems a contradiction in terms because they are going to different markets. Surely the price mechanism for calculating what malting barley is worth should not have any synchronisation with feed barley.
Biomass is increasingly becoming a topic for us. We have our targets to meet by 2021 and if we do not meet them, we are going to suffer significant penalties.
We have not even started to go the way we should with regard to biomass. Our stocking rate is probably at 50% of capacity in terms of the utilisation or our land. It is 80 kg per hectare, and with a derogation it is 170 kg. If we devoted 20% of our land to the production of biomass, how much could it do for the whole cereal and tillage sector? We could grow sugar beet or break crops such as elephant grass, or miscanthus, but it would be very hard to get a conventional tillage farmer to buy into them. Anyone who did so in the past couple of years was badly bitten but conventional tillage crops can have a role to play in meeting our climate change targets. There was a good conference in Gurteen recently but we need a far greater emphasis on the potential of biomass.
My next question is on the potential for us to produce GM-free dairy products for the market place. I have worries over our ability to go down that route and maintain a competitive production base with other countries but can we produce enough protein to be independent? If we go the GM-free route, will be able to produce enough feed for our dairy and beef industry? Organics give a premium but when a market gets saturated that premium goes out the window. We would be competing with countries that were not on the same thoroughfare so would we be able to keep our competitive advantage? At the moment the price is in a relatively good place but slumps will come. Consumers are starting to push us down the GM-free route but price is the common denominator and I wonder if we might leave ourselves in a very vulnerable position in terms of our cost base.
I welcome the presentation. This industry is at a serious crossroads and what has worked in the past is not going to work in the future. When the report comes out I would love to hear grain men or tillage men say they can see light at the end of the tunnel, perhaps a five-year or ten-year roadmap to a decent market for our products at a reasonable price. The graph of world markets shown in the presentation does not look like it can give a lifeline to our tillage sector.
I welcome the delegation from Teagasc. I agree with the policy on food but does it have a GM policy in the area of energy crops? There is a difference in the end user in this case. Grain growers and farmers' organisations were before the committee last week. I am from the midlands and some of my neighbours, as well as people in the west and north west, have been badly affected. While not necessarily losing their full crop, they have lost straw and by the time they got around to cutting their grain it was probably not worth cutting. If they were to knock on the witnesses' doors for advice, based on what has happened in the past two years when they have lost their harvest, in what direction would they send them? What advice would the witnesses give them in the area of diversification? There might be five good years of weather but we cannot say that as we cannot predict the weather.
I thank the witnesses and welcome the presentation. There is a huge discrepancy in single farm payments across the country, from €150,000 to €2,000 or €3,000. Do they think they need to be sorted out to keep family farms more buoyant? Being realistic, conditions in some parts of the country are such that a lot of people are going to pull out of the grain sector. Professor Boyle spoke about the RHI and new ways of creating energy. Does he agree that marginal land is not fit to grow willow, or some of the crops about which people are dreaming? Does he think the RHI should only be paid for what is produced, reared or sown in Ireland? What is his view on tillage sector incomes, which are going down? What is his view on biogas from silage? I know Teagasc is doing research on this but would it be more viable for some people than others?
What research is Teagasc doing into craft beers? I was at a few events in Dublin and it is clear that people in the sector are making a lot of effort to get their beers known and exported. In either New Zealand or Australia they have developed a type of grain which is unique but costs €1,200 because it is wanted everywhere. What work has Teagasc done into this type of thing, where the farmer would not be the price taker and the sector would benefit?
The witnesses spoke of large fines coming down the line. Do they agree we are in a bit of trouble with biomass? A lot of it appears not to be efficient to grow. I feel that the guy in the suit or the guy with the biro gets more from tillage sector knowledge transfer, whether in respect of beef or sheep, than the farmer who gets €400 or €500. It has not been a great scheme from the point of view of attracting farmers.
Professor Gerry Boyle:
There may be a bit of confusion about the knowledge transfer scheme and long-standing activity. Teagasc originated the term "knowledge transfer" a long time ago. The advisory service gives advice and is nothing to do with the scheme. The knowledge group schemes are a different matter and I am well aware of the issues that have arisen but I am talking about the relationship advisers have with farmers on a day-to-day basis.
Deputies Fitzmaurice and Cahill raised the difficulties around the single farm payment. We carried out analysis of reform of the Common Agricultural Policy a couple of years ago, and will do more when the scenarios firm up a bit more. It is not fully appreciated but the tillage sector was revealed to have, proportionately, the single greatest negative impact. Some 75% of family farm income is accounted for by the single farm payment. Any cut in that, such as has been mooted in the event of a hard Brexit, would reflect this.
If a hard Brexit were to occur, there would be approximately the same or a little less negative impact on family farm income. Family farm income is essentially the net margin, having substracted from revenue all variable and fixed costs and added the single farm payment.
Deputy Michael Fitzmaurice asked a question about the distribution of payments that I am reluctant to answer directly because it involves a political issue. I am well aware of the debate in that regard and the discussions taking place on capping and so on which is at the core of the Deputy's question. We can analyse the impact of different caps, but it is not really our business to comment on where the cap should be or if there should be one. In particular, we would be concerned about the impact of any reform on the productive commercial sector of Irish agriculture. That was a point of debate on the last occasion and will be on the next.
There were many detailed remarks that, with the permission of the Chairman, I will ask my colleagues to address as quickly as possible.
Mr. John Spink:
Deputy Jackie Cahill asked about volumes, in particular of Jameson and draft beer, malting contracts and the link with feed and also Flahavans. Deputy Michael Fitzmaurice also mentioned craft beers and high value grains. The value of grain in Ireland is linked with commodity markets which are largely driven by maize in terms of grain or soy in terms of proteins and horse feed. It is worth remembering that on a worldwide basis they are both predominantly genetically-modified, GM, crops; therefore, Irish producers of conventional crops are competing in markets that are set by GM crops. As Professor Boyle said, we are trying to identify premium markets, in particular when the product is marketed as having been made only from Irish ingredients, which means that it has to be sourced in Ireland, not on world commodity markets. Therefore, the value of the grain or tillage product used to make the product is linked with its end value. Tonnages in some high value markets are currently very small, but because we have a small tillage sector, if we find suitable export markets, we could export large quantities of our produce to high value markets and make very little impact on global markets. A big increase in our oat crop exports would have very little impact on a global scale, but it would add a lot more value here. We are considering such measures.
We have not developed a variety of grain worth €1,200 per tonne, but I wish we had. A reason we have an interest in the drinks sector is that the alcohol yield of a grain is inversely related to its protein content. Our niche in Ireland is producing high-starch, low-protein grains and, therefore, higher alcohol yields than one would get from most grains. That is one reason we are particularly interested in that sector. If we could get a price of €1,200 per tonne, we would be delighted.
In relation to GM-free dairy products, we want to be competitive and need to consider whether we can produce enough feed and be competitive on price. A group within Teagasc is examining this issue. We could not produce enough protein to replace all of what we import. The analysis is ongoing. At current prices, one could formulate a ration of oilseed rape meal and beans, for example, for a slightly higher price than an all-GM ration, but if demand for dairy and meat products from non-GM-fed animals was to increase, the cost of these commodities would also increase. Currently it is a relatively small increase, but the analysis is ongoing and the price could change if there was more demand for animal produce from animals fed on non-GM crops.
Mr. Michael Hennessey:
Senator Paul Daly asked a pertinent question about the advice that would be given to a farmer in the west who had had two particularly poor years and what he or she could do next year and the year after that. It is tricky enough because there are several rules, including greening rules and so on, that have forced some such farmers to grow crops that might not be as good as they would like or would ordinarily pick. Certain crops stand better. When a farmer has a poor year, he or she has a much longer period to harvest the crop. There are good and bad farmers in all sectors and Teagasc could bring the Senator to meet many farmers in the west who have managed to get their crops in on time because of the crop mix they use. There may be a mix of winter and spring crops that suit the relevant land. What crop suits a particular piece of land has to be considered on a farm to farm basis. Some such farmers have the necessary machinery, expertise and knowledge, but weather was the big thing that was against them. However, in a normal year they tend to get on reasonably well. There is much we can do, but we cannot do a lot about the weather.
Deputy Michael Fitzmaurice asked about land that was fit to grow willow. No matter what land is in question, good land will produce a good crop, whether it be grass, willow or grain. The better the land, the better the crop that will be produced from it. That is universal for all crops. Willow is capable of being grown on wetter land, but the wetter the land, the poorer the yields one will get. Willow is very much on the conventional side of the house in terms of GM crops. Programmes in Scandinavia, in particular, have shown that willow is outclassed in yield over a period of time; after about 15 years it will be outclassed and will have to be replanted.
Professor Gerry Boyle:
On the GM-free issue, I agree completely with Mr. Spink that there are cost implications. The preliminary indications are that they are not significant at current prices, but it would be a big assumption to rely on this because prices will change, as Mr Spink said. If consumers demand such a product and competitor products are labelled as such, we may not have a choice, which is why it is a matter of urgency for Teagasc to identify what alternatives are available to dry stock and, in particular, dairy farmers.
Senator Paul Daly asked an interesting question about our position on GM crops and the growing of energy crops. We have no position other than a desire to comply with the law and current departmental policy. Irrespective of use, the growing of GM crops is not permitted in Ireland. There are risks of contamination with non-GM strains and so on and they would cross over to crops that could be fed to both animals and humans.
Deputy Michael Fitzmaurice asked whether the RHI should be limited to Irish-grown crops. That is a matter for policymakers to determine.
In my view, given our limited resources, for any such scheme we should look to promote our own sector. There was an interesting question about the production of biogas from silage. We are about to commission an anaerobic digester for research purposes at our Grange site. It is a system that operates on both slurry and grass silage. The best alternative for grass is to use it in the production of livestock products but for an individual farmer with less livestock than is optimal, it may be an opportunity. We will research how exactly it might function over the next number of years.
Mr. John Spink:
Essentially, this is related to the total tonnage of dry matter they produce. We have not formally quantified it but it would be very easy to do as we have all the data. Deputy Fitzmaurice suggested we could not produce biomass efficiently but we can produce some of the highest biomass yields in the world in our drought-free climate, with our long summers and neither very high nor very low temperatures. We can produce large quantities of any crop, be it grass or crops, and this is why we have the highest wheat yields in the world.
I suggested that grass would be used to produce gas but not in a biomass plant where it would be burned at 40% efficiency. I am not talking about grass but willow and miscanthus, which we have done and on which there are reports. I am talking about using average and good land. Everyone wants the good land because they can grow barley, wheat or biomass and milk a lot of cows or fatten a lot of calves. On average, throughout the country, we are not as capable as other countries.
Professor Gerry Boyle:
That is with the exception of grass. We now have the evidence that we have extraordinary potential. Grass has to be produced for some economic outlet and there is no point in producing grass without the animals to utilise it because, in such a case, it will not be efficient and will create problems. There is a limited possibility in anaerobic digestion and we are going to research it. This is also relevant to tillage people because of the utilisation of the digestate, the end product that emerges from the process.
Professor Boyle said there were 3,000 tillage farmers in the country and that 50% of the land being tilled was leased land. Does he have a breakdown of the average cost of the leased land? What is his opinion on the viability of leasing land for tillage?
Professor Boyle also mentioned alternative crops. In my part of the country there has been talk of the abolition of beef quotas in Europe. How viable does he think sugar beet could be if it was started again? Since the abolition of the sugar industry there has been, ironically, a continuous decline in the tillage sector and it is clear that the two go hand in hand. The eucalyptus crop is mentioned in some of the papers with which we have been presented. Has there been much research in that area?
Finally, one of the big things in the last round of CAP was greening. Has that had a negative effect on the tillage sector? Does Deputy Kenny have any questions?
Mr. Michael Hennessey:
Leased land is a major issue in the tillage sector. As the Chairman said, some 50% of land is leased in one form or another. There has been a big change in the past five years, on the back of the change in the taxation status of rented land. A tax-free allowance is available for a long-term lease, that is, anything over five years and up to 20 years. For a husband and wife, the maximum is €80,000 so it is very significant. It has brought good and bad things for the tillage farmer. Much more conacre land, with one-year rentals, has been converted into long-term leases. This is probably no more than 20% of the total but it has increased quite a lot. It has brought disadvantages too, including the fact that the dairy sector has the option of longer-term leases and they now offer 15-year leases, which are attractive to farmers converting from tillage or on grassland. However, they are competing with the tillage farmer for access to land and the latter cannot increase his profits or output unless he gets more land so the price has crept up steadily. In real terms, it has probably gone up by between €30 and €50 over the past four or five years. It is also because of competition from young farmers who are looking for a way into farming along with entitlements, both of which go hand in hand and require a longer-term lease.
I was asked about viability. Teagasc is worn out telling farmers not to do certain things for the past 35 years but the farmers have continued to do them nonetheless. Some have made a good success of it but others have certainly not. The pool of land is now getting smaller, however, and the level of tillage land is getting smaller, which is putting more pressure on the system. Mr. Spink will answer the question on beet.
Mr. Michael Hennessey:
What sort of living would he like? It depends on whether the land is owned or leased. Some would argue that a dairy farmer can run a farm with 80 cows, others would suggest it needs 120 but it depends on where it is. For a tillage farmer on his own, one could argue it would be 600 or 700 acres but it depends on how much he owns and how much he does not own. A farmer who wants to make a very good living and to have a big single farm payment would probably need closer to 1,000 acres than 500.
Another question was on the negative effects of greening. When it came out, there were a lot of rules and regulations stating what farmers had to and could not do. Compliance on the part of farmers on the ground has been extremely high, however, and there have been fewer than 100 breaches of the greening rules. It has, however, made a bit of a difference to a number of different farmers. They used to block land for winter wheat for one year and for another crop in following years, but they now have to subdivide it into different sections for the number of crops in a particular year.
That is adding costs. How many farmers is this happening to? The smaller farmers - those with fewer than 30 acres - are losing out while the bigger guys have more than three crops anyway. The big guys have more than enough environmentally-friendly areas, EFAs. They need 5%. The average is approximately 7.5% and most have more than 12% so it is not a big issue for them. I do not think it is has had a big negative impact generally but it has had an impact on individual farmers.
Mr. John Spink:
I thank Mr. Hennessey for leaving me with the question on whether beet was viable. If we could re-establish a viable beet industry we, as an organisation, would very much welcome it as it is a very good break crop and has benefits for cereals and rotation. We have done some work over the past couple of years with Beet Ireland and looked at the yield potential of new sugar beet varieties since the industry stopped ten or more years ago and there has been a big increase in the yield potential of beet in that time, with improved varieties, etc. That is certainly a positive but the world price of sugar is currently relatively low, at some €350 per tonne. A lot of the predictions of four years ago envisaged between €500 and €600. We would welcome the return of the beet industry if there were defined markets for Irish beet as this would reduce volatility but re-establishing an industry while exposed to the fluctuations of world prices would make any of us a bit nervous.
I was also asked about eucalyptus. I do not know of any work done recently on eucalyptus but some was done a good few years ago and there was a biomass programme at Oak Park for many years. Professor Boyle reminded me that research from a number of years ago found that it was susceptible to low temperatures and some of it was lost during very cold winters. This is less the case with willow or miscanthus and these are the biomass crops that have been looked at in recent years.
If we change to biomass, do we run the risk of divergence away from cattle, given that farmers are price takers? Are we running a risk of food shortages? I asked whether there was any research into grain because craft brewers have forwarded evidence that a special grain was being produced in New Zealand or Australia. Is any research being done here into special grains that might be valuable?
Mr. John Spink:
We are doing work on grain for both beer and distilling. We are at the early stages and we are collaborating with the IT in Carlow where it has started a brewing and distilling course. We are hoping to increase our efforts in the coming years but we are at the early stages at the moment. I am not aware of the very high-value grain from New Zealand but I will look into it. It is an area we are very keen to develop.
I remind members and witnesses to ensure that their mobile phones are completely switched off for the duration of the meeting. We will continue to discuss the future of the tillage industry. I welcome representatives from the Irish Organic Farmers and Growers Association, Ms Gillian Westbrook, CEO; Ms Grace Maher, development officer; Ms Mary Lynch, inspector, tillage farmer and organic adviser; and Mr. Alan Mooney, tillage farmer. I also welcome the Alcohol Beverage Federation of Ireland and its representatives, Ms Patricia Callan, director, and Mr. William Lavelle, head of the Irish Whiskey Association. I thank them for appearing before the committee today. The committee is reviewing the tillage sector and we hope to produce a report on the sector in the next few weeks.
Before we begin, I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a 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 they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or 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 House or an official either by name or in such a way as to make him or her identifiable.
I invite Ms Gillian Westbrook to make her opening statement. Ms Callan will make a statement after Ms Westbrook.
Ms Gillian Westbrook:
I sent a statement to the committee as required but I will give the committee a summary at this point, on account of time pressures. On behalf of the Irish Organic Farmers and Growers Association, I thank the Chairman and committee members for giving us the opportunity to come and speak today.
The complete land area under organic production in Ireland is 73,000 ha, which equates to just under 2% of agricultural land. Of that 2%, 94% is in permanent grassland and 2.2% is in cereal production. This is a very low ratio compared to organic livestock production and other processing requirements. We have a high dependency on imported cereals in order to meet specific market demands.
There are obvious opportunities for Irish tillage farmers to consider converting to organic production and we will highlight some of those to the committee this evening. Last year, the land area under organic tillage was just over 2,200 ha. Even though this is an increase of 650 ha on the previous year, it is not sufficiently large to keep up with demand. No tranche of the organic farming scheme has been opened since 2015 as, apparently, there is no funding available in the RDP but Ireland has an existing policy target of 5% organic production, although we only allocate sufficient funds to support 2% of production.
Even with the limited funding - we fully understand we need to work within budgets - the Irish Organic Farmers and Growers Association, IOFGA, firmly believes that a targeted scheme, which incidentally is 75% co-funded by the EU, needs to be reopened, especially if we are to supply the current deficit with home-grown product. Otherwise we rely on importing cereals that can be grown here, which is simply not economically sensible or sustainable.
Oats represent the largest organic cereal crop in Ireland, not barley, as is the case in the conventional sector. Oats account for 60% of organic cereal production, barley 13%, wheat 9% and protein crops 6%. Oats are a valuable cash crop, with over 50% going directly into porridge oatlets for a growing domestic and international market. The leading industry manufacturer has already stated it has at the very least a 2,000-tonne deficit every year to meet the current supply and requires much more product. There are also valuable industries using grain such as milling, brewing and distilling, all of which have a massive and growing demand for organic cereals. There is also a demand for organic protein crops. The protein aid scheme has boosted the production of protein crops. However, organic systems find it very difficult to grow a single protein crop. They tend to opt for a combi-crop whereby there is a mix of 40% to 50% protein. Nevertheless, it is once again an important source of protein to reduce dependence on imports.
IOFGA prepared a submission for the Minister of State, Deputy Doyle, which was very well received, requesting that organic farmers growing protein via combi-crops be paid a proportional support from the protein aid scheme as many fall outside the protein aid criteria. We look forward to seeing this introduced before the next growing season. Organic tillage production does not have the same high cost base associated with conventional tillage, naturally enough, as chemical inputs are not allowed. That said, the yields are lower in organic production, with an average yield of around 2.5 tonnes per acre - that is 5 tonnes per hectare - but with most organic crops returning a gross margin of between €700 and €1,000 per hectare, that is a profitable enterprise. In 2015 the organic farming scheme saw just over 500 new entrants to the sector, over 90% of whom were livestock farmers, increasing the feed demand significantly. We estimate that approximately 6,000 tonnes of organic grain are being produced in Ireland at present but we need an extra 10,000 ha of land to convert to organic farming even to begin to supply the current Irish demand, and that is not including future needs for farmers or processors. Therefore, the lack of supply is certainly a barrier to the expansion of the sector and one which has been identified in the national organic action plan.
Regarding future organic regulations, albeit not yet finalised, there will be more onus for feedstock to be sourced regionally, giving some market opportunities for home-grown organic grains. This, combined with compliance with high-level policy targets such as pesticide regulations and the Water Framework Directive - we will not even get into the impact of Brexit on trade - makes organic an attractive option for many tillage farmers. While there are economically sound opportunities to increase organic cereal production to meet the deficit in supply, a new targeted scheme is needed to respond to the rapidly increasing market and there is certainly a very clear indication that this issue will not go away.
Ms Patricia Callan:
I thank the Chairman, Deputies and Senators for the opportunity to contribute to the discussion today on the diversification of the tillage sector. The Alcohol Beverage Federation of Ireland, ABFI, is an umbrella organisation encompassing our category associations such as the Irish Whiskey Association, the Irish Spirits Association, of which William Lavelle, who is here with me today, is the head, the Irish Brewers Association, the Irish Cider Association and the Irish Wine Association.
Obviously, the reason we in the drinks sector have been invited here today is that we are viewed as a growing sector. In terms of our economic exports, the growth has been phenomenal. Bord Bia states that last year we increased exports by 4% to €1.4 billion. According to the CSO data already available for this year, we have seen an increase of 18.5% in exports of Irish whiskey, which is now the fastest-growing spirits category in the world. We are therefore very much of the perspective that this is a very big cake.
Irish whiskey comprises only 5% of the overall whiskey market and there is plenty of opportunity for growth into the future, given the right conditions. We are committed to working with the Minister and the Department of Agriculture, Food and the Marine on Food Wise 2025. In this regard we have agreed to try to increase exports by 85% but we think we will actually almost double that within the timeframe if, again, conditions are right.
Regarding the economic benefits, an unusual aspect of our sector is that we are dotted right around the island of Ireland. As far as new production is concerned, four years ago we had four distilleries but now we have 18 in operation and 16 more in planning, and they are right around the island of Ireland. ABFI as an organisation is all-island because our geographical indicators which protect Irish whiskey, Irish cream and Irish poteen are all-island, so we operate on that basis.
As for our strategy regarding delivery on our vision for Irish whiskey, we estimate that we will bring 1,500 new jobs into the sector. This story also benefits Irish farmers when it comes to both the breweries and the distilleries. There is a huge demand for Irish agricultural suppliers to source malted barley and unmalted grains, as well as fresh Irish cream, used in Irish cream liqueurs, and apples, which are used in cider. We purchase 60% of our raw materials in Ireland and create a major multiplier effect as a result, much more than, for example, the multinational sector. It is estimated that for every job created in the drinks manufacturing sector, four additional jobs are created.
Specifically regarding tillage, the drinks industry purchases about 10% of Ireland's annual harvest and the vast majority of Irish brewers and distillers are committed to purchasing their barley and malt locally. At present, we purchase more than 200,000 tonnes of barley every year. The current growth is leading to an increase in demand for both unmalted grain and malted barley, and more of this demand will be met from domestic sources. I will give the committee just three examples from three of our largest drink producers. Diageo uses more than 130,000 tonnes of barley each year at St. James's Gate, and 300 tonnes every day just to brew Guinness. Diageo buys approximately 13% of Ireland's total annual domestic production of barley. Heineken Ireland sources all of its malted barley from 750 Irish farmers. Irish Distillers seeks to purchase all its malted and unmalted barley from Ireland, much of which comes from a very local radius of about 100 miles of the Midleton distillery. It is, however, necessary at times for Irish whiskey producers to source maize from further afield as Ireland does not have the climate to produce maize in the quantities needed for our production process. The three producers I have listed are just some of many now. We have a burgeoning membership and a burgeoning industry. For example, Walsh Whiskey and O'Hara Brewery in Carlow, the Shed Distillery in Drumshanbo, Teelings Whiskey in Dublin's Liberties, Tullamore D.E.W. and many more have signed up to Bord Bia's Origin Green scheme. Under this scheme, the producers have specifically made commitments to source more grain and raw material locally. For example, the Shed Distillery has committed to sourcing 100% of its grain from Origin Green suppliers. We think it is a fantastic initiative.
Irish drinks producers are trying to innovate and produce new products, which means they must work closely with growers and merchants to improve quality, efficiency and sustainability. What is key is reliable, secure production. In the context of trying to innovate, we are looking at different things. For example, Irish Distillers has recently launched a project experimenting with rye blends grown locally. I think we will see more such examples follow through. As more and more people bring new product, there is more opportunity to look at recipe, whereas with traditional recipes it is harder to diversify the grain mix.
Last week, ABFI had a general meeting with the Minister, Deputy Creed, at which we briefly discussed this issue. We have already requested a further meeting with the Department to examine what additional opportunities there are for the Irish drinks industry to collaborate. We are very interested in innovation and research proposals regarding Irish grain usage in brewing and distilling. We are very positive about it. I think the members are willing to look at funding of research and innovation and we look forward to exploring that further with the Department, Teagasc and anyone else who may be interested.
We are conscious of the difficulties the committee has heard from other witnesses before us that face Irish grain farmers and we are supportive of calls from farm organisations for a Government plan to revitalise the tillage sector. At the same time as I have given the committee our good news story, we are aware there are threats on the horizon. Brexit is an obvious one but we have two specific threats to the drinks sector in Ireland which I would like to touch on briefly.
The basic message is that if our industry is growing, so will that of tillage farmers because we will need more supply. However, anything that could damage our overall growth and projections will be problematic. Growth should not be taken for granted in any industry and certainly not in ours.
We have an issue with the Government's Public Health (Alcohol) Bill that will shortly be before the Legislature in terms of it providing for a blanket ban on the marketing and advertisement of drinks products. That would be particularly damaging for start-ups as they would never be able to build brands in the Irish market, although it would be essential to do so before they could go on to export their products. The Alcohol Beverage Federation of Ireland, ABFI, would like to see workable legislation. As was mentioned in reference to barley farmers, our current advertisements might show an orchard or a farmer in a field. That would be banned by the Bill and we would not be able to show a person or a location other than the production process. Breaking that link to our heritage and rural supply chain would be damaging for us. I flag that to members and ask for their assistance in getting legislation that businesses can work with and that will deliver the public health objectives.
The budget will be announced next week and many others are probably more involved in it than we are, but Ireland has the second highest excise duty in the EU on alcohol and that is very damaging to our industry, especially so in the context of Brexit and the North-South divide. The devaluation of sterling has already put strain on our exports.
Those are the impending threats to the drinks industry. The broad vision for the sector is very positive, but if companies' ability to compete is hampered and there is not a supportive home market, there will be less investment in spite of the contribution of the many start-up businesses because a significant portion of them have foreign investment backing.
I welcome both groups to the committee. This is the committee's second week hearing submissions on the future of the tillage sector, and the importance of grain has been a prominent feature. The two presentations today have highlighted the massive success story of the end user and the plight of the producer. I ask the ABFI where between the two extremes is the cookie crumbling? It wants an Irish grain product, and to be using Irish-sourced grain must be an advantage for it, but the committee has heard over the past two weeks about people leaving the tillage sector. Is the alcohol industry not paying a fair price? The committee was told last week that 5 cent of the average price of a pint of Guinness in a pub goes to the farmer and that a 0.1% increase in the price of a pint could be worth €40 per tonne to farmers. There must be a problem if the drinks industry is as successful as it portrays and yet conventional grain growers last week and organic farmers today have highlighted the plight of their industry. I may be stating the obvious but I would like to hear the opinion of the ABFI on that issue.
I welcome the witnesses to the committee. I am interested in the 5 tonne per hectare yield in the organic sector and the gross margin for organic crops, which seem to be quite high. There is a problem getting enough people to join the sector, but what is the solution to that and what needs to be done? There was mention of the reopening of the scheme for tillage farmers and so on, and that could be done, but there must also be a demand-led element. Ms Westbrook said there is very high demand, particularly in the oats sector, and yet not enough people are prepared to produce it. Is that because organic farming involves more difficult husbandry such that farmers are afraid of it and do not want to go down that road or is the price, which seems high, not high enough to compensate for those difficulties?
In regard to the drinks sector, I know the Shed Distillery very well as it is beside where I live in Leitrim. It is a great success story and is doing great work there.
Members would expect the drinks industry to aim to source all its grain in Ireland. If a drinks company that wanted to label its product as Irish had to use Irish ingredients, would that cause a problem due to insufficient raw material being produced here? Most people would think it logical that if one were to say a product is Irish water, that water would have to come from Ireland, or if one were to call a product Irish whiskey, at least a fair proportion of its raw materials would have to be sourced in Ireland. However, the question is whether sufficient materials can be produced here. If that is not the case, it comes back to the point made by Senator Daly as to whether farmers are not being offered a good enough price to produce them. I do not drink very much but what little I do is very dear. That is the same for everyone. The vast majority of people would not begrudge the farmer an extra 0.1% on the price of a pint. If one goes into a bar after 12 midnight the price goes up and then a little later the price goes up again because publicans have to pay staff extra. There needs to be joined-up thinking to come up with a solution. There has to be one if there is a sector as successful and with such potential as the Irish drinks industry and also a farming sector that has the potential to provide for that but cannot do so because it is not being adequately compensated. I want to get the witnesses' views on where a solution may lie. Does somebody need to put their hand deeper into their pocket?
I thank the witnesses for their presentations. My questions will focus on similar issues to those addressed by Senator Daly and Deputy Kenny. In view of some of the presentations given to the committee last week that portrayed a sector in dire financial straits with acreage dropping by 14% over the past couple of years, it is hard to comprehend why the lifeline for a certain number of producers who could produce grain organically and get a viable commercial price for it is not being taken. Very good commercial prices were quoted by Flahavan's for oats and yet there is a deficit in the production of oats. What roadblock is stopping farmers? They are usually very good at making good economic decisions. What is stopping farmers changing to organic farming from conventional tillage farming which everyone agrees is not paying? The witness said there is a severe shortfall or deficit in every sector, so what is the roadblock or what needs to be done in order that a sector of tillage farmers would be able to make a viable income?
It was said that 60% of raw materials used by the drinks industry is purchased in Ireland. That seems a very low figure for an industry that portrays itself as wholly Irish. Kerrygold butter is 100% produced in this country and marketed as such. However, it is disingenuous if whiskeys and craft beers are being marketed as Irish but only 60% of their ingredients come from Ireland. That figure seems extremely low for a product to be labelled as completely Irish.
A point was made by Senator Daly and Deputy Kenny regarding the end product and how one will pay over €5 for a pint of Guinness but the person producing the grain will only get 4 cent or 5 cent of that. If there were a graph before the committee showing the relative division of the final consumer price of a pint, as one often sees, one would hardly be able to see the section showing the portion for the tillage farmer because it would be so small. The ABFI gave figures showing the drinks industry has expanded rapidly in recent years and said that distilleries and breweries have been springing up all over the country, and that is welcome. However, if it is serious about developing the industry in the future, the person producing the raw material has to see a future in it for him or her.
If we are to create a niche market for Irish whiskey and niche Irish craft beers, we need to source the raw material as far as practically possible in Ireland.
We must take action to rectify what is happening at present, as evidenced from the graph. The man producing the raw material is not being paid a viable return for his produce. I would like the industry to focus on the percentage of the raw material that is produced in Ireland and whether the current level of 60% will be increased to a figure in the high nineties, let us say above 95%.
I thank the Irish Organic Farmers and Growers Association, IOFGA, for the presentation. Do the representatives think that many small farmers - those with ten to 16 ha - left organic farming because it was more attractive to participate in the GLAS scheme? This has happened all over the country and I see in my area the farmers have walked away from organic farming. There was also the differential between the prices being charged by the licensing authorities compared to the cost of drawing up a GLAS plan. When the farmers did the sums they would find that they would be better off by €2,000 to €2,500 per year by being in GLAS as opposed to farming organically. Is that the major problem face by IOFGA?
The Department was asked to reduce the acreage needed to farm organically to try to retain the smaller operators, but it did not accede to the request because the Department said it wanted to meet the targets. It is clear from the figures supplied that we are not meeting the targets we set ourselves.
When one looks at the different sectors of agriculture it appears that farmers prefer to have livestock. Why is that? Most of the farmers I know bring their cattle to the commercial marts rather than to special sales because they get the same price. Why is the organic producer not getting a premium price? Are we not marketing our product sufficiently?
When farmers supply to the drinks industry, they are price takers. If one keeps telling a producer that they are a price taker, they will get fed up of taking the price because they will go out of business. The industry needs the raw material. I concur with every other member that if one is selling Irish whiskey, all the raw materials should be Irish and should not be mixed with crops from other countries. Why does the drinks industry not do a five or ten year plan to guarantee security of product? We have the figures that the raw materials cost in the region of 5 cent in the pint. It does not matter whether it would be 6 cent or 7 cent, but that additional 2 cent would give a premium price to the farmer and buy in to doing a deal with the industry down the road. Why does the industry not do that rather than every year bantering over a few pounds with people walking away from supplying the raw material? The industry could ensure the security of supply of the raw materials.
It is great to see that in County Roscommon an announcement was made that planning permission is being sought for a new whiskey distillery. This is happening around the country. However, we must remember that if we keeping pulling a dog's tail, he will bite. What is happening is that if the industry wrangles every year and farmers have to take a low price, the industry will lose them.
The industry is portraying the product as Irish, grown in a clean environment and everything is done in Ireland, but in fact the company is bringing in most of the organic produce from Poland and other countries that are the bread basin of the world. Why will the industry not do a deal with Irish producers instead of engaging in a ding-dong every year? That is not helping the industry. If the different pieces of the jigsaw are not in place, that will not help the industry.
Ms Gillian Westbrook:
I will answer some of the questions and I will then pass questions to my colleagues who have more experience in the practical every day implications of organic cereal production.
In response to Senator Paul Daly's question on the tillage challenge, we have a shortage of supply. The cost of malting barley is around €180 a tonne. There is a demand for the raw material, but it is about getting enough people to come in for conversion. That ties up with Deputy Cahill's question about why more people are not coming in to supply the raw material. For a start, there is a 60 ha cap, and if one wants more tillage farmers to enter the market, one must raise the cap higher than 60 ha. For example, the limit in Wales is 300 ha. That is not for tillage - it is more sheep production - but the size is significantly bigger. Very few EC countries put a cap on the amount of land that will gain support under the scheme. Granted under the organic farming scheme one will get a less support for bringing more land into the scheme, but it would be a big boost for the tillage farmer to remove that cap.
In response to questions from Senator Daly and Deputy Cahill, there is also a two year conversion, which puts quite a few farmers off as well, which is a regulatory requirement and must happen. Taking account of the two year conversion period, one would only produce for three years of the five year period. One would have to measure the return over a ten year period.
Organic farming is very much demand led. Half of the land area would be in rotation to build up fertility in the soil, so the product will not necessarily be giving back a yield year in year out. Therefore, pretty much half of the land will be in rotation. The really successful organic tillage farmers, all of whom give me examples of land that is stockless, generally speaking have farms that are mixed enterprises, with beef and tillage in order to build up the fertility allowing them to use the land that is not in cereal production for those periods.
Deputy Cahill raised the issue of the road block. We do not have a coherent strategy for organic production and I would say that is the cause of the block. We tend to get merged in with Origin Green and different organisations such as that, which is fine up to a point, but we need a coherent marketing and promotion plan specifically for organic production.
To put it bluntly, sometimes there is a them and us division which can come from the organic side and which is not helpful. The product must be seen as an Irish produce for which there is a significant export market. There is a €30 billion export market sitting in Europe, which we are not taking seriously. Whether it is a result of remnants from the past, we should not be competing for the same space, we should be looking for different markets That can be gained from having a coherent strategy on the approach to marketing organic produce.
We do not target the scheme. I appreciate there may be criteria restrictions with which I am not as familiar as the Department of Agriculture, Food and the Marine and I will leave that question for it. Ideally, organic production should be market led, because if one opens the doors and lets everybody into the scheme, it basically pushes down prices elsewhere. Some processors might think that is a good idea but I think that is part of Deputy Fitzmaurice's point on the reason that farming are bringing their produce to the commercial mart, because they are not getting in to supply their beef. There is a limited number of processors, but in order for organic produce to be really successful - I am referring to countries that can demonstrate this - it is a multi-layered product. If one has all of one product, one does not tend to be as successful as somebody with many different commodities, such as livestock, dairy, cheese production, added value, beers. In such instances the whole sector lifts as opposed to having 90% in one sector. That also echoes a point made by Deputy Fitzmaurice.
The double-funding issue with GLAS is something we have asked about tirelessly. We agree completely on that. Clarification may be needed as to what actually constitutes and defines double funding as we were under the impression, and measure 11 of the rural development programme makes it perfectly clear, that the organic farmer is being paid to produce food for the organic food supply whereas GLAS is an environmental scheme. It is in response to the public demand for organic produce that the organic farming scheme was given a separate measure and supported as such. We agree with Deputy Fitzmaurice that it is not double funding and we agree that there has been quite a barrier as such for certain people. Having much of one product in there raises the question of what is actually being supported if this is not market led. Is it that one is just going to give it to people where there is no market? The counter argument to that is that one is paying people to be environmentally-friendly in their farming systems. However, the scheme is market led because it has to go through a value reporting process. As it is queried and audited as to its significant value and the returns to the Exchequer, it is market led. Perhaps we need to be clearer about the market. If we cannot be clearer about targeting it, we certainly need to support it with a full marketing scheme.
The front-loading aspect is again a question for the Department. As far as I am aware, and we have looked into it, it is not actually allowed. I do not think it is possible to front-load a per hectare payment, however I am not clear on it. We looked at it only briefly. Certainly, it is a question for the Department.
There are more processes coming online. Many of them represent a kind of chicken-and-egg situation. Farmers do not want to come on board with more product because they do not have the continuity of supply. They are concerned about coming on board with more product lines if that continuity is not there. Again, that is something the focus group on organic production, which is due to be opened quite soon, needs to sit down and think about. It is a huge market in the EU and there is a great deal of opportunity which we cannot help but feel we are missing out on to a great extent. It is a shame. My colleagues will address some of the other issues.
Ms Grace Maher:
Deputy Martin Kenny asked about the problem of getting people into the sector. As Ms Westbrook outlined, one issue is the support system. With no tranche of the organic farming scheme, OFS, open, farmers simply cannot make the commitment because it is a huge change. The Deputy addressed the issue of husbandry, which Ms Lynch or Mr. Mooney will elaborate on. It is certainly a different system of production and it involves much change, including a change of mindset, for farmers to convert to organic tillage. It is not the same model as the conventional sector because one cannot put all of one's land in. One has to build fertility on some parts of the land while producing crops on the balance. It is quite difficult.
Ms Mary Lynch:
I will elaborate on the barriers for tillage farmers coming into organic tillage. As an adviser, the biggest issue I note is that conventional tillage has become very high-input, which means that for a farmer to change to a system with very low inputs is a major step, even simply of mindset. On foot of the way the tillage sector has developed in Ireland, we are talking about many farms which are 100% tillage. For them to convert to organic requires putting a fertility building phase into their systems. As part of the previous OFS, there was a double payment during that period, which definitely helped many farmers to get through two-year conversion time when they could produce cereals on only 50% of their land. The €220 per hectacre payment was not enough to compensate them for doing that.
There are many technical issues also. If they have been 100% tillage, they do not have any fencing or water. This is a challenge if they switch to having livestock grazing, even if it is another farmer's livestock where they can co-operate with other organic producers. The fertility building phase usually involves a grass-clover mix. If one had a mixed farm, one would let one's cattle out to graze it. We need farmers to co-operate with other organic farmers who could use that part of the rotation to provide an economic return. Currently, there is no economic return from perhaps half of one's farm. If the €220 per hectacre conversion payment is not enough to compensate one, one is not going to convert.
There is a whole psychological aspect to moving from a high chemical input system to the belief that a system with no chemical inputs will work. For many farmers, that is very difficult. The best way to get over that is to bring farmers to organic farms and show them that the crops grow, they are good and that yields are achieved. That really helps but we have probably not had enough of it.
In many cases, the reality is that by having a small scheme which closed quickly, the Department did not show confidence in the system. If the Department is not willing to fund the farmers coming in, that is very hard. It appears to be saying the long-term future of the sector does not look good. Having a system where the target is so low that it is all used up in year one does not provide any confidence to the sector that there will be funding for tillage into the future. That said, I have received many more calls in the last 12 months from conventional tillage farmers who are looking at going organic. Some of them have actually made the jump already even without having an organic farming scheme in the hope that it will come. They can see that what they are doing has no long-term future as they are losing money. If they can at least make sure they do not lose money, they will be better off. If they can go back to a system with very low inputs and if any yield is at all profitable, it is better in some cases than what they have been doing. We need to get much information out there, however, to convince conventional tillage farmers that organic is a viable option. They need to see more successful organic tillage farmers to give them the confidence to make the change also.
Mr. Alan Mooney:
I agree with Ms Lynch. The conventional tillage sector in Ireland has become very specialised, the acreage has got very big and farmers are leasing land. Without a shadow of a doubt, all that is compounding the difficulties of getting into organic production. There is also the fact, to which Ms Lynch alluded, of the loss of infrastructure on those farms, including sheds to house cattle, roadways, water systems and fencing. Even stockmanship skills are disappearing fast on the conventional tillage side. The farmer is a machinery man, basically. That is his pride and joy. He is good at it and at maintaining machines. That is the biggest stumbling block. There is also the fact that it requires a great leap of faith to change from conventional to organic production. A farmer will say, "I am going out five, six or eight times with my sprayer or my fertiliser spreader and I will have nothing if I do not". It is not that he is not interested, but it is a huge jump for him to get his mindset back to more traditional rotational systems. It is the biggest stumbling block.
Mr. Alan Mooney:
Yes. I am an organic tillage farmer and I went into it because of pounds, shillings and pence. I am not saying I had great foresight, but I saw the direction in which the conventional tillage system was going. To me, it was doom and gloom and I am delighted I made the change. I think I am more environmentally friendly and I am definitely producing a product people want. I am happier at it-----
Ms Patricia Callan:
I will respond thematically as many issues were raised. On the price question and, as I said earlier, we are very proud supporters and purchasers of Irish grain. However, we are only 10% of the national grain output. Even within our sector, there is only a limited amount. As such, the 90% focus and problem is still going to be there. For example, we are sourcing almost 100% of malted barley in Ireland which is because there has been innovation in the sector. We have seen over a period of time that we have successfully displaced imported product. By looking at innovation, we can certainly go down that route.
Irish Distillers is experimenting with rye blends on more than 140 acres in Enniscorthy. It planted the rye in the autumn of 2016 with the intention of harvesting it in the late summer of 2017 for use in the distilling process. More opportunities will arise from that pilot if it is successful.
The Alcohol Beverage Federation of Ireland is a trade organisation. Under competition law, if I got involved in price fixing, I would find myself in jail. There is absolutely no role for us in price negotiations. Indeed, the brewers and distillers do not buy directly. They buy through the malting companies. This is a matter for them to deal with. Unfortunately, we cannot get involved in that.
I would like to go back to the issue of Irish whiskey as a protected product. Under a technical file on geographical indications that the Government has agreed with the EU, the drink must be distilled and matured in a very precise and technical way on the island of Ireland. That is great because it means that this industry, unlike other industries, will never be moved offshore. It has to happen here. As an organisation, we have a role in protecting that internationally. We pursue fraudulent products in other markets as an important part of our remit. Under the geographical indications file I have mentioned, it is not necessary to source raw materials from Ireland. There are two reasons for that. First, many of the raw materials are not available here and will never be available here. Second and more important, such a requirement would be in breach of the EU treaties. It would be viewed as protectionist under Articles 107, 108 and 110 of the Treaty on the Functioning of the European Union because it would hamper the freedom of movement of goods and would protect domestic producers, both of which are outlawed. That is why such a requirement cannot be in place.
We are absolutely committed to increasing our use of Irish producers. The industry has been keen to have this conversation in previous dialogues, including the Department's tillage forum, as part of the effort to extend the innovation agenda to a broader range of products. Approximately 60% of raw material inputs in this sector come from the island of Ireland. This is very high in comparison with other sectors, including some that are more lauded. I will come back to the committee with more detail in this regard. I emphasise that many other raw materials in addition to grain are used in the process of making whiskey and beer.
I would like to mention Bord Bia's Origin Green initiative in the context of the five-year to ten-year plan. We are increasingly calling on our members to be part of all the great work that Bord Bia is doing with marketplace initiatives and buyers. One of the criteria now being implemented is that producers have to be in Origin Green, a key part of which involves doing between 90% and 100% of sourcing at local level. I think that plan is actually in place. We are certainly working towards that.
No one here is asking the Alcohol Beverage Federation of Ireland to engage in price fixing. We are suggesting that if the industry offered a premium price, farmers could buy into that or sign into it. A similar approach is taken at the moment in respect of the price of milk. A certain amount of it is offered. Why is this industry not being similarly innovative?
Ms Westbrook said we need larger farms to get involved in organic farming. I have gone through the figures for every county on my iPad. The average single farm payment is made in respect of a farm of 32 ha. The county with the largest average farm size, according to the figures for the single farm payment scheme, has an average farm size of 47 ha. I do not know how Ms Westbrook expects bigger farms to solve this problem. The smaller farms have walked away from organic farming for the reasons on which we agreed earlier. This is a problem. One thing I mentioned earlier has not been addressed. Farmers have spoken to me about the pricing of the licensing bodies in the organic sector. It seems to be a big problem.
Ms Gillian Westbrook:
Deputy Fitzmaurice referred to advisers when he spoke about the licensing bodies. As he was talking about plans, I assumed he meant those who draw up the plans. We do not perform that role. We are involved in certification. We are aware that complaints have previously been made about certification costs. The Irish Organic Farmers and Growers Association is a not a profit-making company. We have submitted our costs to the Department, which has gone through them all rigorously. We are quite content. Our costs and fees are set by our board of directors, all of whom are appointed by our members by means of proportional representation.
I cannot say anything more. If people are not happy with our fees, there is not an awful lot we can do about it. All we can say is that a return of between €8,000 and €11,000 can be achieved on a payment of between €400 and €600.
Ms Gillian Westbrook:
It was previously reported that we were charging €2,000 or €3,000, but it was not mentioned that this is over five years. I agree with the Deputy that some people are getting €2,000. In such cases, the double funding of GLAS is a big issue. I appreciate that some people have argued that GLAS is a very good scheme because they can get priority access into it. However, certain aspects of it, such as the premium payments, mean that the organic farmer will be better off in GLAS. The organic farming sector comprises hundreds of thousands of small farmers. It is important that organic farmers are not omitted from environmental schemes. I know many small farmers are very insulted by the fact that even though they are farming in an environmentally friendly way to produce food for an organic food chain, they cannot get involved in an environmental scheme. I would have to agree with them. The Irish Organic Farmers and Growers Association made a submission under the GLAS programme saying that these were additional measures that would not attract double funding. We called it GLAS+. I do not know if that was a mistake. If so, I apologise. It is not easy to come up with measures that would not attract double funding. We agree that this is a major barrier. We would love to see it removed.
Ms Gillian Westbrook:
Quite a few of our tillage farmers would have much larger farms than that. As I have said, just half of any farm will be productive. If one has a 100 ha farm, one will have just 50 ha in productivity. I know from our own records that we would have bigger tillage farmers than that.
I have another question about the drinks side of the industry. What percentage of the grain that is imported is genetically modified? Is genetically modified grain going into drinks products in Ireland? Does Mr. Lavelle know what the relevant percentage is?
Mr. William Lavelle:
Yes. This process is at a very early stage in distilleries. The industry is very competitive at the moment. We are seeing a lot of innovation on the whiskey side. We are aware that a number of distilleries are beginning to look at organic and non-genetically modified whiskey. It remains to be seen whether they will succeed, or whether these products will take off. We know there is a tentative interest in this area. A number of distilleries are developing brands along these lines.
That is one sector. The Shed Distillery in Drumshanbo is part of the Origin Green programme. Any Origin Green producer that is sourcing its grain in Ireland has an additional asset. I wonder whether this way of sourcing the raw material is competitive from a pricing perspective. Does the importation of raw materials, as opposed to the use of Irish materials, come with a price benefit?
Mr. William Lavelle:
No. It is an issue of supply. There has been a welcome increase in the amount of barley and malted barley that is being sourced locally.
The percentage of barley and malted barley we in the whiskey industry source in Ireland is in the high 90s. This compares favourably with Scotland, where the latest figures from the Scotch Whiskey Association show that the percentage of their barley that is sourced domestically is only in the 80s. It is an issue of supply. As for other grains, we know there is a demand and a need for maize in the development of grain whiskey, which is one of the forms of whiskey which is in turn an important part of blended whiskeys. Some of the major whiskey brands in Ireland are blended. Unfortunately, we cannot guarantee the supply of appropriate grain in Ireland. This is why we are seeing maize being imported but, again, we are no different from Scotland in this regard. In fact, the percentage of wheat used in scotch whisky production that Scotland imports is very high - about 50% - so we are probably doing better than Scotland in domestic sourcing. The example my colleague gave of the Irish distillers developing new rye strains in Wexford, which they are innovating and trying to develop as a sustainable new source, should mean that reliance on imported grains other than barley will decrease over time, particularly in line with the commitments that members have made under Origin Green.
Finally, I know there has been debate earlier and at previous hearings as to whether there should be some sort of regulation or requirement that Irish produce such as Irish whiskey comprise 100% locally sourced raw materials. This would be a very serious constraint on production. The Irish whiskey renaissance would die a death because we would not be able to develop the capacity as we would not be able to import the maize. It would also put us at a severe competitive disadvantage against Scotland, particularly at a time of Brexit. At a time when Irish whiskey is the fastest-growing spirits category in the world, it would set us back substantially. We are committed to using as near as possible to 100% Irish barley. We are increasing the percentage of other grain we are using domestically, and I think over coming years the increased demand, coupled with the commitments for increased sourcing under Origin Green, will mean a significant return for Irish farmers.
If we just think in terms of capacity and consider the size of Scotland and the size of Ireland, which are not that much different one from the other, there is obviously an awful lot more barley being grown in Scotland than in Ireland. Is the Scottish farmer getting a better price than the Irish farmer?
Mr. William Lavelle:
Again, I cannot comment on the issue of pricing, but if the Deputy goes back to figures which even the IFA itself has been using, the malting companies have seen an increase in demand for malted barley of 250% in recent years. We are seeing increased demand and seeing that demand met locally. We have not had concerns expressed to us yet from any of our members that our projections for growth cannot be met locally as far as barley is concerned. We see increased demand for barley going forward. It is an issue of supply, which is in turn an issue of confidence for the tillage sector that the Irish whiskey and Irish brewing sectors will continue to want Irish barley.
I thank the members for their questions. I thank the members of the Irish Organic Farmers and Growers Association and the Alcohol Beverage Federation of Ireland for coming before the committee. Their evidence has been very useful and will feed into our report, which we will publish in the next number of weeks. If we have any further questions, we will come back to the witnesses for clarification before we publish the report.