Mr. Peter Nallen:

I will answer Deputy Martin Kenny first. At the outset of my presentation, I tried to clarify that the ambition of the business, when it was acquired in 2010, was to have a sustainable Irish malting barley supply chain. The ambition was to be 100% self-sufficient for the production of Irish malt, that is, to reach the full capacity of the production unit in Athy with all of that coming from Irish malting barley. That remains, ultimately, a key business objective every single year. As everyone present probably knows, however, barley itself is a product which can vary from year to year; it has some challenges based on climate etc. We have seen in the past couple of years that on occasion, the quality of the barley in certain years or in certain regions within those years has not been up to the standard that is demanded by our customers and which we in turn must impose in procuring a crop that meets a certain specification. Those years are becoming fewer, thankfully, as we evolve, get better and study the data with which we are now working. In the past couple of years we have not had to import malting barley at all.

To put some context on where the industry is going generally as we see it; in terms of brewing on the island, we are fairly full. The potential for future growth for brewing is pretty limited.

It is certainly going to be single-digit, and will be quite slow over time. That is due to the excellent work that the large global brewers on the island have done to consolidate brewing production and improve brewing efficiency in the brewhouse in order that they are able to extract more product from less raw materials. That is a challenge that they set themselves every year.

However, the key sector that we see as still having a huge opportunity for growth is distilling. Distilling is a different product. It needs a malting barley of different quality. The main differentiator between brewing and distilling is the protein level of the malting barley required. To steer and target the lower protein level, a different way of working with the barley has to be applied, along with different crop husbandry and different crop management. Going back to a comment that we heard at the other session today, as we move to satisfy the growing demand in the sector, we are learning very quickly that if things like the application of nitrogen, which traditionally farmers and growers would apply to help boost the yield of the crop and get the most return for themselves, are not done in a science-based way, there is a point where there is no return for additional nitrogen applied. There is a sweet spot within each crop, variety or product type towards which we are guiding growers. We do not want them applying what they have always applied typically or traditionally because they have always done it that way or at that time. We are doing it in a science-based way. They apply only what they need when they need to apply it. If we continue to work that way, with the success of the last couple of seasons, we are confident in and fully committed to building a supply chain in Ireland which is able to satisfy the needs of the malting plant in terms of production.

Looking ahead, that is going to be very important. As I mentioned briefly in the introduction, the supply and demand for distilling is looking very positive. We are prepared, and we are preparing our planning application to increase the size of our production facility in Athy. To do that, we need either to go out to our current list of 600 growers and encourage them to grow more malting barley for us, specifically for distilling, or else entice other cereal growers to switch to growing malting barley. They will have to do it the Boortmalt way, however. Otherwise we cannot be sure about the integrity of the supply chain, and the full traceability from field to glass that we have to commit to as a business.

On the pricing model, which several Deputies raised, we have moved in recent years through a lot of positive and constructive discussion with the Irish Farmers Association, IFA, away from the very typical situation of a one-day, one-price, smoke-filled room test of endurance to see who was the last man standing over the last 50 cent per tonne. Thankfully, we have moved away from that. The model we have today is without doubt, and I am not shy in saying it, the most sophisticated pricing model for malting barley that exists in Europe. What we allow and what we have developed with our growers and key customers is a system whereby growers can take control of what they price and what commitment they make in terms of pricing and hedging of their crop tonnage over a full year. That is complemented by a number of fixed pricing offers, roughly four of which are made throughout the year, as well as the hedging opportunity. Typically, every Wednesday of the season there is a matif wheat price. Linked to that, there is a slight deduction for Irish malting barley, because 100% of the Irish crop has to be dried and stored, unlike crops in France and most of the UK bar Scotland, and we incur a significant add-on cost on our supply chain by doing that. There is an adjustment factor, which has been agreed upon with the IFA, built into that model. Again, the farmer gets information from our business which he can look up online.

Matif wheat prices are available on the Internet right now. They are able to see exactly what price they can take today or tomorrow regarding their own commitments. Our guidance to growers over the last couple of years has been to commit a little and often, so that they do not get caught by the vagaries of the market when it shifts high or low. They are able to insulate or protect themselves from that.

To try to encourage growers to move to that way of thinking, we actually engaged with a well-known national economist, Paul Sommerville. He did a lot of workshops with clusters of growers right around the country, in full co-operation and collaboration with the IFA. That was to illustrate and give real worked out examples to growers and to explain to them how much better off they are working in a fixed hedging model than going back to the traditional one day, one hour in September arrangement. The statistics show us that over the last five years we started off year one with only 5% or 6%, so a poor start. We revitalised the campaign. We try to highlight to the growers the positives because over the last number of years there has been a clear tangible financial benefit in euro per tonne that the grower can win by working with the model. We have tried to show that every year. To make it clear when the growers get their grain statement we highlight all the positions that they chose to take or chose not to take. We also illustrate the price they could have obtained if they had taken each of the options as they became available. The default option is that if growers choose not to participate at all, then they take a September price. However, in trying to work with the IFA we agreed that a day in September is maybe too much of a roll of the dice, so we split it over three dates that they pick in September. It is really over three weeks. It is trying to avoid that in the very week the price in matif could be set, it could be the bottom of a cycle for something else, or the top. We now spread it over the average of three dates. Based on our data, we are seeing that 50% of growers are happy and they are better off working with the model. The other 50% have yet to warm to that concept and they prefer to just wait and take what is the average of those three dates in September as a price.

On Deputy Corcoran Kennedy's question on organic produce, that is a new niche area for us. We are really excited about that. The interest in that came from the craft sector initially. We are seeing a lot of craft brewers and distillers looking to again stand out from the crowd. There are significant challenges in having a fully organic supply chain. We are the only accredited organic supplier. This requires that not only the barley be accredited but also the drying process, the storage process and, indeed, through the full malting process. We are currently the only company on the island which can fully certify every single kilogram of organic malt at every single step of that supply chain. We do that partly because of our ambition to try to listen to what our customers want and to try to be flexible. There are, however, big challenges particularly in relation to the economics of that because it is significantly more costly. It is more costly because we are finding that growing organically impacts on the yield, which was mentioned at the earlier session today. Irish growers are world class in what they do. That is without doubt. We see it in our business. I look after malting plants across seven countries and we see that the Irish yields are without doubt year-on-year absolutely top of the table. The growers know exactly what to do. The big shock they get is when they move, or try to, move to organic produce. They see the whole yield plummet. In terms of where we come in, when the yield plummets, we also see significant challenges in the processing of that crop.

Given the grading or screening levels, it can be a very different grain compared to the typical crop in that year, in terms of shape, size, performance or water uptake. There is another hit then in the conversion yield, which growers do not really see, but we see as a business, that is, how many kilogrammes of malts come out when one puts in one tonne of barley. We see a huge impact there. Naturally then when all of that is added up, one needs to be fully committed to the organic mantra to be prepared to pay a princely sum, as a customer, to have certification all the way through from a field.

In response to Deputy Corcoran Kennedy on genetically modified products, we take our steer from our customers. We are in business because we are delivering what our customers need or are exceeding their expectations. Until our customers come knocking on the door saying they really love genetically modified products, it will be some time before that change takes place. Again, if one looks at some of the customers we mentioned in our brief, they are global brands and they will not run the risk in the very short term until they are very sure about consumer perception. In the digital age and in the age of social media, something very small can travel very quickly. They are very much risk-averse, and rightly so, with the brand they have built up.

Having said that, we are currently working on projects in Africa, and if there were to be genetically modified malting barley available which would thrive in water-stressed areas, for example, then that would add a whole new layer of economic self-sufficiency and sustainability to those emerging countries. Right now in Ireland, however, we are not seeing any interest in going in that direction.

Some questions on the quality of malting barley were asked. In the world we live in, every customer has his or her own specifications, not only for the final product that we deliver, but also for the raw material we are allowed to use in producing that product. Strictly speaking, one can get country-to-country variations in a malting barley specification, but they usually reflect some of the challenges or inherent difficulties of growing a crop in that country. In Ireland, it means that the big global brewers generally prefer protein levels which are slightly lower than they would be on a global level. We have a slightly different specification, but in the event of a force majeureaffecting an Irish crop and if barley had to be imported into the country from France, the UK or Scandinavia, as a business we would still be able to make that match with a customer's malt specification.

Return for growers was mentioned. We are working very closely, which we realise is the only way to work, with the Irish Farmers' Association, IFA, in particular. We deal with it because it represents all the growers, not one or two individuals. It is important that we have a body representing those interests nationally, as opposed to some local or parochial interest. Certainly, the model that was introduced has been a success but it probably can be improved. The matif wheat is probably not the right commodity to which we should link. It can move to a new commodity. Unfortunately, other commodities, such as Chicago wheat or euro-wheat, are not liquid enough right now. There is not enough activity in those markets. Having said that, we are looking forward to further developing the model in the future. The model we have right now is agreed for a period of two years. We are currently looking to see what improvements we can make to try to make sure growers can get the best price for their crop every year.

The other key point, to go back to Deputy Corcoran Kennedy's remark, is that we would strongly encourage all growers to participate in the pricing mechanism or model that we have. Our ambition is to drive that 50% number much higher over time.