Dr. Frank O'Mara:

I thank the Senators and Deputies for the opportunity to address the committee on this very important topic. I wish to convey the apologies of our director, Professor Gerry Boyle. He is unable to attend as he has a meeting outside of the country and is at the airport as we speak.

I will go through my presentation reasonably fast because there is a lot of information that people can have for reference or whatever and afterwards we will have plenty of time for discussion. I will spend a minute or two describing the structure of the beef industry and the challenges facing same. I will focus a lot on the role of technical performance in terms of the profitability of the sector. I will also focus a little on our research and advisory priorities and some of our initiatives that are ongoing or recently started. I will finish by outlining the factors within our remit that impact on the net margin for beef farms.

I will outline the structure of the industry but I will not go into too much detail. I am sure members are familiar with the fact that we have an awful lot of beef farms in this country. The Central Statistics Office farm structure survey shows that in 2016 over half the farms in the country were designated as specialist beef production farms but a good share of the other farms also had beef cattle. Beef production is the biggest sector of Irish agriculture in terms of the number of farms. One can see from the pie chart displayed on the screen that over 50% of farms are specialist beef producers. On the next page there is a chart that displays the size of farms starting with, on the left hand side, farms of less then 10 ha and gradually increasing until one sees on the extreme right hand side the number of farms greater than 100 ha. In general, the distribution is towards the left of the graph so the sector is characterised by relatively small farms that are, on average, 32.4 ha. Nevertheless, the share of agriculture output that comes from the beef sector is very large as displayed in the middle section of the graph on the next page. One can see that over the years it has maintained around one third of the agricultural output of the overall sector and, therefore, beef production is a very important contributor to agricultural output from our farms.

The Irish beef sector faces many challenges and I have listed some that can be viewed on the screen. They include Brexit, which is at the top of the list; climate change, which is very much on everybody's radar these days; and the EU trade deals, which are very important to the sector and could have an impact on the market. Obviously we are coming into the negotiation stage for the next phase of the Common Agricultural Policy, CAP. The outcome is uncertain and potential changes to the distribution of direct income supports is again, potentially, a challenge for certain elements of the sector. The price of cattle is a very important factor for the sector and profitability. In particular, fluctuations in beef cattle prices can cause big fluctuations in income levels for farmers. Like all farmers, beef farmers must cope with severe weather events and their effect on production systems and input costs, which we saw last year with feed costs. Despite all of those challenges the beef sector has a lot going for it. One of the strong points of the sector is its environmental credentials. Irish beef is generally produced in situations of low intensity in comparison with many of the other beef production systems used around the world and these are generally very environmentally friendly. Our beef farmers also have very high participation rates in the agri-environment schemes under Pillar 2. When one compares the sustainability metrics such as the carbon footprint or the water sustainability system they compare very favourably with the systems used in other countries in terms of being environmentally friendly, which is very important in today's world.

Let us consider how the sector is evolving in terms of numbers. A lot of change is happening in the Irish cattle herd at the moment. The next graph shows the change in the number of beef and dairy cows dating as far back as 1980. Pre-quotas we had 400,000 suckler cows and 1.4 million dairy cows but since quotas were introduced we have had a gradual decline over the following 25 years or so in the number of dairy cows. In the late noughties and at the end of that decade the number of dairy cows decreased to around 1 million but at the same time the number of suckler cows increased to over 1 million. Since the abolition of milk quotas, and even before that as farmers were preparing for it, the number of dairy cows started to increase and has moved towards 1.4 million dairy cows. Over the past six or seven years suckler cow numbers have been trending downwards but not at a very rapid rate.

It is not happening at a rapid rate but there has been a reduction of a couple of percentage points every year in the size of the suckler herd, which is now down to slightly fewer than 1 million cows. One of the consequences of this is that an increasing proportion of beef output will come from dairy beef, that is, beef from calves born to dairy herds. The numbers of animals coming through the system may be largely the same, but the proportion coming from the dairy side is increasing. That has been a concern to many people, the worry being that it will lead to a deterioration in carcase quality. It is not just the change in the proportion of dairy beef versus suckler beef that is at play here, but the data also show that the dairy beef carcasses are deteriorating in quality over time. In the table entitled "Deteriorating Carcase Quality in Dairy Beef", the first block of figures relates to the typical beef calf coming out of the dairy herd, which is from an Aberdeen Angus sire and a Friesian dam. The highlighted column shows that, in 2014, almost 12% of those calves were graded O minus or worse, with that proportion rising to 21% in 2018. There are two factors at work here, namely, a decline in the quality of dairy beef and an increase in the volume of dairy beef. It is the same if we look at Friesian sires by Friesian dams and so on up the line; the quality of those calves is also deteriorating, albeit at a slower rate.

This is a significant issue at industry level, to which there have been several responses. One such response is the dairy calf to beef index, which was developed by Teagasc and the Irish Cattle Breeding Federation, ICBF, to help farmers to select sires for dairy cows to breed beef cattle that will be low in calving difficulty, of short gestation and have improved beef characteristics. That index is available to dairy farmers for the current breeding season. Another way the industry has responded is through various players assisting us in setting up a number of research and demonstration farm programmes highlighting the important parameters for dairy beef production. Rearing good dairy beef is not just about genetics but also management. There is a lot to be learned and to teach about how to run a dairy calf to beef system well.

Another significant issue for the industry is the export of live calves, of which there has been a substantial increase in recent years. In the year to date, more than 140,000 calves were exported, a 55% increase on the 2017 figure. All those calves are from the dairy industry and it is an important outlet for some of the lower genetic merit calves coming from that sector. The bulk of the calves exported are male progeny of dairy sire. They are Friesian on Friesian, Jersey on Jersey or Friesian on Jersey, that is, a dairy sire on a dairy cow. We do not have a veal industry in Ireland, which is where most of those calves on the Continent are going, so exportation provides an outlet.

An important issue for the dairy calf export industry is animal welfare standards. Members may be aware of a video that was doing the rounds some weeks ago showing calves being mistreated in France. That type of practice is abhorrent to us and unacceptable to those operating in the sector. For the industry to continue to exist, it will have to eliminate any such instances.

The final issue I will deal with is incomes. The data set out in the table on family farm income, which is from the Teagasc national farm survey, include the direct payments farmers receives. The first block of bars in the table gives the data for the dairy industry from 2011 up to 2017. The second block represents the data for cattle-rearing farms, which tend to be suckler farms. The "Cattle other" group comprises a mixture of finishers, calf to beef and so on. The table also includes data for sheep farmers and tillage farmers. These data illustrate the main difficulty facing the beef industry, which is the low income it generates for farmers. That income is hovering at €10,000 per farm, in comparison with dairy farms, where incomes are varying anywhere from €50,000 to more than €80,000. Of all the challenges facing the sector, this issue of low incomes has consistently been the greatest. Family farm income is what is left over after moneys are paid out to remunerate family labour and give a return on owned land and capital. It is important to note that the beef sector is by far the most diverse of farming sectors, more so than dairy, sheep or tillage. There is a significant diversity in the types of systems farmers operate, a large number of part-time farmers, a broad range in terms of the skills and age profile of farmers and, probably, their motivation. For example, some people have inherited land and do not want to sell it out of the family but have another job. For them, it is important to maintain the land and keep farming it, but profit might not be their ultimate motivation. Of course, everybody wants to make as much money as they can, but other factors come into play in some instances.

We are looking at a stark picture for the beef sector in regard to profitability and income. However, our view is that there are opportunities for committed beef producers. They may comprise a relatively small proportion of the overall number but there are farmers making a net profit per hectare, which excludes direct payments. There is the possibility, therefore, to run a business profitably, and it is Teagasc's view that there is potential for many beef farmers to improve profitability. One of the features of the profitable farms is that they are adaptive and responsive to new technologies, research findings and the messages coming from advisory programmes. The table on page 16 shows net margins, which do not include direct payments. We see that the top 20% of farmers, who are the specialist cattle-rearing farmers, consistently achieve a positive net margin. It is not a big net margin but it is positive. Looking at the next couple of rows down, there is potential for those farms, through efficiency and technology, to improve their net margin.

This is what keeps us committed to the sector, namely, our belief that improving technical performance and stocking rate will improve profitability on farms. The table on page 22 shows the performance of a typical suckler cow that one finds on the national average farm and compares it with the metrics for high-performance farms, which are the top 15% or 20%, that are within the control of the farmer. The number of calves weaned per cow per year on average is 85 per 100 or 0.85. The best performers, however, are achieving a rate of 0.95, which is worth an additional €87 per cow. Age at first calving is 32 months on average, with the better performing farmers calving down heifers at 24 months, which gives a saving of €50 per cow.

The six-week calving rate is 55% on average. If a farmer can bring that to 80%, there is a saving of €28 and so on. Regarding the average daily gain of calves, there is a difference of €86 between the average and the better-performing farms. Regarding concentrates fed to the cow-calf unit, there is a difference of €52. Therefore, if a farmer is able to move himself or herself from the average up to that better farm cohort, there is an extra margin of €300 to be made per cow.

One might say this is all very well but very theoretical and ask whether farmers are actually doing this. The next two charts I will show illustrate this happening in practice. I refer to one of the programmes members may have heard of, namely, the Teagasc-Irish Farmers' JournalBETTER beef programme, whereby we work with something in the order of 25 to 35 beef farmers, depending on the time. They are usually in the programme for three to four years. We work intensively with them on a programme of improving their technical performance, financial management and so on. We then follow through on the impact of the changes they make to their output and, more importantly, their profitability. The graph on page 23 of our submission shows the cohort of farmers we took into phase 2 of the programme. They started on the programme in 2011 with an average growth margin per hectare of about €550 and, as members can see, an output per hectare of 600 kg of beef. Over the course of the programme they increased this output, through increased stocking rates and better performance, to over 800 kg per hectare. Members will see here that the gross margin on these farms had increased to over €1,000 per hectare. This was not through getting bigger or anything but simply through applying best technology on those farms. They are real farms, farmers' farms, not our farms. We just worked with the farmers. They were mainly suckler beef farmers.

We have another programme called green acres, which concentrates on dairy calf to beef. It follows the same principle: these are farmers' farms and we give the farmers intensive advisory support. I will not go down through all the details of page 24, but members can see that the gross margin on these farms at the start of the programme was €513 and that at the end of it, three years later, the margin was over €1,000. Members can see the net margin improve again by about €500 per hectare. There may have been price movements between these years. This is not corrected for changes in beef prices, and there would have been some element of that, but the vast majority of improvements in both these areas were due to better technical performance. We see this as an area where we can contribute positively to the beef sector by helping farmers to improve their productivity and to try to make a few steps along that ladder of improving their margins. There is nothing secret or magic about the areas on which we concentrate: genetic merit of the animals, reproductive efficiencies, grassland management, which is hugely important, animal health, financial performance and environmental sustainability. I will not go through all the slides in our presentation, but these are just some of the beef sector initiatives we have ongoing or have started recently. They are detailed in the slides we distributed to members. If they wish to ask us anything about the initiatives, we will be very happy to discuss them. This is just to illustrate that a lot of research and advisory activity is ongoing in support of the beef sector.

I will finish with the slide on page 29, which is for us where it is at. How can farmers do things inside their own farm gates to maximise their net margins? Margin is maximised where there is a focus on optimising performance per livestock unit farmed through the key technologies of grassland management, genetics, reproductive performance and animal health. The importance of stocking rate cannot be ignored. If one grows more grass, one must carry more animals to get the value out of that grass. This means operating at a high stocking rate, whatever is appropriate to the land type, labour availability, infrastructure and so on, but one carries the animals that suit one's farm. Overhead costs must match the level of output. Direct payments must be maximised. The investments in infrastructure should allow for efficient use of time and labour on farms, in particular for part-time farmers, but also for full-time farmers. Net margins, obviously, are related to the inclusion or incorporation of the latest innovations coming from research and advice on farm operations. For us, this is the contribution we can make to this sector: trying to make sure that farmers can maximise their return based on how efficiently they run their enterprises. I thank the committee. We are happy to deal with any questions or clarifications.