Oireachtas Joint and Select Committees
Thursday, 15 July 2021
Joint Oireachtas Committee on Agriculture, Food and the Marine
Independent Mink Farms: Discussion
I welcome Una Heffernan, Vasa Limited, mink farmer; Mr. Michael Curran, Willow Herb Farm, mink farmer; and Mr. Gerard Reynolds, Gerard P. Reynolds Associates, contracted accountant, representing the three mink farmers. They are joining remotely from a witness room in Kildare House. The opening statement and briefing material have been circulated to members. Time is limited due to Covid-19 safety restrictions. The committee has agreed the opening statement will be taken as read, so we can use the full session for questions and answers. All opening statements are published on the Oireachtas website and are publicly available.
Deputy Carthy had to go to the convention centre and has sent his apologies. However, he is fully up to speed with the issues. He will be joining the meeting at a later stage but he will probably miss your presentation.
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 relating to 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. Participants in the committee meeting who are in locations outside the parliamentary precincts are asked to note that the constitutional protections afforded to those participating from within the parliamentary precincts do not extend to them. No clear guidance can be given on whether or the extent to which participation is covered by the absolute privilege of a statutory nature.
I now invite questions from the members. Deputy Collins was first to indicate.
The fur farming industry would not be my strongest point and the reason I am going first is I have an issue with my phone. It is 14% charged and it will not seem to go above that so I am afraid I will get cut off.
I do not know any of the three people before us but I welcome them. I will put a question to Mr. Curran, which Ms Heffernan and Mr. Reynolds might also want to answer. This is a sector of farming that looks like it is going to cease. Was there an agreement with the witnesses? Was there a process of working towards this or is it being sped up in some way? How many people will lose jobs? The witnesses are availing of services, such as purchasing of foods, so how many people will be affected if fur farming in Ireland comes to an end?
Mr. Michael Curran:
I thank the Deputy. We have been engaging with the Department of Agriculture, Food and the Marine on this over the past number of months. There have been many letters and meetings to and fro, but a good deal more needs to be done. We are not satisfied with much of the correspondence which has been received. The Deputy asked about jobs. We have 13 jobs in this sector, but in the sector in total, you are probably talking about between 30 and 40 jobs. However, it is not just the few jobs involved in the sector directly, but it is the jobs in the spin-off industries, such as food suppliers. What will they do with the remains of the food that we do not collect? What will be the story there? We are dealing with close to 70 or 80 food suppliers throughout the island of Ireland. In my particular region, we are probably dealing with 25 food suppliers.
We do business with 250 companies on the island of Ireland, from buying the nuts and bolts to other identities we deal with. There is a lot involved in this. People do not realise the networking that we do. It is a huge operation. We have been here for 61 years and it has been built up into a huge industry. Many people are depending on this.
Speaking for myself, a group of 70 farmers receive fertiliser from us. That will be a big issue for them when we close. It will be an extra expense on them given the way times are going.
I welcome the witnesses. The opening statements were very helpful. Could I ask the auditor, Mr. Reynolds, to go through the issues the witnesses have with the Department of Agriculture, Food and the Marine? There is talk of a fair compensation scheme and how that has been set out with the Department. The witnesses mentioned core issues that have not been addressed with the Department. Could the auditor go over what those core issues are, so that we can raise them with the Department representatives when we meet them in the next session? It is important we hear about the nuts and bolts, or about the core issues, of the scheme that are problematic.
I have a question for the farmers. I am a farmer but I have never been on a mink farm. The farmers might go through the processes on the farms. What farm inspections were happening on their farms?
First, I would like to hear from Mr. Reynolds and then maybe the farmers might give me an overview of how the farms works.
Mr. Gerard Reynolds:
Good morning everybody. I thank Senator Lombard for his question. The compensation scheme package is dealt with in section 68 of the draft Bill. In particular, subsections (3) and (16) set out the heads of compensation and the definitions of how this compensation will be calculated. The farmers would have concerns under all heads. I appreciate there are constraints of time here this morning, so I will just give an overview of the points. If there is time, I will try to answer the questions.
The initial part, the most focused part of the compensation, is in relation to the unrealised profits and net asset value. The unrealised profits terminology effectively is earnings before interest, tax, depreciation and amortisation, which is effectively adjusted profit. The Department of Agriculture, Food and the Marine, in the proposals, in subsection (16) is suggesting that the compensation package be calculated on an average of the profits for the last five years, that is, the years 2016 to 2020, inclusive. That is not acceptable to the farmers because that reflects a period in the down cycle in the industry when losses were incurred. The graph which we furnished demonstrates that. We have sent the committee a graph showing the combined profitability of the three farms over the period 2016 to 2020, inclusive, which shows that it tends to go in cycles of approximately five years. The period the Department suggests the compensation should be based on coincides with a loss-making cycle. That is evident from the graph furnished and from the financial statements which were furnished to the Department back in mid-March of this year.
The farmers are arguing that the average earnings should be calculated over a longer period of ten years, which would recognise the cyclical nature of the industry. That would give a more fair calculation of the average profitability in that period. For example, if the period the Department is suggesting is taken into account, it would give a negative figure which means the figure on which the compensation would be calculated would be a nil figure. Over a ten year period, it would give a more positive figure. In fact, the farmers would argue that a more reflective period of their profitability would be the years 2011 to 2015, inclusive, which was a profit-making period. The reason for suggesting that would be a better period is that the evidence is that the upcoming period, which is the current year 2021 onwards, is going to be a period of sustained profitability.
In support of that, we have obtained correspondence from two of the prominent four auction houses in Europe, one in Helsinki and one in Copenhagen, which have confirmed that in 2021 to date, the prices of fur have increased by 150% and 127%, and the evidence is that that will continue to increase. Second, a research study has been carried out by a senior adviser in the University of Copenhagen, giving evidence that the fur prices, again, in 2021 have increased. That research was concluded in May of this year, so it is very recent. The evidence is that the prices will continue to increase. In addition, with the Danish cessation of operations, there is a shortage of supply in the global fur market so again, the Irish farmers would have been in a position to take advantage of that. The Department has insisted it will not consider speculative future trading. However, we will submit that the evidence is that the period 2021 onwards is likely to be a sustained period of profitability for the farmers and should be considered, rather than the five years from 2016 to 2020, inclusive, which did not give any prospect of the farmers getting any compensation for the loss of their farms.
The alternative calculation that has been put forward is a net asset basis. What the draft legislation is suggesting is that that be based on the accounting book value of the assets, which again the farmers cannot accept because if, for example, an asset has been written off for accounting purposes, the legislation suggests they would get a nil compensation for that asset, whereas the market value of the asset could be significantly in excess of that. The farmers would argue they should get the market value for their assets.
The third aspect would be the compensation to employees. It is suggested in the draft legislation that the employees get statutory redundancy only, which the farmers consider to be a very unfair compensation to these employees who have been very loyal and contributed to the operation of the farms over many years. Statutory redundancy generally arises in insolvency situations where the employer cannot afford to pay anything higher than that and, in general, this is usually paid by the Social Insurance Fund, because there are deficits in these failing companies. In most negotiated close-downs agreements are reached whereby employees receive enhanced benefits, and we believe this is a case where this should be taken into account. It has been suggested by the Department that any enhancement of the redundancy payment should be funded by the farmers from their compensation. That is considered to be inequitable.
The next heading of compensation is for the demolition and clean-up costs of the farms. The Department proposes that each individual farmer obtains three independent quotations and that the Department will accept the lowest of those three quotations, subject to a cap of a maximum €50 per square metre for the demolition costs. The farmers do not consider this realistic, because it is important to ensure that whatever compensation is paid allows the farmers to do the demolition and clean-up in a safe and environmentally-friendly manner. For example, buildings in some of the farms have asbestos and it is very important that this is disposed of safely, with no environmental negative impact.
The draft legislation also specifies that only those building which are used exclusively to house mink should be part of the compensation scheme. We would submit that any other buildings which are essential for the fur farming business and which do not have an alternative commercial use should also be included in the compensation scheme. If there are any buildings which it is agreed may have an alternative use, that any adaptation costs should be covered by the compensation scheme. Due to the location of the farms there will be extreme difficulty setting up alternative businesses and generating alternative employment for employees.
On the culling costs of the animals and the disposal costs, the Department has suggested that it costs 35 cent per animal for the culling and disposal of the animal. The farmers have examined this and they estimate a figure of between €4 and €5. Further discussion and negotiation is needed on this issue.
Finally, there is a suggestion that the compensation scheme would cover reimbursement to the farmers for professional fees incurred solely after the legislation had been enacted. We do not consider this to be reasonable because the farmers have engaged with the Department over the last number of months and have incurred costs in meeting the requirements of the Department, so it seems unfair and inequitable that they should not be covered for those costs which have been reasonably incurred.
Mr. Reynolds, you have given a very comprehensive outline of the problems regarding compensation. For clarity, regarding the culling costs mentioned, the Department is putting in 35 cent and the farmers are putting in a cost of €4 to €5 per animal. Did I hear that correctly?
There is a huge discrepancy there. I wanted clarification on that because we have seen in the past where culling was not done effectively on farms that ceased production, such as deer, and it created many problems. I think that is a very significant figure. How many minks are on the three farms?
Mr. Gerard Reynolds:
On the question on culling, I think that is one Mr. Curran would be best disposed to answer. The number of mink on the farms will depend on the timing of the culling, or when the prohibition comes into effect. Mr. Curran and Ms Heffernan could give you round figures on what the likelihood would be at that time.
Thank you Chair. Your contribution has been very helpful.
Basically, the Department and the mink farmers are poles apart on this legislation. Could I ask about the local authority input? Has there been some input from the local authority? Is planning required? Do the farmers need to involve the local authority when taking down these buildings? Where are we regarding that timeline?
Mr. Gerard Reynolds:
That is a concern and an issue for the farmers. As far as we are aware, there has been no engagement to date between the Department and the local authorities. As the Senator mentioned, there may well be planning issues, particularly in relation to the safe disposal of any dangerous material, such as asbestos. That is another factor that needs to be taken into consideration when agreeing the level of compensation cost for the demolition and clean up.
Ms Una Heffernan:
I thank the committee for letting us speak today. Some members have probably never been on a mink farm. The mink are housed in houses, which are open on each side. There is a roof, which as Mr. Reynolds said is asbestos. There is a pathway going down the middle. There are lines of cages on each side of the pathway. Most of our houses are 120 m long while some are 100 m long.
The mink are in double tier pens. We could say that there is a ground floor and an upper floor. The mink can move around and run around in the pens. They have a food area and a drinking area. At the very end of a cage, there is a tray which catches all the manure. That is piped out of the farm underground and into holding tanks. All of this is to help members to visualise a mink house.
The most important aspect on a day-to-day basis is the welfare of the animal. Unlike some farming practices, we have welfare checks at least three or four times a day. When the staff arrive first thing in the morning, they make the food. Food is made fresh every day. When the rest of the staff go into the farm, each pen is looked at. This is because we divide the food. We look to see if the food was not eaten the previous night. When the staff divide the food, they look at the pen. At the moment, a pen would hold three animals. The staff first check for water. If a lot of food is left over, that is the first sign of a problem. They would then check the food. The first thing they check is if there is water. The mink are sometimes inclined to put the food into the drinker. Next, the staff check if the three mink are there. If there are only two and the feeder contained enough food for three, that would explain why a lot would be left over.
After that, the staff make a note of any problems, or if a mink is sick. Every house and cage has a number. The staff writes down the number of the house and cage. That is the morning process. They feed the mink at breakfast time. While doing the welfare check, a staff member goes around and immediately puts food into any empty cage. Then we divide the food. After all that, we feed the mink again at about midday. We go to any cages that no longer have food. We may have a problem, as we refer to it. For instance, a mink may have to be taken to sick bay to be looked at, a pen may need to be repaired and so on. Staff members take all of this down in notes as we go along. The problems are then fixed and sorted.
The feeder gives the mink food again in the afternoon. We give a fairly good portion to the mink at that stage. The feeder also observes all of the mink at this time. We feed them three times a day, so those who feed them observe any problems. We also feed them in the evening at 6 p.m. or 7 p.m. At that point, we go around and top up the food. If there is only a little food left, we top it up.
All of this is for the welfare of the animals. It is important that they have fresh food and water at all times. That is more or less what happens on a farm. Each season is different. There is a mating season, a weaning season, a whelping season and a pelting season. There are other jobs as well, such as looking after the pups. Like in all farming areas, there are different seasons. However, giving food to the mink and checking their welfare is done every day of every year: even on Christmas Day. Like all farmers, we do not get a break.
I welcome the witnesses. My understanding, from some documents I have looked at, is that some of them have licences until 2024. Those licences were given by the Department of Agriculture, Food and the Marine. Have the witnesses spoken to the Department about that? I have two quick-fire questions, because I do not want to hold the witnesses all day.
Mr. Michael Curran:
I thank the Deputy. We have been issued a licence to 2024 by the Department of Agriculture, Food and the Marine. It came as a shock to us when they brought in the prohibition. The programme for Government makes provision for a phasing out. We are lucky that it is a phasing out and that we will be compensated, maybe at the end of 2024. Now, however, the prohibition is in front of us.
Mr. Curran mentioned asbestos. He mentioned that there is a cost of €50 per square metre to dispose of asbestos. I presume to get rid of the asbestos it has to go to Germany or somewhere, just as in the case of material from buildings around the country. Is that correct? That is an expensive game.
I am not an expert on mink by any means. Can Mr. Curran take me through how a determination is made as to when the mink is ready to kill? How do the witnesses kill them? Do they do it themselves on-site?
From the documents I read, I understand that, as with other types of farming, there is a seven-year cycle. There could be a few good years and a few bad ones. That is why the witnesses are going for the ten-year system. That way, they can pick up a couple of good years in the middle, along with the bad seven years. Is there an investment or allocation from the Department of Agriculture, Food and the Marine? For example, in cattle farming, one person might have a shed for 20 years. Another person might have borrowed from the bank for a shed only two or three years previously. I am trying to make a comparison between cattle farming and mink farming. What sort of infrastructural upgrades would be done in mink farming? Is there an allocation in the Department's agreement? Are they compensating the witnesses for those? Some of the witnesses may have spent a good few quid and may have borrowings. Now, however, they have been told to get out. If the witnesses could show that they had extra infrastructural spending over the past three or four years, would the Department’s compensation scheme cover that?
That is my last question because I want to let the other members in as well.
Ms Una Heffernan:
We were supposed to be stopped in mink farming in 2012 but we got back in again. The Department of Agriculture, Food and the Marine upped its game. It wanted the farms to be better equipped and updated. On our farm, we had to put up new houses to put up the two storeys. We had two farms. One farm was okay - we could do it - but on the second farm, we could not. We had to put up new houses. We have six new double houses.
Ms Una Heffernan:
We have spent €3.5 million to €4 million on that because we had to put in guttering to catch the manure, put in guttering to take the rainwater from the roofs out and put in all top new cages. Also, the cage sizes changed, which was a recommendation of the EU but which is Irish law, and we had to put in all those. As I said, we put up the new houses because our houses are old and would not fit the second storey to give the area.
I understand that fully. Ms Heffernan has a massive amount of work done, from what she has said. My question is whether there is an allowance in the compensation the Department is offering for people who are left in that situation because they would not have the money in their back pocket to do such enormous work.
I thank the witnesses for coming in today. I will focus my question on two or three aspects. First, for once and for all, we need a straight answer in terms of the three farms they are representing here today. How many mink are on these farms? I refer to the exact numbers of mink that are currently on these farms.
I read a number of newspaper clippings on mink, which I downloaded yesterday. This was in the context of both Covid and the Denmark issues that the witnesses would be familiar with. It suggested there are 120,000 in Ireland. That is only earlier this year. That may be incorrect. I want to start from that point.
The next point is this is Government policy. Fianna Fáil, Fine Gael and the Green Party have agreed in their programme for Government to phase out mink farms. That is the way it is. It is a numbers game in the House, crude and all as it is. They are in the majority. They will support this. They will see this through. I am merely trying to be pragmatic. I am trying to be honest and upfront with the witnesses. It will happen.
Now it is a question of their compensation package. They make a strong case for their compensation package and I would be supportive of that. Also, I am very disappointed to hear, besides the owners, that the workers will end up walking away with the basic redundancy package. That is simply not good enough for committed workers who have worked in this farming sector.
The next real issue is that the most emails and representations I have received on this controversy are around the animal welfare aspect. I took the time to check out the European Communities (Welfare of farmed animals) Regulations on the culling of mink and other animals. The suggested recommendations from this European paper which I received yesterday state permitted methods consist of the use of mechanical instruments which would penetrate the brain, an overdose of a drug of anaesthetic properties, electrocution by cardiac arrest, exposure to carbon monoxide, exposure to chloroform and exposure to carbon dioxide. That is dramatic and headlining stuff. It is of concern to people. Clearly, that is on the record as being permitted. We are talking about culling a large number of animals. What methods do the witnesses use? Are they familiar with any of these methods? Have they used any of these methods? We need to know whether they are familiar with them, whether they have used them, what their preferred option is and how would they envisage culling these animals. Clearly, we cannot release them into the wild and we have to be responsible in how we manage them. I suppose that brings a dose of realism into this debate.
Having talked to the people in government, my view is they are hell-bent on phasing out this trade. That is the decision they have made. That is their political prerogative. It will happen. My two issues are the animal welfare aspect we need to address and a proper, realistic and fair compensation package for everyone involved in this industry.
Mr. Michael Curran:
I thank the Senator for his questions. On the culling or euthanasia of the mink, we are going by the regulation of the Department. The regulation is we use carbon monoxide. Carbon monoxide is used to a slow rate of 2 litres per minute to a percentage of 4% in the euthanasia box. They enter one by one until the stunning takes place and the stunning takes 15 to 18 seconds. As the last animal goes in, it is five minutes before the box is opened and a check for death is done. There is a three-point check done for death. This is the method that is used. We are complying with the rules from the Department that we have to use this. This is the only method it will allow us use in Ireland.
In terms of the compensation for the workforce, what are the witnesses' views? What is a reasonable package, not for them but for the workforce who work for them in this industry? What would they think reasonable and fair for them?
Ms Una Heffernan:
I actually do not know. They have been laid off for no particular reason. It was not any fault of ours or theirs. It is just that the industry is closing. They should get extra somewhere along the line. As to how much, I do not know because it is something new that we have never had to do.
I take it they have had discussions. The witnesses are concerned about their businesses, about the animals and the farming, which is one matter but they are concerned also about their workforce. I would have thought they would have had some discussion. They are highly articulate people. They have made a strong case for their profession and their industry. They do not know what they think would be fair, appropriate and right. Who is advocating for them?
Ms Una Heffernan:
Unless Mr. Reynolds wants to take over that, I do not know. I suppose the Department of Agriculture, Food and the Marine might give us some sort of a guideline. Genuinely, we do not know. Of course, they would be considered in the compensation. As I said, we genuinely do not know what would be expected or what the Department would suggest in giving.
Mr. Gerard Reynolds:
We have had discussions in general terms but the Department has taken such an extreme stance on it that it is insisting the compensation package will only include statutory redundancy. As I mentioned, it has suggested that if the farmers wish to give the employees any further amounts, it would take that from their own compensation amounts. In general terms, we would expect a multiple of the statutory redundancy should be an agreed compensation package. However, that would obviously be subject to negotiations.
That is why Ms Heffernan is hesitating about what the level of the compensation will be, because the Department has been vehemently opposed to anything other than statutory redundancy. As a further example, we have asked about assistance and support services for any mental health issues, or career coaching and retraining facilities for employees, and we have been advised that they can just avail of the services that are generally available. That is unacceptable because of the circumstances of this prohibition and because of the locations these farms are in. It is a very unusual circumstance and the Department is taking the view that statutory redundancy is the top line and it will not discuss anything other than that. It has said that it cannot change the redundancy legislation. We are aware that statutory redundancy is enshrined in legislation and we accept that but in most negotiated closures agreements are reached that the employees will benefit to a level higher than the statutory redundancy to reflect their commitment to the business over a period of years.
I welcome our guests. I find it funny that one of the witnesses said they do not know why the industry is being closed down. They told us that they have been engaging with the Department and the Department says there is a broad consensus among veterinary and other scientific experts as to why the industry should finish. What are the witnesses' feelings on that? What kind of engagement have they had with the Department or what reasons has the Department given them for closing them down? Most of the other questions I had have been asked but I want to come back to the compensation for the workers and the statutory redundancy. Do the farmers themselves intend to contribute anything at all to the redundancy payments for the workers? The farmers want the compensation to be based on earnings averaged over the past ten years instead of the five being sought by the Department. Following a spike in earnings in 2013, the figures have fallen significantly. Is it realistic to call for compensation based on those figures? As others have said, I will not even pretend to be fully up to date with fur farming but people worldwide are saying that the demand for fur is going down, which is different to the figures the witnesses have given us about the projected increase in the price of fur.
Mr. Michael Curran:
I thank the Deputy for his comments. Regarding the closing down, we have been in contact with the Department. It is using the word "prohibition" for closing us down. Welfare is a very important thing for us. We get welfare checks at least six times a year by veterinarians and we are also have three inspections by the Department. Five of those farm inspections are unannounced. Welfare is a big thing for us.
The Deputy asked about compensation for the workers. We have discussed this and both Ms Heffernan and I are a little hesitant to say what we want. I am getting a bit tongue-tied. We want more for our workers. They have been here a long time. I have been working with some of the guys who work with me for the past 20 years and I have been working on this farm for the past 31 years. We need more for the workers, like a lump sum, because they will find it very difficult to get work for age-related reasons. Even I would find it difficult to get full-time employment in the area I come from in south-west Kerry. We will find it incredibly difficult. As a company we are willing to compensate the guys who work for us but it is the Government that is closing us down. Why is the emphasis on the company to compensate the workers when the Government and the Department want to close us down?
Then there is the issue of five years versus ten. Many people do not understand our industry. If we were a normal industry we would probably have gone bankrupt long ago because we have a cycle. There could be seven good years and seven bad years, or five good years or five bad years. There is always a cycle in fur farming. When we have good year we have to put the money away to support ourselves through the bad years and when the bad years come we know the good years will come back again. That is the cycle we work in and that is what the Department and many people do not understand about our industry. There are very few people who actually understand our industry.
That is what I was asking. According to the Department, the veterinary and scientific experts are saying that the industry should be closed down. What reasons are being given in that regard? I do not know what reasons the Department is giving to close down the fur industry now, in 2021. What engagement have the witnesses had with the Department on that matter?
Ms Una Heffernan:
The Deputy mentioned Veterinary Ireland. Veterinary Ireland compiled a report on mink farming but it was not scientifically based. It did not come on to any of the farms even though it was invited. WelFur did nearly the same report and its protocols and research were certified by seven different universities, based on 40 years of scientific research. We get WelFur inspections every year. It is an independent body, which comes on to our farm. It can come from any part of Europe as it is not Irish but we get welfare checks from the Department here as well, as Mr. Curran said.
There are three aspects to this. The Department of Agriculture, Food and the Marine gave the green light to this and very quickly - though maybe not suddenly - it has decided to put on the red light and close the industry down or prohibit it. Please correct me if I am wrong about the three aspects I see here. The most important thing is the compensation for the workers who have been there a long time. Second is the compensation for farmers. The third issue relates to the demolition of the mink farm buildings, which are very specific. They cannot be used for pigs, bonhams or whatever. Have any of the witnesses gotten a professional cost analysis of all this that can be put to the Department. I am not going to go into the ethics or propriety of mink farming and so on because that is another day's work. I am close enough to the Iveragh Peninsula and my understanding of it is that the Department, with all due respect, is pulling the plug without any recognition for the employers or the employees and with very little recognition for how the mink farms can be reinstated to their original natural condition. The Department has a responsibility here, and maybe Europe does too.
These are my fundamental thoughts on it. I do not want to delay the meeting but if any of the witnesses could please respond I would appreciate it. That is my thinking. Where are we going from here rather than back and forth? There is a huge disparity between what the Department is prepared to offer and what the mink farmers expect to get.
Mr. Reynolds indicated that he wanted to make a contribution.
Mr. Gerard Reynolds:
I wanted to come back on the questions raised by Deputy Browne. One query was on the farmers contributing to the compensation packages for the employees. Of course the farmers will be very fair to the employees. They have been long-standing employees on their farms, and almost like family members in some instances. The overriding picture is that the prohibition is being brought in by the Government so the compensation package should be financed by the Government. This should include the payment of appropriate compensation to the employees. It should not have to be taken from the employers' compensation, which will also be calculated in what the Department has said will be a fair and reasonable manner.
On the world demand for fur, I am not too clear if there is an overall drop in the demand for fur but there is a significant drop in supply. The Danish market has ceased with effect from last year. That was a significant contributor to the world supply. From that point of view, this sustains the view that the prices of mink are on the increase, currently and going forward. The independent evidence, which was quoted earlier on, supports this.
With regard to the point made about the ten years, there are two aspects to calculating this part of the compensation. One is to establish a sustainable and realistic average profitability per annum. The Department has suggested that this be done over five years from 2016 to 2020, but that period clearly shows a loss because there was a downturn in the cycle. We suggest ten years which, as Deputy Browne has said, takes into account some good years and some bad years, and gets a reasonable average of what the profitability would be. It must be remembered that the farmers continued to endure the loss-making years in the expectation of getting recoverability of that finance when the profits come in so they could replenish their reserves. This is why we suggest that 2021 onwards should also be taken into account because the market is on the upturn and there will be higher profitability. That calculation is to calculate the average profitability. There is also the multiple figure. When the average profitability on an annual basis is agreed there will be a multiple also. The Department is suggesting five years, but the moment this is five times zero, so it is nothing. We are suggesting a figure of ten, which reflects the most recent compensation scheme in Denmark that takes a ten-year period to review. Again, a multiple period is not an exact science. With any company valuation or disposal there are subjective issues that are part of the negotiation. The farmers are prepared to negotiate, but five times zero is not acceptable.
I thank the businesses for coming in today. I have sympathy for any business that has to wind up as a result of prohibition. I will not get into the ethics of the trade but there is a worldwide move towards the prohibition of fur farming.
I have some questions and any witness who believes that he or she can give the best answer can come back to me. It was mentioned that Denmark has started to exit this trade also. How closely have the witnesses looked at the Danish model in the context of the compensation package vis-à-viswhat is being offered there and what is offered in Ireland?
I have an observation around the workers. There is a statutory redundancy payment for workers. It would be unusual for a Government to have to pay over and beyond that. I expect that any compensation above and beyond statutory redundancy would have to come through the employer.
On the seven-year cycle, on a good year if a farmer had 1,000 animals, broadly speaking what is the likely profit margin on that? What is the net profit on 1,000 animals? Pick a multiple just to give me an example of what that would be in a good year.
I believe that the multiples of ten years is very high. Even in the worst excesses of the Celtic tiger, with any business that is being sold the best multiples they were looking at were probably seven to eight times. I would probably agree that the Department's offer at the minute of a multiple of five is probably reasonable but I take on board Mr. Reynolds view on that being five times zero. It is probably the case that five years is the right period but we can ask what the baseline is and whether it is five times that figure.
Perhaps Mr. Reynolds could try to explain more to us the seven-year cycle and how that works. I would have thought that the demand for fur, which I assume is largely eastern European driven, is still fairly consistent. I cannot understand fully the seven-year cycle. Perhaps Mr. Reynolds could give more background on what causes those fluctuations.
Mr. Gerard Reynolds:
I will answer some of those. We have looked at the Danish model and examined its compensation scheme. While there are differences in the actual calculations, the fundamentals are the same. The Danish scheme provides for compensation for a ten-year period. This is what we are proposing. It is the most recent example. The reason we suggest a multiple of ten years is that the initial calculation of an average over ten years going back takes in significant loss-making periods. It gives an average profitability. This prohibition is proposed to come in immediately. This will preclude the farmers from participating in a period of profitability which, going by previous cycles, would be a period of five years minimum of profitability. The farmers are foregoing that period of profitability by being prohibited now. If the average profitability was determined over a five-year period in the last good period, which was 2011-15, and which we feel is reflective of what is going to happen in the coming five years, the multiple of ten would be a negotiable figure then. With an average over ten years it takes into account loss-making periods. We feel that a multiple of ten is appropriate. Again, it depends, as the Deputy has mentioned, on the baseline that is agreed. When the baseline agreed is reasonable the multiple is negotiable in any valuation. I read an article recently in the Irish Tax Reviewthat calls it the mysterious world of company valuations. It is very much a subjective issue. The Deputy is right that ten is a high figure but in the circumstances we present we believe it is reasonable. If the base figure is calculated on a more realistic basis that is something that could be discussed.
The Deputy referred to statutory redundancy. I accept that this is provided for in legislation but I repeat that in most negotiated settlements there would be agreement where employees would benefit from more than a statutory level of redundancy. In these circumstances, to suggest that employees only get statutory redundancy is not equitable in any sense for the employees.
On behalf of the committee I want to thank the witnesses Ms Heffernan, Mr. Curran and Mr. Reynolds for coming to the committee. They have given a very comprehensive overview of the situation that they find themselves in. The committee and I now have a far better understanding of the representatives' concerns. We are in a unique situation where an agricultural activity, albeit a minority one, is being closed down by legislation. I have never seen that situation before. The Minister is before the committee for the next hour. We are far better educated now to put questions to the Minister on this animal health and welfare (amendment and miscellaneous provisions) Bill 2021.
On behalf of the committee I thank the representatives. They have given us a very comprehensive overview, which is much appreciated.