Mr. Fergal Byrne:

I thank the committee for the invitation to discuss the development of the sheep sector. The sheep sector is in trouble. Unlike other sectors, sheep prices did not increase significantly in 2022, despite the escalating costs. In the year to date, sheep prices in 2023 have averaged €6.71 per kilogram, compared with €6.67 per kilogram in 2021 and €6.80 per kilogram in 2022. In that time, we have seen the cost of all inputs rocketing, and sheep is the one sector that saw a worthless increase. In 2022, the average income for sheep farmers was about €16,500, according to the Teagasc national farm survey, a drop of 21% compared with 2021. Income per hectare for sheep farmers was only one third of the average income per hectare across all other farming sectors and one sixth of the per hectare dairy income.

Part of the problem has been a significant increase in New Zealand lamb imports. In the period from January to May 2023, inclusive, sheepmeat imports from New Zealand were 19% higher in the EU and 14% higher in the UK compared with the equivalent period in previous years. Some 19,100 farmers have applied for the sheep improvement scheme, which is slightly more than half of all sheep farmers. It is our strong view that the scheme is not fit for purpose, given the income crisis on sheep farms, and given the massive increase in costs in the past two years. The ICSA has called for emergency funding to help the sheep sector in 2023. We are frustrated that so far, the Government has failed to find a way to justify the use of the Brexit adjustment reserve to support the sector, in light of the income crisis. The increase in New Zealand imports this year is compounded by a new UK and New Zealand trade deal, which will add a potential further 35,000 tonnes under a tariff rate quota. This will add further pressure to the EU sheep sector, which is already heavily impacted by New Zealand imports under the previous WTO agreement. Prior to Brexit, the quota was set at some 228,000 tonnes. However, post Brexit it might have been expected that the UK would have taken the majority of that quota with it, given that the UK was the strongest trading partner with New Zealand for lamb of any EU member state. However, the quota was divvied up on a 50:50 basis. The fact that the UK then went on to negotiate a further quota of 35,000 tonnes with New Zealand demonstrates that it should have taken a bigger proportion of the original quota of 228,000 tonnes. In addition, the EU has since done a free trade agreement with New Zealand, which will add another 38,000 tonnes of sheepmeat in the next seven-year timescale, albeit not immediately.

It can also be argued that the movement in exchange rates between sterling and the euro, as a consequence of Brexit, has adversely impacted the Irish sheep sector. In the year prior to Brexit, £1 sterling was worth as much as €1.40. Even a few weeks before the June 2016 Brexit vote, it was trading at €1.30. It fell substantially after the 2016 vote and has stayed in the €1.10 to €1.20 range ever since. It has been in the range of €1.12 to €1.16 for the past year. This is reflected in the huge quantities of live lamb imported here in recent years. We imported 422,000 live lambs in 2022 from Northern Ireland. It also means that we are at a competitive disadvantage to UK farmers in the important EU markets, such as France, when it comes to sheepmeat exports. For these reasons, we cannot understand how the sheep sector is not eligible for Brexit adjustment reserve funding, even though it has been used for genomic tagging in the cattle sector.

It is clear to us that the current payment of €12 under the sheep improvement scheme is not going to save the sheep sector. We want to see it radically increased. The ICSA welcomed the establishment of the Irish Grown Wool Council, following our lobbying for it. However, it is now necessary to ensure it does not become just a talking shop. The key logjam is that with wool essentially valueless for the farmer, there is no logic or incentive to rolling fleeces correctly and removing daggings. However, unless farmers do this task, it becomes impossible to add value to wool from the processor point of view. The solution, therefore, is to provide a payment of €5 per ewe for wool presented correctly, which would kickstart the wool sector until value added products could be developed. The ICSA believes there is a lot of potential to develop wool-based products in an era in which natural products are back in fashion.

In relation to the price of lamb, the ICSA is disappointed that no progress has been made in developing access to the US market, even though it is technically open. There are no indications that our sheepmeat factories are investing enough matching funds to support the work being done in this area and it seems as if there is no interest in developing the US market. Instead, the focus seems to be on bringing in live lambs from Northern Ireland which are then processed to fulfil contracts in Europe, all at the expense of our sheep farmers.

The sheep sector has no future if all we can get is a break-even price or even a profit of €7 per ewe. Under current costs, a price of €6 to €7 per kilogram is loss-making. Future strategy must recognise the importance of economic viability. Sheep is a low-carbon farming system but even more important is that it is vital to the rural economies of many counties, especially in upland areas. In these regions we have seen good initiatives driven by local farmers such as Connemara hill lamb and Comeragh hill lamb. For too long, however, sheep has been the forgotten sector at Government level. The Food Vision 2030 group has a sheep committee but it has been sidelined to the extent that it is an afterthought.

We want to see a co-ordinated Government effort to drive development of the sheep sector, but the starting point must be viability for the sheep farmer.

I thank the committee for listening to us.