Seanad debates

Wednesday, 16 October 2002

Adjournment Matters. - Beef Industry.


2:30 pm

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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I thank you, Sir, for selecting this Adjournment matter because it is very important that we address the difficulties in the beef industry. Protests are taking place outside many factories. In County Roscommon protests are under way this week outside the Kepak factory in Athleague. There should be a full examination of the relationship between the beef processing industry, farmers and the providers of stock. The protests have not received much attention because of the Nice treaty referendum campaign.

The European farming industry has suffered in recent years. The BSE crisis and foot and mouth disease outbreak were the main causes of the hardship. While matters appear to have improved on the Continent, Irish farmers continue to be quoted low prices for their beef by the beef processing industry. Recent market trends appear to suggest that the price of beef should be rising. The UK market is very active and across Europe cattle prices have increased by €40 per head since July and demand for Irish beef has been very strong.

The recent lifting of the six county Russian ban provides market access for an additional 36% of our live cattle, although, because it is a very difficult market, this opportunity is not being fully exploited. The Egyptian market is not providing good access whereas at one time it took 100,000 tonnes of Irish beef. The price of approximately 81p per lb for quality stock is exceptionally low and not viable. The Minister of State is very conscious of prices, knows the business well and will be concerned about this trend.

I also appreciate that processors are facing tough margins. The prices paid by the factories this September are 13% lower than those quoted in September 2000. It appears that the only response for the meat factories following the positive news of the lifting of the Russian ban was to cut prices again. In fact, prices have fallen by €95 per annum since July and, at least according to the IFA, only for the farmers' protest the factories would have dropped prices further. These price cuts have left Irish farmers in the position where Irish beef prices are the second lowest in Europe and where prices quoted across all factories and processors in Ireland are, coincidentally, identical.

It is clear that the beef processing sector continues to be dominated by a number of key players and that proposed reform may further tighten their control. While there are reports of no cartels within the industry, the end result is the same for farmers. I spoke to some factory owners today and they assured me that there are no cartels. I call on the Tánaiste and Minister for Enterprise, Trade and Employment to address this issue and again direct the Competition Authority to investigate the alleged anti-competitive pricing structure within the beef industry. It is clear that efforts to improve the position of farmers in recent years have failed.

The IFA has organised protests outside the factories. I spoke to its president, John Dillon, last Wednesday. The IFA should debate the issues within its organisation, not in public. It should make contact with the Government and processors. This should be a co-operative movement in terms of the issues affecting farmers. I do not believe in confrontation, there should be consultation. The IFA relies on the industry to provide an income through the levy system which we, as farmers, are providing. It faces a conflict where it is protesting about prices, yet it collects a levy when beef goes through. For example, the price quoted on organic food is approximately 110p per lb, which is acceptable and indicative of a competitive business.

The industry tells me it has no concerns about showing its books to the Competition Authority. It would allay the fears of the IFA and producers if an independent organisation, such as the authority, was prepared to examine the books of the industry to ensure there is genuine competition between the factories involved. We in County Roscommon are fortunate in having processing plants in Athleague, Roosky and Ballaghaderreen. They have provided good employment and an excellent service for farmers. The Kepak plant in Athleague is in my parish. It brought about a revolution in the business where farmers are paid on the day, unlike the situation outlined by Senator Scanlon, where farmers are owed money. It is one big benefit that accrued following the impact of Noel Keating and the Kepak organisation.

I live on a farm and work with the farmers in my area. They are deeply concerned. Unless prices increase they will not be there in the future. Processors will be affected because, without the raw material, there will not be a processing industry. That is the reason I appeal to the industry and the IFA to try to negotiate a viable price for a quality product. As my party's former spokesperson on agriculture in this House, Sir, you know we have the best beef in this country. We need to see a fair price being given to producers.

Photo of Noel TreacyNoel Treacy (Galway East, Fianna Fail)
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The current events in the beef industry began as a protest three weeks ago and were originally confined to farmers protesting at AIBP owned plants, which were prevented from sorting cattle on Monday, 23 September. The protest has been extended to the point that five plants, accounting for 20% of the national slaughtering capacity, are disrupted by the dispute. I understand the protest was sparked by a fall in prices following the lifting in the middle of September of the Russian BSE related ban on six counties with a relatively high level of BSE. This ban had been causing logistical problems for the meat plants and farmers expected prices to increase following its removal.

The issue of cattle prices is a matter for direct negotiation between beef producers and beef processors and it would be inappropriate for me or any other Minister to intervene in the current dispute. This area is primarily the responsibility of the Minister for Agriculture and Food. The function of the Government, through the Minister, in relation to cattle prices is to set the policy parameters and support framework and seek by every political and diplomatic initiative to secure access to markets. The Minister is discharging these functions and will continue to do so.

I joined the Department as Minister of State last June. The Minister and the staff at the highest level are totally committed to taking every possible diplomatic and official initiative to ensure we can market beef and dairy products out of the country. The market for cheap meat is buoyant. We have had the highest level of representation across the world. There has been tremendous support from the worldwide diplomatic staff and the Minister has led and met delegations pertaining to all of these issues, including the holding of a five hour meeting on 11 September with the IFA.

The Government is concerned that the dispute could lead to a build-up of cattle and disrupt supplies to our major markets, which would not be in the interests of producers or processors. In view of this, I and the Minister for Agriculture and Food have called on both sides to seek to find a solution to the dispute through the well-established lines of communication which exist between farmers and processors.

The Tánaiste and Minister for Enterprise, Trade and Employment is responsible for competition policy. The Competition Authority is the independent enforcement agency for competition policy. Its remit extends to all areas of the economy and it has powers to investigate all breaches of competition law by virtue of section 30(1) of the Competition Act, 2002, which states:

To carry out an investigation, either on its own initiative or in response to a complaint made to it by any person, into any breach of this Act that may be occurring or has occurred.

In relation to cartel-type offences, the key feature of the Competition Act is that it prohibits agreements between undertakings that have as their object or effect the prevention, restriction or distortion of competition. It is therefore necessary to prove that members of a cartel in some way got together to fix prices or markets. Price similarity or price shadowing is not at all conclusive as it may also be characteristic of highly competitive markets and I think that would be the case in our beef industry.

In this area the Competition Authority is absolutely independent in its functions. The matter of beef prices and allegations that there is anti-competitive activity has been investigated before and no hard evidence was produced. Consequently, it is not the intention of the Government to order a re-investigation. The Senators may remember that, when the last stand-off occurred between the farming organisations and the beef processors, we set up a group of three wise men, a powerful committee of eminent former public servants and eminent serving public servants, which produced a wide-ranging report that has been published. Its conclusion was that there was no cartel in the industry at that time.

To deal with anti-competitive activity one needs evidence which can be used in court, which is the final arbiter in deciding whether the Competition Act has been breached. There are two alternative ways in which action can be taken. Any evidence of price fixing should be passed to the Competition Authority and those with allegations to make should use the public enforcement system via the Competition Authority. Equally, section 14 of the Competition Act, 2002, provides that any person aggrieved in consequence of anti-competition activity has a right of action in the courts for relief by way of injunction or declaration and damages, including exemplary damages. One must first of all make an allegation which must be substantiated and in written form with documentary back-up. If the Competition Authority finds in one's favour, one can go to the courts for relief and as a result of the competitive distortion, the courts may award damages.

In early 2000, arising from a dispute which was taking place at the time between the IFA and meat processors, an independent group was established to report on allegations of anti-competitive practices in the beef industry. Among its findings – I have already alluded to this – the group found no evidence of anti-competitive behaviour, either in the pattern of cattle prices or in profits. On the contrary, there was evidence from the various sources consulted that on average the industry is one of low profitability. There may be a problem with the attitude of management in the IMA in that it can make the same profits with low slaughtering volumes as it can with large slaughtering volumes. This could be part of the problem.

The Competition Authority previously conducted an investigation over a number of years into the meat processing industry and particularly into allegations of the existence of a price-fixing cartel among meat processors. Following its investigation the authority was unable to find sufficient evidence to support these allegations so could not take any action under the Competition Act. While previous investigations of anti-competitive behaviour did not result in evidence to support those allegations, the authority is always open to recommence an investigation should any new information come to its attention that would warrant such a step. In that regard, as with all allegations of anti-competitive behaviour, the authority encourages complainants to provide it with as much information and evidence as possible to assist it with its investigations.

I reiterate the authority's encouragement of complainants as it is only by acting on hard evidence that the authority can make progress in rooting out anti-competitive activity which has such negative effects on both the industry and consumers. As stated previously, the authority has responsibility for the enforcement of competition in all areas of our economy. Its remit requires it to be vigilant as to breaches of the Competition Act. Senators can be assured that it is monitoring developments in all sectors. In the absence of competition law being breached, this matter is one for the parties themselves to resolve.

I spoke at the beef quality awards last Monday week in front of the IMA and the farming organisations and I appealed to the Irish Meat Association and to the farming organisations to sit down together to look at the issue of capacity and the primary producers entitlement to the best price possible and to take into account the huge effort being made by the Department of Agriculture and Food along with the State agencies including Bord Bia. We will be at the SIAL food fair next week marketing Irish food produce to the people of France and Europe. I ask them to sit down and see how they can find a resolution to the current impasse so that the primary producer can get ample reward for producing quality beef in one of the most natural environments in the world. I hope that common sense will prevail sooner rather than later, that the markets will be allowed to proceed and that the producers get the proper price.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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I thank the Minister of State, Deputy Treacy, for his very comprehensive response to the issues I raised. I am encouraged by his appeal to bring all parties together to resolve this issue as quickly as possible because it is damaging our industry and our exports. I hope the Minister of State continues his efforts along with the Minister for Agriculture and Food to bring all the interested parties to the table.

The Seanad adjourned at 8.30 p.m. until 10.30 a.m. on Thursday, 17 October 2002.