Seanad debates

Thursday, 21 October 2004

1:00 pm

Michael Finucane (Fine Gael)
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I thank the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Michael Ahern, for his attendance. This is an issue which will concern him as he too comes from west Limerick.

The industry in Castlemahon and Kantoher, now Kerry Foods, is involved in the production of chickens. It is synonymous with the west Limerick area where it continues to provide valuable employment. We want this industry to thrive into the future.

There is concern regarding the supply of broiler chickens to the processing unit. There was a peaceful picket outside the gates last week by concerned people involved in poultry production in the area. Several councillors and Oireachtas representatives were also there in a show of solidarity with the current plight of the industry.

Those involved have formed the West Limerick Co-op Poultry Producers Association Limited, which has approximately 28 members. In most cases, they have stopped supplying the factory unit, which is a matter of concern. The producers have not done this lightly; they felt pressurised into it.

The nub of the matter is the importance of getting a viable price for broiler chickens. Currently, they receive 30.85 cent from Castlemahon Poultry Products Limited. The cost of catching and transporting the chickens is factored into this amount, together with feed costs. However, the 30.85 cent does not yield any significant profit. If it did, there would be no protest. There are also variable costs, which include electricity, gas heating, bedding, cleaning, maintenance repairs and medication. Taking these into account, the producers estimate the profit margin is approximately 5 cent. This is uneconomic if a producer is making repayments on a poultry unit. It is out of sheer frustration that many of them find themselves in this situation. A big part of the problem is that management will not talk to them as a unit in order to discuss their difficulties.

The risk factor involved in poultry production is never quantified or factored into the profit margin. It is a 24-hour labour unit, because the producer must be available at all times. In many cases it is a family enterprise, either in its own right or to compensate for or supplement another farm income.

There are many vital components in poultry production. Poultry units must conform to a high standard and are subject to quality audits by the multiples they supply. Everything is known about their product with regard to its quality. Questions have been raised in the House and in the media with regard to where some of the chickens come from. Sometimes questions are asked about chickens coming from Thailand, China, Brazil and other countries. The consumer has a right to know the country of origin. However, in this instance Irish chickens are produced.

This is probably a delicate matter for the Minister of State. Hopefully, Department personnel can talk to the manufacturing unit involved and see whether discussions can take place with regard to re-establishing supply to the poultry processing unit. It is in the interests of Castlemahon Poultry Products Limited to use these suppliers. Over a period of time, it will obviously affect their production ability.

On the one hand it is a delicate situation for us as politicians, because we want a resolution to this issue and want to ensure that valuable employment continues. However, we also want to ensure these people operate a viable unit.

Photo of Michael AhernMichael Ahern (Minister of State, Department of Enterprise, Trade and Employment; Cork East, Fianna Fail)
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On behalf of the Minister for Agriculture and Food, Deputy Coughlan, I thank Senator Finucane for raising this matter.

The dispute between Castlemahon Food Products Limited and some of its poultry suppliers concerns the price paid by the company to the growers of the birds. The practice in the poultry industry is that the processor supplies day-old chicks and feed to the producer and also covers certain other costs. The producer provides the labour and other overheads, such as electricity. A price per bird is paid to the producer and this can of course vary from processor to processor.

In the Castlemahon case, the producers involved in the protest are claiming the price being paid by the company is insufficient to cover their costs and are seeking an increase. The price paid for finished broilers is a commercial matter for negotiation and agreement between producers and processors. There is no question of involvement by the Department of Agriculture and Food or European Union institutions in the fixing of these prices, as there is a free market in the sale of poultry.

The picketing of the plant has ceased, which is a welcome development. The Minister urges both sides to again consider all the issues surrounding this dispute and to work towards a resolution that is satisfactory to those concerned.

Interruptions to the supply chain, and any form of disruption of the smooth operation of a business, do not serve the sector well. This is particularly true for poultry, where there is an elaborate network of breeding farms, hatcheries, rearing farms and processors involved in the finished product. A dispute anywhere along the supply chain can have widespread repercussions. It is vital to such an industry that the integrated nature of the producer-processor relationship is recognised as being of fundamental importance to the future success of the industry. It is important that margins be available for all parts of the industry, both at production and processing level, and that quality of product be encouraged and rewarded.

Castlemahon is a major poultry processor. It is vital to the west Limerick economy and the rural economy, both in terms of the considerable level of employment at the processing plant and the contribution to the incomes of poultry growers in the area. There is also a strong cross-Border dimension to the Castlemahon corporate structure and business operations, which is very welcome.

While the issues between Castlemahon management and their producers are matters that relate to the commercial operations of the company, it is in the interest of all concerned to ensure there is no resultant disruption to the level of poultry supplies in the country as a whole. The Minister is concerned that any lost market share may fall into the hands of importers and risk a more permanent loss to the indigenous industry.

The poultry and egg sector is an important part of the overall agrifood industry. The sector has a farm gate value of €150 million and provides valuable employment throughout the country, supplying quality products to the domestic and export markets.

Last year 66 million chickens and 10 million birds of other species were slaughtered in Ireland, maintaining a high level continuity of production in the face of increased competition from imported products. Despite increased import penetration, the poultry sector is a net exporter. Taking into account the valuable processed products sector, the poultry sector out-performed imports by 22,000 tonnes last year and contributed some €244 million to our balance of payments.

Increasingly the industry here, in common with other sectors, must continually face up to the pressures of severe price competition to lower cost producers from abroad. This is a fact of international trade. Its implications are felt right across the chain, where costs of production are constantly scrutinised and must be kept tightly under control.

Higher costs of feed, compliance costs associated with welfare and environmental legislation, economies at slaughter level and downward price pressure from the retail sector are major factors impacting on the poultry industry. While the retail sector is dominated by Irish-produced poultry, all other aspects of the business at catering and wholesale levels are mostly supplied by imported product. There is strong competition right across the EU and in other countries at this level of trade and Irish processors have performed extremely well in maintaining their strong share of the domestic retail market while these competitive pressures grow.

The Minister for Agriculture and Food will urge both sides to consider again how they might find a compromise that will continue to bring economic benefits to the entire poultry chain and, in so doing, demonstrate the industry's capacity to respond effectively to the wider competitive challenges in the market.

Michael Finucane (Fine Gael)
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Will there be any consultation between the Department and the company involved?

Photo of Michael AhernMichael Ahern (Minister of State, Department of Enterprise, Trade and Employment; Cork East, Fianna Fail)
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The statement by the Minister for Agriculture and Food makes clear there is no question of involvement by the Department or by EU institutions in the fixing of prices.

Michael Finucane (Fine Gael)
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I accept that. Would it even be brought to the attention of the company that this was being raised?

Photo of Michael AhernMichael Ahern (Minister of State, Department of Enterprise, Trade and Employment; Cork East, Fianna Fail)
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I will seek a comment from the Minister on this point and report back to the Senator.