Tuesday, 25 February 2014
Beef Industry Issues
I thank the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, for taking time from his busy schedule to address the issue of the drop in beef prices in meat factories over the past weeks. This will have implications for Food Harvest 2020 and farmer confidence in stocking levels. Will the Minister consider bringing all the stakeholders together in an emergency beef summit to discuss this issue and find a way of moving forward? Following a meeting with the IFA, the Minister met with a delegation from Meat Industry Ireland. Have there been any developments from this meeting?
The beef market is challenging at present. Prices are still very low which could put some farmers at risk of going out of business. Will the Minister consider a slaughter policy for male calves? Will he also consider waiving the €10 export inspection fee on calves?
I thank the Senator for giving me the opportunity to discuss this matter in the Seanad.
The value of beef exports was estimated at €2.1 billion in 2013. This export performance, based on wide portfolio of customers, has contributed significantly to higher returns for Irish beef in recent years. It also reflects the success of Bord Bia’s marketing strategy which focuses on the key attributes of Irish beef such as environmentally sustainable, grass-based production systems, full traceability, quality assurance at all stages and superior eating quality. I am committed to developing a policy framework that fosters innovation and promotes efficiency and improved performance at all levels of the beef supply chain. These export figures are underpinned by the high quality output from our primary sector. I fully agree with those who advocate for a strong suckler sector.
Under Food Harvest 2020, the original target for the beef sector was to increase the value of exports by 20% by 2020. This was increased on the recommendation of the beef activation group to 40%. The various targets under Food Harvest 2020 are regularly monitored and reviewed by the high level implementation group which I chair. Obviously, any factors which may significantly affect beef prices or which lead to a fall in production would be of concern and it is important that beef farmers have confidence in their sector. However, it would be premature to consider any adjustment in the target for the beef sector on the basis of the recent drop in prices. It would not be prudent to change targets on the basis of temporary price adjustments in the context of a strategy which has another six years to run.
The average R3 steer price per kg, excluding VAT, the benchmark price for cattle, increased by 42% between 2008 and 2013. It is too early to say if the current drop in prices will continue and I hope this will just be a short-term drop. Aggregate cattle supplies at Department-approved meat plants to early February 2014 are up 7% on the corresponding period in 2013 with strong increases recorded in the steer, heifer and cull cow categories. This higher throughput has led to factories giving preference to certain types of stock that are better suited to the requirements of their retail customers. Prices for prime steers and heifers have remained relatively stable but the young bull trade is challenging at present as age and weight issues continue to affect demand. I note, however, that the young bull kill has increased by 60% between week 1 and week 6 of 2014. Up to 6,000 bulls are being killed a week to get through oversupply.
The beef industry is dependent on exports and the need to ensure that it is producing efficiently for overseas markets cannot be ignored. One of the main difficulties in marketing young bulls older than 16 months is that these animals are outside the specifications preferred by the UK market. This is a major disadvantage at present because the UK market has effectively become the highest-priced beef market in the EU. Delays in young bull slaughtering undoubtedly put pressure on producer profit margins. Neither I nor any European agriculture Minister can interfere in a trade that is cyclical in nature and prone to short-term price fluctuations. I am, of course, entirely sympathetic to those farmers facing difficulties in getting their cattle slaughtered. Cattle prices are determined, however, by the interplay of supply and demand. I have no function in commercial transactions between the meat factories and their suppliers.
In response to resent issues in the beef sector, I met last week with the IFA and Meat Industry Ireland, comprising the main beef processors in the country, to discuss the situation. I had a constructive and focused meeting with both parties on this issue. At my request MII member company members agreed to have their livestock offices available to deal with any cases where producers had queries or concerns about the marketing of their stock. Lists of contact telephone numbers for all the main beef processors have been published in the farming press. It is important farmers with concerns make direct contact with their factories to discuss any issues they may have regarding their supplies. I have had anecdotal evidence that some farmers simply cannot get rid of their animals but factory owners tell me they will take animals. Of course, farmers want more money for their animals.
There is a responsibility on the beef industry to think in the medium and long term about beef supplies and the need to maintain confidence in this sector but they can only do that within reason if they a have problem selling on this product afterwards because it is out of specification.
It is the responsibility of the industry – processors and farmers working together – to manage the type and volume of cattle being brought to market so that the supply chain operates for the benefit of both parties and does not undermine the viability of bull beef production systems for either winter finishers or suckler farmers. It is essential that all parties communicate with each other and understand the needs of the market for quality animals produced to an agreed specification. I urge the various farm bodies, the Irish Farmers' Association, IFA, Irish Creamery Milk Supplier Association, ICMSA and Irish Cattle and Sheep Farmers’ Association, ICSA, and Meat Industry Ireland, MII to continue to meet, as they did in January, to resolve any outstanding issues so all parties can benefit from the opportunities available to the Irish beef sector in other EU member states and in emerging third countries.
Since my appointment as Minister I have been very active in developing relationships in new and expanding international markets for the beef industry, raising Ireland's profile and increasing international confidence in our production and control systems. These initiatives have led to a number of notable successes last year in securing new markets for Irish beef in Japan, Singapore, Egypt, Lebanon and Iran. I am hopeful this year will also see significant progress in gaining access to the US, Canada and, perhaps most exciting, the Chinese market.
I fully recognise the importance of maintaining confidence in the beef sector and earlier this month I announced the operational details of an investment package worth up to €40 million for beef farmers in 2014. This package will include €23 million for a beef genomics scheme - which is exciting new thinking about paying farmers to buy into a new genomics breeding programme - €10 million for the beef data programme, €5 million for the beef technology adoption programme and €2 million in residual payments under the suckler cow welfare scheme. The Government’s investment is a continuing strong vote of confidence in the suckler beef sector. It exemplifies the smart, green growth initiatives envisioned in the Food Harvest 2020 strategy.
I am very cognisant of the fact that, regardless of the overall macro figures in terms of beef exports being significantly up last year on the previous year and the numbers of beef animals also being up going into this year, there is an issue for some beef farmers, particularly around bull beef, who were producing what they would see as very good animals but which factories tell me are outside the spec of their customers. That is why farming organisations and factories must work together on this to clear out an oversupply of animals that are not in demand in the marketplace at the moment. That can be done in the next three to four weeks at current slaughter rates of bulls in that category. This has been ramped up to 5,000 to 7,000 per week. If that continues for the next three to four weeks, we will get back to normal pricing.
A farmer who produces bull beef must do it in consultation with a factory that will buy it so that the farmer produces it to a spec the marketplace wants. The problem has arisen when farmers seek to sell animals into a factory that does not want them because they are outside of the spec of what is being demanded in the marketplace. There are a number of examples of farmers producing bull beef at 18 to 22 months and selling them for good prices to the factory because they have been negotiating and talking to the factory about that and the company involved has found an outlet, whether in Italy or somewhere else, for that spec of beef. However, one cannot expect to come to a factory with something nobody wants and expect to get a top price for it. We must learn some lessons from this and I hope we will get a response from the industry that will maintain confidence in this sector into the medium term. Ultimately this is a sector in which we want to facilitate growth and expansion. We want farmers to get a fair and good return that will facilitate that expansion but that will also facilitate meat factories making the margin they need to survive.
I thank the Minister very much for his response. If things do not work out over the next three or four weeks perhaps the Minister would consider a slaughter-out policy of male calves. Farmers are under pressure and there is a danger they will not continue to produce bull beef in the future.
No policy around young male calves, particularly those born in the dairy sector, will provide any instant solution around getting a better price for beef. We can produce much more beef in Ireland, get a good price for it and sell it into markets, but it must be produced according to the spec customers want. Most farmers understand that but, unfortunately, some farmers in the bull beef category have been caught out because of a changing market in this area. We need to learn lessons from that. We will see less bull beef, more steers and more heifers in the future but there will be some specialist bull beef farmers who will produce for factories and they will negotiate spec with those factories. That is a profitable business. However, producing bull beef without knowing one has an outlet for that, and expecting to sell 24 or 26-month-old animals is a very challenging area. We need to get through this immediate problem. We need understanding from the factories on that regarding pricing and taking bull beef, but for next year and for future planning we need to learn the lessons from what has happened over the last few weeks.