I welcome Mr. Cormac Healy and Mr. Ciarán Fitzgerald from Meat Industry Ireland who are here to discuss the issue of beef carcase classification. Before asking Mr. Healy to commence, I draw attention to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.
Meat Industry: Presentation.
I will ask our chairman, Mr. Ciarán Fitzgerald, to make some opening remarks. I will follow with the presentation.
I thank members for the invitation to appear before the committee. This is the first time Meat Industry Ireland has been asked to address this subject at this forum. We are very grateful for the opportunity and open to an exchange of information on the issue. I will give some background details.
Carcase classification, with a quality-driven payment system for the beef industry at its core, has been talked about for a long time, but has been difficult to implement, until the initiative taken by the industry a few years ago to invest in the new system. It is appropriate that the industry selling the end product, boneless meat, directly to consumers should take the initiative. However, the discussions on Sustaining Progress and other partnership agreements would have remained aspirational if the industry had not taken this initiative. While we acknowledge the support of the Department of Agriculture and Food in the matter, that was an important point in putting the new regime together. I ask Mr. Healy to take the committee through some of its aspects. We will then take any questions members might have.
A note has been circulated to members. I propose to outline the background. As Mr. Fitzgerald said, the commitment to introduce the automated beef carcase classification system was one of the main elements of the agriculture chapter of Sustaining Progress. That said, considerable work had been done prior to that time. The undertaking to adopt the technology was signed up to by farmers, processors and the Government through the forum of the Department of Agriculture and Food. All parties desired the introduction of a system that would bring objectivity to carcase classification on a consistent and uniform basis. As I said, some work was done in this regard in the run-up to reaching agreement under Sustaining Progress. Initial trials were held in 1999. Three systems underwent extensive trials in July and August 1999 and March 2000 to establish the ability of the technology to predict carcase classification according to the EUROP grading scale. I am sure members are familiar with this scale as a result of previous presentations made to it by representatives of the Department. The three systems examined were the Danish system, the German system, now in operation in Ireland, and the Australian system. Although the new technology demonstrated the ability of the systems to perform the grading task, the legislative framework had to be changed to allow the use of this technology in the industry.
I would like to speak about the comprehensive legislative framework. Beef carcase classification in the European Union is governed by a range of Commission regulations. Regulation 1208/81 determines the Community scale for the classification of the carcases of adult bovine animals. Regulation 563/82 sets out the detailed implementing rules for the application of the 1981 regulation. The scope of the Community scale for carcase classification was extended in 1990 under Regulation 1186/90. Detailed implementation rules in that regard were set out in Regulation 344/91.
The legislation I have mentioned sets out the detail of the EUROP grading system, under which the shape of carcases are broken down under five grades - E, U, R, O and P - the E grade being the best quality and the P grade being the lowest. The system also breaks down the fat class of carcases under five main grades - 1, 2, 3, 4 and 5 - 1 being the lowest fat cover and 5 being the highest. The system sets out detailed rules and controls relating to the manual grading system. The legislation did not allow for technology to be used, because appropriate technology was not available at the time of its adoption. In July 2003, after lobbying by the Government, the European Commission introduced Regulation 1215/03 to amend Regulation 344/91, which set out the detailed rules on carcase classification. The amending regulation cleared the way for the operation of the new technology and set out rules for the approval process of machines and the use and control of automated graders.
We entered into an approval process at that stage. In autumn 2003 three automated grading systems were submitted for testing in an authorisation trial organised by the Department in conjunction with the European Commission's agriculture directorate. The three systems were tested against an expert panel of graders from across the European Union. The 2003 regulation I have mentioned specified that the panel was to comprise at least five licensed experts in carcase classification, with two from Ireland, as the member state hosting the trial, and the other three from other member states. Two of the experts came from the United Kingdom and France, while the third was a European Commission official involved in the area of carcase classification. The automated systems had to reach certain standards outlined in the 2003 regulation if they were to be approved. There was a prescriptive set out rules relating to the scoring of the machines. The systems considered on a trial basis were the Danish system, the German system and the Australian system. They were all examined in the same plant, over the same time and with the same carcases. All three exceeded the necessary approval criteria and were approved by the European Commission and the Department.
It was necessary to select a machine in the light of the changed legislative framework, the completion of the trials and the issuing of the authorisations. Following considerable analysis of the results of the official approval trial and discussions with the Department and the relevant system manufacturers, it was decided to select the German system which is manufactured by E+V Technology. On the basis that all three systems had been approved and cleared for usage, the industry was keen to ensure one system would be selected for use in Ireland and that there would be maximum uptake of the technology across the industry. Meat Industry Ireland is satisfied that both objectives have been agreed. The committee will be aware that one system - the German system currently in operation - has been selected and is being used by all the major operators in the industry.
In 2005 between 85% and 90% of cattle slaughtered at export approved premises were graded using the automated carcase classification system. We have almost achieved full coverage. It was considered at one time that at least 15 systems would have to be brought into operation to ensure a critical mass, as defined by the Department, of the new technology. Some 24 machines are operating at 24 sites.
I would like to speak about the transition from the manual grading system to the objective system, which was a major undertaking on the part of the industry. As Mr. Fitzgerald indicated, a great deal of work had to be done to bring about this change. The industry had to make a significant investment in the new technology. Given the scale of the exercise, it is a credit to all involved in the industry and the Department that a smooth transition was achieved. The roll-out of the new technology commenced in October 2004 and was completed, more or less, in November that year. Some 14 units were installed throughout the industry in that two-month period. The uptake of the new automated carcase classification system has been welcomed by all parties - farmers, processors and the Department. Beef carcase classification is being carried out using an objective system in a consistent and uniform manner. There is a great deal of satisfaction with the new system on the ground and very few issues have been raised by farmers or processors.
I will update the committee on the ongoing control and monitoring of the new regime. The automated carcase classification system is firmly under the control of the Department which is monitoring use of the system. Since its introduction, departmental officials have maintained an intense monitoring programme at all sites. Meat Industry Ireland has welcomed the monitoring programme and encourages its maintenance by the Department.
The EU regulations which I mentioned set out certain control requirements. The Department is required to carry out at least six checks every three months during the first year of operation of the new technology. This is the first time the technology has been used throughout the entire Community. The industry in Ireland is well ahead of its counterparts in many other member states. The Department has checked the use of the new technology much more often than required under the regulation. The industry understands it intends to maintain such a high level of checking for the foreseeable future. Departmental inspectors visit plants regularly - at least every fortnight but usually more frequently - to assess carcase classification and the results produced by the machines.
The Department's standards panel visits plants on an unannounced basis at least every six weeks. This panel which generally comprises three departmental officials ensures no bias has been introduced to the classification of carcases. The information gathered on foot of the panel's inspections is relayed to Brussels. According to the Department, approximately 750,000 visits and 55,000 independent checks on carcases took place in the past year. The Department has expressed satisfaction with the accuracy of the new technology and has the ability to check that each machine is correctly calibrated and graded accordingly.
In summary, Meat Industry Ireland believes automated beef carcase classification is an extremely positive development for the entire beef sector. It is an advance all players in the sector sought and welcomed. A significant amount of time, effort and finance has been invested in achieving this objective and the smooth transition to the new technology is a credit to all involved. We now have an objective basis for assessing carcase quality, using technology which has been comprehensively tested and approved for use by the European Commission and the Department.
Widespread adoption of the new technology has been achieved throughout the industry in a short timeframe. Carcase classification remains very much under the control and monitoring of the Department and, as I stated, a rigorous monitoring regime is in place. The next stage of development and application will be in the prediction of saleable meat yield, an issue members may wish to address.
I welcome Mr. Healy and Mr. Fitzgerald. It is some time since I was involved in establishing the relevant regulations in the 1980s when this procedure was carried out visually. I was chairman of the IFA livestock committee and the European committee on beef and veal at the time and recall that the proposals for automated beef carcase classification caused considerable controversy. I welcome the presentation detailing the introduction and operation of the system. Although it is a major step forward, concerns have been raised about the security of the scheme.
Mr. Healy raised the issue of a quality-driven payment. This is the key aspect of the scheme. Many breeders went to great lengths to import quality stock such as Charolais and Limousin bulls, although it is dangerous to mention breeds. Many believe they did not receive sufficient payment to compensate for these efforts to produce high quality beef, particularly in the light of the prices paid for animals of similar quality in other countries. One of the reasons for introducing the system was to foster similar standards across Europe, with comparable prices offered for similar animals. Unfortunately, although the price difference is not as significant as a few years ago when we depended on intervention, export refunds and so forth, I am aware from conversations with persons more deeply involved in the industry than I am that this is still an issue.
Who calibrates the machines? Is it done by an independent company? What guarantee is there that all machines are calibrated identically? With machines responsible for 80% to 90% of gradings, are the individuals who carry out gradings in small factories where the procedure is not in place sufficiently knowledgeable? I presume this matter is not relevant to Meat Industry Ireland, given that its involvement in this area is minimal. I have received several complaints recently about practices in smaller units.
Are there only 24 sites remaining? Who looks after carcase trim? The machine uses the EUROP grid and categories 1, 2, 3 and 4. We also know the Department breaks down the grading into even finer detail. As one who came to an agreement on carcase trim with the factories and Department many years ago, I am conscious that fewer independent departmental officials are present on the line in the factories. How is this monitored from factory to factory?
I apologise for my late arrival and thank the delegation for its presentation and summary document. I have several statistical questions. What is the daily throughput for a single machine? The reason I ask is that I am curious about the basis on which calibration is carried out. Is it done on the basis of usage, for instance, after 4,000 carcases have been processed, or on the basis of time intervals, for instance, every six months?
Mr. Healy has indicated that the Department of Agriculture and Food has the ability to check that machines are correctly calibrated. Do officials from the Department carry out the calibration or is it done separately by the service providers from which the technology is procured? Must the machines be serviced, in addition to being calibrated?
How many queries or complaints have been received from farmers? Is it possible to provide a figure as a percentage of carcase throughput? I presume grading is an electronic procedure and the result appears on a scale but is there also a paper trail and, if so, is it retained? Is it possible to determine whether complaints are valid? In how many cases were they found to be valid in that the machine was wrong? Does this ever happen?
I welcome Mr. Healy and Mr. Fitzgerald. I agree with Deputy Crawford on the price paid for beef in the various categories. There is no significant difference between the price paid for the various grades, which is disappointing for farmers who upgraded their herds and brought quality animals into the system. This issue needs to be thoroughly examined.
Do all factories operate the automated system or have some remained outside? How do officials from the Department monitor the system? Do they carry out visual inspections and compare the outcomes with the results produced by the automated system?
I welcome Mr. Healy and Mr. Fitzgerald. It is good to have an opportunity to ask questions. Is the new system only in place since last September or October?
Since October 12 months.
I understand the profile of the animal is stored on a computer database which is also stored in the Department of Agriculture and Food. Is that correct?
Yes.
I raised an issue at a meeting about somebody who had slaughtered 20 heifers weighing 370 kg or 380 kg, which would be good cattle. This was somebody who was used to killing in the region of 100 heifers a year. He always had 16 or 17 U grades out of 20 animals slaughtered. However, even with heifers and cattle at that weight, he found himself with four U grades. It may have been due to teething problems but something was badly wrong. What surprised me at the time was that there was no appeal mechanism in place. The man concerned just had to accept the grading and what he was paid on the day. I understand that because the carcase profile will be stored by the Department, an individual with a complaint about the grades can appeal to it. Is that the case?
The report states 55,000 independent carcase checks were carried out in meat factories in 2005. Were any discrepancies or mistakes found?
I, too, welcome Mr. Healy and Mr. Fitzgerald and thank them for their report. It is perfectly consistent with what was said to us some weeks ago by the representatives of the Department of Agriculture and Food. On that occasion we got excited about the issue of calibration, to which Deputy Upton has referred. There remains a degree of suspicion or questioning on the part of farmers as to how the calibration system operates, who supervises it and so on. I am sure Mr. Healy will refer to this in his response.
Mr. Healy has stated the next stage in development and application is the prediction of saleable meat yield. Will he indicate what work has been done in this area and when it is envisaged that we will move on to this stage?
I welcome the delegates and thank them for their presentation. I will not repeat what has been said but look forward with interest to the responses to some of the questions asked.
Mr. Healy stated that in 2005 approximately 85% to 90% of the cattle slaughtered at export approved premises were graded using the automatic carcase machine. What happened the other 15% and why were they not graded in this way?
By and large, the farming community is pleased with the introduction of the grading machines because they bring more stability to the industry. Since their introduction, farmers tend to be more satisfied with the grading of carcases. However, they are not satisfied with the price. I am interested to hear an explanation of how every Monday morning every factory will quote the same price for the same grade. It is extraordinary. Most in the farming community would suggest that a cartel was operating within the industry, of which the delegates are very much a part. I doubt that they will accept it is a cartel but coming from a farming background, what is happening appears very strange.
The only time there is a shake-up is at this time of year when there is a demand for beef. Representatives of the factories visit farmers in their high powered vehicles and if they need cattle, they could offer anything up to nine pence a pound extra - they still talk in such terms in the country. At harvest time, when the industry knows the farmer will have to dispose of his or her livestock, the price drops. This strange coincidence happens every year. There is no point telling me it is not a cartel. The same price is offered to farmers every Monday morning, which is a rather strange coincidence. I look forward to the comments of the delegates.
Perhaps Mr. Healy has been put on the spot by Senator Coonan's question on the outlook for beef.
I will go through the questions raised and if I miss any, I can come back to it. We will deal first with the calibration issue because it has come up on a few occasions. I will outline my understanding of it but perhaps the Department of Agriculture and Food would be more competent in explaining the full details. At the time of the trial, the system in use was calibrated against the results of an expert panel. The jury or panel consisted of five licensed experts in carcase classification, two drawn from Ireland and three from other EU member states. I have heard it referred to as the gold standard. It was not just down to one individual deciding the grade; five experts were involved in coming to a judgment on grading and machines were calibrated against this standard.
One has to start somewhere. One does not start with a machine that suddenly knows the European system. The information had to be fed into it and this was done by the expert panel. As the Department of Agriculture and Food ran the trial, it would be necessary to discuss the details with it. The calibration was done at that stage and the software and technology used in the system are available to the Department. The information on a number of carcases used in the trial procedure is held on file by the Department. Manufacturers, the industry, farmers or anyone else would not have access to it. This is what the systems can be tested against to ensure they have not moved away from the software and equations used.
When inspectors go to a meat plant, not only will they be looking at carcases in the chill or on the line passing the machine to ascertain if they are being processed in agreement with the system, but they also carry electronic images with them of the carcases used in the trial. They have the ability to feed this information into the system and get a readout. The readout has to be the same as that given in the trials. In this way they can ascertain that the system has not varied to any extent from the way in which it was calibrated. I am not sure if that explains everything but it is as much information as I can give.
Who would rejig the machine if there was a problem?
An alteration can only be made on a machine through the manufacturer being given permission by the Department of Agriculture and Food.
A question was asked about the 85% or 90% of carcases that had been graded by the new technology and what had happened to the other 15%. There are plants which do not use the automated grading technology. The new equipment is in place at 24 sites. There are probably in the order of 35 export approved premises. The remainder account for the figure of 15%. One of our objectives was to have maximum take-up. We probably came close to this but we obviously encourage full take-up. The throughput of a machine at a typical plant is probably between 300 and 350 carcases.
The Department of Agriculture and Food is responsible for checking adherence to the national carcase dressing specification, which has been agreed for many years. Through the unannounced visits by its representatives to the plants to assess grading, it will also assess trim and adherence to the trim pertaining to carcases both in the chill and on the line.
Individual companies that bought machines have a service contract with the manufacturer for general maintenance of the machines. There are pneumatics and various moving arms etc., and all these are covered.
A question was asked about the paper trail. The grade is issued by the machine and is sent electronically to the carcase label printer. There is a paper trail and we are required to report to the Department of Agriculture and Food the grading results of all animals slaughtered. To the best of my knowledge, this is done on a weekly basis and hence the Department is in a position to produce national statistics and statistics on individual plants. The legislation requires a daily classification sheet to be completed with carcase number, grade, weight etc.
Saleable meat yield is the next step and technology is capable of predicting it. It is vision-image technology and was developed to predict saleable meat yield, muscle size and muscle distribution. It had to be adapted to the EUROP grid because that is the grid we use within the European Union. In other countries, such as Australia, different systems are used. In light of some of the trials of 1990 and 2000, which I mentioned, some work was done to predict the machines' ability to predict saleable meat yield. Although I do not have the results to hand, I know they were favourable. More research is required.
One of the challenges that lies ahead concerns the required cutting specification. Carcases are cut up into primals and then into consumer cuts. Different customers, outlets and markets have different cutting specifications and, therefore, while there is a standard EUROP grid for grading, not every company throughout Ireland operates to the same cutting specifications. Different cutting specifications result in different yields of meat and we must therefore consider whether it is possible to have a common specification. Future developments regarding saleable meat yield may not be on a national level but at the level of individual companies. We did some work on this and used a cutting specification agreed purely to assess the capabilities of the machine. There is certainly work done and much more to do in this area. One of the key matters to be addressed is that cutting specifications vary. It is a question of whether one can proceed on the basis of a national or individual company approach.
I do not want to forecast cattle prices. A comment was made that the same price is paid by all. I have no figures to hand but if one looks at the prices published weekly, one will note that there is quite a considerable spread in the prices paid by individual operators for the different grades of animals.
Not in September and October.
It is considerable but I do not have the relevant figures to hand.
We have tried, on the back of the development of the grading technology, to enhance movement on a more differentiated pricing system. We published proposals on this and had discussions with farm organisations. At present, there is probably a range of approximately 22 cent per kilogram. We proposed a spread of at least 40 cent to 45 cent per kilogram across the range of animals but did not succeed at the time. One must bear in mind that some producers favour the flat pay system because it may suit the poorer quality animals. With flat pricing, however, poorer animals benefit at the expense of higher quality animals.
Most of my points have been raised. On carcase trim, farmers who have their own scales find, on selling stock, that they get better prices in different factories. Where comparable weights are concerned, this relates to carcase trim. Certain factories are harder with the knife than others. Farmers in general are fairly canny and many suckler farmers who were finishing stock would have been happier with the manual grading of similar suckler cows or bulls in that they were achieving more R grades, in particular, but are now achieving more O grades than in the past. This has been put to members by genuine people with reasonably good stock and they want to know the reason therefor. If there is a problem, the farmer should not have to deal with it.
On the issue of pricing, I agree that those producing quality stock are not getting enough. At present, there is a 2 cent difference between R and U grades. Even within the R grades, a mix of O grades is being taken. This is not good enough for those who produce quality cattle, and it is not encouraging.
As one who was involved in encouraging the production of higher quality products, I note that we never had to do as much in this regard as we do now. Is the industry involved in trying to encourage producer groups? When I tried to set them up with EU funding in the mid-1980s, the industry did not offer help. I recall that only two plants helped, one in Rathkeale and a smaller one in the Border region. The initiative was funded by the European Union and to me it represented the way to achieve a commitment on the part of the producer to the factory and thereby to the market. We must now concentrate on the European market rather than third country markets, that is clear from the Teagasc report and from other reports. Can we move in that direction?
I support this technology because it removes subjectivity, which is good for everyone. There are checks and balances in terms of being able to follow through the system. The Department of Agriculture and Food's standards panel makes an unannounced visit every six weeks. Does that mean that after the sixth week, everyone can relax for five weeks?
Over the course of the 750 visits and the 55,000 independent checks carried out last year, were discrepancies found in any of the meat plants?
There have never been as many beef cattle sold through marts as has been the case this year, with large numbers of beef cattle not going direct to the factory. Why is that? Are they getting better prices at the mart than in the factories?
Up to 750 checks were carried out by the Department in meat plants, with 55,000 inspections of carcases. There was 80% concurrence with the grades, a high degree of accuracy. If that was achieved under manual grading, we may not have introduced automated grading. Now, however, we have a solid, robust, consistent and objective system which is achieving high standards and is accurate. We will add to that. This has been welcomed by all involved. There may have been individual cases where it was questioned, but it was welcomed by farmers as much as by processors.
In the near future, a European inspection of the system will be introduced. The grading system in each member state is assessed by a European panel on a rotating basis and we have one of those inspections at the end of April. That will be a further assessment of the system and we look forward to it.
Will the factories be warned about it?
The European inspections are scheduled in advance. This panel will be selected from various member states and will assess the quality of plants. That is how things have been done for many years.
Senator Coonan mentioned price. Prices in Ireland increased last autumn. It is not an issue that prices in the autumn period fall or that they are all similar, there is a range and variation in the prices. The key element for us in terms of driving this system forward and predicting prices is the amount of produce imported into the Community. Meat and cattle prices fell in July last year when there was an upsurge in the imports of Brazilian beef.
That is the key to the future of the European beef market. The EU itself estimates that current WTO proposals will increase supply by 800,000 tonnes potentially. The proposition in Agenda 2000 that stated there would be a deficit in the European beef market is fundamentally not the case. We must negotiate an objective import access section to the WTO deal to ensure this product cannot come in this uncontrolled manner but we must also produce a quality product and that involves issues of payment and reward raised today. The current system is not perfect but there is a greater degree of reward for quality than was the case in the intervention system. The range in that system was 12 points whereas here it is 22 points.
There is work to be done to get the saleable yield part right because we no longer sell carcases of beef. People consume boneless meat cuts and we need a better correlation between the yield of those products and the information the farmer gets. There is a commitment at industry level to doing that and, in parallel, to encourage producer groups because many of the niche markets are best served by individual contractors with producer groups.
Labelling is another issue, as we saw with Brazilian beef last year.
On behalf of the committee, I thank Mr. Healy and Mr. Fitzgerald for attending the meeting and for the way in which they responded to questions.
The joint committee adjourned at 4 p.m. until Wednesday, 22 March 2006.