JOINT COMMITTEE ON AGRICULTURE, FISHERIES AND FOOD debate

Discussion with Bord Bia.

Chairman

I welcome the delegation from Bord Bia. It comprises Mr. Aidan Cotter, chief executive, Mr. Michael Murphy, director of markets and Mr. Gerard Brickley, director of meat. I thank it for accepting the invitation to discuss the recent difficulties in the pigmeat sector.

I draw attention to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. 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 Houses or an official by name or in such a way as to make him or her identifiable.

Mr. Aidan Cotter

I thank the committee for the invitation to discuss the recent recall of Irish pigmeat products following the discovery of dioxins in a small sample of Irish pigmeat produced between 1 September and 6 December 2008.

I am joined this morning by my colleagues, Gerard Brickley, director of our meat division, and Michael Murphy, director of our markets division.

With the permission of the committee I will focus my statement on three areas beginning with the role of Bord Bia in the Irish pigmeat industry, the execution of that role in the context of the recall and the associated market reaction, and finally the implications and way forward for the industry, domestically and globally.

Before discussing the recent product recall, it is useful to highlight the importance of the Irish pigmeat sector in the context of Ireland's largest indigenous industry. The pigmeat sector is the third largest within the agrifood industry behind beef and dairy with annual farmgate output of around €300 million. There are over 400 pig producers generating an annual throughput of over 3 million pigs. Approximately 2,000 people are employed in pigmeat processing with a further 4,000 in associated sectors such as feed manufacture, haulage and other services. The Irish market accounts for almost 50% of output with annual consumption of approximately 138,000 tonnes or 33kg per capita. The value of the market, in retail prices, is estimated at €600 million per year. Irish pigmeat exports in 2007 were valued at €368 million with 129,000 tonnes exported to over 40 markets worldwide. In terms of exports, the UK remains the principal destination, accounting for more than 55% of shipments followed by Germany, with Japan and Russia the leading international markets outside the EU.

The role of Bord Bia in the sector, as in the wider food and drink industry, is to promote and develop markets for Irish pigmeat at home and abroad. We are funded by Government grant-in-aid complemented in turn by a levy on cattle, sheep, and pigs, and charges for services. The allocation of this funding and the operation of our programmes are overseen by the meat and livestock subsidiary board, which represents pigmeat producers and processors and advises our main board. We engage actively and separately with producer and processor organisations in the planning, delivery and evaluation of our programmes for pigmeat.

As a State agency in receipt of Government funding we are also acutely aware of the additional obligation we have towards taxpayers as consumers and the need to be both objective and credible in the conduct of our promotional remit. Similarly, the nature of our funding requires that we operate under EU state aid rules which place significant constraints, among other things, on the promotion of country of origin.

Moving on to the actions taken by Bord Bia in the context of the pigmeat product recall, an internal crisis management team was assembled which met throughout the weekend of 6 and 7 December to devise a marketing response in the event of the dioxin tests proving positive. Once the announcement of a full recall was made on Saturday evening, 6 December, that response became one designed to reassure consumers on the Irish market while also devising a strategy to explain the facts behind the recall and reassure buyers of Irish pigmeat in export markets.

This was done in consultation with key stakeholders, including processors and producers. It involved gathering the key facts to form the basis of an information campaign on the Irish market while also providing material to reassure customers in export markets. In addition, research, design, and advertising agencies were briefed on Sunday, 7 December, on the recall with a view to finalising key messages and agreeing the structure of an information campaign that would need to be launched within a matter of days, anticipating the return of Irish product onto retailer shelves.

Detailed material was also prepared throughout the weekend to address potential media queries across the key markets for Irish pigmeat. Simultaneously, a tracking programme examining international media coverage was established, with a view to determining both the level of coverage and identifying instances of incorrect information being published that needed to be clarified.

By Monday, 8 December, plans were at an advanced stage for the implementation of an information campaign for consumers in the Irish market, which would consist of an Irish pork and bacon label developed by Bord Bia and approved by the Department of Agriculture, Fisheries and Food, complemented by a media-based information campaign highlighting the facts about Irish pigmeat and the product recall.

During 8 and 9 December, the final design of the label, together with the logistics of how it would be distributed and the criteria for its use were finalised with the Department of Agriculture, Fisheries and Food. It was agreed that the label would be used to highlight pigmeat that had either been produced after the 6 December or product produced prior to this date that was verified by veterinary officers from the Department of Agriculture, Fisheries and Food as being unaffected.

The campaign design was guided throughout and tested through a series of consumer focus groups conducted on Monday and Tuesday, 8 and 9 December. The research confirmed that consumers did need to see evidence of a new phase of pork and bacon products and that a clear, sober and distinctive label was required to achieve this. It also confirmed a need for immediate national press advertising. The "Irish Pork and Bacon Approved" label and the full page public announcements issued across seven national daily newspapers on Thursday morning, 11 December, and their content headlined "Irish Pork and Bacon — The Facts" were completely guided by what consumers told us they wanted to hear: what happened, that there was no public health issue, and information about the new label and the products it would cover. This was followed over the subsequent weekend by advertisements across television, radio and print media.

By Thursday, 11 December, 4 million labels had been printed, increasing to 6 million over the following weeks, and the distribution programme commenced with the first labels evident on product at retail level. Distribution of the labels, the use of which was voluntary, was rigorously controlled to ensure that they were carried on approved Irish product only, and in order to emphasise the importance we attached to their proper use I will beg the committee's indulgence to describe the process. On 8 and 9 December, the label and distribution logistics were discussed with processors. It was emphasised at this stage that the label could go only on approved Irish product and that its use was voluntary. On Thursday, 11 December, the Department of Agriculture, Fisheries and Food issued a veterinary procedure notice to vets in all plants covered by them to inform them of the procedure to be followed before product could be certified and released. When product was certified for release they had to send an e-mail to a dedicated address in the Department of Agriculture, Fisheries and Food. This approval was then communicated via e-mail to Bord Bia. Those plants covered by county council veterinary inspectors and environmental health officers issued their approval to the Food Safety Authority of Ireland, FSAI, which communicated this approval to Bord Bia. An e-mail was then sent to the approved processor regarding the procedures under which the label could be used. Only when we received a reply from the processors, giving their commitment to follow the guidelines as outlined by Bord Bia was any material released in hard or soft copy. An intensive series of unannounced audits of plants which were issued with labels was carried out on behalf of Bord Bia in the following days and weeks by an independent group of auditors. An additional focus of these audits was the level of traceability of products and Bord Bia is satisfied that the traceability systems in place were suitable and effective.

In parallel with the development of the campaign on the Irish market, our overseas office network implemented a trade contact programme to explain the issues surrounding the product recall and to reassure customers of the safety of Irish pigmeat. This programme was also extended to address concerns emerging among customers of Irish beef, principally in continental Europe, which, together with the UK, accounts for virtually all of our beef exports.

In conjunction with the Department of Agriculture, Fisheries and Food, a diplomatic offensive was taken to address a range of issues in export markets from veterinary matters to statements by health and consumer groups. Given the different reactions evident across markets, strategies were tailored to address relevant concerns.

On Thursday, 11 December, the Minister attended the annual Bord Bia trade function in the Irish embassy in Paris where he took the opportunity to acknowledge the support of the French authorities and the trade in what is the most important continental European market for Irish meat exports. Bord Bia representatives over the last week or so also accompanied Department of Agriculture, Fisheries and Food officials at meetings with the authorities in Singapore and Beijing, China, where imports of Irish pork remain suspended. We also participated with the Minister in last week's trade delegation to Japan, where the authorities confirmed that the market remains open, and where we took the opportunity to bring the Japanese trade up to date on recent events during a Bord Bia meat seminar in Tokyo.

The market reaction to the issue varied considerably across domestic and export markets. In terms of the Irish market, the impact on sales was short-lived. Once pigmeat returned to the market, consumer demand returned to relative normality very quickly with reports from both processors and retailers suggesting that sales over the Christmas period performed very strongly. The consistent view to emerge from our focus group research was one of a minimal level of anxiety about the issue. While the complete recall of pork and bacon products was a dramatic response to the scare, the groups felt that the speed and size of the remedial action reflected well on the authorities.

Quantitative research across more than 1,000 consumers taken within approximately ten days of the recall announcement indicated that approximately three quarters of respondents would maintain their consumption of pork, bacon, rashers, joints, sausages and ham. Among the remainder, somewhat more consumers planned to reduce their consumption than increase it. Given that 98% of respondents declared that they were familiar with the recall, this was an exceptionally positive result. Moreover, 56% of respondents agreed that they were more worried about the impact of the recall on the economy and exports than they were about risks to their health, with just 25% disagreeing. That was in December. Focus group research undertaken over recent days, in preparation for our forthcoming promotional campaign in February, indicates that consumers now regard the matter as very much in the past. It has been dealt with and they have moved on.

In terms of export markets, the reaction to the product recall varied, in some cases considerably. Within the European Union, notwithstanding the statement from the European Food Safety Authority and the guidelines of the EU standing committee on the food chain and animal health, testing for dioxins in Irish meat was initiated by national or regional authorities in Germany, Italy and Poland, leading to significant disruptions in trade with those markets. Interventions by the Department of Agriculture, Fisheries and Food were followed by a cessation of testing in Germany and Poland prior to Christmas and finally in Italy, where disruption was greatest, only last week. In some member states, including the UK, France and Portugal, statements by the authorities actively endorsed that made by the European Food Safety Authority and served to reassure consumers.

Meanwhile, the authorities in China, Hong Kong, Russia, South Korea and Singapore suspended imports of Irish pigmeat, while consumer authorities in Russia called for the suspension of imports of all Irish meat. South Africa initially suspended all EU imports of meat and dairy products, but subsequently confined their restriction to Irish pigmeat.

The principal concerns in export markets among customers related to the product recall and how the recall was going to work, timeframes and compensation for product removed. International media coverage of the recall peaked on Tuesday and Wednesday, 9 and 10 December, and had largely ceased by the following weekend. With the exception principally of the UK and Germany, the issue was not generally a front page story and notwithstanding some dramatic headlines, coverage was reasonably balanced.

Among four consumer focus groups undertaken in London on Thursday, 11 December, the product recall was mentioned spontaneously in two. In both groups, it was generally one or two persons from the group of eight who were aware of the situation. Once probed, the issue was of minor importance with the acceptability and image of Irish food, particularly meat produce, unaffected. Of those aware of the scare, it was mentioned that the decisive action taken to remove product was indicative of the safeguards in place to ensure consumer safety. All groups acknowledged that while the scare would make them more aware of their food purchases in general, this was likely to be temporary with no lasting effects on shopping patterns.

The endorsement of the recall decision in the Financial Times editorial of 8 December and the conclusion by the BBC Northern Ireland consumer affairs correspondent that honesty was the best policy for the food industry, have been important contributions in what is Ireland’s largest pigmeat and largest food and drink export market.

Consumer omnibus research currently in field across the UK, German and Italian markets will help us to further establish awareness quantitatively, at a consumer level, of the product recall and current perceptions of Ireland as a food producer. These results will be available shortly. In the meantime, I am obliged to conclude that the response in dealing with the original contamination was proportionate and, judging by the market's reaction, has been fully endorsed. It is a response that, in an industry that must be consumer-led, has sent a powerful signal about the primacy of our commitment to consumers. This will stand to us as we seek to not only rebuild markets for pigmeat, but expand the industry's €8 billion export business in food and drink in the rest of the world.

In considering the way forward domestically and globally, our priority must lie with securing the industry's market position in the near term and in the year ahead. In this context, it is important to differentiate between the actions that must be taken on the domestic market and those needed to restore export markets for Irish pigmeat.

The fact that consumption in Ireland has returned to relative normality so quickly is a highly positive development and demonstrates the confidence that consumers have in Irish pigmeat. The principal issue facing the Irish market over the next six months is that with exports likely to take some time to recover, domestic supplies are set to exceed demand, particularly in the case of manufacturing meat, bringing downward pressure on prices. While the operation of the aids to private storage scheme will relieve supply pressures to some extent, there is an opportunity to build on the apparent goodwill of Irish consumers towards Irish pigmeat and expand demand through a series of intensive promotional campaigns.

Accordingly, we are currently preparing the first in such a series of promotional campaigns, to be launched in February. It is hoped, subject to resources, that this can be followed by two similar campaigns later in the year. It is intended that these will focus on promoting products bearing the Bord Bia quality mark, which also communicates origin, as the "Irish Pork and Bacon Approved" label is phased out.

We are conscious of the industry view that this label helped consumers clearly identify the origin of the pigmeat on sale and led to an increased desire among consumers to source locally produced product. The label will remain on products until the end of January and perhaps a little later. However, the timeframe for its continued use in promotion is finite, due to state aid rules. The challenge for promotional campaigns now is to help maintain an increased share of the market for domestically produced pigmeat. Measures to increase the size and widen the usage of the quality mark, making it more prominent on packaging, are in place. Ultimately, the prominence of the mark must strike a balance with that of the manufacturer or retailer brand.

In contrast to the recovery of the domestic market, the restoration of export activity has been much more gradual and trading levels are still relatively limited. There is reluctance among some existing customers in Britain and continental Europe to source Irish pigmeat products in the short term, mainly due to uncertainty with regard to the operation of the recall and the recompense for affected product.

The speed at which the product recall can be completed, therefore, is a significant issue. Once all recalled product has been removed from the marketplace, trade can then build further. However, it is likely to take time to return to normal levels, particularly in some international markets where suspensions remain in place.

In order to facilitate the full return to normal exports of Irish pigmeat, a market recovery campaign has been designed to build on the reassurances we have been providing to customers since the product recall. The key elements of a market recovery and reassurance campaign include the following: a customer reassurance programme will entail continued direct Bord Bia contact with customers, using our international network of offices, placing key information about the Irish pigmeat industry in context and demonstrating the integrity of Irish health controls; working with the Department of Agriculture, Fisheries and Food and with the Irish embassies, bilateral veterinary meetings are being pursued in selected markets within Europe where appropriate; a trade communications programme designed to position the capability of the Irish pigmeat sector and the safety and quality measures in place to influence key decision makers in the retail, food service and manufacturing sectors; and a programme to maximise international market access for Irish pigmeat products, which will involve communications activities designed to build confidence among national authorities and opinion formers in markets based around Ireland's exemplary health controls.

Bord Bia will continue to work closely with the Department of Agriculture, Fisheries and Food and with the Department of Foreign Affairs on market access and will be guided by Irish exporters with regard to programmes and activities required on a market by market and customer by customer basis.

While the events surrounding the product recall have posed significant challenges to the image and reputation of Ireland "the Food Island", if our future actions affirming our food safety credentials are as uncompromising as the recall decision itself, then that image and reputation will be safe. I have no doubt that the deliberations of this committee will make a significant contribution to ensuring that this will be so.

I thank the Chairman and the members of the committee for affording me the opportunity of addressing them this morning. My colleagues and I are happy to address any questions they may wish to ask.

Chairman

Thank you.

Deputy Michael Creed

I welcome Mr. Cotter and his colleagues. His presentation has been positive and upbeat and I hope the message he has conveyed will be sustained in interest of the food industry, particularly the meat sector. I have some reservations in that regard, but I hope he is right.

I have a number of questions. I presume that in December, when this crisis arose out of the blue, Bord Bia would have already prepared or would have been preparing its marketing programme for 2009. I compliment the board on its handling of the crisis, but it must have thrown into disarray Bord Bia's marketing plans for at least the early part of 2009. That could only be at the expense of some of the initiatives planned. Can Mr. Cotter give us some indication of the overall budget of Bord Bia and the financial costs of the initiatives taken to deal with the crisis to date, marketing, labelling, etc.? Will he indicate whether Bord Bia is now concerned about its capacity to meet its overall requirements for the food industry, rather than just the pork sector?

Given that in 2009 Bord Bia faces a budget cut in its allocation and that it takes on substantial additional responsibilities for the seafood sector, is it inevitable that the organisation faces financial difficulties if it is to meet its obligations? It would have been difficult enough to take on the seafood sector in 2009 with the cut in resources but to do so now with this very significant added cost must have grave consequences for the programme of events regarded as necessary.

I refer to the presentation document where it states at the bottom of page three that distribution of the labels, the use of which was voluntary, was rigorously controlled to ensure they were carried on approved Irish product only. I question how Bord Bia can be absolutely certain of this, in view of the fact that some of the very large secondary processors have branded product which is a mixture of both imported bacon which has been processed here and packaged under recognisable marketing brands. How can Bord Bia be assured that its label is only applied on the product produced on Irish pig farms, given the fact that, in respect of the recall, we were not in a position to differentiate between non-Irish and Irish products? This issue is tied into traceability and country of origin labelling.

Mr. Cotter referred to Bord Bia's examination of international media coverage. In my view, the national coverage was quite balanced and consumer-focused and conveyed a responsible message. It gave the unvarnished truth and, over a short period of time, consumer confidence was restored. However, the more lurid international headlines, particularly in the red top newspapers in the significant UK market, would make Bord Bia's job in that market more difficult than the delegation states, particularly with regard to getting shelf space and winning back consumer confidence. I have no doubt, and I ask the delegation to comment, that our competitors for those supermarket shelves will not be slow to play the card of dioxin-contaminated Irish pork not just with regard to the period in which the contaminated product was on the shelf, but also in the future. They may be knocking on the doors of the major multiples and saying the kind of things I do not have to repeat here. I am sure that if the shoe was on the other foot, I would be disappointed if Bord Bia was not out there exploiting the opportunities for an Irish product if one of our major competitors had this problem with their product. This will be an ongoing cost and, in the overall scheme of things, it will skew Bord Bia's budgets and some element of its area of responsibility will lose out in marketing terms. What plans are in place and what discussions, if any, have taken place with the Department of Agriculture, Fisheries and Food, the funding Department, regarding an appropriate budget to deal with these unforeseen events?

Deputy Bobby Aylward

I welcome Bord Bia to the meeting and compliment the delegation on the manner in which the whole situation was handled and the consequent promotion programme following this debacle. It is obvious that Bord Bia led the way by being open and transparent and accountable for everything that happened. I commend the fact that Bord Bia went out front, informed the people and brought the message to Europe and everywhere else because this is what actually saved us. Previous experience from other countries shows that those who tried to hide such information paid the penalty in the long run. The transparent attitude adopted by Bord Bia saved the market and got it back up and running. I refer to the markets of China, Hong Kong, Russia, South Korea and South Africa, which are all outside Europe and which are very valuable markets for our pork and bacon. How long will it take to get back in or when does the delegation expect that other countries will reopen their markets to Irish pork and bacon?

This is the sixth day of the committee's hearings on this issue and this is the tenth or twelfth group to have appeared before us. Is there any way to identify carcasses and products such as exists for cattle? We have asked this question on several occasions. It is a pity that so many thousands of tonnes of pork had to be destroyed even though it was not contaminated to ensure consumer confidence. Could a better system be put in place to avoid something like this happening again?

Deputy Creed referred to the country of origin labelling. This is a very important issue. I know of one company that used to kill a lot of Irish pigs but ceased doing so about eight years ago. Until this crisis arose, I thought this company was selling Irish pork and bacon, but to my dismay I learned that for the past eight years it had not sold one bit of Irish pork or bacon because it was all imported from Holland and sold under secondary processing under Irish labelling. This is a terrible state of affairs. People buying that meat thought they were buying Irish product from Irish producers. Something has to be done to identify such stock. Bar coding is a simple measure and it is used on all products so why can it not be applied to pork products to show the country of origin? We must get to grips with this issue so that everyone knows the origin of the product they are buying and makes up their own mind whether to purchase.

I compliment Bord Bia on its handling of the crisis but it has a tough job in 2009 to get hold of these markets again. I wish the delegation the very best in 2009 in the board's efforts to open up all these markets in countries which have withdrawn access to Irish pork.

Deputy Christy O’Sullivan

I thank Bord Bia for the presentation. In the past I criticised it for some of its decisions and the manner in which labelling showing products to be Irish was freely available to processors when that was not the case. I believe this aspect has been smartened up recently.

The media played a significant part. The delegation has stated that on occasion Bord Bia needed to clarify wrong accounts of what had happened. I ask the delegation to explain how widespread this was and how many clarifications were required. This was also an opportunity for our competitors to make gains, especially competitors in the European markets. There are still countries taking advantage of the situation even though it is clear that everything was handled properly and this will stand to us in the future. It might have been a costly exercise but we must now move on. Ireland is now recognised as a country which has handled the situation properly and we must use this to our advantage.

The issue of labelling is very important. The pig producers and the producers of different types of food, such as beef or other products, have been hard-done by in so far as they produce food to the very highest standards. The least they could expect is that their product would carry a label identifying where that animal was reared, especially the country of origin, and where it was slaughtered and processed. This is the very least that our pig and beef producers expect. Until we reach that stage, we are doing them a grave injustice. Bord Bia exists to promote the product. I would expect it to work with everybody involved to ensure we strive to get this done because until it is achieved we are working at a disadvantage. It is well known that we are producing the best and we must drive that home in the marketplace.

The issue was handled well and the recall was probably the right decision. The traceability element in the pig processing business is not as I would like to see it. As I have said at previous meetings of the committee, I find it hard to understand why a batch of pigs sent to a factory from a producer cannot be traced. We are not in the position we were in 30 or 40 years ago when farmers were sending in only ten or 12 pigs at a time. Now there are fewer than 500 producers in the country, who would be sending pigs to the factory in batches of 200 or 300. I do not see where the rocket science comes into it that these batches cannot be traced and that it cannot be improved. We might never reach 100%, but at least we can go a long way to improving it. There may be a role for Bord Bia in trying to promote that aspect.

In the future we will be judged on how we handled this situation. While it was a costly operation, it will work to our advantage in the long run.

Deputy Eamon Scanlon

I thank Mr. Cotter for his presentation. After our three weeks of hearings there is no doubt that the right decision was taken by the Department of Agriculture, Fisheries and Food and the various agencies involved. Unfortunately, it has been a very expensive mistake. The Irish food industry would be in nuclear meltdown if it had not taken the decision it took. Pork on the home market will recover and sales are probably at pre-December levels already. I have two reasons for saying so. It is a versatile food source and can be processed in 20 different ways. The cost is an important factor. It is approximately 30% cheaper than beef and 40% cheaper than lamb.

I understand 80% of pork produced here is exported to Great Britain, which is where the major emphasis needs to be. It all comes back to country of origin labelling. One of the witnesses appearing before the committee yesterday said that there was a big difference between Irish smoked salmon and smoked Irish salmon. There is a problem with labelling. People are being conned by labels that misrepresent the product itself or its country of origin. We have a major job to do in that regard and the quicker it is done the better for the entire food industry. I have no doubt we will recover from this. It will take work and of course other countries have good reason to run down our industry. It is Bord Bia's job to counter that and I wish it well in the future. I agree with previous speakers that something needs to be done on country of origin labelling. Our food has a good green image and I hope we will recover from this problem.

Deputy Andrew Doyle

I thank Mr. Cotter for his presentation. In many ways Bord Bia is left to clean up the mess and deal with the fallout from the problem. Market research on the domestic market has identified that the use of the Irish pork and bacon approved label indicated a definite desire for people to buy locally produced product. That works very well in the Irish market. When that label is put on products, it does not necessarily mean that the product also has the Bord Bia quality mark. Is that quality mark voluntary? Is it possible for product to be Irish all the way through and not have that mark on it? The country of origin has a significant impact on the domestic market and other members have spoken about traceability. If a more comprehensive traceability regime had been in place that had allowed for a limited recall of 10% or 15% in the first instance, would it have been easier to contain the damage in the export market? That would have allowed us to identify the product that was abroad and call it back.

Chairman

As we did with beef.

Deputy Andrew Doyle

As we did with beef. It would have made it much easier to rebuild the markets, which would not have been as shattered. I ask specifically about the Italian trade. This issue has had an impact on the live cattle trade to Italy. I am glad the thing has been suspended only last week on the testing. Is Bord Bia confident about the future of the live trade to Italy? I am aware of a shipment of cattle that was held and returned here at enormous cost. They are being rejected on arrival in Italy. Is Bord Bia happy that this market can reopen? I know it does not relate to pork but it arises from the problems in the pork sector.

Mr. Aidan Cotter

Deputy Creed asked about budgets and the changes that would be required in the marketing plans for the early part of 2009 at least. Our marketing activities needed to be changed in December itself. We were in the process of undertaking a number of campaigns on the Irish market promoting the quality mark across a number of meat species in December. We cancelled those when this issue arose and transferred the resources and in many cases the media time to support our response on the recall issue. We are fortunate that we were able to do that and transfer the resources accordingly. The plans for 2009 would have been different from what they now are and we had a board meeting in early January to discuss the changes that would be necessary.

Principally the requirement will be for fairly intensive campaigns on the Irish market. As I said in my statement, we hope we will be able to follow our February campaign with two further fairly intensive campaigns, which are over and above what we would normally do later in the year. I said that was subject to resources. Those resources have yet to be identified. We are again reviewing our budgets and prioritising our resources. We hope to be able to find savings or transfers from other activities that would support the implementation of those programmes.

In regard to the funding of pigmeat campaigns, as I mentioned, we are partly funded by a levy in addition to grant in aid. The total spend promoting Irish pigmeat is €1.5 million per year. That goes into promoting on the Irish market and internationally. That is still what we plan for the coming year. We would hope to supplement that by finding further savings through prioritisation of resources as the year goes on.

The Deputy also mentioned the need for the promotion of the seafood sector. It is expected that the transfer of responsibilities will be accompanied by a transfer of resources. It is obvious that this function has been carried out by Bord Iascaigh Mhara and the Department of Agriculture, Fisheries and Food. We expect they will examine how an appropriate transfer of resources might take place to ensure the same resources are applied as the transfer of functions takes place.

I was asked whether we can be certain that the approved label that was issued is used in all instances on Irish produce only. It is obvious that there are no absolute certainties. We believe we have taken all precautions to ensure that the label in question is applied to Irish produce only. I took the time to set out in my statement the various measures we undertook in conjunction with the Department of Agriculture, Fisheries and Food, in respect of the premises over which it has control, and the Food Safety Authority of Ireland, in respect of the local authority premises over which it has control. As part of our process of intensive auditing systems and procedures, we have endeavoured to ensure, as far as possible, that we can have sufficient confidence that the label is being applied only where it should be. We have no reason to believe any issues have arisen in respect of the distribution of the label. We have had little or no feedback about the label being applied incorrectly. Anybody involved in the retail sector will see that a great deal of produce does not have the approved label. We can be reasonably confident that the process has worked. We spent significant resources in terms of personnel and money on it.

In response to a question that was asked by a member, I can inform the committee that €500,000 was spent on labels, public announcements and research as part of the pre-Christmas campaign. I was also asked about the international media coverage of the recall. Some fairly dramatic headlines were used by newspapers in the UK, which is our largest market. Words like "poison" and "toxic" were used in headlines, particularly in the tabloid press, which is clearly potentially damaging. On 11 December, after the headlines in question appeared, our focus group found that people were not spontaneously aware of them, by and large. We are undertaking quantitative research as the reaction to the recall cannot be measured by focus group research alone. The quantitative research I mentioned will more accurately ascertain the response to the recall. We will have to assess it on that basis. Positive contributions were made by some media outlets, such as the Financial Times and the BBC. They helped to ensure that there is some stability in the market. I do not doubt that throughout this process, there was remarkable stability in the UK market, which is the destination for half of our food and drink exports, over half of our beef exports and half of our pigmeat exports. There has been no wobble in that market. On that basis, I am fairly confident that all the issues can be contained.

I was asked whether discussions are taking place with the Department about the provision of additional moneys this year. We have not specifically engaged in discussions on budgetary matters. We hope resources can be made available if they are needed to fund our plans. It is obvious that the question of how long it will take to lift the suspensions is a matter for the relevant markets. Based on discussions in some of those markets over the past week or so, some of them might reopen to Irish pork within a matter of months. It may take longer for some of them to reopen. It is difficult to put a timeframe on it. In some cases, Ireland's efforts to lift the various suspensions may get caught up in other issues which do not necessarily relate to Ireland. The issues in question may need to be resolved by the EU and the relevant countries. We cannot say exactly what the timeline is likely to be on that. We are reasonably hopeful that it will be sooner, rather than later.

I was also asked about the possibility of providing for better systems of traceability in the pigmeat industry. I am sure the Chairman has heard more expertise on this issue than we are in a position to offer. It is clear that the issue of traceability is a major one. I understand that the daily batch system is fairly well replicated in other markets around the world. The committee may be aware that the addition of more detail to the traceability system would lead to additional costs. We need to consider whether such costs can be recovered from the marketplace. We need to ensure that our traceability systems are as good as those in the countries with which we compete. I am sure the committee's deliberations will set out an appropriate way of making progress in this area. We would all like to have the best traceability system in place. Bord Bia favours a traceability system that provides the same level of confidence as DNA traceability. We need to ensure our produce is quality assured — it must be from the country we claim it is from. That would be the ideal situation. Additional costs are associated with all of these systems.

The country of origin of secondary processors is a long-standing issue. We are familiar with the allegations that have been made about certain packaged products being promoted and labelled with Irish-sounding names even though they come from a different country. I do not doubt that significant issues arise in respect of country of origin labelling. The question of what constitutes the misleading of the consumer is open to interpretation. If this issue were to be resolved, it would make it easier for Bord Bia to market Irish produce. An appropriate system of country of origin labelling should be in place in the pigmeat sector, just as it is in the beef sector. In late 2003 or early 2004, the European Commission approved our quality assurance mark scheme, which makes the origin of pigmeat clear. All of the resources in the Irish market are being invested in the promotion of that mark, which informs consumers about the origin and production methods of Irish meat.

Deputy Bobby Aylward

I would like to get some clarification on that point. Is it possible for the mark mentioned by Mr. Cotter to be placed on meat that came from Holland before it was processed by a secondary producer in Ireland? Does the meat in question need to have been produced in Ireland in the first instance?

Mr. Aidan Cotter

If the mark states "origin: Ireland", the pork or bacon in question will have come from a pig that was born, reared and slaughtered in Ireland.

Deputy Bobby Aylward

I thank Mr. Cotter for that clarification.

Deputy Michael Creed

Does the problem we are discussing not relate to established brand names which are perceived to be Irish, rather than the logo that is approved by Bord Bia? If a packet of rashers has an established brand name, people assume that the produce is Irish even though it might come from a mixture of countries. Some of it might not be Irish. The marketing divisions of these companies do not buy into Bord Bia's quality assurance mark scheme at all. The scheme needs to be much bigger than it is at present if it is to resonate with the consumer. The mark on the packet is much too small. Consumers believe that if they buy a packet of rashers with an Irish brand name, the produce they are buying is Irish.

Mr. Aidan Cotter

We are aware that in some cases, the mark is smaller than it should be. We put in place revamped and reissued rules and guidelines two months ago, before the product recall. We are making every effort to ensure that the size and profile of the quality assurance scheme mark is sufficiently prominent to meet the needs of consumers when they are identifying produce.

We must also recognise that retailers and manufacturers have branding priorities. Our brand must not be in conflict with their brand in respect of size and profile or they will not use it. The scheme is a voluntary mark and we must bring our members on side in that regard. Measures are in place to improve the profile of the mark and make it more prominent for consumers.

Deputy Andrew Doyle

Many products in butchers and fresh meat counters are not sold in packs. If the mark is visible on the window of the store or shelf where the product is sold, does this indicate that the shop or counter only sells quality assured Irish produce? How would the scheme be monitored?

Mr. Aidan Cotter

The scheme primarily covers packaged products. We are working with the craft butchers to develop a scheme which would allow produce to carry the mark. In that case, commingling would not be permitted and all produce would have to be quality assured and of Irish origin.

I was asked a question about clarification of media statements and what corrections were necessary. It was not necessary to make many corrections and we confined ourselves principally to correcting issues of fact. For example, a report on an evening news bulletin on Dutch television stated the Dutch food safety authority had indicated it had problems with Irish meat. We had the matter clarified quickly and the correct position was related in the subsequent news bulletin which was transmitted at 10 p.m.

On the recovery of the Irish market, many of us will be aware anecdotally that the market has recovered well and Irish consumers have shown a great deal of good will towards Irish produce. We have seen proof of this in TNS-MRBI retail audit data for December which showed that sales of Irish produce in the final week of December were higher than for corresponding week in the previous year. Sales have, therefore, recovered to the point that they exceeded the levels of previous years. There has been a significant bounce in that regard.

On the question concerning interaction between the approved label and quality mark, the latter is clearly a subset of the former. The approved label may be shown on all Irish produce whereas the quality mark may only feature on produce which has been quality approved. There is, therefore, some interaction between the label and mark, with some produce carrying both. This was not always the case.

The trade with Italy in live cattle was a problem in December. However, now that the Italian veterinary authorities have ceased testing and the position has been clarified, we are confident trade in all beef and live cattle products will recover speedily and normality will return.

Deputy Michael Creed

Is there not a quantum leap between, on the one hand, the authorities being satisfied and, on the other, consumers accepting assurances and the retail chains involved in purchasing and processing being satisfied they can overcome consumer resistance?

Mr. Aidan Cotter

Trade in beef with the retail chains in Italy with which Ireland does business is returning to normal. Throughout the period when the Italian veterinary authorities had issues in this regard, some retailers continued to use Irish beef. The position is rapidly returning to normal following the lifting of restrictions last week. We expect that once the retailers have received this clearance, there will not be an issue with consumers.

As I indicated, research to assess consumer responses is under way in Germany, the United Kingdom and Italy. Bord Bia does not wish to understate or overstate the response of consumers anywhere and must make an objective evaluation. We can only do this when we have more information available to us on how consumers have been responding.

Deputy Eamon Scanlon

It is important to note that farmers are contributing to this promotion. All farmers, whether in the sheep, beef or pork sector, pay a contribution through the slaughter factories. How much do farmers contribute to Bord Bia meat promotions here and abroad?

Deputy Christy O’Sullivan

Producers must account for every movement they make with their animals. If they lose a pig or other animal, they must dispose of it at a cost. I am satisfied producers are fully playing their part. Improvements must be made further up the line. This returns us to the issue of traceability. Producers are fulfilling their side of the bargain and it is important to ensure everyone else does his or her bit.

China, Hong Kong, Russia and other countries have suspended trade. Is it a responsibility of Bord Bia to try to reopen these markets? What action is it taking in this regard? Russia has suspended pig and beef imports? What effort can Bord Bia take to reopen this and other markets?

Chairman

I believe Mr. Cotter answered that question.

Mr. Aidan Cotter

I can do so again. In regard to the funding of the organisation, Bord Bia collects €5 million per annum in levies on cattle, sheep and pigs. Our promotional spend on the meat sector is €10 million. We work closely with producers and processors to determine how this money is allocated and spent and regard this partnership as critical to the effectiveness of our work.

On the question as to whose role it is to seek to lift suspensions, clearly the issues at stake are of a veterinary nature. For this reason, the veterinary division of the Department of Agriculture, Fisheries and Food is the lead player in that regard. The embassies in the various markets are also actively involved and we work with them to move the process along. In the case of Russia, we have an office in Moscow and have good relationships with the authorities in that market. We help the Department of Agriculture, Fisheries and Food and the embassy to move the process along. The issue is slightly complicated in Russia in that national consumer authorities established on a legislative basis have raised issues in regard to pigmeat and other Irish meat.

We visited the authorities in Beijing and Singapore last week on the occasion of my colleague's visit to Japan. The soundings coming back from these locations are reasonably good. However, a number of complications arise in some of the markets in question related to areas of food safety which have no connection with us. Everything that can be done to speed up the process of lifting the suspensions is being done.

Chairman

I thank the delegates for coming before the committee, their comprehensive presentation and answering the questions raised by members. Before we suspend, having listened to Dr. Kelly of the EPA, we should invite officials from Carlow County Council. What is the feeling of the committee on this issue? Is that agreed? Agreed. I will ask the clerk to the committee to contact the officials of Carlow County Council. We will try to fit it in——

Deputy Tom Sheahan

We should contact the relevant members of Carlow County Council, namely, the staff.

Chairman

I presume it would be the manager and the staff of the environment section.

Sitting suspended at 12.50 p.m. and resumed at 2.30 p.m.

Chairman

On behalf of the committee, I welcome Mr. Padraig Walshe, president of the IFA, Mr. Tim Cullinane, chairman of the IFA pigs and pigmeat committee, Mr. Michael Berkery, general secretary, and Ms Amii Cahill, executive secretary of the IFA pigs and pigmeat committee. I thank the delegates for accepting our invitation to discuss the recent difficulties in the pigmeat sector. Before I call on them to make their presentation, I draw attention to the fact that members of the committee have absolute privilege but the same privilege does not extend to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I invite Mr. Walshe to make his presentation.

Mr. Padraig Walshe

I thank the committee for inviting the IFA to make a presentation and discuss this matter with members. As members know, the past six weeks have been traumatic and costly for pig farmers, and there have also been collateral costs to the beef industry. While only nine pig producers were directly affected, every pig farmer in the country has paid a heavy price as a result of the pork recall necessitated by the dioxin oil contamination crisis. Members are all aware of the massive disruption caused by the recall in the marketing channels for Irish pigmeat. The shock waves hit all producers immediately and directly in their pockets. Pig prices have fallen by up to 12 cent per kilogram, stretching the viability of many producers. Almost as damaging for farmers is the fact that two major factories, representing 70% of the kill, have extended their payment delay by over two weeks since this happened. With the current credit crunch, this delay in payment and the disruption to the market is seriously threatening the viability of many pig producers.

Let me be absolutely clear: what happened in terms of the contamination of Irish pork is totally unacceptable and must never be allowed to happen again in this country. We have given this issue serious consideration in the IFA. I fully acknowledge the cost borne by the taxpayer due to the recent recall. The sum of money involved, €180 million, is considerable, especially in the times that are in it. Just imagine what could have been achieved had this €180 million been invested in the development of the Irish pigmeat industry or indeed Irish agriculture rather than being expended on a defensive recall of a prime product that should have been of the highest standards and above reproach on the home and international markets.

To prevent a recurrence of the systems failure that happened in Carlow, I am pleased to inform the committee that we are establishing a food safety task force within the IFA. It will assess all risks and cover traceability and inspections throughout the food chain to prevent a repeat of such a catastrophe as we have had to cope with in the last six weeks. We believe a risk-based assessment, with constant reviewing of practices, technology, processes and traceability, is the way forward. I will be announcing the full details of this initiative at our AGM next Tuesday but I can say today that the IFA will retain the best professionals nationally and internationally to advise us in this vital issue of consumer confidence. We will bring these recommendations to the Department of Agriculture, Fisheries and Food, and I will share them with this committee at the appropriate time.

It was simply unacceptable that a food recycling plant appeared to have the most minimal supervision and very lax inspections. It is unacceptable to farmers, consumers and the international markets and, clearly, it must be unacceptable to the Department of Agriculture, Fisheries and Food and the Food Safety Authority. Lessons should have been learned from the Belgian dioxin crisis in 1999. In the Carlow case, while the investigation is not complete, it is understood that the feed contamination resulted from the use of inappropriate fuel oil in the drying process. We know the plant was inspected by the Department in 2006 and 2007 but not in 2008, and was deemed to be low risk. However, we also know there are no regulations covering the fuel oil to be used in recycling plants. The drying process through which the feed products became contaminated was never inspected. It is clear that the procedures involved in monitoring licensed food recycling premises were seriously deficient. Clearly, new controls are required in respect of the oil that may be used in licensed food recycling plants and in other processes in the animal and human food chain, in order to eliminate any danger of contamination. This is a European issue because currently there are no EU regulations in this area.

I wish to comment on the effectiveness of the traceability system currently in place. I am satisfied that our experience in the feed contamination crisis shows that the traceability system at farm level stands up to scrutiny. I refer to what the Secretary General of the Department of Agriculture, Fisheries and Food, Mr. Tom Moran, told this committee two weeks ago. He said: "It was the traceability at farm level that enabled the Department to move immediately from positive samples at slaughter, to a farm, to a feed supplier and to all customers of that feed supplier." However, one of the most important lessons we have learned is that the traceability system for pigmeat beyond slaughter is less than adequate, even if it does meet current EU requirements. This issue must be addressed immediately. We already have traceability on the farm, and from farm to factory. We now must now ensure traceability from factory to fork. At a minimum we must have an effective batch traceability system for pigmeat, at processor and retail levels.

I stress again that we have effective traceability systems at farm level. What shocked producers was that, despite all their efforts, this traceability is lost at processor level. The necessity for the total product recall clearly demonstrated major shortcomings in the traceability system beyond the primary processors.

The IFA supported the Government's decision to recall all pork products in order to protect the reputation of Irish food and of Ireland as a food producing country. The total product recall was based on the best advice given by the experts. As a food producing country which values the reputation of its food, we must always be able to stand over the integrity of our product. The perception and integrity of Irish food among consumers at home and abroad would have been irreparably damaged had we allowed potentially contaminated Irish pork to remain on the shelves.

Pig and poultry farmers are at the forefront of trading on a world market that takes no account of the higher production standards placed on EU products. The Department is fully aware that products from third countries have lower production standards and, ultimately, lower production costs. This fundamental issue must be dealt with and implementation of country of origin labelling must be passed into Irish law and effectively policed. This will allow the consumer to make an informed choice when purchasing meats. For the best part of a decade, the IFA has campaigned to see the Government put legislation in place in respect of country of origin labelling for pig and poultry meat. This issue has been passed from one body to the next and the lack of progress is costing producers millions. At the same time, consumers are being misled.

There is a commitment in the programme for Government for the extension of country of origin labelling. The Government must vigorously pursue this through all necessary avenues to see it come to fruition. The present situation, whereby processors can package and label product in a deliberately misleading manner, does not serve the best interests of either consumers or producers. The current situation amounts to unfair competition and must be rectified. The issue of substantial transformation must also be addressed. It is not acceptable that processors can import products such as pork from outside the EU, cover it in breadcrumbs, spices or sauces, and call it produce of Ireland.

Ireland introduced legislation on country of origin labelling for beef in June 2007, at restaurant, hotel and catering level. The responsibility for enforcing this legislation was given to the Food Safety Authority of Ireland. Unfortunately, in many restaurants, pubs, hotels and catering outlets the requirement has been ignored, and the FSAI has done little to enforce the law. This must also be addressed.

There are questions I would like this committee to investigate. When and who carried out the last inspection of the food recycling plant at the centre of the contamination? When will the Garda investigation be complete? Was Irish or EU law broken by an individual or individuals? If so, will they be prosecuted? What measures have the Department of Agriculture, Fisheries and Food and other agencies taken to ensure that contamination in the food chain can never happen again? Why was the elaborate national laboratory at Backweston not functioning during the crisis, necessitating the sending of samples to York and the Continent for testing? Were the traceability procedures set out by the Department of Agriculture, Fisheries and Food for the pig processing industry adequate to minimise the scale and cost of the product recall arising from the dioxin contamination?

I appreciate this opportunity to give the farmers' perspective on the dioxin crisis. I assure the committee of our commitment and of the urgent attention we are giving towards preventing the recurrence of such a damaging experience. I want Irish consumers and our international customers to have total confidence, without a question or a doubt, in the integrity, safety and quality of Irish food and the processes undertaken in its production and preparation.

I thank the Chairman and members of the committee and will gladly answer any questions that arise.

Chairman

I thank Mr. Walshe. There are apologies from Deputies Sherlock, McGrath and O'Keeffe who cannot be present for the afternoon session.

Deputy Michael Creed

I welcome the IFA delegation. I sympathise with the pig farmers they represent who have been the innocent victims of this debacle. I compliment the organisation, the chairman of the pig committee, and the president, who have been very measured voices in this controversy. I hope we can emerge on the far side of this with lessons learned, and that we will try to ensure we will never again have this threat to the Irish food industry. The issue is not solely confined to the pig sector.

I wish to comment on two matters the delegation might address. The president states in his address: "However, one of the most important lessons that we have learned is that the traceability system for pigmeat beyond slaughter is less than adequate, even if it does meet current EU requirements".

That much is glaringly obvious. There is a stark difference between the pigmeat sector and the beef sector. Farmers have been sold the principle of traceability on the basis that it is possible to do a forensic recall. It did not work and for a 10% contamination we had a 100% recall. I am sure the delegates would agree that is one of the biggest lessons we must learn.

The next representatives before the committee are the representatives of the processors. An issue that will arise is the cost involved in putting in place a fully traceable regime from factory to fork and how such a cost might be borne and shared equitably so that it does not unnecessarily fall on the producer. This is a marginal enterprise for the primary producers but it is a matter we must address. I wish to know how the delegates see the way forward. We are led to believe there are other international best practices we could follow. Deputy O'Keeffe referred to the Danish experience. I would like the hear the views of the IFA.

The other issue that concerns all of us, particularly those directly involved as producers, is the fact that there are still, on some farms, breeding sows that have not been dealt with by the Department. What progress is being made to finalise this matter between the IFA and the Department? It is extremely regrettable that, to date, the Department has not finalised payment for the killing of breeding sows and gilts that were in contact with the contaminated feed. That is a hangover from this event that should be long gone at this stage so that farmers can get on with their business and restock. What stage are we at in concluding a deal with the Department on that matter?

Deputy Christy O’Sullivan

I welcome the IFA representatives and thank the president for his assessment of the situation. I would like to address the very important issue of the two week delay in payment to producers who are working within tight margins and for whom turnover is hugely important. It is important that they receive the cheque sooner rather than later.

This issue has a huge bearing on the whole industry, not just producers but millers and feed compounders also. It affects everyone along the line. It must be raised and addressed. It is disheartening for producers who are doing business to the very highest standards. This has been the case for a long time. There is no problem with traceability at their end of the scale because every animal in the herd must be accounted for and when an animal is lost, it must be disposed of, which costs money. However, when pigs leave through the farm gate, the system breaks down. During previous meetings and again this morning I said I could not figure out how there was not a proper system of traceability when pigs entered a factory. We are not living in the 1930s and 1940s when animals were sent in groups of two, three, five or six. They are sent in substantial numbers. There are fewer than 500 producers of pork in the country. Have efforts been made to improve traceability? Have we learned from this experience? Will investment be made to ensure proper traceability? If we do not, we will be letting down pig producers who up to now have put in the effort. It is an issue which needs to be looked at seriously.

I welcome the IFA's proposal to introduce a positive measure and look forward with interest to discovering what form it will take. It will be at the coalface and involve producers and farmers. I hope it will be brought forward sooner rather than later in order that we can get moving while the iron is hot.

On the cost to producers, it is unfair that it is levied upon them to no avail. The inputs have not produced what was expected.

Deputy P. J. Sheehan

I too welcome the delegation. The IFA has always promoted a safe food policy and maintained its idealism for many years. However, there seems to be a lack of co-operation somewhere along the line.

Mr. Walshe has stated pig prices have fallen by up to 12 cent per kilo, stretching the viability of many producers. There is no sense to this and I am delighted he has outlined this issue. Some want to cash in on the hardship experienced by pig producers. Damage has been caused to farmers in that two major factories which account for 70% of the kill increased the delay in making payments by more than two weeks, which is outrageous. This is something the Minister for Agriculture, Fisheries and Food, Deputy Brendan Smith, should not stand over. He should have the matter investigated as quickly as possible. There is no need for a delay of two weeks in paying pig producers.

The most encouraging remark made by Mr. Walshe in a comprehensive report was: "Let me be absolutely clear: what happened in terms of the contamination of Irish pork is totally unacceptable and must never be allowed to happen again in this country." It is the soundest message I have heard from any farming body for many years. It was also stated one of the most important lessons learned was that the traceability system for pigmeat beyond slaughter was less than adequate, even if it did meet current EU requirements. The European Union is avuncular in sending details of directives to the Minister for Agriculture, Fisheries and Food and Irish farmers. However, it does not seem to understand the kernel of the problem. This must be rectified immediately. There is traceability from the farm to the factory. Why can there not be traceability from the factory to the fork? It is of vital importance that, at a minimum, there be an effective batch traceability system at processor and retail level for pigmeat.

It was stated in the presentation: "In the Carlow case, while the investigation is not complete, it is understood that the feed contamination resulted from the use of inappropriate fuel oil in the drying process". The inferior fuel oil has now been identified as the major cause of this problem which has devastated Irish pig producers in a market which has been free from contamination for many years. Why was the factory in question deemed to be low-risk? Why was it not inspected in 2008? That is the kernel of the problem. This morning we listened to elaborate presentations from different bodies on different oils which were tested. Is it to the benefit of the farming industry?

Another important question is why the elaborate national laboratory at Backweston was not functioning during the crisis, necessitating the sending of samples to York and elsewhere in Europe for testing. It is a disgrace that the Department of Agriculture, Fisheries and Food does not have a functioning national laboratory.

Questions were outlined to the committee, including when the last inspection of the food recycling plant took place, who carried it out, when the Garda investigation would be completed and if Irish or EU laws had been broken.

Chairman

We have had that question already.

Deputy P. J. Sheehan

I know, but it is of paramount importance that we heed the remarks of Mr. Walshe.

Chairman

Questions, please.

Deputy P. J. Sheehan

Mr. Walshe is a man who understands what is involved in the production of pork. I hope he will reply to all of the valuable questions asked.

Chairman

Mr. Walshe, we will take the relevant questions only.

Mr. Padraig Walshe

It was so good the Deputy wanted to repeat it. I am depending on the Chairman and members of the committee to provide some of the answers to the questions which are all pertinent and must be answered if we are to prevent anything like this happening again. If they are not answered, we are not doing our job. That applies to the committee as well as us.

Some important points were raised, chiefly about traceability. As Deputy Creed stated, less than 10% of pork was involved. The figure is approximately 7% or 8% at most, yet 100% of the industry is suffering. The cost to the taxpayer of not having a traceability system in place is a minimum of €200 million. That sum would have been better invested in the pig sector or the agriculture industry generally than on a recall of meat products. In addition, the drop in price that we have suffered since the crisis has cost the pig industry between €50 million and €100 million. We will not know the full extent until the price recovers and we do not know when that will happen because several markets remain closed since the crisis happened six weeks ago. There is also the downstream cost of recalling products from countries as far away as Japan, which includes the cost of transporting it back here. China, Russia and South Africa are still closed to Irish product. While the volumes there might not have been great, they were important in moving product. Money is now being wasted on recalling and incinerating the product. The cost must be considered. A system in operation in Denmark has been mentioned. I am not familiar with it but Mr. Berkery or Mr. Cullinane might be able to comment on it.

I can assure the committee that the system stood up at farm level. That has been proved. There is no need for anybody to impose further costs on farmers and there is no point in doing so, unless traceability is to be followed through from the farm to the fork. The delay in payment and the sows still on farms involve a major cost. As we all know that the pig industry is a low margin sector, a two week delay in payment creates serious cash flow difficulties for farmers. Mr. Berkery and Mr. Cullinane will deal with these points. It is vital that the sows are moved off farms as quickly as possible. The sooner farms get back to full production the better for everybody. We must put this incident behind us.

Mr. Michael Berkery

On the cost issue raised by Deputy Creed, I am familiar with the Danish model and approach. It is based on bottlenecks through which the process passes continuously, uses very elaborate software, automation and the batching principle, in the same way that television sets are marked as having been made at a certain time on a particular production line. The identification is traced through the process and if further processing takes place, or other meat is mixed in later, the references are maintained. In that way the origin of the product is never lost, whereas it appears in our case that the origin of the product was the live animal and beyond that it was meat. That explains the figure of 8% or 9% that necessitated the 100% recall. The Danish system is not labour intensive but it requires capital investment. The production process must have stop bottlenecks through which the meat passes, marking it as a.m. or as having been closed off at 4 p.m. or in a p.m. batch. The reference code system is maintained throughout the process. When one buys a kilo of Danepak rashers in the United Kingdom, it is traceable to the process in the plant in Denmark at a particular time on a particular day or a.m. or p.m. production and so on. This can be verified and established to the satisfaction of the customer.

I am involved in trying to close off the valuation issue on behalf of the producers waiting to slaughter sows. They asked me, Mr. Cullinane and Ms Amy Cahill from the pigs committee to try to represent them or pull together some response. I hope we can settle the matter, possibly today. There is a significant impact on a unit that must be depopulated entirely at once because it is against the normal cycle of production which continues incrementally, with a certain process happening all the time, from the breeding to the slaughtered pig at the end of the chain. If the entire herd is depopulated, one is without income for 15 months. There is contention between us and the Department on how to value this in the system, taking into account the feeding of the animal, labour costs and all the costs associated with the production process which are incurred without one cent of income and no animal sold. We retained KPMG to evaluate and assess the true cost, etc. because we want fair value. The IFA is not representing, or making a case for, an exorbitant or additional value. We want the producer to be put back where he or she was before being caught up in this process through no fault of his or her own.

Deputy Michael Creed

Does Mr. Berkery have any figures from an independent evaluator or arbitrator to help in this process? The producer will understandably say one thing, while the Department will have a different view. Has there been an independent evaluation of the cost of re-establishing production lines?

Mr. Michael Berkery

We retained KPMG to do precisely that. It signed off on its work within its internal audit systems as it went through this process; therefore, it states this is as professional an evaluation as possible. The difficulty is that there is no reference market. In other areas where there is disease or animals are depopulated, there is a reference market for animals. The animals are valued and the categories identified. That is the price set. It is a straightforward exercise, although there might occasionally be a debate to raise or lower the margin but only by very little. In this case, however, there is no market. It is not possible to refer to The Farmers Journal and find a market where 1,000 thousand sows were sold or bought at every stage of the process. We are trying to find a reasonable figure. Our main objective is to put the person back as close as possible to the position he or she was in before this event occurred which was not of his or her making.

Deputy Eamon Scanlon

Where farms must be completely destocked, could farmers buy piglets from unaffected farms to get back into production more quickly? The numbers coming onto the market would be reduced eventually and prices might strengthen. It is a pity farmers must wait 15 months before getting back into production.

Mr. Tim Cullinane

On that point, all our pig farms are specialised breeding units. A farmer coming back into the market buys minimum disease stock. That means very low levels of disease, which is important where there is intensification. The farmer begins by buying maiden gilts which are young sows to breed. If he or she has, say, 1,000 sows, he or she needs approximately 50 breeding animals a week to get the cycle going and it is 16 weeks before they farrow. One cannot replace all the stock immediately. That is why we were trying to establish the value when a farm was destocked. There are so many sows in a chain, some farrowing this week, some next week and so on, and this provides the cash flow for the farmer. Once the farmer goes out of business, however, it is 12 months before he or she can put a pig into a factory again. There is no way to speed this up. All the sows cannot be served in the one week.

Deputy Eamon Scanlon

I understand that.

I welcome the IFA delegation. I suppose we have been repeating ourselves in the past week but it is widely accepted by everybody that the decision to recall all pork products was the right one. I agree with Mr. Berkery that pig farmers were innocent and it is unfortunate they find themselves in this position. I also agree with comments regarding traceability from farm to processor. Traceability is possible in primary processing but there is a problem with regard to secondary processing. I do not know how it can be overcome, given that blood, pig fat, pork belly and so on are processed. One could have the blood or offal from 1,000 pigs being processed together. It would, therefore, be very difficult to have 100% traceability. Something must be done in that regard.

The plant which was processing human food into animal feed was classified as low risk. We have learned from recent events that this is not the case. The Irish Grain and Feed Association makes at least eight inspections a year. At the plant in question in this case there was one inspection in 2006, one in 2007 and none until 8 or 9 December 2008. The issue of inspections will have to be examined again and the plant will have to be declassified because what happened there caused much hardship for many.

The issue of country of origin labelling has arisen frequently and is one the committee should try to advance. What is happening is a joke. We can import meat into Ireland, add a bit of spice and send it out again as Irish. I am sure it happens in other countries also. These issues need to be addressed.

In regard to processors not paying farmers for an extra two weeks, I understand compensation of approximately €40 million has been paid to the affected plants. I may be corrected if I am wrong but the figure mentioned a week to ten days ago was €35 million and it has been paid. It is unfair that processors are being paid compensation, yet farmers are being penalised. That is not right. The president mentioned a reduction of 12 cent per kilo in the price of pigs. That may not be a small figure but it is a good deal in regard to pigs because the margins are very tight.

Processors are not suffering currently because of the home market. Representatives of Bord Bia told the committee this morning that the market is as good if not better than it was before December and therefore they cannot use that as an excuse. A total of 80% of our pork production goes to Great Britain. We had that debate this morning also. That is where they should be promoting Irish pork at a greater level. The quicker we get that market back to its full potential, and it is improving all the time, the better it will be for everybody. There is no doubt there are lessons to be learned from what has happened in the past four or five weeks, and we must move on those areas.

Deputy Bobby Aylward

I welcome the representatives of the pig processors and the Irish Farmers Association. The reason we started this analysis, which is now in its sixth day, and brought in all the stakeholders was to try to find a solution to this problem, find out who was at fault, why we allowed it to happen and ensure it will never happen again. We have heard from the Department officials, the Environmental Protection Agency, whose representatives were before us this morning, and professional people along the line. Lessons must be learned and we must find out how this happened.

The EPA representatives expressed strong views this morning on the oil involved in the event. I suppose it will be proven when the Garda investigation is concluded but there is no doubt that it came from contaminated oil containing PCBs or dioxins. I understand 77,000 gallons of oil is produced in Ireland per year. They made it clear that this oil was under control but we asked how oil containing PCBs got into the system. It is alleged it came from Northern Ireland to the plant in Carlow but why was that oil allowed into the system? How that happened is the most important aspect.

The EPA representatives said they were satisfied they had control of all this oil and where it was going but that they were unable to account for a small percentage of it, 2,000 tonnes. These are the lessons we must learn.

It is vitally important that we open up the markets. We have done well domestically. We have proven that with the consumption of pork. We are back in the market in England but we are still refused entry to other countries and it is important that Bord Bia, whose representatives were before the committee this morning, tries to reopen those markets and explain to everyone what happened.

In fairness, the whole event was handled well with the withdrawal of all the products from the shelves. The operation was up and running again within a week to ten days and the shelves were restocked. The confidence in the product remains.

The IFA representatives asked many relevant questions including when this investigation will conclude and if anyone will be prosecuted by the gardaí. We all want answers to those questions but it is a question of whether the owner of this establishment believed he was getting oil from a legitimate source. If the oil was contaminated I presume he would not buy it, unless he had some other reason for doing so. If they bought the oil knowing it was contaminated they should be prosecuted. If they did not know it was contaminated, the person who supplied the oil should be prosecuted and that must be followed through.

The committee has to produce a report on this event and we will conclude on 28 January. I hope our report will go some way towards trying to establish what went wrong, how we can address the problem and ensure it does not happen again. There is always a danger in food processing. We can never be too stringent. The inspection regime must be continually tightened and made secure. For years we have used recycled food from humans. I know the system has changed but as I said yesterday, slops were used all the time in the 1950s and 1960s on our own farms to feed pigs, and swine in particular.

I hope we learn the lessons from this event, that we will find out the reasons it happened and that it will never happen again. This committee will ensure that will be the case.

Deputy Andrew Doyle

What I had intended to say I will save for later because much of it has been repeated. I want to make an observation. I found out to my cost some years ago when I had a water leak that the house insurance does not cover the cost of finding the leak. It pays for the consequential damage. The point was made earlier that we want to ensure we put in place a process that does not mean we have consequential damage from here on. It will be interesting to hear the next contributions because nobody will win out of this episode if we deny the glaring breakdowns and weaknesses in the system that allowed this to happen on the scale it happened.

For the benefit of the committee, I will introduce us and give a little information on the organisation we represent and the companies for which we work. My name is Cormac Healy and I am director of the Irish Association of Pigmeat Processors. The IAPP is a business sector organisation within IBEC which represents the interests of primary pigmeat processors in Ireland, principally the slaughtering and deboning operators in the sector.

Member companies of the IAPP account for approximately 85% to 90% of pigmeat slaughterings in the Republic of Ireland. Our members are engaged in slaughtering, deboning of product into primal cuts and some further processing activity. IAPP members are also the principal pigmeat exporters in Ireland.

I am joined by Mr. Paul Kelly, director of Food and Drink Industry Ireland. FDII is the overall food division within IBEC and several members of FDII are involved in secondary and tertiary pigmeat processing in Ireland.

With the Chairman's permission, I propose to give the committee some views and comments from a primary processing perspective in the first instance. My colleague, Mr. Paul Kelly, will add some further comments dealing with the secondary and tertiary processing segment of our sector.

Before commenting on the pork contamination issue and addressing some of the specific areas of interest to the committee as outlined in its letter of invitation to attend the hearing, I would like to highlight some of the key parameters of the Irish pigmeat sector. While the events of December shone an unfortunate spotlight on the pigmeat sector, it highlighted the significance of the sector within the Irish agrifood sector and the important role it plays within the national economy in terms of employment, export earnings and the regional dimension to the sector. In these challenging economic times, with job losses being announced with increasing regularity and intensity, the benefit of traditional indigenous industries is underlined.

I will summarise some of the key parameters of the sector. Total sow numbers are 147,000 head; total number of producers is in the region of 400 units; total farm level employment is estimated between 1,100 and 1,500 workers; total slaughterings was 2.5 million head in Irish slaughter houses in 2008; and total employment at processing sector level was 2,000 people. In general, it is accepted that there is an indirect employment benefit of 1:1, so a further 2,000 people are indirectly employed. I know members will have heard these details from Bord Bia this morning but, in 2007, total exports were 129,000 tonnes with a value in the region of €370 million.

The figures mentioned above highlight the importance of the Irish pigmeat sector. The figures largely concern the production and primary processing level. When account is taken of the full extent of pigmeat processing in this country, the sector is valued closer to €1 billion per annum with an estimated total employment of close to 10,000 jobs.

While the Irish pigmeat sector has suffered a major shock and is currently facing some significant challenges, the IAPP believes that, collectively, we can work our way out of these problems. We believe that this traditional indigenous sector has a major role to play in the Irish agrifood sector and in the overall economy.

The IAPP, therefore, calls on this committee, in the context of its investigation and review of recent events, to take full cognisance of the overall contribution of the sector and to take a strategic look at the future for this sector in Ireland.

I would like to say a few words on the impact of the contamination issue and the total product recall on processing companies and members of the IAPP and to take a look at where were are now seven weeks on from the announcement by Government of a total recall of Irish pork and pork products on 6 December 2008.

This has undoubtedly been a disastrous event for the Irish pigmeat sector and for all those involved at every stage of the chain. The Irish pigmeat processing industry operates to the highest EU and international standards. This crisis was not of the processors' making. This was effectively a feed contamination issue, yet many processing companies were almost wiped out through no fault of their own.

The decision on the evening of 6 December last to initiate a total product recall for all product derived from pigs slaughtered in Ireland from 1 September to 6 December wiped out the equivalent of a quarter of the annual revenue of the sector and effectively shut down the primary processing sector. IAPP member companies had up to the previous day purchased and processed pigs as normal, yet, as of 6 December, the value of the derived product was reduced to zero. All stocks held by companies were reduced to zero value. Debtors for sales of product from 1 September would not be paying for this product.

The industry was faced with a critical cash flow crisis which, unless addressed, would have led to a complete cessation of processing activity and potentially the loss of an entire industry. Companies were not in a position to resume processing operations, having sustained such a financial loss and with the absence of cash flow. Many companies were advised that were they to resume operations, given their financial predicament, this would have been deemed reckless trading under company law.

A financial rescue package — it has been referred to as various things here, although we saw it as a rescue package for the sector — was essential to save the sector and get it back to processing activity as soon as possible. I will revert to some of these points later.

It may be worthwhile for the benefit of the committee to give some information on where things are now as of 22 January, seven weeks on from the recall. A number of points can be made. First, slaughterers or primary processors continue to face severe and worsening cash flow difficulties. This, as I stated already, is a result of stock value being reduced to zero and significant debtor books with no expectation of payment. The IAPP acknowledges the efforts of Government in bringing forward a Supplementary Estimate in late December to facilitate an interim payment before year end. Without this, slaughtering operations would not have been able to continue.

I remind the committee that processors recommenced immediate slaughter of pigs on the same day as the rescue package was concluded. As the committee already heard from previous representatives, the interim payment made in late December amounted to €35.4 million, of which €10 million went to primary processors. There is an urgent need for an additional interim payment to be made to primary processors. I will revert to that point later.

Second, considerable work is ongoing, and will be for some time, in bringing back Irish product affected by the recall from markets abroad. It is vital that this aspect of the recall process be clarified and completed as soon as possible. As the committee is aware, all affected product must be rendered. Where possible, product will be rendered in the foreign market. However, significant quantities of product will have to be brought back to Ireland for rendering. Many difficulties have had to be addressed in dealing with product in markets abroad, including verification-validation procedures, costs associated with the destruction of this product, including transport, demurrage, shipping and storage, as well as other issues such as import tariffs.

While the speed and comprehensiveness of the initial Government decision to initiate a total recall helped to retain our reputation abroad as a serious food supplying nation, it is equally important that the follow through on the recall in terms of dealing comprehensively with all affected product is completed as efficiently as possible. Otherwise, reputations will be affected and the process of regaining customers and markets made all the more difficult.

The most important aspect of the sustained recovery of the Irish pigmeat sector is the restoration of our customer profile, market access and sales of Irish pigmeat. As the committee is aware, Irish consumers reacted extremely positively in the aftermath of the recall. Their strong, patriotic response led to an immediate resumption of sales volumes on the home market. This has been the mainstay of the industry during the past six weeks. The introduction of the new label for Irish pork by Bord Bia has been beneficial. While this was envisaged as a temporary measure, the IAPP believes this label should be maintained into the future.

The Irish pigmeat sector is highly dependent on export markets, both European and international. In 2007, Ireland exported 129,000 tonnes of pigmeat, valued at €368 million. Of this, 56% went to the UK, 27% to other EU member states and 17% to international markets, including Japan, Russia, Hong Kong, the US and China. Resumption of trade with customers in these export markets has been slow. In many cases, it has not resumed. Issues associated with recall product must be resolved to the satisfaction of individual customers before they will begin to purchase new product. Some trading activity has recommenced with the UK. Continental EU markets are proving slower to recover, in particular those in Poland, Germany and Italy. There are still significant quantities of product being held in international markets or on the way back to Ireland.

There are a number of extremely difficult issues to be dealt with as regards product in export markets. In addition to the logistics and associated costs in removing recalled product, customers believe they have valid claims in respect of final product — valued added product they have produced which incorporates Irish pigmeat — lost market share, loss of brand image, etc. Our ability to satisfy these customers will determine our future trading with them.

We hope, however, that new trade can commence with some of these countries in the near future. The IAPP welcomes the news from Japan that trade can now recommence. We are also hopeful of early resolution of any issues in markets such as the US and Hong Kong, which is an important Asian destination. I must, however, bring to the attention of the committee the fact that revised retaliatory measures adopted in the past week by US authorities as part of the ongoing US-EU beef hormone saga have resulted in a major increase in import tariffs on Irish pigmeat products entering the market there. These new tariffs will effectively halt our trade with the US. A significant diplomatic effort on the part of the Government in respect of this matter will be necessary.

There continue to be considerable difficulties with the Russian market, to which some 7,000 tonnes of Irish pigmeat were exported in 2007. In addition, there are blockages to resumption of trade with China, South Africa and South Korea. It is clear that a considerable amount of work remains to be done in the context of restoring international markets.

I will now comment on some of the specific areas of interest to the committee which were outlined in the letter of invitation issued to us. These areas include the effectiveness of the traceability system; the procedures involved in monitoring licensed premises; the proportionality of the response to the original contamination; and the way forward for the industry, domestically and globally.

The traceability system that operates in the Irish pigmeat processing sector fully adheres to all national and EU regulations and is on par with systems used throughout the Union and internationally. As previous witnesses have already pointed out, all food businesses involved in this incident met their legal requirements with regard to traceability. To give the committee a brief overview of the general features of the traceability systems, the following applies. At carcass stage, there is individual traceability to the pig; at primal stage, when the carcass side is cut into three parts, namely, leg, middle and shoulder, there is individual traceability to the pig; and at boning hall stage, for operational and customer specification reasons, traceability must, as is the case with other meats, move to a batch system. Batching of product entering the boning hall is necessary in order to grade product to produce to the wide array of customer specifications — be that on cut type, muscle size, weight, fat level, etc. Companies can have up to 600 different product specifications. In general, boxed product from the boning hall is traceable to a slaughter date. Obviously, as one goes down the processing chain and into the manufacturing phase, batches are incorporated with other batches and volumes increase substantially.

It has been suggested the level of traceability in the pigmeat sector is the main reason for the large volumes involved in the recall. It should be noted that the impact of the recent crisis and the scale of the problem is not simply attributable to the traceability system in operation in the pigmeat sector. The scale of the impact is directly related to a number of factors. I refer here to the fact that a total recall was decided upon in the first instance; the length of the period covered by the recall, namely, 14 weeks from 1 September to 6 December, or more than one quarter of the production year; the fact that the 17 units involved are some of the largest operations in the country and account for 10% of pig output — given the nature of pig production, pigs from the herds at these units were killed on virtually every day of the recall period; and the nature of the business means that pigmeat is a versatile product that is incorporated into a huge number of processed products, often at low levels. In addition to the latter, pigmeat from several origins may also be mixed at the manufacturing stage.

These factors, and not the traceability system, are what gave rise to the scale of the impact of the recall, particularly in the context of the volumes involved. It should also be remembered that the traceability system was able to identify slaughter days that were clear and identify unaffected product.

The industry will, as it does in all aspects of its business, continue to monitor new developments and approaches to traceability and, where possible, adopt these practices to ensure that the pigmeat sector remains to the forefront in a very competitive global marketplace. We are aware that the Department of Agriculture, Fisheries and Food has already opened discussions in Brussels on the subject of traceability in the sector. Representatives from the IAPP are due to meet their counterparts from the Department in the near future to discuss the matter. Any developments in this area should be pursued from an EU perspective, bearing in mind the Single Market and competitiveness issues.

On the monitoring of licensed premises, I reiterate that this was a feed contamination issue. The processing industry was not responsible for this catastrophe but was rather a victim of it. Processors purchased pigs and producers purchased feedstuff in good faith. The Irish pigmeat processing industry, as with other meat processing sectors, is a highly regulated and policed industry. Processing establishments operate under comprehensive EU legislation and are licensed by the Department of Agriculture, Fisheries and Food under the hygiene package. The latter was introduced as a revised suite of EU regulations on 1 January 2006. Along the entire food chain, the processing sector is the most heavily regulated and monitored stage of the entire process from farm to fork. To some extent, the processing stage and, in particular, primary processing establishments — slaughterhouses — are used as the bottleneck at which the entire chain is monitored. As many members will be aware, many of our processing establishments have a permanent presence of significant numbers of Department of Agriculture, Fisheries and Food officials, supported by temporary veterinary inspectors, on a daily basis. Perhaps one of the conclusions that will emerge from this process is the need to spread the control function throughout the entire chain, revise the risk assessment of where controls-monitoring needs to be and target specific areas and issues that are deemed to present the greatest risk. The European Commission is currently giving consideration to the modernisation of the meat inspection process, which is welcome. However, attention must be paid to the entire feed and food chain.

As the committee has already heard from previous witnesses, a food business operator, FBO, is ultimately responsible for the safety of the food it produces. Under the EU hygiene package, producers, primary processors, secondary processors, etc., are all deemed to be FBOs. In general, IAPP members and processors take this responsibility very seriously. Their businesses, workforces, investment and reputations are dependent upon their delivering safe food. In addition to the permanent presence of Department of Agriculture, Fisheries and Food officials at our meat plants, companies have been obliged to invest in building up significant quality control resources in their operations. Every company has a quality control team of professionals from a food science background which is constantly monitoring process hygiene and product hygiene and safety at its plants and which is responsible for the operation of that company's entire food safety management system.

Processing companies, in addition to having EU approval and operating comprehensive HACCP systems, must also, in the context of securing customers and access to particular markets, meet and obtain myriad other independent standards and approvals. These include BRC, EFSIS, USDA approval, Russian, Chinese and Bord Bia quality assurance. I reiterate that the Irish pigmeat processing sector operates to the highest EU and international standards and that, on top of a heavily regulated official control function, the industry also invests heavily in its own quality control apparatus.

I refer to the proportionality of the response. The committee has, over several days dealing with this matter, heard from a considerable number of Departments, agencies and organisations, all of which have concluded that the right decision was taken with regard to the initiation of the total recall. We hope the swiftness and comprehensiveness of the response will stand us in good stead in the long term. This was a comprehensive response to the contamination issue, which was aimed at ensuring maximum consumer safely, underpinning consumer confidence and defending Ireland's reputation as a serious food supplying nation. We have to remember, however, that the decision on a total recall brought an entire industry to its knees and had major financial implications for operators in the sector and for the taxpayer as a result of the rescue package needed. We must also bear in mind that by mid-week of the week concerned, European Commission advice was that composite products with more than 20% pork inclusion could be excluded from the recall. These are not easy issues to deal with but they need to be borne in mind and need to be considered in terms of our preparedness should a similar issue arise in the future.

Another important point needs to be made in this regard. We cannot talk of our response as past-tense, it is current and ongoing. While the decision taken on the evening of 6 December to have a total product recall may have helped our reputation in the face of such a catastrophe, the maintenance of our reputation in the marketplace and our ability to retain important customers for Irish pigmeat is equally dependent on how the entire recall process is handled. This must be equally swift, efficient and comprehensive. The assessment of our overall response to this issue, therefore, can only be made at some point in the future.

I referred to the fact that this crisis, while regrettable and unfortunate, had highlighted the significance of the pigmeat sector to the overall agri-food sector and the important contribution it has made, and can continue to make, to the economy. In the current economic climate, the importance of traditional indigenous industry such as the agri-food industry and, in this case, the pigmeat industry, in job creation, export earnings and the rural-regional dimension must be recognised and promoted. The world's population is forecast to increase to 9 billion by 2050 from its current position of just below 7 billion. The population is expected to become increasingly urbanised. Pigmeat consumption in non-OECD countries is expected to increase by almost 15% over the next decade. Against this background, there must real potential for the future of the Irish pigmeat sector.

I hope, in the context of the current review, the committee will agree that the pigmeat sector is an important national asset, which can be farther exploited to the benefit of the overall economy and the Government should work with the stakeholders in the sector to set out a strategy for its future sustainability and growth. There is an immediate need for further interim payments under the pigmeat recall scheme to deal with the critical cashflow difficulties facing processors. We must ensure the efficient and comprehensive completion of the recall of product from markets to avoid straining customer relations and undermining reputation. Efforts must continue to ensure restoration of foil market access for Irish pigmeat. Any review of control and monitoring arrangements must recognise that the processing sector is the most heavily regulated and attention should be given to targeting the control function to all parts of the chain.

With regard to traceability, the IAPP will work with the Department of Agriculture, Fisheries and Food to examine latest developments and best practice. We must, however, be cognisant of the need to maintain competitiveness. In this respect, the EU dimension should be explored. I thank the Chairman and the committee for its time.

Mr. Paul Kelly

I thank the Chairman for the invitation to participate in the committee's hearings. I also welcome the review the committee is undertaking into the feed contamination issue. As my colleague, Mr. Cormac Healy, said in his introduction, I will add comments dealing specifically with the secondary processing sector. Much of what he has said is applicable to the entire processing sector and it is not my intention to repeat it.

The secondary processing sector utilises the output of primary processors to produce added value consumer ready products for retail and food service customers, including sausages, rashers, hams, cooked meats. They also supply ingredients for the composite products of tertiary processors such as cooked meat pizza toppings and sandwich fillings. With regard to the size of the sector, estimates on numbers employed vary but it is approximately 3,500 while turnover in the sector is €700 million. Combined with the primary sector, total turnover exceeds €1 billion while exports are in excess of €300 million. Even before the events of recent weeks, the sector, like the rest of the food and drink industry, faced an extremely challenging environment with steep changes in currency values, ongoing retailer and food service pressure on prices, difficult credit conditions and energy prices way out of line with competitor economies. I ask the committee to take account of this in its deliberations, as it needs to be reflected in how the recall and operation of the compensation scheme impacts on the sector.

I refer to the impact on processors. First, the compensation scheme will cover the value of eligible stock that has to be disposed of or has been credited to customers. It does not cover other costs associated with the recall such as transport, storage, overheads and lost business at the busiest time of the year. The sector will suffer a major financial loss as a result. Many of the impacts felt by the secondary processing sector on foot of the total product recall are shared with the primary processors. For the sake of brevity, I will simply echo many of Mr. Healy's comments regarding the initiation of the total product recall on 6 December effectively also shutting down the secondary processing sector and outline issues specific to secondary processors. It must, however, be acknowledged that both processors and the Department of Agriculture, Fisheries and Food worked hard to ensure the limited amount of product in stock that fell outside the scope of the recall was released in as timely a manner as possible.

The secondary processing sector continues to face significant cash flow problems. While acknowledging the payments to processors and the efforts of the Government and the Department of Agriculture, Fisheries and Food in this respect, they are simply interim payments. Processing companies have outstanding creditors in the primary sector, debtors seeking to offset their recall costs and a range of other costs associated with the recall. Further and final payments are required as a matter of urgency. We are now seven weeks on from the initial recall and there is still significant confusion in export markets about procedures for verification and disposal of product and so on. We share the concerns of primary processors in this regard. Major international retail and food service customers are less than sympathetic and unimpressed at the lack of clarity coming from Ireland. Sophisticated and complex supply chain and logistics operations underpin this type of business. These customers have very high expectations both for product quality and product delivery. The ongoing confusion has the potential to disrupt hard won supply contracts and reputations and needs to be addressed as a matter of urgency.

In the domestic market, we have faced a range of claims from retailers over and beyond compensation for product covered by the recall. Claims for administration, logistics and storage costs and in some instances loss of profits have been lodged with secondary processor suppliers by retailers. These claims cannot be borne the sector which already faces significant financial losses over and beyond what the compensation scheme will cover. Fair play from retailers is needed. The industry has said this repeatedly through the negotiations with the Department of Agriculture, Fisheries and Food and it is hoped the retail sector will see sense and support this Irish industry. In overseas markets such as the United Kingdom and beyond, we are currently gathering evidence that indicates secondary and tertiary processors are in receipt of claims from retailers for charges and fines arising from the recall. Moreover, significant consequential losses and liabilities have been incurred by some companies in respect of major international customers where product was used as ingredients in the production of tertiary product.

I echo Mr. Healy's comments in respect of traceability and monitoring of licensed premises noting that all food businesses involved in this incident met the comprehensive legal requirements that are in place. This was a feed contamination issue and the processing industry was not responsible for this catastrophe. Similarly, while echoing his comments on proportionality, I wish to outline the following example, which may add colour to where things are from a secondary processor's perspective: the recall was initiated on a Saturday, industry, in turn, initiated a recall from customers, who, in turn, initiated a recall from their customers. This resulted in the customer of one secondary processor, for example, withdrawing branded product from seven countries on Sunday afternoon. The risk assessment from the EFSA, coupled with the advice from the European Commission, came on the Wednesday, three days later and four days after the initial recall. It stated that composite products with less than 20% pork inclusion could be excluded from the recall. As it turned out, less than half the branded product withdrawn in the example given would have had to be recalled based on the risk assessment, but by then it was too late. This highlights the complexity of the supply chain and the significant cost involved in satisfying customers whose products and brands have been caught up in the recall.

The sector has been badly affected financially by the contamination incident and subsequent recall. While acknowledging the support of the Government through the introduction of the compensation scheme, it is of critical importance that momentum is maintained to iron out the remaining issues, to which we have already referred, to allow the industry to return to some form of normality. Appropriate measures must be taken nationally to ensure a similar situation does not arise again. However, a much higher level of preparedness is needed and a national plan must be developed to deal with this type of issue should it arise in the future. As secondary processors, we are more than happy to contribute fully to the development of that plan.

I thank the Chairman and the committee for their attention. Mr. Healy and I are happy to take questions from committee members.

Deputy Michael Creed

I apologise, but I must leave the meeting by 4.20 p.m. and will just make a few brief comments. With regard to the points made by Mr. Kelly on retailers seeking to exploit the difficulties of the industry by looking to primary, secondary or tertiary processors for compensation for loss of profit etc., that is unacceptable. IBEC is a broad organisation and some of these retailers are members of a section of it. Perhaps Mr. Kelly and Mr. Healy should begin in-house in terms of talking to these people and explaining to them what is happening in the sector. There is a role for Government in this regard, but the umbrella body, IBEC, should talk to them also. Otherwise we will end up in a downward spiral that will take the industry out entirely.

Mr. Healy was very involved in negotiating the compensation package, recall scheme or whatever one calls it. One of the difficulties we have now, albeit we emerged from this difficult situation, is that it is a scheme that is ill-defined and, to some extent, open. The Secretary General, Mr. Tom Moran, said to us two weeks ago that the scheme would still consider cases made to it. Would we not be better served by a clearly defined compensation package — although this might be rough justice in some respects — that would draw down the curtain and not entertain the kind of shenanigans now being witnessed and to which Mr. Kelly made reference?

Is there resistance, particularly among secondary processors, to a proper traceability system and is it likely that some of the compensation package of €180 million will be used to compensate secondary processors for pork or bacon products that are not Irish-produced? Given that there is no clear country of origin labelling and that many of IBEC's constituent member secondary processors import substantial volumes of meat and package it here under recognised national and international brand names for export, can IBEC assure us that none of that product will benefit from the €180 million scheme funded by the taxpayer? Is it not likely that as it cannot be forensically identified or recalled because of the lack of a proper traceability system, it will benefit? That would be entirely unacceptable and, perhaps, in years to come the Committee of Public Accounts would have great fun with the issue if it was perceived that taxpayers were bailing out product that was not of Irish origin, for example, pork and bacon products coming in from South America and elsewhere to be processed and packaged here and sold under recognised Irish brand labels. Can we be assured that is not the case?

I accept the requirement in terms of competitiveness and not putting the industry unfairly at a cost disadvantage relative to its EU competitors in particular. Regrettably, Europe is the only forum where we can have an equivalence currently. However, if there is more forensic traceability available in some EU countries currently, why can that not apply in Ireland? Is it because of the volume of imports and secondary processing activity?

Deputy Eamon Scanlon

I thank Mr. Healy and Mr. Kelly for their presentations and direct my first question to Mr. Healy. Is it physically possible to have traceability on secondary processing? Mr. Kelly made the good point that there should be a much higher level of preparedness for situations such as this and that if it ever happens again, we should be better prepared. Hopefully it will never happen again, but it is possible it will. We should have a plan in place to deal with it, following our experience and what we have gone through in recent weeks.

Chairman

I invite Mr. Healy and Mr. Kelly to answer those questions now as Deputy Creed must leave shortly.

Mr. Paul Kelly

On the question of retailers, this issue is a big concern for us. The general view is that this was a product recall and the scheme specifically relates to product. Whether it is called financial assistance, compensation or whatever, it relates specifically to eligible product. I mentioned already that at our stage, secondary processors — the case is probably the same elsewhere along the line — there were many additional costs related to the recall. These must just be absorbed. Each sector along the supply chain must absorb a financial loss as a result of the recall and that is the unfortunate reality. The overall compensation scheme will not cover the loss associated with it.

What we find unacceptable and untenable, in addition to having to absorb our own losses over and above the scheme, is that further losses from another part of the supply chain would be passed on to us. We have expressed this dissatisfaction on a number of occasions to the Department and to retailers. All our individual secondary processor companies have done the same. We hope people see sense in this regard.

On the traceability issue, it has been pointed out by us and previous representatives before the committee that all food businesses meet their legal requirements for traceability. The industry can and will work with the Department of Agriculture, Fisheries and Food to examine the latest developments and best practice on traceability. However, there are a number of practical points that must be considered. Once pigmeat enters processing factories, it is transformed into a range of products — sausages, cooked and processed meats, hams and so on. Traceability to the day of production at large-scale processing level is possible, but all the way back to individual producer would present significant technical and financial challenges.

Deputy Michael Creed

It should be possible for primary products, but perhaps not composite products such as puddings and sausages.

Mr. Paul Kelly

That should be the case. Perhaps Mr. Healy could answer that particular point.

Mr. Cormac Healy

There is huge focus on traceability within this committee, as evidenced in previous hearings on this subject. I want to re-emphasise the point that traceability seems to be being blamed for the scale of the problem. We do not believe that is the case. I outlined some points in terms of the reason for the volume concerned. Effectively, we took a decision on 6 December that went back to produce from 1 September. That is a quarter of the year and covered a long period of time. The nature of pigmeat production and processing is that we slaughter pigs on a routine basis from the large units. Therefore, as I said in my presentation, pigs were being slaughtered from the affected farms on almost a daily basis. There were very few days in the period from 1 September to 6 December when pigs from these farms were not being slaughtered in a slaughterhouse in the Republic.

Such factors are major contributors to why there is a huge volume of produce concerned with the recall. The problem cannot all be laid down at the door of traceability. There is traceability in the sector. I have spoken with our member companies on this and we will engage with the Department on the issue. We have a meeting on 4 February with the Department to take a detailed look at traceability and talk about what it wants to do at EU level. We do not believe there are greatly more advanced systems in operation in other countries. Our meat sector has some of the most modern processing plants and facilities. It is in the interests of both the industry and the company to have traceability in the management of the business because they are ultimately responsible for food safety. We are not objecting in any way to a full and thorough examination of the traceability arrangements but I would not like to think the committee would find that this major problem was the result of an absence of traceability because it was not the only factor.

Deputy Michael Creed

I accept the point Mr. Healy makes about the volume of product accounted for by the nine farms involved, but if it were the case that a single smaller operator was the source of the contamination in an isolated batch, it still would not have been possible to have the forensic recall available in the beef sector. The real problem is that there is not the capacity to reach out and have a forensic recall.

Mr. Cormac Healy

I agree on the need to achieve a forensic recall but it must be remembered that almost every plant in the country received pigs from the farms involved. If there had been a single supplier to a single plant, it could have been isolated and narrowed down to the days on which that supplier supplied pigs. As one moves down the chain, the batch becomes bigger. That is the position in meat processing. In the beef sector one is dealing with animals weighing 340 kg to 350 kg. Therefore, there will be smaller batches for production, compared with the pigmeat sector where one is dealing with a carcase weighing 80 kg. There will always be a batch element to traceability which is unavoidable. Perhaps there will be further advancements and this crisis will mean that a serious examination will be undertaken in that regard. I came here today to make the point that traceability is not the core of the issue.

Chairman

Does Mr. Healy have any other comments to make?

Mr. Cormac Healy

Some comments about delayed payments were made at the earlier hearing with the farm organisations which I would like to address. The two weeks issue is of major concern to producers. Primary processors are facing a major cash flow problem. They have lost the value of their product more or less for one quarter of a year. One would expect to receive payment in January for product supplied in October and November but that is not happening because that product has been recalled. Such processors have suffered a major financial loss and do not have a cash flow; therefore, the position is becoming very difficult.

A further point is that of the interim payment made which we welcome, only €10 million has gone to primary processors, the slaughterers, who are paying producers for pigs. Every week primary processors spend in the region of €5.5 million on pig purchases. One can imagine, therefore, that a sum of €10 million will barely cover the cost of a two weeks supply of pigs, that there has not been substantial income and that there has been serious income problems since. On top of this, we are continuing to slaughter the same numbers of pigs — up to 45,000 to 50,000 each week — yet a significant number of markets are still not available. The industry is facing a greater deficit and a greater cash flow problem. We are still spending in the region of €5.5 million for pigs and a further €1 million on processing, wages and energy each week but not recouping this cost from the marketplace. There is a serious need to have a further interim payment made as soon as possible and continue the work being done to have markets opened. The normal procedure is that pigs are paid for within the week or within a number of days. The industry wants to resume this pattern but it will not be able to do so until such time as further interim payments come through the system.

On the drop in price, I remind the committee that the processing industry is continuing to process pigs but does not have its full market range available. It does not have the same number of European customers as it had prior to Christmas; this is also the case with regard to the international markets. The industry is doing an exceptional job in maintaining price levels. It may be of little comfort to producers but the industry is maintaining prices at a level that is unsustainable considering the markets open to it. Price drops are being seen in the European market, so much so that the French Government has been looking for an APS scheme involving a figure of 100,000 tonnes for the wider European industry.

Deputy Andrew Doyle

These presentations have illustrated that one blip in the system has repercussions, with the French looking for a wider system. It is in no one's interests to try to blame someone else. The reason traceability has been mentioned is that the aim of such a system is to try to minimise any damage caused. One cannot always predict where a problem will arise.

Mr. Healy said this crisis had concentrated minds on the importance of the sector to the economy but it has also concentrated minds with regard to product which can be traced which is not of Irish origin, although people had been under the impression that it was.

I refer to the section of the presentation on the monitoring of licensed premises. In the context of securing customers, Mr. Healy has stated processing companies must achieve Bord Bia quality assurance status. The committee was told this morning that this was a voluntary scheme; therefore, I ask Mr. Healy to clarify the matter.

I direct the following question to Mr. Kelly. This crisis happened on a Saturday evening. Could the product not have been withdrawn from the shelves until a further assessment was undertaken? There could also have been an assessment of the risk to human health. There was a similar case involving bottled water which was not taken off the shelves, even though it was deemed that there was e.coli in the water but it was not regarded as a threat to public health. There is a difference in assessment in this case and in the manner in which the products involved were dealt with.

The point was made last week that it was clear that in its own best interests that the processing industry needed to move beyond minimum standards of traceability. This was a point made by a delegate, not the committee.

Deputy Eamon Scanlon

I do not think anyone is blaming the absence of traceability but the damage could have been limited if there had been better traceability.

I asked a question about secondary processing. If God himself came down from Heaven, I do not think he could guarantee 100% traceability in secondary processing.

Mr. Cormac Healy

Traceability can be guaranteed but the question arises in the further processing stage where one is dealing with batches and larger volumes. If a particular batch is deemed to be affected and has been mixed with three others in the processing operation, the volume is three times the size of the original batch. It is a question of how small those batches can become and whether it can work logistically both from the point of view of operational difficulty and from the point of view of the product being produced.

I will address some of the points Deputy Doyle made. He asked about the quality assurance scheme. It is a voluntary scheme. I read some comment from a previous witness that we should go for the honours paper as opposed to the pass paper. This is an example of the fact that not only do we have EU approval which sets a very high international baseline, but beyond that to deal with particular retail customers or to have access to particular markets we need to get the BRC approval and the Russian approval based on separate inspections from their authorities. I made the point that the Bord Bia standard is a further standard that companies can and do try to meet. It is not a compulsory one.

I agree with the Deputy's point regarding the recall in that there was an identification of products on the shelf that were not Irish. In that context my presentation referred to the label that Bord Bia introduced during the crisis. We welcomed that Department-approved label which highlighted the Irish product on the shelves. From the perspective of the Irish Association of Pigmeat Processors we would encourage its continuation. I understand there are certain difficulties with continuing the use of that label owing to state aid issues. We would welcome continuation of that label or something of its kind. That may be the quality assurance label, which is an Irish label.

Mr. Paul Kelly

Further to Deputy Doyle's comments, I wish to make a point about traceability. We are a very export oriented industry both at primary level and at secondary level. There are obviously existing EU standards in place. We are more than happy to enter into dialogue with the Department on this issue in particular. Mr. Healy said that the primary processors have already organised a meeting next month in this regard. It would appear appropriate that any initiatives of this sort need to have an associated EU dimension. We operate effectively within a single market and we need to ensure there are neither distortions to trade nor impacts on our competitiveness. We effectively need a level playing pitch. We do not have it in other aspects of our business in terms of business costs, distance from market and so on. However, most regulation here either comes directly or is transposed from European legislation. Traceability can be considered but this needs to happen as much from an EU perspective as directly from an Irish perspective.

Regarding product being removed from shelves and so on, I was trying to cite an example to show the complexity of the supply chain when one goes not just to secondary level but effectively to tertiary products. These products can be produced in a distant country and distributed to a variety of different countries. I do not dispute the decision taken on the recall on Saturday. I am merely highlighting that regarding certain aspects of the recall further messages came out later in the week. This highlights the need to review the preparedness and the sequencing of such events. Obviously the correct decision was made to withdraw product from shelves by the industry and the customers of the industry. That is what is expected when a recall of this sort occurs. We need to review the sequencing, which should be part of how we address the issue of preparedness.

Chairman

Do the delegates believe it would have been worse if tests carried out in plants in some European countries had shown levels of dioxins but they could not prove where these had come from? Eventually within the State here we discovered that it was from this particular plant. If it had been the other way around and some of the European countries had found out would it have been considerably worse for the industry?

Mr. Cormac Healy

That is a hypothetical question. We work on what we have. I do not know the exact detail and sequencing of all the events. We had a finding here that showed up PCB levels in pork fat. That was followed through and there was reaction to it straight away. In that sense we were reacting to an issue that our own systems had revealed. Clearly if a customer, including an export customer, comes knocking on our door highlighting a problem we would be on the back foot. I presume the conclusion from that is that it would be worse. We had a long timeframe, which is part of the problem. Government and the agencies were making these decisions on 6 December and regrettably we were covering a period that went back effectively for a quarter of a year. That is why this entire issue is so extreme in its nature.

Chairman

On behalf of the committee, I thank the delegates for appearing before it. I thank them for their comprehensive presentations and answering the questions raised.

The joint committee adjourned at 4.40 p.m. until 11 a.m. on Wednesday, 28 January 2009.

JOINT COMMITTEE ON AGRICULTURE, FISHERIES AND FOOD debate - Thursday, 22 Jan 2009

Discussion with Bord Bia.

Mr. Aidan Cotter

Mr. Aidan Cotter

Mr. Aidan Cotter

Mr. Aidan Cotter

Mr. Aidan Cotter

Mr. Aidan Cotter

Mr. Aidan Cotter

Mr. Padraig Walshe

Mr. Padraig Walshe

Mr. Michael Berkery

Mr. Michael Berkery

Mr. Tim Cullinane

Mr. Padraig Walshe

Mr. Padraig Walshe

Mr. Padraig Walshe

Mr. Padraig Walshe

Mr. Padraig Walshe

Mr. Padraig Walshe

Mr. Padraig Walshe

Mr. Padraig Walshe

Mr. Padraig Walshe

Mr. Michael Berkery

Mr. Cormac Healy

Mr. Paul Kelly

Mr. Paul Kelly

Mr. Paul Kelly

Mr. Cormac Healy

Mr. Cormac Healy

Mr. Cormac Healy

Mr. Cormac Healy

Mr. Paul Kelly

Mr. Cormac Healy

JOINT COMMITTEE ON AGRICULTURE, FISHERIES AND FOOD debate -
Thursday, 22 Jan 2009