Joint Committee on Agriculture, Food and the Marine debate -
Thursday, 21 Nov 2013

Live Exports: Discussion

Chairman

I welcome Mr. Michael Spellman, chairman, Irish Co-operative Organisation Society, Mr. Seamus O’Donohoe, chief executive officer, Irish Co-operative Organisation Society, Mr. Ray Doyle, secretary, Irish Co-operative Organisation Society, Mr. John Bryan, president, Irish Farmers Association, Mr. Tomas Bourke, livestock officer, Irish Farmers Association. Mr. Gabriel Gilmartin, president, Irish Cattle and Sheep Farmers Association, Mr. Eddie Punch, general secretary, Irish Cattle and Sheep Farmers Association, Mr. Paul Smyth, policy officer, Irish Creamery Milk Suppliers Association and Mr. Paddy Cassidy, Irish Creamery Milk Suppliers Association. I thank them all for coming at short notice.

Members raised concerns about the closure of TNT International and its implications for farmers and the marts. In this respect, the purpose of today’s meeting is to allow the relevant representative bodies to update the committee on the potential of this episode to undermine confidence in the live trade, as well as their concerns about individual farmers exposed by potential losses. The meeting will focus on what safeguards can be put in place to prevent a similar reoccurrence of this episode.

Witnesses are protected by absolute privilege in respect of evidence they give to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. 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.

I invite Mr. Seamus O’Donohoe to make his opening statement.

Mr. Seamus O’Donohoe

I thank the committee for the invitation to discuss the recent closure of TLT International with a view to identifying what safeguards can be put in place to prevent a similar reoccurrence.

The decision by HSBC Bank to appoint a receiver to TLT International was a disappointment to the entire mart sector and, undoubtedly, to our own mart members. While it is likely to put certain strains on the balance sheets of some of our members, the marts in question have the capacity to absorb any losses likely to emerge from the receivership process. The turnover of TLT International was approximately €35 million and represented a relatively small proportion of national mart sales, which involves a throughput of 1.7 million animals a year with a sales turnover value of approximately €1.2 billion. While the receiver has not, as of yet provided a detailed quantification of the debtor schedule for TLT International, our own estimates, derived from informal consultation with the trade would suggest that collective mart exposure to the TLT International receivership is between €3 million to €4 million. Our understanding is that part of the explanation for the variance between the €3 million and €4 million estimate relates to a requirement on the part of the receiver to assess the extent to which some farmers may have recovered stock which had been purchased but not paid for by TLT International.

Undoubtedly, this level of potential loss is an unwelcome shock for the sector. However, any consultations we have had with our membership since this crisis arose would confirm that those of our co-operative livestock marts affected have the capacity to withstand this shock. Anyone familiar with dealing with our livestock mart members over a long number of years would be aware that one of their key strengths has been their willingness and capacity to guarantee to pay all sellers of stock promptly and to honour those payments. As they have consistently done over the past 60 years, our marts are committed to continuing to pay all customers promptly for their stock.

The establishment of the Property Services Regulatory Authority last year with its powers to licence and regulate the mart sector has been welcomed by the Irish Co-operative Organisation Society, ICOS, as it reinforces and underpins the existing commitment and practice on the part of our co-operative livestock marts to guarantee to pay all sellers of stock through the livestock mart system.

The credit policy of the marts has been the subject of much discussion and comment over the past several weeks.

The provision of credit to certain purchasers of stock by some of our marts has been an ongoing challenge for the ICOS marts committee. The issue of credit policy has been the subject of a number of consultations and discussions and indeed regional meetings of our mart members in the last 12 months.

The policy of the ICOS marts committee, particularly under its present chairman, Michael Spellman, has been to seek to advise and encourage marts to move to a policy of not providing credit to purchasers of stock. Given the structure and trading traditions of the mart sector, the acceptance by our marts of such a policy was never going to be achieved overnight. One of the observations of the marts committee has been that it is in those parts of the country with a large number of private and co-operative marts with single mart centre operations competing against one another that some mart boards have found it most challenging to introduce a more prudent credit policy. Those mart operations with a number of sales outlets and larger scale operations have, by and large, been more successful in managing their credit policies.

It should also be pointed out that even where a co-operative livestock mart does have the capacity to enforce a restrictive credit policy, it will continue to have the normal exposure between sales that arise from the fact that even where a cheque has been issued by a purchaser of stock, it will still take five to seven days to clear the banking system. ICOS has examined other forms of security from purchasers that are in use in other sectors and to date, such instruments have proven to be too expensive and cumbersome for our livestock marts. In addition, the general caution now being exercised by our commercial banks with regard to their credit policy for small and medium-sized enterprises has resulted in greater pressure from purchasers of stock for more liberal credit facilities. The business environment which marts are currently encountering with increasing cost pressures arising from every increasing regulatory burdens - be they health and safety, welfare, environmental and more recently, the costs associated with compliance with the licensing requirements of the Property Services Regulatory Authority - is posing problems in respect of the number of individual mart firms currently competing with each other .

ICOS has a clearly enunciated policy in respect of the need for mart consolidation and rationalisation. In many instances, this does not require the closure of mart centres as such as at times, seasonal supplies of stock would require all of the existing capacity available. What is required, however, is the consolidation of a number of mart centres into one co-operative society with a view to achieving economies of scale. This enhances the potential for improved efficiencies and gives co-operative mart boards and management a better capability to introduce appropriate policies around the provision of credit. Without some form of rationalisation and consolidation, the danger is that in some areas of the country, marts will continue to compete with one another on the basis of the level of credit they are willing to offer to purchasers of stock. Ultimately, the role of co-operative marts is to improve price transparency in the cattle sector through providing a live auction system that allows a certain volume of stock to be exported live from this country and in so doing, provide farmers with a very valuable and transparent countervailing force to the dominance of a small number of privately owned beef processing factories in this country.

In conclusion, while ICOS is not in a position to guarantee future outcomes, the past performance of our co-operative livestock marts has been to honour all its transactions with its farmer customers and this is still the stated intention and objective of our livestock marts. My colleagues, Michael Spellman and Ray Doyle who is the ICOS marts secretary, and I will be happy to address and questions and expand on some of the issues raised in this contribution.

Mr. John Bryan

I thank the Chairman and members for inviting the IFA here today to address this issue. When I was here with the committee last October, I outlined the findings of an IFA-commissioned report carried out by Professor Alan Renwick from UCD which quantifies the huge contribution the cattle and sheep sectors make to the Irish economy, particularly the local rural economy. Professor Renwick showed that the livestock sector generates €2.3 billion worth of output at the farm gate which equates to total output of €5.7 billion for the national economy. The sectors support 100,000 farmers and over 50,000 jobs in the wider economy. The cattle and sheep sectors deliver a real return in every rural parish, generating economic activity and providing employment across the country. Combined, the sectors have an unparalleled reach in terms of their contribution to the rural and wider economy. Professor Renwick's figures also showed that every €1 of direct payment invested in the cattle and sheep sector underpins over €4 in the economy. There is no doubt that the cattle and sheep sectors are hugely important to the Irish economy and particularly the rural economy.

The live export trade is a critically important part of the livestock sector in this country. On an annual basis, Ireland exports between 150,000 and 300,000 head of animals. These include calves, weanlings, forward store cattle and 30,000 to 80,000 head of sheep. The importance of the live trade cannot be underestimated in terms of its role in creating price competition. It is important to point out that the live export trade is heavily regulated by the Department of Agriculture, Food and the Marine and operates to the highest international and EU standards in terms of animal welfare. Previous UCD studies from Dr. John O'Connell indicate that the live trade provides price competition in the region of up to €76 per head on cattle. On the sheep side, with the opening up of the live trade to Libya for the very first time this year, the IFA estimated the live trade was worth an extra €6 to €8 per head on the price of lamb during the peak selling months of June, July and August. So again, the live export is vital to cattle and sheep price competition.

Against this background, the recent announcement that TLT International has been placed into receivership by its main bank HSBC is bad news. TLT has been the dominant Irish exporter of weanlings to the Italian market, shipping up to 21,000 cattle annually in recent years and several tens of thousands of sheep to EU markets. In total, Ireland exported 37,855 cattle to Italy in 2012, back from 53,678 in 2011. Total Irish live cattle exports to all markets in 2012 were 160,407 head and total sheep live exports were about 40,000 head. Total live exports to Italy to date in 2013 are at about 23,000. This is back from 33,000 during the same period in 2012. TLT had exported just over 11,500 of these animals to Italy. It also exported live cattle to Greece, Tunisia and Libya this year.

When news of the TLT receivership broke on Friday, 8 November, the IFA 's solicitors were in direct contact with the receiver, Gearóid Costello of Grant Thornton. The IFA arranged a meeting with Mr. Costello along with the ICOS marts committee representatives. The IFA made it very clear that payment to farmers and marts for livestock must be prioritised. The IFA also highlighted to the receiver that farmers and marts would be claiming retention of title on any livestock recently purchased and not yet gone for export. On 12 November, the IFA met with the directors of TLT, Mr. Paulo Garavelli and Mr. Davide Garavelli, at their export premises in Mullingar accompanied by ICOS. Again, the IFA made it clear that payment to farmers and marts must be prioritised. Later on that Tuesday evening, the IFA and ICOS organised a meeting in the Sheraton Hotel in Athlone attended by 70 mart managers and farmers. At all stages, the IFA has made it very clear to both the receiver, the directors of TLT and the bank that payment for livestock must be prioritised. The key component to finding any type of acceptable resolution to this situation is that farmers and marts are paid for the livestock supplied. The IFA has also been in contact with HSBC, which appointed the receiver. The specific details in respect of the full extent of the liabilities and creditors of TLT are still not available either from the receiver or TLT's directors. Mr. O'Donohoe mentioned one of the reasons why clarity has not arisen and all the individual farmers have not yet come to discuss it. There is an urgent need for clarity on the extent of the creditors and debtors in respect of TLT and the IFA has called on the receiver to make this information available.

What is known and already outlined in the media is that HSBC is owed in the region of €3 million and AIB is owed in the region of €750,000. We also know that up to 30 marts are owed millions of euro and a relatively small number of farmers are also owed an unknown amount of money at this stage.

It appears that the company has very few tangible fixed assets and it has been reported that the Mullingar export layerage and the trucks were leased to the company. The main company assets appear to be trading debts due from customers in Italy.

The directors of TLT must take full responsibility for their position and work to ensure all farmers and marts are paid in full for their livestock purchases. The IFA has made it clear to the receiver that payments for farmers and marts must be prioritised. The goodwill of farmers and marts is a crucial aspect of the business but it will only remain if farmers and marts are prioritised. The receiver, the bank, the current directors of TLT and potential buyers and debtors will be aware that the farmer and mart, as creditors, are essential to the business. A satisfactory resolution to these aspects will have to be found before progress can be made. The IFA will continue to work with everyone involved to progress matters but our priority is achieving payment for farmers and marts. Our policy on payments to farmers for livestock has always been to insist on payment on the day and we encourage farmers to sell through the marts because they have an excellent record of payment. Farmers expect that payment is guaranteed when they sell an animal in a mart.

Chairman

I invite Mr. Paul Smyth from the ICMSA to make his opening remarks.

Mr. Paul Smyth

I will briefly set out the ICMSA's views on the closure of TLT. We have received a considerable number of complaints in recent weeks regarding the closure of TLT. It is the view of the ICMSA that the farmers concerned should be preferential creditors when it comes to the company's assets. As we have heard, there is a limited amount of fixed assets available for sale. It is the view of the ICMSA that farmers should receive payment upfront before entering into contracts but unfortunately that is not always the case. Goodwill has often prevailed. We heard about shipments over the weekend and we hope that retention of title is made to the farmers who produced the animals concerned.

Ireland is an export economy. If we are to meet the Food Harvest 2020 goal of increasing dairy output by 50%, there will be many more instances of farmers trying to export animals in future. As export companies represent competition for Irish marts and factories, it is essential that the Government provides some form of credit insurance. The Government received a report on this subject from KPMG several years ago and we would like to see an export insurance scheme not only for the farming industry but also for exporters if we are to be serious about developing our agriculture and other industries.

Chairman

I invite Mr. Gabriel Gilmartin from the ICSA to make his opening remarks.

Mr. Gabriel Gilmartin

I am grateful for the opportunity to contribute to this important debate on TLT. Our first concern is the immediate difficulties faced by farmers and marts owed money. For a farmer, the exposure is traumatic. This is also a time for mart managers and committees. The early indications are that the bulk of the debt is owed to marts. While there is considerable speculation about the scale of the money owed to individual marts, much of it has been based on wild guesses. Assuming they have been diligent in managing credit level and in pursuing moneys owed to them, we expect that the marts have been run profitably for several years and will have the financial resources to ensure business as usual. We must be careful to avoid exaggerating the extent to which marts are exposed or, worse, speculating on the position of individual marts. Confidence in the marts is vital to the livestock trade just as confidence in the financial system is vital to the economy.

The marts affected by the TLT issue continue to trade. While concerns understandably arose when the story broke, farmers continue to bring stock to marts. In the past few weeks it has been business as usual. The fact that the marts are paying their clients promptly is reassuring. Some of the marts involved have confirmed that they have put reserves in place. That is an important step in rebuilding confidence. Demands that the marts should publicly declare what they are owed are premature. Mart committees need to tread carefully in any public statements they make. A blanket statement to the effect that a mart is owed thousands of euro is meaningless unless it is set in the context of the mart's overall financial position. A mart's financial position is best understood when the auditors lay the full accounts in front of an AGM. A loss of €50,000 could have entirely different effects in two marts, depending on their underlying viability. In due course, each mart will be accountable to its shareholders at its AGM but, in the sort term, the interest of shareholders are best served by ensuring that mart managers and their committees take steps to maintain confidence in the mart by paying promptly for livestock.

The immediate worry is how farmers and marts will get what they are owed. The receiver who has been appointed by the bank will follow the regulations, which provide that the receiver and the banks are paid before everybody else. There will be lingering doubts about whether HSBC made its biggest mistake in advancing credit in the first place or in being too hasty in appointing a receiver. An argument can be made that the best way to ensure the maximum return to all creditors would have involved an examinership or a more gradual wind-down of the credit facilities rather than a receivership, which has wiped out TLT without hope of recouping all of the moneys owed.

In the broader context the question that exercises most thought concerns the impact on live exports and the cattle trade in general. I am concerned that the impact of the TLT closure has been understated, particularly in political circles. There is reason to be hopeful that demand for livestock in Europe and North Africa will remain constant and that the slack will be taken up by other Irish exporters. However, it would be naive to think this will happen easily. The directors of TLT built up a base of customers over many years and there is no obvious reason to expect these relationships to be readily taken over by another Irish exporter. Its influence on the Italian market was particularly important for suckler farmers, who have bred top of the range weanlings. Moreover, the credit terms required by continental buyers are not going to soften just because of the TLT experience.

The credit facility of €3 million which HSBC made available to TLT is now off the table and marts have an exposure of up to €3 million. That means we will have to find €6 million elsewhere. Regardless of the marts' exposure, they are likely to be much more cautious in the foreseeable future, with the consequence that we will either have to develop an export trade based on payment up front or find a better way of financing the sector. Neither option looks simple. I have heard it said that TLT deserved to go under because it paid €50 too much on average.

However, if the trade to Italy is undermined, by how much will top grade weanlings fall in 2014? The progressive suckler farmer breeding top grade weanlings has no scope to take lower prices.

Farmers will be concerned also that any reduction in live exports will be a silver lining for the meat factories. Recent years have demonstrated that beef price and levels of live exports are linked. The higher level of dairy calf exports in 2013 has been welcome after the collapse of 2012. There has also been a positive reaction from farmers to new live cattle export markets out of Europe to places such as Libya and Tunisia, some of which involved TLT. All of this ensured that cattle were scarcer for the meat industry here, and scarcity equals firmer prices. It must also be remembered that TLT was involved in live sheep exports and, again, the concern is that less live exports means lower factory prices for sheep farmers.

It will be this time next year before an accurate assessment can be made. Fortunately, Irish beef finishers have been strong customers for weanlings in recent weeks. However, the key for any mart and for the wider sector is to ensure that there is a strong trade over the full 12 months. The whole episode is a huge wake-up call to us all. ICSA believes very firmly that unless there is competition on some sort of an equal footing between live exports and the meat factories, the future for sucklers in particular is very bleak.

It seems absurd that a deficiency of perhaps €6 million could completely undermine the potential for expansion as set out in Food Harvest 2020, but that is the reality. It is not long ago that a key player in the Irish meat processing sector got into difficulty with exports. The Government at the time seemed to believe that regardless of the cost, the export of beef had to be supported. The question we now face is whether the Government of today understands and is committed to the importance of live exports. I am not suggesting that TLT should be bailed out. However we must examine what needs to be done to support the rest of the live export sector, the marts and the farmers who produce export grade weanlings. We also need to be concerned that a significant reduction in live exports could impact on the shipping service provided by Celtic Link.

In the final analysis, the overall debacle again raises the question of the availability of credit to the livestock business. Just as cattle and sheep farmers have found credit being squeezed by banks, TLT discovered that the banking sector seems to be intent on continuing to reduce its exposure to the sector. It is also time to consider whether a different model can be developed to support live exports, one which does not depend on a small number of essentially small limited companies taking risks to drive the business.

Is there a role for export credit insurance? How would this be funded, especially given State aid rules? Is there a role for a co-operative structure? Can we deal with the financing required and what are the credit options that do not leave marts or farmers exposed?

It is easy to pontificate about the risks that marts take in extending credit. But in the real world, credit is an integral part of most commerce across Europe, and the EU Commission has been to the fore in pushing for credit terms of 30 days. Marts have played a crucial role in supporting a policy in favour of live exports that has been enthusiastically backed by farm organisations, politicians and farmers. In most cases, marts did not provide extended credit facilities to any individual company, but are caught by the fact that one good sale involving as little as seven days' credit can involve tens of thousands of euro. The Minister for Agriculture, Food and the Marine needs to realise that the future of live exports is now an urgent issue and at minimum needs to be treated in the same way as the closure of a large scale employer. A task force to examine the way forward for live exports might be a first step. I thank the Chairman. Mr. Eddie Punch and I are open to questions.

Chairman

I thank Mr. Gilmartin. I have to suspend the meeting for a vote in the Dáil.

Sitting suspended at 11.55 a.m. and resumed at 12.10 p.m.

Chairman

I thank the witnesses for bearing with us.

Deputy Éamon Ó Cuív

I thank all the representatives of ICOS, IFA, ICMSA and ICSA for their presentations. There is significant concern among committee members about this issue. What we need to do can be broken into two parts. There is the issue of the receivership of TLT International and I concur it is a pity it is not an examinership and then there is the wider policy issue for the future.

I welcome Mr. O'Donohoe's reassurance that the co-operative marts can take the hit of the receivership and farmers will continue, as they have for many years, to receive their payments from the marts and none will be left short. That is important because the last thing we need is them holding back cattle from marts and refusing to trade. We should not be part of scaremongering in this regard. I take Mr. O'Donohoe's reassurance on behalf of the co-operative marts at face value. He has stated categorically that marts will honour every payment they owe to every customer and will continue to do so.

Mr. Byran said he wanted farmers to get priority in payment. The receiver is bound by the law and there is a hierarchy of rights, including Revenue, preferential creditors and so on. I would like to tease out of the issue of farmers who sold directly to TLT International and who are, therefore, creditors. We have a reassurance from the marts that anyone who deals through a mart will be paid. The second issue centres on farmers dealing with companies who when they go bust leave them high and dry. There are three elements to this. The first is the credit policy for marts. It is correct that every mart should restrict credit according to what has been done in the context of property registration. They cannot be using clients accounts, which is more or less what they have to do when they give credit. We need to have another meeting to tease that out more fully how we as legislators can address that. We should consider whether the law needs to be amended to say that where farmers deal with marts or meat factories they are granted a preferential payment status and, in other words, become preferential creditors. We will not solve that problem today but it needs to be examined.

Mr. Gilmartin spoke eloquently about live exports and the wider issue for the distant future. If we do not have a live export trade, the meat processors will control the price because we live on an island. The final issue, therefore, we should discuss in the context of development a policy, and encouraging the Minister to develop a policy, is how we create sustainable live exports in such a way that farmers or marts are not left exposed. If one has a factory, one has many buildings and so on but a live exporter does not have to put the same infrastructure in place and is, therefore, at more risk. As a country, while we would prefer to slaughter the vast majority of cattle in Ireland and retain jobs here, without a competitive live export trade, farmers will not achieve the maximum price for the cattle. We need a structured live export trade built on the firm foundations of a coherent Government policy on live exports and not on waiting for the market to make it happen. The issue of credit and so on should be examined in that context.

Chairman

This needs to be broken into four distinct areas: the TLT International episode; a live exports policy for the future; credit control; and who becomes a preferential creditor.

That is a reasonable way to focus on it from the outset. Deputy Pringle indicated that Deputy Luke 'Ming' Flanagan was substituting for him and, as there is no Sinn Féin member present, I will call him.

Deputy Luke 'Ming' Flanagan

In response to a Topical Issue raised by Deputy Troy, the Minister said he understood the company was being placed in receivership by AIB and HSBC banks. That is not correct. I understand it has been placed in receivership by HSBC. It is important to correct that fact because on this issue all the facts need to be correct if people are to have confidence in what is going on.

The farming organisations have made it clear that TLT going into receivership will cause a problem for farmers and the prices they will get. Last night I met several farmers who are affected by this. They claim it is already affecting them by up to €300 per animal. The loss of the main live exporter will cause a problem. It has been suggested that others will take up the slack, but who will take up the slack? One of the people who is supposed to take up the slack owns a meat factory here and the others just export to Hungary and Germany. One of the others who could potentially take up the slack does not have access to the same markets this company had. Someone is just not going to rush in here and solve this problem. We need to consider the possibility that there might be a future for TLT or something similar. It is quite obvious that this will leave a big hole in the market. Regardless of the product, if fewer people are vying to buy it, the price will obviously be affected.

When did representatives of the IFA and TLT last meet? Has the IFA made a serious effort to sort this out? One of the main purposes of this meeting is to ensure this does not happen again. One way to ensure this does not go wrong again is by opening up access to the UK markets. There seems to be an animal welfare problem in transporting animals on a ferry to Britain while there seems not to be a problem bringing them on a ferry all the way to Cherbourg. If there are concerns about a short journey, why are there not concerns about a very long journey? Last night I spent about three hours with the owners of TLT. As far as they are concerned, if the markets to Britain were opened up, the company's shipping costs for last year would have been reduced from €1.5 million to about €900,000. That €600,000 would have made a massive difference to it. What are the farming organisations doing to open this potentially phenomenal market for the live trade? When did the IFA have its last contact with TLT?

May I ask a supplementary question on that?

Chairman

We will get everybody in and then we can have supplementary questions.

Deputy Martin Heydon

I thank all the witnesses from various organisations for attending to discuss this very important issue. The Chairman summed up the problem very well when he broke it into four different parts. There is major concern that individual farmers who sold to TLT and have not been paid, will get caught. There is a major concern that our marts find themselves in a difficult financial situation. Ultimately as outlined, the preferential creditors, whoever they are, will be key.

In the longer term there is very big concern over the loss of competition in the cattle and sheep sectors. The export of live weanlings to Italy had been a very important aspect of our beef trade and had a positive impact on the prices our factories were paying due to demand. Any break in a link of that chain is of concern. We need some analysis of how this happened and how TLT was run. We need to know if TLT made any large capital investments prior to the receivership that would have put pressure on its cashflow. If so were those capital investments in this jurisdiction? What level of follow up is being done? There may be a case for the committee to engage with the receivers. I believe we should write to them following today's meeting.

Deputy Michael McNamara

I welcome the representatives of the farming organisations and thank them for their solution-based approach. Obviously this will result in a tightening of credit. The Property Registration Authority was mentioned. What exactly is required by that? Obviously a tightening of credit would protect farmers or marts at the very least. However, it also creates difficulty for farmers. Most people who sell cattle, including me, have obtained short periods of credit. It would be difficult to get rid of credit completely without it inconveniencing people who buy and sell cattle at Sixmilebridge, Ennis, Kilmallock or any of the major marts in the west.

Will export credit insurance apply to any calves or cattle that have been exported outside the Union, including to north Africa? If not, I presume there is no obstacle. Obviously export insurance is an obstacle for exports within the Union, but when it is outside I do not imagine it would be an obstacle. There would be a lien over the cattle until they are paid for, but the difficulty would be tracing or finding those cattle. Given the increased level of traceability - obviously all cattle have ear tags, etc. - is there scope for a mechanism within the European Union so that if cattle go from one member state to another one and have not been paid for, it could be registered? At least then when the cattle are finally slaughtered there might be a mechanism of recovering moneys. Is that completely naïve given the possibility of switching tags?

Deputy Tom Barry

I thank the representatives of the organisations for attending. As there will be more cases such as the TLT one, governance needs to be considered. Agribusiness has changed in recent years. We applied credit liberally across the agribusiness area, including in the sector I am in. However, that does not happen anymore. That period of adjustment was very difficult because we were telling people we knew well that we could not get extra credit and so could not pass on extra credit. It was difficult to do. If credit is applied now, it is being applied very strictly and those receiving it are being asked difficult questions. They are being asked for a guarantee from their bank that they are good for the credit. Appearances do not merit anything anymore. A business, including a mart, cannot become a bank. Farmers or marts selling on the goods have the responsibility to establish that there is a reasonable chance of getting paid.

There cannot be a dribble-down effect. The farmer down the line from those who sell abroad should not be the one to be caught because he or she has not been part of it.

What bad debt provisions are in place for marts? What are the amounts of bad debts, in percentage terms, which have been written off in the past three years? Are customers asked to provide credit guarantees from their banks? Is work done to ensure a decision to provide credit is correct? Those asking a bank for a loan will go through a lot of hoops before they get the money. It should not be assumed one should receive credit just because it has always been the done thing.

It was mentioned that marts were competing on the level of credit given and that this was quite dangerous. The marts are becoming a banking service and are not dealing with their core business. Liberal credit will distort the price in the marketplace. It happened in the property sector. When those who do not have equity or substance behind them can have cash flow to compete in the marketplace because of the availability of credit, it will bring it down like a house of cards. I am concerned about this. Mr. Bryan mentioned price competition. Marts need to have a policy on credit across the board. Perhaps legislation is required. We cannot have one mart doing better than another based on the availability of credit because it is building a bubble which will hurt farmers.

We must distinguish between good will and reckless trading. Reckless trading hurts everybody. Neither the mart nor the primary producer can afford to take losses in this day and age. We cannot use Government credit insurance to cover bad practices. The industry must get itself in line first and then we will discuss these issues. I am not so sure about HSBC and will wait to hear the response of delegates on it.

Senator Susan O'Keeffe

The IFA has stated it knows of up to 30 marts that are owed millions of euro. How many marts will go down this road?

With regard to the ICOS, it was stated there would be danger without rationalisation or consolidation in some form. Is this an aspiration or is it becoming a reality? How much work has been done in this regard?

Deputy Denis Naughten

I thank the Chairman for giving me the opportunity to address the committee, of which I am not a member.

I have spoken to a number of farmers who are owed money, some of the mart managers, some of the people persent and Mr. Paulo Garavelli. I have also raised the issue in the House, with the bank and the Italian authorities. There is no doubt this is a complex issue. It is not simple and will not be simple to solve. Everyone who has contributed agrees on this point. The biggest challenge is trying to maximise the money we can get from the Italian trade debtors. That must be the objective, to try to ensure unsecured debtors, in particular farmers and marts, get as much money back as possible.

We have an indication that approximately 30 marts are owed money. Have the three farming organisations been contacted by many individual farmers who are in financial difficulty? In Roscommon there has been a history of IOUs which have had a devastating impact on individual families. Will the delegates give us some idea of what we are speaking about? How can we influence the flow of moneys due back into Ireland from Italy? It is not relevant now with regard to this company, but how do we provide for the retention of title across EU member states? Deputy McNamara raised a similar question. I have raised this issue with the Department of Agriculture, Food and Marine and it is washing its hands of it, stating it is not its problem. I have also been in contact with the Italian authorities through the Italian embassy. They are also washing their hands of the issue, stating it is the Irish consulate in Italy which must deal with it. No one seems to be prepared to deal with the issue of the retention of credit across EU borders.

We all accept that the live export trade is vital to the industry in this country. In fairness, it must be acknowledged TLT opened up a new market in Italy which had not been easily accessible to Irish exporters. Has the receiver given an explanation as to why he went down the receivership rather than the examinership route? The elephant in the room is the fact we can ship cattle to Benghazi, but we cannot ship them to Birmingham. If we were owed these debts in Manchester, it would be far easier to collect them than having to go to Milan to collect them, which is a big part of the problem. On this bigger issue, it is not, as we know, as simple as an animal welfare issue across the Irish Sea. If it was, we could get around it. There are complex issues in the United Kingdom with regard to having our animals slaughtered, processed and placed on supermarket shelves there. Will the delegates elaborate on the steps we need to take, as members of the committee, the Oireachtas and the Government to ensure this market is opened up. There is a premium market. Why in God's name must we send cattle to north Africa when we should be able to send them across the Irish Sea where there is a deficit with regard to the volume of beef produced and a premium market available to us?

Chairman

A few specific points were raised, particularly with regard to who appointed the receiver, credit requirements and trade debtors. Grant Thornton has an office in Italy. Is it possible for the receiver to pursue animals through traceability provisions and, if they are not paid for, to impound them? Is it the case that the majority of contracts in north Africa are government contracts and that as such, there is a better chance of recovering the moneys?

The point made by Deputy Denis Naughten on access to the United Kingdom falls under the heading of live exports policy and developing a live exports trade policy. Except for one or two specifics, all of the questions are related to either TLT, a credit policy for marts, a live exports policy or the law on preferential creditors.

Deputy Luke 'Ming' Flanagan

What about access to the UK market?

Chairman

I mentioned it.

Mr. Seamus O'Donohoe

The best way to deal with a number of the questions asked is for some of my colleagues to comment on them in more detail.

In respect of the TLT receivership, we are looking at a done deal and a receiver has been appointed. My understanding is this was done by HSBC but that technically AIB joined in the receivership. I imagine that would be the description and that the lead appointee was HSBC. I am to a degree pessimistic about the outcome of the receivership process for the marts, but, in truth, we will not know until the receiver is able to forensically identify the extent of the debt and the ability to collect the receivables.

He is on record as saying the north African creditors are largely government creditors and that the debts are collectable. He is also on record as indicating there is some uncertainty about the collection of Italian debt. There is no clarity in that regard. From the perspective of marts and farmers owed money, there are many issues of concern to us.

I will ask the chairman of the marts committee to respond to the question of credit policy generally and the secretary to respond to the question on the constraints in export of livestock to the United Kngdom, which is an issue at which we have looked.

On Senator Susan O'Keeffe's question about rationalisation initiatives, at a high level we produce a rationalisation strategy every seven to eight years. At a micro level, we never stop socialising the idea of achieving consolidation between marts. The most substantial recent consolidation is approximately eight or nine years old. It involved the consolidation of three marts in Tipperary into Central Auctions. If there is any advertisement for the success and merits of and efficiencies achieved by consolidation, this is one incidence. There are other marts that are managers of multiple sites. It is generally recognised there are efficiencies derived from consolidation.

I will ask the chairman to comment on the issue of credit.

Mr. Michael Spellman

We have spent a great deal of time on the issue of credit, including speaking to members on the reason there should be a no credit policy. If operators in the business of exporting cannot obtain sufficient facilities from their banks to carry on their businesses, where banks have access to their securities and know everything about them, why should marts give them credit? This has been an issue of serious concern for us for a number of years.

Deputy McNamara raised questions about the PRSA and credit. In licensing any mart the main concern and requirement of the PRSA is that the client account be in credit at all times. There cannot be a deficit at any time. This means that if a mart does business to the tune of €500,000 on any auction day, it must have €500,000 in its client accounts before issuing cheques. Obviously, any mart that has afforded credit to a company or any other customer will have done so in the full knowledge that it can withstand the consequences. All livestock marts - I speak definitively about co-operative livestock marts - are managed by boards or committees of management made up of responsible mature people who would not give credit to any customer if they thought they could not withstand it. We have been extremely concerned about this issue and will continue to enforce the stance that there has to be a no credit policy. That is how it should be.

Reference was made to the fact that a customer was paying €50 over the odds for stock. Why should that customer be afforded a credit line when an ordinary farmer client wishing to purchase stock is required to pay before collecting the stock and leaving the mart? It is totally unfair.

With regard to credit insurance, we investigated this issue a number of years ago. The reality is that putting credit insurance in place for anyone dealing with a mart would cost more than what the mart would get in commission. A mart putting in place credit insurance would be a non-runner.

To put matters in context, the main topic of the 37 meetings held from January 2009 to 9 October last was credit. We have been and remain very concerned about this issue.

The question was asked as to the reason the HSBC had appointed a receiver. It is fairly well known that the company concerned was operating on the basis of invoice discounting and that the bank was aware of its exposure. My understanding from the receiver is that in the past four to six months it was not meeting its commitments. For this reason, the bank had to become involved. I do not think it came as a surprise when it moved when it did. It might have been better for many of us if the bank had moved sooner.

Chairman

Would Mr. Doyle like to comment on the policy?

Mr. Ray Doyle

I would like to comment on the situation in the United Kingdom. We have investigated this issue on numerous occasions. We first investigated it three years ago. As recently as three months ago, we went to England to reignite the UK trade. Prior to the advent of EU Regulation 1760/2000, hundreds of thousands of animals were shipped live to the United Kingdom, in respect of which no issue arose. Irish cattle were much sought after in the United Kindom. Implementation of the regulation and various statutory instruments at national level has greatly hindered that trade. Because of labelling issues, cattle born in Ireland and subsequently shipped to England or Scotland lose their identity. They become nomads. Under the regulations, the sellers of this beef, the multiples, etc., can no longer call it Irish or UK beef and it ends up being sold at discount prices to the catering trade. That is a problem. The labelling issue has begun to hinder trade. As stated earlier, it would be much easier from a credit point of view to travel to the United Kingdom by aeroplane or boat to collect a debt in respect of which a problem has arisen.

The second impediment is that a handful of Irish companies involved in the slaughter of Irish cattle are also involved in the slaughter of a sizeable proportion of UK cattle. They will actively resist any feed lot owner in the United Kingdom buying large quantities of Irish born cattle and finishing them. Perhaps it is an issue of market segmentation from their point of view and that of the multiples. During our trip to the United Kingdom three months ago we obtained photographic evidence which indicates that Irish beef - cattle born, raised and slaughtered in an Irish plant and subsequently sold to a UK multiple - and British beef - cattle born, raised and slaughtered in England - are being sold at the same price per kilo, yet there is an almost a €200 difference between the price Irish and British farmers are getting. Normal economics of supply and demand override these difficulties and we see sizeable amounts of Irish cattle being sold and finished in England. However, the impediment in this regard is EU legislation. Perhaps with the assistance of the committee and the Government, a bilateral arrangement between Ireland and the United Kingdom could be put in place. Currently, it is easy for players in the market, either Irish processors or multiples here or in England, to hide behind an EU regulation, thus interfering with the economics of supply and demand.

The British sector can only meet 55% of its beef needs. Ireland exports 80% of the beef it produces. In other words, we produce 500,000 tonnes of beef, of which 260,000 tonnes is exported to the United Kingdom in carcase form. We are then forced to find export markets for the remainder - alive or dead. All of these problems are linked. Our exporters have to find different countries to which to export, in respect of which the need for credit difficulties may arise, including, as mentioned, north Africa and Italy. Farmers in Ireland are being forced to find markets for live and dead cattle, one of the pivotal points which solidifies in the credit issue being discussed. The issue I have highlighted is a major one that needs to be addressed.

Chairman

I thank Mr. Doyle for his response which gives a fair indication of what is going on. Would Mr. Bryan like to comment?

Mr. John Bryan

I will continue from where Mr. Doyle finished. We have put a lot of effort into the UK, meeting representatives of Irish Ferries and P&O over recent months. There is a higher concern, rather than awareness, of live exports in England. We have a very steady trade of more than 300,000 animals, with some going to the UK and many going to Northern Ireland. A substantial number of those animals go to Europe. The Chairman referred to the African trade, which is much better regulated. Quinn International had three boats of animals for export earlier this year, and not one animal leaves the port until the cheque is lodged. There is a simple policy as the ship stays in the port until the money is received. The company is dealing with a state agency but the ship does not leave until the cheque is lodged, as otherwise the guarantee of payment is dodgy.

The UK is our nearest market and I have met representatives of Tesco, Sainsbury's and Asda. The representatives of Tesco told me if I rocked the boat in advocating Irish beef, it would purchase less than the €300 million of Irish beef it purports to buy. Our biggest single customer told us it did not want Irish cattle going to England to be slaughtered as it upset the National Farmers Union. It is a delicate balance. Deputy Naughten asked the very good question of what we can do. The visit of Queen Elizabeth II to Ireland last year was very helpful, as is the Irish President's upcoming visit to Britain. The closer the two countries get, the better the amalgamation of market. We will be able to get Tesco to be happy to put an Irish flag on beef packaging, as today it wants to put the Union Jack or the red tractor on such products for a premium price. Collectively, we must achieve a better relationship through closer ties.

There are four impediments to this, with the first being labelling legislation. There is also shipping, and Deputy Ó Cuív has highlighted this issue on several occasions. I am amazed when I meet representatives of P&O and Irish Ferries because they ask who will indemnify the service if there is a protest at the destination. That does not happen on this side. The UK would love to have a live export trade but it cannot have it because of the fear of animal rights lobbies, which are stronger in the UK than they are in this country. Retailers are the biggest impediment, and last of all are the colleague farming organisations, which have on a couple of occasions lately gone to retailers to throw Irish cheddar and beef on the ground. Colleagues in France were protesting about Irish cheddar and beef in McDonald's. There is always a delicate balance between maximum market access and not getting a reaction that causes damage.

The Deputy summed up the concerns of farmers very clearly, especially the viability of individual farmers. I met a farmer from Monaghan who is owed €45,000 and one from Limerick who is owed €25,000. The cattle in question were called a few days before the receiver went in and collected from the farm. There are mart managers who spent five and six weeks telephoning the directors of TLT International. They would not answer the calls because they had cancelled cheques. There is a serious concern about this. I am a director of a mart and as a director of any business, as Deputy Barry knows, one has a responsibility to ensure anything that is purchased is paid for. No mart director should allow a mart trade unless he or she is 100% sure the cattle will be paid for. I have made that clear to the directors of TLT International, which has a clear responsibility. They purchased cattle when they knew they had massive debts of €10 million and assets of only perhaps €4 million, and some of them difficult to collect in Italy.

Deputy Ó Cuív asked the simple question of how the farmers will get paid. We need goodwill from the receiver and debtors in Italy, as well as a certain amount from TLT International. At the meeting with representatives of the company, we were told it did not own the yard or trucks and was unwilling to put any money into the process. It is unacceptable for people who purchased cattle to argue they own nothing and add nothing to the party. The directors have a responsibility to put in money to pay farmers owed money. Another shipper called Seamus Purcell was in a similar position and he sold a farm to pay the farmers. When Sallyview Estates, a company related to TLT, went broke, it had no corporate responsibility but it paid the farmers affected. It will be difficult but I spent four years to get that money for farmers. The receiver did not get paid and, unfortunately, the Revenue Commissioners did not get paid, but the farmers were paid. There is an opportunity that can be based on goodwill, as the company will not trade again unless farmers are paid. It is a fact that if a company wants to do business in Ireland, it must pay for the stock or not do business at all.

Chairman

Deputy Heydon asked if there is any indication that TLT made significant purchases or investments.

Mr. John Bryan

That is a job for the receiver. If the books show a €2 million profit two years ago, how is there a €6 million gap now? The liabilities are €10 million so the receiver has a job to examine where the gap came from. That is not an area for the IFA to be involved in, as it would take in investments in Italy, the UK or Ireland. No more than in a mart or anywhere else, reckless trading was highlighted by Mr. Spellman and Deputy Barry. There is a duty on those involved with these processes. Unfortunately, farmers have had similar problems lately with regard to grain and poultry in Waterford. Companies take assets just before the receiver is called in and the farmer is left to suffer.

Deputy Ó Cuív asked if legislation can be changed and that is something for the long haul, although the issue must be considered. Mr. Spellman mentioned that the company was put in receivership with maximum debt to marts and farmers. If the process had begun four or five months earlier, the same debts would not have accrued for farmers. There is a blatant flaw in that receivers can be appointed at a time of maximum exposure to primary producers.

Chairman

There is another vote so the witnesses may return if we have time.

Senator Susan O'Keeffe

I asked Mr. Bryan a question but he has not answered it.

Mr. John Bryan

I have not gone through the list completely.

Senator Susan O'Keeffe

It was indicated that up to 30 marts are owed millions of euro and I asked if this event was a one-off or whether there are more waiting to happen. Is the witness suggesting there are other receiverships coming down the track?

Mr. John Bryan

No.

Senator Susan O'Keeffe

What is he saying in that respect?

Mr. John Bryan

ICOS is an integrated body but there are marts outside ICOS. Different marts are owed different amounts, and some are owed very small amounts of money. Mr. Spellman has indicated that all marts have operated a client account and have funds to pay. Somebody asked a question about other shippers, and more than 20 shippers operate in the Irish market currently. Some go to Italy and others go elsewhere. Quinn International goes to Italy and the Malin Group is separate from the meat company and would not have the same level of assets. Live exports are up 50,000 on this time last year and there have been 100,000 fewer births. I do not want anybody to overestimate the damage. The Irish Farmers' Journal does a weekly report and there has not been a drop in the beef price of any level, although it might go to €30 or €40 in some marts.

Deputy Éamon Ó Cuív

There is a vote and I will not be able to return afterwards. There are two issues, with the first being the immediate issue of TLT International. Other than discuss the matter, the committee cannot take direct action.

Chairman

We could write to the receiver.

Deputy Éamon Ó Cuív

We should do that. There is a much bigger and more important issue. If we had taken action five years ago that we should take now of considering policy, credit and markets, we would be doing some hard work. That is the best way to prevent any future TLT Internationals having an impact on farmers. It would ensure a live trade that could ensure farmers get the best price.

I suggest we do not finish the issue today.

Today should be the beginning of looking at the credit issue in marts, as well as policies, securities and all the other issues raised at this meeting, to ensure a policy will be put in place to try to prevent a repeat of what has happened in this case and many times in the past. It will happen again if we do not deal with the policy issues.

Chairman

Are members happy with that? I know Deputies have to attend for a vote in the Dáil. We have had a fair indication of where we want to go.

Deputy Luke 'Ming' Flanagan

We have to go and vote, but we are in danger of missing it.

Chairman

I am chairing the meeting and I will suspend it in a minute. The Deputy is free to go at any stage but I am seeking clarification. If members of the committee are happy to do so, we can suspend the sitting and return to finish the responses from Mr. Gilmartin and Mr. Smyth.

Deputy Martin Heydon

I cannot come back, I am afraid.

Chairman

We still need to finish off this meeting's business, so I ask as many members as possible to return after the vote. I am suspending the meeting until after the Dáil vote.

Sitting suspended at 1.01 p.m. and resumed at 1.16 p.m.

Chairman

I thank the witnesses for their patience. We hope to get the meeting concluded before another vote is called. I call Mr. Smyth to respond.

Mr. Paul Smyth

I will be brief. Many of the issues arise from whether there is a political will to ensure there is an export market in future. There must be a policy at Government level to ensure there is competition between factories, marts and exports in order that a farmer who is producing a quality product can sell that quality product. The first striking thing about TLT International being gone is that many thousands of animals will not be exported next year. Next autumn thousands of animals will have nowhere to go, so it will be a field day for factories to name their price. As we see every year, when there is an excess of supply, prices drop quite quickly.

The crux of this is whether a policy can be introduced at Government level to ensure there is a viable export industry. We have heard the responses at this meeting, but we need concrete proposals for the future. We are happy to discuss with people what proposals are possible, but if that does not happen, we will be back here in a few years when another company goes into receivership or-----

Deputy Michael McNamara

Does the witness have anything to propose?

Chairman

We will come to that shortly.

Mr. Paul Smyth

First, ICOS has said it is unable to get insurance for its marts, so it is too expensive for ICOS. There could be a State-funded export insurance scheme. A report by KPMG in 2011, which I do not believe was published, stated it would cost €1.7 million, although I am open to correction on that. As an export nation, €1.7 million is not too high a figure if it would ensure exports into the future.

Chairman

I call Mr. Gilmartin.

Mr. Gabriel Gilmartin

With regard to the receiver, if there were problems for a number of months, an examiner should have been put in place rather than sending shockwaves through the entire farming community and have mart managers panicking. It is laid out clearly in the law, as has been emphasised several times, that the bank hires a receiver and the receiver gets paid first. Naturally, the bank will get paid, so the marts and the farmers are at the bottom rung of the ladder. That is a disaster. I do not believe it can be changed because that is the law.

With regard to exports, particularly into the UK, it is amazing that no boat leaves the Republic of Ireland to transport livestock to the UK. We have constantly and intensively lobbied various ferry companies here to provide a ferry service. They are a little bit worried about animal rights issues in the UK which is a problem but one never knows unless one tries. Exports and the opening of gateways should be strongly pushed by the Ministry. It is a scandal that to transport calves or weanlings from Cahirciveen in Kerry to the south of England, one must first travel all the way to Larne in Belfast.

The feed lots in England want our cattle. There is a problem with labelling issues and the supermarkets, as some people on this side of the room referred to earlier. Those issues can be overcome because the feed lots in the UK want Irish livestock due to the scarcity of animals in the UK. We must address those issues. We have talked to the farming unions and supermarkets in the UK about the matter. There may be a way around the matter but it will take a little more work. To help us on our way we need a big push by the Irish Government.

With regard to the closure of TLT International, we must first establish a task force to ensure that it never happens again and to protect the weanling trade. Between 80,000 and 90,000 farmers produce weanling calves and every one of them will be affected by the closure. We also need competition in the marketplace. All one must do is look at what happened with Irish beef in the UK. One individual involved in the meat industry here, controls the markets in the UK, mainland Europe and South America. We do not want to see all of the markets go the same way. In order for farming to survive, particularly weanling exports, we must export from Ireland. We must get people who are involved in the industry together, learn what their problems are and find a solution.

Deputy Willie Penrose

I apologise for being late but I heard some of the contributions. Obviously the TLT closure is a significant issue that affected the part of the country that I come from. The placing of TLT International into receivership has sent shivers through the wider agricultural community and a significant element of competition has been removed. I concur with the view that with factories being dominant it could act as an impetus for them to return to their bad old ways. It is essential that all of the stakeholders sit down with the Department of Agriculture, Food and the Marine to work out appropriate mechanisms to ensure that marketplace competition is restored. That is critical.

Mr. Paul Smyth mentioned an export insurance scheme. I remember examining the idea when I was spokesperson on enterprise, trade and employment so I know it is not a simple matter. Nevertheless it should be explored. One of the problems with perishable goods is that retention of title clauses are ephemeral and do not mean anything. The retention of title for a durable product, and where one can follow through, can give sustenance and comfort. In this instance, it is not available. Even if one were to explore the matter I do not think it would be an option.

Deputy Naughten and I may have referred to winning back the moneys lost by the Italian situation. Have the organisations present had any contact with their Italian counterparts on how to alleviate the situation?

The closure will impact on the marts and their balance sheets. Nevertheless the marts have been prudent over the years and should be able to absorb the loss. That is a very healthy situation to be in and I salute them. However, marts cannot afford to take anything for granted.

It appears that the only significant asset of TLT is its level of trade debtors. Obviously marts, farmers and haulage contractors have been significantly impacted. The company employed 25 workers but also provided a lot of indirect work. A number of significant creditors have also suffered the impact in terms of all sorts of supplies. Have the organisations explored the possibility of an export insurance scheme with the Minister? Have they suggested assembling all of the relevant stakeholders to ensure competition?

I noticed that the IFA said it spoke to the receiver last week. Deputy Naughten and I spoke to other people at the same time. Have further discussions been held with the receiver to see if progress has been made? A story published in The Farming Independent stated that there were a number of potential buyers, some of which exist and some were from outside.

In terms of restoring the transport mechanisms, Italy is so far away and it would not be easy to fit into its market. The British market is closer and far simpler to understand. Has progress been made following inquiries and contacts with the receiver?

Chairman

I shall allow three supplementary questioners, Deputies Luke 'Ming' Flanagan, Naughten and McNamara.

Deputy Luke 'Ming' Flanagan

I am curious. Why are there animal welfare issues when one arrives in Stranraer as opposed to other ports in England or Wales? Are people more sensitive in England and Wales than in Scotland?

There is some agreement that we need access to the British market so it is remarkable that we cannot get someone to ship over to Britain. Bord Bia can play a role. I shall quote Bord Bia. Having read the quote it seems undecided as to whether to enter the British market. Mr. Aidan Cotter, head of Bord Bia, said:

We have always been discussing with retailers in the UK about this issue around labelling. British retailers have been reluctant to move that set up as it has been the convention used since BSE in 1996. Ireland exports 50% of its beef into Britain and the other 50% goes into continental markets. If we lose any of those premium markets because their prices are too high that would be a real dilemma for our farmers. If our cattle prices rose to the UK level it would be very difficult for us to compete on the continent. The UK is exporting, it is a deficit market. If our prices rose to that level how could we possible compete? .... I do not think that it is in our best interest to focus on Britain.

Those are the words spoken by the head of Bord Bia.

Is it good? Is it our future to go into Britain? If it is, then what is the head of Bord Bia talking about? It is one of Bord Bia's primary jobs to sort out labelling. What has Bord Bia done about labelling? What has the Department of Agriculture, Food and the Marine done about labelling? If it is a good thing for us to get into the British market, then what is Bord Bia at?

I have a final question for Mr. John Bryan. When did the IFA last contact TLT? The documentation here says it was on Tuesday, 12 November. What was the IFA's last contact with TLT? What effort has been made to work with TLT to sort out the matter? When was the last time that the IFA and TLT met?

Deputy Denis Naughten

I want to pick up on the comment made by Mr. Ray Doyle on labelling. I know that other speakers have also raised the matter but I want to specifically pick up on his comment about nomad cattle. He is correct that labelling is a significant part of the problem. Can he explain how the EU allows the issue of nomad cattle to arise, cattle that are not Irish or British, yet allows chicken fillets to be flown in from Thailand, covered in breadcrumbs and labelled as an Irish or British product? The law is an ass in terms of food labelling because a gross contradiction has been allowed to take place for two completely different types of product.

I have a related question. Mr. Bryan was right, it would help the situation if the President, Michael D. Higgins, and the Queen of England sat down to enjoy a couple of striploin steaks. Building stronger relationships is important but there is an issue closer to home.

If we were to have an all-island animal health regime, it would not make a difference whether the animal was born in Armagh or Roscommon when it was taken across the Irish Sea and placed on supermarket shelves in the United Kingdom. That is the way to get around this problem, through closer North-South co-operation and an all-island animal health regime.

Deputy Michael McNamara

The chairman of Bord Bia is not present, but he does appear before the committee; therefore, Deputies will have an opportunity to ask him whatever questions they want.

Specifically with regard to the delegates present, I asked whether tracing was a reality and whether we could write to the receivers. Deputy Éamon Ó Cuív supported this. Should we propose legislation to the Commission to make it easier to trace cattle that have not been paid for and have been moved from one member state to another? Inevitably, the animals will be killed and slaughtered. Assuming the tags have not been changed, a central European registry could make it easier to take a lien on the money provided at the time of slaughter. That is a question I raised at the beginning, but I have not received a reply to it. Is that a naive proposal in the light of the possibility of tags being changed? Are there obstacles to export insurance, particularly for exports between member states?

Mr. Seamus O’Donohoe

I will deal with the last question and ask the chairman of the mart committee to expand on the issue credit.

On the question of traceability, it is not a wasted effort and it is not a naive question. It is a challenging one because the ephemeral nature of the guarantee, as mentioned by Deputy Willie Penrose, is the recoverability of stock items such as young cattle. It is worth pursuing in order that we can have clarity. We must know that there is a mechanism in place whereby the European Union can validate; otherwise, we cannot discuss the creativity of people in how they avoid their legitimate debts and the recovery of same. It is worth pursuing as a policy issue.

Mr. Michael Spellman

On the tracing of stock leaving the country, the central way to solve the problem is as follows. If no credit was given to the people concerned, there would not be an issue. The availability of credit has caused this problem, which is why marts find themselves caught for a sum in excess of €3 million. If people have sufficient facilities when trading, the mart will pay its client for the stock sold on any auction day. If the individual who buys the stock pays for it, there will be no issue. That is where we must focus our attention. It is not economically possible to put credit insurance in place because marts operate on a commission rate of between 1.6% and 1.9%. It would cost more than this to put credit insurance in place. The PSRA will be helpful to us. If individual farmers were to transact their business through marts, none of them would be caught because the responsibility is on the mart to pay them as individual clients who sell stock. If the marts continue to do business in the way they have always done, they will not allow anyone credit. We would then not have to go into the question of examining the traceability of stock leaving the country. That might sound simplistic, but it is the way to go.

From 2015, we will be out of the cheque regime, which will be helpful. There will be an onus on people to make immediate payment, whether by electronic transfer or otherwise, and that will be an advantage. We should solve the credit issue and other issues will be sorted out.

Mr. John Bryan

I buy cattle in different marts. Before I am allowed to lift my hand, I must give my bank details to the mart. I cannot just turn up in a mart in County Roscommon or County Kerry and buy cattle. I must ring a few days beforehand and provide my bank account details in order that they can be cleared. It is a good practice.

Deputy Willie Penrose asked a few very good questions. The most important point is on competition. We need some competition. The numbers of births have reduced by 100,000, whether dairy or beef cattle, while live exports are up by 50,000. In 2014 there will be a major reduction in the suckler herd and we expect to be down by another 100,000. That will put more pressure on the factories to pay for them. Competition is essential and the life of all trade. It is no good unless the lad lifting the hand is paying for the cattle.

Retention of title works very well within countries and we have experience in the case of grain. In cases where perishable products leave the country, we recently had the case of the Waterford chickens, in which farmers got badly burned. Export insurance sounds like a simple solution, but the last time the Government looked at the issue, it would have lost £500 million. For the Government to underwrite a system under which I could sell to anyone, regardless of whether he or she could pay, sounds simple, but it would be reckless of it to do so. European competition law and WTO regulations prohibit the Government from subsidising companies. We are fighting with the Americans over the subsidising in which they are engaged. The company involved pays 80% of the cost and the government subsidises it. Europe is taking the United States to the WTO because it is illegal under international law to subsidise. It tends to encourage reckless trading.

We need prudent dealing. Deputy Tom Barry spoke earlier. There must be a tighter supply of cash and we must be careful about those to whom we give credit. This applies to farmers and agribusiness. It is putting pressure on the banking system and there is no easy fix. The Minister, Bord Bia and farming organisations, particularly ICOS, have roles to play. Bord Bia has staff in Italy and Spain. Ms Cecelia Ruiz works in the Spanish office and if she was asked whether she would sell cattle to certain people, she would say she would not sell them chicken. A prudent attitude in knowing about business is required. John Keane works for Bord Bia in Italy and I do not know whether people ask him with whom they should do business. I agree with those who suggested Bord Bia had a greater role to play in this regard.

With regard to Deputy Luke 'Ming' Flanagan's comment, we all agree that the British market is at our back door. I have been a cattle farmer for many years and it was not always that way. Japan and Italy were always the highest priced markets, but today it is the UK market. Ten years ago a top quality heifer made more in Italy than anywhere else in the world. Today England offers the best price.

Why is there an animal welfare issue? It is because well funded groups in England are absolutely against live exports at any level. They played a part in stopping our live exports to north Africa. They lobbied substantially in the European Parliament to bring export refunds to an end. The day Ireland's exports to north Africa were stopped, they were replaced by Australian exports that had to travel for six or seven weeks when Irish cattle only had to travel for six days. The animal rights groups are acting in a reckless fashion and it makes no sense. Unfortunately, they are very well funded.

Deputy Luke 'Ming' Flanagan

What about Stranraer specifically, if they are that well funded?

Mr. John Bryan

Stranraer is seen as a link within the United Kingdom.

Under UK legislation, it is seen as part of the UK. Not everyone might see it that way but under its legislation, it is seen as trade within Great Britain. Technically, it is only meant to be for breeding stock. What happened with-----

Deputy Luke 'Ming' Flanagan

I refer to those well-funded groups. Mr. Bryan stated it today and we all know it is going through. How come those well-funded groups do not head up to Stranraer, because they know it is happening?

Mr. John Bryan

They regard it as part of the UK and as domestic trade. The rules for domestic trade-----

Deputy Luke 'Ming' Flanagan

Their animal rights is based on unionism-----

Chairman

Through the Chair, please.

Mr. John Bryan

I am explaining to the Deputy that they regard it as a domestic market. However, there is something else going on at the moment which they know. More than 70,000 cattle from the Republic of Ireland went to the North. Someone asked the question about nomad cattle which became Northern Ireland cattle. Northern Ireland cattle go to Scotland because they can get the red tractor. There is a deficit of cattle in Scotland and England. They can ship cattle from Northern Ireland and get the red tractor. Our cattle cannot get the red tractor. Deputy Naughten asked the question in great detail. Ireland is one of the countries lobbying for clear traceability. Yesterday, I held a press conference in which we complained about foreign pork becoming Irish. We are very clear about it and are saying born, reared and slaughtered in Ireland. Those nomad cattle exist in Ireland at the moment.

There was a very big market for calves last year and 20,000 to 30,000 UK calves came in. They are finding it very hard to find homes at the moment because they cannot get quality assurance. The rules are the same - born, reared and slaughtered in England or in Ireland. Approximately, 70,000 Irish live animals go to Northern Ireland, which some people call the UK. Some 250,000 lambs come from the North to the South.

I mention the amount of milk that comes from the North. The expansion that took place in milk in the North over the past ten years could not have taken place without the Republic of Ireland. What happened was that they had no quota and they expanded. They had no no processing facilities, so that milk goes to Monaghan, Connacht Gold, Glanbia and Virginia. The Deputy referred to the inter-relationship. We are totally intertwined. Cattle go up to the North and sheep and milk come down to the South. The trouble is that we cannot get the red tractor when we sell in England. I have sat down with the retailers. If one goes to the south of Italy, there are local cattle or to the Limousin area of France, there are local products.

There is a big row between Canada and the US over COOL, which is the American labelling system. Canadian beef sells at a huge discount in America. Every country in the developed world pays a premium for its own product. Ireland is a big exporter and exports 90% of our beef and 85% of our dairy. We are at a slight disadvantage and that is why we put such investment into Origin Green and quality assurance and having the same standards as the UK. Deputy Flanagan asked a few questions, which only Aidan Cotter of Bord Bia could answer. I could not answer for him.

Our last contact with TLT was when we sat down with the people there and they told us they had no money. We have made a couple of telephone calls, which have not been returned.

Deputy Luke 'Ming' Flanagan

When was that?

Mr. John Bryan

On 12 November.

Deputy Luke 'Ming' Flanagan

That is the last time Mr. Bryan engaged with them.

Mr. John Bryan

We telephoned them over the past couple of days but they have not returned the calls. I have spoken to dozens of marts that have telephoned them in the past few days but they have not returned the calls. I have also spoken to farmers who were assured of payment. I spoke to a farmer only a couple of days ago whose cattle had been collected a couple of days before the receiver was appointed and who was assured the money would be electronically transferred. She has been telephoning them constantly but they are not answering. They are being a little choosy in terms of whose telephone calls they will answer, which I find unacceptable. They took cattle from people's farms and assured them they would electronically transfer the money but now they will not answer the telephone, which I find unacceptable. The receiver is the person who has the legal claim to the debt. We are interacting with the receiver and are in discussions with the bank in the UK. Since it is an off island bank, we have to travel to England to meet it.

Chairman

It is 1.45 p.m.

Deputy Luke 'Ming' Flanagan

I did not get an answer.

Chairman

We have a deadline of 1.45 p.m.

Deputy Luke 'Ming' Flanagan

Can I get an answer to my question?

Chairman

Mr. Bryan answered it. The last contact was on 12 November.

Deputy Luke 'Ming' Flanagan

Am I correct in saying that the reason Stanraer is not a problem is that animal rights activists have no problem as long as animals are not moved from one jurisdiction to another? That is all one can conclude.

Mr. John Bryan

I cannot speak for animal rights people.

Deputy Luke 'Ming' Flanagan

I am curious as to what-----

Mr. John Bryan

I am not a member of any animal rights group in England, so I do not-----

Deputy Luke 'Ming' Flanagan

Obviously, but what does Mr. Bryan think?

Chairman

Mr. Bryan has given his opinion on the reason animal rights groups do not have a problem with transfer. I think he twice explained that it is because it is within the jurisdiction of the UK. It is the same as the ferry from Omeath to Warrenpoint which has to get an international waters licence but it can sail up and down the channel on a national licence. It is one of these strange quirks of having a border within the territory.

We are trying to look at another aspect. The live trade in breeding sheep from the South to the North is quite a lucrative trade but it has been stopped.

Deputy Denis Naughten

From Wicklow.

Chairman

Particularly from Wicklow.

I am under pressure to conclude the meeting. I thank the witnesses for giving us their insight. I refer to the issues Mr. Doyle highlighted regarding access to the UK and EU Regulation 1760/2000 and the Irish companies which control the slaughtering. The issue of live exports is something to which we will have to come back.

In regard to the credit policy for marts, I think Mr. Spellman laid it out pretty simply. It is a very simple policy that if one does not give credit, one does not have to insure it. I take the point Mr. Bryan made about allowing for credit insurance.

We did not really touch on changing the law in regard to preferential creditors because it is not something we can address. However, it is something that should be looked at.

In regard to TLT, we have agreed, in principle, to write to the receiver to ask him to clarify a few points and to emphasise a few points to him. I will draft that letter and circulate it to members for their consideration.

I refer to the point about whether there is political will to support the export market, which I think there is. Following the BSE situation, efforts were made by numerous Governments to secure markets - Libya and Tunisia are the latest ones - for live and processed meat products, in particular beef. Governments have made commitments. Some of these have only come through recently. There is a commitment to a live trade. The Government, the Department and Bord Bia cannot afford to allow this to go. The committee produced a report on the grocery sector which stated that consolidation and too few players in the market is bad for everybody, including the processor, the producer and, ultimately, the consumer. The same applies to the markets for beef, which is the largest agricultural export we have.

Again, I thank the witnesses. It was important to address this issue today rather than in few weeks' time when it will have gone off the agenda. Some very valid points were made.

The joint committee adjourned at 1.50 p.m until 2 p.m. on Tuesday, 26 November 2013.