I thank the committee for its invitation to present on our issues. I am joined by Mr. McGovern, chairman of CMP, Mr. Codd of Codd Mushrooms in Tullow, County Carlow, Mr. Wilson of Monaghan Mushrooms and Ms Dwyer, the IFA's chief economist. Along with my role as horticulture chairman, I am the vice chairman of CMP. Mr. McGovern, Mr. Wilson and I provide mushrooms through CMP, which is a recognised producer group under the EU fruit and vegetables scheme.
Codd Mushrooms is one of the biggest suppliers to the domestic trade, supplying all the main retail outlets in the country. We are here today under the leadership of the Irish Farmers Association, IFA, which has vouched its full support for the horticultural sector to help us get through a crisis where 3,500 jobs are in danger. There are already 130 jobs gone and €7 million of exports have been lost.
I will give a brief background to the Commercial Mushroom Producers, CMP. It was established in 1999, following rapid expansion of the industry over the 1990s, which grew to almost 600 mushroom growers by 1996. It was established by mushroom growers as a co-operative to deliver stability in the marketplace by maintaining the consistency of supply and achieving a sustainable margin for producers, along with improving the overall quality of mushrooms. During the past ten years, there has been significant rationalisation of the Irish mushroom industry, during which grower numbers have dwindled from approximately 600 to approximately 60. Today, these growers produce the same amount of mushrooms and we employ 3,500 people. It should be remembered that those jobs are in rural Ireland and in country parishes. Due to CMP's programme of consistent improvements since 1999, the farm gate value of mushrooms has increased despite very stiff competition from Europe and volatile exchange rates.
Currently, the 60 growers produce 70,000 tonnes of mushrooms per year, of which 80% or more, worth €120 million at farm gate, is marketed to UK multiples through a network of marketing agents. For the majority of Irish growers, 100% of their production is exported to the UK. Irish production equates to over 7% of the total mushrooms produced across Europe. We now produce more mushrooms than the Germans, Italians and the English. Only four European countries - the Netherlands, Poland, France and Spain - produce more than Ireland. It takes over 32 million people to consume the mushrooms produced by Irish mushroom growers. We are very proud of that.
We have secured almost 60% of the UK multiple market, and that has been hard earned over the past 30 years. Consumption of mushrooms in the UK is approximately 190,000 tonnes per year. The English produce approximately 50,000 tonnes and we produce 70,000 tonnes in the South and 20,000 tonnes in the North. It must be remembered that mushrooms are a perishable product with a relatively short shelf life, produced 52 weeks per year. The "best before" date is five to seven days after harvesting, so the mushrooms must be sold within one or two days of coming from the farms. There is no viable alternative market for such a highly perishable fresh product and currently the UK is our only market. We send more than 50 articulated lorry loads to the UK, seven days per week, 365 days per year. That amounts to 50 40-foot lorries going out of Ireland every day of the week and year. As a result of the closure of the Russian market, mushrooms from eastern Europe, produced at much lower production costs, are now entering the UK retail market and displacing Irish produce. With regard to the domestic market, growers supplying Irish retailers produce 14,000 tonnes annually, with Codd Mushrooms making up a large part of that. These growers now find themselves competing with growers whose produce would normally be destined for the UK export market.
Since the UK vote to leave the EU on 23 June, the mushroom industry in Ireland has been thrown into turmoil and growers are in loss-making territory, resulting from the sudden and significant weakening of sterling. I will outline why mushroom producers are particularly impacted by the sterling decline. The marketing companies which sell our mushrooms negotiate our contracts in sterling. In addition, mushroom prices are forward agreed, generally for contract periods of up to 12 months and longer in some cases. We mushroom growers are paid in sterling every week.
Twelve months or so ago, when the euro was worth 70p, we would go to the bank with £1 sterling and end up with €1.36. Today, when we go to the same bank, we get €1.16 for our £1 sterling. That is on our total sales figure and this is where it is really hurting.
When the UK retailers agreed contract prices with Irish marketing companies, they knew that we were doing well with an exchange rate of 70p or 72p to the euro, hammered down the prices to match it and subsequently paid us accordingly. Now, however, we have to honour these contracts until they run out. Our marketing companies, along with Commercial Mushroom Producers, are battling with the UK retailers to get new contracts in place, but they are telling us, as growers, that it is a very slow and painful process. Unfortunately, there are many European and Eastern European producers ready to supply the UK and there are no guarantees of getting the prices up. My colleague, Ronnie Wilson, who has been in the UK market for the past 30 years and worked on building up those markets, will articulate later the difficulty of this challenge.
From where I sit, this is a crisis. The mushroom business is in free fall. My wife, Mary, and I have invested all we have and 30 years of our lives in the mushroom industry. More than 50 families, including our own, depend on our business surviving what I consider is probably the worst slap in the face since we started in 1988. The impact of Brexit will mean huge losses for every farm trying to stay alive at the moment. As we have seen in recent weeks, three mushroom farms went out of business since Brexit. This volatility in the marketplace cannot be sustained. As I said earlier, and I would like to say it again, 130 jobs are gone so far in the first 100 days of Brexit and €7 million in exports have been lost. This is something we cannot replace quickly.
A significant and longer term market pressure for Irish producers is the foothold that has been gained in the UK retail market by Polish product in recent times. This is worrying as their cost base is only a fraction of ours. For example, their labour rate is 28% of our minimum wage in Ireland. In the mushroom industry, 40% of our costs is labour. It is a huge part of our costs. The Polish producers can produce at 28% of our cost.
The dominant power of the retailers and significant food price deflation in fresh produce have resulted in serious downward price pressure on our mushroom exports, which is now being compounded by the decline in the value of sterling. As I said, mushroom production is highly labour intensive and the threats now faced by the industry could result in significant job losses. I keep reminding the committee that we have 3,500 people employed in the mushroom industry in Ireland. That is, we had 3,500 people employed in the mushroom industry; 130 jobs have been lost.
It will also impact on the tillage sector, as the mushroom industry is a significant purchaser of wheaten straw, and on the poultry sector, as poultry litter is used in mushroom compost. There are several other areas that would also be affected. Take those jobs out of rural and Ireland and see what happens.
In the past, a reduction in production or closure of a mushroom business was generally replaced. If one farmer closed down, another farmer would extend or put on another mushroom house or two. They would take it up. Now, no one has the appetite to build new farms or extend. Therefore, those jobs and that market share is being lost to Eastern Europe and our competitors.
Recently, the IFA has met with Minister of State with responsibility for horticulture, Deputy Andrew Doyle, to impress on him the immediate need - I stress the word "immediate" - to take a number of actions to support our mushroom sector in the wake of Brexit and the weakening of sterling. We also note the recent comments by the Minister for Agriculture, Deputy Michael Creed, acknowledging the particular issues of the mushroom sector and his commitment to provide support to the sector in the budget process.
The IFA has proposed a number of practical measures.
We need a lifeline. We need oxygen. We need to get through a period of time. The Government must act on our proposals to address the short-term impact of the exchange rate volatility and to support cost competitiveness.
We are hoping the committee will help us ensure the Government pays, as soon as possible, the producer organisation, PO, funding that is due to the commercial mushroom producers, CMPs, for the 2015 programme. Given that it is 2016, we want it paid as quickly as possible.
A temporary reduction in the lower rate of employer PRSI from 8.5% to 4.25% must be introduced in October's budget. This would impact directly on employment costs for mushroom producers and other SMEs which have been negatively impacted by the weakening of sterling, and who will not have undertaken hedging or other risk management measures to offset the price decline. This measure existed between 2011 and 2013 as part of the then Government’s jobs initiative. It must be recognised, however, that this will not have an impact on employment costs where employees are on the higher rate of PRSI. The IFA believes, therefore, the Government must give consideration to temporarily reducing the higher rate of PRSI for affected sectors.
The Government must consider other measures to reduce employment costs. In particular, the IFA proposes extending the tax relief measure for start-up companies to existing companies in the mushroom sector. This would be capped at €15,000 per annum, recognising the limitations imposed by State aid rules for the agriculture sector. The Government must immediately introduce the renewable heat incentive scheme. There must be no increase in excise rates on agricultural diesel or other road fuels.
External to the budget process, the IFA believes that there should be no change to the national minimum wage until there is greater certainty on the longer-term exchange rate position between sterling and the euro. We live in a world of uncertainty at the moment. The IFA believes direct support should be provided to mushroom producers through Common Agriculture Policy, CAP, market support measures. The decline of sterling, arising from the UK vote, is a market disturbance which has occurred swiftly and unexpectedly, and has resulted in a significant price fall for the mushroom sector. Over the past year, the European Commission has provided support for exceptional measures for the dairy, pig meat and other livestock sectors. Support must be provided directly to mushroom producers for whom an external political event has had an immediate and negative economic impact.
We hope the committee will support the proposals. It is critical that the threat to the mushroom industry is taken on board as a matter of urgency by the Government and the Minister for Agriculture, Food and the Marine. Action is required at national and EU level to underpin the viability of the mushroom industry.