I thank the Chairman for his invitation to Meat Industry Ireland, MII, to attend and to contribute to the current work of the Joint Committee on Agriculture, Food and the Marine in respect of the future of the beef sector in Ireland. I am accompanied this afternoon by Mr. Cormac Healy, senior director, and Mr. Joe Ryan, executive director of MII.
The joint committee’s initiative to review and take stock of Food Wise 2025 growth targets, particularly as they relate to the beef sector, is welcome and appropriate. As signalled to the joint committee, the outcomes of Brexit, CAP reform and climate change policy will be highly relevant to how the sector develops in the coming years. We believe that the review should focus on the measures required to maintain development of the beef sector and policy changes necessary rather than considering any contraction of the sector and its contribution to rural economies.
As members will know, the beef sector, from farm through to processing and export, remains one of the most important industries in the national economy. It supports in excess of 70,000 beef farmers and generates an ex-farm output value of €2.4 billion. Exports in 2018, which account for 90% of the sector’s sales, were valued in excess of €2.4 billion. Approximately 10,000 jobs exist across processing, distribution and transport as a direct result of this sector. The sector has a huge and unique impact on regional economy spend and rural economic activity. The average meat plant in rural towns such as Bunclody, Clones or Rathdowney spends over €100 million in the local economy. There are 35 beef processing facilities situated the length and breadth of the country in areas that are critically dependent on these facilities for employment, income, economic activity and wider societal contributions.
The existence of a national strategy for growth and development of the Irish agrifood sector is important. Food Wise 2025 has set out the growth ambitions for agrifood, identifying the measures needed for delivering this growth and helping to keep our sector at the centre of overall economic development. Our targets for beef include growing the sector by some 20% and generating, in turn, increased export earnings of €500 million through the production of 80,000 additional tonnes of beef destined for international markets. For the rural economy in which the sector resides, this additional growth will generate 3,000 extra jobs. To a considerable extent, this additional output growth is a derivative of growth in the dairy herd following the elimination of quotas in 2015, growth which has remained on a continuous upward trajectory. Of course, a key component of the sector is its reliance on the suckler cow herd. MII and its members are fully committed to maintaining and enhancing the suckler cow herd by driving productivity improvements through genomics, utilising the very successful beef data and genomics scheme to assist with calving rates, age at first calving, and by lowering slaughter age and associated weights, these being crucial to increasing productivity and farm level margins, while correspondingly reducing the carbon intensity associated with the sector.
Despite the current challenging market environment, which is largely associated with Brexit-related market turbulence together with the hangover of surplus production at EU level in 2018, real growth has taken place against the Food Wise 2025 baseline period from 2012 to 2014. In 2018, Irish farms sold approximately 300,000 more finished cattle than in the three-year baseline period. At a minimum, this represents revenue growth of over €300 million in farm sales. During this period, taking account of some price volatility, Irish finished cattle price has maintained a strong position relative to the prevailing EU beef price. Indeed, in 2018, the all-categories price, which includes steers, heifers, cows and young bulls, in Ireland was 107% of the EU average price. While finished cattle price is obviously an important factor in producer margin, it should not be the sole focus. Of equal importance to the margin of a beef enterprise are EU direct payments and on-farm efficiency.
In the aftermath of the launch of Food Wise 2025, the Government, at our request, established a meat implementation group to identify the key policy measures needed for the various meat sectors in order to ensure delivery of growth. Among the most critical issues is Brexit, in respect of which the report highlighted the need for the Government, with EU support, to put in place robust measures to mitigate the worst effects of a no-deal Brexit, while also recognising that any post-Brexit arrangement will leave the Irish beef sector most exposed and facing additional costs. While the risk of a no-deal Brexit has receded somewhat, it would be foolish to dismiss a crash-out by the UK entirely, given past experience in securing consensus in the UK parliament on an agreed way forward, which still remains elusive.
Chaos would ensue were the UK to leave without a deal. This would be most acute were exporters to be faced with a tariff wall on entry to the UK market of such proportions as to effectively close that market off to Irish beef and, by doing so, open it up to cheaper and lesser quality product from elsewhere in the world. Such a course would have devastating implications for the trade and in turn would cause untold damage to beef production in Ireland. That is why we need a Government guarantee that support mechanisms will be immediately available, delivered efficiently, and applied at the point of trade in order to eliminate the ensuing market values loss extracted by the imposition of tariffs and to achieve the objective of keeping Irish beef supplied to the UK market. Anything less would risk relinquishing our share of the UK market to other global suppliers.
During the uncertainty that reigned as the March and April Brexit deadlines loomed, Irish beef processors continued to process animals while facing the real risk that meat from these animals might not have been able to enter the UK market or, if it did, risk the market return being seriously devalued due to the high levels of tariffs and restrictive import quotas which had been indicated by the UK Government.
The meat implementation group report, which was presented to the Minister in November 2018, stressed the group's view that beef from the suckler herd is of critical importance for the international marketability of Irish beef abroad and for the health and viability of the rural economy in large parts of the country. The report also expressed concerns that very low profitability would lead to a sharp drop in suckler output thus risking long-term overall growth in respect of the Food Wise 2025 ambitions. The possibility of introducing some form of targeted support for this sector was recommended by the group. However, it accepted that any such measures, in addition to providing income support, should be clearly geared towards bringing environmental and animal welfare benefits. We support this approach.
Furthermore, we agree that the rapid expansion of the national dairy herd must serve to enhance the quality of both meat and milk products. This will involve a breeding programme that will improve the metrics across both herds in the context of ease of calving, gestation length, and improving the market suitability of beef calves coming from the dairy herd. MII welcomes the introduction by the ICBF of the dairy-beef breeding index and encourages all stakeholders to promote its uptake.
We also endorse the need for a continued drive on market diversification, not only because we want to secure access to many target markets across the globe in order to bolster our international presence, but also to broaden the scope for stronger market returns and as a protection against periods of volatility in different markets that occur from time to time. In the post-Brexit period, which could potentially herald the commencement of a changing landscape for exports, diversification will be subject to renewed focus. Now more than ever, we need to take every single opportunity to broaden our horizons. While doing so, there needs to be a full awareness at farm level of the absolute need to deliver animals that meet market specifications, bearing in mind that product from individual animals may serve many different international and European markets.
Also regarding market access, MII stresses we can no longer tolerate efforts to chip away at our valuable EU markets in beef. We need the Government to resist any effort to broaden and implement an EU-Mercosur free trade agreement, and other agreements, that would further weaken our market position in the EU.
Climate change and its association with above average greenhouse gas emissions from the agricultural sector has attracted a relentless focus in recent years and this is not likely to dissipate any time soon. We accept that agriculture accounts for a sizeable proportion of Ireland’s overall emissions, this being principally due to the strategic importance of agriculture to the national economy. While recognising we need to continue to work to reduce the environmental impact of agrifood production systems, Irish beef production has strong environmental credentials and is among the lowest in greenhouse gas emissions intensity per kilogram of output in Europe and globally. Our sector, at farm and factory level, is doing its utmost in its efforts at mitigating the effects of climate change. We fully acknowledge that we can and must do more. We will be happy to discuss with the committee the intensifications of actions that we believe can deliver results.
It is also the case, however, that Ireland’s grass-based system gives us a unique advantage in the production of beef. The sector must continue to focus on sustainable intensification, on driving increased efficiency and improving productivity. We also need to play our part at industry level and maintain a strong focus on delivering on a range of sustainability measures. We can approach this challenge knowing that progress on environmental performance of beef enterprises will also benefit economic performance. A renewed focus on the environment as part of CAP 2021, properly resourced, can make a major contribution to achieving these aims. On the subject of the CAP, MII strongly supports producer calls for the maintenance of funding in the next CAP post 2020 and the delivery of support to active producers.
The beef sector is critical to the rural fabric of Ireland. It is a key generator of economic activity in rural areas and Irish beef has a strong reputation in the marketplace. Our suckler herd and our grass-based beef production have an important role to play in the future of our agrifood sector and in ensuring balanced growth in agriculture. Progress has been made in output, exports and prices over the past decade. Farm enterprise margin remains a challenge but margin is not about price alone. While we face big challenges, we do so with the collaboration of stakeholders and Government as we jointly work towards the successor to Food Wise 2025.