Go raibh maith agat agus comhghairdeas ar bheith tofa mar Chathaoirleach ar an choiste seo. Go n-éirí ant-ádh leat agus le bhaill an choiste fosta.
I am delighted to be before the committee and I wish members well in their deliberations. I am pleased to introduce this technical Supplementary Estimate.
I am seeking approval for an additional allocation of €1.2 million to be included in the annual grant-in-aid for Bord Bia. The additional funding will be met from savings in subhead F of my Vote, which funds the rural environment protection scheme. This is a demand-led scheme and the savings have arisen as a result of lower than anticipated demand, in part attributable to the late approval of the rural development programme. The Supplementary Estimate will bring the grant-in-aid for Bord Bia for this year to €27.705 million.
The additional funding sought will be used to augment Bord Bia's promotion budget. It will fund targeted campaigns to address particular difficulties that exist in the beef and pigmeat sectors at present. The additional funding for beef of €650,000 will be used to extend the current European beef campaign, while the funding for pigmeat of €550,000 will be used to raise further awareness of quality assured bacon and ham products on the home market.
I would like to discuss the beef issue initially. The members of the committee will be aware of the importance of the beef sector to Ireland. We produce over 500,000 tonnes of beef annually, over 90% of which is exported. The majority of these exports are destined for the high-value EU marketplace. Our largest single export destination remains the UK, which takes almost 50% of all trade. There has been a significant destination shift in Irish beef exports over recent years from international to EU markets, with trade to continental Europe reaching record levels in 2006. This shift has come about as a result of effective marketing and promotion by the industry and Bord Bia, together with the delivery of high quality, competitively-priced product.
While slaughtering has declined slightly this year, production is expected to remain stable due to an increase in average carcase weights. Although prices have stabilised in recent months they are 3% down year-on-year. Beef exports to both the UK and continental Europe are relatively unchanged from last year's record levels, while third country trade has fallen, albeit from a low base. Live exports are not expected to reach the levels of recent years, due mainly to higher feed and milk replacer costs in our largest continental markets.
The recent significant rise in feed prices has, however, placed a burden on beef finishers. Typical feed prices to farmers have increased by over 50% since the start of this year. The rise in feed prices can be attributed to a number of factors, including heavy demand for cereals in Asia, the increased demand for feed materials from the bio-fuel industry and unfavourable weather conditions, which affected many of the major cereal growing countries. Little can be done about the price of feed in the short term, although the EU Council of Agriculture Ministers has, in response to the pressures on the international cereal and feed markets, agreed to suspend the obligation to set 10% of arable land aside. This will ensure that more arable land is available for cereal cultivation in 2008.
Over the past five years the industry has made very significant strides in securing access to the best customers in Europe. The number of retail accounts purchasing Irish beef has risen from 27 to 62. These are the customers who pay the highest prices. Increasing the level of promotion will encourage increased sales and higher overall prices to Ireland. Against this background, Bord Bia will use €650,000 of the additional funding to extend its promotion of quality assurance scheme beef in European markets. Specifically, Bord Bia will intensify its European beef promotion campaign, which reaches 38 supermarket groups in 13 countries and involves the provision of point of sale promotional materials at 10,000 outlets. The current promotion will run for longer than intended and Bord Bia intends to get Irish beef into new retail outlets through its promotional efforts. The aim is to increase demand for prime Irish beef among the best paying customers, resulting in improved returns from the marketplace. This will help underpin the price paid to Irish producers over the coming months.
We also have a number of other related and complementary measures in place involving non-price strategies, which are fundamental to meeting evolving market challenges. To this end, and in line with the Agri Vision 2015 Action Plan, a number of policy initiatives have been developed and enhanced. These include the capital investment aid scheme for the beef and sheepmeat processing sectors, ongoing Bord Bia Irish beef promotion strategies, the animal welfare recording and breeding scheme for suckler herds, the Bord Bia quality assurance schemes and breed improvement programmes currently being developed by ICBF.
The animal welfare, recording and breeding scheme for suckler herds was formally approved by the EU Commission on 23 October last. An annual payment will be made to suckler cow farmers who undertake to comply with certain specific welfare measures from 1 January 2008. Detailed arrangements for the administration of the scheme are currently being finalised and I will launch it shortly.
We are continuing our efforts to open new markets for Irish beef. Determined efforts by the Department, together with Bord Bia and the Department of Foreign Affairs, led to the recent re-opening of the Saudi Arabian and South African markets for Irish beef. This is a significant achievement and will impact on similar markets elsewhere. Russia, Egypt and Algeria are also open and there has been a partial opening of the United Arab Emirates market. Discussions are well advanced with a number of countries including Indonesia, the Philippines and Japan. A market access group has also been established to facilitate, through all means possible, trade in Irish meat to non-EU markets.
I now wish to turn to Bord Bia's pigmeat campaign, for which €550,000 of the €1.2 million Supplementary Estimate is sought. By far the main difficulty facing the pig sector is the very high cost of feed. This has significantly eroded the profitability of Irish pig enterprises. In addition to high input costs, the price producers are getting for their pigs is quite low, at around 7% less than 2006 levels. This is a global phenomenon and is not confined to Ireland. As part of the strategy to deal with this phenomenon, and as a result of lobbying by like-minded member states, including Ireland, the EU Commission has re-introduced export refunds for pigmeat, and has introduced a scheme of aids to private storage for pigmeat.
On the domestic front, while there is no immediate prospect of significantly increased producer prices, there is evidence of consumer preference for quality assured product. Some cuts of bacon, such as loins for rasher production, can achieve premiums of 10-15% in the home market, due to consumer preference for quality assurance scheme produce. Consequently, further increasing demand for these products will pull increased volumes into these channels, and return that additional premium to the supply chain.
The Bord Bia quality assurance schemes are also a good tool in maintaining consumer confidence and, in this context the pigmeat scheme is well established and managed. Bord Bia is intensifying its promotion campaign on the Irish market through an intensive campaign, in both the both print and television media, emphasising the elements of the quality assured product and encouraging consumers to look for quality assured bacon when shopping.
The focus of the pigmeat promotion is on increasing consumer understanding of the Bord Bia quality mark on bacon and cooked ham and encouraging purchase of quality assured products in-store. The campaign includes television, radio and press advertising, outdoor posters on bus shelters, bus sides and sites in shopping centres, distribution of 50,000 information-recipe leaflets and in-store promotions and tastings.
The pressures now facing the beef and pig sectors are symptomatic of a fundamental shift in the dynamics of agriculture globally. Rapid economic development in India and China, drought in Australia and elsewhere, increasing oil prices, the growing political impact of climate change and the shift from feed and food to bio- fuel production have led to dramatic increases in the price of cereals and dairy products world wide. This has also led to increases in the price of inputs which, in the case of beef and pigmeat, have not to date been matched by returns in the marketplace.
Against this background, and taking into account the prospect of increasing competition in the beef sector, particularly from non-EU operators, the work of Bord Bia in promoting Irish produce, in increasing the focus on quality and exploiting the strong animal health status of Ireland in the marketplace, is more important than ever. I am happy to propose this Supplementary Estimate to assist it in its efforts in this regard. I will be more than happy to answer any questions members of the committee might have.
