Deputy Avril Doyle gave me notice of her intention to raise on the Adjournment the subject matter of the crisis facing beef producers, especially market fatteners.
Adjournment Debate. - Beef Production.
I should like to correct that last statement, if I may. I was referring to winter feeders. There must have been some misconception as to what I said today.
I should like to thank the Deputy.
I thank the Chair for giving me permission to raise this matter and to thank the Minister for Agriculture and Food for coming to the House to respond. I do not think I have to point out to him the severe income crisis that beef producers, particularly the winter feeders, are experiencing. We all sold our entry into the EC in 1973 on the basis of the advantages that would accrue to this country, particularly to the agricultural sector. Those advantages were based on the natural advantage of grass-based production in agriculture. It is with a very heavy heart that I raise this issue of the income crisis for beef producers.
Beef producers suffered an 80 per cent decline in their incomes in 1988 over 1987. I am appealing to the Minister for Agriculture and Food to take urgent action to ensure that this vital industry, which contributes more than £1.2 billion to our exports and represents 4 per cent of our gross national product, is supported immediately by him and the Government. To date the Minister has failed to recognise the income crisis for this sector. When we compare like with like and consider that industrial output depends on 71 per cent of imported raw material — that figure includes profit repatriation — we will see that in regard to agriculture, particularly beef production, which has 18 per cent imported raw material, the real value of our beef exports when compared with manufacturing exports is in the region of £5 billion.
Unless measures are taken to ensure a future for our farmer-producers the seasonal distortion caused by APS — aids to private storage — last autumn, and indeed the promised removal of the British variable premium from the beginning of April next, will further exacerbate an already difficult situation which has been caused by the necessary compliance with the ban on growth promoters and, indeed, the price of calves and stores since the introduction of the super-levy and their scarcity of supply.
In the autumn of 1986 the average price for a 400 kg store was £400. In the autumn of 1988, just a few short months ago, as our winter fatteners were trying to fill their sheds, the average price for a 400 kg store had gone up to £600, an increase of more than 40 per cent. The Minister may not be aware that yesterday £300, plus £1 per kilo, was given for a 300 kg bullock; £625 for a 300 kg store. There are 10,000 jobs at risk in meat processing factories and on commercial and family farms. Meat factories that are quoting — indeed, there are not too many and most of them are open for a day or two per week at the moment — are offering at best 111p or 112p per lb. for the top grades and down to 107p to 108p per lb. Effectively, they do not want them. A factory in my constituency has not killed bullocks since Christmas. Winter feeders would need a minimum of 120p per lb. to break even and to have any margin or any profit we are talking about 125p per lb.
Every bullock, as I said before, that will die between now and July will die in debt. There will be a total collapse of the beef industry if the farmer-producer's income is not protected, as the banks will no longer, and to be fair can no longer, advance the necessary capital to replace stock. Winter feeders will no longer be able to fill their sheds next autumn as the margins have been completely eroded. Fine Gael pointed to this danger long before today or yesterday. In March 1988 my predecessor produced a policy document on securing a future for the beef industry. In that document he pointed out that calf prices were booming and were squeezing the margins for beef production. Indeed, he said that the increase in calf and store cattle prices put into question whether many farmers could afford to remain in beef production.
A year ago Fine Gael pointed out the dangers but nothing was done about this problem. We went on to say that about 90,000 farmers were involved in cattle production in 1985 and that the future viability of many of them was in question. The situation has deteriorated since then. There are 25,000 farm families at risk from the production of the calf through the store into the fattening to beef stage.
The Minister will be aware that I have criticised him before on capitulating at the meeting of the Council of Agriculture Ministers on the new beef regime in the face of the new farm Commissioner. To accept 220,000 tonnes on a tender system for intervention, given the position last year, was an appalling abandonment of a sector that is of vital national importance, in view of the fact that it was the bull regime and not the steer regime that was causing the problem in relation to intervention. I do not have to reiterate that it is steers we are talking about and not bulls.
The Deputy's facts are incorrect. The Deputy said I accepted this and that, and that is wrong.
The Minister will have an opportunity to correct me when he is replying. He failed to achieve what he promised us in December and for 20,000 tonnes he took the shilling. There is a coincidence in that the Commissioner for Agriculture changed between December and January and he was looking across the table at his former colleague. The Minister can forgive me for drawing conclusions from that, conclusions that, perhaps, he is not too comfortable with, but I have made those views known before now. The Minister knows as well as I do that it was the bull regime that was causing trouble and not the steer beef regime. We have been abandoned by the European beef regime.
In 1989 our steer beef production is at a disadvantage of £350 per beast on German bull beef production. Two years ago the disadvantage was £30 per animal. The figure I have quoted is compiled by taking into account the difference in the price of a calf, about £150, and I am being conservative, dearer here than in Germany. The VAT refund difference is £70. The Germans, as we all know, get 11 per cent of the flat rate refund compared to our 2 per cent.
With regard to hormones, natural in the bull, we are no longer able to use growth promoters here through a willing compliance with EC regulations and effectively, that is worth £120 per animal when talking about bullock versus bull. The proposed removal of the variable premium in a few weeks time will also cause problems in that last year it was worth 8p per lb. The Minister was pushed around at the negotiating table. To be fair to him, he did not get his way but he protested meekly; he did not do as he said he would in December, he capitulated. The Minister allowed further advantage to the bull beef producer over the steer beef producer.
The removal of the British variable premium of 8p per lb. is another story for the Council of Agriculture Ministers. The British Minister, as I understand it, was taken ill at the meeting and within eight minutes of his departure from the Council his replacement capitulated on the variable premium issue.
That is not correct. I do not know who is giving these fairy tales to the Deputy; they are not true.
The Deputy will have his opportunity to correct me. The effect of the change is that at this time there is an off-loading of finished cattle and forward stores in the UK to take advantage of the last remaining weeks of variable premium there. The normal market we would expect in the UK at this time of the year is not available to us because of that. There is also a problem in relation to the sheepmeat subsidy in the UK, effectively equivalent of £950 per tonne because of the variable premium aspect thereto which makes sheepmeat cheaper so that there is a lesser demand for beef than we could expect at this time of the year.
The margins on beef production, more particularly the winter feeder, have been further eroded by the super-levy, the scarcity of calves, the increasing of the price. We also have the major problem of seasonality and the distortion of the trade by APS in the back end. At the height of APS 54,000 to 55,000 bullocks were killed and put into store shortly before Christmas. Last week 3,500 bullocks were killed here. Any contracts that have been filled out at the moment are being filled from stores.
The necessary compliance on the hormone ban effectively means a decrease of .4 of a kilo per day in live weight gain and up to 90 days longer to reach the equivalent weight on the finished steer. Then the risks are that they will not grade; in fact most are not grading.
We also had an increase in the price of feed this winter. Let us compare the 1986 figures with the 1988 figures for beef production. There has been a 40 per cent increase in the price of a calf and only a 5 per cent increase in the price of beef averaged over the spring months. Please do not tell me — because I have heard the Minister say it before — that there was an increase of 15 per cent in the price of beef last year. Yes, there was; for one week. I am talking about averaging it out and getting a true picture of what was achieved, particularly by the winter beef feeder in the spring months. I would ask the Minister not to repeat the figure because he makes a fool of all of us, particularly himself.
I would not do that to you.
At least we are agreed on that if on little else. The winter feeder at the moment would need to reach 120p per lb. at one kilo per day live weight gain to break even. The farmer is not getting that. He is not getting 120p per lb. but somewhere around 111p for those that make the top grades, the Rs, forgetting the Us altogether at this stage. That is at least 8p a lb. short of his expectations.
I am asking the Minister, as Minister for Agriculture and Food, as the Minister who has been beating his drum about the increase in agricultural incomes both last year and the year before, the Minister who has failed to differentiate between the different enterprises, to do something. Thankfully our dairy farmers have enjoyed a very good increase in their income. Thank God, because they worked hard enough and long enough for little return, 52 weeks of the year, seven days a week; but the Minister has not said, on all the occasions he announced the increase in agricultural incomes in recent times, that none of the other sectors are enjoying the same increase in income as the dairy farmer. The sheep producers have had better times, I will agree, and it looks like there will be another year or two for them and things are not going too badly; but what about the pig production sector? What about the cereal farmers and the tillage farmers and what about the beef rises that we are talking about here tonight? The Minister has not analysed and has not broken down enterprise by enterprise and margin by margin and is giving a false impression. In fact he is casting despair on the other sectors because everyone feels at the moment that all agricultural incomes increased by 17 per cent last year and 15 per cent the year before. I wish to God that was the case, and anything I can do to help the Minister to be able to state that and stand over it I certainly will do.
We look to the Minister for a solution to the beef crisis which affects the 90,000 farmers involved in beef production from the calf through the store to the finished animal. If the winter beef men cannot fill their sheds, if the banks will not forward them the money in the autumn, the store price will collapse and we will not have the natural flow of calves and stores from the west to the east and midland counties where we have the more intensive feeding units for the winter months. I hope the Minister can offer us something here this evening because this entire industry is looking at him for a solution.
First, what efforts has the Minister made to increase the export refunds? If we could increase the flow of the animals that will not grade, the poor and middling quality animals, out of this country and out of the Community, it will leave more room down the line. What efforts is the Minister making, and has there been any effort in Europe to recognise our problem and to respond to our problem with an increase in export refunds? Would the Minister consider restricting APS in the autumn? We need it in the autumn when 54 per cent of our beef comes in off grass, but would the Minister consider restricting the APS price to 90 per cent of the average spring price, to have it related to the spring price so that we reward the winter feeder and get away from this appalling seasonality problem? Would the Minister also consider having a trigger price so that we could have APS in and out depending on whether the market price of beef in the autumn hits 90 per cent of the spring price or not?
Would the Minister make efforts to extend the British variable premium to at least 1 July so that the winter feeders this year can be looked after and we can plan and modulate our programme for next year and further years accordingly? This would bring order back into the sale of the fat cattle coming out of the sheds this year.
Has the Minister looked at the possibility of pursuing the modulation of the variable premium again? I know it was discussed in Brussels and again there was very little support. I know the store men would be up in arms if they got nothing. We are not talking about abandoning the store men; we are talking about weighting the payment in favour of the winter beef producer and those killing the cattle or selling the cattle in the spring of the year. We must look again and not abandon this possibility, and I know the Minister has not been getting support and that the British are involved in this too. We must look again at the possibility of looking after the store men but weighting the special premium in favour particularly of the winter feeder. There are storemen in my own constituency too and they must be looked after, but let us not forget that they do not have the added burden of the £6.50 levy at the point of kill of the bullock in relation to TB eradication. That is borne by the winter fattener or the summer grazier who kills off grass or kills out of the sheds. There already is a disadvantage there to the man producing the finished beast and we could look again at the modulation of the variable premium and be fair to all sectors in beef production.
We are expecting intervention back next week for R grades only. I am afraid this will not be extensive enough to even make a dent in the crisis. It will perhaps increase the price by about 3p per lb. We will then be looking at 114p per lb. for R grades. To break even they need 120p per lb. To have any margin and allow the bank managers to forward the money next back end they need 125p per lb. Intervention will fall so far short that it will be virtually meaningless.
Can anything be done about this? Will the Minister look to this again? Will his colleagues, the other agricultural Ministers, recognise the crisis here and come to our aid? Will the Minister pursue the problem with venom and determination and not capitulate, and ensure that his former colleague, whom we all wish very well in his new job as Farm Commissioner, recognises and fully understands the crisis in a vital industry here, our winter beef sector and the beef sector generally? I look to the Minister for answers and for solutions. The 90,000 farmers here involved look to the Minister for solutions and we need them now, not next autumn.
The Deputy has addressed a number of issues to me. I have to take this as flattery in that she seems to suggest that not only do I have the role of Irish Minister for Agriculture and Food but of all 12 Ministers for Agriculture and Food and that of Commissioner for Agriculture and Food. According to the Deputy I have this dominant role of all 12 Ministers and the Commissioner and all I have to do is to tell all the others to do something and it is done. The Deputy will acknowledge herself that I do not have that power. I have had, I am glad to say, considerable success which has been measured in the unique increase in farm incomes in the beef sector as in other sectors which is out of line with that experienced in any other country.
The Deputy would do well to read the records as distinct from listening to some of the corridor stories, fairy tales as to the capitulation of a British Minister 15 minutes after another Minister became ill. None of that is true. I would invite the Deputy to have a look at the Community price proposals, and particularly at the paragraph which makes special reference to the unique income increases in Ireland which are out of line with the rest and the graphs which demonstrate, if words are not adequate, that that is exactly the pattern. In this case I am glad to say that beef too has been a feature of this substantial income increase in those last two years. There have been no two years in the history of farming in which income increases in all our major sectors have been as significant as in the last two years.
What the Deputy is obviously pointing to — and I acknowledge it because it is fact — is that there is now a seasonal reduction in beef prices. It has to be acknowledged that while we have had those two years of unique, unprecedented increases in farm incomes, including beef, we are now witnessing a problem of seasonality in beef production. It is a problem I have highlighted on a number of occasions and I propose to address the issue as to how we can deal with it. It will not be possible to establish an efficient value added industry in this sector until an adequate and permanent solution to the problem of seasonality is found, no matter what the level of buoyancy in beef prices generally is throughout the year.
Our target in the years ahead is to seek out and develop an increasing share of European Community markets. Our ultimate aim should be to develop marketing channels which would enable the customers to identify our products and develop a loyalty to them. This strategy cannot work unless we can supply our products on a year round basis. Not only do I acknowledge that but I have stated it many times. European markets require fresh meat cuts, hence the importance of eliminating, or at least greatly reducing, the seasonal variation in cattle supplies. There are two aspects to this problem. First, there is the immediate problem created by current market prices for fat cattle and, secondly, there is the long term or structural problem.
I am optimistic that prices will show improvement over the coming months. The following factors are relevant: a green rate adjustment of 1.55 per cent, which incidentally followed from the beef outcome that the Deputy has decried so much, will apply as and from 27 February and will affect intervention prices as well as eliminating negative MCAs, the intervention for R grade steers to which the Deputy has referred will be triggered on 27 February 1989; live exports, which had been dormant in January have now recommenced. The optimism of farmers generally, which can be measured from a variety of factors, for the future of beef must be reflected in the prices they pay for calves. If beef prices are depressed surely calf prices will also be depressed and some people must face that reality. Buoyant beef prices mean high calf prices. You cannot have it the other way around and it is time that was stated as a simple fact.
High calf prices do not necessarily mean increased beef prices. That is the problem.
Prices continue, for that reason, at a very high level in Ireland and throughout the EC — at a disproportionately high level in Ireland by comparison with the rest of the European Community.
The reduced supply of calves as a consequence of the reduction in cow numbers has been partly compensated for by a shift away from veal production on the European mainland. Veal production dropped by about 9 per cent in 1988 compared to 1987. However veal price has substantially increased in response to the reduced supply and the trend to reduced veal production is expected to stop and even reverse itself. The "overhang" on the market of a large reserve of EC public storage beef is rapidly reducing. This dropped by 44 per cent during 1988 from 755,000 tonnes at the beginning of the year to 425,000 tonnes at year end and has further reduced to 385,000 tonnes at present. Most importantly, a general improvement in the market for beef is anticipated, particularly in the UK, France and Germany. The post Christmas traditional lull in demand for beef seems to have lasted longer than usual this year.
That is nonsense.
This is related in part to the unusually mild winter. However, there are signs that the demand for beef is picking up, and the supply of beef is forecast to drop by a further 3 per cent during 1989 in the EC as a whole. This would be the lowest level of supply during this decade.
There has always been a greater element of risk in shorter term beef production systems especially those where farmers are in production for part of the year only. The summer finisher who buys in spring and sells in autumn wants low spring prices and high autumn prices. The winter finisher who buys in autumn and sells in spring wants the opposite.
Perhaps we would have greater stability and less fluctuation in the fortunes of individual beef farmers if longer term production systems were more widely practised, such as calf to beef systems, buy in spring to sell the following spring or buy in autumn to sell the following autumn. The belief of many beef farmers in the past was that you should buy replacements at the time you sold, then your real profit related to the differences in price received for one batch of cattle and the price paid for its replacement rather than the price paid and received for the same cattle. With greater specialisation in recent times this practice, I am glad to say, has diminished. Perhaps it is time for individual farmers to reconsider its merits in terms of cash flow and reduced risk.
Turning to the longer term aspects, as I have already said the main Community support for beef in recent years has been geared towards catering for the autumn glut of cattle which primarily arises in Ireland. It is hardly realistic to suggest that we should seek a reduction in these supports, beyond those which have been already agreed, in the interests of winter fatteners. Neither is it realistic to suggest an APS scheme in the spring months. No other member state is in favour of such a scheme and we would get no support for it. It is one thing to say we should have it but the facts are otherwise.
A modulation of the special beef premium on a seasonal basis would have some attractions but the reality is that it was not possible to get agreement in Brussels for such a system. It is clear that we will have to rely to a greater extent in the future on returns from the marketplace. I believe that much can be achieved by meat factories through their pricing policies. If, as we hope, increased market outlets are obtained in Europe, the increased competition for cattle in the springtime should lift prices to more attractive levels. Indeed, it might well be in the interests of meat factories to pay more competitive prices in the springtime and to rely on the autumn business to generate their profits. The recently agreed revisions to the Community beef system contain a number of positive factors which should be beneficial in helping to tackle the seasonality problem.
What are they?
During 1988 I succeeded in getting Brussels agreement to extending the date for eligibility for the suckler cow premium scheme from 30 November to 31 January. The premium will be increased from £38 to £51. The extension of the date will be of assistance to farmers wishing to engage in once calved heifer production which is now being actively promoted by some commercial interests. The termination of the UK variable premium scheme will, in fact, facilitate this development. The variable premium applies to steers and maiden heifers only. Until now once calved heifers suffered because the heifer, when slaughtered after producing a calf, did not qualify for variable premium and accordingly had to bear a discount of up to 10p per pound compared to the prices available for maiden heifers. Following the termination of the scheme this differential will disappear. The heifers which produce calves before 31 January each year will be available for slaughter during the following spring. These developments, including the increase in the suckler cow premium, will have the effect of increasing considerably the profitability of once calved heifer systems of production.
To sum up, the short-term difficulties which winter fatteners are now experiencing — I recognise there are short-term difficulties — will, hopefully, be of short duration and prices should begin to harden in the near future. In the longer term, a solution to the seasonality problem is of major importance to the continued development of the beef industry. All the indications are that in future we will have to rely to an increasing extent on the market price for returns and I would urge the meat factories to look to their longer term interests as well as immediate ones in framing pricing policies. Elements of the revised EC beef support régime should be of assistance in increasing the supply of cattle in the spring.
In conclusion, I welcome the opportunity to make this brief statement late at night but I wish to make one further comment. One thing we should all avoid is contributing to talking down prices. Even in the face of the buoyant prices we have experienced in the last two years, I would caution against anyone in this House or outside, for the sake of making an argument, talking down prices against the interests of the producers we are anxious to serve.
The Minister is not in touch with reality.
The Dáil adjourned at 11 p.m. until 10.30 a.m. on Wednesday, 22 February 1989.