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Joint Committee on Agriculture, Food and the Marine díospóireacht -
Tuesday, 8 May 2018

Fodder Shortage Risk Management Measures: Discussion

We are discussing the risk management measures related to the recent fodder shortages. It is ironic that today the sun is shining and has been for the past few days. A number of weeks ago we had a special committee meeting to deal with the fodder crisis. We felt it was important that we have a further meeting with the Irish Co-operative Organisation Society, ICOS, and Teagasc to discuss how we might put a plan or structure in place to deal with issues such as this in the future in order that we would not have to deal with them with fire brigade measures. We will discuss with the delegates the issues of finance and credit.

I offer my apologies as I have to leave to attend another meeting. Deputy Jackie Cahill will now take the Chair.

Deputy Jackie Cahill took the Chair.

I welcome all of the delegates. I will start with Mr. Sean Farrell from Bank of Ireland. I am sorry; Mr. Michael Lauhoff wants to make the opening presentation.

Mr. Michael Lauhoff

I will speak first. I thank the joint committee for giving us the opportunity to come before it. I will start on our overall approach to the market, while Mr. Farrell will address agriculture-specific areas.

As shown on the slides we sent in advance, Bank of Ireland has the largest branch footprint across the country. We continue to operate in all towns in which we have operated since before the downturn. The branch network is supported by a team of 115 mobile relationship managers who are focused on small and medium enterprises, SMEs, and the agri-community. They, in turn, are supported by a direct lending unit which supports many of the day to day requirements for working capital of the agri-community. There are two teams spread across Dublin and Kilkenny, with the majority of agri-community requirements being looked after by our team in Kilkenny which is staffed by a number of experienced advisers, many of whom have direct farming experience and run farms in their own time.

Bank of Ireland continues to be the largest lender to the economy. In 2017 we contributed 51% of overall new lending to the agriculture sector. Total agri-approvals in 2017 amounted to a sum of €563 million.

I will pass over to Mr. Farrell who will cover specific areas in agriculture.

Mr. Sean Farrell

Agriculture continues to be the largest stand-alone business sector in Bank of Ireland. We are committed to meeting our customers' needs across all enterprises. When we look across the range of lending we provide for the sector, we see that most of the demand for on-farm development funding comes from the dairy sector, with pig and poultry farmers also investing in improved housing facilities as they seek to increase efficiency and output levels. The beef, tillage and sheep sectors also continue to have annual working capital requirements to fund stock and input purchases. With our customers, we are aware of the potential implications of a hard Brexit and the importance of Common Agricultural Policy, CAP, payments to support farm incomes. In that context, we welcome funding applications for farm developments focused on improving efficiencies. Lending for land purchase spans all enterprises. We saw a 25% increase in land loan approvals last year. Bank of Ireland also participated in the Strategic Banking Corporation of Ireland, SBCI, agriculture cashflow support loan scheme in 2017. We successfully loaned €65 million to our customers in partnership with the SBCI. Farmers are not eligible to apply under the new SBCI scheme aimed at supporting SMEs exposed to Brexit. However, should another farmer-focused scheme come onto the agenda in 2018, we will look to offer support and participate, as we have done in previous SBCI and Government-sponsored lending initiatives.

Driven by increased profitability and improved cashflow last year, average agri-overdraft balances at the start of the year were 26% lower than 12 months previously. Despite the additional fodder and feed purchased on farms in recent months, current overdraft utilisation levels are lower than they were a year ago. In recent weeks we have seen a small increase in the number of requests from customers seeking temporary overdraft limit increases and stocking loan extensions owing to increased feed costs. We are taking a proactive approach to supporting customers. All of our front-line staff are acutely aware of the challenges they are facing and we are actively asking customers, if they believe they are likely to need extra working capital or other support, to let us know and that we will look to put the required facilities in place for them. Our approach, where we believe a customer has a viable farm business, is that we need to support him or her through short-term cashflow challenges. Options available to support customers with cashflow challenges include increases in overdraft facilities and the provision of new or the extension of existing stocking loans. Additionally, through our AgriFlex loan proposition we can offer customers interest only repayments to reduce their annual debt funding requirements. We understand many customers invested significantly in new farm buildings and land improvements, funded through cashflow during 2017 which, in hindsight, might have been funded more appropriately through a farm development loan. Customers can apply to retrospectively fund these developments with some borrowings now and apply the loan proceeds to supporting their cashflow in the current year. Bank of Ireland views lending to the agri-sector through that lens of volatility, accounting for peaks and troughs in commodity prices and farm input costs, and their subsequent impact on farm incomes. We understand weather conditions, disease and other factors can also have a serious impact on cashflow. We are willing to provide support through these troughs where a farm business is viable in the long run.

Lending is one of the ways we look to support customers. We place significant value on the sector-specific expertise that we bring to clients and as the agri-sector head I work with a team of agri-development managers who provide specialist support to customers and to colleagues and to implement an agri-training and capability development programme across the bank's branch network. We offer customers online business and cashflow business tools through thinkbusiness.ie, a website developed by Bank of Ireland to support farmers in all businesses, and customers can now also apply online to Bank of Ireland for loans for up to €120,000.

We are committed to hosting sector-specific events aimed at providing relevant information and networking opportunities to customers. So far this year, we have held over 40 such events, targeted specifically at the agri-sector. These events included farm development case studies forums, digital skills development workshops, agri-business breakfasts and sector update seminars.

I thank the Vice Chairman for the opportunity to address the committee today and would like to conclude by reiterating Bank of Ireland's commitment to supporting our customers. We understand the challenges brought about by the fodder crisis and it will take some time for its full impact to be known and to feed through the system. We will continue to assess how best we can channel specific supports to the sector in line with market demand. I will gladly answer any questions the committee may have.

Dr. Anne Finnegan

I thank the Vice Chairman and members of the committee for inviting AIB to discuss with it the recent fodder crisis that has impacted on Irish farms and AIB’s response to any cashflow pressure that may materialise. I am head of agriculture with AIB and I am joined by Ms Margaret Brennan, head of sector strategy in AIB.

AIB has a long association with Irish agriculture and is the main lender to Irish farmers accounting for over 40% of total outstanding lending balances to the sector. Agriculture is core to AIB’s strategy. AIB's dedicated agri-advisory team of 12 agricultural science graduates, provides objective farm financial and technical analysis in individual farm lending cases and through training equips our front-line staff to support farmers throughout the cycle. They work closely with all customer-facing staff to support farmers through various income and cashflow cycles and crises.

The past 18 months have been somewhat of a dichotomy for Irish farmers. On the one hand, annual average incomes for most sectors increased in 2017, beyond expectations in some sectors and to an historic high in the dairy sector. With the exception of tillage farmers, who experienced another relatively low margin year, all sectors performed relatively strongly.

On the other hand, weather from the end of July onwards complicated operations at farm level, first in the north west and west of the country where both the quality and quantity of second cut silage was impacted. In some cases, animals required rehousing, fodder shortages started to emerge and the use of concentrate feeds increased. In the south and east of the country the delayed spring and lack of growth significantly delayed the turnout of stock. The situation, as we find it, has varied significantly both regionally and between farms depending on individual circumstances. Both dairy and beef farmers report an impact on animal performance and milk yield. The tillage sector too has faced disruption to spring plantings which again varies between geography and farm.

The result for many farmers has been significant operational challenges at what is typically the busiest time of the year. AIB appreciates that this has resulted in considerable additional pressure on farmers and their families and has added to workload and stress over the past number of months. From a financial perspective, this will undoubtedly result in higher costs.

The sector came into 2018 in a relatively strong financial position. At the end of the first quarter of 2018, AIB’s metrics show that average cash balances for the agriculture sector were up considerably year-on-year, while average overdraft utilisation for the sector was down year-on-year. To date we have seen no material increase in requests for working capital support and no material pressure on farming current accounts.

The extent to which cashflow and current accounts have been impacted to date has varied depending on the strength of cash balances coming into the year, fodder availability on the farm and whether fertiliser had been bought forward. The significant cost of increased concentrate feed has yet to be felt in current accounts. As expected, farmers purchased concentrate feed on credit with co-ops and merchants. As these bills fall due, the cost will crystallise in farm current accounts and the impact on working capital will become apparent. We expect that this to materialise into the summer months.

AIB has been mindful of the emerging challenges on farm since late 2017 and of the pressures that farm families have been experiencing. We participated in the Fodder Action Group in the north west during the winter, which was established by the Minister for Agriculture, Food and the Marine and chaired by Teagasc. All front-line staff were advised of the emerging fodder situation and on AIB’s cashflow support options. We wrote to national and regional stakeholders in early April highlighting the range of options available to farmers and advising that farmers make early contact with their bank. In addition, we issued external communications acknowledging the challenges being experienced by farmers and advising impacted farmer to make early contact with their bank. Depending on the severity of the problem, in some locations we have initiated proactive contact programmes with our customers.

We are encouraging farmers who may need support to quantify the level of working capital they require and make early contact with the bank to consider an appropriate solution to their circumstances. We will work with customers on a case-by-case basis as experience has taught us that no one solution will suit all farms.

AIB has a range of options to support our farming customers, including 48 hour decision on business loans and overdrafts up to €60,000 for AIB customers; flexible working capital finance by way of a AIB farmer credit line at a competitive interest rate; and extended contact hours for farmers via a dedicated phone line, which is available Monday to Friday from 8 a.m. to 9 p.m. and Saturdays from 9 a.m. to 6 p.m. Farmers who find themselves under severe cashflow pressure should advise the bank that their situation is urgent and we will prioritise their request accordingly.

AIB encourages affected farmers to engage with Teagasc supports on fodder budgeting and rebuilding winter fodder stocks. Our forthcoming edition of Agri Matters advises on how to rebuild fodder stocks for next winter and how to deal with the cashflow impact of the past winter and, indeed, our two editions of Young Farmer Bytes since the start of the year have dealt with this issues as well.

We know that cashflow support will, in the main, be short term to medium term in nature. The additional costs experienced may continue to be felt on the farm throughout the summer and into back end of the year and AIB will continue to monitor the situation closely. We maintain a positive long-term outlook for the agriculture sector, recognising that there will be periods of income and cashflow pressure when the sector will require short-term financial support. We will continue to support farmer initiatives focused on increasing efficiency and financial resilience at farm level, such as Teagasc's Grass10, which is also supported by the Department of Agriculture, Food and the Marine. These initiatives are key to ensuring resilience during periods of income and cashflow challenges.

On behalf of the bank, I again thank the Vice Chairman and the committee for inviting us today. We very much appreciate the opportunity to discuss with the committee one of our most important SME sectors and we look forward to questions.

Dr. Ailish Byrne

I thank the Vice Chairman and the members of the committee for inviting us today. We welcome the opportunity to discuss Ulster Bank’s ongoing support for the agriculture sector, particularly following a prolonged period of adverse weather conditions and the significant pressures on farming communities. I am Ulster Bank’s head of agriculture and I am joined by my colleague, Mr. Eddie Cullen, managing director of our commercial banking division.

As I previously discussed with committee members, supporting agriculture and the farming sector is a key focus for Ulster Bank. The increased volatility evident in the agriculture sector over the last few years, either due to weather, price or unexpected individual on-farm challenges is a reality the sector must learn to manage. Irish farmers must continue to improve on-farm efficiencies and competitiveness to survive the income cycles which have now become the norm. At Ulster Bank, we take a long-term view of agricultural lending and we believe that the production and utilisation of grass on livestock farms drives efficiency. To support this and meet the needs of the industry, we developed and introduced a pasture loan, which provides finance for grazing infrastructure, drainage, re-seeding and soil fertility. We proactively engage and interact with farmers and industry stakeholders, including having a recent meeting with Minister for Agriculture, Food and the Marine, Deputy Creed, to ensure we understand the current challenges facing the sector.

There are a number of key items about the current pressures facing farmers I would like to highlight. The nature and extent of the current challenges are not uniform throughout the country even though there is a nationwide fodder shortage. We believe that due to the physical and mental strain on farmers over the last few months, they may not have yet reacted to the possible financial impact of the current situation. At Ulster Bank we have not experienced any significant increase in demand for working capital facilities. Farmers need to consider how they will replenish their fodder stocks in 2018 which will result in increased fertiliser and contractor charges, they need to plan for the possibility of a larger than normal tax bill in November and some may also need to reassess their infrastructure requirements on expanding farms. All of these pressures must be managed in a year in which a reduction in agricultural output across all the main farming sectors is anticipated.

Anecdotally, we believe that farmers have acquired additional fodder, with the majority of payments still to be made. Overdraft utilisation levels remain in line with previous years when seasonal variations are taken into account.

While this indicates that there are no major signs of liquidity issues across the sector as a whole, we are aware that there are pressures on individual farms. Farmers use a variety of mechanisms to manage working capital, including bank funding and merchant credit. Depending on the nature of the enterprise and the working capital cycle, Ulster Bank has a number of options available, including a business overdraft, trading stock facility and seasonal input facility. A farmer may avail of one or all of these in combination to support his or her working capital requirements.

Over the last few weeks we have engaged with our farming customers ranging from dairy farmers who have recently expanded, to drystock farmers in the north west, to ascertain if they are under cashflow pressure. Some farmers requested small increases in their overdraft limits to pay for feed and fertiliser, while other farmers indicated that they might need additional finances as the year progresses. No farmer advised that they could not get access to feed. A handful of farmers will have significantly increased feed costs due to the prolonged winter compared to what they budgeted for and they all advised that they had learned valuable lessons this year. Ulster Bank offers support and solutions to all our customers during periods of pressure, once the underlying core business is sustainable into the future. One thing I would like to emphasise today is that farmers should talk to their bank if they are in any way concerned about their financial circumstances.

As part of our meaningful help and support measures for farm families we recently ran regional seminars in Cork, Kilkenny, Limerick and Donegal, entitled "Building Capabilities on Farms". These seminars brought industry experts and sectoral intermediaries together to enable the attending farmers and stakeholders in the industry to discuss and seek advice on solutions and strategies to help farmers to address volatility in their businesses. We had representatives from Aware, Pieta House and Mental Health Ireland at these events to recognise and support the need for mental well-being as well as financial well-being on farms. They stressed the importance of talking, listening and seeking regular downtime from the stresses and strains of running a farm business. During the last 12 months, Ulster Bank has partnered with Teagasc Moorepark to support its biannual open day, supported robotic and organic farm open days in Cavan and Monaghan, a beef expo in Mayo and the Agricultural Science Association dairy technical masterclass.

I reiterate that Ulster Bank is committed to the agrifood and farming sectors. Our aim is to partner with farming businesses to enable them to grow and to continue to support the agriculture sector through the difficulties that arise. We have developed flexible solutions to support our customers, including the dairy expansion loan, dairy farmer toolkit and pasture loans, as well as participating in the Strategic Banking Corporation of Ireland, SBCI, agriculture cashflow loan support scheme. Ulster Bank looks forward to further engagement and collaboration with all stakeholders in the industry to consider a range of options to address the fundamental difficulties facing the sector.

I thank the Vice Chairman and members for affording Ulster Bank the opportunity to address the committee. Mr. Cullen and I will be happy to address questions members may have for us.

I thank Dr. Byrne and invite Mr. Ashmore to make his contribution.

Mr. Nick Ashmore

I thank the Chairman and members. We welcome the opportunity to tell the committee about the work the Strategic Banking Corporation of Ireland, SBCI, has been doing to support farmers and agribusinesses throughout Ireland. Joining me today is my colleague, Suzanne Sweeney, head of lending. I am conscious of the committee’s concerns around the recent fodder shortage and its interest in any measures that are open to farmers to help address their financial pressures.

The SBCI is a significant supporter of farmers and the wider agribusiness sector. We have done this through two main channels. The first is the agriculture cashflow support loan scheme, which we deployed through three partner banks, all present today, between January and May last year. This scheme was hugely successful in delivering €145 million in low-cost working capital loans with an interest rate of 2.95% to over 4,000 primary agriculture businesses throughout the country. Demand for this support was so strong that it reached capacity within weeks of its launch, far ahead of our expectations. There was a strong mix of farm categories benefitting from this scheme. Dairy farmers accounted for 45% of the total; beef farmers 40%; tillage 6%; and others, primarily pigs, sheep and horticulture, 9%. There was also a broad-based geographical mix with a particularly strong uptake on the southern and western seaboards and in Border counties.

Our second major channel for supporting farmers has been the low-cost loans we have provided through our network of eight on-lending institutions. These partners currently include three non-bank providers of leasing and asset finance to farmers and give us excellent reach throughout Ireland, facilitating access to a wide range of borrowers. Through this channel we have supported almost 23,000 businesses overall throughout Ireland with low-cost loans, leasing, working capital and other forms of finance totalling over €920 million. We were not surprised to see farmers being among the biggest users of SBCI loans. Taken together, the SBCI with its partners have deployed €330 million, or 35% of total SBCI funding since it first opened for business three years ago, in funding supports to farmers and the wider Irish agricultural sector.

In addition to these direct benefits for the sector, we also have a wider aim of improving the general funding environment for SMEs and farms by stimulating much-needed competition in the financing market. Our strategy is based on supporting new entrants to the SME financing market, both domestic and international businesses, which in turn enhances the level of competition and encourages existing lenders to offer better terms and more innovative products. We also use existing operators to benefit from their wide geographical coverage and gain access to as many SMEs as possible. Ultimately we are aiming for greater diversity in the supply of SME and farm finance, with a wider range of finance offerings and a greater number of finance providers.

Our success with the agriculture cashflow support loan scheme comprehensively demonstrates our ability to act as an effective conduit to the Irish market for similar supports schemes in the future. Building on this, the SBCI recently launched the €300 million Brexit loan scheme, which is there to support businesses impacted by Brexit, especially food businesses which are often customers of the farming sector.

We have included some slides on the activities of the SBCI for the committee’s reference. That concludes my opening remarks. I hope members have found them helpful and we will be happy to take any questions they may have.

Thank you. I now invite questions from the members.

There are eight witnesses here today and I am glad to see there is perfect gender balance with four women and four men. I think the women will be a bit softer and easier to deal with in terms of trying to get loans for farmers and small businesses. We have been deeply concerned for the past month or six weeks in terms of the impact the fodder crisis was having on farmers. A lot of other things are happening as well. We know the milk situation is getting to a point where there may well be voluntary cessation schemes. We have reached our level of production well in advance of what was anticipated in terms of Harvest 2025 and so on. I hope the witnesses are evaluating all those things and the various market situations that are likely to arise for the different farm sectors and products. I hope they are devising financial packages that can help people. A lot of investment has gone into dairying, particularly in the last three or four years. I anticipate that the witnesses are watching that with an eagle eye.

It is no use engaging in the usual claptrap of everybody getting excited when the game is over and the teams have left the field and are in the dressing room. We want to be getting excited when the referee is going onto the pitch. I am referring in metaphorical terms to the marking that is in place. I know the SBCI is bringing in the €300 million Brexit loan scheme for small businesses. The agriculture cashflow support scheme was very successful last year in January and May. The SBCI has the ear of the Minister continuously and is always talking to him. In response to various questions that we raise here, he indicates that he is in constant contact with it. Was there a request to bring forward a cashflow loan scheme this year between January and May? That would have been very interesting in the light of the significant obstacles facing farmers, particularly over the last weeks.

I am not surprised at what the witnesses are talking about. The financial institutions are skinning everyone for the cost of money. They are legalised robbers. Let us be clear about a few things. The cost of overdraft money means not one farmer wants to increase or get an extra few bob through overdraft. The witnesses are all very educated. AIB told us in its written presentation that it has 16 agricultural science graduates although that figure has gone down to 12 in today's meeting. There are graduates coming out of UCD and elsewhere in agricultural science and they are very sharp boys and ladies. They will tell the witnesses that it is the cost of money. No one wants to get an overdraft because the banks are charging too much.

I am not surprised, notwithstanding that farmers are on their knees. All the witnesses have said it. The common thread throughout the presentations has been that no one has looked for an extra penny. I am not surprised. The witnesses should ask themselves why that is the case.

I am glad to see Ulster Bank representatives before the committee and I compliment them. The bank had representatives from Aware, Pieta House and Mental Health Ireland at various events in recognition of the need for mental well-being. I congratulate the bank on that, but there has been extraordinary strain and anxiety for a large cohort of farmers. It has been scattered and localised in various areas. The recent bad weather heralded the feed difficulty, the fodder crisis and various animal welfare issues. Human health and mental welfare issues arise as well for individual farmers. As the witnesses know, farmers are attached to animals to the point where they know them by name and so on. I would hope that what Ulster Bank has done is being seen by others as worthwhile and something that should be taken up. I compliment Ulster Bank in that regard.

I cannot but go back to Bank of Ireland because I know something about the organisation. In theory, the bank operates in all major centres throughout the country. The only things the bank has operating are the buildings. It has eliminated almost every human face out of the buildings. The bank has come up with a great idea. It probably presented it as digital support with potential for 120,000 online applications. Despite this, the only thing that counts is the relationship between the banker and the borrower. In this case, we are discussing the farmer but the same applies to any small business. The bank has virtually removed people from rural Ireland. Perhaps it is still packing people into the four or five cities but it has certainly removed staff from rural Ireland. The bank has undertaken wholesale withdrawal. God help the poor bank employees left behind – I salute them. They are working the skin off their bones to keep going.

The bank representatives need not tell me this is not happening. The Bank of Ireland chief executive was lauding the development as another cost-cutting measure only a couple of weeks ago at the annual general meeting. Cost-cutting comes at a price and the price is the reduction of the individual reaction, contact and relationship. I know it myself because I am a customer of Bank of Ireland. I would not bother my head going in.

Despite this, the bank representatives talk about digital progress. I hope it is as fast as they are making it out to be. I would not like to be looking for 120,000 staff with a digital application. I would not like to be the farmer depending on it either. What we have now is impersonal banking. There is no personal contact. At one time a customer could go into the local bank manager. The Vice Chairman knows this because he is president of an organisation. The bank manager knew the customer and everyone belonging to the customer. The bank manager made a decision based on the immediate situation. The bank manager knew who the customer was, what he or she would be and could rely upon that, but that approach does not work anymore. The bank representatives can come before the committee with glossy presentations and so on but I am afraid that I am inclined to tell the truth and tell them what I think rather than what they might like me to tell them. I have no wish to engage with that.

It is great that the bank representatives can come in with all of those things. They have not so much shocked me – I am not altogether surprised – but no farmer needed a tosser, as they say down the country, during the crisis. There were little blips and only a handful. I must be going around drumming up stuff in Westmeath and Longford if that is the situation. Either I must be drumming it up or I am sleepwalking and do not realise that everything is so good.

I cannot understand the position with the Strategic Banking Corporation of Ireland. Let us leave aside the Brexit money which we all acknowledge is important. The banks probably need more because I figure €300 million is only a start. We appreciate that fact. I imagine the banks are all working hard on Brexit scenarios unfolding. They can see that two people at the top of the British Government cannot agree about what day of the week it is never mind what is going to happen with Brexit. It is difficult for the banks just as it is difficult for anyone to try to guess what will happen. The prudent approach to any econometric evaluation is to evaluate for the worst scenario and then perhaps the best will unfold.

Is there a chance of making money available at reasonable prices? I imagine the bank representatives will tell me they are doing that. If that is the case, why is there hue and cry throughout the country? A well-to-do farmer dealing with one of the institutions before the committee asked me to keep highlighting the need for a Sparkasse model or a similar model in this country to give "those boyos" – that is what he called the banks – a rub of competition. The farmer in question works extremely hard. He works 18 hours a day. He is working the flesh off his bones to meet his commitments. He believes the banks are charging too much.

I will leave the witnesses with this thought. That farmer told me that he, his wife and his children are paying for the sins of the bankers. He said that the banks do not have the decency to put forward a loan with a decent rate. Meanwhile the banks are shouting. That is why he is calling for the community-based model of banking to shake up the system. It is an interesting thought. Perhaps the bank representatives might take the view that there is no need for community-based banking, that the existing banks are community-based and that they are giving away money at 2% or 3%, but I doubt it.

We will take some questions before we go back to the panel.

I welcome the representatives before the committee from the various banking organisations. I will follow on somewhat on what my colleague, Deputy Penrose, has been saying. The common denominator in every presentation was an increase in the overdraft facility as the solution to the problems facing farmers. As Deputy Penrose has said, any farmer or any person knows that an overdraft is the most expensive way a customer can possibly get money. Having said that, numerous other loan structures are operated by the various institutions and they are expensive as well. Given the European rate and the interest rates business people, individuals and the farming community have to pay, the question has to be revisited.

We are specifically dealing with the fodder crisis of winter 2017 and spring 2018. My question is for all the representatives. As Deputy Penrose has said, the bank representatives have all painted a rather glossy picture. In their eyes it does not seem to be nearly as bad as we see it. Do the bank representatives think that perhaps it has not come to their attention yet? Do they believe merchants have been carrying the majority of the problem of the farmers to date? As the year goes on, merchant credit will run out and will have to be paid. Where farmers have had to buy extra fodder as well as grain and feedstuffs through the merchants, they will now have to move into fertiliser, silage wrap and so forth. The merchant credit will come to an end. The merchant will have to call stop. It is possible that only then will the banks see the seriousness of this crisis.

This may be something of a contradiction to what I have said earlier because it may be only coming down the line. Have the banks seen a spur in defaulters or those with problems and issues? Has there been a spike in the number of those unable to meet their arrangements with the banks?

I would also like to hear a little more from the delegates on specific sectors within agriculture. Farmers in my area are predominately suckler cow or dry stock farmers, with some engaged in tillage. If one speaks to any of these farmers about banking, he or she will say attending a bank is a waste of half a day and dependent on a member of staff actually being available, as Deputy Willie Penrose said. The bank will ask how many cows is a farmer milking and if he or she does not milk cows, he or she might as well leave and close the door behind. What are the specific targets for the suckler cow sector and also those engaged in small-scale tillage? I come from County Westmeath which is not in a major tillage area, but some farmers might have 40, 50 or 60 acres and they are in serious difficulty. A report was carried out on the crisis in the tillage sector which found that bigger farmers in areas with a greater concentration of tillage were not in as bad a position, but the small family unit is struggling. When we talk about agriculture, our emphasis should always be on maintaining the small family farm. Those involved have been forgotten about. If a farmer is not milking cows, the one thing he or she can bring to the table when looking for a loan is the guarantee of a single farm payment at the end of the year. Last week Commissioner Oettinger indicated that there would probably be a 5% cut in the Common Agricultural Policy, CAP, budget. When it filters down to individual farmers, how will existing and potential future arrangements with banks be affected if the one guarantee they can provide is a cut in income of 5%?

There has to be a degree of honesty in our assessment. The pillar banks that are represented before us are in the business of making a profit for their shareholders. That is what they do; it is the task staff are given by management and shareholders. The difficulty as I see it is the framework and infrastructure provided by the Government for farmers. A range of sectors have been vulnerable to cashflow issues and the fodder crisis again demonstrated the very tight margins within which people were operating. Most farmers rely on the single farm payment for the vast majority of their annual income. We must be honest and acknowledge that the system has been designed to produce cheap food. The objectives of the Common Agricultural Policy, CAP, are centred on the production of cheap food for European consumers and farmers are compensated via environmental and other schemes. Schemes are dreamed up all the time, but, ultimately, farmers are financially compensated for the poor price they get for their produce which feeds the cheap food agenda at European level. By its very nature, the sector is vulnerable and because of the way we have set up the framework.

I do not have any attack to make on the pillar banks represented as they are in the business of making money. Has Government pulled the banks into any dialogue or framework aimed at getting them to offer lower interest rates, similar to those offered to farmers in other European jurisdictions? Has that been mooted? I read the presentations submitted by the delegates and apologise for missing their delivery. In Ms Finnegan's presentation I was struck by the use of the word "dichotomy". These things fluctuate, but it has been a decent year in a number of sectors. However, that may change next year, but this year has been decent. In the presentation made by the Strategic Banking Corporation of Ireland the huge demand for the agri-cashflow support loan scheme is correctly identified. I am struck that there is a demand among farmers for low interest rates, good deals and sustainability because of the nature of their industry. Is the Government taking a hands-on approach? If the pillar banks are left to their own devices, they will try to make as much profit as possible for their shareholders and reduce the exposure to risk. I have no issue with this as it is their job, but is the Government asking them to come up with a fairer deal for farmers based on European norms? That is the main complaint I hear when speaking to farmers and farm organisations.

I apologise again as I have to slip out for about 20 minutes. If I do not hear the responses, I will read them in the blacks later.

I also apologise for not being here for the introductions. All of the delegates are welcome.

I am very conscious that the ultimate problem farmers face in most cases is that margins are tight and that when farmers have a problem, it is also a problem for their banks. They may find it difficult to meet repayments, etc. When I was 18 or 19 years old, I borrowed money from AIB to build mushroom tunnels. At the time the interest rate was 17.5%. It was so high because I did not have a record with the bank. The notion within banking, that if someone is struggling, he or she will be hit with a penalty, thus making things worse for him or her, is often spoken about by farmers. Help is hardest to find when it is needed most.

It is clear from the presentations we have heard that a large volume of business with the banks is done with the agrifood sector. The banks do well from this business. There is, in times of difficulty, an onus on the banking sector to step up to the mark and support farmers. That support will be repaid in multiples because farms are long-term businesses, extending for several generations, which are usually very loyal to their banks, provided they work with them. We are coming out of a financial crisis and we are not going to get into a fight about how it occurred, but there has to be a recognition that the agrifood sector has been to the fore in helping the recovery to happen, from which the banks have benefited.

I have a bee in my bonnet about the interest rates being charged. At times the Government has to intervene and leverage various schemes to lower interest rates, which are still not as low as those charged by the standard banks across the European Union. I know that people from the various banking institutions have appeared before the committee and provided all sorts of excuse, saying Ireland has a different market and that a different model is used, but it is clear to everybody looking at this issue that the money comes from the same place and at the same rate. It comes from the European Central Bank at a low rate, yet the lending rate in Ireland is much higher. I am sure it is acknowledged in private conversations that this is done to fund the recovery from the disaster that happened and that it has nothing to do with different markets and different models being used. It should be acknowledged that Irish businesses and householders, including mortgage holders, are paying a price for what happened in the past. We need to put a plan in place to change this. A way to do it is to start by lending money, particularly to the agrifood sector which has been so good to the banking sector in assisting with its recovery, at the interest rates available in other countries across Europe. That could be done and there is nothing to stop it from happening. I suggest the banking institutions and the Government need to consider this carefully.

We need to put something in place such that our financial services sector actually services our businesses, rather than the other way around as has been the case up to now.

On the agricultural cash flow support loan scheme, Mr. Ashmore said, "Demand for this support was so strong that it reached capacity within weeks of its launch – far ahead of our expectations." In the Dáil Chamber I told the Minister that the €145 million being put in place for below-cost capital loans would not be nearly sufficient to meet demand. That shows the pent-up frustration in the industry at the absence of money at a low cost. Once a loan was made available that frustration was evident and the scheme closed in a matter of weeks.

While the banks were partners in the scheme they were never really happy with it. The first problem was that the maximum length of the loan was to be six years. There was a concerted attempt to make it as short as possible. One of the pillar banks gave stocking loans for this agricash flow which was not the purpose of the scheme.

The other drawback was that those farmers who needed it the most, the ones in serious financial difficulties, definitely did not get access to it as well. The door was closed and they were told the scheme was oversubscribed. It was a good initiative but the demand just shows the frustration at the cost of credit. The other speakers have referred to the cost of overdraft and farmers' reluctance to go to the banks to sort out their cash flow problems. It is very hard to comprehend how the banks can say they do not see evidence of cash flow difficulties on farms at the moment because up to two or three days ago dairy cows were being fed the same amount of concentrate they would normally be fed in February. The level of its use this spring is double what it would normally be. We are almost at the middle of May and cows are still being fed significant levels of concentrates. There is tillage ground not yet sown and that will bring its problems as we go into the back end of the year.

The cash flow problems that arise with the volatility in pricing and our taxation system mean that invariably, as has happened in the past couple of years, we have a high tax bill in a year when income is down. Do the banks have any view on a system that would relieve that pressure on cash flow? I am not blaming the banks for the volatility in pricing, although I might blame them for a lot of other things. In the dairy sector, for example, in 2017 there were relatively reasonable prices for milk but this year it will be down between 5 cent and 7 cent a litre with the increased costs. In October there will be a very high tax bill to be paid. Have the witnesses any idea how to get around that?

Mr. Sean Farrell

Many issues have been raised but I am sure if I leave one out the Vice Chairman will remind me.

There are several themes in the questions, one is prices and the cost of credit. Mr. Lauhoff will address that specifically.

One of the other themes feeds into the Vice Chairman's points about taxation and cash flow. Deputy Penrose spoke about the optimism and excitement about dairying. We view the agrisector through the lens of volatility, the ups and downs of good and bad years, and we try not to get too excited when there is a particularly good year for profitability or to get too concerned when there is a more challenging year with low levels of profitability. Irish agriculture has significant competitive advantage over some of its international counterparts and costs of production, while certainly higher here this year, stand us in good stead compared with some international competitors. We understand, taking the taxation example, that we will need to give support later this year in terms of cash flow as that feeds through the system.

Deputy Martin Kenny or Senator Paul Daly mentioned merchant credit and how much of that has come through to the system, and will come through later in the year. Looking back to the last fodder crisis we expect that the cost of this challenge will feed through into current accounts and lending later this year. Last time around this was experienced in the following spring. We may receive requests at that point. Our operating model remains the same once we are comfortable with long-term viability.

The other point concerned our interaction with the Government and the Minister for Agriculture, Food and the Marine and our conversations with him. Bank of Ireland's chief executive officer, Ms McDonagh, met the Minister in the past couple of weeks. He impressed on us, as the committee has done, the importance of supplying credit to the sector at a competitive margin. At that meeting we clearly outlined our appetite to continue to support the sector, as we are doing today.

It is not that we are particularly focused on dairying. That is where the demand has come from. Most of our customers are not dairy farmers. The majority have some exposure to the beef sector, be it sucklers or other types of beef production, and we have a significant portion of tillage farmer customers and are acutely aware of the requirement to support them, as we are of the significance of CAP. While the 5% announcement made earlier this week is probably an early indication of where the budget might go our view is that there is some conversation to be had about the direction of that budget within the overall EU and within member states. How that will end in respect of individual farmer payments has some way to go yet. We continue to monitor and assess that.

I have tried to address some of the issues raised. I will ask Mr. Lauhoff to address the overall cost of credit because it is relevant not only to the agrimarket but to all business banking markets.

Mr. Michael Lauhoff

Rate is always very topical in respect of the overall cost of credit and how we deploy it. Competition is part of it but we do have to cover our core costs and there is a return on the capital we deploy too. Overdraft is the most expensive form of funding for several reasons, even if the lines are not used we have to allocate capital against it and that has to be funded, so that feeds into some of it. Overdraft is not necessarily the right solution for the pressures at the moment. If a more enduring cash flow or cash cost is incurred that needs to be funded over several years, a term loan should be in put in place. In some cases it is more short term where a stocking loan that will be paid within the 12-month period is most appropriate. Our default position is not to look for overdraft. We focused on overdraft usage in the presentation because that is normally the first place that we would see signs of cash flow pressure. Each situation differs from another but the level of cash resources is higher now than it would have been at this time last year. There are several farmers who have significant cash flow challenges that have been increased as a result of the fodder crisis but we do not see that in some other areas where cash resources have not been spent. The experience differs according to the part of the country and the sector.

In respect of the different interest rates in Ireland and the rest of Europe, another key feature is that the scale of the downturn in the Irish market, relative to much of Europe, has been far more severe in the banking sector here with the consequence that we have higher capital requirements and have to allocate more capital against lending than many of our European peers.

That is a feature in the market that we have to deal with. Ensuring that we can provide pricing at as competitive a rate as possible and getting a return on the capital we allocate are matters on which we must focus.

The branch model changes were mentioned. I accept Deputy Penrose's point that the number of staff in the branches has changed significantly. To ensure that we can maintain a presence in the market and provide a service, we have had to change how we provide that service. Our focus is to make sure that we have staff available out in the marketplace to meet farmers or business and to be able to discuss their requirements at their place of business where at all possible, and then changing the branch structure too to make sure that it can provide a service.

In terms of our customers' requirements, specifically, in the agri-area when it comes to seasonal-type facilities, being able to apply for and get credit by phone is a significant benefit to them. It does not take time out of their day. Historically, where they would have had to come in to the branch to go through their requirements, we now have all the details of their previous history because of the relationship and it enables us to provide that facility through a phone call with no need for form-filling and other issues as happened in the past. How we provide that service will evolve. It is a matter of making sure that we can provide a service as best as possible.

Likewise, we have invested in our ATM network in order that farmers can lodge a cheque or anything whenever they want. We have external lodgment ATMs. They do not have to come off the farm during the day to do these tasks whereas, historically, they would have had to.

I accept that there are changes. Some of those changes will take time to evolve but our focus is to make sure we can provide the service through investing in technology and support in that area but also in trying to make sure that we can provide the service for more complex needs on a one-to-one basis.

Dr. Anne Finnegan

I will start with Deputy Penrose. I am sorry for bamboozling the Deputy with the numbers on our team. There are 16 agricultural graduates on the team. Four of those are centrally based and 12 are regionally based, and they are all customer facing. We make a point of hiring agricultural graduates into this team because the technical capabilities and understanding are key to delivering an appropriate service to farmers. I always say we can build bankers and we can build credit but it is difficult to build the sector knowledge and expertise.

In terms of the point around volatility, similar to Bank of Ireland, we are cognisant of the volatility. We take a through-the-cycle approach to lending to all sectors, not only the dairy sector. We look at repayment capacity over a three-to-five year period trying to account for any particularly good or particularly bad years, and we base our budgets on budget prices for each of the sectors which are usually somewhat on a divergence from the market prices of the day, for example, at present our budget price on dairying is 30 cent a litre.

In terms of the availability of credit, Senator Paul Daly asked has the problem not come to our door yet. I would say it has not. The figures we gave to the committee for overdraft utilisation and current account cash balance show the strength of the sector at present. Cash balances and current accounts in AIB for the farming sector were up 25% year on year at the end of quarter one. We do not expect that picture to continue throughout the year. Those bills - all of that feed that is being purchased on credit - will fall due in 30, 60 or 90 days and will have to be repaid. We will start to see that flow through current accounts and we will be encouraging farmers, particularly to come and talk to us, not to put undue pressure on the overdraft and to look at what other options are available.

In terms of the principal option that is available from AIB, we talk about two types of working capital solutions. The overdraft, which works in tandem with the current account, is the default position. It is for the unforeseen circumstances and most farmers will operate an overdraft alongside their current account. We also encourage farmers to take out our farmer credit line. This is a flexible working capital solution which gives farmers an unlimited number of drawdowns in a 12-month period. It works similar to an overdraft in that it has to come into credit for 30 days within the year but farmers only pay interest on the drawn balances. The current rate on that product is 3.825%, which is a competitive rate for farmer working capital. It takes an amount of management. Farmers can manage that online, on the phone or through their branch. We encourage customers to look at that alongside an element of overdraft. The farmer credit line should be for their planned seasonal expenditure and what is known, using the overdraft for the unforeseen circumstances.

In response to Senator Paul Daly's question about customers who have not met their commitments or defaulters, we have not seen any sign of pressure on loan accounts or current accounts. There was some small amount of pressure, very variable, between individual farmers coming up to the April milk cheque and the milk cheque has more or less washed that out. There were small numbers of cases.

Senator Paul Daly spoke to the suckler sector and the tillage sector. Approximately 25% of the new money that AIB lends on an annual basis goes to the beef sector. If one takes the points in relation to CAP, the announcement last week was key for the sector. We have been stress testing for a reduction in CAP payments post 2019 and we will continue to do so. Whether the finality of CAP means that there is a reduction in the overall budget where we see greater flattening of payments, or, indeed, if we saw the budget maintained but more funds going from Pillar I into Pillar II, there will be a range of issues and matters on the table that could ultimately impact on farmers in Ireland. We are already stress testing for that when we lend to farmers for the post-2019 period. Up to 2019, we are already taking account of what the previous reform has accounted for.

The Chairman commented on the SBCI and I will give the figures of our own fund last year. Fifty-five per cent of the amount of SBCI funding that we loaned to farmers under the low-cost loan scheme was for more than five years and only 4% was for up to one year last year. We were fairly confident that where farmers came to us with a proposal, we did our best to meet that. We did not put any tolerances around the amount that had to be loaned over any particular period. We met the requirement as it came in to us. Perhaps our figures are somewhat related to the fact that we have a fairly dominant dairy business and the demand was for longer-term finance there.

The Chairman made the point that it was hard to comprehend that we are not seeing cashflow pressure at present. We are just not seeing it in the current accounts - they came off a strong position last year - but we fully expect to see that materialise throughout the summer months and into the back end of the year. It is anybody's guess how much can be saved between now and middle of August in terms of a normalised weather pattern, grass growth, and how the cost bases materialise. We expect this to come to our door. It just has not arrived yet but we will see it coming.

Dr. Ailish Byrne

Last year was a good year for Irish farmers, as reported in the Teagasc national farm survey results. This, combined with the SBCI funding that was available in 2017, left farmers in a strong financial position coming into 2018. However, they have had it difficult over the past six or seven months due to the adverse weather conditions, a fall in milk price and, for the tillage sector, a delayed spring that will mean that harvest prospects for spring-growing crops will look poor, which will put extra pressure on the tillage sector. At Ulster Bank, our overdraft facility is available to support working capital facilities but we also have term loans that will support seasonable input on farms. The rates on these loans start from 4%. This provides financial solutions for farmers who need to pay for additional feed, fodder and fertiliser which they need to put out now on grass to ensure that they have adequate fodder stocks for the coming winter.

This term loan funding may also be used to finance an additional tax bill that farmers could have coming up to the November period.

We are currently seeing very little demand from farmers for increased working capital facilities. I feel that is due to the pressures on farms in terms of the physical workload now; stock was housed for much longer than farmers had anticipated and they are also busy as temperatures rise and ground conditions improve. Farmers are getting fertiliser out on land, sowing crops and ensuring that they get their business back on track so that they will have enough feed in place for next year. Their big focus was on getting enough feed, getting the physical performance of their businesses back on track and then they can examine the financial impact of this once they have returned their business back to a normal track of activities.

On the suckler, dry stock and tillage sectors, Ulster Bank's geographical footprint means that we have a stronger presence in the agrimarket around the Border regions and midlands where there are more suckler, tillage and dry stock farmers. We support the sector there which was evident in our distribution of the Strategic Banking Corporation of Ireland, SBCI, agri cash flow loan scheme. Ulster Bank had 30% of its funds going out in those particular areas, compared with 15% of the overall fund.

Deputy Martin Kenny referred to the tillage sector. We are supporting that sector, however, harvest prospects for 2018 do not look good as crops were sown much later than normal. Tillage prices may be slightly higher but overall costs for the sector are high and the majority of the demand in the tillage sector is for working capital facilities which we supply to farmers on an annual basis, and which they clear from the proceeds of their harvest.

On the CAP proposals announced last week and the up to 5% reduction, in recent years we have been stress testing CAP payments for our loans that extend beyond 2019. On milk price, we use a base milk price of 28 cents per litre, plus VAT and fat and protein bonuses on top, regardless of the market milk price. We try to take a sustainable long-term view of businesses rather than short term, for instance where in 2016 the milk price was very low or last year when it was very high. Instead we take a medium to long-term view.

The Vice Chairman, Deputy Cahill, asked about SBCI. Some 50% of Ulster Bank's loans which went out on the SBCI scheme were for a period of three years or more and another 30% of loans were between for periods of one to three years. We have extended more facilities than the overall fund into the Border and midlands area.

I will now hand over to my colleague, Mr. Cullen.

Mr. Eddie Cullen

Every contributor has asked about pricing. We are the only foreign-owned bank now operating in Ireland, following several exits. Our position would be that providing competition is part of what we do. We have the smallest market share so we are very focused on trying to provide that competition. In discussing the cost of capital for a bank, a bank has multiple stakeholders so we must think about depositors and those who provide capital as well as those who borrow money from us. Part of the challenge is to ensure that we are even-handed across those stakeholders. As my colleague from Bank of Ireland commented, and this would be something that would be well understood in terms of capital inputs or, to use the technical term, the risk-weighted asset input that Irish banks have compared to European banks, is relatively high. There are many reports which go to that point. This is something that will need to work its way out of the system over years as we move past the crisis. The models that we use are something that we are all working on with the regulatory authorities. We also see in Europe the history of using guarantee schemes, such as those which SBCI has brought to the market, is much more deeply embedded. The SBCI have been bringing that focus to the Irish market and will continue to do so. As we see that come in over time, it will have an impact on relative pricing. On another occasion I have told this committee that from our perspective, as a UK-owned bank, we have the opportunity to compare and contrast, particularly across sectors, what pricing is like in the United Kingdom versus here. We discern very little difference, particularly in this sector, with what farmers in the UK pay for credit compared with what Irish farmers pay.

Mr. Nick Ashmore

The SBCI can comment most on the agri cash flow support loan scheme. It is the first time that we have brought a SBCI-generated guarantee programme. We also support and deliver the credit guarantee scheme on behalf of the Minister for Business, Enterprise and Innovation but this was the first time that we took the risk on our own balance sheet of delivering a guarantee. It was something of a step into the unknown for us. We saw very strong demand, as we noted earlier, and price was definitely a factor. The knowledge and awareness around the scheme among farmers was very high. From the outset, we did not have to do any marketing. The Irish Farmers Association and other representative bodies took care of that for us. Among all the SMEs we spoke to and that we interact with, farmers are by far the most switched on in finances and interest rate sensitivity.

The scheme was sized for a number of factors. One was the funding available through the European Commission and the State, which was €25 million. That was exceptional aid. A window opened in the state aid rules through which we could then deploy that funding, which was on an exceptional basis. A European-wide market failure was acknowledged, funding was deployed and a state aid window was opened. We were able to intervene and provide a support to the working capital side of farming that we would not normally be able to do. The only way to provide aid through working capital is through a de minimis state aid window which is very small, it is €15,000 of aid per farmer in any one three-year period. If we take up too much of that capacity, direct aid such as fodder supports or other schemes that the Department operates may be restricted in their ability to be deployed. State aid is a factor in how we can do these things.

Early on, the loan duration in that scheme appeared to be a little shorter on average than we expected. Ultimately, the longer-term loans took longer to come through so that by the end of the scheme when we deployed €145 million, we found that 29% was less than two years in duration while the vast majority of the scheme went out at longer durations, with 23% out at six years. We got a good spread in the duration of the loans.

We are looking to learn lessons from that scheme. We have engaged a market research firm to conduct our survey to examine the impact and see what happened on the ground with farmers, and asking questions such as whether the farmers who wanted aid got it and whether the farmers who got it need it. Getting these answers in a pure piece of research will help to inform us about how the scheme worked and inform new schemes that we hope to bring to market in future. We are doing that with the Department of Agriculture, Food and the Marine. We have included questions in the survey to address what the needs are now and what they will be going into the second half of the year.

The scheme was first come, first served. We felt that was the fairest way of doing this for the first time. There were various criteria around whether farmers had engaged in environmental practices or education processes and those criteria were deployed by the Department and provided some degree of targeting although most farmers qualified in one way or another. Ultimately, we understood from the banks that the decline rate was about 2% across the board.

As we look at new schemes for the future, one question is whether we should support investment loans or working capital loans. Of the aggregate of about €350 million that we deployed to farmers, slightly over half has been in support of investment loans through the original bank funding that we provided and also through the non-bank lenders. In each case, we have sought to ensure that the financial advantage of discount that we provide is passed through to the end borrower. Those discounts have varied over recent years from 1% to 2% and more against what they would normally pay.

We have had very strong interest in our schemes and co-operation from the banks.

It was no easy task to spin up a new product and a new scheme for new lenders to operate and we very much appreciate the hard work of all the institutions in this respect, as well as their co-operation and collaboration in delivering these schemes. As we do more of them, the process will get easier and will get better. It is a serial process and, given the number of banks, we can only bring one scheme to market at one time. We have to manage the demands of the primary agriculture sector and the SME sector. Our recent priority has been to deliver the Brexit support loan scheme. We have learned a lot of lessons from the agri scheme and used it in the Brexit support scheme and we will learn the lessons from the latter in our next scheme.

The type of guarantee is important. We deployed a capped portfolio guarantee in the original scheme and an uncapped guarantee in the Brexit support loan scheme. The former is easier under state aid rules but the latter has a bigger impact because the capital costs of SME and farming lending are high. If we can do an uncapped guarantee we can have a bigger impact on the capital requirement and we can leverage the funding available much more significantly. In the original scheme we had to put a lot of the money into subsidising the interest rate to get it down to where it was. In the Brexit scheme, where we have a price cap of 4%, we are not providing any subsidy and that is purely down to the guarantee we have provided. We are starting to work our way through the different options.

The split within the support loan scheme was pretty much equal as between beef and dairy. We are not in a position to comment too much on price but Central Bank and other research suggests that capital requirements, historic loss rates and new SME regulations increase the cost of administration, and in turn the price of lending. We also believe a small element is down to competition and if there were more competitors in the market the prices would come down a little bit in line with the economics of supply and demand.

The community banking model is very interesting but very challenging. Germany and other countries have an effective community banking model but it is massively underpinned by Government support. The role of KfW in that market is fundamental and enormous but the SBCI is not at that level nor do we want to get to that level and create a Government-reliant market. We would rather intervene where there are specific market failures and look to the banks to use their capital to lend to the market, rather than relying on a pure Government support. That is challenging in the farming sector where margins are tight and the onus is on looking at the cost of funds. It is also more efficient for the State if there is an effective private market in place.

We are seeing some interesting green shoots within the community banking space and a number of credit unions have got together in the west to share their resources to provide loans to farmers. That is a really encouraging first step and if we can see more of that we may be able to deploy risk sharing in the future to support them in competing and in growing their operations. We also understand the Irish Strategic Investment Fund, ISIF, is reporting a new MilkFlex product today, though I do not want to steal its thunder, which speaks to the volatility around milk prices and is a broader measure than we have seen heretofore in terms of the co-ops through which it can be operated.

We operate through our three non-bank finance on-lenders, Finance Ireland, Fexco and First Citizen, which support farmers releasing hire purchase products so that they can invest in new equipment and facilities. Our average interest rate across the spectrum is around 5% at the moment. We are co-ordinating with the Department around new supports that might come forward. The Minister is the policy setter in this regard while we are the policy delivery mechanism. We are not here to comment on policy and will leave that to him but we are here to help deliver what mechanism he chooses to use. We also engage at European level, which is very important because the European Commission is waking up to the importance of financial instruments as it goes into the next multiannual financial framework and we are hearing talk of surveys being done around special financial instruments for farming. We have been successful in deploying small, SME-type, supports such as the COSME programme which we were the first in Europe to use for farmers. Indeed, the head of the COSME programme came over to have a look at our books, having been unable to understand how we had managed to do it. It is about taking European supports, adapting them and making them work with the banking organisations for Irish businesses and farmers.

We are engaged in preliminary discussions with other promotional institutions around Europe and the European Investment Bank, EIB, ahead of the next multiannual financial framework because, as the emphasis pushes more towards financial instruments given budget constraints and their impact on the CAP, we need to be ready to be able to deploy new instruments and supports into the market. I am meeting the European Investment Bank with a bunch of other national promotional institutions, NPIs, next week in Luxembourg to talk specifically about this and I will put agriculture on the table at that meeting as a key area of concern. The EIB has stepped up its interest in supporting farmers too.

Farmers are in a strong position in generally being asset rich and so able to access lending through their collateral, which can also have an impact on pricing. We understand that it is not appropriate in every case, however, and that it is important to have the full range of lending options for farmers, which we will look to support how and wherever we can.

There have been a number of cases where farm loans have been sold to various vulture funds and there is a fear of repossession in these cases. Can the main banks reassure us that everything possible is being done to ensure farm loans will not be bundled up and sold off where the farmer is making a genuine effort to come to an arrangement, as has happened in some cases? The IFA has launched an initiative on this recently and other farm organisations have been very active in this area in the past year or more. We sometimes see plots of farm land come up and sometimes the loans associated with them were not for agriculture in the first place but for other businesses but, given the relationship in Ireland between the family farm and land, there has to be at least some awareness of that on the part of the financial institutions. There needs to be some assurance that any farmer who is making a genuine effort to come to an arrangement and to work out a solution over time will be accommodated and will not see their loans sold off in this way.

Mr. Michael Lauhoff

The Bank of Ireland has not sold any loan books across any sector, including residential portfolios, and we do not have any plans to do so. Our focus is to work with our customers to put in place a sustainable solution with an individual agreement on a case by case basis with each of them.

Dr. Anne Finnegan

As regards AIB, the proportion of farmers impacted by long-term financial difficulty is relatively small, both in respect of the sector as a whole and relative to other SME sectors. Our focus is on restructuring and protecting viable farm businesses and the majority of those farmers who find themselves in long-term financial difficulty have now been restructured. Our emphasis is on protecting the family home, where possible, and we encourage all the customers who have not engaged with us to date to talk to their bank, whichever it is, to work towards a consensual solution. We have met with the IFA and we work hand in glove with it in this area.

Mr. Eddie Cullen

Ulster Bank has sold loan books, as the committee will be aware, the last being what we called Oyster in 2016. We engaged extensively with stakeholders and farm bodies at the time of that sale and our obvious preference is to work with customers and help them find solutions. Ulster Bank was not part of NAMA and we have had to repair our balance sheet over the past ten years of the crisis, which we have done in terms of business banking.

Our book is now substantially a good book from a business banking perspective. That has been a very important part of the recovery and our ability to continue to make credit available in this market, as we have been doing in recent years. We have worked extensively with all stakeholders to the extent that there were farmers involved in the loan sales, which were very small numbers in percentage terms. I think it was about 4% in the last loan sale that we did in 2016.

I understand it is a small percentage. One of the things that always happens in these situations is that people talk about averages and look at the overall thing. The averages often hide very uncomfortable realities for the very small minority that is at the bottom of the queue. I am sure the 4% of farmers who found themselves in that difficulty would have much preferred to continue to deal with Ulster Bank or whatever bank they had their loan with rather than seeing it sold off to some other agency they did not know. If it is such a small percentage, an additional effort needs to be made. I said at the outset that the agrifood sector has been very good to the financial services sector. It deserves a recognition that the financial services sector should be able to pay back in respect of that.

Mr. Eddie Cullen

We agree. I have said at this committee and in other forums before that as the smallest lender to the sector, we are not in the business of saying goodbye to customers. That is the last resort. The last loan sale was in 2016 and we have moved on from that.

Will there be any more?

Mr. Eddie Cullen

From a business perspective we have a loan book. Non-business loan sales could potentially happen in the future. That is something I do not have a comment on today.

I thank the witnesses for their presentations and for answering the questions. We will now suspend briefly to allow the next group of witnesses to take their seats.

Sitting suspended at 4.42 p.m. and resumed at 4.46 p.m.

I welcome from Teagasc Professor Gerry Boyle, director, and Dr. Siobhán Kavanagh, regional manager; and from the Irish Co-Operative Organisation Society, ICOS, Mr. Martin Keane, president, Mr. T. J. Flanagan, CEO, Mr. Eamonn Farrell, dairy policy executive, and Mr. Ray Doyle, livestock services executive.

I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a 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 they are 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 House or an official either by name or in such a way as to make him or her identifiable.

I invite Professor Boyle to make his opening statement.

Professor Gerry Boyle

I thank the Vice Chairman and the committee for the invitation. We have circulated a document to the committee to which I will refer. I am happy to report that I have up-to-date data this morning on grass growth. It is good to be able to say that grass is growing well after what we all know was a very late start. There was a substantial drop in grass production from mid-March to mid-April but there has been a recovery since then and the weekend just gone has helped tremendously. As of this morning, we are looking at growth rates ranging from 50 kg to more than 60 kg per hectare per day. That is in line with what has been the normal situation for this time of the year. There are still some parts of the country where ground is very wet. As the committee knows, the dominant characteristic of the past winter rolling into recent months has been the persistent rainfall. In many areas, this has been the case since last September. Only very recently have ground temperatures risen. That is what has given rise to the growth.

I thought I should inform the committee of the responses and actions taken by Teagasc over recent months. We have had an internal standing committee in place since about September of last year working on the issues that were emerging around the country, particularly in the north west initially but subsequently extending to other regions. We think a number of the actions we took will stand should a similar situation arise in the future. One development that was quite successful was the establishment of a fodder register in all 12 Teagasc regions. That enabled us to identify regularly the number of farmers who were in need of fodder and the number registered with us who had fodder to offer. Of course, other organisations such as ICOS and the co-ops and indeed the private sector had similar arrangements in place. In the very early stages of the crisis, we also set up a 24-7 helpline manned by Teagasc staff on a consistent basis.

We focused on putting out key technical messages twice a week during the height of the crisis. We held almost 90 clinics at our 52 offices and these were attended by nearly 700 farmers. We had a major campaign of radio advertisements on all local radio stations during the peak of the crisis. This proved to be a very effective way to communicate. Of course, we worked closely with co-operatives, farm organisations and the Department of Agriculture, Food and the Marine. We engaged actively through our discussion group network and in the provision of one-to-one consultations. One statistic indicates the importance of phone consultations in particular. This was a very sensitive issue for many farmers and it continues to be for some. As such, we had approximately 12,000 phone consultations over recent weeks. More than 8,000 farmers in total were dealt with by way of group contact.

The focus now is very much on the future. I want to talk a little about our advice on the replenishment of forage stocks, which is a critical issue for the next winter. I want also to discuss the importance of us addressing the risk of fodder crises in future. The most important message on the replenishment of stocks is the need for farmers to put a plan in place. It has been a very difficult situation and it appears easy to talk about planning when one is in the middle of a shortage. However, it is essential. My colleague, Dr. Siobhán Kavanagh, is the expert in this area and she will elaborate on the most important advice for farmers, which is that they must create a fodder budget to establish their needs. This has proved critical, in particular in situations of deficit. We recommend, of course, that having created a budget, farmers should maximise the production of fodder inside the farm gate. We are looking very closely at options for the purchase and contract growing of feed. This presents an opportunity for some farmers to engage in the provision of fodder supplies on a contract basis. It will be very important for farmers to assess stock numbers constantly relative to projected available forage.

As regards risk management, our focus is on the adaptation strategies farmers can adopt. We cannot overemphasise the importance of conducting winter feed budgets. We have a variety of tools available for farmers to use themselves or in consultation with their advisers. It is very important for farmers to plan. We have had some discussions about what might constitute a normal winter, but it is most important to plan for an adequate reserve of fodder. We recommend eight weeks' reserve as a requirement. These are not new messages, but they are often pushed to the back burner. If there is no pressure in a particular year, some farmers may take their eye off the ball, as we all can in similar situations. It is very important to match grass growing capacity with stocking rates. We want to address the importance of utilising the grass resource in the best possible manner and that, of course, requires farmers to examine their grazing infrastructure and ensure it is fit for purpose. We continue to stress, year in and year out, the critical importance of getting soil fertility right. There has been significant slippage throughout the country in this regard in recent years. The importance of good soil fertility cannot be overemphasised. We are looking at the option for many farmers, especially the larger dairy farmers, to engage in contract arrangements, as I mentioned, for the growing of fodder. Indeed, we are looking at any arrangement to minimise the number of animals that have to be fed on the home farm, including contract rearing of heifers. It is also important for farmers to examine housing and feeding facilities. Where farmers must go out on the land, they should pay attention to the type of machinery used to minimise the impact on soil conditions.

We are very happy to answer any questions the Chairman and his colleagues may have. We are probably in a better position now than we were a number of years ago in terms of our capacity to respond to crises. We have PastureBase Ireland in place. This is a national database which allows us to update growing conditions throughout the country systematically. That can only improve. We have also brought forward a very effective grass prediction exercise for the week ahead. We encourage as many farmers as possible to participate in what we call PastureBase Ireland so that they can have that information ready to hand.

Mr. Martin Keane

I thank the Chairman for affording us the opportunity to share our thoughts and experiences with the committee. I thank the members of the committee also. As the Chairman said in his introduction, with is Mr. T. J. Flanagan and Mr. Eamonn Farrell. The co-operative movement has been very active in responding to the difficult weather conditions experienced by farmers over recent months. A fodder shortage developed along the western seaboard last autumn. Certainly, it was well before Christmas. Many of our farmer-owned co-operatives were at the forefront in sourcing and transporting fodder for farmers in these counties. In many cases, livestock was housed from August on and farmers were unable to preserve adequate levels of fodder for the winter period. Fodder was transported from east to west by co-operatives to help alleviate that situation.

As 2018 unfolded, the late spring resulted in a serious fodder crisis emerging nationally. As Professor Boyle suggested, normal grass growth failed to materialise due to wet and cold conditions which persisted well into late spring. Land was saturated and it became impossible for stock to be allowed out. Cows which would normally be on grass in March and April were housed day and night. Milk collections were down in March and April with protein levels affected. The co-operatives were very cognisant of the fact that cow condition may have suffered also due to the level of protein in the milk, with resulting challenges as they approach the breeding season and possible fertility challenges on farms. The entire period was an extremely stressful one for farmers and farm families. Most of their waking hours were occupied with concerns around acquiring feed for animals. The mental strain of this crisis on farmers and their families cannot be underestimated.

As the poor weather conditions worsened around the Easter weekend period, a decision by co-operatives to import fodder became inevitable. A measurable tightening of supply became apparent as farmers who might have been in a position to sell fodder previously could no longer afford to do so as their own fodder situation became a concern. Co-operative societies, both dairy and mart, have imported approximately 18,000 tonnes of fodder consisting mainly of hay and haylage from the UK and alfalfa from the Continent. In addition to importing fodder, co-operative members undertook a number of other actions. Co-operatives sourced and transported significant volumes of fodder within the Republic and Northern Ireland. They facilitated the transfer or matching up of fodder between their own suppliers. Some farmers would have had supplies in excess of what they required while others were not in that position. Co-operative farm advisory teams worked very hard with farmers to identify fodder requirements and to develop appropriate fodder regimes to stretch out existing stocks.

This was consistent with the message from Teagasc and others that taking early action could alleviate some of the worst effects by stretching out the availability of roughage and extending feed rations. Co-ops made ruminant feed available at discounted prices, and kept prices low even though ingredient costs rose substantially over the period. Co-op mills operated 24-7 over past two months, an incredible endeavour by all the people involved in the process. Critically, co-ops applied flexible and reasonable approaches towards credit to members throughout the crisis and that will continue into the summer. This will be seen on co-op balance sheets as we go through the summer.

We acknowledge the support provided by the Minister, Deputy Creed, and the Department of Agriculture, Food and the Marine towards the cost of importing fodder. The contribution by the Department was necessary to reduce the extra costs involved in sourcing and transporting fodder from abroad. Despite the contribution by the Department, many of our members have borne a significant increased cost by importing fodder. It is critical that the entire allocation of €1.5 million promised by the Minister is made available to the co-op sector.

ICOS also welcomed the changes made to the national fodder scheme, reducing the minimum distance requirement of 50 km instead of 100 km. The scheme worked better when that change was made. The derogation from the three-crop rule for the tillage sector was a further welcome decision.

In the immediate term, cash flow on farms is a real and pressing concern. In budget 2018, the Government committed to the delivery of a new low-cost loan measure for farmers. This must be introduced as quickly as possible.

Earlier today we had the privilege of being at the national roll-out of the milk flex announcement in partnership with co-ops. It is another significant development by the industry to make available funds that are flexible with the volatility of the milk market. The repayments will be flexible with that as well. It is very welcome that the milk flex scheme has been introduced nationally.

ICOS firmly believes that the past two budgets missed the opportunity to introduce a taxation measure to defer income in a good year in order to draw it down in a bad year. ICOS representatives met Department of Agriculture, Food and the Marine officials on several occasions to discuss this in the past two years. There was significant goodwill towards this measure. If this measure was in place, it would have been available to farmers this year to deal with the significant added costs associated with the long winter at a time of increasing market volatility. Prices have been dropping over the past six months and the co-ops have cushioned their members to a great extent, while co-ops in Europe reduced milk farm-gate prices by 7 cent, 8 cent or 9 cent. It is only now that our co-operatives are reflecting the real market returns. They have cushioned their members over recent months.

The Department of Finance has announced a public consultation on agri-taxation which will run until 25 of May. I urge members of the committee to support the inclusion of an income-stabilisation measure in budget 2019.

In addition to cashflow, other practical issues have arisen due to the adverse weather on farms going back to last autumn. As Professor Boyle mentioned, these issues will impact on the ability of farmers to conserve fodder for the coming year. In this regard, we welcome the establishment of a co-ordination group by Teagasc, to develop the necessary technical advice for farmers who need to replenish stock.

We need to avoid similar problems in the future. ICOS calls for a detailed assessment of fodder needs to be carried out on farms after the harvest to identify any shortfalls that may arise in spring 2019. We know that extreme weather events are becoming more frequent. The farming community has suffered from a similar fodder crisis in 2013. Recently Storm Ophelia in late 2017 and Storm Emma in early 2018 caused enormous disruption to the country and especially to the farming community.

The industry and stakeholders must learn several lessons, including the adoption of more risk-averse strategies, such as carrying greater fodder reserves from year to year. We must learn from this episode that in an ideal world and when things are really good, February is an option in some parts of the country for early turnout, but in many years that may not materialise. When it does not, farmers who only budget for fodder to mid-February or mid-March have a huge crisis.

The fodder crisis and recent extreme weather events have shown the importance of the co-operative movement and its true value to farmers.

I welcome Professor Boyle's comments on having at least eight weeks' reserve. That is the key learning of the present generation from a previous generation that recognised it was essential to have a buffer of fodder available in the event of a very difficult year or late spring. We need to learn that message and need to drill it home. Teagasc, co-ops and all of us who speak to farmers regularly need to reinforce that message. I am not sure whether that will be achieved coming out of a very difficult year, and whether the timeframe will allow for a sufficient buffer to be built up. That will become clear over the summer months. As I said earlier, if we carry out an assessment of requirements in early autumn and we find there is a risk, we need to take action very early on to mitigate that risk.

I thank the Vice Chairman for giving us the opportunity. I pay special tribute to co-op boards throughout the country, their senior management and the staff on the ground for the massive efforts they have made in dealing with the fodder crisis and the extreme weather events. If it ever needed to be demonstrated, this clearly demonstrates the importance of the co-op movement to the farming community and to the fabric of rural society.

Mr. Keane mentioned an eight-week buffer. I do not know if it will be possible to get an eight-week buffer in place in the summer of 2018 because in many cases silage ground is only stocked now because silage ground has been grazed all spring.

I thank Professor Boyle, Dr. Kavanagh and the ICOS delegation for appearing before the committee. I know Professor Boyle was a few years ahead of me in UCD. He will know Dr. Caffrey very well. I recall clearly what he used to lecture back in the early 1970s that there was one tonne of silage or haylage per adult animal per month. At that time it was roughly a five-month period.

What all the witnesses have said this evening is self-evident and relates to farm-management issues. It boils down to two things - the appreciation of climate change and its significant impact on the capacity to achieve this, as the Chairman mentioned earlier. Deputy Cahill is absolutely right that it will be more difficult this year. The eight-week buffer will require an extra two tonnes of silage or other feed being put aside.

That is it. If that cannot be achieved, let us face the unpalatable truth. There is too much hiding, ducking, diving and everything going on, not by the witnesses, but by people in farming organisations and everything else. There is only one thing to do. Stocking numbers have to be reduced, end of story. If one does not have fodder, one cannot be coming along and whingeing. My own brother is in farming. He cannot be coming along and whingeing next winter. I do not want to start repeating the definition of being a fool. To do something one year is an error, but to repeat it a second or third year is something else. This is obvious. If one was sitting in an exam, perhaps a final year exam in UCD or even an exam for an elective module, this is what one would have to say. The numbers must be reduced, otherwise fodder has to be imported. If it cannot be gotten it is replaced with concentrate, which is a fool's farthing, or it is imported and one starts on the same thing again. ICOS will be looking for another €1.5 million, €2 million or €3 million subsidy to import it from Northern Ireland, if it is available, or from England. That is the only place it will be gotten. It is all correlated to stock numbers. The numbers went up by 300,000 like a shot. There was a perfect storm here. There was climate change, an elongated winter, a decreased period in which to produce fodder and increased stock numbers. Talk about a perfect storm. It was absolutely perfect. Perhaps some of the events could not have been anticipated but we should remember that we were in a not dissimilar position five years ago. Now we have the warning. We had 2013 and the winter of 2018. That is the lesson. We have to learn.

Professor Boyle has hit the nail on the head. It is now a matter of matching the stocking rate to the production capacity of the land. That is now very important. One often sees fields such as one I saw lately. I knew the stocking rate on the field was not high enough to meet the production. The rate should have been adequate and the cattle should have taken up more of the land as a corollary. That is a farm management practice and that has to be addressed. Next winter I will give a pardon, but if somebody comes to me the winter after that there will be no pardon. The Chairman is right, it will not be possible to correct this by next winter. With the help of God the winter will not be as long, but again we are in lottery territory in that regard.

I compliment Teagasc. It is talking about this winter budget. I know some its advisers are working hard on that. Have many participated in PastureBase Ireland? I referred to it a number of times here. I thought it was a very useful tool. Have many of the farmers gotten involved with it? Again the issue of nutrient replenishment is also down to farm management. It is about restoring the particular nutrients that are taken out as a result of crop harvesting. Particularly after the first cut, slurry is judiciously utilised to restore the nutrients that are taken out.

I compliment ICOS. It did a great job. We wish the banks were as reactive as it was. I compliment it. I know it will probably find a little bit of a hole in its balance sheet but it is operating on behalf of its own members, which is great, and it has done well. ICOS tries to be flexible in terms of the cost of credit. How much did discounting on normal pricing cost across the wider co-operative movement across the last six to eight weeks, which was the critical period? I compliment it on the work it was doing. It was a little bit ahead of the curve. It anticipated the things that were going to happen with a little bit more precision because it was working on the issue earlier.

I have a question for Dr. Kavanagh. The Minister was depending heavily on Teagasc to get the predictions right. It is an inexact science. The weather could change tonight. It has changed in the last 24 hours. Neither Teagasc nor ICOS nor anybody else can predict the weather. Nor indeed can the Minister. We cannot lay that with anybody. Had it not been for the wicked period at the end of January and into February, would there have been adequate fodder in the country if it could have been transported from the south or the east to the west or north west? Did Teagasc believe there was adequate fodder? We were given to understand that there was adequate fodder but that then the whole thing blew up and the equations and calculations went out the window. Was that Teagasc's best guesstimate? It has a very widespread network of advisers who work at ground level and at the coalface who would be able to give it their best estimates in that regard. Was Teagasc thrown out of kilter by that sudden event?

Deputy Deering will be back in a couple of minutes. I want to pass a couple of comments myself because I have to go to the Chamber to talk on a Topical Issue debate. First of all I compliment both Teagasc and ICOS for their co-ordination efforts during the fodder crisis. They were never more wanted. We are here now in the second week of May and it will be a huge battle to get enough fodder in place for the winter of 2018. There is still some tillage ground that has not been sown. We can put in crops in those areas which would greatly aid the establishment of fodder for livestock farms for the winter of 2018 to 2019. People should be advised to take up that option rather than putting in a late crop of spring barley. The economics of it could be very marginal. There will be a significant market for fodder beet or whatever other fodder crop is sown. Perhaps there could be a bit more focus on that. It might be a common-sense approach for tillage farmers. Instead of putting in a crop the viability of which would be questionable at best, they might put in crops like that.

The other thing that must be looked at is the infrastructure on dairy farms. An awful lot of our farms are fragmented. The stock of cows can be in different places. They all have to be brought to the milking platform in mid to late spring. There was a practice that the cows would be out for a certain period of the day and there was not the same pressure on the infrastructure. This spring raised huge questions. If there are problems, the infrastructure on a dairy farm has to be adequate to cater for the numbers one is dealing with. In late March and April there was huge pressure on the infrastructure. How that can be overcome without huge capital investment is a question. The way it is handled in New Zealand would not satisfy welfare requirements in this country. The cows there are really just let fend for themselves.

It is going to be a challenge and, as I said, I do not think eight weeks is attainable. Advising non-livestock farmers to play a significant role in putting that fodder in place would be a major step forward. I am going to the Chamber. Deputy Deering is here to resume the Chair. It is not that I do not want to listen to the gentlemen, but I have to go to the Chamber for a Topical Issue debate. I will be back in a few minutes.

Deputy Pat Deering resumed the Chair.

I welcome the witnesses today. In regard to Teagasc and the advice it was giving, I know that in my part of the country people like Tom Coll and Ben Wilkinson were magnificent in assisting and working with farmers. Teagasc gave advice from very early stages when people began to see that a crisis was developing.

When it did not stop raining from the end of August onwards, it was obvious that there was going to be a crisis or at least some element of a problem, that farmers would need to use whatever silage they had and that there would be a problem around feed concentrates. One of the criticisms we have of the Minister is that when he did something about the situation, he did not focus on the feed concentrates. He focused on moving fodder around the State. Most of us thought that this was almost in contradiction to what was being advised on the ground. As a result, we now find a situation in parts of the south and the east where the seven of eight weeks of fodder that was a buffer was sucked up into the north west. When the bad weather continued further into the spring, the crisis was not just in one part of the State but all over the place.

This throws up a problem. We say to farmers to make sure they get enough silage, enough fodder and extra to do for the winter. The truth is that there are always some farmers who buy fodder every year, and in general most farmers are able to work it out adequately. Usually in a parish they know the farmer who has a few extra bales every year and the farmer who is a few short and they work it out among themselves, but this year was particularly bad because most farmers did not get a second cut of silage, especially in the north west, because of the rain and the wet and because they were not able to travel on the land.

I am interested to hear the comments on the potential for drainage schemes, where appropriate, for meadow land and in particular on more marginal land. If that land is drained, at least when there is a break in the weather for a week or ten days, the farmers could get out to cut their silage a little bit later. When spring time comes, the land would soak away a bit quicker and grass would come on a bit earlier. I referred to this type of scheme being introduced where appropriate because there are parts of the country where it would not be appropriate. It would be quite appropriate, however, to have such a drainage scheme in many areas.

Reference was made to the problems with tillage this year. We have had a very late spring and an awful lot of the grain will not be got in. What will happen later on? I understand that some mills are already finding it difficult to source grain and to buy forward because it has not been sown. What will happen next year? This will feed into the next possible problem that we will need to look at down the road.

I am aware that Teagasc advises every farmer, as do the people who work in the dairy co-ops, to focus on their inputs and keep their input costs as low as possible. While farmers are told to keep their input costs as low as possible, there is a difficulty because they rely, as a result, on cheap, imported grain. This has a negative impact on Ireland's tillage sector which cannot compete with these imports. If the tillage crop is not going in because the tillage farmer cannot get the price because he is being advised that the other farmer who buys the grain is being advised to keep his or her inputs as low as possible, obviously this has an impact. There has to be a step back to look at the big picture. It comes down to the issue with regard to all our products that we try to sell throughout the world. Origin Green has a big impact on it, but a large portion of the feed that goes into our dairy and beef sectors and into many other sectors is not Origin Green because it is low-cost imports. This aspect needs to be reassessed and looked at because it will have an impact down the road.

Deputy Penrose referred to stock going up. More than anything else, stock has gone up with the pressure from expansion in the dairy sector, and this has also had an impact on the tillage sector. Many dairy farmers expanded to the extent that this has expanded the sector, and it has caused a difficulty and a shortage of fodder. This has happened even in areas where traditionally they would have been able to meet the fodder demands.

The Irish Co-operative Organisation Society, ICOS, performed a great service by importing fodder and stepping up to the mark. The co-ops were there when they were needed, but from our perspective it was unfortunate that we did not have as good or as quick a response from the Minister or the Department to try to resolve the issue faster. If there had to be an intervention and if it had happened at an early stage, then the crisis would not have spread so much as we would not have had as large a problem.

The lesson to be learned from this is that we need to stand back and look at the big picture. We cannot keep expanding without understanding that we must provide for the expansion. We also cannot continue to suggest to farmers that they must keep their inputs at a low cost if it has an impact on another sector of the farming community. We need to look at the bigger picture to come up with solutions that will work for everybody. We are all dependent on one another and each of us in the agrifood sector is dependent on Ireland's reputation around the world for the food we produce. There is an opportunity to ensure that Origin Green means what it says, and if we intend to make it mean what it says, that it will provide a solution for the farmers everywhere.

I welcome the witnesses today and I thank them for their contributions and the work they have done through the crisis.

My initial question is to the witnesses from Teagasc. I ask that they do not get me wrong. We are where we are and it is not about a blame game. Perhaps they would consider this as constructive criticism. When we took the Minister on, from as early as last October, he referred always to Teagasc's good advice and the advice of the standing committee. He was, however, in denial that the situation was a fodder shortage. He almost blindly walked from a fodder shortage into a fodder crisis. At all junctures the answers we got back from the Minister were based on the advice he received from Teagasc. As I have said, I am not in the blame game, and while we are a long way from solutions or back to normality, based on experience we are out through the other side. I presume that Teagasc has had a debriefing and has analysed everything that has happened over the past six or seven months. What would it do differently if we were to face a similar situation at the next harvest?

Other members have commented on the suggested ideal of an eight-week reserve. It was pointed out here, and it is as obvious as the day is long, that we are now in the middle of May and there are still cows and cattle grazing on what would normally be silage ground and which would normally be cut in the next two to three weeks. This ground is still not stripped due to the fact that the cows had to be turned out because there was no feed left in the yard. Farmers are currently at a minus one situation as they start out to build up that reserve. What advice or plans would Teagasc give to its advisers to help the farmers? I cannot see how we will build up a reserve. I am familiar with the exact situation of some farmers on the ground and I cannot see how they will get to a situation where they will have enough fodder going into next winter, even if it turned out to be a short winter, let alone have an eight-week reserve. What advice is Teagasc giving to farmers to try to overcome this deficit? Other members have said, quite rightly, that it is due to stock density and that numbers may have become too big. The numbers are there, however, and we will not get rid of them between now and September. Has Teagasc a plan of action for farmers who are in deficit with regard to fodder and who are now two or three months behind when it comes to forage requirements for next year?

Do the representatives from ICOS see a major credit crisis coming down the tracks? While we have turned a corner and the grass is growing, the 30, 60 or 90 days on the ICOS accounts will start to show regardless of whether farmers will be in a position to pay the money they owe for the extra feed and fodder they needed to get through the crisis. What will be the knock-on effect of this come next September and October when the 2018-2019 winter commences? How will ICOS help in that regard? I compliment ICOS on the support it has provided to date.

I have stated previously that unless we handle this situation properly and manage it correctly for the next four to six months, we will be at the commencement of the fodder crisis of 2018-19 and both organisations here today will have a major role in trying to avert and avoid that. We are depending on the imponderable, which is the weather. We have no idea, as we could be lucky next year. It could be a short winter and people might be able to get their feet back on the ground. The situation with farming and weather is that we have to plan for the worst and hope for the best. Can the witnesses envisage many farmers being able to turn the corner and get the reserves, both financial and fodder wise? I know of farmers who are in far greater credit difficulties with the organisations before the joint committee than they normally would be or would have had any intention of being in at the start of the year. They have no way of paying the extra money they owe to them. While they would have planned for X amount of fodder or meal, in some cases they had to purchase twice as much but their income will not double. Do the witnesses foresee a major crisis when it comes to the dates for those payments being due with the merchants?

I thank the witnesses for their presentations. Like Senator Paul Daly, I thought the writing was on the wall for this issue last October and I raised it in the Dáil in October, November, February and March. The Minister stated that based on Teagasc figures, there was sufficient supply within the country but obviously, that was not evident because everybody knew otherwise. Even in the area where I come from, there are cows that still are not out yet, believe it or not. Thankfully, the co-operatives unquestionably played their part and that must be recognised. The marts where hay was imported also helped. Up to last week it was still coming into the north west, where people in Manorhamilton could not keep it in. Mr. Martin Keane will be aware of that harsh reality. What has happened has happened and there is nothing much we can do about it. I believe a meal voucher system certified by Teagasc people on the ground would have been a much more prompt response. While €1.5 million is available, where farmers were under severe pressure and stress the meal voucher system would have been more effective and could have been introduced much quicker. It is something we should watch for next year. There will be no surplus; we can all accept that. I know farmers who gave silage to their neighbours to get them over the hill and had to turn around and buy fodder themselves afterwards to keep going. That is the harsh reality. From what I can see on the ground I do not think there will be any surplus this year but we need to be more careful next year. Whatever has to be done next year, needs to be done in time rather than waiting until there is a complete disaster. A lot of cattle have died. I know people in the dead animal collection business and they have three lorries running flat out to meet demand. That is partly as a result of bad feed, fodder and weather. It is not all one issue but there is no doubt but that people are at their wit's end. There is no question about that. I agree with the mention of high costs. There should be a system put in place in the budget where a taxation measure should allow a farmer to carry on from a good year into a bad year because if there was ever evidence of that, this is one year that can be used as an example. It should be looked at and it should be proposed in the budget.

Before we go back to the witnesses I must apologise, I had to step out for a while earlier on. I welcome the witnesses to the meeting. I have a few questions on the issue. It is ironic that the sun is shining at the moment and we are talking about fodder, which is the time to plan for the future. The most important point from the last number of months concerns the lessons that we have learned. I have often heard that an opportunity to develop on what mistakes have been learned from the past should never be wasted and it is important that whatever is learned, there must be structures put in place for the future, be it from an advisory point of view or a co-operative point of view. A lot of good work has been done and everybody has to be complimented on that for getting a lot of guys over the hump and some guys have unfortunately still not got over the hump from a farming point of view. In my neck of the woods, I saw two loads of fodder coming through Tullow today. Professor Boyle would know well where I am talking about. That would not be perceived or known to be a difficult area but today I saw two loads of fodder going through the town.

Stocking levels need to be looked at for the future. It is a huge issue. In the past we were talking about getting better before bigger. In the past number of years, rightly or wrongly, we have got bigger before better but I am open to correction on that. That is an issue that needs to be addressed. I ask the witnesses for their opinions on an issue that I raised here before, namely, the idea of Food Wise 2025. Agriculture in general has huge positives but there are very ambitious targets in Food Wise 2025 - creating 25,000 extra jobs and increasing exports by another 50% up to €18 to €19 billion. We also must take into account the cost in all of that, be it from a farming or the costing point of view. Agriculture is resilient but resilience can stretch. This will be a difficult year. In my opinion, it will take a number of years to get over this year. Last year, 2017, was probably the first good year since 2013 and we are probably back to square one now or minus one.

I ask Teagasc what structures it would like to see planning-wise to build up the reserves that were mentioned earlier on? Grass growth has been quite good in the last number of days and it is amazing the amount of time that can be gained and Teagasc will know more about that than me. There appears to be extra stock in the country at the moment that will require extra feeding. How will we get over that balance?

The other issue I will ask about is that a lot of huge bills are outstanding at the moment. They are bigger than they were in 2013 and Revenue bills are coming down the line. The year 2017 was quite good. This is an issue that has not been much discussed and it needs to be factored into the overall planning going forward. Revenue bills are obviously something one cannot get away from and must be paid when they fall due. How will those be planned for?

I refer to the plan for the eight-week reserve and how we could best be doing that. We could be lucky this year, it could be a short winter and a long summer and there could be lots of growth. We could have built up natural reserves but in the event that it is a fairly difficult year, how will we plan for that in the future? Professor Boyle might lead off or before he starts, Deputy O'Keeffe has come in late so I will take a question from him before I go back to Professor Boyle.

I welcome the presentation by the witnesses from Teagasc and Professor Boyle. I am concerned with the eight weeks Professor Boyle mentioned. Is eight weeks even enough? What have we learned? I am not too au fait with the north west of the country but when the fodder crisis moved down to the south, if it is closely looked at, the farmers on the good ground were in a bigger crisis situation than the farmers on the wet ground. They seemed to have a better management system in place with fodder storage over a longer winter period. We were all great at driving on the process of increasing milking capacity and the national herd in the last number of years but was there enough focus done on the management of the herd? What I am trying to say is that it was all about getting from calf to cow out to grass and the emphasis on that is why we have yards with no stock or fodder. The farmers had the idea of getting the cow out to grass straight away and not even having some straw in the yard, just having a clear yard. Should we be changing our focus on that farming practice on good land because the major problems seem to have arisen during the fodder crisis on the good land?

Deputy Willie Penrose has mentioned that we have to consider reducing herd and stocking rates, but the Chairman will realise 100 cows will do the same damage as 300 in a paddock. I, therefore, ask the Teagasc officials if we need to review the eight-week fodder reserve for the future?

Tillage farmers always play second fiddle when it comes to farming practices and a crisis. It was mentioned that mills were working 24 hours a day to get feed out, but some of them had problems in getting raw materials at the ports. If we had produced more grain in the country, the mills would have had more grain. The emphasis seems to move from any type of farming to milking, but that affects dairy farmers because those farmers who move into dairying do not have proper raw materials at source.

I call Professor Boyle to respond to members' comments.

Professor Gerry Boyle

I will ask my colleague Dr. Siobhán Kavanagh to comment on a few points, if that is in order.

That is fine.

Professor Gerry Boyle

I thank the Deputies and Senator Paul Daly for their questions and observations.

One point concerned what would happen next winter taking account of fodder stocks which I believe Mr. Keane mentioned in his presentation. Our plan is to conduct a fodder census on 1 July and possibly 1 September if we need to repeat it.

I agree with some of the comments made, in particular those made by Senator Paul Daly. All of us involved in the business tend to look at growing conditions. We all try to anticipate weather conditions, although we are not very successful at it. It is difficult to do, but we always live in hope things will improve. In so far as weather information was available which we mined as best we could, we are fairly happy the assessment we made at different times of the year - on a regular basis - was as good as it could have been. However, what we did not have an adequate handle on was the actual stocks of fodder on farms. I advise Senator Paul Daly that it is certainly a lesson we have learned. I hope individual farmers have learned, as have we, that we need to get a handle on that aspect in order to plan for the future because it is a serious imponderable.

To respond to some of the specific queries raised, I agree with Deputy Willie Penrose on the advice of Mr. Myles Rath. Dr. Siobhán Kavanagh is more up to date on these matters than I am. The issue of climate change was raised. I am an ex officio member of the Climate Change Advisory Council. I have asked the experts sitting around that table to advise us on the issue, which is one to which the committee might want to return. There is no consensus among the scientists on the way we in Ireland are experiencing climate change on a factual basis. We all have our views on the matter. We can observe extreme events and a couple of years of heavy rainfall in the winter and the spring, but this is an issue we will have to examine closely Until we get a firm handle on it, we will not be able to move to the next stage of assessing what it means for the farming system, turnout dates, fodder reserves, etc. That is a critical point.

I strongly agree with Deputy Willie Penrose on the farm management issue. It is a farm management problem. Ultimately, each farmer has to make his or her own decision on stock numbers relative to feed capacity. I can speak for myself in a different context. At times we can take the odd risk, particularly in a good year. We can say the next one will have to be as good, or if it is a bad year behind us, that the next one cannot be as bad. Unfortunately, such wishful thinking is not adequate for any of us. It goes back to the basic point that every farmer needs to engage in adequate budgeting and we will be there to help them in that regard.

I take on board Deputy Kevin O'Keeffe's point about fodder reserves. As everyone here has attested to or most others have said, having an eight-week reserve is not possible this year. Of course, it is not. That is the target in a normal winter. One could disagree with it, but that is the rule of thumb we are using. As it transpired after the fact - we do not have full evidence on this but are looking into it - unfortunately, many farmers, probably those who recently expanded their farms, as well as those in the more commercial farming region, did not have adequate fodder supplies. They were nowhere near having an eight-week reserve.

A specific question was raised about PastureBase Ireland. It is a hugely important tool. We believe it will be extremely valuable for the future. It is a slow burner in terms of the uptake. Approximately 2,000 farmers, mainly dairy farmers, are using it, but that is nowhere near the number I would like it to be. We have made a substantial investment in the system. It is a very useful tool that provides us with growing information across the country. It is a national service. We provide the information, just like a weather forecast, every day on our website which anyone can check it. However, the real benefit will be gained on individual farms by farmers who follow the system. It is not easy; I would not say it is an effortless system., as it is not. It requires considerable skill for a farmer to be able to use it, but there is a pay-off economically in maximising grass utilisation, but, as we now know, there is also a pay-off in managing a fodder reserve. A modification we are making to the PastureBase Ireland tool is the inclusion of fodder conservation and budgeting as part of the package.

Both Deputy Willie Penrose and Senator Paul Daly raised the issue of the prediction of the crisis and whether Teagasc had been somewhat conservative in calling the fodder crisis that developed. Certainly, as I said, our emphasis on understanding the actual fodder reserves on farms was insufficient. Understanding them would have made a big difference. We were following the prevailing weather conditions at which we were looking very carefully from last August. We instigated the internal committee in August and I had regular reports, virtually every week, on my desk.

There is talk about stock numbers. Nationally, we have lower cattle numbers now compared to the peak at the end of the 1990s, but it is not a national problem. There were difficulties nationally in getting fodder from areas where there was a surplus to areas in which there was a deficit. Some small amounts of imports helped. Nationally, there was not a problem, but the fodder was not in the right place. That was the issue. We all know that we are understocked nationally. The problem is on specific farms. Some farms have expanded rapidly. We have had extraordinary growth on dairy farms during the past three years, as the Chairman will be aware. That is a positive development, but, as someone said, the eye was taken off the ball in matching growth in the numbers of animals on individual farms with the growth in the fodder available. If budgets had been made, it would have been anticipated. It is a basic point for a farmer to know precisely the amount of fodder he or she is carrying into the winter relative to the number of animals he or she has, but with expansion, I can understand how matters could get out of kilter for some farmers. They may have intended to cull cows but they did not do it for one reason or another and carried on with the same numbers. Perhaps they had more heifers than they had anticipated and neglected to make adequate provision. We have to go back to basics and recognise that farmers cannot carry more stock than for the number for which they have feed.

It is not prudent from an economic, an animal welfare or an environmental point of view. That is one of the basic messages. I agree that eight weeks is going to be very difficult. Deputy Cahill made that point. I do not disagree with him. However, he also made the point that there is an opportunity here. I have been saying for a number of years that we have a very serious problem in our tillage sector. I do not think it is widely or sufficiently appreciated. However, this is an opportunity. There is no doubt about that. Our assessment is that it is going to require contractual arrangements. It cannot be expected that a tillage farmer will grow fodder without getting a guaranteed price for doing so. It just will not happen.

That is more difficult to deliver than not. A dairy farmer will look at a tillage farmer and probably say that he is in the same position. Both have to take risks on price. The dairy farmer might ask why he would have to enter into a contract. It will not happen, however, except on that basis. I consider the establishment of contracts that can be enforced as important infrastructural development. We have developed a template and we agree that there is an opportunity here for farmers to get together and, in particular, for dairy farmers to contract.

I appreciate the comments made by Deputy Martin Kenny regarding my ICOS colleagues. This has been a difficult winter for every adviser working with farmers on the ground. There is doubt that people have been under stress. We have found that it was nearly as important to deal with the stress situation as it was with the technical deficits that some farmers were achieving. I was heartened by the way farmers responded. The reserve that we established was a kind of a neutral ground for farmers to offer fodder for exchange and for people to lay out their preferences. It was a tremendous community effort. There were, of course, commercial transactions but there was also a very strong community response. That will not happen year in and year out. There is no question of that.

The focus on input costs was also raised by Deputy Martin Kenny. Our message is always that money is a scarce resource and that people should minimise input costs. Farmers, millers and so on will always tend to go for the same quality but at a lower price. It has to be the same quality on a like-for-like basis. That is perfectly understandable. We would all do the same. We are not going to pay over the odds for diesel or petrol in our cars. None of us is any different. I do take the point - and it is something we have said repeatedly - that our grain sector needs support now. It is very dependent on direct payments. There have been several bad harvests. It is not within our remit but I also agree strongly on the point about the Origin Green label. I have said that publicly before.

There has been a certain pressure on dairy expansion. An expansionary situation is a very dynamic one and it is very easy to cut corners. We have always said to farmers that they have to put efficiency before expansion. It is the less risky strategy. Young farmers in particular have massive ambition to grow their herds. That is understandable. We always tell them to do their farm plans, pause and then ask where they are relative to their peers in the context of efficiency. It is a far less risky strategy to plan for what can be managed.

I take Senator Paul Daly's point on what we might have done differently. The main lesson for me is to focus on the fodder storage and to determine and assess whether that is adequate. Looking at the prevailing climatic conditions and the data, it was - if the Chair will forgive the pun - an extraordinarily perfect storm. Right up to the middle of March, grass growth was on par with last year. The conditions on the ground were very poor but grass was growing. Then, over a relatively short period, we went into a meltdown situation. I am not sure that anyone can predict that. I return to my earlier point that we have to understand - and farmers need to understand - what fodder is available on the ground relative to their stock. I agree that is difficult. We are sticking with the eight weeks at the moment as a prudent guideline but we cannot be definitive about that.

On Deputy Deering's point, there are lessons for all of us. I do not think that we should waste an opportunity. An important point was made in respect of Food Wise. We cannot grow one sector of agriculture without it being interdependent on others. That is a sophisticated and complex relationship. As I was listening to the discussion, it was very obvious that a sector cannot be grown without there being adequate fodder. That means dairy farmers are going to be more and more dependent on others to produce fodder and to contract to rear cattle. That will enable other sectors to generate good stable incomes, which is a positive.

I make the same point about the environment. Dairy farmers are now dependent on people growing trees. That is an example of the complex interdependency we are now facing. As we think about this, perhaps those interdependencies might need to be fleshed out much more in the future. I think I have answered most of the questions. Perhaps Dr. Kavanagh might come in on some of the points I missed.

Dr. Siobhán Kavanagh

On the eight-week reserve, I think we will find that very difficult to do this year. Our main aim at the moment is to try to maximise forage production. We are probably in peak growth at the moment or we are heading into it. We are putting out messages at the moment to get farmers to close as much silage ground and get out as much fertiliser as possible to get a decent first cut. It is hard to make up ground on the second cut if there is not a decent first cut. That is our main focus now.

As Professor Boyle said, we will carry out a fodder census in the first week of July. That will give us a fair idea of where we stand in respect of the remainder of the year. Silage yields will be back maybe 20% to 30% on where they would be at normally. There is ground to be made up. Many dry stock farmers are reliant on a very good first cut and may not make a second cut. They will now have to rely on a second cut to make up that deficit. The first focus will be to try to maximise forage production within the farm gate, whether that is a first, a second and possibly even a third cut in some cases. We will do the fodder budgets in early July and then at least the farmers can make up their minds. Some grains may be an option also as the Chair mentioned. Whole crop grains could be an option as well as on-farm storage of grains, and some of the brassica crops may also be an option for some people. Kale will be gone at that stage but there will be other options such as rapeseed, tyfon stubble turnips and some of these other grazing in situ crops that may help to reduce the demand.

Outside of the farm gate, we are looking at those type of options or buying in grain off the combine and storing it on the farm, where that is possible. It will come back then to stock numbers when people are doing those budgets. The initial budget will be based on a normal winter. If there is a facility then, the eight weeks will be put in. I do not believe that we will build it. I think that will have to be done over the next two years. The hope is that next winter will not come bad and that we will not be not in the same situation. However, it is not realistic to try to build it over the coming winter.

Some people will have to look at stock numbers. On drystock farms, they may have to look at selling weanlings in the autumn rather than waiting until next spring. Cull cows may not be held on farms. In the context of dairy farms, we are looking at a relatively small number that are at these very high stocking rates. The typical stocking rate on dairy farms is 1 livestock unit per hectare. We grow approximately 11 tonnes of dry matter on dairy farms. That is roughly enough to sustain 1.8 to 2 livestock units. I refer to the guys above that. We have about 7,000 farmers in derogation. We do not have accurate figures on them but we are probably talking about half of them being at these very high stocking rates.

One lesson relates to the reserve and that is for everybody. The lesson for those with high stocking rates is that they should try to match grass-growing capacity with those rates. Our message has always been that one cannot expand unless one has the grass-growing capacity.

Professor Boyle mentioned soil fertility. Many more farmers will have to focus on this. We still have a problem with soil fertility. Some 13% of farmers have good soil fertility in terms of pH, phosphorus and potassium. That is still a major issue. The grazing block might be fine but many outside blocks are still struggling with soil fertility.

We are going to see more contract growing of feed for the heavily stocked farms. That will raise questions. Once one goes outside the farm gate to buy in feed, one is exposing oneself to high feed costs. In a low-milk-price scenario, one is more exposed and the system is less resilient. We are working on this, however. We have contracts in place. There are sample contracts for people to examine. We have done a little bit of work in that area. In my region - Wexford, Wicklow and Carlow - the take-up rate has not been great but we are going to have to build on that in the coming years.

There are two sides to the demand for fodder, namely the supply of fodder on the farm and the demand. I refer to the stock numbers. I am not sure that heavily stocked farms will reduce their numbers but they might look to outsource the contract-rearing of heifers and take them off farm. There has been some take-up on that but there is probably potential to do more.

With regard to grazing infrastructure, we saw the farms that are well set up this year in this regard and where it was possible to get out between the showers to do some grazing. Work needs to be done to improve the grazing infrastructure in order that stock can get out and graze more easily in between spells of bad weather.

Deputy Cahill mentioned farm infrastructure. The issue became very evident where stock had to be housed for long periods. We need to examine this. We need to do so in any event under the nitrates directive but, aside from that, the question of having adequate facilities to store feed must be borne in mind. We have seen dairy farmers who have expanded but who might not have expanded their silage pits to match. Therefore, an investment will be required. That will require money. The machinery required to spread fertiliser must be considered. I saw a response about farmers who manage to spread fertiliser earlier in the year. There was a big question as to whether there was value in it but the reality is that there was a good response.

The lesson for everybody is that we will have to put this reserve in place. It will not happen overnight. It will take a year or two to do it. On the other side, for the heavily stocked farms, winter feed budgeting will need to be done on a yearly basis. We are going to be charged with the job of running a campaign on this annually to get people to budget. This is always in the background when we are hosting discussion groups or dealing with clients, but perhaps we have not pushed for annual budgeting as hard as we should.

With regard to an early warning system, the likes of PastureBase will be a very useful tool for us to try to predict where we are going to have a fodder deficit. There is a little work done on satellite mapping so that grass covers, etc., can be mapped to try to predict a problem coming down the line. As Professor Boyle said, one of our problems is trying to establish exactly what stocks are on farm. I do not believe I have anything else to add.

Is there any analysis in respect of those in the dairy sector, the beef sector or elsewhere who were most severely affected in the past? Has there been any analysis of the younger operators in the system or the newcomers in the dairy sector, for example? Is it intended to carry out such an analysis?

Dr. Siobhán Kavanagh

The question of who was affected was raised in our own committee. Many drystock farmers were affected, and they are very lowly stocked. Our overall stocking rate is approximately 1.3 livestock unit per hectare. The winter was just so long, growth rates were poor, and grazing conditions were very difficult. A small number of dairy farmers with high stocking rates are affected also. They just have not grown the grass to match their stocking rates. This is the group we will try to target with advice to make sure the issue is addressed. They will not reduce their stocking number but should improve their grass-growing capacity on-farm and then look to reducing demand by outsourcing heifers and avail of contract-grown feed. For this year, the effect was across the board - both drystock and dairy - but the most severely affected were those in the southern half of the country on dry ground with heavy stocking rates for a finish. It is something on which we need to do a little more analysis.

Mr. Martin Keane

Let me refer to some of the points made by Deputy Penrose on farm management. He is accurate enough in the assessment there is room for some improvement in farm management, but significant progress has been made in recent years. The Deputy said we have too much ruminant stock. The bovine number for 2017 was 6.6 million. It is worth noting that the bovine number in 1996 - 20 years ago - was 7.4 million. The sheep numbers were 8.9 million in 1992 and 3.9 million in 2017. There was a reduction of over 60%. Therefore, to say there is a considerable amount of extra stock is an invalid assessment. There might be extra stock in some places but, overall, from 2013 to 2017, the bovine numbers have gone up by 5.7% and production has gone up 30%. Farm management practices and all that goes with them have improved immensely over the period. We are now getting much more return from the resources that exist.

There is universal agreement here on the necessity to create some headroom. It is a matter of how we go about that. Deputy Cahill, before he left, made some very valid observations on the use of tillage ground. I am certainly not an expert on tillage and do not purport to be. The people to my right are much more qualified to speak on that. The sowing of crops that are suited to this time of the year could help, assuming there is a contractual arrangement between the tillage farmer and the likely user of the product, thereby giving room.

The use of catch crops might play a role later in the summer. A tillage farmer who was sowing corn last week said to me that there is a certain risk but all is not lost if the overall season, and not just the sowing date, turns out to be late. I refer to where crops do not come in too quickly. This comment was from a very substantial grain grower, which shows that there is some room. Certainly, we will not make up all the deficit. I welcome the fact that there will be an assessment at two points in time, in the summer and early autumn, to establish the facts and let us know exactly what will be required for what would be expected to be normal.

To say that people could predict and have management practices in place to deal with the extraordinary challenges of the past six or eight weeks would be stretching it. No matter how good one is, one cannot predict that it will be -4° Celsius or -5° Celsius on Easter Sunday.

I echo exactly what Professor Boyle said when he referred to climate change and the fact that we need to establish much more scientific evidence. It is not a matter of questioning whether climate change is happening but of determining the immediate effect. We cannot plan for what we cannot measure. Right now, no one is able to tell us exactly what is involved other than that we might have a particular kind of climate in 50 years' time. A more immediate assessment is required. Extraordinary events seem to be more frequent. Met Éireann would not exactly say that what happened recently is directly linked to climate change because we have always had extraordinary events. The years 1984 and 1985 were extraordinarily challenging. It could be a little over-simplistic to look at this solely in terms of climate change.

Deputy Martin Kenny is very well informed. I would not disagree with anything he said. The advice to feed concentrate and stretch fodder and roughage was very important. To a degree, that advice was followed. What seemed to have happened in the latter part of the spring, however, was related to the availability of fodder from the south, where short winters are normally expected. Deputy O'Keeffe referred to this. Extraordinary weather events from mid-March onwards took farmers in the south by surprise to a great degree. They would normally be in a relatively comfortable position. Some people exported fodder north and west and then found themselves short later on.

It may not be that it did not exist. That made the position worse.

Deputy Kenny spoke about land drainage. Drainage of any land used for agricultural production, as distinct from other types of production, should be encouraged. The point was made about mills having difficulty. There were pinch points. It is not that the product was not available internationally but delivery dates might have been tight. Mills might have experienced a certain tightness in the delivery of some of their raw materials.

Keeping costs down was mentioned. All of us, the co-ops included, would echo that point. Keeping costs down and ignoring the reality is a very different thing. One has to farm the circumstances. One cannot farm the book. One has to farm the circumstances that present. In a difficult time, one has to adjust one's strategy. It does not mean that one flitters money away but one has to adjust to the reality and ensure that keeping costs down in the short term may not be the right answer. One might need to take a longer term view.

The Chairman referenced the issue of expansion only. We have to get better before we get bigger. The Chairman is absolutely on the money. We have to ensure people do not just expand because they can. They have to be sure they are optimising efficiency and their returns. Huge work has been done in this area. Reference was made to Food Wise 2025. We have a huge opportunity as a country. The consumption of dairy products is increasing by 1.5% to 2% globally. Globalisation is here and we are seen as a very efficient producer of food. We have to protect that image. Reference was made to Origin Green. It is absolutely essential that no damage is done in any way to our image or our green image. The fact that 85% or 90% of our production is from grass is important. That does not mean there will not be the odd blip for a month here or there. We would not want to panic and lose all sense that we have a very natural product that we are exporting to a huge number of countries. We have to congratulate Enterprise Ireland and Bord Bia for the work they do in helping to promote Irish products. They need to stick with us as an industry and ensure we have people on the ground in emerging markets to bring as much of the product to full value as we possibly can. We need to get full value and at the same time keep our costs to a minimum.

Senator Paul Daly asked whether more could have been done earlier. The committee might have thought I would say this anyway as I represent the co-op industry. A very simple measure around a voucher system on buffer-type feed would have had a role to play. I could not disagree on that. The evidence was there that there was a difficulty facing into the winter. No one could have predicted how severe it turned out to be and that we would arrive at a situation where, on 1 May, we see it out in the sun and are not used to it.

The co-ops and credit were mentioned. It will take a number of months before the full extent of this will fully materialise. My anecdotal evidence is that the increased debtor books on co-ops are there. I should not speak for the banks but I imagine they would say the overdraft facilities look okay right now and there is not a big increase. I am sure they would say that because I have heard it said before. I would not be totally surprised by that because the first port of call for a farmer for credit is the co-ops rather than the financial institutions. I would call on them, as the year progresses, to show forbearance particularly in the area of extending overdraft facilities because it will be necessary. As the Chairman said earlier, the November period will be a challenge in light of the fact that 2017 was a good year for price and yield and people will be facing into big tax commitments, all of which will have to be discharged. None of us is here to argue against that.

I refer to what I said earlier. We missed an opportunity in the past two years - Deputy Scanlon referenced this - to have some form of income deferral. If we had done that in the past two years, the result may not have materialised too much in 2016. However, in 2017 if the opportunity had been there and if from a cashflow perspective farmers had deferred a proportion of their receipts, they would be in a better position now facing into the November period to deal with their tax liabilities. Credit and short-term credit will manifest as an issue. The banks have a role to play. We saw earlier today the launch of the MilkFlex fund. It goes back to an earlier point about infrastructural development that is required. I think Deputy Cahill mentioned the need for infrastructural development before he left. We will call for more imaginative funding mechanisms such as the MilkFlex fund. It will only satisfy some of the demand but it is very innovative. The repayments fluctuate with the milk price. It is a unique tool and we welcome it. The banks have a role to play and they have to be more flexible around short-term credit. The cost of credit is always an issue. That is why MilkFlex is there. It is because the cost of credit here is higher than it is for our competitors. It is not for me to go through the exigencies of why that is the case but banks, because of their historical performance, have a necessity to rebuild balance sheets. A certain amount of forbearance might be required on their behalf, as was required by all of us as taxpayers over the past number of years.

The Chairman asked about the lessons to be learned. There are huge lessons to be learned. We have to do things better before we get bigger. We have to plan. The initiative around the fodder and how we fix next year and how we assess where we are before we go into next year is absolutely critical and essential.

From an ICOS perspective, all of our co-operative members will endeavour to afford extended credit terms while at the same time all of the boards involved will have a huge responsibility to protect the balance sheet because a co-operative in a weak position will not be much good into the future. While there will be a facility to help, I do not think we should be burdened with the total responsibility of it ourselves. We have to protect the balance sheets of the business to allow it to continue to grow and develop.

Mr. Flanagan or Mr. Farrell might want to add something.

Mr. T.J. Flanagan

For clarity on the fodder that moved and the support the co-ops provided, as Deputy Kenny will know, well before Christmas there were substantial volumes of fodder moving into and around the north west in response to the particular problems that were there last year. That was before anybody started talking about schemes, even though there was talk about the balance of rations. Then there was the national scheme in the spring, the 100 km scheme. We do not have the numbers for it yet but we will say a few thousand tonnes moved supported by that. We do not have the numbers yet. Then there was the import scheme that came after the realities that hit us over Easter weekend. We think around 18,000 tonnes were supported for import then. In parallel to that, there was probably close to twice that volume of fodder moved into the south of the country from down around the east and from Northern Ireland. There was a lot of maize silage and grass silage moved as well and that was all brokered by co-ops without any support. There was a substantial volume of stuff.

With regard to the tillage crops and the need for contracts, a number of the larger co-ops have started to become brokers in that regard.

It is quite obviously too late to sow spring wheat or oats, and spring barley is marginal at this stage, as Deputy Cahill mentioned. The farmers can grow beet, maize or whole crop or something. They want a price first and they also want to be sure they will actually get paid. A number of the co-ops are putting themselves in as a broker to reassure the tillage farmer that he or she will get paid. I reiterate the point about the last opportunity as last year, notwithstanding the disaster in parts of the country, was very good for most dairy farmers. Volumes were up 9%, the milk price was up 9 cent per litre and constituents were grown consistently. However, people were hit with a large tax bill. If we had put in place those taxation measures, people would have been in a substantially stronger position right now.

That concludes what has been a very informative discussion.

I have one question. We are trying to deal with longer winters and it is certainly a matter that comes up in my part of the country. There were great grants for people looking to store slurry but now when there has been an extra month of cattle being indoors because of saturated ground, there is an additional problem. The slurry problem is almost as bad as the fodder problem. What solutions are there other than stocking fewer animals? Where would there be a solution?

Dr. Siobhán Kavanagh

It is not an easy one. We put in extra storage to beat the nitrates requirements but getting the slurry back to the ground is a problem. Different methods of spreading it might help but traffic ability is still a problem. With the type of machinery, perhaps there will be more umbilical systems and band spreading. I am not an expert in the area at all but we would be looking at systems where a farmer would not have to travel the ground to try to get out with slurry.

Apart from travelling on the ground, that same ground is saturated. When the date comes, the farmer must put out the slurry. Where will the slurry go if the ground is saturated? It is on top of already saturated ground, leading to problems with the water courses, etc. It is not just about being able to travel on the ground but the ground not being able to take it.

There is the nitrates issue as well, which is bigger, I would imagine.

We hope the tillage farmer will work in conjunction with the beef and dairy farmer in the supply of fodder. There is always a reluctance because a tillage farmer can be caught without getting paid. I know there was mention of brokers but is there any way Teagasc could be an intermediary to facilitate agreements? Tillage farmers have been left high and dry after growing maize or even fodder beet if the dairy farmer had a good enough year to grow grass and silage or get cheap straw. They did not want maize or beet so the tillage farmer was left carrying the can. Could there be an intermediary that would not add costs?

Dr. Siobhán Kavanagh

The biggest problem is there is a lack of trust and people have been caught in the past. Having the contract in place is the first port of call. We give guides on prices rather than value; it is cost per acre or, ideally, on a tonne basis. We recommend payment by instalment, with people paying at the beginning and becoming committed to the crop. There is a payment halfway through and the balance is paid on delivery into the yard. That gives commitment from the very start. We do not get involved in setting those arrangements but it is the guide we give.

We have done a little work in some of the units. We have sent a text message to our tillage and dry stock clients asking if they are interested in growing fodder for farmers or, on the other side, if there is interest in having fodder grown. Some regions have a register and they have done some matching but it is up to the farmers to figure out the payment system. It is what we recommend and it shows a commitment from day one if somebody must pay up front. Some of the matching has been done in Teagasc.

We have put out the text in my region and there are 20 tillage farmers on a list prepared to grow crops. Only one dairy farmer came from the other side. Part of the reason for this is that farmers are so physically and mentally tired from the spring that they have not this year processed the option of getting tillage crops grown. Over the next couple of years we will have to try to develop it a bit more. It is a very welcome development that the co-ops have gotten involved with the matching and bringing people together.

I thank the witnesses and we have had a very informative discussion. It is good to hear Teagasc speaking about analysis in July and September. Perhaps it should happen every year and I presume it will happen. I agree with Mr. Keane's analysis that we missed an opportunity in the past couple of years of putting a structure in place and perhaps something can be learned. The co-operatives cannot replace banks from a credit perspective, and that must be got across as well. They have an important role to play but they are not a bank. Likewise, I encourage banks to play their part in this process.

There is much to be learned going forward and even from today we could put a structure in place. We will do a report of the meeting with the key points from parties such as Teagasc, the co-ops and the banks, which were here previously. We will put it together and perhaps it can form part of a solution. There will never be a perfect solution but this could be part of one. I thank the witnesses for appearing before us today.

I am sorry about having to leave. There was mention of getting crops grown by tillage farmers for dairy or livestock farmers. Issues of nitrates and stocking rates will have to be included in such calculations. If a farmer is to source a substantial part of his fodder from land that he has not on his area aid, the stocking rate implications would have to be taken into account. A little work on that might make it much more attractive to livestock farmers.

There are no simple solutions to any of this.

Professor Gerry Boyle

That would be part and parcel of the kind of advice we would give.

I thank the witnesses. We will suspend for a few moments while the next witnesses take their seats.

Sitting suspended at 6.27 p.m. and resumed at 6.30 p.m.
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