Future of the Beef Sector in the Context of Food Wise 2025 (Resumed): Bord Bia

We are continuing our discussion on the future of the beef sector in the context of Food Wise 2025. I welcome the representatives from Bord Bia, Ms Tara McCarthy, chief executive; Mr. Padraig Brennan, director of meat, food and beverages, and Mr. Joe Burke, senior manager, meat and livestock. I thank them for appearing before the committee and for their submissions.

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 Ms McCarthy to make her opening statement.

Ms Tara McCarthy

I thank the committee for the invitation to discuss the future of the Irish beef and livestock sector and its markets in the context of Food Wise 2025. I am joined by my colleagues, Padraig Brennan, director of sectors, and Joe Burke, our senior manager for meat and livestock. With the agreement of the committee, I would like to focus on the recent performance of the Irish beef and livestock sector, and I hope to address some of the issues being experienced as a result of difficult market conditions at present.

As members all know, the Irish beef and livestock sector plays a key role in the Irish economy, with over 100,000 farms involved in cattle production. In 2018, from a supply base of approximately 1 million suckler cows and 1.5 million dairy cows, Irish beef production reached over 630,000 tonnes, of which 90% was exported. Notwithstanding the serious challenges being faced by the sector which I will touch on in a moment, Irish beef exports were valued at a record €2.5 billion last year, which represents a growth of 20% in comparison to the baseline period from 2012 to 2014 on which the Food Wise 2025 targets were set. Over the same timeline, Irish cattle throughput at export meat plants increased by approximately 300,000 head, with significantly more animals coming from the dairy herd since EU quota abolition in 2015. This contributed to an additional 90,000 tonnes of beef being available for export. In respect of market channels, there has been a dramatic advancement in the number of European retailers and major food service customers committed to buying Irish beef, which now totals more than 115 key accounts. As a result, Irish beef exports into retail are estimated to have grown by 30,000 tonnes, with a similar increase in the volume being sold into the quick-service restaurant chains. These developments have been brought about as a result of the enviable reputation which Irish beef has achieved across key markets, based on its unique attributes of grass based production, family farms and a high quality product. The importance of these attributes was clearly highlighted by in-depth research undertaken by Bord Bia over the past year with 22,000 consumers in 13 markets across Europe, Asia, the Middle East and North America. In markets close to home where Ireland is well known, such as the UK, Germany, France, the Netherlands and Italy, Irish product is strongly associated with terms such as grass fed, pasture raised, natural production and a clean environment. In markets in Asia such as China and Japan, Ireland’s natural production system and robust food safety systems are, and will continue to be, key to building the reputation of Irish beef.

Of course, Bord Bia is also acutely aware of the difficulties being experienced by Irish beef farmers, particularly since last autumn. Irish R3 steer prices were below the comparable European average male cattle prices for most of the past nine months, and have fallen by an average of 6% or €0.23 per kilogramme for the year to date in comparison with the same period in 2018. It should, however, be acknowledged that in recent years the improved market position of Irish beef has enabled cattle prices here to move closer to and exceed EU average producer prices. Irish steer prices have exceeded the EU 15 male cattle average in six of the last eight years. It is worth highlighting that prior to this decade, Irish prices had exceeded the EU average in just one year, for a period in 2008. Most recently, for the week ending 11 May, Irish R3 steer prices averaged €3.79 per kilogramme excluding VAT, which represents a recovery of €0.15 per kilogramme in recent weeks. By comparison, R3 steers in the UK are averaging £3.55 sterling per kilogramme, which is equivalent to €4.09 per kilogramme. Across continental Europe, cattle prices are also behind last year’s levels, and the weighted average price of R3 young bulls stands at just €3.65 per kilogramme.

While my colleague, Mr. Brennan, can go into this in further detail, I will put some context on what is happening in the market. In late 2018, the European beef sector was impacted by higher stocks of beef on the market, driven by higher EU production, particularly of cull cows, but also by increased imports of beef into Europe, predominantly from South America. At the same time, exports of European beef into international markets recorded a 5% decline. These factors collectively resulted in an additional 188,000 tonnes onto the supply chain, equivalent to 2.6% of total EU beef consumption. Overall exports of Irish beef increased by 3% in volume during 2018 to 573,000 tonnes. Similar to recent years, the UK market accounted for 52% of Irish beef exports, or 298,000 tonnes. Exports of Irish beef into continental Europe grew by 3% to reach 250,000 tonnes, thereby making up 44% of total exports for 2018. Meanwhile, exports of Irish beef to international markets declined to just 25,000 tonnes, and therefore represented just 4% of Irish beef exports.

Another significant factor within the Irish beef trade this spring was the level of uncertainty surrounding the outcome of Brexit. It is likely that many cattle finishers took the decision to market their animals earlier in fear of the possible consequences of a no-deal Brexit. Cattle throughput has increased by 36,000 head to date this year, in spite of analysis of the Department of Agriculture, Food and the Marine’s animal identification and movement, AIM, system, which had suggested that supplies for 2019 as a whole were likely to decline. A disorderly Brexit would have serious, long lasting consequences for the sector. The potential implications of having to find alternative markets for more than 200,000 tonnes of Irish beef are considerable in terms of the potential damage it would do to the hard-fought position of Irish beef in key markets, as each market would need to absorb 60% to 70% more Irish beef. It is very unlikely that this could be achieved at the prices historically achieved in the UK market.

Apart from Brexit, the beef sector faces other significant challenges, including an ever increasing stream of negative publications and campaigns that question the industry’s right to exist. This includes challenges to the sustainability of red meat consumption on the grounds of health and environmental impact, with the more extreme reports calling for beef consumption to be reduced by almost 80%. For example, the recent EAT Lancet report suggests a daily red meat allowance of 14 g per day, which would equate to less than one quarter pounder per week. Such reports are creating an increasing perception that red meat is not healthy among some consumers, particularly millennials, who are aged between 23 and 38. As a result there has been a substantial and sustained rise in veganism, vegetarianism and, most particularly, flexitarianism. This is a term coined for people who are consciously eating less animal protein. Recent Bord Bia research suggests that up to one fifth of consumers in some European markets fit into one of these groups, particularly younger, urban dwelling consumers.

The sector is also under ever increasing scrutiny from NGOs in respect of animal welfare. Last autumn, a Dutch NGO published an undercover report including photographs and video challenging the animal welfare standards on Irish cattle farms. In each case, the investigators gained access to the farms under false pretences. Thankfully, the industry has been able to counteract the report findings and reassure customers using verified facts and figures from audit data from Bord Bia’s sustainable beef and lamb assurance scheme. It is clear that the power of NGOs continues to increase and the industry needs to have a clear plan for balancing the debate in a more proactive manner. Otherwise it is likely to face further challenges to its social license to operate, potentially leading to declining consumption and, consequently, lower prices.

As already mentioned, the Irish beef sector has a lot of positives which are well recognised, but producers and the industry as a whole are continuously being asked to do more. It should also be acknowledged that the sector has already embraced the sustainable beef and lamb assurance scheme, SBLAS, and Origin Green, thereby providing a unique infrastructure with which to successfully counteract some of these challenges. The introduction of the close-out model and a farmer help desk have encouraged membership of SBLAS to grow to around 52,000 certified farms currently. As a result of the data collected during the audits of SBLAS farms, Bord Bia is in a position to make claims and to provide proof around some of our unique points of difference. For example, our data show there is clearly space to do that on grass. Numerous international research papers have shown that grass fed beef contains higher levels of iron and vital vitamins. Grass fed beef can also point to higher omega 3 and conjugated linoleic fatty acid, CLA, levels, all of which help boost its human health credentials. A specific grass fed claim has also been shown to add further marketing advantages for Irish beef in Bord Bia-commissioned research at consumer and trade levels.

The challenge currently to making that claim is that while there has been a widespread uptake, a considerable number of producers remain outside the sustainable beef and lamb assurance scheme, SBLAS, which makes it impossible for Bord Bia to robustly make claims about the full lifetime of the animal and this in turn can weaken the strength of the claim being made. To fully reflect the efforts being made on cattle farms across the country, every farmer needs to be encouraged to join the sustainable beef and lamb assurance scheme.

Regarding Origin Green, following its launch in 2012, the early stages of the roll-out of Origin Green were all about building the programme, creating scale and proof points and, as a result, credibility with the market and customers. As a result of the widespread support from farmers and industry, Origin Green has become more successful than could have been anticipated. The programme has now established an awareness level of 27% among trade customers internationally and in the more traditional markets of the UK, Germany and the Netherlands, Ireland ranks in the top five of countries associated with sustainable food production.

However, with success comes challenges, as both market priorities and customer demands continue to evolve. The blue-chip customers purchasing Irish beef have an ever increasing expectation that the sector can demonstrate real impact and improvement to allow them to make claims about the product on their shelves. These evolving trends and expectations point to the need to regroup and focus on the production, marketing and promotion of Irish beef to help deliver a viable return for everyone involved in the sector. It was against this backdrop, informed by market data, and built on significant consultation with industry at both farmer and processor level, that Bord Bia has updated its marketing strategy for Irish beef last year.

Our first priority when we look at the strategy is about focus. Ireland currently exports beef to more than 60 markets across the globe. Traditionally Bord Bia tended to treat many of those markets equally, essentially following the volume of exports. As part of our new strategy the marketing investment is being focused on a core set of priority markets. This approach is designed to deliver a better return on investment and allow Bord Bia to further improve the market position of Irish beef.

Germany is a good example of a priority market for Irish beef. Over the past eight years, the value of our beef exports has risen by more than 250%, growing from €45 million in 2010 to reach over €165 million in 2018. This reflects growth in export volumes from 9,500 tonnes to 27,000 tonnes, as well a jump of more than 25% in the average price per tonne. Five years ago Bord Bia commenced the roll-out of a bespoke consumer campaign for the German market that focused on the sustainability credentials of Irish beef and on the family farm tradition in Ireland, which resonates strongly with German consumers. Over the period, Bord Bia has invested around €4 million in the campaign. Under our new strategy, similar marketing campaigns are being implemented across other priority markets such as the Netherlands and Italy.

Our second priority is about new markets. It is clear that the dynamics of the global beef trade will change dramatically over the coming decade. Global beef import demand is expected to grow by more than 20%, with Asia accounting for half of this increase, rising by almost 1 million tonnes, principally driven by China. This means that regions such as Asia look set to become increasingly important outlets for Irish beef over the medium term. The reality is that in many of these markets do not know much about Europe, never mind Ireland. A key focus of Bord Bia’s strategy is to build awareness of Irish beef with key importers in these new markets.

Bord Bia's awareness-building activities in Asia will be supported by its execution of EU information and promotion campaigns. These campaigns generally receive 80% co-funding from the EU, and therefore represent a valuable resource to highlight the supply capabilities of European beef and within that, of Ireland. Two campaigns are currently taking place in the Asian region under the banner "Enjoy it's from Europe", including a €3.75 million campaign across China, Hong Kong and Japan, as well as a €4 million campaign covering the Philippines, South Korea and Singapore. Activities include inward study visits to Ireland, technical seminars for trade buyers, media advertising and participation in multiple trade fairs. At the same time, we are starting to see the scale of the supply challenges being faced by China and other Asian markets due to the escalation in African swine fever outbreaks. This has the potential to significantly change the balance of the global meat market and drive prices upwards over the course of 2019 and into the medium term. Our view, further informed by our recent trade mission to China only last week, is that this market will advance even more quickly than our original plans suggested and other Asian markets such as Japan, South Korea, Vietnam, Singapore and the Philippines are also showing significant potential for Irish beef. Bord Bia has adjusted and continues to adjust its plans and programmes accordingly.

We all know that Ireland’s greatest asset in the marketplace is its reputation, which has traditionally been built on traceability and data. In order to further enhance our market position, we will need to protect and, where necessary, strengthen our credentials. The third area of focus in Bord Bia’s strategy is all about building robust proof points. These proof points will focus on grass and animal welfare in the first instance, both of which we know are of significant importance to customers. The unique infrastructure offered by SBLAS and Origin Green will play a key role in verification. Delivery on these issues will require significant collaboration and buy-in from all parties across the sector, but it will enable us to protect the reputation of Irish beef and help differentiate us from our competitors.

Finally, because the market never stands still, Bord Bia is committed to maintaining a focused and targeted investment in market and consumer insights to anticipate potential new market opportunities for Irish beef. There is no denying the seriousness of the current market situation and there is no denying that there are serious challenges to overcome. All parties in the sector have a role to play in overcoming these and I am committing that Bord Bia will play its role to help deliver the maximum return from the marketplace.

I thank the Chairman and members of the committee for affording me and the team the opportunity to address them this afternoon. My colleagues and I are happy to address any questions the Chairman or members may wish to ask us at this time.

I thank Ms McCarthy for her opening statement. Before I call Deputy Cahill, Ms McCarthy might enlighten the committee on the role Bord Bia plays in live exports. They are a key part of the beef trade and competition is the lifeblood of trade. There was much commentary on that issue, particularly calf exports, earlier in the year. Ms McCarthy might enlighten us on the role Board Bia plays in that area and the role it might be able to play in it in the future.

Ms Tara McCarthy

Mr. Burke might respond to that question.

Mr. Joe Burke

With regard to live exports, similar to our promotion of beef, we execute campaigns to promote live exports. As the Chairman said, they represent an important source of competition and an alternative outlet to the export meat plants. Interestingly, for the year to date, overall live exports have increased by 36% and up to the beginning of May, 173,000 cattle in total have been exported. The calf exports, which were the focus of much attention this spring, increased by 33% to 143,000 head. There were significant increases even on the back of last year's high levels. As a result of those, calf exports are likely to reach record levels this year, in spite of the difficulty posed by the capacity issue in the lairages in Cherbourg earlier this year, of which we are all too aware. Bord Bia, through our market office colleagues, implements the promotion of our live exports in those markets. We work with customers and in many of these and other markets there are significant customers importing large volumes of calves. They represent an outlet for weanlings or heavier animals.

We were involved in various activities, in conjunction with the Minister for Agriculture, Food and the Marine, including trade visits to markets during the past 12 months. We visited the Turkish market to further grow it. We hosted during the past fortnight an inward visit from the Turkish ministry, as well as from the ESK, which is the meat and milk board in Turkey, and which issues many of its import licences. We also worked with veterinary officials of the Department of Agriculture, Food and the Marine recently to secure improved access to the Algerian market.

The committee has been dealing with the issue of the future of the beef industry for the past few weeks. There was some criticism in recent weeks directed at Bord Bia for not doing enough to address the capacity issue in Cherbourg. Is that an issue for Bord Bia to deal with directly or would it be dealt with by another area?

Mr. Joe Burke

I will address that question. I visited the lairages in Cherbourg with my colleagues based in our Paris office. We met those operators and we viewed the facilities last spring. There was only a minor increase in the daily capacity; it increased from approximately 4,000 head per day to 4,500 head per day currently. That capacity was utilised throughout the spring, albeit there are only sailings on three shipping days per week in line with the decision of the ferry companies to sail on those particular days, reflecting their other enterprises and their other trade for exports.

We have been in touch all the various operators, the exporters, in Ireland, with whom I am in regular contact.

We had an inward buyer visit last week from a Spanish customer, who visited many of the live exporters. We have moved away from peak exports now, given the time of year, and that capacity is not as much of a bottleneck as it was in the peak export time of March and early April. Similarly, we continue to find opportunities for other categories of stock. Later in the year the focus will move more to weanlings and heavier cattle, and indeed alternative markets.

On the same point, we will have the same number of calves, or perhaps more, next spring. Does Mr. Burke think we have addressed the issues that arose last spring such that we will not have the same problem next year?

Mr. Joe Burke

Again, the current situation is that the two ferry companies continue to look set to sail on similar days, and the capacity issue also seems to be at a similar level. There is therefore no immediate solution in sight that will see the numbers increase dramatically on last spring. Taking a long-term approach, we advise and work with all the various operators in order to look at the supply chain and see whether we can breed superior animals that will be more valuable even for the home trade, be it through increased usage of beef crossing or usage of better bulls. Similarly, we are involved in a number of other programmes to highlight all the various options that are available at the start of the supply chain through breeding to produce a better-quality calf, while also recognising this is a very important outlet in order to secure markets for the pure male dairy calves in particular.

Bord Bia is a great organisation and does a lot of very good work. That might be the last positive thing I will say for a while.

The Deputy got it out of the way early.

As the Chairman noted, Bord Bia has produced a document here in which there is no mention of live exports. I asked a parliamentary question two or three weeks ago specifically focused on targets for the last six months of the year for live exports, particularly cattle of six months and over. I wanted to know what target had been set for the last six months of 2019. The Minister stated that in respect of Bord Bia, no target or figures were being set for the last six months of the year. I just cannot understand this. I sat on the board of Bord Bia for six years. If we got a new market somewhere or other, there was always a target as to how much beef we intended to get in there. We have heard of this market and that market being open for live exports but the reality is that very little stock is moving. We see a boat of 3,000 bulls the odd time, or this or that, and there is big fanfare about it but there is no competition at the ringside from live exporters. It is not happening.

Mr. Burke talked about breeding a better calf, keeping calves at home, rearing them, sexed semen and so on. The problem is that at the back end of this year, our kill reached 40,000 head and the price we were getting is just not viable. I have never seen such despondency among beef farmers as is there at present. When Bord Bia or anyone else produces a document on the beef industry - I can see targets of growth of 20% in comparison with the baseline figure - what must become compulsory is one for the primary producer as to what the return on beef farming is per hectare. The return on beef farming has dropped and dropped significantly year in, year out.

One of the biggest challenges facing the beef industry is our single farm payment. Beef farmers are completely dependent on it and there will be one hell of a battle to maintain it in the future. What worries me most of all in Bord Bia's statement is the beef price in Europe. We cannot blame anyone for that but it is the reality we must face up to. Ms McCarthy noted that across continental Europe, cattle prices are also behind last year's levels and the average price of R3 young bulls stands at €3.65 per kilogram. Has an analysis been done as to how the European beef farmer is able to survive at such a price? His or her cost of production cannot be lower than ours. If it is, there is something seriously wrong with the way in which they farm on the Continent. One would imagine that the cost of production would have to be significantly higher. If European farmers are able to produce beef at that price and make a viable return, we are in a cul-de-sac. How are Europe's farmers coping with such a price? How are they able to take it?

Ms McCarthy raised the challenges being made against the health of red meat consumption. The dairy industry has a promotional body, the National Dairy Council, one of the main roles of which is to defend and promote the health aspects of having dairy in one's diet, which it has done very successfully. Fifteen years ago, if one touched butter or cheese, it was deemed to be absolutely detrimental to one's health. I think Dr. Nelligan was the first man to come out and say that dairy in a balanced diet was essential for one's health. That battle on the dairy side, in my view, has been won. Very rarely now do we see negative comments about a balanced diet containing dairy. Does the beef industry now need a similar body to take on its opponents and the people who say that if one eats a steak, one is hammering a nail into one's coffin? The dairy industry has defended itself exceptionally well. Does the beef industry need to go down a similar route?

Bord Bia is focused on the family farm tradition in Ireland and has spent €4 million on this campaign. Again, how much scrutiny would this stand up to now? We saw figures for January and February this year. The figures that come to my mind are the amount of cattle coming out of our feedlots and the amount of cattle being sold into factories by agents. Were one of our major customers to come in here and examine our figures, how many of our cattle would now be coming to the slaughter from family farms? It is grand to portray the image but if some of our opponents took us on, to what extent can we stand over this in the future? Our factories are fattening a lot of their own cattle now and the percentage seems to be growing. Again, to what extent can we stand over selling ourselves as producing this green beef in a family farm tradition now? The perennial chestnut in this regard is beef classification and the grid, about which there is huge dissatisfaction. Technology has moved on. I read an article just this morning which stated that it has been, I think, ten years since the grid was introduced. It has been in operation for ten years. I was quoted in the article as being as critical of the grid ten years ago as I am now, so at least I am consistent in my views on it. With the advances in technology, surely there should be improvements in the technology in respect of the way in which the grid is done and the animal classified. The amount of grazers on the grid is one thing but farmers are inherently unhappy with the classification and they rightly or wrongly feel they are not getting a fair crack of the whip on it. I acknowledge the witnesses will say to me that Bord Bia has no role in this, which I accept as its job is the promotion of beef, but this is undermining farmer confidence and must be addressed.

Turning to the positives, Ms McCarthy said beef consumption will rise, especially in Chinese markets. I was surprised by the figure in this regard. She said consumption will grow by more than 20% within the next decade and that Asia will account for half of this increase.

Will people have the same food tastes as ourselves? Will the top-end or quality cuts be in demand in the Asian markets? Will it be the lower end of the market that the increased tonnage will come from? If so, then there will not be the same return for farmers. What growth in price will the market realise? There is mention in the presentation of swine fever. There has been an impact on pig prices here. There are only 360 pig producers left in this country and for the first time in a number of years they are starting to get a reasonable return for their endeavours due to the outbreak, but swine flu will come and go in Asia. Will that market return a price that will make it viable for us to supply produce?

Climate change poses great challenges for farmers. We have 2.5 billion cows in this country and the figure is rising. There is a focus on climate change and a couple of weeks ago a climate emergency was declared in the Dáil. Whether we like or not, agriculture will be the prime target for the reduction of emissions. Does Bord Bia believe we can win the argument with the general that we can produce beef from suckler cows in a climate-friendly way? That is a major challenge because there will definitely be pressure on the agricultural sector to reduce emissions. Does Bord Bia believe we can convince the public and make it sound credible that we can produce beef in an environmentally friendly way? It will be a significant challenge to reduce substantially the emissions produced by the agricultural industry.

I am disappointed by the lack of focus in the report on live exports. I am disappointed by the lack of targets for the rest of the year. Live exports and the number of calves are at record levels. Therefore, the number of calves exported this year will have no impact on the supply of cattle in 2020. The number of men who are deciding to hang up their boots as regards beef farming is increasing rapidly. I do not know how farmers on the Continent can produce a product at €3.65 a kilo because there is definitely no economic return for us here. Let us consider the family farm tradition, the National Dairy Council, NDC, equivalent and the lack of focus on farm incomes in presentations.

I thank the witnesses for their contributions. Again, I commend Bord Bia on a lot of its work. It is important that Irish agriculture has a structure to market its produce worldwide, and to bring into focus the quality of Irish food and unique way in which much of Irish food is produced. One of the downfalls, which I am sure Bord Bia is well aware of, is that the primary producer struggles so much to make a living. That is the focus of what we are trying to work through here, in particular the beef sector.

Comparisons were made between the European average and where we are. One of the things that has always struck me is that given the quality of products we produce, including animals that are grass fed, which is unique, the fact that we have family farms, which is unique in many ways, and the scale we work at, it should result in a premium price being paid to the primary producer, which is one of the core arguments. How we succeed in doing so is what we are at but the consensus always seems to be that the farmer must become more efficient and produce more from less. Being more efficient usually means being more intense. yet that intensity flies in the face of the market model that we try to market the product at, which brings me to the point made by Deputy Cahill. He asked how we can stand over a situation where at least 10% and maybe up to the 20% of our beef comes from a very large feedlot model or an industrial-sized model for producing beef. That situation would be detrimental not just to the current marketing model but the product itself.

Ms McCarthy stated that "Cattle throughput has increased by 36,000 head to date this year". To correct the situation, have we reached a stage where we need to reduce throughput? Should we soon reach a point where we say we are continuing to increase the volume? Ultimately, from where we sit as representatives of farmers, we can see that processors and supermarkets are making a lot of money out of the extra volume while the primary producers make little or nothing. Such a situation does not benefit the common good. Therefore, we need to press the reset button and consider ways to do better.

Ms McCarthy made interesting points about the international market, including that approximately 4% of Irish beef is exported outside of the European Union. I believe there is significant potential in such markets. I know from talking to people about the Asian markets, particularly the Chinese market, that there is a view that anything produced in Ireland is of top quality, that people are prepared to pay a good price, and that there is potential to grow the market if we can do things properly. We can only grow the market properly if we do so for everywhere. There is no point in us going to China and telling people we have a unique product for which they must pay a top price when they can look at Europe and see that we are only getting an average price for our products. We need to find a way to reset ourselves so that Irish beef gets a premium price everywhere that it is sold. I understand that there are difficulties in doing so and I am not saying it would be easy. At the same time, securing a premium price must become the focus for Bord Bia and farming organisations. Everyone has a part to play in securing a premium price.

I want to talk about the bad press that sometimes is given to the beef sector and beef production in particular. There are suckler farmers in my part of the country. In general, suckler farmers produce one thing - the calf - but they must keep a cow for a whole year to produce one calf. Usually, due to the type of land suckler farmers have at their disposal, they cannot finish the calf but sell him or her on to somebody else to finish them. Therefore, suckler farmers are at a great disadvantage. Is there merit in considering alternative models of production for the region? Many farmers have diversified and rear dairy calves on a contract basis, which works for some people but is not the entire solution. Let us assume that an increasing amount of beef comes from an expanding dairy herd. How can we stand over such a situation? How can we produce the quality that we need to produce? How much work has been done in respect of that? Can that model get the premium price that primary producers deserve? All of this, certainly from the point of view of Bord Bia, must be about the price received by primary producers.

I am interested in learning about the relationship between Bord Bia and the factories, processors and supermarkets. Many people believe, and perhaps it is a misconception, that Bord Bia simply finds markets, makes contact, puts the two sides together and then walks away. Bord Bia should act as a guarantor for the primary producer at home because taxpayer's money allows Bord Bia to provide these markets and thus it is unfair if only one section of the industry benefits. I am talking about the beef sector but what I have said applies to all sectors of food produced in Ireland. I will leave my comments at that and I again thank the witnesses for coming here this evening.

I apologise for missing the first part of the presentation by Bord Bia but I was called away for a vote. It is important that we have Bord Bia here today as it will give us a different outlook on where we are going with the beef industry. The export figures are exceptionally good.

That is an area where we have to talk ourselves up. Is there a strategy on the part of Bord Bia regarding the export trade for live animals? What is its outlook for the trade, particularly weanlings and Friesian bull calves? How does it feed into ensuring we have an appropriate market base for our beef going forward? Will the witnesses comment on the levies on live animal exports, which I believe were reduced from €4.50 to €1.30 last year? How has the reduction worked? Has there been a positive or negative impact? How does the levy drive the market? What focus is there on marketing and on ensuring there is the capability to get calves or weanlings to a proper home?

There have been a lot of changes to the industry, especially in my part of the world where there has been a movement away from beef suckler farming to dairy farming. If this trend continues for a decade, where do the witnesses see the beef industry being at that stage? There will be large numbers of dairy stock and smaller Angus animals coming on stream rather than the traditional suckler animal. Do the witnesses have a fear of the marketability of such a product if there are larger numbers of Friesian culled cows, Angus heifers or bulls? Would it have a knock-on effect on the entire industry? What is the long-term plan to deal with this shift in numbers and the shift in emphasis? We market Irish beef with a lovely picture of the suckler cow, but will we have the suckler cow in ten years? If we do not, how do we market the product?

Ms Tara McCarthy

There is a broad range of questions so I will answer them in clusters. Deputy Cahill raised concerns on the attacks towards beef on the grounds of health and the idea that the dairy industry has successfully navigated this issue. I would challenge that analysis because the attacks are coming from three different locations and to both sectors. They do not come just from health but from environmental impact and animal welfare. I would argue that dairy is being challenged just as hard as beef in those areas. I stand over the fantastic work of the National Dairy Council, NDC, but I do not think the battle has been won by any means. There is a challenge to all the industry to articulate its benefits better, whether that is the job of a brand new agency or the current infrastructure in the shape of the meat and dairy organisations and Bord Bia, which can provide data to those organisations. Expertise is also provided by dieticians and there is a job to be done to co-ordinate that message. The campaign attacking the animal protein sector is co-ordinated and both areas need to be grouped together rather than separated. One has not done better than the other and both are equally vulnerable.

If we did not have Brexit, which is one of the biggest challenges facing our sector, the only thing we would be talking about is the challenge of climate change. These are two significant challenges to our industries and they threaten their very existence. I acknowledge the state of emergency but I suggest it is coming from the market as much as from this building. Many farmers and the industry in general signed up to Origin Green, and that is a strong indication of how much the issue has been taken to heart. The infrastructure has been designed and developed since 2012 so that we now have 52,000 farms on board, which is 90% of exports. Some 95% of dairy farms are on board and we have a strong infrastructure to collect data. We now need to move on to the improvement that is happening on farms. A lot of work has been done and a lot of technical expertise is driving the improvement, such as by looking at the marginal abatement cost curve, MACC, and the fantastic work Teagasc has done in this space. There is a significant obligation on Ireland to illustrate the improvements its industry is making to justify its existence, never mind its expansion. I am not saying it is easy but it will only be done by a coalition to look at and align all the targets collectively rather than by segregating them.

Mr. Brennan will talk about the industry structure and feedlots.

Mr. Padraig Brennan

Deputy Cahill asked about targets for live exports. We view the livestock sector as vitally important to the viability of the beef sector in Ireland. I accept that we do not have definitive number targets for the rest of 2019, as the Deputy suggested, but we are focusing on targets for how many buyers we can attract into Ireland to look at Irish cattle and livestock in the context of potential business opportunities down the track. Whether they are from Spain, the Netherlands, Italy Turkey or Algeria, it is about how we undertake activities on the ground locally and how we make these people aware of the capability of the Irish livestock industry to supply the category and type of animal they are looking for. Some of that work can sound a little bit distant but it is very important because in many of these markets there are many competitors and we have to tell them what is different about Irish livestock.

There is a lot of focus on calves, and rightly so, particularly in spring, but a lot of focus is on growing other categories as well, such as weanlings and store cattle. We need all categories of animal to have a number of outlets, whether they are live or dead. We may have expected a more rapid increase in the numbers of live cattle exports over the past year or so, but there was a 20% increase last year, and this year to date we are up by 36% in numbers, which shows we are making progress despite the challenges the Chairman highlighted at the outset. It is hoped we will continue to make progress in conjunction with the livestock exporters.

Irish young bull prices are 104% of the EU 15 average. There is a viability issue across the European Union, though some producers have a slightly lower cost of production than we have with more proximity, greater availability of feed and their young bull system. All we can do is deliver the best price we can to the markets and to the customers we are trying to find. In six of the past eight years of this decade, we have been at or above the European average, while in the 2000s, we were only at or above the European average for one year. We are making some progress in this area, though there is a lot more to be done. There are signs that we are moving in the right direction.

There was a question about the family farm structure and a discussion around feedlots. The data in our quality assurance database show that there are 580 farms that slaughter more than 300 cattle per year.

Based on the audit information we receive, it is clear that the vast majority of those farms do not have feedlots under the international definition or anything close to it because there is a strong outdoor production process and a long grazing season in most cases. In many instances, a farm only has feedlot status or a slaughter-only policy because of the herd's TB status, so it is difficult to know the exact number of what are defined as feedlots, but our information suggests that the majority of farms that might be classified as such are actually representative of the production system found on farms that are classified otherwise.

Deputy Cahill was involved in the discussions on the grid from the outset, so he knows that its purpose was to be a reward for quality and to reflect what the market was looking for at the time. As with every other area, things move on and markets change and evolve. The grid is now more than ten years old, and I welcome the recent discussions on the possible need to review it. That has been raised in a number of quarters. Perhaps now is a good and opportune time, particularly in view of the changing dynamic in the industry in terms of where our beef is coming from.

Looking outside Europe, the Deputy rightly highlighted the growing importance of Asia to us as a market. The figure of 20% is import demand rather than overall consumption. We are likely to see at least that level of increase between now and 2027. The Deputy raised a valid point about Asia's taste requirements or appetite for the cuts that we typically export. In China, for example, a different set of cuts are more popular. We view this in two ways. First, a market like China offers an opportunity to deliver a better return for some cuts that garner a low return in the European market. This adds overall value to the animal. Second, the demand for higher quality cuts in markets such as China is increasing, evidence of which we saw as recently as last week. Next month, we will be in Japan and Korea and will see exactly the same trend. There is a high-value part to those markets. We are probably in the early stages. The first product from Ireland only arrived in China last September, meaning that we are still only six or eight months into developing trade in that market.

We have all heard much about African swine fever in recent months. It is a grave issue for China. Something that struck me in China last week was that it would have a structural impact on that market for a prolonged period. The people that I spoke to locally were considering structural impacts for the next five or seven years at the very least. This year alone, the most recent forecast suggests that 18 million tonnes less pigmeat will be produced in China. This means that China will need to find the equivalent in imports. Whether it is chicken, pork or beef, though, that volume of product does not exist anywhere else in the world. As such, there will be a strong demand in China for beef and pigmeat. Granted, we are in the early stages of developing these markets, but it presents an opportunity for us to establish ourselves there in the way we would like. As the markets evolve and grow, they have the potential to deliver a better overall return for the animals that are produced. That return goes to the primary producer in the form of the price that he or she can achieve.

I will turn to the other questions. Ms McCarthy might also contribute. Regarding price levels, Deputy Martin Kenny is correct about our grass-fed and outdoor production systems. They are unique strengths, and we rely on the sustainable beef and lamb assurance scheme, SBLAS, to provide us with the figures to back that up. In any market that we enter, we are an import supplier and it can take time for us to make the most of these strengths, so we need the facts and figures at our fingertips to demonstrate that it is not just a photograph or statement and that we can back up everything we are telling the customer.

A question was asked about our relationship with the customer and whether we just put the processor and the customer together and walked away. That would be the direct opposite of what we do. Ms McCarthy outlined our revised marketing strategy for beef. It is all about how we get close, and stay close, to our key customers and how we build and secure for Irish beef a profile and position with each of them. One might start at a certain level with a customer, but there is the potential to grow the volume and value of the business over time. More and more of our investment will go towards working with individual customers and trying to increase and improve the profile and position of Irish beef with them. It is not a question of securing or facilitating the business and walking away.

Deputy Martin Kenny asked a valid question about whether we need to reduce output. Consider the dynamics of the global market - there will be an increased demand for beef globally. Obviously, we will have a more mature market closer to home in Europe, but where we focus and how we export our beef will change. In terms of managing Ireland's output, Bord Bia's focus is on ensuring that we have as many markets and customers as we can open to and consistently buying beef from Ireland. That helps to minimise or, as it were, reduce the risk that we have seen in recent months of a higher output.

Senator Lombard asked about the strategy for livestock exports. I will leave those to my colleague, Mr. Burke.

Ms Tara McCarthy

I will add two points to Mr. Brennan's comments on beef consumption in China. It is important to remember that we do not have a strategy of trying to westernise the diet of people in China. Rather, we are trying to ensure that Irish beef has a position within Chinese recipes and in how they design their food. Four master chefs will visit Ireland next week. They have custom designed different regional cuisines, for example, Cantonese, to show how they would cook the Irish beef cuts available in their market and propagate same in China. We are not telling people to eat a steak because that is what the Irish do. Rather, we are looking at their recipes and ensuring that our cuts match them. This is a more efficient use of the funding that we have available and it will give rise to a longer-term gain.

I will build on Mr. Brennan's point regarding our relationship with supermarkets. We also seek cross-sectoral opportunities. For example, when we speak to a supermarket about dairy, we also look for an opportunity in the context of beef. When speaking about beef, we look for an opportunity in respect of seafood. Instead of limiting our conversations to just one sector, we are continuously looking at food brand Ireland and all of the opportunities to cross-promote or cross-sell into the market in order to ensure broad access to buyers. That has been one of the benefits of our cross programmes and of placing our Origin Green ambassadors with key accounts. We learn from them as much as anything else. From a talent perspective, we have taken the new initiative of placing our assets, if I might put it that way. I am referring to professionals whom we are working with through a student network with University College Dublin. We place them with our accounts. By that, I mean that we have our supply chain students placed with Tesco, Marks & Spencer, Sodexo and Sainsbury's in order to understand better how their supply chains and decision-making work and then bring that intelligence back to the industry with a view to ensuring that Ireland positions itself well to face the challenges that may arise. In terms of sustainability, we have, through our Origin Green programme, similarly placed our assets into businesses. Be they customers or non-customers, they are always thought leaders. Ireland is using an opportunity at every point to inform itself about what the best in class are thinking.

Mr. Joe Burke

I will tackle Senator Lombard's first question on the live export trade and whether there is a strategy to maximise numbers. Our focus tends to be on analysing the markets and categories and providing market insights to commercial exporters regarding the potential that exists within those markets. Our focus is also on meeting new contacts within those markets, be they mature or existing markets for calves or new international markets, and gaining access through organising trade missions in conjunction with the Department and the Minister. Another focus is on co-ordinating inward buyer visits where possible. This has been a useful vehicle for kick-starting trade in some markets.

In terms of specific numbers, some of the markets that had appeared to be opening up and presenting new opportunities are volatile at the moment. The difficult war-like situation in Libya, for example, is limiting opportunities. As a result of a political decision, no imports are being allowed in Turkey at present. The issuing of import licences has been suspended. The visits we have had from Turkey over recent weeks have given us hope that Turkey looks set to issue licences and open up imports again. We have the contacts in place to maximise the opportunities for Irish exporters.

The Department of Agriculture, Food and the Marine levy, which is a veterinary sign-off that clears animals for export, has been reduced from €4.80 to €1.20 per calf on foot of some lobbying in recent years. That has had a significant benefit. There are approximately 300 calves on every lorry or truck with calves that leaves the country. Therefore, the reduction in the levy has led to a net saving of more than €1,000 to the exporter in each case. The Bord Bia marketing levy of €1.90 per live bovine animal exported is also significant. This means a budgetary contribution of more than €500,000 is made as a result of live exports across all the animals that are exported. We invest that on behalf of the livestock sector in the various activities I have discussed, including the market insights and the promotional activity. That is the situation in relation to the Bord Bia levy.

The suckler herd is a key area of focus. We have taken on board with interest the trend of decline that has been evident in recent years. There was a decline of 45,000 in suckler calf registrations last year, and there has been a decline of 35,000 so far this year. More animals from a dairy background are coming through the system. The suckler sector is part of our point of difference. It is one of the unique selling points of Irish beef. Many suckler-based animals are seen in Bord Bia's marketing materials that promote Irish beef. When we bring in customers, this sector tends to resonate well with buyers. We tend to focus on bringing them to suckler farms so they can see the commitment of farmers to breeding good stock and bringing animals through the system.

The positive attributes of the suckler system include the welfare related benefits of having animals with their mothers at grass for between six and eight months. We have brought those benefits to the level of applying for an EU promotional campaign. The campaigns that are taking place in Asia are more about discovering the potential of these markets and utilising the funding that is available through the EU. This is another opportunity to maximise the benefit of the suckler herd. We have applied for EU funding, but there is no guarantee that our application will be successful. We have seen the opportunity that exists within the Italian and German markets. We have applied for this campaign in respect of suckler beef. We see this as being potentially useful. We hope we will be successful. In recent years, we have seen that, on balance and on average, we have been successful with just one in four of these applications. In this case, we have used our consumer research in these markets to target affluent consumers who represent an ideal potential customer for this type of product on the basis that these animals come from a high-welfare sustainable background. These unique attributes mean that our campaigns resonate well with such consumers.

Does Mr. Burke believe that ten years from now, the profile will have changed dramatically or these kinds of numbers will have continued? He mentioned that the number of registrations decreased by 45,000 last year and has decreased by 35,000 so far this year. That is a continuous trend. Is Mr. Burke afraid that if this trend continues, Bord Bia's ability to market Irish beef at the current level, with the suckler cow entity as the main focus, will be affected in a way that will have a detrimental impact on the beef industry itself?

Mr. Joe Burke

If the trend mentioned by the Senator were to continue, it would mark a significant decline. We have seen very difficult market conditions as a result of last summer's drought, which affected some parts of the country. The difficulties associated with the price levels that prevailed at that time have also had a knock-on impact. We hope the situation will be more stable. We can influence all of this by helping to bring about the best possible market returns as a result of our efforts and promotional campaigns. One of the initiatives we have developed has been the application for the EU promotional campaign. Our ambition is to drive the highest possible returns and the highest profitability levels back to the producers that will still exist ten years from now. We cannot say whether there will be 800,000 or 900,000 cows at that time. We want to have the most sustainable producer background for producers so they can ultimately make a living from this activity.

I would like clarification on Bord Bia's interaction with exporters. No expert association has been set up for live exporters. I think there are 15 or 18 live exporters working at the moment. I am not sure of the precise number. Does Mr. Burke think the lack of a representative organisation as a single point of contact is an impediment to Bord Bia in its work? If such an entity were to be established, would it offer Bord Bia a better way to engage and work with live exporters?

Mr. Joe Burke

That is a good question. The representative of live exporters on Bord Bia's meat and livestock board is himself a live cattle exporter. That is one of our means of making sure we are relevant and we address the needs of live exporters individually, as we do with our beef clients. Live exporters receive individual support with regard to the specific markets and categories in which they are interested. We have encouraged the exporters to come together as a group to form an association. We would see benefits to that for their engagement with the Department of Agriculture, Food and the Marine on the prioritisation of markets and market access. This is something we have been encouraging the exporters to move towards. We appreciate that there are individual differences, competitive or otherwise. We hope the exporters will be able to come to some arrangement to put a mechanism in place, as described by the Senator.

I forgot to mention during my initial contribution that the Department has a scheme for groups of farmers to come together as producer groups to work to market their products and share their inputs, etc. Does Bord Bia work with any of these producer groups to find markets for them? Does it have a sector that focuses on that specifically? What potential does it see there? If a group of farmers is looking for a niche market in a particular area, can Bord Bia provide for that? What kind of structure can be put around that to protect such groups from the big guys if that is necessary in the future?

I apologise for having to leave earlier. I had to vote in the Seanad and then I was called somewhere else. There is vertical integration between industry and producers in the pig and poultry sectors. Why is the beef sector so slow to have proper vertical integration that would facilitate a more sustainable situation for farmers?

Ms Tara McCarthy

There is already a sophisticated producer group model in the mushroom industry. We engage significantly with the producer groups to co-ordinate their marketing. This allows us to draw down funds with regard to European promotions. These funds are then matched because there is then an industry funding group. We are very comfortable working with producer groups. We actively co-ordinate or help different sectors to look at that model.

We have a slightly different remit within horticulture because of the legacy of Bord Glas. We have a stronger producer responsibility in that sector than we do in co-ordinating the type of activity mentioned. We endorse it as a strong model. It allows smaller producers to bring scale to their offering, prepare themselves to receive market messaging back and co-ordinate funding. As an example, while helping producer groupings in horticulture prepare for Brexit, we were able to introduce the concept of lean production to them in the form of a pilot. Those groups could then explore that idea within their own infrastructures to get that best practice model accelerated into their businesses. We strongly endorse that model going forward. I thank the Senator for the question.

Vertical integration is a very different business model regarding the cashflow funding involved. That is also the case in respect of Ireland's business model regarding land usage, as well as the infrastructure associated with vertical integration, as opposed to family farms and our grass-based production system. Pigmeat and poultry are intensive industries and our beef industry is not closely aligned with those models. There has been closer co-operation in the context of contract suppliers with different beef producers. In that instance, production models have been piloted and investigated. The Kepak KK Beef Club comes to mind, as well as the new 2020 model that Glanbia and Kepak are exploring. While that is not absolute vertical integration, it does seek a further alignment from start to finish and to send much clearer messages. There is a strong structure within the beef industry, which largely involves family farms and that is another factor in the fragmented nature of that industry as well. The working capital needed to finance the number of years involved would also be different from the speed to market in the poultry industry. It is a very different industry structure. Vertical integration exists in the beef industry in the United States but it is based on feedlots, rather than the grass-based extensive production we have in Ireland.

We will not have that model here for much longer unless we address the disconnect between the farmers and the producers.

Ms Tara McCarthy

There is no doubt that the viability of our farmers is a core priority for everyone in this room. We continuously challenge ourselves to ascertain if we are doing the best we can to capture value from the market and send messages to ensure co-ordination and alignment. Our aim is to ensure Ireland does not leave any value on the table when interacting with the market. The industry has many other structural issues but fragmentation is never a friend when seeking to create scale. We are always open to new ideas. Bord Bia, however, has only certain remits, principally in marketing and sending market signals back to the industry. I agree fully with the Senator that the fundamental future of the industry is based on the viability of the farmers working in the sector.

There are exciting developments in this area and I commend Bord Bia on the work it is doing internationally, especially in China and the rest of Asia. Will the rewards of that work be reaped quickly enough to compensate for the situation in Britain regarding Brexit and the tariffs and all that will follow from that? I refer to the flooding of our shelves with beef from South America.

Ms Tara McCarthy

We mentioned this only briefly. We have not spoken much about Brexit in this session but Brexit and climate change are the two major issues facing the fundamentals of our industry. I do not know when the end of Brexit will be. Will it be October or will it last even longer? If it is October, markets in Asia will not be ready to take 200,000 tonnes or 300,000 tonnes of Irish beef. It would not have been ready in March either. We have had access to the market in China since last April. The first products arrived in September but exports at the moment stand at less than 10,000 tonnes. It is 4,000 tonnes and not hundreds of thousands of tonnes.

Deputy Martin Kenny mentioned that Ireland has a fantastic reputation. We do in certain categories but our beef is not known in Asia, for the most part, at a scaled level. We are brand new in that market. There was no beef from Europe in the market until we got access and this concept of beef from Europe is a very new one. We have much work to do to build our brand and expand our exports in Asia. If the question is whether that market will take 200,000 tonnes in the next two to three years, I have to state that will not be the case. That level of exports has not been forecast by anyone. We are exploring the longer term and Asia is providing very strong signals to the floor of global prices. That is a positive for us. It is beneficial for European beef when the floor of global prices rises. We are then able to explore new opportunities and it also provides other outlets for South American beef. I am not, however, seeking in any way to give the impression that markets elsewhere will compensate for our being out of the United Kingdom market.

That is why there needs to be Government intervention to fill the gap. We will not have any family farms left otherwise. A suckler cow premium, even a temporary one, is the only way I can see of filling the gap.

Ms Tara McCarthy

We welcome the €100 million spoken of as coming from Europe, as well the general support being afforded to Ireland. The distribution of that funding is outside of our remit and expertise. We are, however, committed to the sustainability of suckler farmers, as I stated at the outset.

I thank Ms McCarthy.

That completes our business today. I thank everyone for their contributions. This is an ongoing process and we have our last hearings next week with two other groups. We then hope to complete our report by the second week in June. Today's contributions will be invaluable in drawing up that report. This is a major sector of the Irish economy, as the witnesses have outlined. It is of great importance for rural Ireland and, therefore, it is crucial that the industry is sustainable into the future. I hope our report will provide some kind of roadmap for the future of the industry.

The joint committee adjourned at 7.07 p.m. until 3.30 p.m. on Tuesday, 28 May 2019.