Joint Committee on Agriculture, Food and the Marine díospóireacht -
Wednesday, 27 Sep 2023

Development of the Sheep Sector: Discussion (Resumed)

An Cathaoirleach

I bring to the attention of witnesses that those giving evidence from within the parliamentary precincts are protected by absolute privilege in respect of the evidence they give to the committee. This means witnesses have a full defence in any defamation action relating to anything said at a committee meeting. However, witnesses are expected not to abuse this privilege and may be directed to cease giving evidence on an issue at the Chair's direction. Witnesses should follow the direction of the Chair in this regard. They are reminded of the long-standing parliamentary practice that, insofar as is reasonable, no adverse commentary should be made against an identifiable third person or entity. Witnesses who give evidence from a location outside the parliamentary precincts are asked to note that they may not benefit from the same level of immunity from legal proceedings as a witness giving evidence from within the parliamentary precincts. They may consider it appropriate to take legal advice on this matter. Privilege against defamation does not apply to publication by witnesses outside the proceedings held by the committee of any matters arising from those proceedings.

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 Houses or an official either by name or in such a way as to make him or her identifiable. Parliamentary privilege is considered to apply to utterances of members participating online in the committee meeting if their participation is from within the parliamentary precincts. Members may not participate in a public meeting online from outside the parliamentary precincts and any attempt to do so will result in the member having his or her online access removed.

The purpose of today's meeting is to discuss the development of the sheep sector. For the first session, the committee will hear from representatives from Enterprise Ireland, namely, Mr. Mark Christal, divisional manager of food and sustainability; and Mr. Gerard O’Flynn, manager in the primary meats and food technology department. They are very welcome to today's meeting. The opening statement has been circulated to members. I ask Mr. Christal to read his opening statement and we will then proceed to the question-and-answer session.

Mr. Mark Christal

I thank the Cathaoirleach and the committee for the invitation to address it this evening. Enterprise Ireland helps manufacturing and internationally traded services companies to start, scale and grow businesses in international markets.

We work with export-focused companies across all regions and sectors of the economy, predominantly with SMEs, supporting them to improve their competitiveness and productivity, increase innovation and achieve their full growth potential. This growth results in direct and indirect employment and economic growth across all regions of Ireland. We also work with the network of 31 local enterprise offices, LEOs, through our centre of excellence to support the growth of microenterprise across the country.

In 2022, Enterprise Ireland, EI, companies directly employed 218,178 people, with 68% of these jobs outside Dublin. In 2022, EI-backed companies employed over 218,000 people across Ireland and generated more than €32 billion in exports. The EI client companies represented in these figures cover a vast range of sectors, including but not limited to construction, energy, engineering, food and drink, medical devices, ICT and pharmaceuticals.

In respect of the food sector, EI’s annual business review reveals that 50% of exports in 2022 were in the food and drink sector. This sector saw very strong growth in 2022, with the value of exports increasing by 23%, though some of that is accounted for by inflation, particularly in the dairy sector. In 2022, dairy, beverage and food FDI exports increased by 28% to €9.3 billion, primary meats and food technology exports increased by 17% to €4.59 billion and prepared consumer foods, seafood and horticulture exports increased by 11% to €1.91 billion. We also include climate, sustainability and agritech exports in this general sector and they increased by 12% to €364 million.

EI focuses on two main categories of companies: established companies with an exporting footprint and start-up companies looking to bring added value to Ireland’s strong food sector. We assist established brands in the food sector to access new markets or expand in existing markets using our network of 39 overseas offices. We also work closely with these companies to support research and innovation in production processes that result in new value-added products or ensure access to new markets and compliance with country-specific food import regulations.

A recent example of Government support for these companies in co-operation with EI was the capital investment scheme for the processing and marketing of agricultural products, which has seen approximately €100 million of public money utilised to support 34 important development projects in established food processing companies in the dairy and meat sector. This investment will ensure these companies can anticipate changing consumer demands, diversify their offering to increase the prominence of value-added products and access new markets in the medium to long term, thereby ensuring sustainable growth of this vital sector.

The second main area of activity for EI in food and drink is in supporting innovative start-ups to grow and thrive. Innovation is vital to the long-term success of the Irish economy and a core part of EI’s mission is to support start-up entrepreneurs and their teams. We do this by financially supporting promising start-ups, developing the capability of their management teams, supporting research and innovation and exploring overseas market development. We also work with our partners Teagasc and Bord Bia through the food works programme to nurture and develop food start-ups in Ireland.

In respect of the sheepmeat sector, our door is always open to new companies with viable ideas that can benefit from support, expertise and insight. That is the core mission of the agency. We are open to all new business ideas and will go out of our way to support entrepreneurs in the sheepmeat sector. It is not in our remit to support primary producers, that is, what is produced within the farm gate. Our main focus currently in this sector is to support processors exporting cuts of lamb to a range of markets, in partnership with our colleagues in Bord Bia, who focus on the marketing opportunities in these global markets. EI-supported companies in the primary meats sector, including sheepmeat, had exports of €4.5 billion in 2022, an increase of 17% on 2021. Total sales were €7.5 billion, an increase of 19% over the same period. The sector supported approximately 20,000 jobs across the regions outside Dublin, which was an increase of 1% on 2021. In 2022, for a third consecutive year, Irish sheepmeat exports recorded value and volume growth. The value of sheepmeat exports increased by 15% to €471 million while the volume of exports increased by 12% to 76,000 tonnes over 2021.

Domestic consumption of lamb accounts for 15% of total production with 85% exported. Some 75% of our exports are to Europe. European exports increased by 18% to €353 million in 2022. France remains the largest export market at 40%, followed by Germany, Sweden, Belgium, Denmark, the Netherlands, Luxembourg and eastern EU countries. Exports to the UK increased by 15% to €78 million in 2022, driven in part by some of the major Irish lamb processors optimising utilisation of their UK operations. Exports of sheepmeat to international markets grew by 15% in value terms.

sheepmeat exports during the first four months of 2023 were valued at €148 million, a 5% decline from the corresponding period in 2022, representing weaker lamb trade in key markets due to inflation and weaker consumer demand. Opportunities for exports to the US and China are emerging with Bord Bia and the Department of Agriculture, Food and the Marine working to address trade and market access issues for these jurisdictions. Australia and New Zealand remain the major competitors.

Under the 2008 beef and sheepmeat investment fund, 15 projects across the sector were supported with grant assistance of more than €69 million toward a total investment of €168 million. The objective of the fund was to support investment to increase scale and efficiency in primary processing, and added value in further processing for retail, food service and manufacturing outlets. The €100 million capital investment scheme for the processing and marketing of agriculture products, administered by EI, opened in January 2021 and closed in November 2022. So far, it has supported 34 projects in primary food processing plants across the country. The total public and private investment exceeded €420 million. The scheme supported transformational capital investment in SMEs and large companies to enable them to pursue product and market diversification strategies to achieve greater value add. The investments will assist companies to strengthen their operational capability and sustain the agrifood sector into the future.

Other funding that our primary producers have availed of include capital investment initiative for equipment; research, development and innovation, RDI, for new product and process development; lean and digitalisation supports for improved operational efficiencies and sustained competitiveness; management training; and more recently sustainability measures to address emissions targets.

EI also continues to invest in research and development in the primary meat sector through collaborative research, specifically in the meat technology centre, known as Meat Technology Ireland, MTI. MTI is an industry-led technology centre which brought together the beef and sheepmeat processing sector to work collaboratively for the first time. MTI enables highly competitive companies to come to the table, develop research projects, share know-how and address industry challenges. Phase 1 was approved in 2016 with core funding of €5.7 million. Phase 2 commenced in 2022 and was approved for €7.4 million with considerable additional scope for work on sustainability and digitalisation of this important industry. In supporting companies in this sector, EI’s focus is on the business opportunities, particularly overseas, that follow from primary production. That is where our expertise and statutory responsibilities lie.

The committee in its hearings has heard of the potential of the sheepmeat sector and in particular the sheep milk sector. EI will support innovative, export-focused businesses that seek to develop that natural resource into a commercial product. Our door is open and entrepreneurs looking to develop in this sector are welcome to explore how we can build thriving businesses, providing employment across all regions in Ireland.

Deputy Joe Flaherty

I thank Mr. Christal for his comprehensive introduction. Before getting into sheep, I will focus on start-ups. It is the second key area, after the existing companies. In terms of food producers, what is EI’s typical start-up? Are we looking at convenience food that is highly processed or what are we looking at?

Mr. Mark Christal

We see a range of start-ups. The start-ups EI works with have the potential to employ ten people or more and to achieve sales of over €1 million. Those are the working criteria we use for our start-ups. We support start-ups across the range. A number are prepared consumer food, PCF, companies. Ingredients companies are now coming to the fore. We are seeing the adoption of food technology and solutions in respect of ingredients becoming a cornerstone of start-up companies that come through. We do not limit it to one sector but are open to engaging with start-ups across all sectors. We work closely with Bord Bia, Teagasc and the LEOs to develop the pipeline of start-ups coming through and to identify those with the innovative capability to achieve those milestones of ten people or €1 million in sales.

Deputy Joe Flaherty

With regard to sheep, it would look as if 2022, on the face of it, was a good story.

Sales were up, volumes were up, and then in the first couple of months of 2023 there was a 5% reduction. I know the witness pointed to changes in markets but there has to be more to it than that when suddenly it changed, when it had been growing year on year up to that. It is a fairly seismic change, is it not?

Mr. Gerard O'Flynn

Yes, it is. That is probably a market-related question that would be better answered by our colleagues in Bord Bia. Certainly, there was a price-related issue in 2022 as well. Prices were good in 2022 and slipped back a little bit. I am not quite sure why volumes reduced to be honest. That is most likely a question for our colleagues in Bord Bia.

Deputy Joe Flaherty

I was interested to hear Mr. O'Flynn mention sheep milk in terms of the market and scope and Enterprise Ireland's research. What is the scale of that market for Irish producers?

Mr. Gerard O'Flynn

The scale of the market is again a market-related question. I really would not know the scale of the market. Sheep milk is an area we do not have a lot of experience in. We have dealt with a few very small projects. To be honest I would say they are very much in the embryonic stages all the time. We certainly have applied some start-up supports to a very small number of companies. In truth, we do not really have a lot of experience there but much is dependent on supply as well. That is not an area that is particularly well-developed in Ireland at the moment, when compared to the rest of the dairy sector, bovine milk in particular.

Deputy Joe Flaherty

We had one group of farmers in here who were interested in that sector and who have engaged with and I believe have got some funding from Enterprise Ireland. In terms of them scaling up, are there more supports? What Enterprise Ireland would offer to them seems to be vague enough at the moment.

Mr. Mark Christal

Yes, we are limited in what we can do at the primary production level. That is an important point to state clearly. Where Enterprise Ireland comes in is if there is a processing capability. Again, we are happy to talk to and engage with anybody if there is anything we can do in respect of that. It is where the processing is happening, that we can play an active role and really make a contribution.

An Cathaoirleach

It would have to be processed to get it to market.

Mr. Mark Christal

Exactly, Chair.

An Cathaoirleach

Apologies, Deputy Flaherty.

Deputy Joe Flaherty

Is there something in-between for those people? The key issue for them is probably to get to that processing. Where is the assistance for those? Is that through the Department with responsibility for agriculture?

Mr. Mark Christal

Yes, and Teagasc is obviously an important player in that regard. I refer to the likes of the research centres I mentioned in the opening statement. They are an important part of the ecosystem as well.

Deputy Joe Flaherty

I have a final question. I am intrigued by Meat Technology Ireland, MTI, and how it can get probably some of the most secretive firms in a sector to come together and share information. What kind of projects have been funded there or what are we looking at?

Mr. Gerard O'Flynn

There have been a range of projects such as genomics, and meat health. There is a substantial range-----

Mr. Mark Christal

Shelf life.

Mr. Gerard O'Flynn

There was a project on shelf life extension in more recent times. MTI is now in its second iteration and there is a very strong focus now on digitalisation and sustainability. It is now two or three in its second iteration, so the real focus there is the sustainability, and the digitalisation piece.

Deputy Joe Flaherty

For farmers listening in they will probably focus on the genomics, in terms of what is happening in that space. What specific projects did Enterprise Ireland fund on that?

Mr. Mark Christal

Our funding goes into the research centre and there is a collaboration between the processing companies themselves to build on the six research projects they have. I do not have the details this evening of where exactly the genomics project is at but I am happy to supply the committee with information on the research projects on a subsequent date, if that is okay?

Deputy Joe Flaherty

Very good.

Senator Paul Daly

I welcome Mr. Christal and Mr. O'Flynn witnesses and thank them for their presentation. I want to go back on the sheep milk side of things, which Deputy Flaherty touched on. Being honest, that is probably why the witnesses are here this evening. Sheep milk came up when the Crosse brothers from Cashel attended this committee and discussed their innovative idea of sheep milk. As well as the production of the milk, there is the processing. The production of the milk would be straightforward enough but there is also the processing of cheeses or whatever. With that in mind I know they have had communication with Enterprise Ireland. I do not want the witnesses to say anything that would be a breach of whatever communications they would have had with them. Using the Crosse brothers as an example, I think it was a potential lifeline for the sheep sector, if what they talked about could take off. Enterprise Ireland spoke about criteria such as ten plus employees and €1 million in sales. It is a little bit like, "Live horse and you will get grass", or maybe "Live sheep and you will get grass". The Crosse brothers may have that potential but how to they prove it to Enterprise Ireland? I know there are the local enterprise offices, LEOs, etc., they would probably go to first to get them to that level, but they are talking about a national idea that is probably - they will not like to hear me say this - aspirational, but very achievable and deliverable and would be a lifeline for the sector.

How does Enterprise Ireland help the Crosse brothers in their infancy? What is Enterprise Ireland's role within Government or within the Department? For the purposes of conversation and to get a better angle and picture of how the thing works, if the Department with responsibility for agriculture decided that it will be national policy to drive the sheep milk sector because it is working in New Zealand and some other places - and there is a whole web that can be tied into this with solar panels and sheep being ideal grazing along with them - what is the role of Enterprise Ireland in getting the nuts and bolts of that industry off the ground? Does it have to be an entrepreneur who makes an application or can it be the Minister or the Ministers? I know the witnesses are not agricultural but if it was the agricultural policy surely the two Ministers would communicate or bang heads together. Does Enterprise Ireland have a role from that side where it can come from the top down, rather than me or the Crosse brothers, as entrepreneurs, making an application? Can the Government tell Enterprise Ireland, "Look, this is our policy. Get out there. What can you do to develop this policy?".

Mr. Mark Christal

That is the key message or point we are trying to get across. We support companies and it is companies that we fund. It has to be a commercial entity or undertaking. We do not fund primary producers or farmers. That is not our remit and that is not our role.

Senator Paul Daly

What about the processors? This has come up a number of times now about the primary producers. When the Crosse brothers were here they did not need funding to buy or milk the ewes but it was for the processing of the cheese or whatever it is called. It is a processing business.

Mr. Mark Christal

Yes, absolutely.

Senator Paul Daly

The milk would need to be processed even if it went out in milk form. There is potential there. They would not be a primary producer but they would maybe be a member of a co-operative, for the want of a better word, feeding the raw material into that cooperative or that company.

Mr. Mark Christal

That is the role we would play. What we want to stress to the committee is that we are supporting those companies where there is potential for the company to grow. It is not about that the company will come in and say it can show immediate sales of €1 million or will employ ten people. It is the potential to get there. That is where the market comes into play, clearly. Our remit looks at domestic market capability but also at the export market capability. Once that is determined, the role Enterprise Ireland, EI, plays is of supporting companies at all stages of their growth. It can be in so many forms. It can be around the initial research and development that has to take place. It can be around the capital investment that is needed to develop a processing facility. It can be to do with the management capability and supporting key hires within the business. The message is if there a company that has, in this case sheep milk, a processing facility that is established and has the potential to make sales and to export that product, or a secondary product that comes from the processing of sheep milk, then it is the role of the LEOs or Enterprise Ireland to row in behind the company and to support the company on that journey.

It is not so much that there is a policy restriction, not that I am aware of, but our role is to examine the market potential, if there is a commercial entity we can support and then applying the right EI supports to the company at that stage.

Senator Paul Daly

I did not mean a policy restriction. I was putting the cart before the horse in that, if it was policy, could Enterprise Ireland drive it? There is one family and one company, Sheep Milk Ireland. Hypothetically, if the Government decided that there is a future in this area, that is the only company. It has talked to Enterprise Ireland already but can EI be instructed by Government that this is now policy, this is a sector it wants to develop into a world market and it thinks Ireland can get involved in it, yet there is only one very small company. The situation is that it may not fit Enterprise Ireland's criteria for funding but it is Government policy. Can the Government direct Enterprise Ireland to try to develop an area in which it sees a niche that may support agriculture and the sheep sector, going forward? It is in its infancy - there are not even ten people involved at the minute but it has potential. We do not export anything at the moment but there is unbelievable potential. Can Enterprise Ireland drive it from its side or - I will not say it is sitting on its hands doing nothing - does Enterprise Ireland just wait until the Crosse brothers or some similar entity comes knocking on the door? What is Enterprise Ireland's role in implementing Government policy for sectors, if the Government has a sector it wants to develop as part of its policy or programme for Government or future vision?

Mr. Mark Christal

We are hugely guided and informed by Government policy. That is across the food sector, as it is in all other sectors. If one takes Food Vision 2030, it has a huge bearing and impact on where our support goes and how we invest. Policy does not determine the individual supports we provide to companies. It is the basis of the value-for-money measures we apply to all our investments, which are the criteria that determine how much grant aid we support and what kind of support we apply. That is based on the employment potential of a particular company, the export potential and the sustainability impact, which is also a hugely important criterion. Policy may set a direction for the guidelines but it does not determine the companies we invest in. That is determined by a company coming to us, setting out its business case, the business plan for what it is trying to achieve, the potential of the market it is trying to tap into and the stage of the journey the company is on, in respect of whether it is a start-up company, and whether it needs capital support, support around research and development or support for its technology deployment. It is about trying to apply our supports as best we can. The market and potential growth of the company inform and influence the companies we support.

Deputy Johnny Mythen

I thank the witnesses for their presentation. It is a very successful story and we need it. I understand Enterprise Ireland's remit, as Senator Daly said, is totally based on exports. A lot of small companies and small farmers can produce their own cheese, etc., but they are not given any help. I understand why Enterprise Ireland is into export because the more you export, the cheaper the money you can get on the global market. We know exactly what that is based on. On the other side, we should develop far more home-grown. We have really fallen down. In my area, people approached me who were engineers who were starting up a business. They were going to hire ten or 12 people but they got no help because they were not exporting. Perhaps that is a policy Enterprise Ireland could examine.

Is there any scope for sourcing a market for lambs that exceed 21 kg? The witness spoke about opening up other markets. What is the situation with the US and Chinese markets? What exactly are we at in that regard? Australia and New Zealand are our major competitors. At the moment, they only use around 70% of their quota. Do we have anything to counteract that in the future? Are we looking at something that could counteract that? Have we developed in Asian countries, which are very fond of lamb? It is part of their culture. Has Enterprise Ireland looked into that issue?

Mr. Mark Christal

On the first question the Deputy raised about export potential, there are two important points. If you look at our export figures, food and drink exports are huge in terms of the overall scale of our exports, at around 50% of our €30 billion. Exports drive a lot of employment across the sector. On the Deputy's point about the domestic focus, local enterprise offices, LEOs, have a remit and a mandate. We work very closely with them to support companies with a domestic focus. In the case of the company the Deputy mentioned, supports are available for domestically focused companies through the local enterprise office, particularly for smaller companies starting up, which I think fits the description of that company. There are 31 LEOs, at least one in every county in Ireland. That company should engage with its local enterprise office to see what is available. We support companies with a degree of domestic sales. They become an Enterprise Ireland client if there is export potential, long term. The trigger between Enterprise Ireland and the LEO is not just the size of the company, it is also the potential growth of the company. The primary point in respect of domestically focused companies is that is what local enterprise offices do. It should be explored in the case of that company to see what is helpful.

In respect of the questions about lamb, Australia and New Zealand and export potential, we need to refer and defer to our colleagues in Bord Bia, who can give a more comprehensive answer in respect of both of those areas, particularly on the market side. We can come back to the committee about it.

Mr. Gerard O'Flynn

On the development of markets, we put a lot of funding into the meat processing sector, including the sheep meat sector, to build operational resilience and enable it to target markets further afield. Our meat companies traditionally targeted European and UK markets. In the last couple of years, through the capital investment scheme for the processing and marketing of agricultural products, we have put in around €100 million of supports to enable them to reach markets further afield and, essentially, to enable them to change their operating models to target markets further afield. We have invested in companies to achieve that.

Deputy Johnny Mythen

In the opening statement, the witness said there were a lot of challenges including inflation, energy costs and geopolitical instability. What actions does Enterprise think are needed to alleviate these challenges, especially when it comes to inflation and hikes in interest rates? What does Enterprise Ireland predict the impact on business will be?

Mr. Mark Christal

The food sector was impacted by a number of challenges over the last couple of years but it has proved incredibly resilient in responding. They include the challenge and uncertainty created by Brexit, the impact of the global pandemic and, more recently, the invasion of Ukraine by Russia, which was a big factor in energy costs spiking and was hugely problematic. There were also supply chain challenges and the sourcing of supply, as well as cost.

In respect of energy costs, we have an energy scheme and are operating an energy scheme on behalf of the Government, which is offsetting some of the costs in certain cases. There are criteria around the scheme for companies that have experienced a drop in their overall performance and EBITDA directly attributable to Ukraine. In some of our sectors some of the inflationary costs have stabilised while some businesses probably had the margin to be able to absorb them and cope with them. It is an ongoing area of support that we are constantly focused on.

A big area we are having a lot of discussions on is the decarbonisation of the sector. I am talking about the processing and manufacturing side of our food industry and engaging with companies across the sector to see what we can do to try to support the decarbonisation agenda of many of our food companies, which are high-intensity energy users. They are very active conversations.

Deputy Michael Fitzmaurice

I thank the witnesses for coming in. On the Ukraine fund for businesses that have been affected, what is the budget and how much of it has been spent?

Mr. Mark Christal

I do not have the number for the total budget in front of me. That was fully allocated by Government. It was not just for Enterprise Ireland but across all State agencies so I am not sure what the total amount allocated was. However, it was quite a significant sum if I recall.

Deputy Michael Fitzmaurice

A lot of companies were six months dealing with Enterprise Ireland and no go-ahead was given. Is that correct? They could not put in an application.

Mr. Mark Christal

The scheme opened in the middle of 2022 and we processed a number of applications before Christmas. There were a number of approvals for companies before Christmas, including some companies from the food sector. It was not just opened to the food sector; it was open to other sectors. Since Christmas we have also had a number-----

Deputy Michael Fitzmaurice

I thought it was March when the real go-ahead was given for this.

Mr. Mark Christal

No, the scheme was opened last year.

Deputy Michael Fitzmaurice

Was it well opened?

Mr. Mark Christal

There were approvals last year under the Ukraine energy scheme as well. Revisions were made to the scheme at European level, which meant-----

Deputy Michael Fitzmaurice

I am talking about the loan scheme where people could borrow money.

Mr. Mark Christal

We might be talking at cross-purposes here. I was talking about the Ukraine energy support scheme, which is a grant-aided scheme or subsidy scheme in respect of energy costs.

Deputy Michael Fitzmaurice

What I am talking about is the loan scheme where companies that were exporting food products could get €500,000 or €250,000.

Mr. Mark Christal

Is that of loan finance?

Deputy Michael Fitzmaurice

Enterprise Ireland was involved in it.

Mr. Mark Christal

Again Deputy, I am sorry but I do not have the numbers in front of me in respect of that scheme and I am not familiar enough with that to comment on what level of support was provided.

Deputy Michael Fitzmaurice

Mr. Christal talked about China being a new market or whatever. What is Enterprise Ireland's input in it? Is it that it gives grants for different machinery in the factories or does it go out with Bord Bia to the different places?

Mr. Mark Christal

The best example, which we referenced in our statement, is the capital investment scheme. As Mr. O'Flynn said a second ago, we have approved 34 projects as part of the capital investment scheme and it will be €100 million worth of approvals. That was really around the investment by companies in new processing equipment, such as blast freezing capability for example. That was designed so that instead of taking fresh product you are taking frozen product. What that is doing is potentially opening up new markets. In assessing the applications that came in under that scheme we worked jointly with Bord Bia to see if there was a market for the company, what investment is needed in terms of the capital equipment to enable that market to be realised and obviously then taking account of the potential climate or sustainability criteria as well.

Deputy Michael Fitzmaurice

I refer to the foreign missions we go on for trade. Does Enterprise Ireland go on them?

Mr. Mark Christal

We do. We support Bord Bia. In respect of the food sector those missions are typically led by the Department of Agriculture, Food and the Marine and Bord Bia but we would join and support them as much as possible.

Deputy Michael Fitzmaurice

What is Enterprise Ireland's part in it?

Mr. Mark Christal

We have two roles. One is to understand what is happening in the marketplace and the type of investment we think is going to be needed, including the investment in research and development. The second remit we have is that we are responsible for the food foreign direct investment, FDI mandate. That rests with Enterprise Ireland as well. That involves attracting overseas food companies to ideally invest in Ireland. It is similar to what the IDA does across other sectors but we do it for food. For example, in the recent trade mission to China, which we participated in, we had a number of meetings with a number of potential FDI clients. We also met with some Irish companies out there to understand the level of innovation that is required to exploit those markets and the level of investment they are making in terms of their capital and other equipment.

Deputy Michael Fitzmaurice

Do the witnesses find that with our meat factories, it is basically them that are sending out the meat? They do their own thing and take their own stands. They do not even bother with Enterprise Ireland. They might get capital grants but when it comes to selling the food at the different stands they take their own stand.

Mr. Mark Christal

The stands, participation in trade shows and events in respect of the food trade missions are organised and co-ordinated by Bord Bia. We do the same exercise for other sectors. My experience and insight has been that the companies are present. They operate under the Irish flag as it is there and collaborate but they obviously present their own wares, have their own stands and meet their own potential customers, which makes perfect sense.

Deputy Michael Fitzmaurice

In the transport sector for food and beverages there is all that different equipment. Some companies are able to be Enterprise Ireland customers and others are not approved. Why is that?

Mr. Mark Christal

Again, the mandate from an Enterprise Ireland perspective is if it is related to either manufacturing or internationally traded services-----

Deputy Michael Fitzmaurice

Logistics and all that is part of it.

Mr. Mark Christal

That does not typically fall under the mandate of Enterprise Ireland. It depends on what the company is and the service that is being provided. We do not directly fund transport companies, for example. We deal with manufacturing and internationally traded services with export potential. We are always open to looking at whether there is a basis from which we can support a company in a particular sector. Obviously we have to make sure we are not distorting the market here or interfering in the domestic market.

Deputy Michael Fitzmaurice

Mr. Christal spoke about Australia and New Zealand and places like that and market pressures. Does Enterprise Ireland forecast around that or is it Bord Bia that does all that side of it?

Mr. Mark Christal

The market forecasting on food is done by Bord Bia.

Deputy Michael Fitzmaurice

Senator Daly would have spoken about about this earlier around marketing and milk products, be it sheep or goats. I presume goats are as near to a ewe as you will get. Have we Irish companies that Enterprise Ireland is liaising with on exporting cheeses and goat's milk or sheep's milk?

Mr. Mark Christal

We are supporting a number of the processors. For any of the big dairy processors, we are supporting with cheese production. Mr. O'Flynn might comment-----

Deputy Michael Fitzmaurice

I know there are the big processors. I will put it this way. In Ireland at the moment, if a farmer wanted to do organic milk we do not have the drying facility. Would that not be fair to say? Have the witnesses looked at that? Germany is supposed to be a fairly good market for organic stuff. Have they gone to any of the processors and said they will support the infrastructure for the drying because there is fair money involved? It is no more so than when Dublin started it was a small city and it is a big city now. It is the same with organic milk because we would have spoken to some of the processors. With sheep or goats you can go to the big processor and they will give you the usual average price and then there are people who specialise in it, who would be small businesses. They might not have ten or 11 workers but they give a good price to the farmer and they are not up there yet.

The LEOs were mentioned, but it is pittance money that people will get that way if they are trying to export their stuff. What is this rule of, ideally, having ten employees? Let us take the case of someone having got an idea one day, started off doing something in a shed and then built it up and perhaps got to the stage of employing 1,000 people. I went off to observe a company once; the people involved had a jeep, a few shovels and some other bits. Now, they have 1,000 workers employed.

Mr. Mark Christal

Absolutely.

Deputy Michael Fitzmaurice

Mr. Christal mentioned more than ten people being employed earlier, or something like that. Why is there this type of a threshold when we are looking at markets that may need a significant injection of funds? I am talking about the organic milk area. Not every farmer in Ireland is going to do this, first of all. If we go to the conventional places, they will give 60 cent per litre. It might be possible to get way more in a small place that is making cheeses or doing something different. Does Enterprise Ireland look at this aspect at all?

Mr. Mark Christal

Absolutely.

Deputy Michael Fitzmaurice

Is it just the big guys?

Mr. Mark Christal

No, it is not just the big guys. The ten employees aspect is not a barrier to us supporting a start-up company.

Deputy Michael Fitzmaurice

Right.

Mr. Mark Christal

I wish to make this really clear. It goes back to the comment and point that I hopefully got across in discussing this issue with the Senator earlier. It is not about ten employees being a barrier. If a new processor were to come to us and tell us that company was going to process sheep or goat milk and turn it into cheese, or some other product, and then try to sell it, even on the domestic market initially and then look to somewhere like Germany or wherever else, we would be very open to supporting such a processor. What we cannot support, because our remit does not permit us, is the primary production. I refer to the on-farm activity.

Deputy Michael Fitzmaurice

Yes.

Mr. Mark Christal

It is not, therefore, that someone has to go to one of the major processors that we have now. If a new processor were to establish itself, with a credible business plan to process milk from sheep or goats, we would be very interested in talking to its representatives.

Deputy Michael Fitzmaurice

Or organic and fermenting activities?

Mr. Mark Christal

Absolutely. We would be very open to talking to them. The supports are available in the form I described earlier, namely, capital supports or, indeed, whatever the most appropriate support might be, including research and development. This is the business we are in.

Deputy Michael Fitzmaurice

Does Enterprise Ireland get involved in other areas? This morning we heard the news, and I know this is different, that the Dutch voted yesterday to ban imports of calves. Does Enterprise Ireland get involved straightaway in an area to see where we might get new markets, or is it Bord Bia that does this?

Mr. Mark Christal

Again, the primary work around the establishment of new markets or the movement of livestock, for example, would be an area for the Department of Agriculture, Food and the Marine and Bord Bia. This is primarily their role.

Deputy Michael Fitzmaurice

Okay.

Mr. Mark Christal

We are looking at the bigger picture in respect of markets, if I can put it that way. It is not specifically-----

Deputy Michael Fitzmaurice

Just to get this clear in my head, I wish to establish what Enterprise Ireland is open to. I have talked to many organic farmers doing organic milk. They were saying that it goes into the same place as every other bit of milk. This is what happens in many cases, but not in all. If these organic farmers were to have their own small set-up in this regard, a co-operative or whatever, would Enterprise Ireland be open to supporting the purchase of dryers and other equipment to progress this market, if such an organisation were to put forward a credible business plan?

Mr. Mark Christal

Yes. We would be 100% open to that.

Deputy Michael Fitzmaurice

On sheep, does Enterprise Ireland have any workings or research done in collaboration with Bord Bia on sheep's wool? This is a big problem.

Mr. Mark Christal

I do not have any information on sheep's wool. I apologise. I do not know enough about it to comment on. What is the problem?

Deputy Michael Fitzmaurice

The problem is that sheep's wool is worth nothing.

An Cathaoirleach

It is worthless.

Deputy Michael Fitzmaurice

It costs more to shear the sheep than what will be got for selling the wool. We are just wondering if research might be ongoing that we could avail of. I know Enterprise Ireland cannot do this research, but I am just wondering if the organisation is collaborating with Bord Bia or the Department of Agriculture, Food and the Marine in research on insulation materials, for example? I refer to where Enterprise Ireland might have to put money into the development of such an endeavour, including to buy gear, or to support the production of some other product that might put a foundation under the price of sheep's wool.

Mr. Mark Christal

Again, if an entity or organisation were considering conducting research into the by-product that is wool and how it might be used and value extracted from it, I think we would be very interested in talking to it to determine what supports could be available through us or through one of the third-level institutes that we collaborate with. We should be very open to discussing anything concerned with innovation, research and development and the development of new technology and, potentially, new products, especially in the context of the circular economy and what we are trying to do in the area of sustainability. We might not be the direct funder, but we would definitely hope to be helpful in pointing someone in the right direction in this regard.

Deputy Michael Fitzmaurice

Very good. I thank Mr. Christal very much.

An Cathaoirleach

I wish to ask the last question in this session of the meeting. On the €100 million capital investment scheme that opened in January 2021, was all that money allocated?

Mr. Gerard O'Flynn

Yes.

An Cathaoirleach

I thank Mr. O'Flynn very much. I intended to ask some questions about the sheep milk sector, but the other members have covered it fairly comprehensively. It is an area where there is potential growth. We definitely have it very much underdeveloped here. We see farmhouse cheeses have established a niche market all over the world, so there is definitely an opportunity for developing sheep milk for cheese and liquid uses.

On behalf of the committee, I thank all the witnesses for their contributions today. I thank Mr. Christal and Mr. O'Flynn for coming in.

Sitting suspended at 7.06 p.m. and resumed at 7.10 p.m.

An Cathaoirleach

When giving evidence from within the parliamentary precincts, witnesses are protected by absolute privilege in respect of the evidence they give to the committee. This means witnesses have a full defence in any defamation action relating to anything said at a committee meeting. However, they are expected not to abuse that privilege and may be directed to cease giving evidence on an issue at the Chair's direction. Witnesses should follow the direction of the Chair in this regard. They are reminded of the long-standing parliamentary practice that, insofar as is reasonable, no adverse commentary should be made against an identifiable third person or entity. Witnesses who give evidence from a location outside the parliamentary precincts are asked to note that they may not benefit from the same level of immunity from legal proceedings as a witness giving evidence from within the parliamentary precincts. They may consider it appropriate to take legal advice on this matter. Privilege against defamation does not apply to publication by witnesses outside the proceedings held by the committee of any matters arising from those proceedings.

In this session we will hear from representatives from the Irish Cattle and Sheep Farmers Association, ICSA. I welcome Mr. Eddie Punch, general secretary, and Mr. Fergal Byrne, chair of the wool steering committee. I invite them to give an opening statement, after which we will have a question-and-answer session.

Mr. Fergal Byrne

I thank the committee for the invitation to discuss the development of the sheep sector. The sheep sector is in trouble. Unlike other sectors, sheep prices did not increase significantly in 2022, despite the escalating costs. In the year to date, sheep prices in 2023 have averaged €6.71 per kilogram, compared with €6.67 per kilogram in 2021 and €6.80 per kilogram in 2022. In that time, we have seen the cost of all inputs rocketing, and sheep is the one sector that saw a worthless increase. In 2022, the average income for sheep farmers was about €16,500, according to the Teagasc national farm survey, a drop of 21% compared with 2021. Income per hectare for sheep farmers was only one third of the average income per hectare across all other farming sectors and one sixth of the per hectare dairy income.

Part of the problem has been a significant increase in New Zealand lamb imports. In the period from January to May 2023, inclusive, sheepmeat imports from New Zealand were 19% higher in the EU and 14% higher in the UK compared with the equivalent period in previous years. Some 19,100 farmers have applied for the sheep improvement scheme, which is slightly more than half of all sheep farmers. It is our strong view that the scheme is not fit for purpose, given the income crisis on sheep farms, and given the massive increase in costs in the past two years. The ICSA has called for emergency funding to help the sheep sector in 2023. We are frustrated that so far, the Government has failed to find a way to justify the use of the Brexit adjustment reserve to support the sector, in light of the income crisis. The increase in New Zealand imports this year is compounded by a new UK and New Zealand trade deal, which will add a potential further 35,000 tonnes under a tariff rate quota. This will add further pressure to the EU sheep sector, which is already heavily impacted by New Zealand imports under the previous WTO agreement. Prior to Brexit, the quota was set at some 228,000 tonnes. However, post Brexit it might have been expected that the UK would have taken the majority of that quota with it, given that the UK was the strongest trading partner with New Zealand for lamb of any EU member state. However, the quota was divvied up on a 50:50 basis. The fact that the UK then went on to negotiate a further quota of 35,000 tonnes with New Zealand demonstrates that it should have taken a bigger proportion of the original quota of 228,000 tonnes. In addition, the EU has since done a free trade agreement with New Zealand, which will add another 38,000 tonnes of sheepmeat in the next seven-year timescale, albeit not immediately.

It can also be argued that the movement in exchange rates between sterling and the euro, as a consequence of Brexit, has adversely impacted the Irish sheep sector. In the year prior to Brexit, £1 sterling was worth as much as €1.40. Even a few weeks before the June 2016 Brexit vote, it was trading at €1.30. It fell substantially after the 2016 vote and has stayed in the €1.10 to €1.20 range ever since. It has been in the range of €1.12 to €1.16 for the past year. This is reflected in the huge quantities of live lamb imported here in recent years. We imported 422,000 live lambs in 2022 from Northern Ireland. It also means that we are at a competitive disadvantage to UK farmers in the important EU markets, such as France, when it comes to sheepmeat exports. For these reasons, we cannot understand how the sheep sector is not eligible for Brexit adjustment reserve funding, even though it has been used for genomic tagging in the cattle sector.

It is clear to us that the current payment of €12 under the sheep improvement scheme is not going to save the sheep sector. We want to see it radically increased. The ICSA welcomed the establishment of the Irish Grown Wool Council, following our lobbying for it. However, it is now necessary to ensure it does not become just a talking shop. The key logjam is that with wool essentially valueless for the farmer, there is no logic or incentive to rolling fleeces correctly and removing daggings. However, unless farmers do this task, it becomes impossible to add value to wool from the processor point of view. The solution, therefore, is to provide a payment of €5 per ewe for wool presented correctly, which would kickstart the wool sector until value added products could be developed. The ICSA believes there is a lot of potential to develop wool-based products in an era in which natural products are back in fashion.

In relation to the price of lamb, the ICSA is disappointed that no progress has been made in developing access to the US market, even though it is technically open. There are no indications that our sheepmeat factories are investing enough matching funds to support the work being done in this area and it seems as if there is no interest in developing the US market. Instead, the focus seems to be on bringing in live lambs from Northern Ireland which are then processed to fulfil contracts in Europe, all at the expense of our sheep farmers.

The sheep sector has no future if all we can get is a break-even price or even a profit of €7 per ewe. Under current costs, a price of €6 to €7 per kilogram is loss-making. Future strategy must recognise the importance of economic viability. Sheep is a low-carbon farming system but even more important is that it is vital to the rural economies of many counties, especially in upland areas. In these regions we have seen good initiatives driven by local farmers such as Connemara hill lamb and Comeragh hill lamb. For too long, however, sheep has been the forgotten sector at Government level. The Food Vision 2030 group has a sheep committee but it has been sidelined to the extent that it is an afterthought.

We want to see a co-ordinated Government effort to drive development of the sheep sector, but the starting point must be viability for the sheep farmer.

I thank the committee for listening to us.

An Cathaoirleach

There is no disputing that sheep farmers are under serious economic pressure. The profit per ewe is frightening. The profit per ewe, including the premium, is less than the breakeven point per ewe. Due to the price per kilo of sheep on the world market, Brexit has given the UK far greater scope to source lamb in Australia and New Zealand. In my opinion, the UK is exporting its own fresh lamb to France through Northern Ireland, which is having an undermining effect.

Our prices are at approximately €6.80 per kilo this week. Unfortunately, that is a multiple of the price that lamb is making in Australia today. How can we increase our sector’s profitability in the face of Brexit, the extra tonnage coming into Europe that Mr. Byrne mentioned and the global market price being at such a low ebb, given the greater access that the world market now has to Europe?

Mr. Eddie Punch

This speaks to the fact that the sheep sector needs more Government and EU support. It is true that our price is significantly lower than that in some European countries. For example, the gap between Irish and French prices is as wide as it has ever been.

An Cathaoirleach

How wide is it?

Mr. Eddie Punch

It has been close to €2 per kilo this year. France always gets a better price for its farmers’ lamb – we are not disputing that – but the gap is wider than it was several years ago.

Mr. Fergal Byrne

€7.95.

Mr. Eddie Punch

The price of sheepmeat in the southern hemisphere has been weak this year, but costs there are much lower, too. One could argue that we should still-----

An Cathaoirleach

The point I am making is that farmers from the southern hemisphere have far greater access to the European market now due to Brexit.

Mr. Eddie Punch

They have.

An Cathaoirleach

With their prices so low, how will we restore profitability?

Mr. Eddie Punch

That is why we are saying that supports for the sheep sector must be considered. When we look back over its history, it has always had supports. Some of us are old enough to remember when a significant part of the disadvantaged area payment was linked to sheep farming. In the current era, €12 per ewe will not keep the sector going.

Two things need to happen. We need to re-examine the argument about the Brexit adjustment reserve. We have been told repeatedly that no justification for doing so can be found, but justification has been found for using some of the reserve for the genomics programme, which benefits suckler and dairy farmers, and for the processing sector. Not enough has been done at departmental level to make the case for the Brexit adjustment reserve or a portion of same to be used for the sheep sector.

The reserve is an emergency programme. In the longer term, we must try to find a way of putting more money into the sheep improvement scheme or other measures. As Mr. Byrne outlined, the wool sector also needs to be considered. He can speak about that, but it is the case that a product has been sidelined by synthetic fossil fuel-based garments. Surely we live in an era when the tide has turned and we can go back to making garments from wool, which is a natural product with several advantages from the point of view of sustainability. Sustainability is probably one of the only issues that are discussed in policy nowadays, including economic policy. Wool is a more sustainable product than synthetic garments made from fossil fuel-based materials.

There is always a review of the Common Agricultural Policy, CAP. The CAP rural development plan is in place for 2023 and 2024, but we need to consider seriously what we can do to improve the price of €12 per ewe. As most of those present understand, member states have to match financing to draw down Pillar 2 funds, but to be blunt about it, it is possible for a member state to go over and above the minimum co-financing required of it in a rural development programme under Pillar 2. This option must be considered seriously. There will be an opportunity to review how spending under other elements of CAP’s rural development programme is going, but let us be honest – this would mean additional funding from the Exchequer to top up the €12 per ewe.

Deputy Michael Fitzmaurice

I thank the witnesses for attending. They will be aware of major problems in Australia as regards sheep numbers, with farmers even getting rid of them. As has rightly been pointed out, the EU did a trade deal when the UK was still with us. Obviously, the UK is now bringing in its own meat while leaving us with the surplus of lamb coming into Europe from those countries. This situation will not change overnight, and we must be honest with the witnesses about that.

The witnesses might explain something. I watch sheep kill numbers. The information we are getting is that a great deal of unfinished lambs are being killed. What is the reason for that?

Mr. Fergal Byrne

If someone is killing lamb at a certain price – for easier counting, let us say it is €6 per kilo – that lamb is getting €124 or €125, meal costs €350 to €400 per tonne and €10 or €12 is spent on meal, the farmer would make as much from killing the underfleshed lamb and getting €115 or €116 as he or she would from getting €135 and giving the co-op the difference. The farmer would have the same money, and that is what is happening.

As an example, let us say a farmer with 200 ewes and 300 lambs – one and a half lambs per ewe is a good average figure – sells those lambs and only gets €130 apiece. We can do our sums on that. The farmer will never have a surplus of money and will be under pressure constantly. At this time of year, the farmer has to sell sheep. Whether they are finished or not, they have to go.

Deputy Michael Fitzmaurice

In their dealings with factories, farmers are penalised for underweight lambs.

Mr. Fergal Byrne

Yes, and for overweight lambs.

Deputy Michael Fitzmaurice

Factories give farmers nothing for overweight lambs.

Mr. Fergal Byrne

Yes.

Deputy Michael Fitzmaurice

You would want to be pretty good with a weighing scale. Is there any-----

Mr. Fergal Byrne

I was down in Camolin-----

Deputy Michael Fitzmaurice

I believe there was one factory that was going with a higher weight. Generally, when sheep get tight – maybe on the hogget side – factories can go a bit higher.

In the ICSA negotiations with the factories, can that be changed to go to 23 kg? What is the thinking behind it?

Mr. Fergal Byrne

I was down in Camolin early this summer. We were brought through the factory. The producers' thinking is that lambs may come in at, let us say, 19 kg, 22 kg or 23 kg deadweight. A lamb weighing 19 kg or 20 kg will run through the system and no person will have to touch him. The computer will do the whole lot and he will be sliced up whatever way is wanted. It just flows through the system. A big lamb of 23 kg, let us say, which is the best lamb, has to be trimmed. That is where the problem is. The producers are saying they are losing out on it in that way. Any of the craft or other butchers throughout the country would want that other lamb. They hang the lamb and so forth and do all that with the lamb. There is a certain amount of fat but they trim it and do a perfect job. The reason in respect of the 20 kg or 20.5 kg lambs is that there is no trim or anything; it just runs through the system. Even at that, the producers should be able to give more for it. I still reckon they should give more.

Deputy Michael Fitzmaurice

To broaden it out to the dairy side, if the weather in winter is middling and grass is plentiful, cows might have to go in and many farmers would buy store lambs. With the new nitrates rules, can the witnesses envisage a problem in that regard? Store lamb is a bad trade at the moment, to put it simply. Is it the knock-on effect that the dairy men have the banding and the new nitrates rules and they are pulling back?

An Cathaoirleach

They might not have the fencing for all-----

Deputy Michael Fitzmaurice

For the ones who do buy them, is there a problem arising there with more focus on nitrates?

Mr. Fergal Byrne

I am not 100% sure. I have not seen too many dairy men buying store lambs. They do not buy store lambs. Part of the problem last year at least was that the price of lamb does not rise until the middle of January. It is too far out for them to be buying those lambs at that stage. That is where the problem is. What I am hearing from down the country-----

Deputy Michael Fitzmaurice

Why do the witnesses think the store lamb is-----

Mr. Fergal Byrne

With some of the farmers, it may be lack of money.

Deputy Michael Fitzmaurice

There was also confusion about the lie-back and fencing that was causing-----

Mr. Fergal Byrne

Huge problems.

Deputy Michael Fitzmaurice

I even got calls from County Louth about it. There would be the lie-back and the farmers would not be able to do what they always did even though-----

Mr. Fergal Byrne

I stand to be corrected on this but if a farmer had his sheep out on that with no lie-back, he would lose 10% of his full payment.

Deputy Michael Fitzmaurice

That is correct.

Mr. Fergal Byrne

It was not 10% of the ACRES payment; it was 10% of the full thing.

Deputy Michael Fitzmaurice

I understood that was to change.

Mr. Eddie Punch

It has been fixed. It created consternation for several weeks and was an example of decision-making at a level that was removed from reality, let us say.

Deputy Michael Fitzmaurice

I refer to the trend last year in the lamb trade. We bought store lambs ourselves at home. They were worth no more in February or March than they were when we bought them. You would nearly lose money on them. The next thing was that Ramadan came along and they could not get enough lambs. In fairness, a good price was paid for them-----

Mr. Fergal Byrne

An awful lot of men lost their shirts, even against-----

Deputy Michael Fitzmaurice

With hoggets, for example.

Mr. Fergal Byrne

Yes. What it all boils down is that maybe we are not looking enough at the Muslim sector and the trade. Maybe we should be looking to market our lambs more into the Muslim sector-----

Deputy Michael Fitzmaurice

Are we all going out the one gap at the one time? It is the same with calves. Many calves are born in the first three months of the year. The factories know damn well they are going to have a glut when the calves reach 30 months in September. Is the same thing happening with sheep? I understand the farmer cannot go all year around or anything, but a lot of lambs are coming at the one time-----

Mr. Fergal Byrne

Quite possibly. The price of meal has moved more people back to St. Patrick’s day and 1 April. Those lambs, at this stage-----

Deputy Michael Fitzmaurice

It is too costly for early lambs.

Mr. Fergal Byrne

Yes. At this stage, those lambs are only 30 kg. They are only coming fit from Christmas onwards, basically, depending on how they were fed. Now they will not be coming fit until 1 February because a new date has been created with the fodder scheme because that cannot be grazed until 1 January. Those lambs are only going onto that at-----

Deputy Michael Fitzmaurice

Mr. Byrne is saying the sheep sector needs an injection of funding from the Minister. Is that putting it clearly?

Mr. Fergal Byrne

Yes. What we are looking for is €30 for the sheep and €5 for the presentation of the wool. Let us say the wool is worth-----

An Cathaoirleach

One second. Senator Lombard is going to take the Chair as there is a vote in the Dáil Chamber.

Deputy Michael Fitzmaurice

I am finished my questioning.

An Cathaoirleach

Senators Paul Daly and Lombard have questions for the witnesses. My apologies for leaving but we have to attend a vote.

Senator Tim Lombard took the Chair.

Senator Paul Daly

I welcome Mr. Punch and Mr. Byrne and thank them for their presentation. They are preaching to the converted. There is nothing they have told us that we have not heard before. I will again go on the record that, based on what is in their presentation and for many other reasons, I cannot fathom why sheep sector, and the mushroom sector for that matter, do not qualify for the Brexit adjustment reserve. The committee has already discussed the amount that is coming in, with sheep is coming in from Australia and the issue relating to sterling. It is in the witnesses’ presentation and there is no point in me rehashing it. I have no problem going on the record on this. I have been lobbying for it and I cannot see why we seem to be banging our heads against stone walls. It is a no-brainer. I would confidently say that, after the mushroom sector, the sheep sector was probably was the next biggest casualty in the agricultural sphere.

Reference was made to the wool council. Are the witnesses on the wool council? If they are-----

Mr. Fergal Byrne

I am on the wool council.

Senator Paul Daly

I am not asking Mr. Byrne to breach the confidence of the council. I do not like to hear someone who is on a council or committee saying they want to ensure it does not become a talking shop. Is that the direction it is heading? Can Mr. Byrne see any light at the end of the tunnel for the wool sector, based on the council?

Mr. Fergal Byrne

We now have a company limited by guarantee, CLG, set up now. It was set up in the past week or ten days----

Senator Paul Daly

I do not want Mr. Byrne to divulge anything that might be confidential.

Mr. Fergal Byrne

No, I can tell the committee that. It was done in the past week or so. We are currently opening bank accounts and so forth and are now ready to draw down the €30,000 or €35,000 from the Minister of State, Senator Hackett, to start the funding in that regard.

We will be looking for additional funding at that stage to move forward again. Our body is now set up and we are beginning to be recognised. This week, we are going to the Dingle Food Festival. That is really the first official thing to happen. The organisation is ready to move at this stage.

Senator Paul Daly

Does it see potential to have a positive influence?

Mr. Fergal Byrne

Yes. Having spoken to various people, we believe it has to start with the farmer. It still comes back to the €5, because the farmer has to present in writing and so forth. We have to have a proper product going forward, and that is where it is at. The Senator will probably know that the merchants got support during the Covid pandemic. This year, that has stopped. I was talking to a couple of the merchants in the past three weeks and noted it is essential for them to get the wool in clean. This is so they will have less labour. Mr. Pat Temple of Magee Weaving, who is also in the wool group, said to me that one of the things we should be looking for in respect of the €35 we are seeking is the measurement of the microns of the wool. If we had the measurements in microns of the wool from a particular farm or region, we could say the wool is not fit for fabrics or certain products but fit for insulation of a certain type, for example. We would be getting a track on the wool at that stage. If there were something like this, it would be great. Let us say, for argument’s sake, that the farmer is getting up to €1 per kilogram for his wool. Organic wool farmers – I am an organic farmer – can get 70 cent per kilogram across the board, as opposed to 20 cent per kilogram for commercial wool. This happened only in the past two years. If the same thing happened for commercial wool and we got to €1 per kilogram, and the €5 I have mentioned, it would result in a big surplus for the sheep farmer. He would have an additional income from his wool. I know we are talking about very small money but if the price could be brought up by another euro per kilogram, and if a farmer were able to get an average of €150 for his lambs – being organic, my lambs are coming in at €150 rather than €135 – it would be the difference between making money and not making it. It is the same with wool. If you were getting, say, €35 for your sheep payment and a wool price that covered the cost of shearing, in whatever way, it would make a huge difference. It would be the difference between making a viable living and not doing so. If we do not achieve this, we will have no lambs to sell and an industry lost. It is most important. We have to mind this industry.

Senator Paul Daly

Deputy Fitzmaurice touched on a matter I was going to raise. Like him, I was that soldier who bought a few store lambs at this time of the year, basically to clean up the paddocks and, it was hoped, make a few bob. There was nothing in it. Between the odd fatality and the odd birth, I ended up with new ewes with lambs I had not planned on having. I have not done this in a few years and will not do it again. There are many more like me. What are the men who were selling the store lambs doing now? If they do not have the facility to finish them, or do not have a market or at least the same market they had, how will they get out of the position they are in?

Mr. Fergal Byrne

That market has tightened. Before the payment came in, we always grew the cover crop ourselves. I did not apply under ACRES this year, so this did not apply to me. We were using the crop as a very valuable asset for feeding our lambs. What happened did not stop the practice but just put a date on it. It involves jumping rather than having a free-flow product. We are part of the organic forum. At that forum, representatives of Bord Bia talking about lambs say you cannot get the markets because there is no free flow. We have put a balk in it ourselves through stopping the free flow of lambs. It is but one stopping of the free flow. The Senator knows that if he had to buy meal, it would cost €300 or €400 per tonne. Taking only €20 or €30 in profit on selling is just not going to work. You would be lucky to get away with a mortality rate of 3% or 4% in your sheep, even your store lambs. If you did not use Heptavac-P, it could be up to 15% as quick as lightning. It could happen over night. We have to look for more markets, even getting produce to America or somewhere else. I am aware Bord Bia says it works on this but it has to happen. It may be up to the factories and so forth. Alternatively, must the farmers do their own marketing of the lambs? I do not know that.

Senator Paul Daly

We would be told that Bord Bia is supposed to be doing the marketing.

Representatives of Enterprise Ireland were in here before the delegates present, and that was on the back of having heard from the Crosse brothers from Cashel, who had the idea of a sheep milk market. Having spoken to the representatives of Enterprise Ireland today and from the bit of research I have done, I believe there is great potential in this area. The sheep milk process, as explained to us by the Crosse brothers, is such that the ewe rears the lamb to weaning and is milked only then. There are markets abroad for cheeses and other products. Having talked to the representatives of Enterprise Ireland, I believe it was a bit like, “Live horse and get grass.” They said you would have to have ten employees and be guaranteed you could export produce worth €1 million. It was a case of “Live horse and get grass.” You would nearly want to be established. It entails a kind of co-operative. The Crosses told us when they were here that they have a market for some produce but are actually importing some sheep milk to be able to produce, hoping they will eventually be able to get suppliers here.

Does the ICSA envisage itself having a role in pulling some of its members together into a group, talking to the Crosse brothers and being the mediator that would get something together? I am speaking very hypothetically. I refer to the ICSA being a mediator to pull together a few farmers who could supply to the Crosse brothers and then, as a group, front the approach to Enterprise Ireland. We are all talking about it but, in fairness to the two lads, they are doing something about it. However, a bigger approach will be needed to get the initiative off the ground. If they got it off the ground and got the support they needed to get it up and running, it could take off and be a massive boost to the sector. It has potential in a sector that has quite rightly been described as on its knees or even lower.

Mr. Fergal Byrne

I was talking to somebody in Enterprise Ireland – it was about wool – and in describing the way to proceed, they said it was to do with clusters to get over the need for ten people.

Senator Paul Daly

The point I am making is more for Mr. Punch. Does he see his organisation as being in a position to spearhead this? His organisation represents the sheep farmers of Ireland. In conjunction or collaboration with the Crosse brothers and whoever else, could Mr. Punch see a role for the ICSA? We are all talking about it but somebody is going to have to grab the bull, or in this case the ram, by the horns and start putting something together. We must move away from just talking about the situation.

Mr. Eddie Punch

The Senator is right. There is potential here for lowland sheep producers. I am aware of various initiatives, including those of the Crosse brothers. In my neck of the woods, there is a farm that was producing sheep's cheese. It started in that business approximately 20 years ago.

Senator Paul Daly

With the greatest of respect to other people out there, I should not have mentioned only the Crosse brothers. They were before the committee. I mean the greatest of respect to anybody else in the field.

Mr. Eddie Punch

I know that. It has always seemed to me that the battle in all of these cases has been how to make the move to scale up the business for exporting internationally. There have been no huge efforts on the part of Teagasc and Bord Bia to develop these markets or to develop the skills and supports that would be necessary. Any people who go milking sheep, and there have been a few in Ireland, have been very much pioneers who have had to educate themselves about it by travelling to European countries, such as the Netherlands, to get foundation stock and to milk Friesland ewes and that kind of thing. There has not been any of that. It is certainly something we will have to look at from an ICSA perspective. It is an area that is untapped and undeveloped. There is a lot of interest in sheep's milk and the products that can be made from it, and not only from the point of view that it is good protein and all of that. Many people who are not tolerant of dairy milk can use products that are based on sheep's milk, including cheeses, yoghurts and all that kind of stuff. There is a good reason for it in Ireland. We have a sheep sector but not a very profitable one. When we look at all of the sheep meat challenges, it is not simple.

I would make the point that it is disappointing there has not been more put into the marketing of sheep meat. The potential for sheep dairy is very much untapped. From our perspective, we would be interested in being involved in that.

An Leas-Chathaoirleach

I thank the Senator. The voting block in the Dáil has ended so other members will be returning shortly. I will take our guests back to their opening statements. Mr. Punch made an interesting opening statement regarding the Brexit adjustment fund, which Senator Paul Daly also mentioned. It is quite an amazing story to think that the sheep industry was the industry most affected by the Brexit scenario. Free trade agreements have been opened up with other countries to allow them access to the UK. I am thinking in particular of Australia. UK lamb is now displacing our lamb in the continental markets. Brexit did not have a major effect on dairy. One could argue it had an effect on beef. It had a big impact on the lamb trade and distorted the lamb trade, which was something we had not seen in the past. Where do we need to go with the money in the fund itself that could evaporate? We are looking at a scenario whereby unless there is movement shortly, the fund, which has been talked about so much, will return almost in full to the European Union with no real benefit for the State. The relevant part of Mr. Punch's opening statement was significant. Where does he see the next game going or the next play in this game regarding the fund itself? What leverage would he be asking this committee to use to ensure it becomes a part of the debate in the next few weeks?

Mr. Eddie Punch

The first thing is to press pause on allowing the money to go back to Brussels. The clock is ticking and we need to get an extension on that. It is the first thing and it is urgent. The second piece is that the Minister needs to direct his Department to put in a bit of effort to be creative and imaginative. Genomic tagging is being subsidised by the Brexit adjustment reserve, BAR. That happened because the Irish Cattle Breeding Federation, ICBF, thought long and hard about how it could justify using the Brexit adjustment reserve to pay for the genomic tags, or at least to subsidise them. As we said in our submission, there are various reasons the sheep sector should get this money. There are various ways to demonstrate that the sheep sector was impacted by Brexit more than any other sector. The import of live lambs from Northern Ireland, which is a big business and worth €400,000 a year, is possible because of the way Brexit was done. Some of that was positive. We were all pleased in the aftermath of Brexit that a deal was done to keep the status quo from the point of view of cattle, and predominantly beef, going to the UK. The downside is that it has left us very vulnerable to the UK in terms of competition and to Northern Irish lambs coming into the country for processing or further processing. There was an issue in respect of the way in which the quotas were dealt with. The UK immediately used its post-Brexit freedom to add more quotas for itself. All of these things are unique to the sheep sector. They are unique challenges that no other sector had.

We have discussed the matter with the Minister and his officials. The only argument I hear them making, and I think it is flawed, is that the price of sheep meat is higher in 2022 and 2023 than it was in 2016. That is a poor argument.

An Leas-Chathaoirleach

The comparison is with 2016.

Mr. Eddie Punch

That is correct. The comparison is with the time of Brexit. Those are completely different worlds. The cost of doing business is in a different ballpark completely. We must consider other sectors. Dairy has had a hard year. No one is arguing otherwise. However, the sector had a good year last year. It is on a considerably higher plane than it was in 2016. I am not going to say the beef sector is doing well but it has seen significant increases in price in the past two years albeit those prices have since come down again. The sheep sector has struggled with price in the marketplace. It is struggling with competition from New Zealand and Australia. There are other factors out there. Obviously the Chinese market has been impacted severely by the recession in China. That has led the New Zealanders and Australians to look at other markets. All of that is linked back to the way in which business was done post Brexit, the way the original 228,000 World Trade Organization, WTO, quota was carved up and the fact that the UK prioritised a deal with New Zealand for even more sheep meat. The argument is makeable if enough effort is put into it.

An Leas-Chathaoirleach

It is the biggest game in town. We have funding in place that has already been approved. We have an argument that shows the sheep sector has been critically damaged by the Brexit deal compared to the other two major sectors, which are dairy and beef. If we are looking for the argument, that is the ultimate case. What is our next step? Should the committee call the Minister before it? What is the next step?

Mr. Eddie Punch

There has to be pressure applied to the Minister, to be blunt.

Is there the will in his Department to make it a priority for the next six months to hold onto the funding and buy us time, and to prioritise it subsequently? The Department has been very much tied up with the implementation of the CAP strategic plan and the new Common Agricultural Policy. To be fair, that is a big challenge that I do not want to underestimate. That excuse, however, is now over. It is now time to focus on the sheep sector. It would be useful if there was more pressure on the Minister, from this committee and the general political debate, to now deliver for the sheep sector because it has been forgotten for too long.

Deputy Johnny Mythen

I thank the ICSA for its presentation. I will not rake over old coals or anything but the BAR fund was mentioned. Will the representatives elaborate more on the justification for applying for the fund? It was said that €12 per ewe is available under the sheep improvement scheme. Will they elaborate on what exact figure the ICSA has in mind for an increase in that? Are there any ICSA representatives on the wool council? Has it received feedback from the wool council regarding its suggestion of €5 per ewe for wool that is preserved?

Mr. Eddie Punch

I will delve deeper into the Brexit adjustment reserve. Maybe the starting point is to understand the way in which our export of lamb, and our sheep business in general, is closely linked to the welfare of the UK sheep sector. We are a major exporter of beef but the UK is not. The traditional markets for Irish lamb have been to sell lamb to France and some other European countries. The French market is notorious in the sense that the French very much pay a premium to their own producers, and there is clear competition between suppliers like the UK and Ireland for the considerable demand that is in France. Unlike beef, we are playing in the world cup in France when it comes to sheep meat. We are up against England and New Zealand. The argument for the BAR in the sheep meat sector is that sheep meat has a unique relationship with the UK in respect of export markets and the fact that we import lamb from Northern Ireland.

On the exchange rate, when you are in competition with a country that has a different currency, exchange rate is very important. There is not any argument but that Brexit impacted the value of sterling against the euro. That can be seen in that prior to the June 2016 vote, sterling was trundling along where £1 was worth about €1.30 or €1.40. Immediately after the Brexit vote, the value of sterling collapsed and has never recovered to that €1.30 to €1.40 value. Today, £1 is worth approximately €1.16. Sterling is much weaker now. There are many economic factors in respect of the exchange rate but it is clear that the graph went down in respect of sterling. Brexit changed in a fairly permanent way the price of sterling against the price of the euro. That means we are competitively disadvantaged in the sheep sector, more so than the beef sector because we do not compete with the UK so blatantly.

Mr. Fergal Byrne

I am one of the two ICSA representatives on the wool council. Seán McNamara, whose place I am taking at the committee tonight, is the other. Within the wool council, a company limited by guarantee has been set up in the past week or ten days. It took three or four months to get that established. The first official event the wool council attended was the Dingle Food Festival. It was mentioned in the Irish Farmers' Journal that it was also represented at an event at Gurteen Agricultural College. That is where we are at the minute. It is all ready to go at this stage. There are 21 different members on the wool council. It is there and is ready to move at this stage. From next week on, the committee will hear more about it. We will probably be back looking for different funding for that as well.

On the €12 figure, we are looking for that to increase to €35. We want €5 of that €35 to go towards the presentation of the wool, in order that the wool is presented correctly to merchants. Mr. Punch talked about cattle and getting genotypes. Similarly, we should look to get the micron of the wool tested so we will be able to see exactly what wool is out there. It might not make much addition in the short term, but in the long term it will make a huge addition to the marketing of the wool.

Deputy Johnny Mythen

If we were playing France and England at rugby, I would fancy us all right.

Deputy Claire Kerrane

I thank both witnesses for coming in and for their presentation. The BAR has been talked about a lot but I will come back to it briefly. The eligible period will end on 31 December 2023 so three months are left. We know €115 million remains in that fund and approval has been given to move the BAR to the REPowerEU fund, which will take it totally away from the impacts of Brexit and what it was set up to do initially. Does the ICSA have a figure for what is needed as regards emergency funding or what it is looking for in that regard? Does it know what the actual physical mechanics of the process are in going to Europe to seek that money? That is the part I cannot seem to get an answer to. When I raised this with the Minister, he said it was about whether the case could be made, but the ICSA has made the case as regards the impact of New Zealand and the deal done with England, in addition to the exchange rate.

Something else seems to be going on here in that money from the BAR for Bord Bia to promote the organic sector has been announced twice now. Where does that link to the impact of Brexit? I feel that something else is going on. I would like to hear the witnesses' thoughts on how we move this along. We now have three months. The deal is done. The BAR is going back to Europe into REPowerEU so time is of the essence. We have raised this issue with the Minister. I have raised it with him numerous times and the response is, "What's the case?". The ICSA has made the case. If the representatives have a figure and know what the actual process is, we can try to see whether there is a way to move this on. We have three months to do it and then that is it.

On the sheep improvement scheme, and there is an issue with the money that is available, only half of sheep farmers have applied for it in the first place. It was said the scheme was not fit for purpose. I know the ICSA is not happy with the amount and of course that is an issue. However, is there more to it than that as regards why sheep farmers are not applying for the scheme?

We have huge potential in respect of wool. Insulation is just one example. As we have to insulate every house in the country, the potential is massive. How much potential does wool have in terms of actually bringing it back? That is what it is about; it is not a new phenomenon. The potential in it is huge.

Is there potential for more in the US market?

I do not know what talks are going on in relation to any of that but I would appreciate any information the witnesses have. Bord Bia is given €3.5 million to promote it and the witnesses say this is not enough. I presume the figure for promoting beef is much higher.

Mr. Eddie Punch

To work backwards, we think the funding for the promotion of sheepmeat is woefully inadequate. Bord Bia has stated it spends €3.5 million. It also has another fund but it is a joint EU fund for sheep and beef that is worth about €4.8 million. However, it is not clear how much of that is being spent on sheepmeat. That was being targeted at south-east Asia and a number of other international markets, including the US. It strikes me that there is no real targeted spend of promotional money. There is a few bob here and a few bob there, so to speak. That is a real deficiency in the promotion of sheepmeat. There does not seem to be a lot of buy-in from meat factories either to have a co-ordinated strategy where a decision is made to prioritise, for example, the US and to go hell for leather for that. It seems like a few quid in south-east Asia and no real strategic planning about how those markets will be developed.

To go back to the additional funding for the sheep improvement scheme, it is a problem but it just takes work. Schemes now have to be built on the basis of income foregone and costs incurred. We should revisit how those are calculated because the costs incurred of everything in Ireland now are much higher than when these arguments were made. Generally as well, there are additional measures required in some cases, but I think that can be done if the will is there.

Regarding the amount of money coming out of the Brexit adjustment reserve, earlier this year, when we were campaigning for this, we said that €50 million would provide about €20 per ewe across 2.5 million ewes if pretty much all ewes qualified. There is this question about how why not all sheep farmers are collecting the sheep improvements scheme money. We said it is about 19,000, which is not much more than half. The answer is that it reflects how €12 per ewe is not really very appealing, particularly to smaller-scale sheep farmers. The scheme involves a lot of paperwork and bureaucracy. Schemes have to be fit for purpose. This is a general problem now that we are getting a lot of schemes with small amounts of money and a lot of paperwork and bureaucracy and a lot of actions. The money is completely out of kilter with the economy we live in here in Ireland today. That is a big problem.

Deputy Claire Kerrane

While I have to go into the Dáil Chamber for a vote, I ask the witnesses to keep talking and I will read back the transcripts.

An Leas-Chathaoirleach

Please continue as normal and that will be on the record.

Mr. Fergal Byrne

Regarding the scheme and the figure of €12 per ewe, four or five years ago compulsory electronic tagging was introduced. Each tag costs between €1.30 and €1.50. This tagging was going to be a godsend to everyone. It was only a godsend to the factories. They could cut down on costs but it did not cut the costs for the farmers. It was swallowed up.

Deputy Kerrane referred to the different uses that wool could be put to. An educational hub has been set up to investigate the different uses of wool and how they could be developed. That is working well. Ms. Lorna McCormack is in charge and there are 21 people involved in the project.

There is further potential to use wool for insulation. I know a businessman who is very interested in developing an insulation industry and is going hell for leather on it. There is no shortage of money in that regard.

Senator Paul Daly

Regarding the sheep census, what is the trajectory? Are national numbers dropping or are they holding up?

Mr. Fergal Byrne

In my area, when I started farming 30 years ago, there were 18 or 19 sheep farmers in our locality. Now there are only two, myself and another man.

Mr. Eddie Punch

Ewe numbers are stable. There was a huge collapse in sheep numbers back in the 1990s when the subsidy system changed. We are close to the bottom number in terms of ewe numbers. The number of people involved in sheep farming has been stable enough at around 35,000 for a few years. There is a lot of anecdotal evidence that in the hill areas, there is pressure on numbers because that is a very unprofitable business. The age issue is certainly becoming a factor there. Numbers are not going up but they are stable.

Senator Paul Daly

Does Mr. Punch see them remaining stable, based on everything that has been discussed? In my opinion I can only see the numbers going in one direction.

Mr. Eddie Punch

Yes, what we hear from members paints a negative picture of what is going on. There are a number of factors involved. The store purchasing sector got burned last year. As we discussed earlier this year the sector is showing a bit of reluctance around it. That will inevitably feed back to the farmers in the west supplying those kind of store lambs. Some of them are hill lambs and crossbreeds and some of them are just store lambs would say from lowland west of Ireland farms, so that is going to have a negative impact.

Nitrates obviously will also be an issue. Deputy Fitzmaurice mentioned this earlier. While it will not necessarily have a direct impact, sooner or later, the demand for land as a consequence of nitrates is going to feed in, in areas like Wexford, Roscommon and the midlands. It may not have so much of an effect in the west because they are not as affected by nitrates. Inevitably, that will feed through so I would say the prospects are not positive.

An Leas-Chathaoirleach

I thank the witnesses. The presentations were very informative. On behalf of the committee, I thank everyone for attending. The next public meeting committee will be held on 4 October 2023 at 5.30 p.m., when there will be an update on the forestry programme and strategy. Since there is no other business, the meeting stands adjourned.

The joint committee adjourned at 8.19 p.m. until 5.30 p.m. on Wednesday, 4 October 2023.