Official Report (Hansard)
Date: Tuesday, 12 March 2013
Committee for Agriculture and Rural Development
Agri-Food Strategy Board: Progress Report
The Chairperson: I welcome Tony O'Neill, chairperson of the Agri-Food Strategy Board; David Thomson, deputy secretary; and Colette McMaster; assistant secretary. None of you is a stranger to this Committee, and it is good to have you here with us today.
Tony, I am sure that you are leading off with a presentation.
Mr Tony O'Neill (Agri-Food Strategy Board): I am.
The Chairperson: Without further ado, I invite you to give your presentation, then there will be questions. Thank you.
Mr T O'Neill: Thank you, Chairman. I thank you for the opportunity to address the Committee once again on the work of the Agri-Food Strategy Board. This is a summary update on progress. I have to register my apologies for the last time I was scheduled to meet you. I got stuck in snow in England, and I am beginning to think that that is a recurring theme because we seem to have had a touch of snow again today.
Since I last addressed the Committee in June 2012, we have had nine full board meetings of the Agri-Food Strategy Board, the most recent on Friday past. We met the Northern Ireland Tourist Board and a number of Ministers, including Minister Attwood, on planning and regulation; Minister Farry, on skills and innovation; and Minister Wilson, on finance. We also met the new chief executive of the Environment Agency. All those meetings built on the theme of developing agrifood in Northern Ireland and sought input on where we are going.
We recently met a wide range of environmental interest groups to try to make sure that all interested parties were allowed the opportunity to have input on our deliberations and, hopefully, by doing that, we can address some of the concerns that were raised. Many of the things that we are talking about have implications for the environment. We have a theme running around looking for sustainable intensification in our farming industry. We need to make sure that that is consistent and compatible with good environmental control.
This morning, I met Minister O'Neill to keep her up to date with our progress, and I met Minister Foster a few weeks ago to give her the same progress report.
As you know, we have nine sectoral subgroups, each chaired by one member of the main board. Each of those had the opportunity to consult and discuss our activities with a wide range of stakeholders. About 80 people are involved in that exercise; I am not sure whether I made that clear last time. The work of those subgroups has been largely finalised and we are going through an editorial process to try to bring them together in a consistent style and format. We had many responses to our activities over the months, and those are being considered in the development of proposals.
We are finalising a report, which we have been doing now for three or four weeks. That is quite challenging because we had nine authors producing a report, and we are trying to bring that into one consistent format and theme through the project. Our target is to complete that process by the end of March. There may be a short delay after that in putting it into a printed format so that we can issue a public report, but we expect to have a draft report with Ministers by the end of March.
We are endeavouring to put together an action plan consistent with the report that will identify the actions that we expect to take, the timescales and the broad levels of funding requirements associated with those. We are testing everyone up front. We are looking at fairly significant investment in the industry and are clearly challenging the Executive to back that investment with various levels of support for different programmes.
The board has agreed with the key developments in that process. We are pretty united in our views, which is very positive. The programme brought two sets of priorities together with the producers on one side of the table and the processors on the other. It has been positive that those two sets of different interests have come very much closer over the period of the project. That is not to say that we are all first cousins yet, but we are pretty close. We tend to find that the natural tensions come out pretty quickly, but we have come a long way and the project has been interesting in that that relationship has been built and strengthened.
As I said, I still expect to submit the plan to the Minister of Agriculture and Rural Development and the Minister of Enterprise, Trade and Investment by the end of March. The primary concern is to make sure that the document is as good as we can make it and is consistent around clarity of implementation. We do not wish to produce a report that fudges the issues or is subject to interpretation. We want to be as clear as we possibly can. To be blunt: that process is challenging us. It might delay us a little bit in completing it, but we are within a few weeks of that in any event.
I and my board members are committed to delivering the project and seeing through the implementation process. This is not simply about passing a report to Ministers at the end of March and disappearing into the sunset. We are in place for the next two-plus years and intend to be part of the implementation process.
We are convinced that this project is a key element in the development of the local economy. We think that we have a major part to play, and we are seeking the support of the Executive to implement it for the good of the Northern Ireland economy.
Chairman, I will leave it there and invite you to ask questions.
The Chairperson: OK. Thank you very much, Tony, for your presentation.
Now that we have a full house, I remind members to ask just one question. I will allow one supplementary question, and we will try to get round as many people as we can. If we have time, we will go round again, but rest assured that if there are other questions that you need answers to, we will ask them in writing.
The call for evidence closed in September of last year, but work has been going on since then with your nine subgroups. Undoubtedly, the debacle and crisis with the horse meat scandal is bound to have an impact. How big an impact has it had on your work?
Mr T O'Neill: This is the new world of agrifood. As far as I am concerned, agrifood is accelerating with the pace of change in the world. Things are happening all over the world that are affecting food supply in the UK and Europe, and more and more as we go on. In the past nine months, we have had an issue with commodities. We have had the harvest and crop and the seasonal implication on farm incomes, and so on. We have had a major debate on beef, and, in recent times, we have moved on to horse meat and contamination or substitution of meat. That has had a major impact on us in a number of ways. All those factors have come into play. Every time one of those things has come up, we have had to review and reflect on the learnings from it. In many ways, I am talking about the industry side of this issue. Every time one of those events has come up, we have had to go back and ask, "How does that affect our industry?" In some cases, we have been diverted from the agrifood strategy discussion back to managing that industry.
Horse meat has been a major issue in the widest possible sense. It has had the effect of pulling us off pushing our report forward to going back to managing an industry crisis. It has also raised a number of very important issues that we need to ensure that we address in the project. I am sorry if I am rolling on to your next agenda item, but we have all had a view that we had a very robust traceability programme for our meat supply, and that has been questioned very seriously over recent weeks. That has had an implication on what we are saying that we should do going forward and what we are doing daily in managing our business. It also brings in a lot of new challenges that were in the pipeline but have now become very imminent and time critical.
You will be aware of the impending changes of country-of-origin labelling of meat. There are different programmes associated with that, all of which were probably going to hit us over the next three or four years. It is probably realistic to expect all those things to be pulled forward due to the recent issue with horse meat. So, all those things have an implication for what we are doing today and clearly have an implication for our report. We will be reinforcing some of those messages in respect of what we should be doing now. That will challenge industry as well as the system.
Horse meat is a big issue, and it presents big opportunities. Our objective is to move agrifood in Northern Ireland up, and, broadly speaking, we are talking about an increase of 40-plus per cent over the period. It is pretty challenging in any event, and the move back to local supply will probably accelerate that opportunity, but it will present lots of challenges in doing it because, in many cases, we simply do not have the farm base to meet the increased demand. All those things crystallise very quickly in the agrifood discussion.
The Chairperson: OK. Thank you for your answer. The public have become very aware of just how complicated and long the food supply chain is and how it can dart from states all over Europe before going to the country where it will be eaten. I do not want to pre-empt the report or your recommendations, but is it essential that the supply chains become less complicated or, at least, shorter? Has that been factored in?
Mr T O'Neill: That is the premise that we are working on now. The control of the supply chains was always an issue, but the pressure is to shorten them. That might turn out to be a simple relationship between the producer and the supplier. The issue that has arisen in the horse meat thing was the fact that meat went through a series of hands before it reached the guy who used it. Taking traders out of the supply chain may well be an element that will satisfy some people. At the moment, the momentum is building to go back to local supply. A huge demand is being placed on UK farming right now. The question is this: how fast can you take up that opportunity and supply it from the UK?
Mrs Dobson: Tony, you are very welcome. Thank you for your briefing. When you briefed us last June, you said to me:
"we collectively make a lot of noise. We will be surprised if people don't listen to us."
You mentioned earlier that you met the Ministers this morning. Do you feel that the Minister of Agriculture and Rural Development and the Minister of Enterprise, Trade and Investment are listening? Most importantly, do you think that they are prepared to act on your advice? I recall that you also told me that if it was not working, you would walk away. Are we anywhere near that stage?
Mr T O'Neill: I am still positive, because both Ministers are saying that the Executive have said that this is to be supported. They will carry it to the Executive to seek that support. That is when the test will come. Frankly, we are testing both sides. If you take the investment profile that we are looking at for the agrifood sector over the next number of years, we are talking about investments of hundreds of millions of pounds in Northern Ireland to bring that forward. We are clearly calling on the Executive to support us in that process. That is really when the test will come. At the moment, all the Ministers are saying the right things. It is only when they are asked to go beyond saying the right things that we will be able to judge whether it is serious. At the moment, however, all the indications are positive.
Mrs Dobson: Does your commitment to walk away if that changed still stand?
Mr T O'Neill: Yes.
Mrs Dobson: Do you see any difference in the way in which the two Departments view the board? Do you think that the Department of Agriculture and Rural Development (DARD) is taking a wait-and-see approach to the final outworkings of common agricultural policy reform before implementing any future strategy for growth?
Mr T O'Neill: I cannot answer that. We have talked about the scale of investment that we are talking about here. The fact is that we are looking for support at farm level to see the investment through. DARD has said that its budget is limited and that it has had reductions imposed on it.
Mrs Dobson: Obviously, farmers need the support of the Department.
Mr T O'Neill: Absolutely. DARD says that it will take the programme to the Executive for support. As I said, the message is still there that the Executive will have to make decisions on where they invest money. Both Ministers are saying the right things; they are saying that they are calling for that support and investment to go to agrifood. When we start to weigh the different calls, the investment will be the issue.
Mrs Dobson: Do you feel that both Departments have the same view of the board's role or are there any differences?
Mr T O'Neill: We have different styles and different Ministers; there is no question about that. At the moment, however, I do not have any reason to suspect that I am not getting the support of both.
Mrs Dobson: I look forward to posing that question again next time.
Mr T O'Neill: I have put my colours on the mast before. I am taking this seriously, and I have had that conversation with both Ministers and both Departments. My challenge is more with officialdom than Ministers. The Ministers are saying that they want it to happen. Most officials respond to that by saying that they have a budget cut. I understand that, but it is up to the Ministers and Executive to make sure that the funding is available for the officials to do it. We are not putting forward a programme that will fit into existing normal programmes in other Departments. We are challenging beyond that. It will be a challenge; there is no question about that, and I understand that. However, the challenge goes both ways. Let me be clear: we are saying that if the Executive support us in this investment, we, as industry, will invest lots of money. This is a very serious set of investments across the industry. It is not tens of millions of pounds; it is hundreds of millions of pounds.
Mr Hazzard: Thanks for the briefing. I want to talk a little bit about the fishing industry. We often get bogged down in talking about red meat, horse meat scandals and everything else. As I am a representative of South Down, which holds the fishing harbours, this may be a clash of interests. However, I believe that there are great opportunities for growth if we look at it the right way. To what extent did common fisheries policy reform and maybe a move towards regional strengthening of fishing arrangements in Europe play a part in the reporting of this? What factors are inhibiting these opportunities? I do not want to prejudice the report.
Mr T O'Neill: I am not a fishing expert, so I need to be careful. I could get into talking about national parks in a minute.
Mr Hazzard: You can leave that at the door, too.
Mr T O'Neill: He ambushed me before.
Mr McMullan: I never thought of that.
Mr T O'Neill: A subgroup has been working on fish and aquaculture, and it has been very positive. The whole framework of European funding, and so on, is an issue. We can either use it as a reason not to do anything or we can say that we have to work. The programme that the guys have put together is very good and very ambitious. This may be a bit condescending, but the team that worked on it was hugely enthusiastic. I have to say that I thought that that was good.
Mr Irwin: You are very welcome. I am delighted to hear a positive message. I declare an interest as a farmer.
For the agrifood sector to grow, it is vital that the issues around the primary producer are addressed. The past year has probably been one of the most challenging for most sectors right across the board, as you are fully aware. I spoke to a bank manager just the other day. He said that it is the most challenging time that he has seen in agriculture for over 20 years, with many farmers needing overdraft extensions to survive this year. I hope that the issue of the primary producer getting a fair price will be addressed in your final report. Will that be the case?
Mr T O'Neill: To be honest: it depends what you mean by addressed. It is almost self-evident that, to grow, farmers have to be viable; that is a fact. We cannot hope to grow, and grow substantially, if farmers are not able to make a living. It will just not work. However, it is not our remit, and it is not within our power, to say that prices have to change. We have to accept that that is a market condition. The positive, as far as I am concerned, is that, at the moment, all the market dynamics are effectively putting prices up; let us be blunt. You have to say that, over the next couple of years, there will be all the right conditions to make pricing sensible. That applies to farmers as well as to all the processors down the line.
The horse meat issue is almost a tipping point. All the retailers in the UK that we work with are very reluctant to talk about, or engage with, cheap food any more. Everybody is moving away from cheap food, because they recognise that that is where they are vulnerable. The fact is that that pushes us back to what we would say is our forte: high-quality food. That is where our strength is, and that is where the growth is today. We would expect that that will put the whole supply chain in a much stronger position over the next couple of years.
Mr Irwin: I would probably agree with you on that. There are concerns out there, even in the poultry industry. The input costs for meal have been massive. There are issues across America and the world, so it is a big issue beyond our control. I hope that the strategy that you come forward with pushes the agriculture sector forward. I would be one of the first to welcome that.
Mr McMullan: Thank you for the presentation. I promise you that I will not mention national parks.
In my area, a lot of young farmers have gone into poultry. In the past week or so, there has been a lot of talk about the dangers of the poultry industry at the moment because of feed prices, etc. I read just today that feed prices could be coming down. In your view, how strong will the poultry industry be for the long term? It is an industry that you can go into with little land. As you said — and I want to come back to it — we do not have the critical mass here for production.
Mr T O'Neill: I need to be careful about where I put my hat on this; I could start speaking as Moy Park rather than as the Agri-Food Strategy Board. I would say that poultry — and I think that this is genuine — is an ideal activity for small farms; that is a fact. You need only a small amount of land, so it is ideal for small enterprises. Poultry has been stable for many years. You talk about input costs, but the fact of the matter is that our model means that the farmers never see the input costs. The input costs of wheat and feed are absorbed by Moy Park. The only thing that affects a farmer's performance in practical terms is bird performance and the physical growing of a bird.
This will sound almost like a press release for Moy Park. However, everybody knows that UK wheat is crap. The crops are just dreadful, because they are waterlogged. UK wheat this year is abysmal. Yield is down, and the quality of the grain is low. Remember that we, in Northern Ireland, operate more than 50% of our business in England, so we are eating the crop in England. In Northern Ireland, because we ship the grain in, we decided that we would buy grain in the Baltics and ship it to Northern Ireland. We have been buying premium grain throughout this season. Our performance in Northern Ireland has held up all the way through. When I talk about our performance holding up, I mean that a bird grows to its weight in the time that it should without eating excess feed. We have had a huge drop in performance since January. It dipped, but we are now climbing back up.
As a business, we monitor that all the time. Where farmers are below a certain threshold, we step in and effectively give them subsidy benefits so that they can fall only so far. They should not fall to a point at which they have financial difficulties. That is not to say that it is comfortable. When farmers get that far down, they feel the pain. However, we have had our vets and nutritionists look at the feed to see what is going on and to try to fix it. We are making progress. When animals are not growing for whatever reason, it is a bit like black art. You could bring all the scientists and vets into a room and ask them what is going on, and they will all tell you different things. Then something happens and they start to grow again, but nobody tells you what it is because they do not know.
We have gone through all that. Our performance is generally coming back up again. We are supportive of our farmers. We paid them more in the last crop, and we always do that. It is very unusual for us to hit the headlines. As I said, it normally works invisibly in the background. I suggest to you that the fall in poultry performance this year has been exacerbated by all the other things that we know about; for example, the rest of their farm is in trouble, with their dairy or beef not working, or their bank has put tighter limits on their overdraft than before. However, poultry is coming back, and it will be there for a long time. I am not making light of the fact that some of our farmers are having difficulty at the moment, but we have 600 farmers, and fewer than 30 are expressing difficulties right now, and, as I say, there could be a number of other factors. However, we will address that and fix it. In the long term, poultry is huge.
If I go back to the Agri-Food Strategy Board, our strategy outlined in the paper is to grow from two million birds today to three million birds. We can do that as fast as we can get investment in housing in Northern Ireland to do it. That is 2,000-odd jobs and 300-odd farms that would become sustainable because of that development in poultry.
Mr McMullan: On the sustainability of the agriculture industry, when we do not have the critical mass to produce what the market needs, are we coming to the stage at which we have to look at the land mass that we have? We are losing land every year to industry and housing development. Are we coming to the stage now where we will have to take stock of what we have and preserve it, or are we coming to the stage where farming will have to really diversify into something that will pay?
Mr T O'Neill: I use the term "sustainable intensification". Farmers will have to have an element of scale, so we have to get enterprises to a big enough size to sustain the family that depends on them. That means that a number of small farms are not going to be sustainable commercial enterprises. That is where rural development grants, and so on, come into play for environmental protection, if you like. In my mind there will be a challenge, in the coming years, in how you can put clusters of farms together to get scale, because, without doing something along those lines, I think that the future for many of those enterprises will be challenging. That is when you get into whether you can lease farms in the long term without having a problem with your inheritance tax and all those other things. There is a big piece of work in there to see how we can get a long-term fix.
Mr McMullan: I will just make an observation. Of the 102 members on the subgroups of your board, only eight or nine are women. Is that deliberate, or is it just —
Mr T O'Neill: I have women behind me.
The Chairperson: Sneak another question in there, Oliver, albeit a very important one.
Mr Byrne: Apologies for being late. I welcome the presentation by Tony and the others. In relation to the type of objectives that you are going to set, there is reference to providing strategic advice to DARD and the Department of Enterprise, Trade and Investment (DETI), and reference to the Focus on Food strategy. What experiences are you drawing from the Focus on Food strategy, and what sort of resources have you had? I know that you have all of those different people on different committees, but who is actually doing the organ-grinding work that is necessary?
Mr T O'Neill: Nearly everybody, to be honest with you. We have a number of different subgroups working on it, but we have had to do some of the heavy lifting ourselves at board level. We have sought input from the Departments as well on specific bits where we need papers drafted to give us input on specific topics, but the majority of it has been from the subgroups and the board itself.
Mr Byrne: What about drawing on the Focus on Food strategy?
Mr T O'Neill: If you look at the participants, you will find that some of them are still here.
Mr Byrne: That is what I am trying to work out. Is it a comfort club or a radical club looking for blue-sky thinking?
Mr T O'Neill: I was not there the last time.
Mr Byrne: Good. So you are the new thinker.
Mr T O'Neill: Probably.
Mr Byrne: The Republic has had a strategy called Food Harvest 2020. Are we drawing any parallels to that?
Mr T O'Neill: We have had — you will probably know this better than me — several Northern Ireland-based reports on food over the years, including the food strategy implementation one. We got all those reports. We have had Food Harvest 2020 on the desk, and people came up from Dublin to make a presentation to us and tell us about the work that is going on behind it. We have also talked to the Scots and got copies of similar food strategy papers from Australia and New Zealand. You will not be surprised to know that everybody in the world today is talking about agrifood, so there is a lot of work out there. Frankly, what we have been doing is harvesting the best ideas and asking, "How does this apply in Northern Ireland?" A couple of the members who were involved in previous activities gave us that homework, so at least we did not have to do it again, but that is not to say that we used it all.
Mr Byrne: Chairman, can I ask one further supplementary question?
The Chairperson: OK, but just because you are Deputy Chairperson. Go ahead.
Mr Byrne: You referred to the intensive sectors, which William also mentioned. The poultry and pig industries are obviously intensive. Do you see those areas as having the greatest potential for growth, given the land restrictions on dairy, beef and sheep?
Mr T O'Neill: The dairy guys are approaching it differently. They are at looking at the fat content in milk rather than the production of more milk. So, they are basically saying that the herd is more or less the right size. What they are looking for is better quality milk, but I am not sure that it is as simple as that. I think that it is a little bit of both: they need the volume of animals as well as quality milk. So that sector is, let us say, more or less standing still.
The poultry industry is looking at a 50% increase in birds. The pig industry is looking for, I think, 40,000 or 50,000 extra sows in Northern Ireland. Those are big, intensive sectors that have associated complications, such as looking at what to do with poultry litter, and the pig guys have the same issues. The beef industry is looking to go back up to, I think, 400,000 as well. So, the volume in all sectors is going up.
That raises one of our big questions: the old greenhouse gas discussion. We are talking about efficiency, not an overall number. If we accept that Northern Ireland has to have a net reduction in greenhouse gases, you have a problem in respect of growing your herd. What we are saying is that we can improve our throughput per animal and reduce our greenhouse gases per unit, but the total is likely to increase because we are putting so many more animals on the ground. There is an environmental theme running through this, because we can offset all that by doing x, y and z in environmental terms. That is another one of the challenges on the table. In theory, we could grow the number of animals and reduce greenhouse gases, but we would be extremely cautious about the Minister of the Environment issuing an edict that says, "You have to have a net reduction because —". We would certainly be concerned about that being a condition instead of a condition that says that you must have more efficient production.
Mr Buchanan: Again, this may have been touched on. How do you envisage the strategy addressing the key difficulties in the farming sector, from low farmgate price to high input costs? Is there something to encourage marketing right across Europe? Can you give us some indication of some of the key findings that came out of the consultation?
Mr T O'Neill: I am not sure that I can. I do not think that I can tell you the answer without — [Inaudible.]. We are sort of caught in a dilemma there.
I made a point earlier about farmgate pricing. We are clearly saying that the farmer has to make a living. You cannot produce if you are not making a living. In all cases, we have asked the guys working on the subgroups to look at the supply chain. All these things are being looked at as a supply chain exercise, from farmer right through to processor. Some of them have addressed it by saying that there needs to be predictability in the contractual relationship between the farmer and the processor, so that, in respect of investment, you know what you are getting for your animal rather than depending on what the guy offers you at the auction tomorrow. So, it is more along the contractual line than an ad hoc line on selling weekly or daily at the farm gate. Those issues have been considered and, with a bit of luck, the mechanics that we are talking about will prevent the volatility that farmers are seeing today.
Mr Swann: Thanks very much for the presentation, Tony. I will start with a supplementary to Joe's question. We are looking at an end to on-field storage very shortly due to legislation from Europe. I do not want to put you on the spot too much, Tony, but if we cannot remove poultry litter in some shape or form, how realistic is a 50% increase in the poultry sector without a resolution to our litter problem?
Mr T O'Neill: That is one of the challenges for the Executive. It is very realistic if certain issues are agreed. Whether it is Rose Energy or son of Rose Energy, it is possible to digest the poultry litter. We have to make decisions and go on and do things. The issue is that the poultry litter problem is taking too long to resolve. Our proposal on Rose Energy was the best solution.
A DARD and DETI project is looking at research and development for options. We know some of those technologies and are pretty sure that they will come up with an answer in due course. The issues are how long that will take and the cost. We are confident that, with the will, there is an answer there. Our frustration, quite bluntly, is with the time it is taking to get there. I am firmly of the view that we could agree the answer inside a month, but it is taking a long time.
Mr Swann: You spoke in your presentation about working with the Minister for Employment and Learning on skills and innovation. What is the scale of provision of skill training in agrifood? It is not like large-scale education programmes. Will the training be more specific and detailed?
Mr T O'Neill: Separate from the Agri-Food Strategy Board, we had a food sector skills action group some time ago, and we made recommendations to the Minister. One recommendation from this project is that those should be implemented. A series of issues are already defined, and we have added to them in terms of the capability.
We also said that DARD should introduce a programme for business innovation on farms. That is the widest possible way to look at how and why farmers do things and to bring in more innovation and research and development onto farms to make sure that the output matches what the industry and market need. There is a lot of coverage on that in the report.
The Chairperson: Are there any other questions, members? We are OK for time. Does anybody want to ask a question or are we content? With that consensus of silence, I think we are content, Tony.
Mr T O'Neill: I am glad to hear it.
The Chairperson: Again, thank you very much for your presentation and your answers, which were insightful and informative. I am sure that we will eagerly await the published document to see the challenges that will be put on the Executive — and rightly so. Thank you, Tony, David and Colette for your attendance.