Committe for Agriculture and Rural Development:Inquiry into the Livestock and Meat Commission(Report 01/01R)
TABLE OF CONTENTS
Appendix 1 – Proceedings of the Committee Relating to the Report
Appendix 2 – Minutes of Evidence
Appendix 3 – Annexes to the Minutes of Evidence
Appendix 4 – List of Unpublished Memoranda
1. General
1.1 In conducting this Inquiry, the Committee wished to consider the results of the Department’s five-year review of the Livestock and Meat Commission (LMC) but found that the report, although completed in early 2000, had not yet been published. There were widespread concerns about this delay among those who took part in the Inquiry. Given the interest in the LMC’s performance, the Committee firmly believes that future DARD quinquennial reviews should be thorough, timely and the results disseminated quickly to all stakeholders.
2. Perception and Communication
2.1 Both the Committee and representatives of producers believe that the relationship between the LMC and the Northern Ireland Meat Exporters Association (NIMEA) is perceived as being too close, compromising the independence of the LMC in the eyes of producers. The LMC must, therefore, take steps in order to balance this negative perception. This could be achieved through greater transparency regarding the relationship. This perception is related to an underlying theme of the evidence presented to the Committee i.e. that of poor communication between the LMC and producers. This has contributed to suspicion and scepticism on behalf of the producer in relation to a range of LMC activities and must be addressed. The Committee recommends a range of actions that it believes will lead to improvements in both these areas.
3. LMC Funding and Levy Charges
3.1 Funding was an important aspect of the evidence presented to the Committee by every organisation. While there is widespread acknowledgement that the LMC is under-funded there is disagreement on how this should be addressed. Producers, and the Committee, do not support the argument for additional funding from slaughter levy, especially given the current crisis in farming. For example, establishing levy-funding parity with producers in GB would entail a significant increase for farmers in Northern Ireland. The Committee could only support such a move if producers here were receiving similar prices to their colleagues in Great Britain – this is certainly not the case. However, the Committee considers that annual increases in slaughter levy, in line with inflation, would be fair and reasonable.
3.2 The processor levy has been widely welcomed but there is still concern, shared by the Committee (despite explanations from NIMEA on the procedure for payment) that it may be passed back to the producer. The Committee is disappointed by the Department’s response to this concern and has made recommendations regarding DARD’s role. Other options for levy collection were also considered during the Inquiry. These include a levy on animals sold at livestock markets or from producers who do not take animals to slaughter. It is generally felt by the Committee that all who benefit from LMC operations should contribute, and although the Committee is reluctant to support any immediate increase in costs to farmers, it believes the LMC should pursue an extension of levy in the longer term.
3.3 The Committee acknowledges previous funding from the Department for specific marketing schemes. However, it encourages the Department to reassess the potential for ‘mainstreamed’ marketing support funding, particularly in light of the funding provided to competitors such as An Bord Bia in the Republic of Ireland, Welsh Beef and Lamb Promotions Ltd. and Quality Meat Scotland. The Committee also believes that Commissionmembers’ expenses should be covered by DARD in line with practice in the Meat and Livestock Commission in Great Britain.
3.4 The Committee, in summary, believes the following:
- additional, and secure, funding for the Farm Quality Assurance Scheme;
- unchanged, but separated, classification fee income;
- a processor levy, fairly applied on a statutory basis;
- an ‘index-linked’ producer levy;
- additional ‘transaction levy’ (in due course);
- Commission members’ expenses paid by DARD; and
- ‘mainstreaming’ funding by DARD for promotional and marketing activities
would allow the LMC to fulfil its statutory and other obligations and allow it to engage in strategic planning with full confidence.
4. Classification Service
4.1 Perhaps the most contentious issue is that of classification or grading of animals. This is unsurprising given that the grade applied to an animal will determine the price paid to the farmer for it. Classification is mandatory and the LMC provides this service at the request of producers and processors. However, because of the subjective nature of the procedure, and the perceived close relationship with NIMEA, the LMC’s independence has been called into question. The Committee sees no obvious alternative that has widespread support and, in lieu of this, believes that the LMC should take steps to ensure a clearer distinction between its classification service and other elements of its operation. The Committee believes this may help re-establish producer confidence in the LMC and understanding of the classification system.
4.2 While the last EU appraisal of LMC classification was positive, these appraisals are infrequent. The Committee suggests that the Department provide enhanced supervision of the application of standards in the period between EU appraisals. Additionally, the Committee is of the opinion that the accepted standard error in classification of 20% is too high and that actual performance, as regularly assessed, should be an error rate between 5 and 10%.
4.3 The Committee heard evidence that the farmer is dissuaded from viewing the grading of his animals. As one way to gain farmer confidence, the Committee suggests that the option to view grading be available to all farmers. This would also provide the farmer and grader an opportunity to discuss how certain grades were determined.
4.4 The Committee heard evidence from NIMEA that the large majority of complaints come from the infrequent slaughterer and from the LMC that ‘big producers’ understood the grading system. This suggests that there is an existing prejudice that may be not be conducive to objective treatment of all producers, regardless of their size or frequency of slaughter. Rather than apportion blame to small mixed farmers for the number of complaints in classification, the Committee suggests that the LMC should take a lead in educating the producers and provide information on the procedure in order to foster good relations and better understanding of each other’s viewpoint. The Committee also seeks DARD’s involvement in investigating allegations that meat plant management has altered the grade of beef after classification. A full investigation is necessary to protect the integrity of Northern Ireland beef.
5. Appeals and Mechanical Grading
5.1 As in any operation where there is a decision-making process, the Committee believes there should be an effective appeals process for disputed grades. However it recognises that there is currently no body to whom an independent appeals process could be entrusted. The Committee therefore supports the NIMEA suggestion that the procedure should initially involve the original grader and then a senior grader only if disagreement persists. It further suggests an improved analysis of appeals by the LMC, with a view to targeting advice, education and support to those most in need. The Committee also suggests secondary or spot-check grading to counteract the loss of opportunity to appeal caused by the practice of ‘aitch-bone hanging’.
5.2 There was unanimous agreement that mechanical grading, if verified as technically feasible and acceptable to EU regulations, should be adopted in order to remove the subjective element of grading. The Committee supports calls for trials in Northern Ireland meat plants. The Committee also believes that the European authorities must be challenged to review their current requirements, which link grading to price reporting, and to consider alternative systems, such as are in use in Australia. Additionally, within the current system, the Committee believes that the number of payment bands should be reduced and biased towards providing strong incentives for higher quality carcasees.
6. Promotional Activities
6.1 Another function of the LMC is in the promotion of Northern Ireland red meat. However, evidence suggests that producers (and their representative organisations) are ill informed about these activities, and of positive independent evaluations of them. The potential benefits to primary producers of promotion also appear to be little understood. This is unsurprising, given that there is no immediate, tangible or direct benefit to farmers. The Committee suggests this lack of understanding is at least partly due to poor communication, which has fostered a negative opinion, among producers, of promotional activities. In this context, NIMEA’s praise of the LMC’s activities in this area will merely re-enforce perceptions of a ‘cosy’ relationship, rather than being seen in a positive light. The Committee therefore re-emphasises the need for the LMC to enhance its communication strategy in order to establish a better understanding of its broad remit within the wider farming community.
6.2 On a positive note the Committee is broadly supportive of the LMC’s promotional campaigns in NI, GB (including expenditure of £450,000 to secure use of the ‘British Meat’ brand) and internationally. It does believe, however, that there is room for greater emphasis on the home market, particularly in the promotion of lamb and beef for use in catering and domestic outlets.
6.3 There is also recognition from producer organisations that the LMC has played a role in securing business in the multiple retail sector and a reluctant acceptance that this is the main market outlet for NI produce. Understandably, producers question the continued expenditure on export marketing at a time when export markets are closed to NI beef. However the Committee believes it is necessary to maintain a market presence in anticipation of re-opened markets and that the LMC should, for example, continue its investment in the ‘Greenfields’ brand. Although there is disagreement on the involvement of retailers, in an advisory capacity, in the LMC’s marketing activities, the Committee believes that such expertise, where available, should be accessed to enhance promotion operations.
7. LMC Appointments
7.1Producers believe their sector is under-represented on the Board of the LMC and therefore welcome the proposed increase in Board membership to nine, which they expect to result in an additional representative from the farming sector. The Committee agrees that this is desirable. In relation to participation on the Board, there is concern about a potential conflict of interest since the NIMEA Chairman is also on the LMC Board. This again raises questions about the independence of the LMC in the eyes of producers. To minimise the potential for concern, the Committee suggests that the LMC reviews the implications of having current meat-plant directors on its Board and that a code of conduct for members should be drawn up and widely circulated. This would prescribe the behaviour expected of Commission members in terms of contact and relationship with their own sector.
7.2 Related to this is the issue of appointment to the Board. The continuation of appointment in accordance with the Nolan Principles is strongly supported by the Committee. Nominations can therefore be made by anyone and allows anyone to be nominated. This appears to the Committee to be the most open and fair approach, provided that the procedures for alerting potential candidates to board vacancies is improved. In order to enhance the quality and function of the Board the Committee suggests that a ‘balance of competencies’ be drawn up between the LMC and the Department, in consultation with the industry. This would help ensure a balance between sectoral representation in the event of resignation or completion of appointment. Furthermore, no unnecessary obstacles, such as formal qualifications, should be allowed to exclude any sector from consideration for appointment.
7.3 The Committee does have concerns, however, about second re-appointments to the LMC. Although it acknowledges the potential advantages of continuity, the Committee suggests that such appointments should only be made in exceptional circumstances. Finally, in relation to Board membership, the Committee suggests a review of payments made to board members, and that payments should be linked to attendance at meetings and involvement in ‘external’ LMC activities. In whatever way members are remunerated, the Committee believes that they must be dedicated to their task and that attendance at meetings should be an expectation of appointees.
8. Main Conclusions
8.1 The evidence points to a need for the LMC to ‘re-invent’ itself in terms of farmers’ perceptions and to demonstrate, unequivocally, its impartiality and independence. Importantly, the LMC’s ‘sponsoring’ Department, DARD, must also enhance its role in monitoring the LMC’s activities, particularly in the supervision of classification standards and in expediting its five-year reviews.
8.2 The Committee considers that changes to the current system of funding the LMC are essential, that they should be made in the near future and that they should be radical. Given that some increase in costs to primary producers is inevitable in the longer-term, the Committee also concludes that the changes must be sensitively managed, with full consultation with, and explanation to, producers.
8.3 The provision of a classification service is, the Committee concludes, the LMC’s biggest problem. When both processors and producers express concerns about the LMC’s involvement in classification (albeit for very different reasons) the importance of the problem should not be underestimated. The Committee believes that the only way of addressing the difficulty is for a far greater degree of separation to be brought in between the classification service and the LMC’s other activities.
8.4Furthermore, the Committee’s belief that a 20% margin for error in classifiers’ performance is much too great, and higher than in virtually any other job or profession, will be mirrored by many producers. The Committee concludes that the classifiers’ performance must be demonstrably better than this, in order to build producer (and indeed processor) confidence in the grading and payments system.
8.5 It appears to the Committee that the primary producer is under-valued by the rest of the supply-chain, despite the extent of his role in bringing an animal from birth to slaughter. This, the Committee believes, must be addressed in the context of carcase classification as much as in other areas. Improvements are therefore necessary in terms of farmers’ access to grading standards information, to meat plants themselves and to a credible appeals system within the grading process.
8.6 The Committee’s main conclusions from investigating the LMC’s promotional activities must be that there is insufficient understanding of the rationale for the activities and of the activities themselves, and that the LMC must address this lack of understanding. The Committee’s view is that funds spent by the LMC are justifiable in each of the three geographical areas: local, GB and international. The Committee do, however, conclude that more visible work in the home market would have a beneficial effect on producers’ perceptions of the LMC’s promotional activities.
8.7 As another area of contention, the Committee agrees that there is room for improvement in the way in which appointments are made, in the ways that board members relate to their own sectors and in the make-up of the board itself. As a major contributor to the LMC’s funding, the producer sector is absolutely justified in seeking to ensure that its interests are fully understood, acknowledged and taken into account as the LMC agrees its strategy and priorities. The Committee also agrees that a wide range of skills and expertise is essential for a strong board, and that it should not therefore be exclusively farmer-orientated. However, the Committee feels that a stronger and bigger producer representation is necessary to improve the LMC’s credibility amongst producers.
8.8 The Committee considered producers’ concerns related to the appointment of serving plant management to the board, and the alleged ability to exert undue influence on the Board’s policy in favour of the processing sector. The Committee concluded that the relationship of all members with their ‘own’ sector should be as transparent as possible and be subject to monitoring and control. It also concluded that if the LMC’s working relationship with processors was fully documented and understood, there would be less producer concern over this relationship.
9. The Next Steps
9.1 The complete set of findings, conclusions and recommendations of this Inquiry may be found in Paragraphs 9-33 of the main Report and the Committee expects the LMC, DARD and others to study these carefully before making any response.
9.2 The Committee firmly believes that implementation of these recommendations - aimed as they are at the whole industry - would bring an improvement to the LMC’s operation and a greater acceptance of the organisation by a larger number of producers.
9.3 The Committee expects the LMC, in particular, to respond positively to these recommendations and, with the help of DARD and others, to bring about change beneficial to the entire red-meat industry in Northern Ireland.
9.4 The Committee would welcome reaction to this Report from any source. If you wish to comment on it please write to the Clerk of the Committee, Mr Paul Moore, in Room 401/D Parliament Buildings, Belfast BT4 3XX or e-mail him at:
committee.agriculture@niassembly.gov.uk
All comments received will be brought to the Committee’s attention.
General - Quinquennial review.
1. The Committee recommends that DARD’s next quinquennial review takes place in 2004 and is completed within three months. The Committee further recommends that industry and other responses to any draft or preliminary report on the review are both acknowledged and given a substantive reply by the Department and that the final report is circulated widely. This circulation could be enhanced through provision of an Executive Summary as a press release or articles in farming and other industry press, and through use of the Department’s and LMC’s web-sites.
General – Perceptions of the LMC
2. The Committee recommends that the LMC develops and publishes a concise ‘protocol’ in which the purpose, level and frequency of LMC contact with the meat processing industry is defined. Contacts should be monitored and the protocol reviewed in light of actual events, with a clear position report published at least once a year.
General - Communication with Producers
3. The Committee recommends that the LMC embarks on a series of structured producer meetings, in consultation with farmers’ representative organisations (both at general and sectoral level). In order to reduce costs, the Committee recommends that DARD facilitates these meetings in its accommodation throughout Northern Ireland. Producers must also play their part through participation and a willingness to learn about the LMC’s activities and to pass on this information to fellow producers.
4. The Committee also considers that there is much merit in the proposal to develop an agricultural forum, in order to structure the relationship between the LMC, NIMEA, producers, consumers and all interested parties. The Committee therefore recommends that DARD facilitates discussions among the interested parties regarding the development of such a forum.
5. The Committee recommends that the LMC takes urgent and clearly defined steps to improve its relationship with the National Beef Association and to include their views in discussions on the Red Meat Strategy and the Farm Quality Assurance Scheme. The LMC should also formalise and improve its relationships with the National Sheep Association to ensure the widest perspective in sheep and lamb-related matters.
6. The Committee recommends that more use is made of the LMC Bulletin and articles in the farming press to provide immediate and specific updates of the LMC’s activities. In this way, the Committee believes that farmers would consider themselves to be more involved and better informed. Opportunities also exist to link IT training for farmers (and their families) to IT-accessible information from the LMC. The Committee recommends that these are explored in conjunction with DARD.
LMC Funding – Increases and Review of Producer Levies
7. The Committee recommends that DARD proceed with the necessary legislative changes to allow for future increased levy rates but that the LMC increases the current rate only in line with inflation from 2002/03. This increase could then be made annually and would be anticipated by producers. If, and only if, parity of prices with GB is obtained, the LMC should propose an increase in levy to achieve parity with levy charges in GB. If the current price differential reduces and remains stable, there may be an argument for some increase towards GB levels, proportionate to that reduction in differential.
LMC Funding – Processor Levy
8. The Committee recommends introduction by DARD, at the earliest opportunity, of the legislative base for payment of processor levy. As part of this exercise, DARD must satisfy itself, through careful consideration of LMC records, that the current method of levy collection is transparent, workable and unlikely to result in the levy being passed back directly to the primary producer. If DARD is not satisfied, then it should, through the legislation, insist on the adoption of a more appropriate methodology.
LMC Funding – Levies other than at Slaughter
9. The Committee recommends that the LMC intention to extend levies and collect these at livestock markets is taken into account as new arrangements for animal sales and movement are considered by DARD. The Committee further recommends that the intention to extend levies (and the rationale for the extension) is clearly stated, with a start date no sooner than April 2002. This will require appropriate legislative changes to be brought forward by DARD. It is the Committee’s recommendation that the new levy is set at a lower rate than the slaughter levy but that it should be commensurate with benefits from LMC activities, which the LMC should quantify and publicise as part of the advance notice referred to above.
LMC Funding – Government and EU Assistance
10. The Committee recommends that DARD, in agreement with the Executive, should provide ‘mainstreaming’ of marketing support to the LMC in its budget. This would allow strategic development in this vitally important area. The level of such support should be determined through analysis of the activities and results of implementation of the red-meat strategy so far, and would be in the context of a clearly defined marketing strategy. The Committee further recommends that the costs/expenses of LMC members should be met immediately by the Department, to bring Northern Ireland into line with Great Britain.
11. The Committee recommends that, since expenditure of even small amounts of Treasury match funding for discrete marketing projects would be a tangible return for funds modulated from farmers’ premia, DARD should consider carefully the provision of Treasury match funding to the LMC to enable them to undertake such actions.
12. The Committee recommends that DARD take the lead in negotiating with existing agencies involved in meat promotion (and, in time, with the new ‘super-agency’) to ensure joined-up government and that a partnership approach, with full LMC involvement, is adopted.
Classification Service – Statutory Background and need for Service
13. The Committee recommends that the LMC should build in a much greater degree of separation, and transparency, in their activities, whether through setting up a separate company for classification or by internal re-organisation. Charging for the classification service should be entirely separate and funds should relate only to the provision of that service, i.e. the service should stand alone, both organisationally and financially.
Classification Service - Application of EU Standards
14. The Committee recommends that DARD perform more regular formal checks (at least annually) in accordance with procedures adopted by the EU Committee (i.e. a panel of DARD staff performing personal classification and agreeing a ‘committee’ classification, against which the classifier’s grade is measured). LMC should state its aim for a 5% incorrect classification margin, in the context of the 20% permitted, and disseminate the actual results quickly and widely to stakeholders. The Committee is not recommending that an individual officer’s performance should be publicised, merely that the overall result of the service is available for all to see. Results should, however, be used internally by the LMC for training purposes.
Classification Service – Provision of a Quality Service to all Producers
15. The Committee recommends that plant managers should make appropriate arrangements for farmers to view, on request, the grading procedures and that the LMC maintains records of reports of any failing in these arrangements. The LMC should also consider whether additional training for its staff would be useful, for example interpersonal skills, to assist classifiers meet additional demands.
16. The Committee further recommends that DARD, as the ‘competent authority’ under European law regarding the classification of beef carcases offered for sale, must instigate an immediate, thorough and highly transparent inquiry into meat plant practices following carcase classification. The Committee believes that there must be absolute confidence in these practices to protect the integrity of Northern Ireland beef.
17. The Committee recommends that the LMC communicates more clearly with producers regarding the standards applicable to grading. This should specifically target infrequent users of the service and should include more live grading demonstrations to groups of producers. The Committee also recommends that DARD should provide specific training to producers.
Classification Service – Appeals
18. The Committee firstly recommends that the LMC investigates the practicalities of putting secondary full or spot-check grading in place in cases where Aitch-bone hanging is in operation. These cases should be known in advance by plant management, and the LMC advised to allow planning. Secondary grading would provide at least some reassurance for producers, where they currently have no recourse to the appeals procedure, that the grade given to their animals was fair and reasonable.
19. The Committee further recommends that the appeals process is reviewed in consultation with the producer sector and that a first level appeal to the original grader is introduced. The LMC has undertaken to listen to alternative suggestions on the appeals process and it is imperative that producer representatives offer realistic solutions, rather than simply say “something should be done”.
20. The Committee’s final recommendation in this section is that the LMC should extend its record keeping of appeals and perform analyses of them. For example, the frequency, type and location of appeals, and appellant farmer-type, could be considered, and results of the analyses disseminated in the Annual Report.
Classification Service – Mechanical Grading
21. The Committee recommends a two-strand approach. Firstly, the introduction of a technologically improved mechanical system on a trial basis in one or more Northern Ireland meat plants. Secondly, negotiation with DEFRA and the European Commission regarding a review of alternative systems, such as the Australian model, and on reviewing the current links between grading and price reporting.
Classification Service – Links to Payment Structure
22. The Committee repeats its previous recommendation that meat plants must make changes to their pricing structures and urges the LMC to broker a ‘deal’ on this matter with all haste.
Promotional Activities – Communication with Producers
23. The Committee recommends that the LMC should provide prior notice and information about specific promotional activities. It should then provide timely feedback and evaluation of these activities. This clear communication with producers and other stakeholders (through methods recommended earlier in this report) will result in a greater understanding of the benefits to producers and others. This should also apply to existing activity – an example being greater clarity in what is being bought through the LMC’s contribution to the Meat and Livestock Commission.
Promotional Activities – Priorities
24. The Committee recommends that the LMC reviews its Northern Ireland activities, with a view to developing a local promotional campaign to increase the use of NI beef and lamb, both in catering and domestic outlets.
25. The Committee recommends that the LMC maintains its relationship with the MLC and negotiates an extension to its current agreement.
26. The Committee recommends that the LMC reviews its international strategy, particularly its attendance at international fairs, in order to identify less costly methods of maintaining the important contacts with potential customers. The LMC should also give serious consideration to skewing resources, in the short term at least, from international to Northern Ireland promotion.
Promotional Activities – Involvement of other Stakeholders
27. Despite NIMEA’s protestations, that neither LMC nor political approaches should be made to retailers which would affect relations between retailers and suppliers, the Committee recommends that the LMC explores all possibilities of involving retailers and availing of their expertise when planning and undertaking promotional activity.
LMC Appointments – Producer (and Other) Representation and Board Size
28. The Committee recommends that the LMC board is expanded to nine with producer representation increased to at least three and preferably four. The LMC, together with DARD, should consider the implications of having current meat plant directors on its Board. They should also draw up and publish a code of conduct for members regarding their behaviour towards, and contact with, their own sector.
LMC Appointments – Method of Appointments
29. The Committee recommends that DARD engages with the Chief Executive and Chairman of the LMC to develop a full ‘balance of competencies’ required on the board. This should reflect the qualities outlined in the LMC submission to this Inquiry. It should also be subject to consultation with the industry and the agreed version widely publicised. DARD should also use this balance of competencies to draw up the specification required for each individual vacancy, so that the balance of skills is maintained. No formal qualifications should be required unless absolutely necessary to a particular vacancy.
30. The Committee recommends that future vacancies are advertised in the agricultural press as well as the Belfast newspapers, and that all electronic and other means should be used to ‘trail’ the appearance of these advertisements for a 3-4 week period before the adverts are placed. The Department should also ensure that all producer organisations known to it are informed of forthcoming vacancies.
31. The Committee recommends that DARD should review its own non-Departmental Public Bodies, and seek advice about others, to establish whether or not the current salaries paid to members are consistent with similar appointments across Northern Ireland.
32. The Committee further recommends that the Department should draw up a timetable for changes to the LMC and begin the appointments process immediately, taking into account the recommendation made earlier regarding the balance of competencies.
33. The Committee recommends that the Department should introduce procedures whereby payment of salary is dependent upon attendance at board meetings and/or involvement in ‘external’ LMC activities.
1. Background to the Inquiry
1.1 The Committee, during their meetings on 23 February and 2 March 2001, deliberated on potential subjects for Inquiry.
1.2 In view of the widespread occurrence of constituent comment on the Livestock and Meat Commission (LMC), particularly with regard to the classification services provided by the LMC, members agreed to consider a number of aspects of the LMC’s operation.
1.3 During the meeting on 9 March 2001, the Committee agreed the following Terms of Reference for the Inquiry:
The Committee for Agriculture and Rural Development has agreed to hold an Inquiry into Certain Aspects of the Operation of the Livestock and Meat Commission (LMC). The Committee wishes to investigate the following:
The funding of the LMC, including the operation of producer and processor levies and core funding from the Department;
The provision by the LMC of classification services in both the beef and sheep sectors;
The LMC’s promotional activities; and
The Department’s appointments to the Livestock and Meat Commission, including re-appointments.
In so doing, the Committee will wish to take account of the results of a 5 year review of the Commission, carried out by the Department of Agriculture and Rural Development in accordance with Government requirements for the management of Non-Departmental Public Bodies.
The Committee will also seek the views of the LMC, the Department and, in particular, those of the relevant sectors of the agricultural industry that are affected directly by the carcase classification systems.
2. The Committee’s Approach
2.1 The Committee agreed that it would place a public notice in the three main Belfast newspapers and issue a press release which would alert the public to the Inquiry and invite submissions from interested parties.
2.2 The Committee further agreed to seek written submissions from the following seven organisations: Department of Agriculture and Rural Development (DARD), Livestock and Meat Commission (LMC), Ulster Farmers’ Union (UFU), Northern Ireland Agricultural Producers’ Association (NIAPA), Northern Ireland Meat Exporters’ Association (NIMEA), National Beef Association (NBA) and the National Sheep Association (NSA). Copies of their submissions are included in Appendix 3 to this Report.
2.3 Apart from the organisations specifically targeted for a written response, the Committee received a number of requests for information from the public about submitting written evidence. However, only one of these resulted in a submission and this is also included at Appendix 3.
2.4 In addition to these written submissions, the Committee agreed to call the same seven organisations to give oral evidence, in order that the Committee might explore the submissions further. Evidence sessions were held on 6 and 27 April and 4 and 11 May 2001. Transcripts of these sessions may be found in Appendix 2 of this Report. Following consideration of this evidence, the Committee sought further written answers to additional questions (see Appendix 3).
3. Acknowledgements
3.1 The Committee would like to thank all those who participated in its Inquiry, whether through submission or in person. Particular thanks must go to the Board members and staff of the Livestock and Meat Commission who gave their full co-operation throughout the Inquiry, providing full, and frank, responses to the Committee’s questioning.
3.2 The Committee acknowledges the breadth of information provided by those who responded to the Inquiry. Where the Committee felt that publication of particular documents (or extracts of documents) did not add value to the Report, or was not appropriate, these have not been printed with the Report. However, a list of “Unpublished Memoranda” is provided at Appendix 4 and copies of the papers have been lodged in the Assembly’s library.
Note that written submissions were sought from a number of organisations, including the Northern Ireland Agricultural Producers’ Association (NIAPA). Two separate sets of submissions were made to the Inquiry from those claiming to represent this organisation. For the purposes of this Report, the organisations are shown as ‘NIAPA’ and ‘NIAPA Ruling Council’.
4. General Points
4.1 The National Beef Association (NBA) stated[1] that:
4.1.1 The LMC is similar to other levy-funded meat and livestock bodies in the UK and other EU member states in that its most regular critics are producers. If more is not done to avoid this, then the LMC’s potential to work for the benefit of producers, processors and retailers will be undermined.
4.1.2 The LMC can communicate more easily with small groups of processors or retailers than it can with a highly fragmented body of farmers. Producers must be fully represented by their own organisations who should keep their membership fully in touch with LMC strategy and industry thinking.
4.1.3 It would be beneficial for the LMC Board to hold more direct and regular consultations with producers in open forums, perhaps in the style adopted by the newly-formed Food Standards Agency, and the NBA would encourage it to do this.
4.1.4 Farmers should look upon the LMC as their organisation and be encouraged to use, rather than abuse them. The LMC are employed to serve the farmer as well as the rest of the meat industry and farmers should pressurise and dictate to the LMC.
4.2 The National Sheep Association (NSA) stated[2] that:
4.2.1 There is a feeling among farmers that the LMC is controlled by meat plants. LMC makes no effort to counter that.
4.2.2 There should be targets set (for the LMC) and full accountability if targets are not met.
4.2.3 The NSA would welcome closer relationships with the LMC. In particular it feels that there should be regular meetings with the sheep industry – two representatives each from the NSA, Ulster Lamb Groups, NIAPA and UFU.
4.3 The Ulster Farmers’ Union (UFU) stated[3] that:
4.3.1 A quinquennial review of the LMC was carried out by a Steering Group and a preliminary report of that Group’s findings was circulated for further comment by the industry. The UFU received no feedback, from DARD, on its submission.
4.3.2 The UFU is concerned at the length of time taken between five year reviews of the LMC and recommends that they should be conducted every five years to enable stakeholders to appraise the LMC’s performance.
4.3.3Following debate on this review the UFU concluded that no other body currently existed in Northern Ireland that could satisfactorily adopt any of the roles performed by the LMC.
4.4 The Northern Ireland Agricultural Producers’ Association (NIAPA) Ruling Council stated[4] that:
4.4.1 The LMC is supposedly independent and impartial but in effect is perceived by many primary producers as being more aligned with the needs and objectives of the processing industry.
4.5 The Northern Ireland Meat Exporters’ Association (NIMEA) stated[5] that:
4.5.1 NIMEA expresses concern that the result of the recent quinquennial review of LMC has not been published.
4.6 The Department of Agriculture and Rural Development stated[6] that:
4.6.1 The Quinquennial Review Report was completed during the period when the Assembly was suspended and the Report was circulated at that time to all those who had contributed to the Review. The main findings and recommendations were largely agreed by them. The Minister will be publishing the Report in the context of the outcome of (the Committee’s) investigations.
4.6.2 The work (on the quinquennial review) was undertaken around 1999. Therefore, the Minister expects the next quinquennial review to be starting around 2004.
4.6.3 Among the LMC’s strengths are that it is independent of the Government and specific interests in the industry; it has a broad base of skills ... and is broadly representative of the industry at commission level. The Minister notes the broad support for the LMC across virtually the whole industry and the wish for the LMC to take a more active and central role in areas such as generic marketing and provision of services to the industry.
4.7 The Livestock and Meat Commission (LMC) stated[7] that:
4.7.1 The quinquennial review carried out by DARD was initiated in the autumn of 1998 and Commission members have repeatedly expressed their disappointment that it has not yet been published.
5 Funding of the LMC
5.1 The National Beef Association stated[8] that:
5.1.1 If the LMC’s income could be secured other than through levy, improved communication with producers would result. DARD, the processors and EU funding should be used to boost the funds required to run the LMC. The LMC acquired European money for promotion of the export of beef. At present, meat needs to be promoted at home.
5.1.2 It is worth supporting the LMC if that body is performing well and the NBA would encourage producers not to resist a levy increase if the LMC was doing a good job. Indeed, such an increase could be described as sensible given the possibility of an easily identified and substantial return. However, producers would not currently be positive about an increase because of low returns from low prime cattle prices and farmers cannot be expected to pay more levy in their present financial circumstances.
5.1.3 There should be no annual review of levy payments as ... this would undermine the relationship between the Commission and a principal source of its funding. It would be more sensible to agree to levy payments being increased annually on an index-linked, inflation-proof basis – although provision should also exist for the Commission to approach the industry whenever it wished if it felt moved to put forward ideas for entirely new projects and seek additional funding for them.
5.1.4 The NBA welcomes an income contribution from the processors as they have benefited from producer-assisted LMC efforts and promotional activities. However, producers are concerned that this contribution will result in a matching reduction in the price of prime cattle, effectively resulting in their paying an LMC levy twice. The NBA suggests that alternative ways of securing processor funding be found, preferably in direct proportion to profits.
5.1.5 It is the NBA’s view that NI producers would prefer the LMC, which is closer to the farm gate than the MLC, to remain in this position and not to become as sleek, suited and distant from mainstream farming as the MLC has become since its promotional work has taken it closer to corporate, retail and marketing environments.
5.1.6 Because of EU constraints on the management of marketing funds (which allow only generic promotion) and the fact that GB is only 75% self-sufficient in beef, any rise in consumption as a result of successful promotion automatically means an increase in imports.
5.1.7 The NBA fears that the future of Northern Ireland’s beef industry is more likely to be driven by the hunger of factory owners with spare packing capacity to import either sides or primals for de-boning and packing from a range of non-NI sources than it is by their hunger for live NI cattle for slaughter. As a result, the payment of realistic prices for live cattle will be of secondary interest. If this is correct, then Northern Ireland’s cattle numbers will continue to dwindle and the income of the LMC with it.
5.2 The National Sheep Association stated[9] that:
5.2.1 LMC funding is inadequate but the NSA is doubtful if producers could afford to pay higher levies.
5.2.2 The NSA feels that a processor levy may be paid indirectly by the producer, as has been the case in the past. It would be better to involve processors in promotional work, with processors incurring costs at that end. If a levy is done on a cost per lamb basis it will be passed directly back to the producers.
5.2.3 Levy is currently collected on 559,100 lambs. If levy was collected on the numbers of ewes, all producers would be contributing, rather than only those selling lambs deadweight in Northern Ireland. The amount of levy collected would also be increased. Those who sell their lambs live and therefore do not currently pay levy would, as could be expected, not like the introduction of a wider levy.
5.2.4 The NSA acknowledges that, even with the increased levy, the sum collected would be insufficient to undertake a meaningful promotional campaign. However, it would be greater than currently available and could be used in conjunction with some of the beef levy.
5.2.5 The NSA asks whether rural development funds, siphoned off from modulated Sheep Annual Premium payments, could be used for LMC activities. The money is going out of the sheep industry and the NSA feels strongly that it should be spent on something that will benefit the sheep industry. The NSA also asks whether or not EU funds could be used for lamb promotion.
5.3 The Ulster Farmers’ Union stated[10] that:
5.3.1 The UFU would be reasonably satisfied with the openness of LMC with regard to its funding sources. The LMC has no more money than the money that the industry puts in. They are accountable, their accounts are available to us all every year to see what they do with that money. If they want to get more money for sales or promotions, they must take it off one end or the other.
5.3.2Regarding the funding mix, it is inevitable that each component of income may not necessarily be used to fund activities in that area. For example, money available for lamb promotion would be fairly limited if that activity was curtailed to levy income generated from sheep alone.
5.3.3 At this stage, any increase in levies to be collected from producers would be totally unacceptable.
5.3.4 Given the increasingly challenging market places in which the local beef and sheep sectors must compete the resources required to capitalise on and develop new market opportunities are likely to grow. For this reason, a review of levy payment rates for both producers and processors should be conducted on an annual basis in consultation with industry stakeholders.
5.3.5 The UFU cannot be sure that the levy paid by the processor is not passed back to the primary producer. However, the UFU believes that it is beneficial for the processors to pay levy.
5.3.6 The UFU believes that levies should only be collected on finished animals at point of slaughter and does not support the introduction of a levy on dropped calves, or on exports of live animals, at present. These alternatives have been dismissed as unworkable.
5.3.7 There should be lots of funding given to the LMC to promote beef. It receives some promotional money from Europe but the sums are nominal.
5.4 NIAPA stated[11] that:
5.4.1 Although an increase in levy may be necessary, as the industry needs to ready itself for increased exports, the timing is inappropriate given that farmers’ incomes are virtually nil. Farmers’ expectations for the LMC’s output would need to be met before they would agree to any levy increase.
5.4.2 In addition, it would be ridiculous to impose a levy increase on farmers against the backdrop of increasing imported product.
5.4.3 Levy reviews should not be annual. A three year review period would allow a balanced analysis of environmental and economic factors.
5.4.4NIAPA’s dialogue with the processors resulted in their agreement to a voluntary levy, which equates to the levy provided annually by producers. All producer contributions come from the efforts of primary producers. However, from 1967 to 2000 the processors made no contribution to the LMC and their involvement now is important.
5.4.5 It must be realised that government provides no core funding to the LMC even though it is a non-Departmental Public Body. Processors should assist the LMC to a greater extent through a procedure related to profitability.
5.5 NIAPA Ruling Council stated[12] that:
5.5.1Members would certainly not welcome an increase in the LMC levy at this time.
5.5.2 Any so-called (processor) levy would almost certainly be laid off or discounted against the returns to the primary producer by way of additional charge by the processor.
5.6 The Northern Ireland Meat Exporters’ Association stated[13] that:
5.6.1 NIMEA would fully support government funding of LMC equivalent to the support from the ROI Government to Bord Bia. NIMEA also understands that the government pays the Meat and Livestock Commission (MLC) Commissioners’ expenses and fees. If we are to compete in the available market, then government-assisted promotion similar to that enjoyed by competitors is essential.
5.6.2 The LMC should be able to attract and utilise the amount of government money currently spent by other government agencies meddling in the area of meat promotion. All these bodies have money for the promotion of meat or lamb products, either in the UK or in other EU states, but there is no co-ordination. All such activities should be spearheaded, collated and pulled together in one driving force that represents Northern Ireland. The LMC, along with the people who sell the produce, understands exactly what is required in relation to quality and customer requirements in the wider world meat markets, and should be that spearhead body.
5.6.3 When the rates of promotional levy funding obtained by competitors in the GB and ROI are compared to that obtained in Northern Ireland we are by far the poor relation. Levy funding must come into line with GB and should be at the level of around £3 rather than 80p. The current rate of levy contribution to the body which carries out the generic marketing function demonstrates that producers themselves do not have the desire to promote their own product. Returns will be commensurate with the promotional investment.
5.6.4 Funding should be generated in the same percentage basis as in GB between producer and processor. While it may appear that the producer is paying the lion’s share ... that is not the case, because funding retailer promotions is a matter directly between plants and retailer and outside the generic promotion by LMC. The producer is always the beneficiary of positive promotional activity no matter who pays.
5.6.5 An annual review of levy rates would be advantageous to take account of competitive factors in other countries.
5.6.6 Farmers who choose to operate through livestock markets do not contribute to LMC operations but demand attention from the LMC. The movement of half a million sheep to ROI evading the LMC levy also needs to be addressed. It is NIMEA’s opinion that, as in Australia, the government should introduce a ‘transaction levy’ to be applied every time livestock (cattle and sheep) are sold through a market. This would be at a lower rate than the slaughter levy and would mean that all producers ... would be contributing to the promotion of the product in which they were involved.
5.6.7 The (Committee’s) comment that farmers are “paying for the Commission” is hurtful, inaccurate and discriminatory in light of the voluntary contribution being made by the processors. It clearly again displays (the Committee’s) lack of understanding to appreciate or recognise the vast amounts of money, time and activity being invested annually by individual processors to simply retain their current markets. It also ignores the fact that the farmers are the largest and main beneficiaries of the Commission’s activities.
5.6.8 Due to the excellent promotion work being done for the product in our main export markets the processors agreed last year to contribute a voluntary levy to LMC of £1 for each animal slaughtered (10p per sheep). The voluntary agreement was entered into as the devolved administration was not yet in place for the necessary legislation to be introduced to implement a processor contribution in line with GB and ROI.
5.6.9Deductions made from producers in respect of LMC levies are clearly indicated on the payment documents and the processor contribution would be clearly paid from company accounts. It can therefore be clearly demonstrated that producers were not funding the processor contribution.
5.6.10 In terms of promotional funding it is important to look at the markets, where they are going and the competition. An amount five times that available in 1998/99 might still not be enough. Value for money must be a focus and it is for the LMC to spend the money wisely.
5.7 The Department of Agriculture and Rural Development stated[14] that:
5.7.1 The Department is supportive of the need for increased funding for the LMC as indicated in the quinquennial review. That review report notes the wish of the LMC to extend the scope of the levy to producers other than beef finishers. When that is taken forward the Minister would expect the LMC to specify where the levy should be targeted and how much funding might be raised. The Minister will then consider the need for legislation.
5.7.2 The specific functions and responsibilities of the LMC are set out in legislation – the Livestock Marketing Commission Act (Northern Ireland) 1967. The core functions of the LMC are to provide services to the Northern Ireland red meat industry and to advise the Department on matters relating to this sector. As such the LMC is acting on behalf of the industry and it is entirely appropriate that the core funding should come from industry rather than government. This position is consistent with that of the GB Meat and Livestock Commission (MLC).
5.7.3 Although not providing core funding, there has been funding provided related to specific programmes or projects. For example, £2m was provided by the Department to the LMC for implementation of the Red Meat Strategy while previously £250,000 was provided for red-meat marketing support in the aftermath of the BSE export ban in 1996.
5.7.4 Given the clear differences in levy arrangements between Northern Ireland and GB there is scope for levy income to be increased.
5.7.5 Subject to comments from interested parties, plans to amend the legislation to increase maximum producer levy and introduce a processor levy are under way. That levy should be reviewed annually and amendments to the basic levy arrangements may be effected by subordinate legislation. Any extension of the levy system to other parts of the food chain would require primary legislation.
5.7.6 The Minister notes that processors have begun to pay a voluntary levy and this will be given statutory effect in due course. DARD cannot interfere in any commercial decisions by any private companies (when asked how DARD would ensure that a producer levy would not get passed back to the producer).
5.7.7 The Minister is prepared to consider the costs of Commission members being met from public funds though she would wish to have clear reasoned arguments as to why this is appropriate at this time.
5.7.8 When the LMC had built up significant surpluses, the Minister believes it was entirely appropriate that the reserves be used for the benefit of all in the industry. The surpluses from classification fees were used solely to offset the costs of the Farm Quality Assurance Scheme, thereby benefiting the very same group of producers.
5.7.9(Quotation from the quinquennial review report, which was attached to the Minister’s submission) “Although current legislation provides that the levy should also be payable by the owners of cattle and sheep exported from Northern Ireland, in practice the levy has not been collected on exports. Arrangements are in place in both GB and ROI to collect levy on their exports and it is noted in LMC’s Strategic Plan that the Commission plans to introduce measures to collect the levy at live markets.”
5.7.10 (In answer to a point raised by the National Sheep Association as to whether money modulated from Sheep Annual Premium could be used to support LMC activities) It is unlikely – the Department can only carry out what is contained in the rural development plan. That is unlikely since that was not in the plan.
5.7.11 (In answer to a question on funding for the red meat strategy coming to an end in 2002 and DARD’s proposals to continue that funding) The Department has given no commitment to do so, but will keep it under review and make a decision at the appropriate time. If necessary, DARD will seek funding.
5.8 The LMC stated[15] that:
5.8.1 Prior to the BSE crisis in 1996 the LMC had built up considerable cash reserves. At that time the focus of LMC marketing and promotion was in export markets (with very little activity in Northern Ireland and virtually nothing in GB). An evolution towards activity in both NI and GB has resulted in increased expenditure. Reserves have also been run down through not seeking increases in levies between 1998 and 2000.
5.8.2 Cash surpluses are now almost depleted. There is now a significant deficit between income and expenditure based on on-going activities. The choice will be either curtailment of activities or increasing resources available from the industry. It will be the LMC’s objective to deliver the best value to our industry with whatever funds industry or Government provides.
5.8.3Commission members have not yet given detailed consideration to the areas of LMC activity that might be curtailed if additional resources are not made available. The current year (2001/02) budget broadly sustains activities at last year’s levels but cash balances will be run down to a minimum level. It follows that there will be curtailment of activities under “Information Services”, “Agriculture” and “Marketing and Promotion”. As marketing and promotion expenditure is significantly greater than the other two combined then curtailment will have to fall most heavily on this area.
5.8.4 Within marketing and promotion the budget is split into three roughly equal parts: Northern Ireland, GB and Export. The NI focus is primarily on educating the local population regarding the benefits of red meat. The impact on farmers of ceasing this work may be modest in the short term. However, if we do not seek to sustain current eating habits and build similar habits in the next generation, then consumption levels will slip and this will prove difficult to reverse. The agreement with the MLC allows us to benefit from the £13.8m annual promotional budget for beef and enjoy the use of the “British Beef” brand. If NI producers lost the premium (multiple retailer) market segment through not renewing the agreement, the LMC estimates that NI producers would lose 10p per Kg from finished cattle prices. Current investment in export marketing could be deemed to have no short-term impact on beef producers. However, the process of building and sustaining relationships with past and potential future customers is important. The Commission will therefore have very considerable difficulty in determining where curtailment of expenditure should be applied.
5.8.5Surpluses from classification charges have never been used to support general LMC activities. Under an agreement set up in the early 1990’s they have been specifically directed towards the costs of running the NI Farm Quality Assurance Scheme. During 2001/02 the LMC anticipates that the classification service will have broken even and the 2001/02 budget anticipates that it will be loss-making at direct cost level. Sheep classification in particular has become significantly loss-making.
5.8.6 The LMC confirms that a voluntary levy from the slaughtering companies has been in place since July 2000. It is the LMC’s understanding that DARD is in the process of introducing legislation to give statutory effect to this source of income for the LMC.
5.8.7 The LMC believes that the processors’ decision to pay this levy was influenced by several factors: all of the major processors have sought and gained assistance from LMC in dealing with particular markets or customers; the need for equivalence within Northern Ireland to the contributions paid by their GB counterparts to the MLC; agreement under the Red Meat Strategy that both producers and processors would jointly fund the industry portion of expenditure; and a recognition by the processors of the work carried out in NI, GB and export markets.
5.8.8 In terms of the processor levy being passed back to producers, this levy should be put in the same category of processor costs as electricity, rates, labour etc. In a free market, the distribution of margin throughout the chain will be based on the competitive forces operating. As there has not been a reduction in producer price against sales value since the levy began (in fact the opposite) the LMC is confident that the cost of the voluntary contributions has not been passed down to the farmer.
5.8.9 Primary slaughterers are providing a voluntary contribution to LMC, the LMC has almost completed an agreement on Farm Quality Assurance funding and the LMC had hoped not to deal with classification this year. The LMC’s strategy was built around not having any additional levy income or uplift in classification until next year.
5.8.10.The Foot and Mouth outbreak has implications for funding in that the LMC is not generating as much income as was budgeted. Others’ problems created by Foot and Mouth are, of course, far more important.
5.8.11 While the Department is responsible for setting the level at which statutory levels are applied, they do not provide any core funding to the LMC. However, under the Red Meat Strategy agreement, funding from Treasury was made available through DARD as 50% of an agreed programme of expenditure over a three year period. In addition, there was £250,000 of support at the onset of the BSE crisis. Apart from these instances, there have been no other occasions when LMC received government funding.
5.8.12 The LMC notes that the MLC in Great Britain receives support through the funding of the costs of Commission members by MAFF. The LMC believes that both the Welsh Development Agency and the Scottish Executive provide some support to Welsh Beef and Lamb Promotions Ltd. and Quality Meat Scotland respectively.
5.8.13 The LMC also notes that An Bord Bia in the Republic of Ireland continues to receive very significant government support, which is fully cleared by the European Commission under State Aid Rules. They have a national development plan under which they are able to provide substantial funding. Out of a £IR20m budget, some £IR14m comes from Government in some form or other.
5.8.14 The LMC has not considered an approach to government for core funding. The LMC agrees … that such funding, dependent on its quantum, would indeed be helpful in shielding farmers from requests for additional contributions.
5.8.15 If money was to be made available to the industry, there is the political question of whether it is justifiable to assist in the promotion of meat against other competing priorities.
5.8.16.There are organisations like the LMC in most significant meat-producing countries in the world and most are funded through levies applied to the industry, usually at point of slaughter but, in a number of instances, as a transaction charge on every livestock transaction throughout the chain.
5.8.17 It is currently part of the legislation on levies that livestock leaving Northern Ireland are eligible to pay. However, the LMC has no practical or economic means of collecting such levies and they remain substantially unpaid. The main loss is in regard to sheep and the LMC anticipates that legislation requiring the collection of this at livestock marts is the only viable solution. This ‘transaction levy’ would require a payment on each occasion when livestock changes ownership, whether at a slaughter plant or at an auction mart. This system operates quite successfully in Australia.
5.8.18 The approach of generating income by imposing a levy on every bovine and ovine born in Northern Ireland has been considered. The benefits of LMC activities are argued to accrue to all producers throughout the chain and the LMC had concluded that it would be a laudable objective to spread wider the burden of funding these activities. Implementation is, however, exceedingly difficult and it may be cumbersome to collect such levies until the animal is ultimately presented for slaughter.
5.8.19 The LMC is pleased to report that industry agreement has been reached whereby the Farm Quality Assurance Scheme is being upgraded to achieve EN 45011 accreditation and that a more sustainable funding arrangement has been put in place. Producers will be asked to subscribe £35 per annum as a membership fee and processors will contribute a membership fee equivalent to £1 per animal for every animal slaughtered on their premises. This will generate sufficient funding to fully meet the scheme’s costs (around £750,000 per annum).
5.8.20 In summary, the funding of LMC has, and will continue to be completely transparent to the industry. The Annual Report is available each year to any industry participant on request to the LMC Secretary. It is important that debate is encouraged to ensure that the LMC is held properly to account for the value it is expected to add to the industry. It is also important that expectations are set at a level commensurate with the resources made available.
6. The Provision of Classification Services
6.1 The National Beef Association stated[16] that:
6.1.1 The results of classification, particularly where ‘demotion’ into lower grades means less income, will inevitably prevent many producers from taking as positive a view of the LMC as they ought. The LMC has a thankless job running the classification service.
6.1.2 The development of the LMC’s relationship with farmers is hindered by routine antagonism by farmers who feel aggrieved at levy payments and what they regard as harsh carcase classification.
6.1.3 If the LMC could be separated from its current classification function, or if the aggravation surrounding classification could be reduced, then more effective communication with producers would be possible.
6.1.4 It would be better from a public relations point of view if the LMC gave up the service. Their classification remit should be properly defined and presented to private companies for tender, with one company for Northern Ireland the best option for consistency and ease of management (not each factory employing its own classifier). Alongside such a structure, the LMC would take on the role of inspector, ensuring classification was operated correctly, and be in charge of disputes. This would apply irrespective of whether classification is determined electronically or by human assessment.
6.1.5 The NBA concedes that while classification remains a subjective exercise there will inevitably be criticism and disputes.
6.1.6 The NBA does not receive complaints about classification at small meat plants, although the same graders also work at the larger plants.
6.1.7 The senior grader who carries out appeals would say that the appeals procedure provided a truly independent assessment.
6.1.8 The 20% figure for wrong classification would not be tolerated in any other work area. Graders need to be held responsible for their actions, with their names put on each classification.
6.1.9 Aitch-bone hanging should be banned if there are suspicions that it is masking poor classification. It is the supermarkets and processors who are trying to go down that road. The practice allows fresh beef to go into the supermarkets sooner, but this does not help the industry. The whole carcase is distorted and appeals are not possible because of the shape. Beasts could be downgraded and once they are aitch-bone hung there is no way of getting the beasts upgraded again.
6.1.10 Graders would have it in the back of their mind that a meat plant manager is looking over their shoulder and managers would like to see a beast downgraded to pay farmers 6p less on the grade. In such circumstances a senior grader should check the beast but in cases where farmers do not follow their cattle through, the bad grade is noticed too late. There is, however, no encouragement for farmers to remain on-site to see their cattle graded. Indeed, ABP Newry actively discourages people from doing so. Another example was given of a farmer seeking an appeal but being advised that if he appealed, his cattle would not be taken.
6.1.11Automatic scanning machines, run by independent operators, should be introduced to replace graders, on a commercial basis, at the earliest opportunity. The NBA believes that, in trials, the machines more than held their own against ROI master graders on carcase conformation but failed to beat them on fat cover classification.
6.1.12 If mechanical grading came in, a classification/weighing charge of £1 per head would be fair because actual cost would be around 75p. Factories killing less than 75 cattle per week should be exempted from classification requirements. Some of the training costs could be met by a successful tendering company and the rest from a one-off government assistance programme. The installation costs should be met by the factory with the LMC being given central funds to cover its inspection.
6.1.13 The NBA believes that the current payment grids are much too complicated, and generate confusion. The numbers of grades should be reduced to U, R, O+, O- and P for conformation and 4,3,2 for fat cover. The principle behind this observation is that the differences between them are too fine – which is in direct contrast with the price penalties which are significant. For example, it can be shown in meat yield terms that there is very little difference between an R3 and an O+3 carcase, yet the latter is penalised by 6p per dwkg – or around £19 per animal.
6.1.14 The LMC should publish details, at individual plant level, regarding the prices for grades of animal killed. This should be compared to a production price, also prepared by the LMC, giving a simple comparison which is likely to show the loss margin for farmers.
6.2 The National Sheep Association stated[17] that:
6.2.1Classification in the lamb trade is slightly different than for other animals; it is graded in a different way. The grading system is more complicated than it needs to be. The taste and eating quality are more important and the EUROP system is only a guide to meat yield.
6.2.2Producers are improving the quality of their lambs but standards set seem to rise as quality improves.
6.2.3 Graders are only human and cannot produce as exact a measurement as a mechanical method would. Unfortunately the NSA does not know of an accurate and consistent mechanical method of grading at present but would be interested in seeing such a development.
6.2.4 The cost issue of introducing mechanical classification would be an important one to consider.
6.2.5 It would appear from members’ comments that a more lenient system of grading applies in the Republic of Ireland meat plants. A lamb in the South would be a grade higher than it would here. This might be surprising as the graders in the South are paid by the meat plants.
6.2.6 It would be helpful if the LMC could provide information on individual grades as well as the grading groups, as this is not very useful at the moment.
6.2.7 A star rating system indicating eating quality, such as is in operation in other countries including Australia, might be useful.
6.3 The Ulster Farmers’ Union stated[18] that:
6.3.1 The LMC’s classification work is a major area of frustration to producers given the subjective nature of the exercise. It is the biggest issue at all producers’ meetings and in all conversations with processors and producers.
6.3.2 Most dissatisfied producers are those who slaughter animals only occasionally. Those who slaughter regularly are more skilled at selecting stock to the desired finish and slaughtering at the correct stage.
6.3.3 Farmers would complain less about classification if it were not so closely linked to the payment structure. The problem is not classification; it is the payment structure. In a study by the LMC it was found that the variation between some of the grades was only 1% although the cut in price was 6p.
6.3.4 The UFU is reasonably satisfied that classification has been reasonable over the most recent 18 month period. There was a tightening of standards (by DARD) following the most recent EU inspection.
6.3.5 The LMC’s standards are monitored by DARD and when last assessed were (approximately) 7% off the mark – to the advantage of the producer, not the processor.
6.3.6 The LMC is best placed as an independent body to carry out this service. It should also be remembered that the LMC does not set the standard – it is supervised by DARD which sets standards to meet EU regulations. If there are variations in classification then DARD should pick these up. It is not in the interests of the LMC to make the grading system advantageous to either producers or processors, although it is the UFU’s understanding that the producer is given the benefit of the doubt if there is any debate.
6.3.7 Moving responsibility for classification to another body will not eliminate the differentials and variations in grades, because of the system’s subjectivity.
6.3.8Comparisons with classification in GB and ROI are not conclusive – some producers say it is more severe, others that it was better suited to producers.
6.3.9 The UFU recommends that the LMC actively engages in the analysis of objective classification trials and introduces such systems into Northern Ireland at the earliest possible opportunity. However, there is concern that if further work is not carried out on the existing machines then it would not be to the producers’ advantage to implement them.
6.3.10 There is an interesting development in Australia (Meat Standards Australia Total Quality Management System) where meat is sold on taste, not grade. Meat is graded according to three different categories related to eating quality, through analysing critical control points in the production, processing and value added sectors. A conference on selling on taste and eating quality was postponed due to the Foot and Mouth crisis.
6.3.11 A simpler pricing structure is required. The UFU would like the Committee’s help in exerting pressure to have the number of payment bands reduced.
6.3.12 The grading appeals procedure’s practical operation is of concern. The existing procedure needs a fundamental overhaul to make it more ‘user-friendly’. In addition the UFU notes that aitch-bone hanging renders appeals impossible. However, the UFU acknowledges that it is difficult to go against the customer’s requirement that animals be aitch-bone hung immediately.
6.3.13 The UFU hopes that the processors do not have influence over grading standards. DARD should make sure that it polices the process properly.
6.3.14 Under the FQAS scheme some producers have the opportunity to see classification in other places and this should be beneficial.
6.4 NIAPA stated[19] that:
6.4.1 Farmers believe that grading is getting tighter each year and that resources spent on improved breeding are to no avail. It also appears to farmers that seasonal grading is operated where grades are harder to achieve in an over-supply situation.
6.4.2According to a farming journal, the percentage of higher grades under EU classification is 50% higher in the Republic of Ireland than in Northern Ireland.
6.4.3 The LMC staff’s grades are reviewed by European graders and have found them not to be very far out.
6.4.4 There is a need to change the pricing structure operated by plants and it would be helpful for a proper analysis of pricing differentials between regions of the United Kingdom to be provided. There should be fewer grades, with processors paying a large amount towards the higher grades, thus rewarding the production to market requirements. The current system, with six price differentials, differs from the ROI and GB and dates from the time of intervention.
6.4.5 Twenty-five grades for a 20 Kg carcase (sheep) would seem to be a large number to identify. However, the issue is not grading – it is pricing and NIAPA have been lobbying for grades and prices to be grouped into three or four zones. The grading system is not used in supermarkets or butchers’ shelves. It relates only to paying the farmer and we all agree it is open to abuse.
6.4.6Mechanical methods of grading would be desirable but must be shown to provide uniform grading and to be tamper-proof. It would remove the element of variability and NIAPA would advocate a pilot scheme for its use. An example was given of a scanning machine trial in which five or six hundred lambs were scanned before slaughter. Fat grade results were more than 90% accurate.
6.4.7 NIAPA believes that the LMC should initiate more live grading demonstrations to give farmers a better understanding of live and slaughter carcase information.
6.4.8 Other systems, such as the Keenan Keepack system, which uses a nutritional system as well as the grading and conformation, should be considered. It achieves consistency in eating quality. Australia has a star system for the eating quality of beef.
6.4.9 There is an important management role in ensuring consistency of the grading service provided by LMC personnel. Staff are experienced and capable but efficiency can be less than adequate. Consistency can be a problem if more than one grader is involved in grading a batch of animals. Human nature also dictates that a grader’s mood might reflect his grading.
6.4.10 Farmers who slaughter cattle every week observe the grading system and would be positive about it. Farmers who slaughter perhaps once a year might not be so objective and may feel aggrieved by the grades achieved. It is also possible that farmers with a lot of stock may build up a rapport with the graders over time.
6.4.11 Farmers should be encouraged to learn from bad grades. For example, they might pick lambs earlier the next time they bring them to slaughter. Many farmers are reluctant to go to a meat plant to see their animals graded but problems may be solved if they did.
6.4.12 There needs to be a proper appeals system whereby the appeals grader does not feel pressure to stand by the original grade. The appeals system needs to be credible to producer, grader and processor and should be independent.
6.5 NIAPA Ruling Council stated[20] that:
6.5.1 NIAPA Ruling Council cannot offer information on grading comparisons with the Republic of Ireland or other UK regions but there is no doubt that members are acutely aware of the subjective nature of grading and generally dissatisfied with the present variable standards.
6.5.2Members would welcome a mechanical approach to grading, on the understanding that this methodology would be both accurate and fair to producers.
6.5.3 NIAPA Ruling Council is not in a position to comment on the competence or otherwise of LMC staff other than to comment on the obvious subjectivity of the present grading procedure.
6.6 The Northern Ireland Meat Exporters’ Association stated[21] that:
6.6.1Classification is a statutory EU requirement with which all member states are obliged to comply. When government decided to privatise the classification service in 1990 the entire industry asked the LMC to take on the function. It performs this service under the supervision of the competent authority (DARD).
6.6.2 To fully appreciate the debate on classification, the full EU classification legislation has to be read, understood and appreciated. Classification is much more than just applying a grade to an animal. The legislation includes the checking of weighscales, confirmation of accurate weight, confirmation of the carcase dressing specification and the determination from carcase inspection of the correct category of carcase (steer, heifer, cow, bull or young bull. The LMC is still accepted as the most independent means of performing this function.
6.6.3Classification by its very nature is a controversial issue and, as an independent body, may well be better without the task in the interests of developing transparency in the supply chain. The provision of this service has resulted in the LMC being maliciously scandalised by various groups. NIMEA is concerned that the LMC’s promotional independence has now been tarnished as well. This may be an opportunity for the Assembly to establish ... a separate, exclusive and totally independent classification service, thus relieving the LMC of an extremely arbitrary function.
6.6.4 Despite cost benefits to larger plants in providing their own classifiers, (as permitted under the EU legislation) NIMEA believes this would not be seen as independent and NIMEA has no desire to change until a more professional body or method displays itself. NIMEA would ask whether it is better to have one body in Northern Ireland doing the job to a single monitored standard, rather than a plethora of bodies trying to operate a national standard.
6.6.5Individual classifiers are mostly from farming backgrounds and at times lean towards the producer rather than administer strict EU standards. However, on the whole, NIMEA members would agree that the LMC has provided a professional classification service but perhaps not as rigid or consistent at times as the service provided by MLC in GB. When the quality in the bands is compared directly it is more advantageous to bone an R3-graded animal in England than in Northern Ireland. The difference is that the benefit swings to the producer.
6.6.6 NIMEA members have operations in ROI and GB and are well placed to compare classification in all three regions. In the main the system operated across the two islands is relatively parallel. Because of the human element, there will always be small individual differences in the interpretation of standards but there are no wide variations.
6.6.7 The LMC could, perhaps, instil into its classifiers the importance of being an accurate, independent service. That is the mark of a competent classifier and it should also be noted that it takes ten years for a classifier to be fully conversant and confident in the job.
6.6.8 The EUROP grid classification has now outlived its usefulness and the industry needs to move to a more sophisticated method of evaluating carcase value and saleable lean meat. The problem is that carcases of sheep, pigs and poultry have similar size and weight etc. However, cattle have carcases ranging from 190 Kg to 450 Kg and there is not yet a more cost-effective or efficient method than the human eye. NIMEA believes that within 5 years this function will be more accurately performed by advanced technology and NIMEA members would welcome that advancement as soon as possible. A further problem is that the EC insists that any mechanical means must transcribe the results into the EUROP grid. This is a serious and unnecessary hindrance to the equipment’s development.
6.6.9 The LMC should forge ahead with developing an electronic grading system, forming a strategic partnership with an organisation that is pioneering work in the field. A number of countries and organisations are spending money in that area. If the industry got together and decided to bring these machines into Northern Ireland on a trial basis that would be a positive step. NIMEA would be willing to operate trials in its plants. A trial run of a year or so in conjunction with a major institution from another country would be a major advantage for Northern Ireland.
6.6.10 As far as disputes go there is an appeals procedure in place for use by any party who disagrees with a classification result. NIMEA accepts that there has to be a final adjudicator. The appeal system should, in the first instance, be to the original classifier, and only after he refuses to change should the appeal be made to the Senior LMC official. He is regarded as an independent assessment as both he and the original classifier are both subject to standardisation exercises and control by DARD. While the final authority lies with DARD, the highest competence would be in LMC.
6.6.11 LMC classification staff attend plants in a “third party guest” role. They are at all times under the employment and management of the LMC and are under no obligation to the plant in which they operate. At times, however, there is considerable influence and pressure exerted on classifiers by producers to have carcases graded higher than warranted.
6.6.12 Those who oppose the classification system most ferociously are usually the “once-a-year” producers or the cattle dealers who are really out of touch with the normal flow of operations. The main complaints area is in the division between the O and R grades, which is also the dividing line between beef-bred animals and dairy-bred animals. It tends to be the mixed farmers with dairy-herd animals who appeal grades and who least understand the classification standards. It is NIMEA’s experience that the professional beef and sheep producer has briefed himself well on the classification system and understands the standards and accepts the limitations of the human element. This type of producer is also keen to adapt to supply what the market wants.
6.6.13 One member company’s experience is that, in England, 10-15 producers would be involved in slaughtering 300 cattle a day. At most, one or two would come to see their cattle graded by someone employed by a grading service or the plant itself.
6.6.14 The error rate of 20% quoted does not refer to 20% of all cattle graded. About 90-92% of all cattle fall into a box on the grid without any dispute. The remaining 8% are borderline cases, with points recommending them for a higher grade and other points pulling them into the lower one. In those cases, the classification skill comes in. The error rate is 20% of that 8%, not of all cattle.
6.6.15 In terms of grading, not enough is being paid at the upper end of the scale and too much is being paid at the lower end of the scale. Those farmers who engage in quality production in a serious fashion are not being appropriately rewarded. The meat plants pay what they can afford to, depending on the customers. It is an average price, ranging from £1.70 to as low as £1.30, but it is an average price every week. That is the way it works.
6.7 The Department of Agriculture and Rural Development stated[22] that:
6.7.1 EU legislation introduced mandatory beef carcase classification from 1 January 1992. Similar legislation was introduced later in 1992 in respect of sheep. The purpose of carcase classification is to provide a basis for fair payment to producers and is carried out on the basis of conformation and fat cover in cattle and on meat colour and fat class in respect of sheep.
6.7.2Classification in Northern Ireland is carried out under a formal contract between the LMC and meat plants. LMC officers are licensed by the Department, undertaking a test for approval as a licensed classifier. The standards they apply are subsequently monitored by LMC senior staff, DARD technical inspectorate, IBEA and the EU.
6.7.3 All carcase classifiers are subject to supervisory checks by the Department at least twice per quarter. This is in addition to checks carried out by senior LMC field officers. DARD also holds standardisation exercises twice a year for those staff who spend less than 50% of their time on classification work. Over the past 2 years over 300 supervisory checks were carried out by the Department.
6.7.4 DARD will continue to supervise the classification system and will also continue to explain to producers the nature of both the classification system and the supervisory arrangements. In this, DARD will work closely with the LMC and producer representatives.
6.7.5 EU inspections in February and May 1998 found that beef classification standards were not being properly applied. Following this, the Department reviewed the classification by LMC staff ... and one outcome of this reviewwas that in marginal cases, producers were to be given the benefit of the doubt. Subsequent monitoring has ensured that EU standards are being properly applied. A further inspection visit in November 1998 confirmed this.
6.7.6(Quotations from the ‘Mission Report’ dated 7 December 1998 by the EU Control Committee on beef Carcase Classification) “The Committee was impressed by the high standards of classification found in all the plants visited. The majority of differences observed were within one sub-class.” “The Committee welcomed as well the frequent spot checks performed by the DANI as well as the LMC, to monitor the activity of the classifiers. Repeated inspections explain the good results of the classification; their importance is also highlighted by the practise of hip hanging hot carcases at the end of the kill line, thus making checks necessary prior to the new hanging method.” “Price reporting conforms with EC ruling ... The Committee was impressed by the thorough and regular controls performed in order to reconciliate with the plant records the prices supplied by the price reporting centres.”
6.7.7 On the basis of supervisory checks by the LMC, DARD, the Intervention Board and the EU Classification Control Committee, the Minister is satisfied that the standards are being applied fairly with the benefit of doubt in marginal decisions being given to the producer.
6.7.8 The current programme of visits to member states by the EU Classification Control Committee has been abandoned because of workload pressures arising from Foot and Mouth Disease. In any event this year’s programme did not include a visit to the UK and it is not clear when the next visit to Northern Ireland may take place.
6.7.9Classification is essentially a subjective judgement and there can be disputes from producers. Appeal arrangements allow producers to have a classification decision review by a senior member of LMC classification staff. The Minister is not aware of any evidence that the existing appeal mechanism is unsatisfactory. There would be additional costs if any other body were to take over the appeal function and there is no obvious body to whom that function could easily be passed.
6.7.10 DARD has no evidence to suggest that classifiers are being influenced by processing plant management.
6.7.11 DARD is aware that the classification system is being properly applied in GB, by virtue of the close relationship of DARD technical inspectorate and their GB colleagues. DARD has no specific knowledge of the application of standards in the Republic of Ireland other than that the EU inspects and is satisfied with classification standards there.
6.7.12 (In answer to a question about the LMC’s recommendation that the European Commission be urged to adopt modern technology and change its price reporting structure from subjective grades to one based on meat yield objectively measured – i.e. would the Minister support that line in negotiations with MAFF and the European Commission) “It will not be easy and they are looking at ways of achieving it. However, I would support that.” It should be noted that EU legislation links price reporting to the current classification grid and if any new pricing system were adopted commercially it would be necessary to ensure that the EU price reporting requirements could be met.
6.7.13 DARD is aware of developments towards objective mechanical methods of classification and supports the move towards the EU adopting such a system when it is proven that this is fully reliable. Developments are being closely monitored but the development of the necessary technology means that that is some way off.
6.7.14Classification is not a core function of the LMC. The industry requested that it be undertaken by the LMC, as it is an independent body. That was reaffirmed in a consultation on the quinquennial review.
6.7.15(Quotation from quinquennial review report) “Despite the criticisms levelled at the LMC in the provision of the classification service, all sectors acknowledged that LMC remain best placed to carry out the function at the present time.”
6.7.16 The question of who should pay the classification fee is entirely a commercial matter between those who provide and those who receive the service.
6.7.17 The problems may relate more to the pricing arrangements in Northern Ireland. The LMC has facilitated discussions between producers and processors on those issues. The Department has agreed to investigate the differentials in prices, at the Committee’s recommendation.
6.8 The LMC stated[23] that:
6.8.1 It is a requirement under European law that all beef carcases offered for trade must be classified in accordance with the European Classification Grid. It is a further requirement that the competent authority in each member state (DARD in Northern Ireland) puts in place measures to ensure that the standard set down in the regulation is properly applied.
6.8.2 There is no regulatory requirement for sheep carcases at this time. However, classification is operated in sheep slaughter plants to help in meeting customer requirements in terms of grades. In addition, sheep carcase classification is very useful to producers and producer groups and the LMC reports details to allow improved selection of breeding stock and to facilitate selection of best size, weight and finish of animals for the particular market.
6.8.3 The classification activity has always been separately accounted for within LMC finances.
6.8.4 The LMC responded to requests by producers and processors for an independent body to undertake this service. Its operation presents LMC and its staff with considerable difficulties; primarily sporadic abuse from a small number of producers and commentators who are unwilling to accept the validity of the LMC’s classifications. In addition, the LMC has difficulty with some meat plants who perceive LMC classifications to be more lenient towards producers than classifications applied in GB. The LMC has neither any right to the business, nor indeed any desire to continue to provide that service if a better solution can be found to meeting the European Regulation.
6.8.5 The LMC operates an appeals system whereby if a producer is in disagreement with the Classification Officer’s grade he can appeal to a Senior Officer to review the grade. The LMC maintains a full record of the appeals and notes a very strong correlation between the volume of appeals received and price movements in the marketplace. (When prices move downwards, the volume of appeals moves upwards.)
6.8.6 (From a bar–chart provided) there were between 25 and 85 appeals per month over a two year period. Example given: February 2001 there was a total of 68 appeals involving 478 carcases out of month’s total slaughterings of 37,281. Of the 478 carcases, 19 were upgraded (4 %).
6.8.7 It is worth noting that the increased prevalence of aitchbone hanging required for some customers eliminates the opportunity to appeal to a cold carcase. This occasionally causes frustration. The LMC can do no other than to try to assist with meeting customers’ needs.
6.8.8Technically, the appeals process is indeed available to meat processors but senior staff can recollect only a couple of instances of such appeals over the last few years.
6.8.9 (In answer to a question on making the appeals system more credible and user-friendly) The LMC would be happy to listen to alternative suggestions for an appeals process but does not see how it can achieve that.
6.8.10 It might be argued that because the appeal is carried out by LMC it is not fully independent. However, the senior officer is tasked with determining the correct grade only on the basis of the carcase and not on the basis of support for a subordinate. The appeals process adds significantly to cost of service provision. Any independent element would have to be separately funded. A Senior Officer is not always on site to conduct the appeal but this is not prejudicial since the definitive classification should be conducted on the cold carcase.
6.8.11 The big producers understand the grading process and generally agree that the grades are consistent and right.
6.8.12 (When asked whether LMC staff can operate without undue influence from processing plant management) the LMC has little record of complaints from Field Staff in this regard. To be fair to the plants, it is in fact unusual for them to complain to classification staff. Their natural inclination is to voice their complaints at corporate, rather than operational, level.
6.8.13 The LMC arranges periodic visits by Senior Classification staff to plants in GB and ROI. Visitors of similar standing from there are also received. It is both staff and visitors’ view that the classification service is operated to a very similar standard across the British Isles.
6.8.14 There is a comprehensive record available from DARD (as the competent authority) regarding the LMC’s performance as a service provider. This record highlights a small bias on the part of LMC towards the producer in regard to both fatness and conformation. This bias is deemed to be within acceptable limits. To the knowledge of the LMC, there has never been an EC inspection of the service in Northern Ireland where the EC experts have found the competent authority to be setting the standard other than in the producer’s favour. On the contrary, a proposal by the EC for intervention disallowance in regard to 1998 is still under debate as a consequence of the alleged over-leniency to the producer in the interpretation of the standard.
6.8.15 (In answer to a question about on-going training) there is an initial training programme for classification officers which LMC operates. There is then a licensing process where each officer is subject to scrutiny by DARD in the meat plants. Each officer subsequently is brought through with a review by LMC management. If it found that that they are drifting towards the boundaries set in the standard then on-going training and development will take place. There are between three and five Department staff employed with the sole purpose of monitoring the classification officers.
6.8.16 The boundaries mentioned above are set so that when a classification grade is put on an animal for its conformation, the officer is allowed, in the regulation, up to 20% of his classifications to be wrong. He is also allowed 20% of his grades on fatness to be wrong and still maintain his licence. There will be a monitoring process to bring him back within the boundaries where the incorrect percentage is closer to the norm. The records show that, on both fatness and conformation, LMC officers are drifting in the direction of the producers by an average of about 10%.
6.8.17 The LMC would be in severe bother if the European Commission found that the LMC had an actual error level of 20%. It would not tolerate that. Our people are classifying within a margin of about 10% but it is LMC policy … that the producer be given the benefit of the doubt. When the European Commission team comes over, it does not want to do that. The LMC has evolved an understanding with the industry that on the boundary between two grades where judgement is difficult, the LMC officers give the benefit of doubt to the producer. This results in DARD deeming that LMC classifications favour producers by a grade increment in approximately 10% of cases. Such a benefit could not be officially sanctioned and its publicity is sensitive.
6.8.18 The extent of the latitude (20%) recognises that the ‘correct’ classification is an opinion of experts. The European Committee, consisting of 12 experts from a range of member states and the Commission, is the ultimate authority. On a visit, the Committee visits plants in Northern Ireland and each expert carries out a personal classification of a range of cold carcases in a chill. The Committee reviews the expert opinions (which vary from each other) and the correct grade is the consensus grade agreed by the Committee. It is against this background that a 20% deviation from the concensus is permitted by individual officers. Classification Officers can maintain their licences even if they disagree with up to 20% of carcase grades against the competent authority classification.
6.8.19 The LMC repeats its invitation to Committee members to visit meat plants to view the classification process and to discuss with senior officers any concerns which remain.
6.8.20 There is subjectivity on the boundary between grades which is inevitably subject to the frailty of human judgement. LMC would be strongly in favour of the adoption of mechanical classification arrangements if the technology was available. Regrettably, the conclusion of trials, held in the ROI on the three most advanced systems available, was that none of the equipment could accurately and reliably allocate a grade to meet the requirements of the European Regulation.
6.8.21 The equipment did seem to have merit in its capacity to accurately determine the yield of meat in a carcase. It seems to the LMC that the European Commission should be strongly urged to consider the adoption of modern technology and change its price reporting structure from that based on subjective grades to one based on meat yields objectively measured.
6.8.22 It could be argued that, in the grading system as it is structured now, that the price paid for cattle at the top end of the scale is too little … the price paid for cattle at the lower end of the scale … is too high. There is no formula to justify the present structure or the differences between the grades down to the last 3 or 4%.
6.8.23 (In response to a question about whether an animal which might get a high grade on a day where the overall quality was average could get a lower grade on a day where overall quality was high) “The circumstances described are not what we find in practice. The average does not change significantly from day-to-day and only moves very gradually upwards or downwards as quality changes with season, feeding or as a consequence of genetic developments.”
6.8.24 The LMC believes that within the boundaries of human judgement, every animal receives a fair grade from the service which the LMC provides. On average, the LMC is absolutely confident that Northern Ireland producers benefit from a professional service offered to the industry by LMC.
7. Promotional Activities
7.1 The National Beef Association stated[24] that:
7.1.1 It would like to play a full part in the red-meat strategy group and the Farm Quality Assurance Scheme (FQAS) Standing Committee but their representations to do so have been rejected. The NBA’s members in Northern Ireland benefit from direct contact with the wider organisation at UK level – that may on occasions allow it to make valuable contributions springing from its wider UK perspective. The NBA is therefore unable to comment with any great authority on the LMC’s promotional activities. It does, however, acknowledge that the Red Meat Strategy was instigated before the NBA was formed in Northern Ireland.
7.1.2 The NBA supports the principle of the FQAS as a lever for re-entry into continental supermarkets when export restrictions are lifted.
7.1.3 The NBA would like to see LMC funds directed into the promotion of auction markets, which play a useful role in the industry, as an efficient assembly and distribution point for store cattle and with its price transparency at primestock sales.
7.1.4 Farmers are not good at marketing themselves – the priority is on getting the animals out of the way rather than marketing them.
7.1.5 The LMC has to be complimented on its work in schools, in order to combat anti-farming or anti-meat industry material which is being circulated.
7.1.6Promotion of exports, in the short term, should be met by processors until price-rises allow producers to contribute more.
7.1.7 The LMC did a good job on the promotion of beef to Europe before BSE. Farmers cannot do without the organisation.
7.1.8 NBA members feel that more work should be done to raise the value of their beef on the domestic retail and catering markets by properly identifying its regional origins and working on the sympathies and appreciation of Northern Irish consumers for home-produced Northern Ireland beef.
7.1.9 The NBA would counsel the LMC to recognise that ... greater mileage could be enjoyed if more beef was sold to catering outlets, particularly hotels, which were encouraged to sell it at a premium as a product of Northern Ireland – provided that the processing and cooking delivered the beef to the consumer in a condition that would not disappoint.
7.1.10 Beef is a product that can easily be damaged at any point of the production, processing, retailing and cooking chain so it is essential to establish an all-round strategy to ensure that improved incomes can be sustained on a cross-industry basis on the back of consistent delivery of a high quality product. The NBA would therefore suggest that the LMC pursue an integrated national system through a national brand with strict quality monitoring and strong disciplines.
7.2 The National Sheep Association stated[25] that:
7.2.1 Where the LMC has stated that the promotion of lamb at a German trade show proved successful the NSA would ask how they measured this success.
7.2.2 The LMC is not good at communication with farmers.
7.2.3 Lamb needs to be promoted better on the home market – for example it is rarely seen on hotel or restaurant menus.
7.2.4 The NSA asks whether or not joint promotions (on lamb) with the Republic of Ireland would be viable.
7.2.5 The NSA has not been asked to take an active part in LMC promotional activities. However, the NSA appreciates help given to the Ulster Lamb Groups in subsidising presence at food fairs and for the LMC’s role in the success of the lamb carcase competition at the NSA Lamb 2000 event.
7.2.6 More needs to be done to encourage marketing initiatives and the branding of lamb. If something similar to the ‘Greenfields’ brand could be done to promote Northern Irish lamb, this could be a success. Both the Scots and Welsh have lamb brands which are doing well. However, LMC would counter that they have not enough money to afford such a programme.
7.2.7 The MLC in Britain gives assistance to pedigree breeders and the NSA would recommend that LMC look at ways of helping Northern Ireland’s pedigree breeders. A representative with knowledge of the pedigree sheep industry could promote NI genetics alongside the MLC and others.
7.2.8 The LMC should examine costs and highlight returns required by the producer.
7.2.9 The LMC should look at innovation required in the industry and examine eating quality, health benefits of lamb and new ways of preparing and eating lamb.
7.2.10 While there is not enough money available for promotional work, the NSA sees the LMC’s production of the annual ‘glossy brochure’ as a bone of contention as it believes this must be very costly. The NSA believes that much of the content is ‘padding’.
7.2.11 Lambs going to the South are likely to end up in the same markets as those killed in plants in Northern Ireland. This could be said to reflect on the promotion of Northern Ireland lamb.
7.3 The Ulster Farmers’ Union stated[26] that:
7.3.1 The LMC performed their marketing function well throughout Europe prior to the onset of the BSE crisis. However, since then, with the re-concentration of beef sales on the GB market producers are disillusioned at the LMC’s performance in promoting the quality, diversity and saleability of locally produced beef on the home market. The UFU recommends much more emphasis in this area until export restrictions are relaxed.
7.3.2 Whether we like it or not, we must work with the supermarkets. The LMC has made a reasonable job of securing contracts with United Kingdom supermarkets that were not there prior to BSE.
7.3.3 Not enough resources are deployed by LMC in the promotion and marketing of the diversity of Northern Irish lamb and lamb products. Much more work on the promotion of lamb is considered essential. The UFU acknowledges that with income from lamb slaughterings only about £40,000 per year, there is little funding available for lamb promotion. However, the Union cannot support any increase in the levy generated on lamb slaughterings.
7.3.4 More clarity is required in the LMC’s relationship with the MLC in Great Britain. However, the UFU considers that the relationship has helped facilitate the tremendous growth of Northern Ireland beef in the British market.
7.3.5Promotion must include the processor and the producer. If the processor does not have a market the producer has no market. If there is a market, then processors are needed to process the product.
7.3.6 The MLC’s levy per animal is about £4 per head, roughly four times that paid in Northern Ireland. The marketing budget is obviously greater.
7.3.7Measurements of benefits arising out of promotional activities would be difficult to quantify. Any promotional work that enhances the image and sales of Northern Ireland beef and lamb is likely to benefit all parties concerned.
7.3.8Globalisation is the biggest threat to Northern Ireland’s beef and lamb producers. It will be imperative for bodies such as the LMC to continue to seek out niche markets for foods produced locally and to promote the very considerable advantages that Northern Ireland produce has to offer over the global commodity players.
7.4 NIAPA stated[27] that:
7.4.1 NIAPA believes that it exerts influence on LMC promotional activities through presence of members on the Board, and on various committees.
7.4.2Promotions need to be sustained at point of sale and education and schools work should continue. There needs to be a balance between short term output and the longer time frame promotions aimed at the younger generation.
7.4.3 NIAPA believes that the LMC’s use of the MLC’s expertise and documentation provides value for money.
7.4.4Historically, NIAPA believes, the processor appears to be the largest benefactor of promotional activities and can benefit quickly, compared to the farmer, whose long lead-in times do not allow the versatility of management decision making enjoyed by processors. Promotional activity could be managed more closely by farmer representatives on the Board to ensure that benefits included a long-term return for the farmer.
7.4.5 Branding is essential. The ‘Greenfields’ brand was a success and that success might be emulated once more. However, competitors have not stood still. We must take the farming industry forward, especially the 25-50% that is willing to adapt, and ensure an appropriate market return for birth-to-slaughter farm assurance.
7.5 NIAPA Ruling Council stated[28] that:
7.5.1 The organisation has neither involvement nor feedback with regard to promotional activities conducted by the LMC.
7.5.2 NIAPA Ruling Council members would be of the opinion that any direct benefit to producers by way of marketing promotion is at best insignificant if at all measurable.
7.5.3 NIAPA Council members are not impressed by the performance of the LMC by any standards, and compare badly to their counterparts in the UK where equivalent prices are known to be 22p per Kg above the Northern Ireland price.
7.6 The Northern Ireland Meat Exporters’ Association stated[29] that:
7.6.1. If the NI beef and sheep industry is to give the highest returns to producers it is absolutely essential that there is a promotion agency doing the generic marketing function. Promotional activity is seen as one of the LMC’s strongest points and they (and only they) are best equipped to do the work.
7.6.2.Promotion is an area that needs to be seen by the public to be divorced from the agricultural and agency sides of LMC’s activities, yet professionally co-ordinated under the Board’s management.
7.6.3 LMC should have the over-arching control of all promotions within the meat and lamb sectors, including areas that are currently carried out by DARD, LEDU and the IDB.
7.6.4 Some district councils and rural development authorities have also been involved in promotions. On occasions, this has embarrassed some of NIMEA’s premium customers.
7.6.5 The LMC should collate available data to harness knowledge gained through the Farm Quality Assurance Scheme and make realistic forecasts on the availability of quality raw material. Currently, nobody can tell either the number of quality cattle or sheep available for any given time ahead. Armed with that information, the processing sector can perform a marketing function directly related to production, thus being more efficient and adding value back down the chain.
7.6.6 To date, all promotion of Northern Irish beef and lamb products has been run by individual processor investment in conjunction with the LMC.
7.6.7 It is unfair to say that the LMC has made no contribution to European markets or to the value that the producer was getting for his beef in Northern Ireland pre-1996. Prior to that year, Northern Irish prices were probably the highest or second highest in Europe.
7.6.8 The strategic alliance with the MLC ensures that we keep a British label on our meat in Northern Ireland. You only have to look at the price differentials between NI and the ROI to see the success of that campaign. That does not take into account the promotional and marketing funding that has been contributed directly from the processors to the retailers in order to move the disproportionate amount of meat coming out of NI that traditionally went to the European market.
7.6.9 The LMC is currently working on identifying particular niche markets around the world because we are a very high cost producer of red meat. It has held onto the ‘Greenfields’ brand to ensure that there will still be a premium place for Northern Irish meat in that market. The LMC is identifying other markets. When those are open, the LMC will launch an attack with its (hopefully) increased funding and that should work its way down the chain.
7.6.10 The fact that farmers do not know what the LMC is doing is not the issue. The issue is what the LMC is doing for the customers – the customers being the buyers of our product. That is where the achievements lie and they are the people who should be giving their opinions.
7.6.11 The LMC provides value for money. That judgement is based on the customer’s opinion of the independence, integrity and the foresight of the LMC. In many cases, the LMC’s foresight in developing and sticking with the Farm Quality Assurance Scheme without farmer support has been instrumental in winning a return that would be less today.
7.6.12 (In response to a question about encouraging retailers to subscribe to promotional activities for Northern Ireland meat products) the fact that you ask this question displays the fact that you do not even have a basic understanding of the trading contract relationship between a supplier and a retailer. It costs to get space on a retailer shelf, they are not queuing up for our business. There is nothing to stop either the LMC or political approaches to retailers, but nothing should be done that would prove divisive to the current retailer relations with NI meat and lamb suppliers.
7.6.13 Market research shows a swift increasing percentage of the younger generation becoming pro-vegetarian. The Vegetarian Society claims that 12% of young people are vegetarian and that there are 4 million vegetarians in the UK, representing 7% of the adult population. It is therefore absolutely essential that a strong educational programme be pursued to accurately display both the health and nutritional values of beef and lamb and to encourage it as a regular ingredient in meals. Processors are aware of the importance of this activity and have supplied meat for schools educational programmes at discounted rates to supplement this. The educational seminars conducted by the LMC for the higher education teachers across NI have been an excellent promotional activity for beef and lamb and have resulted in a much higher awareness of the value of a balanced, healthy diet within the community.
7.6.14 The market place is ever changing and LMC must be pro-active in discerning where to focus its attention. That activity must be left to the marketing experts on the LMC Board and within the LMC ranks. This activity should not be shackled by government or anyone else, in dictating what should be priority for market research.
7.6.15 It must be stated categorically that the main beneficiary of beef and lamb promotion is the primary producer. If we do not continue to promote, then the return will be even lower. We should actually be trying to increase promotion, with greater emphasis on certain areas. The formula for where the money is found is a matter for further debate. There is a rhetoric and misconception around that the world is queuing up to buy NI beef and lamb. They enjoy their current market position due simply to both the generic promotion by LMC and the product promotion and supplier services marketed by individual companies.
7.6.16 The simple means of demonstrating the value of generic promotion of NI beef and lamb is to stop all promotional activity and then watch our market outlets being taken over by others and producer prices spiral down further and further.
7.6.17 It may be that the real return of increased levy will simply be that we retain the market share we have fought for and secured to date.
7.7 The Department of Agriculture and Rural Development stated[30] that:
7.7.1 DARD’s overall responsibility for the LMC’s promotional and other activities is exercised in a number of ways. The LMC draws up a 3 year Strategy Plan which is agreed by DARD. Where public funds have been provided to support marketing or promotional activities the LMC will have submitted specific proposals. A condition of approval will normally be that a report is provided on the extent to which the programme has successfully met the set objectives.
7.7.2Evaluation reports of marketing promotional activities are sought by DARD and the information available does indicate that the activities are cost effective and represent value for money. The report on the LMC’s promotional activities in 2000 part-funded by the EU Quality Beef Promotion Scheme indicated that consumption of beef in Northern Ireland increased by 6.5% over the period of the programme and that, in terms of awareness, a significantly high number of people have been reached by the campaign. In addition an independent evaluation of expenditure in 1997 concluded that the LMC promotional activity was properly targeted and represented value for money.
7.7.3Evaluation of promotional activities, undertaken on behalf of the industry as a whole, would not distinguish between the benefits to the different parts of the supply chain. It is doubtful whether such benefit could be separately identified. In any event the processors’ levy contribution means that they are contributing to LMC promotional activities.
7.7.4 The Minister suspects that retailers will be reluctant to contribute to LMC promotional activities even though they may benefit indirectly from them.
7.7.5Consideration is being given to action that might be necessary to help the agri-food sector, in particular the livestock sector, to recover from the impact of Foot and Mouth Disease. At this stage it is not possible to say whether the marketing of meat products (or any individual proposal) may be allocated additional funds.
7.7.6 The Minister believes that the LMC should continue with its policy of being fully open and transparent in all its activities thereby demonstrating to producers the full range and impact of its services. The Minister welcomes the fact that ... the LMC has initiated a series of meetings with producers throughout the Province. It is by making the industry more aware of its services and activities, and by identifying and responding to the needs of industry and engaging in constructive dialogue, that the LMC can build on what has been achieved to date.
7.8 The LMC stated[31] that:
7.8.1 It is important to highlight two guiding principles under which the LMC feels it is appropriate to operate:
- Strategically the LMC must recognise that NI is not a low-cost producer of red meat, and, as a consequence, the LMC has concluded that we must seek to position the industry to supply the maximum possible percentage of our production into the highest value premium markets accessible to us.
- We must recognise that LMC can only function at a generic level and that all of the promotional work which it does needs to be complementary to the specific activities of both processors and retailers who are essential participants in the chain of distribution.
7.8.2 (In response to a question on value for money) it is generally a requirement that an independent assessment is carried out on the effectiveness of individual programmes. (On evaluation of the red meat strategy) it will be for the appointed independent (evaluator) to decide how best the assessment is carried out. (It will) consider the strategy, the programme of activity carried out and the achievements of objectives. Assessments are normally completed within 6 months of the programme’s completion.
7.8.3 The LMC divides its promotional and marketing activities into three geographical areas: Northern Ireland, Great Britain and International.
7.8.4 In essence the LMC since 1996 has assumed the role of ‘brand guardian’ for Northern Ireland beef and lamb. The LMC has vitally important messages in regard to the nutritional attributes, provenance and health benefits of red meat. The LMC has concluded the necessity to portray the benefits and attractions of red meat to a younger generation; the majority of activities in Northern Ireland are within the education sector. The LMC has succeeded in developing a very productive working relationship with the schools, both meal-providers and the teaching side. Annual expenditure in NI is approximately £400,000 of which two thirds is spent in education.
7.8.5 Within the GB market, the best returns are available from the premium multiple retailers. The NI processing industry has made substantial progress in building business with these premium retailers. It is critically important that we have the capacity to brand our product as “British Meat” the brand attached to the vast majority of beef and lamb sold by these retailers. In order to secure full and proper qualification for the attachment of this brand to NI meat, LMC has entered into a two-year agreement with the MLC, whereby we make a significant contribution to the promotional budget of MLC for beef and lamb. Expenditure for years 2000 and 2001 is £450,000 per annum. MLC invests in the order of £8m per annum in consumer marketing the brand for several years.
7.8.6 The MLC’s campaigns in GB are highly effective, as this is the only market in Europe since 1995 that has achieved growth in beef consumption (5%). The benefit to our industry can be seen from the premium of 9p/Kg or £27 per beast for NI cattle over Republic of Ireland cattle. This is equivalent to a benefit to NI beef producers of over £10m per annum. The British Meat brand is not used to any significant degree (in Northern Ireland). Our interest is in securing the market share we currently enjoy in GB. Our best customers have no interest in confining themselves to sourcing beef or lamb in one region only. Northern Ireland could not supply the full beef requirements of even one of the top four GB retailers.
7.8.7 Exports historically accounted for approximately 50% of NI production. LMC believes it is vital that we remain active in sustaining contacts in export markets, keeping abreast of customer developments and looking for new opportunities. Activities include: market research - building a ‘world map’ of the red meat industry; international trade fairs – supporting red meat industry participation at major international food fairs e.g. SIAL and ANUGA; development of the ‘Greenfields’ brand; and brand research. Budget of £425,000 for the current financial year – reducing to £300,000 per annum thereafter. A lot of this relates to the Red Meat Strategy – as that comes to an end it will reduce the amount that the LMC will spend.
7.8.8 The LMC would highlight the value of ‘Greenfields’ brand in the Netherlands: in January 2001 Dutch cattle at farm-gate level were £1.09/Kg where ROI cattle for Greenfields were £1.50/Kg. (In response to a question about whether NI cattle producers will benefit in the longer term from the re-launch of the brand) – yes, otherwise the LMC would no longer invest in the brand.
7.8.9 The role of the LMC (in relation to exports) is to attract the customers that Northern Ireland used to have and to keep constant contact with them to ensure that when markets are re-opened to us we have still got the good relationship and product to provide to those customers. The LMC should add that a significant proportion of lamb processed in Northern Ireland is exported.
7.8.10 No assessment of the balance of benefits from LMC’s promotional activities (between producers, processors and retailers) has been carried out. The LMC does not believe that it is possible to make a definitive determination in regard to such a balance. In dealing with multiple retailers, it must be understood that NI processors already make a significant contribution to promotional campaigns by their customers. In addition, retailers will argue that at point of sale and promotion and advertising in in-house magazines, they already make by far the largest contribution towards promotion of beef and lamb.
7.8.11 The LMC thinks it is unlikely that retailers will willingly contribute (to the LMC’s activities) even though they do inevitably benefit. Where professional organisations equivalent to LMC exist throughout the world the LMC is aware of no example of core funding coming from retailers. However, LMC … have found retailers willing to participate to new bodies or schemes and to offer advice using their knowledge of the market. The LMC would cite Tesco’s collaboration with it in the promotion of Northern Ireland Aberdeen Angus beef in January as being a particularly good example.
7.8.12Retailers, and to an extent processors, have the right to source their raw material as they choose. It can therefore be argued that the only beneficiary from LMC’s promotional activity is in fact the producer. For example, NI producer prices have held remarkably well following the recent BSE crisis across European markets due to the quality of markets being served. Commodity beef is freely available in the UK market at a producer equivalent price of under £1.20/Kg. Throughout this period NI beef has sustained an average producer price of almost £1.60/Kg.
7.8.13 In conclusion, the LMC is convinced that the marketing and promotional work of LMC adds significant value to our red-meat industry. The independent evaluations of individual elements of LMC activities support this view.
7.8.14 (From independent evaluation (carried out by CAPITA) on LMC promotional campaign conducted under the European Quality Beef Promotion Scheme):
- Overall the campaign’s objectives to increase the awareness of, and demand for, Quality Beef was achieved. Overall consumption of beef in Northern Ireland increased by 6.5% over the contract period reviewed.
- … to conclude, the Livestock and Meat Commission have carefully developed an astute marketing and promotional strategy based on market intelligence and research. The success of this strategy is reflected in the positive feedback gathered through this evaluation and the high numbers of people directly and indirectly reached through the campaign.
- It is our general recommendation that some type of evaluation is carried out for events that LMC attends. A more in-depth evaluation of the CD-Rom ‘On the Farm’ should be conducted.
8. Appointments to the Commission
8.1 The National Beef Association stated[32] that:
8.1.1 The NBA would view the current composition of the Board as the most visible example of its fundamental weakness. Of the two current ‘producers’, neither could be described as a typical full-time farmer. Even if they were, the NBA considers that this would remain a disproportionately low representation against that enjoyed by other sectors. This underpins the accusation that the LMC leans too far towards the meat trade.
8.1.2 The most urgent challenge facing the LMC is to address the producer perception that it is “too cosy” with NIMEA, either by demonstrating that it is not true, or by taking steps to correct any leanings in that direction identified through self-examination. The LMC should re-arrange and expand its Board to ensure fuller farmer representation (through places for four full time farmers out of nine members) and farmers’ influence should reflect the weight of the producer sector. The NBA believes this would result in less routine criticism from producers and the adoption of policies which are in tune with grass roots aspirations. Full time farmers could force change and there are many who could do so.
8.1.3 The Board membership should change completely after either one or two years and there should be no salary paid for the job, only expenses. This would ensure that only those with a real interest in the industry would apply and that members would not be seen or consider themselves as employees of the LMC. They could then become genuinely independent representatives of their sector. The NBA dismisses the idea that, without financial encouragement, the LMC would not be able to attract individuals of sufficient calibre.
8.1.4 The NBA has no involvement in the LMC appointments process.
8.2 The National Sheep Association stated[33] that:
8.2.1 The NSA is not involved in the selection of the Board members or given any notice of vacancies. None of the NSA’s members saw the last advertisement. The advertisements are usually in the Belfast Telegraph. There would be a much higher chance of farmers applying for it if an advertisement was placed in ‘Farming Life’ or ‘Farm Week’. The first time farmers are aware of an appointment is after it is made.
8.2.2 The NSA would welcome the opportunity to advise on selection of a Board member or to propose a candidate. There is a lack of transparency in the present selection process.
8.2.3 The NSA is not satisfied with the composition of the Board, bearing in mind that the LMC is producer-funded. There are no complaints about specific members but the overall make up shows a bias towards the processing industry.
8.2.4 It may also be worthwhile securing the services of someone from a similar but non red-meat sector (e.g. Moy Park) with expertise in meat production and meat exports but a less direct influence on red-meat processing.
8.2.5 If farm producers are funding the LMC then they ought to have a say in it. There are no full-time farmers, depending on farming as their only income, on the body. The NSA would also like to see a sheep producer on the Commission.
8.2.6 The NSA acknowledges that beef is a much bigger industry but believes that the sheep industry should not be neglected – there being no option in hill farming other than sheep. The LMC should consider introducing a specialist sheep sub-committee to deal with sheep and lamb issues. The NSA feels that the industry would support such a move, provided that it ‘produced the goods’.
8.3 The Ulster Farmers’ Union stated[34] that:
8.3.1 There must be more representation of producers on the LMC – it is heavily weighted ‘the other way’. There should be three livestock producers on the Board, two of whom should be nominated by the UFU. This would alleviate producers’ concerns and lead to greater accountability. The UFU would be content with eight or nine members, no more.
8.3.2 The UFU recognises that farmers are poor promoters and that there must be outside expertise on the LMC Board. There is a need for people who know the market and, possibly, some who know the political field because marketing of foodstuffs involves politics.
8.3.3 With a portfolio ranging from promotional and marketing activities to provision of carcase classification services it is vital that sufficient representation of producers at board level is accommodated to give proper ground level accountability on the direction of LMC activities.
8.3.4 In the past, the UFU has undertaken to nominate producers to serve on the Board of the LMC. Current appointments are made by the Minister following rigorous procedures. However, if the current Board structure were to change, the UFU would prefer to be able to nominate suitably qualified candidates for the producer participants who could readily input the views of beef and sheep producers on the ground.
8.4 NIAPA stated[35] that:
8.4.1 There is a good mix on the current Board but an increase to nine members would be preferred, with a minimum of four farmers directly involved in the agricultural industry.
8.4.2Appointments (including those to allow expansion) should be according to the Nolan principles and appointees should have personal skills, expertise, experience and knowledge to allow them to take an industry, rather than a sectoral view. NIAPA does not believe that specific groups or associations should have sole powers to nominate.
8.4.3 NIAPA has never been involved in the appointments process but believes it was changed for the better and will be glad to comment on the process.
8.5 NIAPA Ruling Council stated[36] that:
8.5.1 The organisation would not be satisfied that present representation on the LMC Board is either balanced or adequate in terms of producer need.
8.5.2 The organisation would not see a cost benefit to producers in expanding the number of Board members.
8.6 The Northern Ireland Meat Exporters’ Association stated[37] that:
8.6.1 The current Board of LMC is much more relative, capable and focused on their task than may have been the case in the past and being much more attuned to the activities of a fast-changing meat industry, have enhanced their standing considerably. The future of the Board needs to be made up of strong, senior experienced meat industry personnel. The LMC must rise to a level of its competitors, i.e. An Bord Bia and MLC.
8.6.2 Because of the development of the industry in Northern Ireland over the past 15 years NIMEA believes that the Board should be increased from 7 to 9. The Board should consist of those who can demonstrate marketing vision and contribute to the marketing potential of the beef and sheep industry of Northern Ireland.
8.6.3 There should be three reps from the processing sector, two farming reps, one retail butcher rep, one other meat sector related person and one food industry-related independent Chairman. There should also be one person from the Food Service sector, e.g. a retired manger from one of the major multiples.
8.6.4 The various sectors should have input into the appointments and should be made by Ministers from nominations, exempt from the Nolan principles. NIMEA sees these principles as contributing to mediocrity, in that anyone can apply. NIMEA believes that Board members should be captains of industry who understand the international marketing arena. However, they do not apply for those sorts of positions – those who are likely to apply are people who do not have the skills that are required. We do not want to end up with a Board of mediocre people – the Nolan principles are prejudicial to the real top professional people that we need on the Board.
8.6.5 With the greatest of respect to the farming sector, they are not the best people to be involved in marketing. Look what has happened to the farmer-controlled marketing boards of the past. The generic promotion must be done on behalf of the entire industry by a professional team under the direction of a professional Board that understands the market place.
8.6.6 If the LMC is to become a farmer-dominated body then there is a real fear for the future vision of the beef and sheep industry. Discrimination in favour of either producer or processor will cause imbalance and lack of co-ordinated determination. The focus must be removed from “perceived sector representation” to a Northern Ireland industry marketing perspective for the benefit of “NI Beef and Lamb plc.”
8.6.7 DARD has informed NIMEA when vacancies on the LMC Board are being advertised in the press and in return NIMEA has encouraged potential candidates to apply for appointment.
8.6.8 The LMC should adapt to represent the industry needs of the 21st century. It should continue to be managed under a Board of appointed Commissioners. The day-to-day running should be under a Chief Executive with two Deputy Directors, one for agricultural services and one for processing and promotion services. This would give some perception to the “separateness” of functions co-ordinated under the Board.
8.6.9 The Chairman of NIMEA also sits on the Board of the LMC. That is not a conflict of interests. We can make decisions without having to and consult and then come back again. We can make some very quick suppositions at board meetings on some things that are happening in the industry. This is seen as an advantage, not a conflict. Other members of NIMEA are former members of the LMC Board. The intimacy of that relationship is a strength, not a weakness.
8.7 The Department of Agriculture and Rural Development stated[38] that:
8.7.1Appointments to the LMC are carried out in accordance with the Nolan procedures. These have been reviewed by auditors appointed by the Office of the Commissioner for Public Appointments on two occasions and found to be in compliance.
8.7.2 Officials discuss, with the LMC Chairperson, the nature of the skills required in any particular appointment before the procedures begin.
8.7.3 In the most recent appointments process the Department identified a field of candidates through public advertisement in the main Belfast newspapers, by writing to industry organisations with an interest in the activities of the LMC and by drawing on the list of available people held by the Central Appointments Unit. Candidates were assessed on merit by means of a panel which included independent representation. The independent assessor is chosen, having regard to the central list of people who have been identified as being willing and suitable to serve in such a capacity and Departmental knowledge of other suitable persons.
8.7.4 It is through ensuring that vacancies are widely notified through advertisement and writing to organisations that DARD ensures there is no discrimination in making all groups aware of the process of appointment. All advertisements carry a statement that appointments are based on the merit principle and on equality of opportunity. Where appropriate, specific encouragement will be inserted in advertisements to bring forward applications from under-represented groups.
8.7.5 Re-appointments have also been considered in accordance with the Nolan procedures. In particular, the Department seeks an assessment by the Chairman of the performance of each member, covering issues such as attendance, involvement in Commission activities beyond Board meetings and the performance of the individual in terms of the contribution made to the overall work of the Commission.
8.7.6 (In answer to a question on whether the Minister would allow sector bodies to nominate members to the LMC rather than be appointed by the Minister) “The legislation requires that I make appointments. A change in the legislation would be required to do that and we would have to be careful that nominations would be in accordance with the Nolan procedures. I am not sure that would be the case if we insisted on sectoral appointments.”
8.7.7 (In answer to a question about there being no women on the LMC Board) “I assure (the member) that that has not gone unnoticed by me and I am very anxious to address that issue as soon as possible within the Nolan guidelines. It is important that we have a gender balance on Committees, otherwise we will not reflect society.”
8.7.8 There are two producers on the LMC out of the seven members, which, considering that it must reflect the whole industry, is a fair proportion. The (quinquennial review) report contains a proposition to increase membership to nine. Consumers are not represented, which they would complain about; the technology end of the industry could also possibly be represented.
8.7.9 (In answer to a question about how additional seats would be allocated) “We will be consulting the industry on any changes that we intend to make. I have an open mind and I am prepared to listen to other people’s views.”
8.7.10 If membership of the LMC is increased there will be consultation with the Commission and relevant industry organisations on the additional skills or background that may be necessary to ensure a fully effective Commission.
8.7.11 While the possibility of linking payments to attendance will be considered the Minister will want to be satisfied that in so doing there would be no adverse implications in terms of the ability to attract a range of candidates of sufficient calibre. Payment by attendance may not be entirely fair unless there is some mechanism for taking account of time spent on LMC activities outside of formal meetings.
8.8 The LMC stated[39] that:
8.8.1Appointments to the Board of LMC are entirely the prerogative of the Minister. It is the LMC’s understanding that the level of consultation on appointments with either the Chief Executive or the Chairman of LMC has varied considerably over the years.
8.8.2 It is the view of the current Board that Commission members should have the following qualities:
- Skills, knowledge and experience of the industry at either producer, processor, distributor, retailer or consumer level, or professional expertise in a discipline that is relevant to the activities of LMC.
- Be of independent standing, capable of rising above sectoral interests and taking a view which is for the greater industry good.
- Be of independent means and not substantially reliant on their Commission fees as a significant part of their income. Commission members should operate across all of their business interests to the highest ethical standards and be open and transparent in regard to any possible conflicts of interest which might arise.
- Be able to demonstrate a continuing enthusiasm, interest and support for the red meat industry, should be available and prepared to attend the vast majority of Commission meetings and should be prepared to fully engage and contribute their skills, knowledge and experience to the benefit of policy formulation at the LMC Board table.
8.8.3 While these are the qualities which the Commission has defined, the LMC believes that the approach by the Department is in reasonable accord with its views.
8.8.4 In addition to the above it is critically important that the three major interest areas across the industry are represented on the Board: Producers, Processors and Retailers/Consumers. It is noted that considerable damage was done to the LMC’s standing when a previous Minister made appointments to the LMC which failed to recognise the importance of having skills, knowledge and experience at producer level at the Board table. The current Board, the LMC believes, demonstrates a more appropriate mix. (The Chairman is) convinced that the LMC now has the strongest Commission since he was appointed.
8.8.5 If (the Board is extended from seven to nine) it would allow farmers’ interests to be further represented by at least one additional player. That would go some way towards allaying the industry’s perception that it is under-represented.
8.8.6. LMC is generally supportive of the proposal to increase the Commission membership to nine. It would help ensure that all of the interest areas were covered. The LMC is a larger business than its simply being a producer-owned organisation. There are other issues, and the diversity of expertise and experience which comes to the board must always be respected.
8.8.7 (In answer to a question about the appointment of women to the Board) (the Chairman) would be delighted if the LMC had excellent women on the Board. (He) would be singularly disappointed if (on an increase to nine) there were not more female members.
8.8.8 (In answer to a question about whether the LMC would object to sectional interests having the right to nominate to the Board) that might take away from the independence of the Commission – (it should be) the subject of a consultation process. (There is) no necessity for it.
9. General - Quinquennial review.
9.1 The Committee undertook, in its agreed Terms of Reference for this Inquiry, to take account of the results of the five-year review of the LMC. However, it was apparent that the review, although completed early in 2000, when the Assembly was in suspension, had never been finalised or published. It was also reported to the Committee that the Ulster Farmers’ Union had received no feedback from DARD on its submission following the preliminary report.
9.2 Both the UFU and NIMEA expressed concerns about the review – the former that reviews do not take place every five years and the latter that the results were not published. The LMC also reported that Commission members had repeatedly expressed their disappointment that the report had not yet been published.
9.3 It is clear to the Committee from the evidence that there is a real interest, particularly from producer/levy-payers, in how the LMC is performing. It is essential that the sponsoring Department’s reviews are carried out thoroughly, and in a timely fashion. It is even more important that the results of these reviews are widely publicised to stakeholders. Delays in publication of the review report, as have been seen in this review, must be avoided in future.
9.4 It is therefore the Committee’s recommendation that DARD’s next quinquennial review takes place in 2004 and is completed within three months. The Committee further recommends that industry and other responses to any draft or preliminary report on the review are both acknowledged and given a substantive reply by the Department and that the final report is circulated widely. This circulation could be enhanced through provision of an Executive Summary as a press release or articles in farming and other industry press, and through use of the Department’s and LMC’s web-sites.
10 General – Perceptions of the LMC
10.1 The Committee was sympathetic to the evidence from producer organisations that farmers perceived the LMC to be controlled by the meat plants, too cosy with NIMEA, or to be more aligned to the needs and objectives of the processing industry. This would be entirely consistent with views expressed to members by their constituents. The Committee is broadly of the view that this results in consumers not deriving the benefit of reduced prices to the farmer.
10.2 There was, of course, the counter-argument, expounded by both NIMEA and the Department, that the LMC’s strengths included its independence and its broad representation at Commission level. The Committee heard this argument, but was not convinced.
10.3 The Committee also noted with interest that the UFU believes that no other body in Northern Ireland could satisfactorily adopt any of the roles performed by the LMC. NIAPA also acknowledged that the LMC provided services essential to the industry’s ability to perform. This broad support, in general terms, was also reflected in DARD’s quinquennial review.
10.4 The Committee considers that the LMC’s perceived independence is of such importance (in all aspects of its work) that the Commission must take whatever steps are necessary to counter the negative perceptions. A positive perception is crucial to enable the LMC to fully serve all its stakeholders.
10.5 Some of the producers’ concerns result from perceptions about the loyalties and affiliations of current Commission members. This aspect will be further explored later in this Report, when the system of appointments to the LMC is being discussed.
10.6 It is acknowledged by the Committee that the LMC and its staff will have to work closely with meat processors, particularly in relation to promotion and in trying to maintain existing markets and to access new ones. However, these relationships must be transparent regarding their necessity, conducted in a completely professional manner and demonstrate the independence of one ‘side’ from the other. From the evidence heard, producers do not believe that this is currently the case.
10.7 The Committee therefore recommends that the LMC develops and publishes a concise ‘protocol’ in which the purpose, level and frequency of LMC contact with the meat processing industry is defined. Contacts should be monitored and the protocol reviewed in light of actual events, with a clear position report published at least once a year.
11. General - Communication with Producers
11.1 Many of those giving evidence from the producer side also referred to communication as an issue. The National Beef Association acknowledged that the LMC would find it easier to communicate with small groups of processors than with a highly fragmented body of farmers. There are clear links here to recommendations made by the Committee in its earlier Report “Restoring Profit for the Beef Producer”[40] regarding the need for a production-orientated Task Force. The Committee would re-iterate the need to transform this fragmentation into a market-orientated, organised production force, with which the LMC could communicate more easily.
11.2 The NBA advocates that the LMC Board should hold more direct and regular consultations in open forums, and that the example set by the Food Standards Agency be adopted. The National Sheep Association believes that the LMC is not good at communicating with farmers and recommends regular meetings with the sheep industry representative bodies.
11.3 The Committee also notes that the LMC has initiated a series of producer meetings and that the Minister has welcomed this. It appears to the Committee that such meetings, if properly structured, inclusive and frequent, may have a two-fold effect. Firstly, producers would feel more inclined to ‘ownership’ of the LMC through greater understanding of the services it provides. Secondly, the LMC would gain a closer understanding of the needs and expectations of producers and be able to respond to these. It must surely be one of the prime objectives for the LMC to be accountable to those whose funds enable it to exist.
11.4 The Committee therefore recommends that the LMC embarks on a series of structured producer meetings, in consultation with farmers’ representative organisations (both at general and sectoral level). In order to reduce costs, the Committee recommends that DARD facilitates these meetings in its accommodation throughout Northern Ireland. Producers must also play their part through participation and a willingness to learn about the LMC’s activities and to pass on this information to fellow producers.
11.5 The Committee also considers that there is much merit in the proposal to develop an agricultural forum, in order to structure the relationship between the LMC, NIMEA, producers, consumers and all interested parties. The Committee therefore recommends that DARD facilitates discussions among the interested parties regarding the development of such a forum.
11.6 In terms of producer representation, the Committee acknowledges that the relationship between the LMC and the National Beef Association is an uneasy one. However, the Committee also accepts the NBA’s view that its links with a wider UK organisation, and its members’ different perspective from the main farmers’ representative organisations, make its views valid and worthy of consultation.
11.7 The Committee therefore recommends that the LMC takes urgent and clearly defined steps to improve its relationship with the National Beef Association and to include their views in discussions on the Red Meat Strategyand the Farm Quality Assurance Scheme. The LMC should also formalise and improve its relationships with the National Sheep Association to ensure the widest perspective in sheep and lamb-related matters.
11.8 It was also interesting for the Committee to note one organisation’s view of the LMC’s Annual Report. The glossy brochure was considered expensive and much of the content “padding”. The Committee understands that, as an Executive non-Departmental Public Body, there are certain requirements of the LMC in terms of its Annual Report and Accounts. These demands must be met. However, the Committee believes that the views expressed about the Annual Report offer a warning to the LMC that it must not rely on this Report as its main method of communication of its activities and objectives to the producer sector.
11.9 The Committee recommends that more use is made of the LMC Bulletin and articles in the farming press to provide immediate and specific updates of the LMC’s activities. In this way, the Committee believes that farmers would consider themselves to be more involved and better informed. Opportunities also exist to link IT training for farmers (and their families) to IT-accessible information from the LMC. The Committee recommends that these are explored in conjunction with DARD.
12. LMC Funding – Increases and Review of Producer Levies
12.1 The Committee concurs with DARD’s view that it is appropriate for the LMC’s core funding to come from the industry rather than from government – always assuming that benefits to the industry are a clear outcome of the LMC’s activities. It would appear to the Committee that levies are the simplest method through which such core funding can be obtained, and that similar arrangements exist in other meat-producing countries.
12.2 There is also very clear and widespread acknowledgement throughout the evidence that the current funding of the LMC is inadequate. Much was made, by some of those giving evidence, of the disparity in levies payable by producers in Northern Ireland compared to those charged to their counterparts in Great Britain.
12.3 For example, NIMEA believes that the levy on cattle should be nearer £3 than the current charge of 80p. DARD suggests that the clear differences between NI and GB demonstrate that there is scope for levy income to be increased. From the producer perspective, there is, perhaps surprisingly, an acknowledgement that an increase in levy may be necessary. However, there is also unanimity in the view that no increase would be sustainable in the current economic climate in which farmers operate.
12.4 There are also differing views on whether an annual review of levies should be undertaken. NIMEA believes such a review would be beneficial in that it would allow the LMC to take account of competitive factors in other countries. DARD also advocates an annual review and reports that it is currently in the process of amending legislation to increase maximum levy rates and to introduce a processor levy. The UFU, despite their position that any increase to levies would be unacceptable, advocates annual reviews to take account of the increasingly challenging market places. NIAPA considers that three-year reviews would be more beneficial to allow a balanced analysis of environmental and economic factors. The National Beef Association takes what may be described as a pragmatic view, that annual reviews would cause regular difficulties and undermine the relationship between the LMC and a principal source of its funding. The NBA advocates annual rises, to coincide with inflation, that could be applied without review.
12.5 The Committee accepts that there are disparities between NI and GB in the levies charged. Funds available to the LMC are, as a consequence, lower in relative terms, to those available to the Meat and Livestock Commission. However, members believe that parity of charges would only be justifiable in the context of parity of prices to producers being achieved. That is, of course, far from the current position. If, for example, farmers received £60 to £70 more for each animal slaughtered (and actual figures seen previously be the Committee have demonstrated that such differences are the norm), then the increase in fee of £2.20 would conceivably be acceptable to them.
12.6Furthermore, it is the Committee’s stated position that, given the current crisis in farming income, there should be no immediate increases in fees or levies paid by farmers.
12.7 The Committee therefore recommends that DARD proceed with the necessary legislative changes to allow for future increased levy rates but that the LMC increases the current rate only in line with inflation from 2002/03. This increase could then be made annually and would be anticipated by producers. If, and only if, parity of prices with GB is obtained, the LMC should propose an increase in levy to achieve parity with levy charges in GB. If the current price differential reduces and remains stable, there may be an argument for some increase towards GB levels, proportionate to that reduction in differential.
13. LMC Funding – Processor Levy
13.1 In considering the principle of a producer levy, producer organisations were broadly supportive and welcoming of it. Producers consider that processors have benefited from LMC activities since the organisation’s inception and that they clearly benefit now.
13.2 The Committee was not impressed with the attitude demonstrated by the NI Meat Exporters’ Association, who complained that the Committee’s comment that farmers were “paying for the Commission” was “hurtful”. The Committee accepts that NIMEA members are now paying a voluntary levy. However, this only began in the year 2000, the LMC having been funded by producers for very many years before that. The Committee agrees with the LMC’s assertion that all of the major processors have sought and gained assistance from the LMC in dealing with particular markets or customers.
13.3 Far from being some altruistic concession on behalf of the meat processors, the Committee considers that the new levy should be seen as the processors merely ‘paying their dues’ for extremely fruitful work carried out in local, national and export markets. NIMEA themselves also acknowledge that the introduction of a processor levy on a statutory basis will simply be in line with GB and ROI.
13.4Furthermore, the Committee takes exception to NIMEA’s comments that the producer is always the beneficiary of positive promotional activity, no matter who pays, and that farmers are the largest and main beneficiaries of the LMC’s activities. The Committee is not fooled into believing that these major processing companies would countenance any expenditure without significant return. The Committee considers that processors are at least equal beneficiaries of promotional work and their profitability, compared with farmers’ lack of profitability, suggests no different.
13.5 The producer sector voiced some concerns regarding the processor levy, particularly that primary producers would end up paying LMC levy twice, the processor levy having been passed back in costs to producers. The Committee shares these concerns. However, the Committee also notes NIMEA’s explanation of how levy is actually paid, with producer levy deductions shown on payment documents and the processor contribution paid from company accounts. NIMEA believes that this clearly demonstrates that producers are not funding the processor levy, and, in fairness, the method described seems reasonable and transparent. The LMC also expressed confidence that costs were not being passed to the farmer. However, company accounts are not always accessible and safeguards may be needed to provide the assurances that producers seek.
13.6 The Committee was disappointed at the Department’s response to the question about processor levy being passed back to producers. DARD states that it cannot interfere in a purely commercial matter. However, DARD must bring in the legislation that will provide for the levy collection to be made on a statutory basis and cannot relinquish responsibility for ensuring that the levy works in practice, including the methodology for collection of the levy.
13.7 The Committee therefore recommends introduction by DARD, at the earliest opportunity, of the legislative base for payment of processor levy. As part of this exercise, DARD must satisfy itself, through careful consideration of LMC records, that the current method of levy collection is transparent, workable and unlikely to result in the levy being passed back directly to the primary producer. If DARD is not satisfied, then it should, through the legislation, insist on the adoption of a more appropriate methodology.
14. LMC Funding – Levies other than at Slaughter
14.1 The Committee was interested to note, from the five-year review and evidence, that current legislation allows levy to be collected from owners of cattle and sheep exported from Northern Ireland. The Department reported that arrangements are in place to collect levy on exports from GB and ROI.
14.2 In this context, NIMEA made a valid point regarding the loss of potential revenue to the LMC through half a million sheep moving to ROI, and suggested a ‘transaction levy’ such as operates in Australia. The National Sheep Association agreed with this and stated its belief that levy could be collected on all ewes, not limited to those slaughtered in NI meat plants.
14.3 The UFU takes a different position, suggesting that levies should only be paid at slaughter. This organisation does not support the extension of levies to dropped calves or on exports of live animals, but the Committee questions the Union’s assertion that these actions would be unworkable. Furthermore, it was reported as being the LMC’s stated intention to collect levy at livestock markets.
14.4 The Committee can agree with the principle that where LMC activities benefit the whole industry, they should be paid for by the whole industry. It follows that levies should, therefore, be extended to producers who currently benefit, but who do not take animals to slaughter. However, farmers’ ability to pay a new levy is questionable, short term, and a suggestion to introduce new levies would be contrary to the Committee’s agreed ‘policy’ on applying increases in costs to farmers. The Committee believes that such a levy could only ever be justified in the circumstances where both producers and consumers benefit.
14.5 At the time of taking evidence, the Department was engaged in preparations for the re-opening of livestock markets, following restrictions put in place to avoid further outbreaks of Foot and Mouth disease. The Committee considers that any new regime may provide opportunities to change policies and practice surrounding levy collection and that difficulties envisaged by the UFU might be overcome.
14.6 The Committee therefore recommends that the LMC intention to extend levies and collect these at livestock markets is taken into account as new arrangements for animal sales and movement are considered by DARD. The Committee further recommends that the intention to extend levies (and the rationale for the extension) is clearly stated, with a start date no sooner than April 2002. This will require appropriate legislative changes to be brought forward by DARD. It is the Committee’s recommendation that the new levy is set at a lower rate than the slaughter levy but that it should be commensurate with benefits from LMC activities, which the LMC should quantify and publicise as part of the advance notice referred to above.
15. LMC Funding – Government and EU Assistance
15.1 In comparing the position of the LMC in Northern Ireland with similar organisations in Great Britain and the Republic of Ireland, the Committee noted that significant government assistance is provided to An Bord Bia in ROI. DARD frequently refers to EU State-Aid Rules as being a major obstacle to the provision of financial assistance. However, the Committee believes that, if the figures quoted by the LMC are accurate (£IR14m from government out of a £IR20m budget) then a precedent for state-aid has been firmly set. It should not be beyond the abilities of DARD officials to justify government assistance (at whatever levels) to the LMC.
15.2 The LMC reported that the Welsh Development Agency and the Scottish Executive provide support to Welsh Beef and Lamb promotions Ltd. and Quality Meat Scotland respectively. The Committee also notes that expenses are paid to MLC members by MAFF (as it was known). In her response to the Committee, the Minister stated that she was prepared to consider the costs of Commission members being met from public funds, but that she would wish to have clear, reasoned arguments as to why this is appropriate. The Committee considers that, where all of the LMC’s near neighbouring ‘competitors’ enjoy government assistance, and the Department recognises that the LMC requires more funding to carry out its responsibilities, then the appropriateness of at least meeting members’ costs is undeniable.
15.3 In clarifying that DARD does not provide core funding, the LMC outlined two occasions where funding has been provided for specific actions. These were a £250,000 injection for red-meat marketing support in the aftermath of the BSE export ban in 1996 and a sum of £2m provided for the implementation of the Red Meat Strategy. The Committee believes that the provision of this funding, where State Aids Rules difficulties have been overcome, and a clear need for £2m over 3 years for a red meat strategy established, presents a persuasive argument for ‘mainstreaming’ this level of support. The Executive also recognised the importance of red-meat marketing in agreeing a DARD bid for £0.5m in the 2001/02 budget. This, the Committee understands, is part of the £2m referred to above.
15.4 DARD has given no commitment to continuing this funding after the period anticipated for the red-meat strategy is completed. The Minister has, however, said that she will seek funding if necessary.
15.5 The Committee therefore recommends that DARD, in agreement with the Executive, should provide ‘mainstreaming’ of marketing support to the LMC in its budget. This would allow strategic development in this vitally important area. The level of such support should be determined through analysis of the activities and results of implementation of the red-meat strategy so far, and would be in the context of a clearly defined marketing strategy. The Committee further recommends that the costs of LMC members should be met immediately by the Department, to bring Northern Ireland into line with Great Britain.
15.6 The Committee also reflected on the National Sheep Association’s question about funds modulated from Sheep Annual Premium payments. The Association felt strongly that the money was being taken out of the sheep industry and that it should be spent on something that would benefit the industry. When the Committee put this proposal to the Minister, her response was negative, saying that DARD could only carry out what is contained in the Rural Development Plan. The Committee would remind the Minister that modulation was announced (by Nick Brown) as being intended for new activities and that these funds are coming straight out of farmers’ pockets. In a memorandum to the Committee, when modulation was first announced, the Minister confirmed that Treasury match funding of modulated funds may be used for wider activities than the four Accompanying Measures in the Rural Development Plan. The Committee suggests that DARD looks again at all possible options.
15.7 The Committee recommends that, since expenditure of even small amounts of Treasury match funding for discrete marketing projects would be a tangible return for funds modulated from farmers’ premia, DARD should consider carefully the provision of Treasury match funding to the LMC to enable them to undertake such actions.
15.8 During evidence, NIMEA made a point to the Committee about the divergence of effort by a number of government agencies involved in marketing Northern Ireland meat. Although NIMEA did not provide specific examples of such “meddling” (as it described these efforts), they spoke of embarrassment caused to customers through uncoordinated actions. NIMEA further recommended that the LMC was the one body with the knowledge, experience and contacts required and that it should be the body to ‘spearhead’ all such activity. The Committee would agree that all Departments and agencies should be pulling together in support of Northern Ireland products and believes that it is crucial for inter-departmental partnerships to be developed.
15.9 The Committee recommends that DARD take the lead in negotiating with existing agencies involved in meat promotion (and, in time, with the new ‘super-agency’) to ensure joined-up government and that a partnership approach, with full LMC involvement, is adopted.
16. LMC Funding – General
16.1 In one of its submissions, the LMC reported to the Committee that the industry had reached agreement on upgrading the Farm Quality Assurance Scheme to achieve EN 45011 accreditation and that a sustainable funding arrangement was being put in place. This entails farmers paying an annual membership fee of £35 per annum and processors contributing £1 for every animal slaughtered on their premises. Income generated, the LMC assured the Committee, will cover the scheme’s costs. The Committee understands that a fee may prove difficult for farmers in their current financial state. However, the cash reserves which were, in effect, subsidising the FQAS scheme, have been exhausted and the importance of the scheme, to ensure the product meets customers’ requirements, is such that continuity of funding must be assured.
16.2 The Committee is, however, concerned that there is insufficient benefit, to the farmer, in the Farm Quality Assurance Scheme. The Committee believes that non-FQAS beef is reaching the same markets as that intended for FQAS beef. If the scheme is to be effective, there needs to be a clear distinction in those markets in order to re-assure both consumer and producer.
16.3 The Committee sees merit in clear lines of funding for the LMC’s activities. In the new system, the FQAS funds can be shown as entirely separate from those raised through levy. Likewise, the costs of the LMC’s classification service, and the fees raised from classification charges, should also stand-alone. If, as the Committee recommends, additional funding from government can be secured for the marketing and promotion functions, then the results of LMC expenditure should be much more apparent to farmers and their representatives, leading to greater understanding and acceptance of the organisation.
16.4 To sum up, the Committee believes that having the following items in place:
- Additional and secure FQAS funding;
- classification fee income (remaining unchanged);
- the processor levy being applied fairly and on a statutory basis;
- an ‘index-linked’ producer levy;
- additional ‘transaction levies’ collected;
- members’ costs being paid by DARD; and
- a ‘mainstreamed’ element of promotional and marketing funds from government
would allow the LMC to fulfil its statutory and other obligations and provide it with the capability of acting in a planned and strategic manner.
16.5Throughout the Inquiry, the Committee formed the impression that producers felt that the LMC should be more accountable to them. In terms of funding of the LMC, the Ulster Farmers’ Union is reasonably satisfied with the openness of the organisation and that the LMC accounts are available to everyone annually to see what they do with the money. That is undoubtedly so, but farmers are not, in most cases, accountants and the Committee believes that straightforward, simple and transparent use of funding is essential to build a better understanding of the LMC amongst primary producers.
17. Classification Service – Statutory Background and need for Service
17.1 The LMC’s provision of a classification service was by far the most contentious and talked-about issue explored during the taking of evidence in this Inquiry. The Ulster Farmers’ Union stated that it was the biggest issue at all producers’ meetings and in all conversations with producers and processors. This is entirely consistent with representations made to members. All respondents acknowledged that the service was a source of frustration to producers, particularly because of its subjective nature and direct link to the price obtained for an animal.
17.2 The Committee fully accepts and acknowledges the statutory requirement for beef carcase classification, introduced through EU legislation in 1992. It further acknowledges that all beef carcases offered for trade must be classified in accordance with the European Classification Grid. It is the Committee’s understanding, from the evidence provided by the LMC, that there is no regulatory requirement for sheep carcase classification. However, classification is operated in sheep slaughter plants to help meet customer needs. It also results in the provision of information helpful to producers and producer groups.
17.3 The Committee also acknowledges that the LMC undertook to provide this service, following requests by producers and processors for them to do so as an independent body. It is clear that the LMC has no great desire to continue to provide the service, but that the organisation believes it provides a professional service to the industry.
17.4 The Committee was interested to note the meat processors’ concern that the LMC’s promotional independence may have been “tarnished” by its involvement in the classification service. This, together with producers’ concerns over the LMC’s independence from the meat processors, makes it clear to the Committee that a problem exists which must be tackled in the interests of improving relationships throughout the supply chain.
17.5 The Committee agrees that the question, “Who should provide the service?” must be addressed. The National Beef Association advocates that classification should be properly defined and presented to private companies for tender, and that the LMC would take on a role as inspector. The Northern Ireland Meat Exporters’ Association states that there may be an opportunity to establish a separate, exclusive and totally independent classification service. They feel that this would relieve the LMC of an extremely arbitrary function. The UFU argues that the LMC is best placed to carry out the classification function. That was also the finding of the Department’s five-year review.
17.6 The UFU point out that moving responsibility to another body will not eliminate the differentials and variations in grades, because of the subjective nature of the system. The Meat Exporters point out that the EU legislation permits meat plants to provide their own classifiers. They accept that this would not be seen as independent and question the practicalities of having different bodies trying to operate a European standard. NIMEA voiced no desire to change the current system.
17.7 The Committee is absolutely convinced that there should be one independent classification service and that any move by meat plants to employ their own classifiers would be met with dismay by producers. It would be impossible for these classifiers to command any perception of independence. During evidence, the Committee heard of no other existing body which would be capable of ‘picking up’ the classification service. The Committee has no wish to recommend a change in responsibility for the service, where there is no indication of widespread support for such a move, or any obvious benefit to producers from it. However, the Committee believes that there is not sufficient separation of the LMC’s classification service from its other activities to satisfy the demands of producers.
17.8 The relationship between grade and price makes it all too easy for producers to assume that retailers’ demands have led to commercial pressures being applied to grading staff through meat plant management. The opportunity to pay 6p per kg less for an animal by having it downgraded is an obvious temptation for meat plants. The fact that LMC staff work closely with meat processors, in taking forward their marketing and promotion role, will lead some to assume that close working relationships offer the opportunity for undue influence to be exerted by those processors. In the circumstances it is unsurprising that producers question the LMC’s independence.
17.9 The Committee concludes that a separation of the classification service from the LMC’s other activities is essential to improve producers’ overall perception of the LMC, to assist in producers’ understanding of the service and its necessity and to provide reassurances on the organisation’s independence in its dealings with meat processors.
17.10 The Committee therefore recommends that the LMC should build in a much greater degree of separation, and transparency, in their activities, whether through setting up a separate company for classification or by internal re-organisation. Charging for the classification service should be entirely separate and funds should relate only to the provision of that service, i.e. the service should stand alone, both organisationally and financially.
18. Classification Service - Application of EU Standards
18.1 Whilst accepting that classification is a subjective exercise, the Committee’s view is that the standards, which are common across all member states, must be applied fairly, consistently, impartially and accurately. In this regard, the Committee believes that the Department, as the competent authority in Northern Ireland, has a crucial role to play.
18.2 LMC classification officers are licensed by DARD, having been approved through a testing procedure. The Department’s technical inspectorate then monitors the standards applied by the LMC staff. DARD reported that over 300 supervisory checks had been carried out over a 2 year period in a regime that aims to carry out supervisory checks on each classifier at least twice per quarter.
18.3 A higher level of supervision is carried out by the EU Control Committee on Beef Carcase Classification. However, the most recent inspection took place in 1998 and Northern Ireland was not included in that Committee’s programme of visits to member states in 2001. While this EU Committee remains the highest authority on classification matters, the infrequency of visits leads this Committee to conclude that DARD’s supervision of the application of standards is of the utmost importance.
18.4 The Committee was astonished to learn that, according to the European regulations, a classification officer is allowed to be wrong in 20% of his classifications (for both conformation and fatness) while still retaining his licence. In no other walk of life, the Committee believes, would as large a margin for error be permitted.
18.5 The LMC was at pains to point out that their staff do not err by 20%. Their margin is around 10% which, the LMC states, drifts in the direction of producers. Committee members were surprised at this assertion, and at the UFU’s apparent agreement with it. Members’ own experience of constituents’ comments does not indicate a ‘leaning’ towards the producer.
18.6 The LMC stressed that the margin is so high because of the subjective nature of classification. That may be so. However, the Committee believes that such a generous margin does nothing for the confidence of producers in the system and that the LMC must strive, in a very public way, to ensure that the actual performance is assessed (independently) to be within 10% and preferably nearer 5%.
18.7 How is this performance measured? The ‘correct’ classification is regarded as that made by the EU Classification Committee, consisting of 12 experts from a range of member states and the Commission. The members undertaking this Inquiry acknowledge the Department’s report of the findings of the EU Committee, following inspections in February and May 1998. Their report, and the Department’s subsequent investigations, found that standards were not being properly applied, with producers being given the benefit of the doubt in marginal cases. Further monitoring showed that standards were being applied and the Committee notes the findings in the EU ‘Mission Report’, dated 7 December 1998 (extracts included in Annex C1 of this report), in which there were “high standards of classification found in all the plants visited” and that “the majority of differences observed were within one sub-class”.
18.8 Such results, from an independent source, would have provided reassurance for producers at the time, provided that suitable publicity was given to the reports. However, with three years having elapsed since the last inspection, the Committee concludes that there is a need for more frequent reinforcement of such assurances.
18.9 The Committee believes that the more transparent the system of supervision by DARD, the more likely it is that producers (and indeed processors) will accept that the performance of the LMC classification staff lies within acceptable limits. If there are ‘leanings’ one way or another, it is reasonable that producers and processors should be made aware of these.
18.10 The Committee therefore recommends that DARD perform more regular formal checks (at least annually) in accordance with procedures adopted by the EU Committee (i.e. a panel of DARD staff performing personal classification and agreeing a ‘committee’ classification, against which the classifier’s grade is measured). LMC should state its aim for a 5% incorrect classification margin, in the context of the 20% permitted, and disseminate the actual results quickly and widely to stakeholders. The Committee is not recommending that an individual officer’s performance should be publicised, merely that the overall result of the service is available for all to see. Results should, however, be used internally by the LMC for training purposes.
19. Classification Service – Provision of a Quality Service to all Producers
19.1 As mentioned above, there are perceptions amongst producers that graders may be aware of plant management ‘looking over their shoulder’ in terms of the price they pay for certain grades. The processors themselves are at pains to point out that LMC staff attend their plants in a “third party guest” role and insist that they are under no obligation to the plant in which they operate. DARD has no evidence to suggest any influence and the LMC has little record of complaint from field staff, saying that plants would complain at the corporate, rather than personal, level.
19.2 NIMEA goes further to allege that there is, at times, considerable influence and pressure exerted on the classifiers to have carcases graded higher then warranted.
19.3 There was discussion about the merits of producers ‘following their animals through’ to see the grading – putting them in a position to appeal if they feel aggrieved by the grade awarded. NIAPA, in particular, felt that farmers should be encouraged to learn from bad grades. The example of sheep farmers was given – they may see the need to pick lambs earlier for slaughter on their next visit to the meat plant. NIAPA felt that problems surrounding grading may be solved if farmers went to meat plants to see their animals graded.
19.4However, it was reported to the Committee that farmers were actively discouraged by plant management from doing so. Anecdotes were told about threats to farmers that their animals would not be taken again if they appealed against grading decisions.
19.5 While such anecdotal evidence may not represent an indictment of plant management, the Committee believes that there is a culture amongst some meat plant management which holds primary producers in contempt. Recent allegations about factories changing grades after classification, suggest that some might also hold the grading system in contempt, and do nothing to improve farmers’ confidence in the classification and pricing process.
19.6 The Committee believes that, within health and safety constraints, farmers should have the absolute right to follow his animals (which are his very livelihood) through the grading process. Experience of the grading system is likely to improve the farmer’s understanding of it. Farmers should not, however, abuse this right by seeking to intimidate or otherwise unfairly influence the classifying officer. The Committee would see this as no better than plant management attempting to exert influence to downgrade a carcase.
19.7 In turn, the classifying officer must treat the farmer with respect, offering explanations of his decisions if these are sought.
19.8 The Committee also concludes that farmers who experience what they see as unfair treatment from plant management, in terms of access to grading or appeals, should report any such occurrence to the LMC. Any pattern emerging from these reports could be dealt with at the corporate level by the Commission members.
19.9 The Committee therefore recommends that plant managers should make appropriate arrangements for farmers to view, on request, the grading procedures and that the LMC maintains records of reports of any failing in these arrangements. The LMC should also consider whether additional training for its staff would be useful, for example interpersonal skills, to assist classifiers meet additional demands.
19.10 The Committee further recommends that DARD, as the ‘competent authority’ under European law regarding the classification of beef carcases offered for sale, must instigate an immediate, thorough and highly transparent inquiry into meat plant practices following carcase classification. The Committee believes that there must be absolute confidence in these practices to protect the integrity of Northern Ireland beef.
19.11 During evidence, the Committee heard that consistency of service may be a difficulty. The NBA stated that it did not receive complaints about classification at small meat plants, even though the same staff work in both large and small plants. There were alleged differences in grading standards between the ROI and Northern Ireland. Some farmers also believe that there are seasonal differences – i.e. grades are harder to achieve when there is over-supply of animals. It was also mooted (by NIAPA) that two different graders, working on the same batch of animals, may differ in their grading and that the grader’s mood may be a factor in awarding a grade.
19.12 These factors were worrying for the Committee. With the grading structure linked so directly to price received, it should be unthinkable that a farmer might lose out financially because someone has had a bad day. The Committee would argue that this is another reason for frequent checks on the standards of classification. Human frailties aside, there must be an assurance that LMC staff are providing an impartial and consistent service to both producer and processor. There is undoubtedly an onus on LMC management to drum this home at every opportunity and to ensure that theory is turned into practice.
19.13 To the Committee, the most worrying aspect of the allegations of inconsistency was the almost universal acceptance that most appellants or those with difficulties with the classification service, were farmers who brought animals to slaughter infrequently. The UFU believed that those who slaughter regularly are more skilled at selecting stock to the desired finished and slaughtering at the right time. NIAPA concurred – farmers who slaughter every week would be positive about the grading system, they said. What concerned the Committee was NIAPA’s belief that frequent slaughterers may build up a rapport with graders over time.
19.14 NIMEA also blamed the ‘once-a-year’ producers or cattle dealers who were “out of touch”. The LMC felt that the “big producers” understand the grading process and agree that grades are consistent and right.
19.15 The Committee is most concerned about these points. Firstly, there must be no difference in the standards applied to animals, whether they are brought forward by “big producers”, frequent slaughterers or the man who slaughters cattle once a year. Rapport and personal knowledge of farmers must not be a factor in grading decisions and LMC management must ensure that message is clearly given to staff.
19.16 It is bordering on contemptuous for the NI Meat Exporters’ Association to say that it is the mixed farmers, rather than the professional beef farmers, who appeal grades and who least understand the classification standards. Such an attitude of generalisation, if adopted by classification staff, would prejudice grading results before a carcase was even seen, and must not be allowed to prevail.
19.17 Rather than blame those with less experience for their lack of knowledge and understanding, meat processors, and particularly the LMC, should be making efforts to educate the infrequent slaughterer, and those who have mixed dairy/beef herds. This is another example of where communications with producers could be improved, with information and assistance targeted at those who most need it.
19.18 The Committee therefore recommends that the LMC communicates more clearly with producers regarding the standards applicable to grading. This should specifically target infrequent users of the service and should include more live grading demonstrations to groups of producers. The Committee also recommends that DARD should provide specific training to producers.
20. Classification Service – Appeals
20.1 The current appeals process was described to the Committee by the LMC, DARD and the NI Meat Exporters’ Association. If a producer disagrees with a grade he may appeal to a senior LMC officer. There may not always be a senior officer on-site but the LMC assured the Committee that this was unimportant, given that the ‘proper’ grade should be assessed on a cold carcase in the chill.
20.2 The LMC reported that it maintains a full record of appeals and from this, notes that there is a strong correlation between volumes of appeals and price movements (i.e. when prices fall, appeals rise).
20.3 A chart submitted by the LMC in evidence suggests that there were between 25-85 appeals per month over a 2 year period. One month’s records were highlighted with 68 appeals covering 478 carcases (just over 1% of animals slaughtered) resulting in 19 carcases (4% of those appealed) being up-graded. It could be argued that this demonstrates that the original grading is generally correct. However, the Committee believes that the numbers reflect the importance of having an appeals procedure in place.
20.4 During evidence, the Committee heard the producer side call for improvements to the current appeals procedure. Both the National Beef Association and NIAPA mentioned the independence element. The Ulster Farmers’ Union and NIAPA called for an overhaul of the system to make it more user-friendly and credible to producer, grader and processor.
20.5 The Committee acknowledges that independence is hard to achieve. While the greatest number of graders (and, according to NIMEA, the highest competence) lies within the LMC, any external element for appeals will be difficult and potentially costly to introduce. However, if producers could be assured that, as the LMC put it, the Senior Officer considers the appeal grade only on the basis of the carcase and not on supporting his colleague, then the level of independence of the second grade might be acceptable to them.
20.6 The Committee accepts that there is currently no body to whom an independent appeals process could be entrusted. DARD does not have sufficient resources and the Committee has no wish to see increased costs, with these inevitably passed back to the producer.
20.7 NIMEA suggested that the first point of appeal should be the original grader, with the senior officer only brought in where the original grader refuses to change the grade. This seems patently sensible to the Committee, and, even though it may result in an increase in appeals, it may actually result in a reduction of costs if the senior officer is required in fewer cases.
20.8 The Committee believes that the LMC, in maintaining a full record of appeals, should look for patterns other than the link to price movements. It would be interesting, for example, to see where in the ‘grid’ the majority of appeals lie (i.e. between which grades). This information would be of interest to producers and may highlight areas where actions are required in terms of quality and finishing practices.
20.9 Of serious concern to producers was the practice of ‘aitch-bone hanging’ which distorts the carcase and makes it impossible to appeal against the original grade. The LMC acknowledges that this practice eliminates any appeals process. The Committee heard arguments against the practice, suggesting that the meat quality was not helped by such hanging. Indeed the NBA called for the practice to be banned. However, it is clear that there are major customers of the meat plants who demand aitch-bone hanging and it would be a foolish supplier who refused to meet his customers’ requirements. The issue must therefore be how to overcome the difficulties regarding appeals when this practice is in operation.
20.10 The Committee firstly recommends that the LMC investigates the practicalities of putting secondary full or spot-check grading in place in cases where Aitch-bone hanging is in operation. These cases should be known in advance by plant management and the LMC advised to allow planning. Secondary grading would provide at least some reassurance for producers, where they currently have no recourse to the appeals procedure, that the grade given to their animals was fair and reasonable.
20.11 The Committee further recommends that the appeals process is reviewed in consultation with the producer sector and that a first level appeal to the original grader is introduced. The LMC has undertaken to listen to alternative suggestions on the appeals process and it is imperative that producer representatives offer realistic solutions, rather than simply say “something should be done”.
20.12 The Committee’s final recommendation in this section is that the LMC should extend its record keeping of appeals and perform analyses of them. For example, the frequency, type and location of appeals, and appellant farmer-type, could be considered, and results of the analyses disseminated in the Annual Report.
21. Classification Service – Mechanical Grading
21.1 The one area in the debate on classification on which there was unanimous agreement was mechanical grading. All of the producer organisations were in favour of the introduction of mechanical grading at the earliest opportunity, although, understandably, they were concerned that the machines should be accurate, consistent, fair and tamper-proof.
21.2 DARD, NIMEA and the LMC all agreed that they were in favour of such an approach, but warned that the technology was not yet ready to meet the demands of the European Union. DARD pointed out that current EU legislation links price reporting to the current classification grid.
21.3 The Committee noted with interest that the Meat Exporters were keen for the LMC to enter into a partnership with an organisation already pioneering work in this field, with a view to developing an electronic system. The processors undertook to operate trials in their meat plants, suggesting that a year-long trial would be worthwhile. The Committee would also like to see trials carried out in Northern Ireland. However, there would need to be an assurance that technology had improved from the systems that had undergone trials in the ROI. Although these were positive in terms of capacity to measure meat yield, they could not accurately and reliably allocate a grade to EU requirements. The Committee also felt that the LMC should involve its GB counterpart, the MLC, in partnership arrangements and in undertaking any trials.
21.4 NIMEA (and the LMC) went slightly further than simply advocating improved technology to meet EU regulations. They felt that the EU should be actively lobbied to adopt modern technology and to change the price reporting structure from subjective grading to one based on meat yields measured objectively. The Minister agreed that she would support this line in negotiations with MAFF (as it was) and the European Commission. This would seem to the Committee to be a sensible approach, particularly as the technology is available now.
21.5 Several of the groups giving evidence referred also to a ‘star’ rating system operated in Australia. The UFU explained that this system (The Meat Standards Australia Total Quality Management System) entailed the grading of meat according to eating quality, through analysis of critical control points in production, processing and value adding. The Committee believes that there must be thorough analysis of such a system, with a view to its introduction in the European Union. The LMC could play a role (albeit a small one) in this review.
21.6 Some of those giving evidence raised concerns regarding the costs of introducing mechanical grading. This is an issue that would warrant careful consideration. There would be installation costs and training costs at the very least. There would be costs associated with a trial scheme as well. The Committee believes that up-front costs should be met by the factories, with reasonable assistance from government, either directly or through the LMC.
21.7 The Committee also recognises that there will be an employment issue if mechanical grading is introduced on a widespread issue. The skills of the LMC’s grading staff (and DARD supervisory graders) would no longer be required. The Committee believes that these staff should be offered the opportunity to train in the use of mechanical equipment, in the hope that retraining would safeguard jobs.
21.8 The Committee recommends a two-strand approach. Firstly, the introduction of a technologically improved mechanical system on a trial basis in one or more Northern Ireland meat plants. Secondly, negotiation with DEFRA and the European Commission regarding a review of alternative systems, such as the Australian model, and on reviewing the current links between grading and price reporting.
22. Classification Service – Links to Payment Structure
22.1 Finally, on the classification issue, the Committee noted comments made about the current price structure. It seems that all are in agreement that there are far too many grades and that arbitrary price levels within these grades are unhelpful. The Committee agrees with the UFU’s view that there would be many less complaints about classification if it were not so closely linked to the payment structure. The UFU referred to work carried out by the LMC, in which the variation between some of the grades was only 1% but the cut in price was 6p per kg.
22.2 There has already been a great deal of negotiation to have the number of payment bands reduced and the Committee believes that this is an imperative, while the subjective system of classification remains.
22.3 In the Committee’s Report “Restoring Profit for the Beef Producer”, the Committee recommended that processors must alter their pricing policies to offer strong incentives in favour of higher quality carcases. Evidence to this Inquiry reinforces the Committee’s belief in this recommendation. When a representative of one of the major meat processors agrees that the price paid for cattle at the top end of the scale is too little, the Committee sees no reason why this matter can not be resolved quickly and to the satisfaction of all sides.
22.4 The Committee therefore repeats its recommendation that meat plants must make changes to their pricing structures and urges the LMC to broker a ‘deal’ on this matter with all haste.
23. Promotional Activities – Communication with Producers
23.1 The Committee acknowledges and was grateful for the very comprehensive summary of activities provided by the LMC. The Committee recommends that interested readers of this Report spend time reading the summary (contained in Annex D1 of Appendix 3 of this Report) in order to become more fully informed about these matters.
23.2 The Committee was most interested to read, from the submission made by the LMC, the nature of activities in which the LMC is involved. It appears to the Committee, however, that there is a dearth of knowledge, amongst Northern Ireland’s farmers, of the LMC’s approach, activity and the outcome of its promotional work. For example, the National Sheep Association claimed that the LMC is not good at communicating with farmers. Others (the NBA and NIAPA Ruling Council) could not comment on the LMC’s promotional work.
23.3 The Committee contends that communication of the LMC’s priorities in promotional work to producers is paramount. Members were astonished to hear a representative from NIMEA state that “the fact that farmers do not know what the LMC is doing is not the issue”. In the Committee’s view it is entirely the issue, and may account for many of the negative perceptions of the LMC held by farmers, who, after all, are payers of the levy which enables the LMC to undertake their activities.
23.4 Farmers would be the first to admit that they are not good at marketing themselves. Often, as highlighted by the NBA, farmers simply wish to ‘get rid of’ their animals. There is, according to the evidence, a recognition by some farmers that the LMC is capable of doing a good job and that farmers need the organisation: the UFU and the NBA were both positive about the LMC’s work in Europe prior to BSE. On the other hand, however, there are question marks over their current activities: the UFU, for example, claims that farmers are disillusioned at the LMC’s performance in promotion in the home market. NIAPA Ruling Council suggests that the benefits to producers of promotion and marketing is insignificant.
23.5 The Committee has no doubt that the LMC can explain its promotional work – it has taken care do so to this Inquiry. What is in doubt is whether the LMC is currently providing enough explanation of that work to an important set of stakeholders – the farmers.
23.6 The Committee notes the praise heaped upon the LMC by the NI Meat Exporters’ Association: promotion is one of the LMC’s strongest points, the customer’s belief in the independence, integrity and foresight of the LMC and so on. No doubt, the LMC Commissioners and staff draw great comfort and professional satisfaction from such remarks. However, in the absence of greater understanding by producers of what is being done, why it is being done and, in particular, why the processors are so closely involved in the work, such comments will merely reinforce producers’ belief that the LMC is “too cosy” with the meat plants.
23.7 If it is farmers’ ignorance which is the cause of such perceptions, farmers themselves should not be blamed for this ignorance. It is incumbent on a body working on behalf of the whole industry to ensure that the whole industry is aware of, and supports, what it is doing. It is an indictment of the LMC that the National Sheep Association can ask how the LMC measures success (when the LMC says that the promotion of lamb at a German trade show proved successful). The Committee believes that producer bodies must be fully informed of performance, and given facts to support assertions of ‘success’.
23.8 In its own questioning about how the LMC’s promotional activities are measured, the Committee established that where public funds have been used to support promotional or marketing activities, then a condition of support is the provision of a report on the activities’ success in meeting objectives. DARD, for example, seeks evaluation reports, and the Minister is satisfied with the results of these.
23.9 The Committee had sight of one independent evaluation, dated March 2001, carried out on a LMC campaign funded through the European Quality Beef Promotion Scheme. This is reproduced in Annex D1 of Appendix 3 of this Report. The Committee recognises the evaluation’s conclusions as having been very positive, and believes that information such as is contained in this evaluation should be made widely available and given significant publicity. In this way, stakeholders in the LMC will be kept much better informed.
23.10 The Committee therefore recommends that the LMC should provide prior notice and information about specific promotional activities. It should then provide timely feedback and evaluation of these activities. This clear communication with producers and other stakeholders (through methods recommended earlier in this report) will result in a greater understanding of the benefits to producers and others. This should also apply to existing activity – an example being greater clarity in what is being bought through the LMC’s contribution to the Meat and Livestock Commission.
24. Promotional Activities – Priorities
24.1. In considering its views on the priorities for LMC promotional activity, the Committee took note of the two ‘guiding principles’ outlined in the LMC submission. These reflected firstly upon the fact that Northern Ireland could not produce red meat at a low cost, pointing to the need to ensure as much production as possible is supplied into the highest value markets available. Secondly, the LMC recognises that its marketing function must be at the generic level and that its activities must complement those of the processors and retailers.
24.2. The Committee has no difficulty whatsoever with the first principle. The Beef Report from the Committee’s Debt Inquiry contained several references to the need to secure premium and niche markets. The final part of the second principle is less clear. The Committee accepts that, in the absence of exports to Europe, the premium multiple retailers in GB currently offer the best market for NI beef. It would be pointless to get involved in retailer-related promotion that was at odds with the processors and their customers. However, the Committee believes that this principle should not deter the LMC from activities which may ultimately be in competition with the joint activities of the processors and retailers.
24.3. The LMC splits its promotional activities into three discrete geographical areas: Northern Ireland, Great Britain and international. Funding is distributed virtually evenly among the three.
24.4. The LMC made reasoned arguments in support of its activities in all three areas. The Committee, in considering these activities, finds it easy to understand why producers, involved in the long process of rearing animals from birth to slaughter, may not fully appreciate the point of the LMC’s work. There is no immediate, tangible or direct benefit to these farmers from expenditure in any of the three areas. A farmer’s conclusion[41] that the LMC has failed miserably with regard to promotion, is therefore unsurprising. However, that is not to say that the activities themselves are without merit or indeed that they do not offer quite significant indirect benefits to the farmer.
24.5. The Committee believes that this once again comes down to communication and understanding. Farmers would be quick to agree the importance of securing the next generation of potential consumers as actual consumers of red meat, particularly in the context of a vociferous pro-vegetarian lobby. The LMC reports a productive working relationship with schools, demonstrating the health and nutritional values of beef and lamb. Members of the National Beef Association delegation felt it to be extremely important work, for which the LMC was to be complimented. NIAPA felt that the schools work should continue. The independent evaluation, referred to earlier, was also positive about this work.
24.6. The Committee must therefore conclude that the funds spent on education (two thirds of £400,000) are a necessary investment in the future of the red-meat industry in Northern Ireland.
24.7. The Committee also concludes, however, that there is scope for more tangible marketing in Northern Ireland. The NBA seeks the use of LMC funds for promotion of auction marts. They also see the need for work on domestic retail and catering markets. The NSA wants to see lamb promoted better on the home market, particularly in hotels and restaurants. The UFU has expressed its members’ disillusionment over the promotion of NI beef on the home market in terms of its quality and diversity. The potential market may be relatively small in comparison with the GB multiple retail market. However, the Committee would conclude that the home market offers an opportunity for the LMC to undertake relatively inexpensive promotion that would have positive benefits for the profile of the LMC in addition to the objectives of the campaign itself.
24.8. The Committee therefore recommends that the LMC reviews its Northern Ireland activities, with a view to developing a local promotional campaign to increase the use of NI beef and lamb, both in catering and domestic outlets.
24.9. Turning to the LMC’s activities in Great Britain, there is a reluctant acceptance amongst the producer organisations that the multiple retailer market is currently ‘the only show in town’, and that the LMC has played a part in securing that business. The UFU reflects that “like it or not” NI farmers must work with the supermarkets.
24.10 The LMC advises the Committee that it is vital for this GB retail business that NI beef can use the “British Meat” brand. It is to ensure qualification for this brand that the LMC has agreed to provide £450,000 per annum for 2 years to the Meat and Livestock Commission. Once again this might seem like money spent to no local avail – the brand is not used widely in Northern Ireland. However, the GB market in beef has grown, according to the LMC, by 5% since 1995 and is the only market in Europe to show this growth.
24.11 The UFU has called for more clarity in the LMC’s relationship with the MLC, even though they acknowledge that the relationship has helped the growth of NI beef’s share of the GB market. NIAPA was satisfied that the use of MLC’s expertise and documentation provided value for money.
24.12 The Committee has often heard very justifiable concerns about the difference in prices between GB and Northern Ireland. This is a ‘running sore’ and, in accordance with a Committee recommendation, the Department has it under investigation. However, the LMC points to the price differential between NI cattle over ROI cattle, which they give as 9p per kg or £27 per beast, as the actual benefit of accessing the GB retailer markets. This would equate to a benefit of over £10m per annum.
24.13 The Committee also accepts that retailers can source beef from wherever they choose and it is absolutely vital that the market share is secured. The Committee finds it difficult to argue with the rationale of ‘tapping in’ to an existing promotional campaign. Given the amount of money spent by the LMC, a stand-alone campaign would be small-scale and ineffective by comparison.
24.14 The Committee does not necessarily accept the ‘doomsday scenario’ offered by NIMEA if promotional activity was to be stopped or curtailed. However, it recognises that, in a competitive environment it is almost inevitable that mere maintenance of market share comes at a cost.
24.15 If the GB campaign continues to shift larger quantities of beef through the supermarkets, and NI beef retains or improves its market share of the GB supermarket trade, and the LMC is certain that there is no other way to secure use of the “British Meat” brand, then the Committee must conclude that the expenditure of £450,000 represents good value for money.
24.16 The Committee therefore recommends that the LMC maintains its relationship with the MLC and negotiates an extension to its current agreement.
24.17 The third area of coverage for the LMC’s promotional activities is of course ‘international’. The Committee understands completely that many farmers see no point in ‘export marketing’ when beef exports have been denied them for so many years. Thus, the third nail in the promotional activity ‘coffin’ is hammered home.
24.18However, the industry must maintain a level of readiness for the eventual re-opening of these markets. The Committee’s report into the beef sector recommended that the Department should vigorously continue its direct and indirect actions in supporting the re-opening of European markets. The same must also apply to the LMC and the Committee sees merit in developing the ‘world map’ of the red-meat industry and in brand research. Those merits, however, are difficult to demonstrate and must be kept under careful review.
24.19 There would be a question mark against attendance and support at major international food fairs, where it is not possible to secure immediate business. However, the Committee also accepts that future competitors will be present at these events. Within the independent evaluation, mentioned previously in this report, there was a general recommendation that some type of evaluation is carried out for events that the LMC attends. The Committee would agree that this is particularly important for international events.
24.20 Virtually everyone who gave evidence recognised the success of the ‘Greenfields’ brand prior to the BSE ban. The Committee shares the industry’s hopes and expectations that this brand will once again provide particular benefits to NI beef sales once exports resume and agrees that the LMC should continue its investment in the brand.
24.21 In common with other areas of the LMC’s work, the Committee believes that better representation of these activities to the producer sector may well bring greater acceptance by producers of the rationale for this work. A willingness to sacrifice what might be seen as ‘junkets’ abroad could well lead to greater satisfaction levels but this should be considered against the benefits of participation.
24.22 The Committee therefore recommends that the LMC reviews its international strategy, particularly its attendance at international fairs, in order to identify less costly methods of maintaining the important contacts with potential customers. The LMC should also give serious consideration to skewing resources, in the short term at least, from international to Northern Ireland promotion.
24.23 During discussions on the international efforts, the Committee was reminded that a significant proportion of NI lamb is exported. As part of a review of promotional activities, the Committee believes that the LMC should consider ways of improving promotion of NI lamb. The producer side acknowledges that funds secured through levy of lambs slaughtered are insufficient to mount any significant campaign but the fact remains that lamb is being exported and so the potential for new and better markets should be explored.
24.24 The NSA suggested that something similar to the ‘Greenfields’ brand would work well for NI lamb, particularly as both the Scots and Welsh have successful lamb branding. The Committee considers that the LMC should investigate this possibility, and awaits the results of work due to be commissioned by the LMC on the potential scope for branding Northern Ireland red-meat. This proposed study was referred to by the Minister in her response to the Committee’s Report “Restoring Profit to the Beef Producer”.
24.25 One further lamb-related area is in the promotion of NI pedigree sheep genetics. The NSA reported that the MLC gives assistance to pedigree breeders and the Committee would ask the LMC to consider its position with regard to this.
25. Promotional Activities – Involvement of other Stakeholders
25.1 In taking evidence for the Committee’s first report from the debt Inquiry: “Retailing in Northern Ireland – a fair deal for the farmer?”[42] there was an offer made by a major retailer to participate in new bodies or schemes in which they could offer advice using their knowledge of the market. The Committee recommended that this offer must be taken up but has seen little sign of action on this front.
25.2 The Committee put it to the LMC, DARD and NIMEA that the retailers could make a contribution to promotional activities, as they would benefit from them. DARD acknowledged that retailers benefit from the LMC’s activities but felt that they would be reluctant to contribute. The Meat Exporters demonstrated their narrow viewpoint by attacking the Committee’s lack of “understanding of the trading contract relationship between a supplier and a retailer”. However, the LMC agreed that retailers were willing to participate, citing their collaboration with Tesco in the promotion of Aberdeen Angus beef in January 2001.
25.3 Much was made, by the Meat Exporters, of the money spent by both processors and retailers on promotion. However, the Committee is not interested in this – the Inquiry was into the LMC’s promotional activities, in the generic sense, and the Committee’s desire is to see the expertise available within the major supermarket chains being harnessed to the benefit of the NI industry.
25.4 Despite NIMEA’s protestations that neither LMC nor political approaches should be made to retailers which would affect relations between retailers and suppliers, the Committee recommends that the LMC explores all possibilities of involving retailers and availing of their expertise when planning and undertaking promotional activity.
26. LMC Appointments – Producer (and Other) Representation and Board Size
26.1 The Committee was interested, but not surprised, to note the differences of opinion expressed about the need for increased producer representation on the board of the LMC.
26.2 All of the producer side agreed that the current situation, with two farmers on a Board of seven, did not reflect the fact that producers provided the main element of funding for the Commission, nor the producers’ stake in the overall industry. Indeed, the fact that neither of the two farmers depended on farming for all of his income made the situation even less satisfactory.
26.3 The affiliations of the remaining five members led many on the producer side to the conclusion that the LMC had a bias towards the processing industry.
26.4Unsurprisingly, producers called for an increased representation for farmers on an expanded Board (of eight or nine), with the UFU seeking three and both NBA and NIAPA looking for four full time farmers. Only NIAPA Ruling Council were set against an expansion of the Board.
26.5 NIMEA, as the Committee would also have anticipated, saw things differently. Their view was that the Board should be made up of strong, senior experienced meat industry personnel, who should be able to demonstrate marketing vision and contribute to the marketing potential of the industry. NIMEA’s vision was for two farming representatives out of a board of nine, with three reps from the processing sector.
26.6NIMEA’s rationale for the low farmer representation appears to be that farmers are not the best to be involved in marketing – citing the demise of farmer-controlled marketing boards. The Committee accepts that farmers are not great marketers. However, it is doubtful that a director of a meat processing firm could bring livestock from birth to slaughter and the Committee believes that it is essential to have a balance of expertise on the board.
26.7 The Committee was encouraged that the LMC representatives acknowledged the critical importance of producers being represented and that their view was that an expansion of the board to nine should allow one additional ‘player’ representing farmers’ interests. The Committee accepts that other interests must also be represented. It was stated that the LMC is much larger business than a producer-owned organisation. However, it is also much more than a pure marketing organisation, which seems to be where the NIMEA interest begins and ends.
26.8 The Committee concludes that a producer representation of three to four on a board of nine would be sufficient to allay current fears about under-representation and bias towards the processing industry.
26.9 The Committee also noted two other ‘groups’ which were not represented. There are currently neither women nor consumers/retailers on the board. The Committee believes that it is important for these imbalances to be rectified and noted the Minister’s intention to address the gender balance within the Nolan guidelines.
26.10 The Committee understands that the Minister’s intention is to consult with the Commission and other relevant industry organisations if the Board, as widely expected, is to be increased to nine. The Committee believes that the qualities outlined by the LMC in its submission to the Inquiry are a reasonable starting point from which to ensure that the make up of the board is as required.
26.11 There was some discussion about whether there was a conflict of interest in having the Chairman of NIMEA also on the Board of the LMC. The individual involved saw no conflict – indeed he felt that the ability to makequick decisions without lengthy consultations was a strength. The Committee does, however, understand producers’ concerns that someone so close to one part of the industry may lead the LMC to decisions which are beneficial to that side of the industry. It is the Committee’s view that it would be preferable for board members to hold less influential positions within the meat industry.
26.12 The Committee suggests that a code of conduct for members, detailing the behaviour expected of members regarding their own sector, should be developed and widely published. This would allow onlookers to assess members’ actual behaviour against that expected of them.
26.13 The Committee recommends that the LMC board is expanded to nine with producer representation increased to at least three and preferably four. The LMC, together with DARD, should consider the implications of havingcurrent meat plant directors on its Board. They should also draw up and publish a code of conduct for members regarding their behaviour towards, and contact with, their own sector.
27. LMC Appointments – Method of Appointments
27.1 The Minister made it clear that all appointments to the LMC are carried out in accordance with Nolan principles. As the LMC is a non-Departmental Public Body (NDPB) the Committee accepts that the Minister is bound by these principles and that the Office of the Commissioner for Public Appointments (OCPA) can and will appoint auditors to ensure Departments follow those principles. The Minister reported that auditors have reviewed the appointments to the LMC on two occasions and found them to be in compliance with the principles.
27.2Furthermore, the Committee accepts that the existing legislation requires that the Minister must make all appointments to the LMC. Compliance with principles and legislative requirements does not, however, mean that improvements should not be considered.
27.3 The Committee was somewhat bemused by NIMEA’s call for exemption to the Nolan principles, and their assertion that the principles contribute to mediocrity. NIMEA appears to object to the openness of the system, which allows anyone to apply. NIMEA would prefer to see appointments from nominations, presumably including their own, outside of Nolan procedures. If the Department ignored the Nolan procedures, it would be wide open to criticism from many quarters.
27.4 The UFU also expressed a preference to be able to nominate, but did not comment on the use of Nolan. NIAPA did not wish to see specific groups or associations have the power to nominate.
27.5 The Committee’s understanding of the process is that anyone can nominate anyone for consideration for a public appointment. Provided that all interested parties are made aware of any vacancies, then the point about nomination should be irrelevant. If NIMEA wishes to nominate an individual, then it can do so, likewise the UFU.
27.6 The Committee further understands that the Department should agree a ‘balance of competencies’ required in the board and take into account skills and competencies that are required whenever there is a vacancy on the Board. If managed correctly, this should allow DARD to control the sectoral balance of the board through ensuring that the ‘person specification’ reflects the competencies required for the specific vacancy.
27.7 The Committee believes that the Department should carefully consider the formal qualifications it requires of applicants to be eligible for appointment, to ensure that farmers, or other groupings, are not ruled out unnecessarily.
27.8 The Committee therefore recommends that DARD engages with the Chief Executive and Chairman of the LMC to develop a full ‘balance of competencies’ required on the board. This should reflect the qualities outlined in the LMC submission to this Inquiry. It should also be subject to consultation with the industry and the agreed version widely publicised. DARD should also use this balance of competencies to draw up the specification required for each individual vacancy, so that the balance of skills is maintained. No formal qualifications should be required unless absolutely necessary to a particular vacancy.
27.9 The Committee found it odd that neither the NBA nor the NSA had had any involvement in the appointments process to date, nor had they been given notice of vacancies. NIAPA also reported that they had never been involved in the process. In addition, the NSA said that none of its members saw the most recent advertisement. Despite the Minister’s assurances about how the Department identified the field of candidates, the Committee believes that it is not good enough for farmers to learn of vacancies in the LMC only when appointments are being made.
27.10 The Minister stated that vacancies were advertised in the main Belfast newspapers. The NSA pointed out that farmers were more likely to apply if an advertisement was placed in ‘Farming Life’ or ‘Farm Week’. The Committee agrees entirely and concludes that the Department must make a greater effort to reach a higher number of potential applicants.
27.11 The Committee therefore recommends that future vacancies are advertised in the agricultural press as well as the Belfast newspapers, and that all electronic and other means should be used to ‘trail’ the appearance of these advertisements for a 3-4 week period before the adverts are placed. The Department should also ensure that all producer organisations known to it are informed of forthcoming vacancies.
27.12 The length and terms of appointment to the LMC was another issue which arose from the evidence. The NBA felt that the Board membership should change completely after either one or two years and that there should be no ‘salary’, merely expenses. Their rationale for such a move was that members would not be seen, or consider themselves as, employees of the LMC. The NBA saw no reason that this move should lead to a difficulty in attracting people of the right calibre.
27.13Currently, terms of appointment are for three years. The Nolan principles state that re-appointments should not be automatic, and should involve some form of assessment. They further advise that second re-appointments should be exceptional. The Minister assured the Committee that the Department follows Nolan procedures in re-appointing members. The Department seeks an assessment of the member from the Chairman, covering issues such as attendance, involvement in Commission activities beyond Board meetings and the contribution made to the overall work of the Commission. This appears, to the Committee, to satisfy the Nolan procedures.
27.14 The Committee is more concerned about second re-appointments. The current Chairman has been a member since 1992, appointed Chair in 1997 and re-appointed Chair until October 2002. Two other members were re-appointed from January 2000 and a fourth member has been in the LMC since 1995. If second re-appointments are to be the exception, then it follows that there must, over the next two years, be a significant turnover in the membership of the LMC.
27.15 The Committee recognises the benefits of continuity. However, there are reasons that any board membership should change, and these apply to the LMC. The Committee believes that one re-appointment to the Commission is enough and that second re-appointments should only be made in the most exceptional of circumstances. The Committee suggests that, with up to four members having to step down, and an expected extension of membership of the board from seven to nine, the Department should waste no time in beginning the appointments process to ensure that suitable candidates are available to replace present incumbents.
27.16 The Committee believes that it may be more beneficial to limit the ‘salary’ or fee paid to LMC members. There might be a tendency for producers, or others, to assume that, where members receive a fee from the LMC (over £5,000 per annum) they may feel an obligation to the Minister who appointed them. This perception would be allayed if members’ expenses only were paid. There is, of course, a counter argument, that the fee is an incentive to apply and the Committee can see the attraction to a farmer, for example, to supplement his income through membership.
27.17 The Committee therefore recommends that DARD should review its own non-Departmental Public Bodies, and seek advice about others, to establish whether or not the current salaries paid to members are consistent with similar appointments across Northern Ireland.
27.18 The Committee further recommends that the Department should draw up a timetable for changes to the LMC and begin the appointments process immediately, taking into account the recommendation made earlier regarding the balance of competencies.
27.19 One other suggestion made during the Inquiry was that payments to Board members should be linked to members’ attendance at Board meetings. The Committee believes that this is a sound principle. Members accept the Minister’s reservation about taking account of time spent on LMC activities outside formal meetings. This should, however, prove manageable. The Minister also had a concern that such a rule may have adverse implications in attracting high calibre candidates. The Committee believes that the Board members must be dedicated to their task and that attendance should be expected of someone who nominates themselves to ‘serve’.
27.20 The Committee therefore recommends that the Department introduces procedures whereby payment of salary is dependent upon attendance at Board meetings and/or involvement in ‘external’ LMC activities.
28. General
28.1 There can be no doubt that there exists a negative perception, among many farmers and their representatives, regarding the relationship between the LMC and the processing industry. Whatever the arguments about the necessity of working closely with each other, the Committee believes it is imperative for there to be a clear distinction between the two, and for farmers to be reassured that the LMC’s commitment to them is not compromised by this relationship.
28.2Furthermore, in an era when information has become more accessible and communication is so crucial, it is disappointing to find producers expressing frustration at the LMC’s communication with them. There is clearly a need for the LMC to review its style and methods of communication – the onus is on the LMC to meet its customers’ needs.
28.3Together, these factors point to a need for the LMC to ‘re-invent’ itself in terms of farmers’ perceptions and to demonstrate, unequivocally, its impartiality and independence. Importantly, the LMC’s ‘sponsoring’ Department, DARD, must also enhance its role in monitoring the LMC’s activities, particularly in the supervision of classification standards and in expediting its five-year reviews.
28.4Furthermore, the Committee has concluded that an agricultural forum, in which all elements of the supply chain participate, could improve relationships within that supply chain, and has recommended its development.
29. Funding
29.1 The Committee concludes that changes to the current system of funding the LMC are essential, that they should be made in the near future and that they should be radical. Given that some increase in costs to primary producers is inevitable in the longer-term, the Committee also concludes that the changes must be sensitively managed, with full consultation with, and explanation to, producers.
29.2 Further conclusions are that all those who benefit from the LMC’s activities should contribute to the costs of these activities, that levy on processors must be transparent and that the LMC should not be disadvantaged against ‘competitor’ organisations in other countries.
29.3 The Committee also concludes that a clear need has been identified for a medium to long-term marketing strategy for Northern Ireland red meat, thus justifying the ‘mainstreaming’ of government support. That support should be co-ordinated and integrated through ‘joined-up government’. The Committee’s belief is that this approach, rather than short-term (and piece-meal) project-based one employed to date, will allow strategic development of the LMC’s marketing activities, thus building on successes to date.
29.4 In all parts of the LMC’s operations, the Committee concludes that clear accountability for use of funds is essential and, in terms of producers’ understanding through better communication, could be improved.
30. Classification
30.1 The provision of a classification service is, the Committee concludes, the LMC’s biggest problem. When both processors and producers express concerns about the LMC’s involvement in classification (albeit for very different reasons) the importance of the problem should not be underestimated.
30.2 The Committee concludes that the only way of addressing the difficulty is for a far greater degree of separation to be brought in between the classification service and the LMC’s other activities.
30.3 The performance of the LMC’s classification officers is also questioned by the Committee, not specifically relating to individuals, but to the standards which they are expected to meet. The Committee’s belief that a 20% margin for error in classifiers’ performance is much too great, and higher than in virtually any other job or profession, will be mirrored by many producers. The Committee concludes that the classifiers’ performance must be demonstrably better than this, in order to build producer (and indeed processor) confidence in the grading and payments system.
30.4 That current system is also called into question by the Committee and, it concludes, must be changed quickly. It has plenty of detractors and no ‘champions’ among the industry. Too many grades, with arbitrary and unfair price levels attached to these grades, have brought the whole system into disrepute and all sides agree that change is essential.
30.5 There was also widespread support for the introduction of mechanical grading and the Committee concludes that this must be pursued with vigour by the entire industry, and accepted by the European authorities.
30.6 The Committee concludes, as it has done in previous reports, that the supply-chain relationships must be improved, but that the processors have little desire to facilitate such improvement. It appears to the Committee that the primary producer is under-valued by the rest of the supply-chain, despite the extent of his role in bringing an animal from birth to slaughter. This, the Committee believes, must be addressed in the context of carcase classification as much as in other areas. Improvements are therefore necessary in terms of farmers’ access to grading standards information, to meat plants themselves and to a credible appeals system.
31. Promotional Activities
31.1 The Committee’s main conclusions from investigating this aspect of the LMC’s work must be that there is insufficient understanding of the rationale for the activities and of the activities themselves, and that the LMC must address this lack of understanding.
31.2 The realities of a competitive market are such that market-share is difficult to improve and even to retain. The Committee concludes, however, that these realities must be better explained to primary producers. Without the efforts of the LMC in helping secure the business with GB multiple retailers, for example, the Northern Ireland beef industry would undoubtedly be much worse off than it is. That is not to say that doing business with retailers has resulted in a fair deal for the farmer – the Committee’s earlier report showed clearly that this was not the case – but at least an outlet has been secured. The ways in which the business is retained and the consequences of losing that business, if better understood by the producer, may go a long way towards producer acknowledgement and acceptance of the LMC’s role.
31.3 The Committee could only conclude that the funds spent by the LMC were justifiable in each of the three geographical areas: local, GB and international. The Committee did, however, conclude that more visible work in the home market would have a beneficial effect on producers’ perceptions of the LMC’s promotional activities.
32. Appointments to the LMC
32.1 As another area of contention, the Committee concluded that there was also room for improvement in the way in which appointments are made, in the ways that board members relate to their own sectors and in the make-up of the board itself.
32.2 It was easy for the Committee to agree with those who wished to see better producer representation on the LMC. As a major contributor to the LMC’s funding, the producer sector is absolutely justified in seeking to ensure that its interests are fully understood, acknowledged and taken into account as the LMC agrees its strategy and priorities. The Committee also agrees that a wide range of skills and expertise is essential for a strong board, and that it should not therefore be exclusively farmer-orientated. However, the Committee felt that a stronger and bigger producer representation was necessary to improve the LMC’s credibility amongst producers.
32.3 The Committee considered producers’ concerns related to the appointment of serving plant management to the board, and the alleged ability to exert undue influence on the Board’s policy, in favour of the processing sector. The Committee concluded that the relationship of all members with their ‘own’ sector should be as transparent as possible and be subject to monitoring and control. It also concluded that if the LMC’s working relationship with processors was fully documented and understood, there would be less producer concern over this relationship.
32.4 A further conclusion reached by the Committee was that the sponsoring Department, DARD, could do more to ensure the best balance of skills and expertise is available for selection onto the board. This would be achieved through improving its appointments procedures, particularly in ensuring that a widely accepted set of required competencies is established and understood, and in making vacancies known to a greater number of potential applicants.
32.5 The Committee ultimately wishes to see a board appointed in which all parts of the supply chain have full confidence and in which members are seen to act impartially and independently with a full understanding of the circumstances faced throughout the chain. It concludes that this is possible through a realignment of board membership, a formalisation of relationships with the various sectors and through transparent appointment procedures.
33. The Next Steps
33.1 The Committee firmly believes that implementation of the recommendations contained in this report, aimed as they are at the LMC, DARD, the meat exporters and producers, would bring an improvement to the LMC’s operation and a greater acceptance of the organisation by a larger number of producers.
33.2 The Committee expects the LMC, in particular, to respond positively to these recommendations and, with the help of DARD and others, to bring about change beneficial to the entire red-meat industry in Northern Ireland.
33.3 The Committee would welcome reaction to this Report from any source. If you wish to comment on it please write to the Clerk of the Committee, Mr Paul Moore, in Room 401/D Parliament Buildings, Belfast BT4 3XX or e-mail him at:
committee.agriculture@niassembly.gov.uk
All comments received will be brought to the Committee’s attention.
Proceedings of the Committee
relating to the report
MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Friday 15 June 2001
HELD IN ROOM 135 parliament buildings
Present:Dr IRK Paisley MP MEP (Chairperson)
Mr G Savage (Deputy Chairperson)
Mr B Armstrong
Mr PJ Bradley
Mr B Douglas
Mr D Ford
Mr G Kane
Mr G McHugh
Mr I Paisley Jnr
Committee Inquiry into the Livestock and Meat Commission.
The Chairperson declared the meeting closed to the public at 12.37pm.
Members deliberated on draft findings and recommendations drawn up by the Clerk, based on the evidence submitted to, and heard by, the Committee, and agreed amendment and direction on a number of points.
Resolved:that the Clerk was instructed to proceed with drafting in accordance with the Committee directions.
[EXTRACT]
MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR
AGRICULTURE AND RURAL DEVELOPMENT
Friday 29 June 2001
HELD IN ROOM 135 parliament buildings
Present:Dr IRK Paisley MP MEP (Chairperson)
Mr PJ Bradley
Mr J Dallat
Mr B Douglas
Mr D Ford
Mr G Kane
Mr G McHugh
Mr I Paisley Jnr
Committee Inquiry into the Livestock and Meat Commission.
Members discussed the production of the first draft report into the Livestock and Meat Commission.
Resolved:that a first draft report would be distributed to the Committee at their meeting on 6 July 2001, for members' consideration during the summer recess.
[EXTRACT]
MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR
AGRICULTURE AND RURAL DEVELOPMENT
Friday 6 July 2001
HELD IN ROOM 135 parliament buildings
Present:Dr IRK Paisley MP MEP (Chairperson)
Mr G Savage (Deputy Chairperson)
Mr B Armstrong
Mr B Douglas
Mr D Ford
Mr G Kane
Mr G McHugh
Committee Inquiry into the Livestock and Meat Commission.
Members were provided with the first draft of the report for their consideration over the Summer recess. A member raised the possibility of the Committee taking further evidence as part of the Inquiry in the next session.
Resolved:that the Committee would consider any further evidence received in relation to the Terms of Reference for the Inquiry and decide if further evidence sessions are required.
[EXTRACT]
MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR
AGRICULTURE AND RURAL DEVELOPMENT
MONDAY 17 SEPTEMBER 2001
HELD IN ROOM 135 parliament buildings
Present:Dr IRK Paisley MP MEP (Chairperson)
Mr G Savage (Deputy Chairperson)
Mr B Armstrong
Mr PJ Bradley
Mr J Dallat
Mr B Douglas
Mr G Kane
Mr G McHugh
Mr F Molloy
Mr I Paisley Jnr
Committee Inquiry into the Livestock and Meat Commission.
The Chairperson declared the meeting closed to the public at 9.51am.
Papers to be Published along with the Report
Resolved:that only those Minutes of Proceedings relating to the reading of the Report be published.
Resolved:that all written submissions, including further questions and written answers, be published.
Resolved:that all Minutes of Evidence taken, be published.
Resolved:that agreed memoranda should not be published but that a list of these should be included in the Report and the memoranda lodged in the Assembly Library.
The draft report was brought up and read for the second time, paragraph by paragraph.
The title page (including the draft title for the Report), Contents page and preamble were read, amended and agreed.
Mr Armstrong attended the meeting at 9.56am. Mr Dallat returned to the meeting at 9.57am.
Executive Summary and Recommendations. The Committee agreed to postpone consideration of the Executive Summary and Recommendations.
Introduction.
Paragraphs 1.1 to 1.3 read and agreed
Paragraphs 2.1 to 2.4 read and agreed
Paragraphs 3.1 and 3.2 read and agreed
Response to issues by groups giving evidence.
Resolved:that inverted comas be used throughout the Report when speaking in the first person.
Paragraphs 4.1 to 4.7.1 read and agreed
Paragraphs 5.1 to 5.8.20 read and agreed
Paragraphs 6.1 to 6.4.12 read and agreed
Paragraph 6.5.1 read
Resolved:that paragraph 6.5.1 should be placed in the Promotional Activities section.
Paragraphs 6.5.2 to 6.8.24 read and agreed
Paragraphs 7.1 to 7.3.6 read and agreed
Paragraph 7.3.7 read
Resolved:that paragraph 7.3.7 should be placed in The Provision of Classification Services section.
Paragraph 7.3.8 to 7.8.14 read and agreed
Paragraphs 8.1 to 8.8.8 read and agreed
Mr Douglas attended the meeting at 10.12am. Mr Savage left the meeting at 10.13am.
Findings.
Paragraphs 9.1 to 9.4 read and agreed
Paragraphs 10.1 and 10.2 read, amended and agreed
Paragraphs 10.3 to 10.6 read and agreed
Paragraph 10.7 read, amended and agreed
Paragraphs 11.1 to 11.4 read and agreed
Resolved:that the need for an Agricultural Forum should be included in the Report. New text was drafted and agreed for insertion as an additional paragraph to follow 11.4.
Paragraph 11.5 read and agreed
Paragraph 11.6 read, amended and agreed
Mr Bradley left the meeting at 10.33am.
Paragraphs 11.7 and 11.8 read and agreed
Mr Dallat left the meeting at 10.35am.
Paragraphs 12.1 to 12.7 read and agreed
Paragraphs 13.1 to 13.7 read and agreed
Mr Savage returned to the meeting at 10.45am.
Paragraphs 14.1 to 14.3 read and agreed
Paragraphs 14.4 and 14.5 read, amended and agreed
Paragraph 14.6 read and agreed
Paragraphs 15.1 to 15.4 read and agreed
Paragraph 15.5 read, amended and agreed
Paragraphs15.6 to 15.9 read and agreed
The Chairperson and Mr Paisley Jnr left the meeting at 10.54am. The Deputy Chairperson assumed the Chair at this time.
Paragraph 16.1 read and agreed
Resolved:that reference to the Farm Quality Assurance Scheme should be included. New text was drafted and agreed for insertion as an additional paragraph to follow paragraph 16.1.
Paragraphs 16.2 to 16.4 read and agreed
Paragraphs 17.1 to 17.9 read and agreed
Paragraph 17.10 read, amended and agreed
Mr Dallat returned to the meeting at 11.28am.
Paragraphs 18.1 to 18.10 read and agreed
Paragraphs 19.1 to 19.17 read and agreed
Paragraph 19.18 read, amended and agreed
Resolved:that the Committee should meet at 9.00am on Friday 21 September 2001 to continue and finalise consideration of the Report.
[EXTRACT]
MINUTES OF PROCEEDINGS OF THE COMMITTEE FOR
AGRICULTURE AND RURAL DEVELOPMENT
FRIDAY 21 SEPTEMBER 2001
HELD IN ROOM 135 parliament buildings
Present:Dr IRK Paisley MP MEP (Chairperson)
Mr G Savage (Deputy Chairperson)
Mr B Armstrong
Mr PJ Bradley
Mr J Dallat
Mr D Ford
Mr G Kane
Mr G McHugh
Committee Inquiry into the Livestock and Meat Commission.
The Chairperson declared the meeting closed to the public at 9.23am.
Resolved:that the Report should be entitled "Inquiry into the Livestock and Meat Commission".
Mr McHugh attended the meeting at 9.27am.
Findings.
Resolved:that the new paragraph relating to the need for an Agricultural Forum should have additional text added and become a recommendation. New text was drafted and agreed.
Additional text drafted and agreed for paragraph 14.4
Additional text drafted and agreed for paragraph 15.9
Resolved:that minor amendments would be made within paragraphs 4.1 to 8.8.8 to change remarks from the first person to the third person.
The Chairperson left the meeting at 9.42am. The Deputy Chairperson assumed the Chair at this time.
Paragraphs 20.1 to 20.8 read and agreed
Paragraph 20.9 read, amended and agreed
Paragraphs 20.10 and 20.11 read and agreed
Paragraph 20.12 read, amended and agreed
Paragraphs 21.1 to 21.3 read and agreed
Paragraph 21.4 read, amended and agreed
Paragraphs 21.5 and 21.6 read and agreed
Paragraphs 21.7 and 21.8 read, amended and agreed
The Chairperson returned to the meeting at 9.57 and assumed the Chair.
Paragraphs 22.1 to 22.4 read and agreed
Mr McHugh left the meeting at 10.03am. Mr Bradley attended the meeting at 10.06am.
Paragraphs 23.1 to 23.10 read and agreed
Mr Dallat left the meeting at 10.11am.
Paragraphs 24.1 to 24.7 read and agreed
Mr McHugh returned to the meeting at 10.21am.
Paragraph 24.8 read, amended and agreed
Paragraphs 24.9 to 24.25 read and agreed
Paragraphs 25.1 to 25.4 read and agreed
Paragraph 25.5 read
Resolved:that paragraph 25.5 be deleted from the Report.
Paragraphs 26.1 to 26.10 read and agreed
Paragraphs 26.11 to 26.13 read, amended and agreed
Paragraphs 27.1 and 27.2 read, amended and agreed
Paragraphs 27.3 to 27.5 read and agreed
Paragraphs 27.6 read, amended and agreed
Paragraph 27.7 read and agreed
Paragraph 27.8 read, amended and agreed
Paragraphs 27.9 to 27.20 read and agreed
Conclusions.
Paragraphs 28.1 and 28.2 read and agreed
Paragraphs 28.3 read, amended and agreed
Resolved:that a new conclusion was required to take account of the recommendation relating to the need for an Agricultural Forum. New text was drafted and agreed for insertion as an additional paragraph to follow 28.3.
Paragraphs 29.1 to 29.4 read and agreed
Paragraphs 30.1 to 30.6 read and agreed
Paragraphs 31.1 to 31.3 read and agreed
Paragraphs 32.1 to 32.5 read and agreed
Paragraph 33.1 read and agreed
Paragraphs 33.2 read, amended and agreed
Resolved:that an additional conclusion regarding comments on the contents of this Report should be inserted. New text was drafted and agreed for insertion after paragraph 33.2.
The Executive Summary of the Report was brought up, read and agreed with minor amendments for insertion at the beginning of the Report.
Resolved:that the list of recommendations would be amended to incorporate changes made during consideration of "Findings".
Mr Ford left the meeting at 11.09am.
The Chairperson explained new arrangements for publishing reports and for their introduction to the Assembly.
Resolved:that the draft Report as amended should be the Report of the Committee for Agriculture and Rural Development and that the Committee orders the Report to be printed. The Clerk was instructed to table the Report in the Business office.
Resolved:that the motion "This Assembly takes note of the Report from the Committee for Agriculture and Rural Development on its Inquiry into the Livestock and Meat Commission" should be signed by the Chairperson and tabled today in the Assembly Business Office.
Resolved:that the Committee would seek a further debate on the Report within six weeks.
Resolved:that the Committee would issue a press release, along with copies of the Report to the press and witnesses and that a press conference should be arranged to follow the "take-note" debate.
[EXTRACT OF DRAFT MINUTES OF PROCEEDINGS]
Minutes of Evidence
LIST OF WITNESSES WHO GAVE EVIDENCE TO THE COMMITTEE
EVIDENCE TAKEN ON FRIDAY 6 APRIL 2001 Evidence
Paragraph
Ulster Farmers' Union 1
Mr D Rowe - President
Mr K Sharkey - Chairman-Cattle and Sheep Committee
Mr I Stevenson - Secretary-Cattle and Sheep Committee
Northern Ireland Agricultural Producers' Association 131
Mr N McLaughlin - Vice-Chairman
Mr V Boyle - Vice-Chairman
Mr O Cunningham - Co. Down Chairman
EVIDENCE TAKEN ON FRIDAY 27 APRIL 2001
Department of Agriculture and Rural Development 217
Ms B Rodgers - Minister for Agriculture and Rural Development
Mr L McKibben - DARD official
Mr G McCracken - DARD official
Livestock and Meat Commission 287
Mr D Rutledge - Chief Executive
Mr G Lowe - Chairman
Mr C Duffy - Board Member
Mr M McCoy - Board Member
Mr I Mark - Board Member
EVIDENCE TAKEN ON FRIDAY 4 MAY 2001
Northern Ireland Meat Exporters' Association 414
Mr C Mathers - Chief Executive
Mr C Duffy - Chairman
Mr R Moore - Vice- Chairman
Mr C Tweedie - Past Chairman
EVIDENCE TAKEN ON FRIDAY 11 MAY 2001
National Beef Association 546
Mr H Marquess - N.I. Chairman
Mr J Carson - Vice-Chairman
Mr T O'Brien - Vice-Chairman
National Sheep Association 637
Mr I Gibson - N.I. Chairman
Mr E Adamson - Secretary
Mr S Wharry - Treasurer
MINUTES OF EVIDENCE
Friday 6 April 2001
Members present:
Rev Dr Ian Paisley (Chairperson)
Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Ford
Mr Kane
Mr McHugh
Mr Molloy
Mr Paisley Jnr
Witnesses:
Mr D Rowe )
Mr K Sharkey ) Ulster Farmers' Union
Mr I Stevenson )
1.
The Chairperson: Thank you gentlemen for coming. This is the first part of our inquiry and we want to deal with it as expeditiously as we can.
2.
Mr Rowe: I thank the Committee for what it is doing for the agriculture industry in Northern Ireland in its role as scrutineer. It is good that the Committee is here to scrutinise and question what all of us - the Department, the Minister and us - are doing. We can all go off the rails at time; no one is beyond that. The recent past has been tiring for all of us. There have been many problems. We have had to work longer hours than we thought we would when we were elected, but, at least, we seem to be coming to the end of our current problems. There appears to be some light at the end of the tunnel.
3.
With me today is Mr Kenneth Sharkey, chairman of our cattle and sheep committee. He will cover most of what we want to say. We also have Mr Ian Stevenson from headquarters, who is secretary to the cattle and sheep committee. I shall let them do the talking: why work when you have slaves? There is no point in being elected to office if you cannot delegate responsibility. That is the privilege of being president.
4.
The marketing of livestock in the North of Ireland, to the best possible advantage of the farmers and economy, is a matter dear to everyone's heart. The Livestock and Meat Commission (LMC) is an integral part of the industry. It is a semi-public body, and we can afford to take a look at what it does. If, at the end, there are any other problems not relating to the LMC that you want to raise with us, we will be happy to discuss them, if time permits.
5.
Mr Sharkey: I shall deal with the four questions in your letter. We have submitted a lengthy response on the review of the LMC to the Department, and the Committee will have seen that response. Many of the questions are answered in it.
6.
The first question was on the funding of the Livestock and Meat Commission. Until July 2000, the LMC was funded primarily by producer levy. In July 2000, after discussions with the LMC and ourselves, the processors agreed to pay a levy to the LMC. That levy was equivalent to the producer's levy and was approximately £1 from the producer and approximately £1 from the processor for each finished animal. That is the source of the LMC's revenue.
7.
In the letter, the Committee asked whether we could be sure that the levy paid by the processor would not be passed back to the primary producer. We cannot be sure of that. The only income for a meat processor in Northern Ireland is farmers' money; the only revenue that they receive is from slaughtering and processing farmers' animals. We could argue that we are also paying their water bills, rates and wages. We believe that their coming on board and paying a levy is beneficial.
8.
Classification is, undoubtedly, the biggest issue at all producers' meetings and in all conversations with processors and producers. We should remember that the LMC does not set the standard of classification. The LMC carries out classification work, but is supervised by the Department of Agriculture and Rural Development, which sets standards to meet EU regulations. If there is variation in classification, the Department of Agriculture and Rural Development monitors the work and should pick it up at the outset.
9.
As classification is such a controversial topic, the LMC would get rid of it tomorrow if it could. It is not a profit-making exercise, and it has given the LMC a lot of bad publicity. However, we must have classification as stated in EU regulations. In our meetings with farmers from throughout Northern Ireland, we find that the most dissatisfied producers are those who slaughter animals only occasionally. Those who slaughter animals regularly are most satisfied, because they are more skilled at selecting stock, feeding stock to the desired finish and slaughtering at the correct stage. One of our major producers, who kills cattle regularly, said that he had never heard of an animal changing its classification between the time that it left home and its arrival at the factory; that is another issue.
10.
We were also asked about how we compare with Great Britain and the Republic of Ireland. That is always a bone of contention. Some of our producers have slaughtered cattle on the mainland. Some have said that classification there was better suited to producers; others said that it was more severe there and that it was better here. The processors are in the same situation: some say that the standard is tighter there, and some say that it is easier. The conclusion is that any system in which human beings are involved will have some variation. There is variation in the system, and we must accept that. We have been reasonably satisfied in the past year or 18 months that classification has been reasonable. About 18 months to two years ago, there was an EU inspection and, undoubtedly, there was a tightening of standards at that time - not by the LMC but by the Department of Agriculture and Rural Development. The Department tightened the standards, and the LMC had to administer them.
11.
Some work has been done in the Republic of Ireland on objective mechanical methods of grading. It was a fairly large operation, partly funded by the EU. The results were interesting, but we feel that it is probably too early to introduce such machines in Northern Ireland; producers would be disappointed and would complain bitterly. The machines are designed for EU countries that produce a lot of bull beef, and they have great difficulty dealing with the fatter type of animal that we produce. Unless further work is done on the machines, it would not be to the producers' advantage to implement them.
12.
There was a question about whether the commission's promotion activities were good value for money. That is a difficult thing to assess. People have complained about the promotion of lamb in Northern Ireland, but the LMC receives only a small amount of money for that. Many of our lambs are exported live to the Republic of Ireland for slaughter, and only about 400,000 lambs are slaughtered in Northern Ireland. At 10p per lamb, the commission receives about £40,000 per year, which does not help much with promotion. Such a sum would barely pay for more than one full-time member of staff. Indeed, the commission is working to promote lamb on a restricted budget. There is more money available for meat.
13.
It is difficult to say whether promotions are more beneficial to processors or producers. As producers, we believe that opening up any market is good for us. The LMC is not directly involved in arranging prices with customers and producers, but if it introduces a processor to a specific market, we are at the processor's mercy as regards the price that he feels is reasonable. We accept, however, that promotion must include the processor and the producer. If the processor does not have a market, we do not have a market. If we have a market, we need a processor to process the produce.
14.
More could be done. Until recently, all the activities of the LMC have been paid for by the producer and, to some extent, the processor. It is a limited amount of money, in comparison with that paid to the Meat and Livestock Commission (MLC) on the mainland. The MLC's levy per animal is about £4 per head, giving it four times the money in the kitty that the LMC in Northern Ireland has.
15.
Over the years, there have been complaints that farmers were not represented properly on the LMC board. We agree that there should be three or four farmers on the board. We realise that if there were nine farmers sitting on the board, the promoting activities for beef would not be very successful. We farmers accept that we are poor promoters. We would like to have a good input into the LMC and its activities, but we realise that there must be outside expertise on the board to help with the promotion of the industry. We would be happy enough with eight or nine members, but we would not want the board to grow massively.
16.
I have worked closely with the LMC and have attended many meetings about its activities. I am reasonably satisfied with its work.
17.
The Chairperson: As constituency representatives, we hear many complaints about the classification service. There seems to be too much subjectivity in the classification. All members of the Committee mentioned that point when we decided to start the inquiry. If only one man makes the decision, that is very subjective. I do not know how we deal with that. I appreciate that it is a difficult issue, but the point has been made strongly to us that people feel that some animals are appraised more fairly than others.
18.
I note the point that people who regularly take cattle to slaughter seem to be less worried than those who turn up only occasionally; perhaps, the fellow knows them.
19.
Mr Sharkey: I would take a different view on that. Somebody who kills cattle every week selects his cattle better. It is the same with lambs. Someone who is killing lambs every week can select lambs much better because he is used to handling them.
20.
Farmers would not complain so much about classification if it were not closely linked to the payment structure. A farmer is not too worried whether an animal is classed as R3 or R4L if he gets the same price for it. Therefore, the problem is not classification; it is the payment structure. We have negotiated with processors over the years to get the payment structure changed. If we could have a meaningful change in the pricing structure, classification problems would quickly disappear.
21.
Mr Rowe: Classification is grand for the identification of a type of animal or the payment that that animal is worth. In 1998, just after I got this job, the LMC did a piece of work for the union that showed that the variation between some of the grades was only 1%, although the cut in price was 6p. The pricing structure has been there from the time of intervention. Intervention has now gone, and we should consider the pricing structure, rather than the grading structure, perhaps.
22.
The Chairperson: Is the classification the basis of the pricing structure?
23.
Mr Rowe: Yes, although the position is not exactly the same in other parts of the UK and in the Republic of Ireland, where it moves on a different scale. Here, the 6p per grade difference is mandatory. The union managed to get O+3s brought up a grade, and that was worth about £600,000 to farmers. It took a lot of effort and a lot of meetings; Kenneth Sharkey and I did the legwork. More changes of that kind could help.
24.
Mechanical grading, as Mr Sharkey said, has yet to be fully developed. However, there has been an interesting development in Australia, where meat is sold on taste, not on grade. The consumer does not know when he sits down to eat roast beef, steak or mince whether the animal was R3 or O+4L, a Friesian bullock or a Charolais bullock. If it tastes good, he will come back for more; if it does not taste good, he will buy pork or chicken the next time. I have talked to members of the Australian board on two occasions. They gave three of us, including our pigs chairman, a run through their work. It was very interesting, and people in Northern Ireland will want to follow up on it. We can sell on taste. Nobody sees whether the animal is black and white or what the grade is, but if it tastes good, people will come back for more.
25.
Mr Dallat: There would be a lot if interest in the job of taster.
26.
Mr Sharkey: A conference on selling on taste and eating quality has been postponed because of the foot-and-mouth outbreak. Members of the Committee will be invited to attend when it has been rescheduled.
27.
The Chairperson: The classification is meaningless to the buyer. The housewife buying meat in the store would not know anything about it.
28.
Mr Rowe: It is meaningless to the housewife, but the supermarkets, in particular, use it to buy meat. They are strict about what they buy - U3, R3, and 10% O+3, say - and, if they get more than 10% O+3, they fine us.
29.
Mr Sharkey: Grading gives an indication as to the yield of meat.
30.
Mr Paisley Jnr: That affects the price that the consumer pays. The supermarkets buy at that grade so that they can say that they are selling the best quality meat.
31.
Mr Sharkey: To some degree.
32.
The Chairperson: I must remind everyone that we are all on the record. The Hansard report of proceedings will be sent to you for your information.
33.
How would the taste idea be developed?
34.
Mr Stevenson: It is quite complicated. Variables are used to define the type of meat and its quality for frying, stir-frying or oven cooking. Meat is graded according to three different categories. It could be steak meat or meat from poorer quality cuts, but it is all defined according to eating quality. That is the new system that is being talked about, and there will be a meeting to discuss it in the near future.
35.
The Chairperson: When I was a lad, there was good frying meat, which does not seem to be on the market today at all. That frying meat was delicious and was one of the culinary basics in the ordinary person's home. Rich people might have opted for other cuts of meat, but the ordinary person bought good frying meat, which tasted great. I suppose that that had to do with the feeding of the animal.
36.
Mr Sharkey: It is fairly complicated. There are many factors in the grading, such as age, sex and breed. The advantage is that there would be only three types of meat on sale. Some of the cuts that we sell at a lower price are from good eating quality meat and would reach a much better price. That would be an advantage.
37.
The Chairperson: We would be anxious to have further information on that interesting point. We have had many representations on the matter of classification.
38.
The union has already submitted a paper as part of the five-year review being undertaken by officials from the Department of Agriculture and Rural Development and the Livestock and Meat Commission. Have you had any response to that paper?
39.
Mr Stevenson: We forwarded a copy of our submission to the review to this Committee because it also answered most of the questions that the Committee had asked. We have had no further feedback from the Department of Agriculture and Rural Development.
40.
The Chairperson: When will you have the Department's response? It would be useful to know its reaction to the union's submission.
41.
Mr Sharkey: It was to be published some time ago.
42.
Mr Rowe: This is a five-year review, but we reckon that the answers will come back in ten years. It will cover the period to 2005.
43.
The Chairperson: It would help the Committee if you were to enquire when the response from the Department of Agriculture might be available. That would allow us to deal with any matters that arose.
44.
Mr Douglas: The farmer is more concerned with what he receives for his animal than with the grading, so it is important that something be done to the pricing structure. I live exactly half way between Foyle Meats Ltd and WD Meats Ltd, so we can decide where to take our stock. One of our neighbours is a good beef producer, and he split his cattle, sending some to Foyle Meats Ltd and some to WD Meats Ltd. On the day, there was a big variation in grading, and I am in no doubt that differences occur. My neighbour did not pick out the cattle specially - all his cattle are fairly good. There is definitely a problem there. It would be fine if we could do away with the grading system and devise a better pricing structure.
45.
Mr Sharkey: We accept that there is some variation from day to day and from grade to grade. We are human beings, and such things will happen. That situation will not improve much until there is a different system. Moving responsibility to another organisation will not eliminate those differentials.
46.
Mr Douglas: My neighbour sent cattle to that abattoir over a period of time and it changed over that period. Sometimes he went back to the other one and received better prices. That must be dealt with.
47.
Mr Paisley Jnr: We talked about a mechanical grading scheme. In the poultry industry, Moy Park Ltd uses a photographic grading scheme that grades birds in a split second. Can that be done with other livestock?
48.
Mr Sharkey: Yes. The mechanical grading system that we talked about uses that type of machine. They were designed for mainland Europe, where a lot of lean bull beef is processed, and they can assess the meat yield of the carcass with reasonable accuracy. The fatter carcasses that we deal with tend to throw the machines off and reduce their accuracy. The purpose of the mechanical system is to calculate the yield of meat on a carcass - be it 58% meat yield or 60%. That is the big advantage; farmers are paid according to the amount of meat produced by the animal.
49.
Mr Paisley Jnr: Do the benefits of the Livestock and Meat Commission's classification scheme go to producers, processors or consumers?
50.
Mr Sharkey: It is not in the interests of the LMC to make the grading system advantageous to producers or processors; it does not set the standard. The person who awards the grade on the day is supervised by officials from the Department of Agriculture and Rural Development, and he must answer to them if he awards the wrong grade. The Department of Agriculture and Rural Development monitors the standard. It is of no benefit to the LMC to make the system fluctuate one way or another. Our understanding with the LMC is that the producer is given the benefit of the doubt if there is any debate.
51.
Mr Rowe: The Livestock and Meat Commission's standards are monitored by the Department of Agriculture and Rural Development. The figures were about 7% off the mark when they were last assessed - I am almost certain that it was 7% - and it was all found to be to the advantage of the producer, not the processor. Who gets the benefit at the end of the day is a subject for debate.
52.
Mr Savage: Is the time coming when factory buyers will come into the yard or the pen and simply offer so much money per kilo? I do not think that that situation is far away; buyers have been doing that over the previous couple of weeks. There is no point in the farmer complaining after the animal has left the yard. A farmer will know how much he is getting per litre for his milk before it leaves the yard; it seems right that he should also know how much he is getting per kilo for his beef.
53.
I would agree that, sometimes, there is as much difference between graders as there is between day and night. A Department official told the Committee a few weeks ago that what he would judge with his eye would be different to what we might judge with ours. Ultimately, the farmer is the fall guy. The difference in grading can mean as much as 10p per kilo, and that is not on.
54.
Because of the extra grades on beef in Northern Ireland, a farmer can put his cattle on a lorry and take them to Scotland, and, after all the expenses are taken into account, he will still be £40 per head better off by doing that. Surely, that is wrong. Whose fault is that? Is it the Livestock and Meat Commission's? I do not want to fall out with them. Nevertheless, the farmer is entitled to a fair share for what he produces; he is not getting that.
55.
Mr Sharkey: We do not have a problem with factories buying cattle in the yard at a price. However, persuading them to do that is a problem.
56.
Mr Savage: They have been doing that in the past week or two.
57.
Mr Sharkey: We accept that, at times, it might be worthwhile to take cattle to Scotland. However, if there is always such a big differential, why are larger numbers of Northern Ireland cattle not taken across?
58.
Mr Savage: That is open to question.
59.
The Chairperson: I failed to give members of the Committee the opportunity to declare an interest. Anyone with an interest should raise his or her hand.
60.
The classification system is hurting farmers. That matter is raised with me everywhere I go. The system is subjective; what does a man see when he looks at cattle? People who take cattle in regularly might not feel that the system is too bad, but a man who does not come so regularly might feel that it is poor. Do people work on the basis that they have dealt with a man's cattle before and knows what they are. I do not understand - perhaps you could explain - how the official from the Department of Agriculture and Rural Development can judge on the matter.
61.
Mr Rowe: I will answer the first part of your question. Usually, the men who come in every week with cattle buy stock. They buy their stores and feed them up. Many of them buy their stores to a standard; for example, they might want a bullock that will die when it is in category R3. They buy them that way.
62.
I breed cows and calves and kill some of those calves. I must take what the cow gave me to the factory. I sent in a trailer-load of cattle - six animals at a time - two weeks ago. I thought that they were O+ or better, but one of them was graded as an ordinary O. Given the problems with foot-and-mouth disease, by the time that I got my paper back from the grading, there was no point in appealing it. At that stage, the animal had probably been eaten, although it probably did not taste too good, for it would not have had long enough to hang. That is the difference. Sometimes, those of us who are feeding our own stock have to sell. We might put six animals in the trailer, five of which are good, fit cattle. The expenses are the same for five as for six, so we put the sixth one on and end up getting a dog of a grade. I got £374 for a bullock for which I had expected to get £474. If I had been there, I would have pushed for a better grade.
63.
Mr Paisley Jnr: Does it ever go the other way?
64.
Mr Rowe: Yes, sometimes prices go down.
65.
Mr Paisley Jnr: Would you sometimes get more money for a beast than you expected?
66.
Mr Rowe: Yes. I got £585 for a couple of beasts in that load; I did not think that I would get quite as much for them. At the end of the day, I was a wee bit lighter than I thought, but not much. That is how the difference comes in. I do not think that it is collusion as such; it happens because the farmer who comes in regularly does the job better.
67.
The Chairperson: What measurement does the official from the Department of Agriculture and Rural Development make?
68.
Mr Sharkey: He makes an eye judgement as well.
69.
Mr Rowe: He goes through the chills every so often to check the day's work.
70.
Mr Armstrong: We know that we have a lot of grades and that there are many variations in prices. I do not mind how many grades there are, as long as the price is good enough. Is there too much variation in price? Would it not be better to have a simpler pricing structure?
71.
Mr Rowe: I would not like to add up the time that Mr Sharkey and I have spent since August 1998 going round the meat exporters pushing that point of view. In February 1998, there was a change in the grading; EU officials came over and tightened things up. We maintained that the cattle had not changed, just the grading. We would like to enlist the help of the Committee in exerting pressure to have the number of payment bands reduced. We have had some success in moving the grades around, but not as much success as we would like.
72.
The Chairperson: Our beef report recommended that there should be fewer bands, but it was not heeded.
73.
Mr Sharkey: We could lose a lot of time discussing classification. Classification is not a problem - the payment structure is the problem. If we could get the processors to pay more fairly, the classification problems would disappear.
74.
Mr Rowe: The Committee's report was obviously not read or heeded. It may take some pressure from the people who now have power to make people consider the issue again and do things differently.
75.
Mr Armstrong: We know that every penny that goes to the LMC comes from the proceeds of the sale of animals. Should there not be funding from some other source?
76.
Mr Sharkey: We believe that there should be lots of funding given to the LMC to promote beef. The Industrial Development Board receives a large amount of money to promote job creation. The LMC receives some promotional money from Europe, but the sums are nominal. Any source of revenue for promoting beef, lamb or our produce would be welcome.
77.
Mr Armstrong: Any resources that would take the extra expense from the sale of beasts would help.
78.
Mr Kane: I want to ask about aitchbone hanging. Does the Ulster Farmers' Union feel that cattle carcasses should not be hung in that form until producers have been made aware of - and have accepted - the grade?
79.
Mr Sharkey: Aitchbone hanging is a problem, as far as appeals are concerned. It is stipulated by purchasers that the animals be aitchbone hung immediately. It is difficult to tell people who are buying your product that you will not provide it in the way that they want it. We all know the power of the supermarkets, and that is their request. It creates a problem with appeals.
80.
Mr Kane: Is it possible to develop a branding system to complement the farm quality assurance scheme (FQAS)? How can more applicants be attracted to the FQAS if the Livestock and Meat Commission raises the cost to producers? What are the odds that levy costs will not be passed back to the producer? Is there a need to enforce FQA standards of production in all European Union States?
81.
Mr Sharkey: I have spent a great deal of time in the past six or nine months on farm quality assurance. We are in the process of accrediting our FQAS to bring it up to European normative standard EN45011.
82.
We have set up the Northern Ireland Food Chain Certification (NIFCC) body. We hope that it will be an umbrella organisation that will embrace farm quality assurance for beef, lamb, milk, poultry and pork - one inspection per farm rather than the current four or five. Each scheme would be run independently.
83.
There has been much debate about membership of the FQAS and so on. As I have explained at umpteen meetings with farmers, the new proposal is that there will be a yearly membership fee of approximately £35. I do not know of any club of which membership is totally free. People have a notion that the FQAS was free until now; it was not. Farmers have paid the full running cost of the FQAS since it was set up in 1991. It was funded from surplus money in the classification fund. Each farmer paid his contribution to the FQAS each year. The surplus in that fund has been depleted, and we must move towards an alternative arrangement for funding. Until now, the producers have funded the entire scheme. We have negotiated with the processors, and they are prepared to provide half the funding. The proposed £35 membership fee is really only half the cost.
84.
Primary producers tell me that they do not want to pay £35 and that the money should come from the finished animal. Why should a finisher pay for a farm to be inspected for quality? Surely, each person who wishes to be a member of the FQAS must take some responsibility. We must also accept that the FQAS is voluntary, and no one is compelled to join. At the moment, 50-60% of producers handle 80-85% of the cattle in the scheme. After the foot-and-mouth regulations are lifted and we return to normality, the FQA will be a necessity: there will be no choice.
85.
Mr Kane: The FQAS has been not a viable proposition for farmers at all - it is nonsense. What is the UFU's genuine opinion of the FQAS?
86.
Mr Sharkey: The simple fact is that, if we do not have FQA animals today, supermarkets will not buy them. Perhaps it is nonsense; many things in agriculture are. Nonetheless, if an animal is not deemed to be farm quality assured, we do not have the same market for it.
87.
Mr Kane: Would you agree that the scheme is being abused?
88.
Mr Sharkey: Yes.
89.
Mr Ford: I should like to shift the focus to promotion and marketing. The paper that the union submitted a year ago said that the LMC had carried out its marketing duties well until the BSE crisis but expressed considerable reservations about its achievements since. Can you be more specific about that? Are we getting value for money? What is the relationship between the LMC and the Meat and Livestock Commission (MLC) regarding promotions in Great Britain?
90.
Mr Sharkey: In 1996, when BSE broke out, the mat was pulled from under everybody's feet and everything changed. At that stage, we were exporting a lot of meat beyond Great Britain, and producers in Northern Ireland were receiving a higher price than those on the mainland, because of those export markets. Then, the whole situation changed and we had to buy our way back into the English market, which was the only market left for us.
91.
The situation on the mainland is complex. The MLC promotes British beef and was not particularly happy about promoting British beef so that Northern Ireland processors could fill the market. There was an agreement between the LMC and the MLC that the LMC in Northern Ireland would give some money towards promoting beef on the mainland. I am not exactly sure about the mechanics of that.
92.
The LMC has worked reasonably well. We must accept the fact that consumers shop in supermarkets. We might not like the supermarkets, but if they have a demand from the consumer, they will buy our produce. Whether we like it or not, we must work with them. The LMC has made a reasonable job of securing contracts with United Kingdom supermarkets that we did not have prior to BSE.
93.
Mr Bradley: I thank the Ulster Farmers' Union for the role that it played last week in getting the problems in Newry and Mourne sorted out.
94.
Mr Rowe: The thanks must go to my deputy and our director of commodities; it fell in their lap. They were there when it started, so I let them be there at the finish.
95.
The Chairperson: You were glad to delegate.
96.
Mr Rowe: On one occasion, I told them to extricate themselves from the problem, but they carried on - with good results.
97.
Mr Bradley: You said that the Department of Agriculture and Rural Development monitored standards. Can LMC classification staff operate independently of the influence of processing plant management? How does the number of price categories compare within the confines of the meat plant with the range of prices used when the meat is sold on?
98.
Mr Rowe: We will answer the second part of your question first. We have no documentary evidence to show what way they sell it on. If something is cut up, put in a bag and sold on as processed meat, we need to know where it came from. It is difficult to know whether mince comes from a U3, a O+4 or a P5 and whether there is a difference in the price.
99.
We hope that processors do not have influence over grading standards. The Department of Agriculture and Rural Development should make sure that it polices the process properly. I know that people say that it happens; I have no knowledge of it one way or the other, and I have been involved in the business for some time. I hear it said sometimes, but it is hard to prove.
100.
Mr Dallat: The enormous amount of goodwill that the union has generated extends well beyond Newry and Mourne. In the area that I come from, there is great admiration for Mr Rowe, Mr John Gilliland and others who have handled the crisis so well.
101.
How far does the union get involved in the LMC's promotional work? Is that promotional work of most benefit to the producers that you represent or to other elements in the food chain, such as the processors? Do the retailers exploit the grading system in any way? I accept that the grading system does not benefit consumers much, because they are interested in taste. Do the large supermarkets exploit the grading system to keep prices down?
102.
Mr Sharkey: It is possible that the supermarkets exploit the grading system. We need a classification system for regulation. The supermarkets have a specification within which cattle should be placed.
103.
I am a member of the red meat strategy group that was set up a couple of years ago. It has some money for promotion, and the UFU has some influence on it. To educate producers and let them see what happens with classification in other places, some producers could, if members of the farm quality assurance scheme, go to various places - maybe other countries - to get an insight into what happens throughout Europe. That should be beneficial. We have some input into promotion, but the board of LMC normally looks after it.
104.
Mr Dallat: Would you like to have more input into promotion?
105.
Mr Sharkey: One of our members sits on the board, but we would be happy to have more input into promotion. If there were three or four farmers on the board, they would have more input.
106.
Mr Dallat: I think that there should be.
107.
Mr Rowe: There are few people around who have done as much work on the matter as Mr Sharkey. He sits on the board and on a number of committees of the LMC. He has done good work for his fellow farmers. There are few who know as much about the matter as he does.
108.
Mr Sharkey: I receive no financial benefit from the LMC. I receive no money of any kind. I hope that I did not create that impression.
109.
The Chairperson: It is not an office of profit under the Crown.
110.
Mr Rowe: It is not an office of profit under anything.
111.
Mr McHugh: I acknowledge the union's work in the recent difficulties experienced by the industry. However, I do not agree with the Minister's accolades for others who represent farm organisations. You said that you were generally satisfied with how the LMC does business. Some of the people on that board are well-off people who are attached to as many boards as there are days in the year.
112.
The finishers buy the best quality meat. Processors or the meat plants will see the man who brings in the odd animal as an easy target. We have been talking about quality assurance for years, and we are no better off. Quality assurance is tied to price. The prime motivator for everybody involved is price, take-home pay and returns, and nobody knows that better than Mr Rowe. Farm quality assurance has not occurred, and that is affecting my part of the country - and your part of the country - more than anywhere else.
113.
The current foot-and-mouth problems mean that farmers cannot even sell their stores, and they are the only things that they normally have to sell. We must get this right. We talked about consumers and what they want; they want the cheapest price. There is little labelling to tell people where the product comes from or what is in it. Big Mac burgers can come from Holstein meat, and McDonalds will sell them for as high a price.
114.
The question of grading is a big one. How can we get to the point where the processors do the necessary marketing? I do not believe that they are doing it. Every outfit should have a marketing strategy, and the nearest outlets are, obviously, across the water. Local farmers are having difficulties, but we have not got a large number of animals, and we should be able to make a better job of marketing the product. Our product is a saleable product that is needed now. We should not have a mishmash of bad breeding cows. We talk about using taste as the basis, but nobody has directed us towards Aberdeen Angus.
115.
Mr Rowe: I am part of the community that net exports stores. We are considering ways of moving those stores. We may come back to the Committee for help with that.
116.
The quality of animals has given us a lot of worry recently. Farmers are getting around half of the end-price in the brown envelope, as we call it. Many farmers go out to work because agriculture is not giving them enough income. That is common throughout the country. It is a lot easier to have an easy calving bull, sell the store for what you can get and make it up in the brown envelope or in the wage packet at the end of the week. The idea of high quality is sliding down the scale, and we will have a problem when the whole system becomes profitable once again. When men are able to return to meaningful full-time farming, there will be a push towards higher quality. I am as guilty as any other man of keeping a mishmash of cows instead of breeding through to the best. It is hard to get a good system for breeding good suckler cows, and it always seems to be the good bull calf that dies at birth.
117.
There must be promotion of beef. We must promote today's product in the best possible way. We may have a better product and be in a different situation five years down the road. We were in an entirely different situation five years and one month ago, just before BSE. We do not know what the situation will be in five years; we must take what we have and push it as best we can. We are trying to do that.
118.
Mr McHugh referred to the board of the Livestock and Meat Commission. I believe that any board should be selected on its merit and its ability to do the job. Any promotional board, particularly in the agricultural world, must not be too heavily weighted with farmers; it must have marketers and those who understand the commercial world. The Ulster Farmers' Union believes that the Livestock and Meat Commission needs more farmer representation because, at the moment, it is heavily weighted in the other direction. It needs people who know the market and, perhaps, some people who know the political field, because marketing any foodstuff involves politics.
119.
Mr McHugh: If the 6p difference does not go to the farmers, it will be available for sales. The promotional people could spend a lot more on the sales themselves, rather than looking for funding for marketing from elsewhere.
120.
Mr Sharkey: If that 6p does not go to the farmer, it goes to the processor.
121.
Mr Rowe: The Livestock and Meat Commission (LMC) has no more money than the money that the industry puts in. They are accountable; their accounts are available to us all every year to see what they do with that money. If they want to get more money for sales or promotions, they must take it off one end or the other.
122.
Mr McHugh: They should speak to the processors.
123.
Mr Rowe: The processor has no other spot than you or me - either the market at that end, or you and I as producers.
124.
Mr Savage: I listened carefully to what the president said about the money. There is the LMC, the Meat and Livestock Commission (MLC), which has nothing to do with Northern Ireland, and the Northern Ireland Meat Exporters' Association (NIMEA). Is there any call for both the LMC and NIMEA? I do not think so. The farmer is, ultimately, the fall guy. There may be a conflict of interest, but it all comes down to cost. 'Farmers Weekly' carried a story about an independent survey done by a college in England. The survey showed that the animal making the most profit was the Friesian bullock. I like to see continental cattle, but the nitty-gritty is profit.
125.
Mr Rowe: The LMC and NIMEA are entirely different bodies; they should not be confused. NIMEA is the collective body of the meat plants; the LMC is a different body with different responsibilities, which answers to different people. We could not afford to let those two bodies amalgamate.
126.
One of our great worries is that it looked as if the EU might push in the direction of the Friesian bull. The Friesian bull starts off as worth virtually nothing, but the beef-bred bull starts off with a price. The Friesian bull is a by-product of the dairy industry. If we want to produce our beef as a by-product of the dairy industry, we can wave goodbye to our quality.
127.
Mr Sharkey: Primary producers must remember that, at this moment, they are making no contribution to the LMC; only the beef finishers do. We might think that the meat processors and exporters have done a bad job over the years, but we must look at the other side of the coin. Our counterparts in the Republic of Ireland have had the world at their feet and have been able to export beef throughout the world during the past five years, yet their prices are worse than ours.
128.
The Chairperson: We did not get to the end of our questions. We will write to you about them, and, if you would answer them, it would be very helpful to our inquiry.
129.
Mr Rowe: We would be delighted to receive questions from the Committee, in writing or by telephone, at any time. We are always available to help the Committee in any way, either as individuals or as a body.
130.
The Chairperson: Thank you for attending today.
MINUTES OF EVIDENCE
Friday 6 April 2001
Members present:
Rev Dr Ian Paisley (Chairperson)
Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Ford
Mr Kane
Mr McHugh
Mr Molloy
Mr Paisley Jnr
Witnesses:
Mr N McLaughlin )
Mr V Boyle ) Northern Ireland Agricultural
Mr O Cunningham ) Producers' Association (NIAPA)
131.
The Chairperson: As you know we are dealing with the Livestock and Meat Commission (LMC) issue and we have questions to ask, but first we will hear the statement from Mr McLaughlin.
132.
Mr McLaughlin: We welcome the chance to make representations to the Committee. We have given you a submission, and we would like to move to questions and answers. The meeting that we held to discuss the Livestock and Meat Commission was fairly supportive of the LMC's role as a referee. We would like to see progress in marketing. The market return for our product is not enough to justify our production costs. However, things do not happen overnight, and we appreciate your concern and your inquiry. We will answer any questions that you have.
133.
The Chairperson: All members of the Committee receive representations from farmers about the classification system. The farmers think that the system lends itself to abuse, because it rests on a subjective decision by one person on the classification of the beast. Farmers feel that that is unfair and have lobbied us strongly about that. There is also the question of pricing. People buying meat from the butcher know nothing about classification; they look at the price.
134.
We feel that, prima facie, there is unfairness in the system. We are informed that a Department of Agriculture and Rural Development official is also present at classification, but his eye is the same. If there is a difference of opinion, they might argue it out, but that is not really a good way to do things. We have also heard a large number of people saying that there are far too many classifications and that the number should be reduced.
135.
Mr McLaughlin: The EUROP range is the accepted European standard. I accept that everybody's perception is different and that, undoubtedly, there is variation within grading. No two graders can grade the same item in exactly the same fashion. They will probably arrive at the same grade but there will be differentiation at the ends of the spectrum. Also, a farmer's perception of the grade that he should achieve may not be realistic. We have farmers who slaughter cattle every week, observe them being graded and would be fairly upbeat about the grading system. However, a farmer who slaughters perhaps once a year might not be so objective and would probably feel aggrieved at not achieving the grades that he feels that he should have achieved.
136.
Twenty-five grades is a large number to try to identify in a 20-kilogram carcass. That is a particular issue with sheep. However, the issue is not grading; it is pricing - pricing according to grade. We have been lobbying for grades and prices to be grouped into three to four zones. We could do without one of the grades, possibly the O+ grade. We could have the scale going from the poor carcasses - the Os and the Ps - to suckler beef, with an adjustment in price. There would be better economic returns from the better grades, so there would be a gap between the R and O range. Pricing is the issue, and there is variation between graders.
137.
The possibility of using a grading machine is being investigated. A machine could be subjective in grading carcass fat, as is the case with pigs, but it cannot provide exact confirmation of the animal. We will wait and see what develops.
138.
Mr Boyle: Many sheep farmers say that sometimes they stand beside the grader while he works. He could be in great form - maybe, he is whistling - and the grading is no problem. Then, everyone goes for a tea break and a different grader comes out. This fellow stands with his head down and does not speak. The farmer starts to notice that he is getting R4s and U4s, even though the lambs come from the same flock, and he gets cross at his grading results. We cannot get away from that; it is just human nature. A fellow can be in good form one day and bad form the next.
139.
I am involved in the Causeway Coast lamb group, and we tell our farmers to go to see how lamb is graded. If they have a bad day, we want them to learn from that, go home to the farm and pick the lambs earlier next time. Farmers are reluctant to take a few hours off to go to a meat plant to see the lambs being graded, but it would solve a lot of their problems if they did.
140.
The Chairperson: The previous witnesses said that farmers who have a lot of cattle going through the grading process do not usually have many complaints. However, a farmer who does not go through the process regularly may find himself in a bad position. That illustrates the subjectivity of the system. It should have nothing to do with how frequently the farmer goes through the process. The graders are not judging the farmers, they are judging the cattle. It worries me that farmers who go through the process only rarely should get bad grades.
141.
Mr Cunningham: A farmer with a lot of stock is in more regular contact with his graders and his abattoir than the farmer who has little stock and can build up a rapport.
142.
The Chairperson: He should not build up a rapport. We accept that someone's attitude might change: even Members of the Committee - great though they are - have their off days. The point is that there is human error in the system, and it affects farmers, who are not getting good prices anyway. We hear that complaint from our constituents, and that is why the Committee decided that we should look at the issue. One complaint is that the number of bands and classifications is ridiculous. Other people ask whether the system is absolutely fair. Is everyone treated the same as everyone else?
143.
Mr McLaughlin: We seem to be at cross purposes. The farmer who goes to the grader occasionally may not have the objective analysis of his animals that he should have. Most farmers would like to class their hen eggs as duck eggs; we never get the price that we expect. There is human frailty on both sides. The problem is not just one of familiarity with graders: there is also fault on the farmers' side.
144.
Mr Savage: The farmer is always at the wrong end of the stick, and I feel that he gets a raw deal. A Departmental official told the Committee that what one grader sees is not necessarily what another grader would see; that seems fair. Yet, a stroke of a pen can mean a difference of 5 or 6 pence more between two grades. On that decision depends whether the farmer makes a profit or a loss. That is totally wrong.
145.
What fairer regulations for the farmer would the Northern Ireland Agricultural Producers' Association like to see in place? The present system cannot continue; there are too many grades. There should be a reduction to three grades. The grading system will have to change or be abolished. I would rather see factory buyers coming into the yard and offering a certain amount of money per kilo for the animal. That way, the farmer will know exactly what he is getting for the animal before it leaves the yard. That is the way it should be. My wish may not come true, but I would have a tough job changing my mind. That is how it used to be done. There must be a fairer way of grading.
146.
Mr McLaughlin: There is a need for an appeals system. In the present system, a grader looks at the animal and if the farmer shouts loudly enough, the animal may be looked at by another grader. There needs to be a system of appeal that is credible to the producers, the graders and the processors. There needs to be an independent appeals system.
147.
If the buyer of the cattle comes to the yard, the farmer is dependent on the subjective analysis of that buyer. He is grading the animal on the hoof, as it were. I know that that happens under the Keenan Kepak system that is used in the South of Ireland. There, the cattle are graded before they go for slaughter, and the slaughter grades are compared with the yard grader's results. The grader's analysis and percentages are analysed as to whether they are right or wrong, hitting the mark or over or under the slaughter grade. By and large, that is also going on with the LMC - and I do not mean to defend them. Their grades are reviewed by European graders who come across to Northern Ireland to carry out trial grades and reviews. The grades are not very far out.
148.
I agree that there are too many prices according to grade. Our system is different from the system across the water and from the system in the South of Ireland. The six price differentials were introduced at the time of the intervention. The grades should be abbreviated; the 0+ grade is probably irrelevant. They could probably be zoned into three broad bands. The fat classifications could also be narrowed down from five grades to three zones.
149.
Mr McHugh: I was not at the early part of today's meeting when the Committee made the decision about who it would meet. I will not ask questions of these witnesses as purported representatives of NIAPA, given the unfounded comments and statements that appeared in the farming press about the people whom I represent. However, I will ask a couple of questions about the document that we have received.
150.
The person who signed the document is a member of the Livestock and Meat Commission. What has he done as a member of that body to address the issues that the Committee raised in its questionnaire? He states that he has
"requested the NIAPA Executive to individually answer the questions posed by your inquiry".
Who answered the questionnaire?
151.
Mr McLaughlin: All members of the executive were asked to comment. I was not at the meeting last night at which the matter was discussed, but my understanding is that the majority of the executive members answered. It is not Miceál McCoy's view; it is the view of other participating farmer members. As such, the document was put together, and Miceál McCoy forwarded it to you.
152.
The Chairperson: The Committee ruled that we would not enter into the dispute. Any questions that the Committee puts to you are part of the inquiry into the LMC. All Committee members agreed to stick to that, although the member who spoke was not present at the beginning of the meeting.
153.
Mr McHugh: Could I have an answer to the first question?
154.
The Chairperson: Yes, but I want to say that any questions will not be about the man who signed the paper, but about NIAPA's opinion.
155.
Mr McLaughlin: Could Mr McHugh repeat the question?
156.
Mr McHugh: Miceál McCoy has been on the LMC for some time. What has he done to address the current issues?
157.
Mr Boyle: In January 2000, farmers picketed meat plants. Miceál McCoy and the Northern Ireland Agricultural Producers' Association entered into negotiations with the meat plants and got the Livestock and Meat Commission (LMC) to come up with a levy that corresponded to what the farmers were paying. Payment of that levy started in July 2000. That was one thing that he achieved.
158.
Mr McLaughlin: As a result of our lobbying, the meat plants have agreed to joint funding of the farm quality assurance scheme (FQAS). There is a greater perception among those in the processing industry that they cannot just run along on the backs of the producers. There is an onus on them, too; it is their industry as well. If the goose that lays the golden eggs is no longer there, there will be no eggs for anybody. The processors realise that the tonnage of meat is decreasing, and there is concern that there will be significant overcapacity in the processing industry.
159.
Mr Molloy: I am a layperson, and I am amazed at the idea that getting to know the grader is one way of getting a good grade. There should be some mechanical or technical way of grading animals; the current system is unfair. I am also concerned that we are hearing a defence of the LMC's position, rather than representation by a farming union of the farmers' position. Everyone wants a balanced inquiry, but at this stage we want to hear about farmers' problems with the grading system and with the LMC.
160.
Mr McLaughlin: I am not defending the LMC. I analyse the LMC's position critically, as I would do with anything else. I do not take sides. There is variation in farmers' perceptions of the LMC - from "very bad" to "doing a fair job". From our contact with farmers, our general perception is that the LMC could do a better job, but could also do a worse job. If the export trade starts to move forward again, the LMC must market our produce, as well as running the grading systems, the farm quality assurance scheme and the red meat strategy.
161.
What is the alternative to the LMC? Will the meat plants grade the cattle? Would that be better or worse? We put that question to farmers, and their replies showed that they want to see the variations tightened up. There are allegations that some people get better grades than others, but it is all conjecture. The LMC itself cannot sell anything; it is a marketing tool for the industry. It is up to us to decide how we use that marketing tool.
162.
The Chairperson: What is your attitude towards the way that the Department appoints people to the commission? Do you think that the commission is representative of the interests of farmers and others? The interests of housewives and others are often forgotten.
163.
Mr McLaughlin: The board of the LMC would benefit from being expanded, perhaps to include some additional farmer members. Recruitment to the board is done on a subjective basis - not by a lobby group. The question is whether the people on the board are representative of the agriculture industry and whether they are au fait with all aspects of the industry. No one who puts forward only his own view will be a good member of the group - people must be aware of the views of everyone else on the board.
164.
The Department has a rigorous recruitment system. With the benefit of hindsight, people might think that they could have hired someone who would have been better for the job - someone who participated more or had done more research. However, they might also have recruited someone worse.
165.
Mr Dallat: We were told, in an earlier discussion, that the grading system did not interest the consumer that much and that he or she placed more importance on taste. Is it possible for the large supermarkets to abuse the grading system in order to control prices? Are there good arguments for revising the system completely? The consumer does not benefit from the system because he or she thinks that taste is more important, and the farmer does not benefit because the grading system seems to exploit him.
166.
Mr McLaughlin: We need a system that encourages farmers to do the best that they can. I accept the point that the supermarkets are flexing their considerable muscles and that taste and eating quality are not included in the calculations. We have suggested that other systems such as the Keenan Kepak system, which uses a nutritional system as well as the grading and confirmation system, should be considered. That system achieves consistency in eating quality, and we are aware that that will have to happen here. Australia has a star system for the eating quality of beef.
167.
Superior carcasses have a greater percentage of better cuts. The price that the farmer is paid does not reflect production costs or even a margin. The difference between grades is only six pence, and that is not the difference between profit and loss - it is only the difference between loss and greater loss. There is a marketing job to be done here. There is a massive job to be done in exports, and the LMC will have to be at the forefront of that.
168.
Mr Dallat: Would you welcome more opportunity to become involved in the promotional activities of the LMC?
169.
Mr McLaughlin: I am a farmer - not a marketer. We are in an unfortunate situation, in which the processors are the marketers. They have been amply rewarded for their marketing work. The processors can take their cut, but the primary producer is left to salvage what he can out of it. I would like to see a system brought in whereby there is a percentage reward for the LMC if we achieve an enhanced market return. We have also been asking for an ombudsman who will take account of the margins coming from the end product and who will have power to apportion the rewards.
170.
Mr Boyle: When lambs or cattle are taken to be slaughtered, there are all the different grades. When the meat is cut up and packaged in a supermarket or is sitting on a butcher's shelf, it is not graded from a U3 down to a P grade. The grading system relates only to paying the farmer, and we all agree that it is open to abuse.
171.
Until BSE hit in 1996, any animal could be turned into money. Farming was good. Now we have a different scenario; the whole country has to look at things differently. People have to be re-educated about eating quality, and they must tell farmers what they want. There must be a collective effort to increase awareness. My neighbours say that they would not eat lamb. I asked them why not, and they said that it was too hard to cook. Although I am no gourmet chef, I said that I would cook them lamb chops. Lamb chops can be ready in 10 minutes, and they are lovely. My neighbours would not believe it. People are - for want of a better word - ignorant, although I would not want to tell them that.
172.
The Chairperson: The danger for our farming community is that the big men dictate what they want. The big stores give the orders. It is not really the housewife; she can buy only what is on the shelves. The primary producer has his back against the wall, as we brought out in our report.
173.
Mr Bradley: I come from Newry and Mourne, and, just as I did when the representatives of the Ulster Farmers' Union were here, I would like to pay tribute to NIAPA for its efforts to resolve the problems in the Newry area last week. That assistance was appreciated.
174.
I was going to ask whether the grade of meat could be improved between being graded and reaching the supermarket shelf, but I think that you have answered that question. Can LMC classification staff operate independently of the influence of the processing plant management?
175.
Mr McLaughlin: There is a lot of innuendo in that question. They are subject to audit systems, including European audit systems, but sometimes it can depend on what side of the bed someone got out of. It is all down to human variability. The innuendo is that when there is a good market for a superior product, or when product is in short supply, the grades are better; when there is an over-supply, the grades are worse. That is the perception of the farmers. When farmers are under strain, that can be a severe blow.
176.
Mr Boyle: Farmers like to think that they are the best judges. I like to think that I am a good judge of lambs. I pick them on Wednesday, and they are killed on Thursday. When the grades come back, I might be surprised to find a U4, or maybe two or three U4s. That means that I would lose £5 for that lamb; I will be kicking myself. When my father asks how well the lambs did, I tell him that I had five U4s, which means that I am down £25; that is half the price of a lamb. The next week, I would try to be much tighter in grading the lambs.
177.
Farmers believe that in the good months - July, August and September - when lambs are thick on the ground and ready to go, there tends to be more fat on the lambs according to the grading results. In January, February and March, lambs are in short supply, and there do not seem to be any U4s or R4s. Perhaps, farmers are busier in July, August and September and do not pick the lambs in the week that they should. We try to tell our men that, after a bad week, they should go to see their lambs being graded the following week. They should be happy in their own mind that they are doing the right thing. Many farmers feel that any error will fall on the side of the farmers and never on the side of the meat plant.
178.
The Chairperson: That is a frank answer.
179.
Mr Ford: The written submission included a detailed answer about the LMC's marketing and promotion work. In particular, NIAPA seems to be happy with the relationship between the LMC and the MLC, as regards promotional materials, at least. What are the long-term marketing needs, particularly given the decline in red meat consumption?
180.
Mr McLaughlin: Red meat consumption is in decline. Generally, consumers are more discerning and better educated. They have specific requirements such as cookability, the speed of cooking and convenience. Also, a nice package always sells well. The marketplace has changed since the old days, when carcass beef was sent to Smithfield Market or carcass lambs sent to Rungis. That is now the bottom end of the market.
181.
We are also subject to global buying forces and, as a result, the world has become a smaller place. To get the return that we require for our producers, we need a marketing strategy, although farmers may not be au fait about how to do that. We will have to supply certain types of product in a consistent way - consistently good or consistently bad, but it must be consistent. We hope to be consistently good. We should also market the natural advantages that we have here - the "clean and green" image, as it were. There is a great opportunity now that the foot-and-mouth crisis is abating. We are free to do whatever we can to maintain our health status.
182.
Money was given to the LMC to buy into GB marketing. As we are in a non-export situation, that is where our market is. We are trying to target the higher end of the market - Marks and Spencer, Tesco and Sainsbury's - but we are concerned about the possibility of intervention at disastrous prices. That was a mode of beef marketing throughout the 1970s and the early part of the 1980s. That is not something that we should contemplate going back to.
183.
Mr Ford: Given our clean, green image, should we distinguish ourselves more clearly from Great Britain?
184.
Mr McLaughlin: A lot of thought has gone into the image. What image of Northern Ireland should we present? Scotland can represent itself using the thistle and the heather. The Republic of Ireland has the shamrock. I hope that we are entering better times in which we can present an image that is different from that which has traditionally been associated with us.
185.
The market is there for us, and we have got the tools, including the Internet, to get access to it. The world is smaller now, and it is easier to get access to world markets than it used to be. Rather than the world coming to us, it is easier for us to get our product to the world. Our brand must be snappy. It must be consistent, and it must appeal to the consumer. The 'Green Fields' brand was a success, and, perhaps, we could emulate that success. However, the competition has not been idle. Australia and South America are getting their act together, and there is also Scotch beef. It will always be a running battle.
186.
Mr Kane: Can NIAPA see a possibility for branding that would complement the FQAS? Is there a need for FQA standards of production to be standardised among EU states?
187.
Mr McLaughlin: Both of those things are going ahead. Branding is essential, and a lot of thought is going into identifying a brand. We are also involved in developing the Northern Ireland Food Chain Certification body, which is accepted throughout Europe as a bona fide independent farm accreditation scheme that is totally independent. We will build our requirements and standards into that scheme, within the broad spectrum of what is acceptable.
188.
We must take the farming industry forward, especially the 25% or 50% of it that is willing to adapt. We should use the carrot, rather than a stick. We should explain that farmers whose stock is farm-assured from birth to slaughter are getting 200 pence per kilo. We should explain that such farmers maintain consistent nutritional standards, that their farms are open to audit every day of the year and that that is why they get an appropriate market return. We should tell our farmers that they could get that too. That has been achieved in the South; we should do likewise.
189.
Mr Kane: How can more applicants be attracted to the FQAS if the LMC raises the cost to producers? What are the odds that levy costs will not be passed back to the producers?
190.
Mr McLaughlin: That has been the subject of debate since the meat plant pickets. The meat plants are now prepared to differentiate in price between quality-assured and non-quality-assured animals. Scotland is moving towards lifetime quality assurance. The problem, as things stand, is that animals coming into my farm, for example, have to be there for only 70 days to get quality assurance. There is no onus on the person supplying me to be quality assured. However, if the quality assured period is extended back, the price bonus of being quality assured will mean that the onus will move back towards the primary producer. That will bring the responsible producers on board.
191.
Mr Kane: Is the system being abused?
192.
Mr McLaughlin: No system is perfect. I agree that the system, although not being abused, is being exploited. I would like to see the quality assurance period extended. That is a market requirement. In Northern Ireland, we have to market our produce; we must jump through the hoops to be better than everyone else. Everywhere else in mainland Europe, there is a large domestic population. We are the only ones in the northern hemisphere who are biting in, as it were.
193.
Mr Armstrong: Everything is in the eye of the beholder; that is our problem. Our farmers feel badly done by. Prior to BSE, meat plants bought cattle on the hoof, and farmers believe that they received a better price for their stock then. That stock still had to go through a meat plant and be graded, but the farmer felt that he was more in control - whether he was getting a better price or not, he thought that he was in control. How can we restore that confidence? The submission states that, because classification relates to pricing policy, farmers perceive that the LMC is to blame. How could pricing be clarified and improved?
194.
Mr McLaughlin: The control was that if the farmer was not getting the price that he wanted, he could withhold his animals. Now, if the farmer does not get the price that he wants, there is not much that he can do about it. Perhaps, for buying on-the-hoof, we should have some kind of branded product, as with the Keenan Kepak system, in which animals are bought on-the-hoof and in the yard by a central person. Some plants are doing that, and it is working reasonably well. If anything, the buyer in the yard tends to verge on the cautious.
195.
Mr Armstrong: The farmer is content.
196.
Mr McLaughlin: Exactly.
197.
Mr Boyle: The farmer is getting a flat rate, which is all right if there is demand for the product. If a U3 or R3 bullock or heifer is considered to have better eating value than an O3 or an O+3, the person producing the better stock should get paid more money. That would be better than having a dealer coming to a yard and buying 10 bullocks at a flat rate. If a farmer is producing better quality animals that will get a U or an R grade, his long-term aim will be to produce better stock, provided that the housewife wants the U or R grade.
198.
Mr Savage: If a dealer comes into a yard and gives the farmer £1·70 per kilo, it gives the farmer confidence.
199.
Mr Armstrong: The LMC should maybe have a marketing tool that will allow people to know what the nutritional value of that meat is. The housewife can look at that docket and see that there is less fat on that meat and that it will be better value for her family.
200.
Mr Boyle: Perhaps, we are wrong to say that it is the housewives who buy the food. A lot of them are out working. Maybe it is the househusbands who do the cooking.
201.
Mr Armstrong: Everyone wants to know about the nutritional quality of meat, just as they do with, for example, a pot of yoghurt.
202.
The Chairperson: Let us leave yoghurt for now and come to the next question.
203.
Mr Paisley Jnr: The way forward is to remove the subjective aspects of classification. Can a mechanical process be developed?
204.
Mr McLaughlin: There is a machine in use in Australia. It cannot really provide grade conformation. It can probably grade fat, and it can estimate red meat yield and the percentage of red meat by bone structure. The consumer pays for red meat, not bones. If such a machine could be found, it would free up a lot of money.
205.
Mr Paisley Jnr: It would speed up the process.
206.
Mr McLaughlin: We would not be tied to office hours, as it were, for grading. It would remove the element of variability, as long as we can have a cast-iron guarantee that the machines could not be tampered with. Hopefully, we can develop it. We have seen a massive advance in foot-and-mouth analysis over the past month.
207.
Mr Boyle: We would advocate a pilot scheme. In the Causeway area a few years ago, we had two fellows over from Scotland with a scanning machine to grade lambs before they went to Foyle to be killed. They scanned five or six hundred lambs in a couple of hours, but they were able to do it only on fat grade, not carcass. Getting a score for a carcass is not hard; the problem lies with agreeing the fat score. I was not there, because I was busy with the silage, but the machine was more than 90% accurate, going by the results of the grader on the day. So, we would advocate that plants put in a pilot machine and start working with it.
208.
Mr Douglas: Most of the questions that I was going to ask have been answered. However, the inquiry is into the work of the LMC, but there is an acknowledgement that there is a need for better stock. Good will come out of this, and it must be put to the farmers who have not got the message that our stock must be improved. When prices improve, things will be better for everyone. Better quality stock will get us a better price.
209.
Mr Cunningham: Farmers are not being paid enough for the quality stock. For instance, a farmer might find that an old, rough bullock is making more money than the fancy U3 bullock. That is a problem. There should be a bonus paid on the higher quality animal.
210.
The Chairperson: We will wait a long time for the organisation that we are looking at to do that for the farmer. It will be a mighty long time. Paradise will have come when they give the farmer that. We need to ask for it.
211.
Unfairness seems to run all through the system. It is not good to have a system that relies on the judgement of a one man's eye. We need a system that we can trust. If I kept cattle, I would be critical of someone's eye judgement if I thought that my beasts were better than that. The system leads to opposition and controversy, and that is not good. A person has a right to go to the market and get fair play; he might not get everything that he wants, but he will, at least, get a decent price.
212.
Mr Cunningham: We are not getting fair play from the factories.
213.
The Chairperson: The Committee thinks out loud so that our message will go back to the Department of Agriculture and Rural Development, but something must be done. Farmers tell me that the system is not good, and that they are unhappy about it. There are far too many bands. How does the person making a judgement have all 10 bands in his head? We are asking him to do an impossible task.
214.
Mr Boyle: If the stock is good enough, he does not have to go through all the bands and can work within, say, three bands. If he is not getting paid for the quality stock, he has to find letters and numbers for the poorer quality animals that come in, which is confusing. The farmer may wonder what one R4H will get - the top price quoted is £1.72 - or what an 03 is worth.
215.
Mr Paisley Jnr: What will it taste like?
216.
The Chairperson: It might taste better. We have not got through half our questions, so we will send you the remainder. It would be helpful if you could get answers back to us as soon as you can. Thank you for coming.
MINUTES OF EVIDENCE
Friday 27 April 2001
Members present:
Rev Dr Ian Paisley (Chairperson)
Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Ford
Mr Kane
Mr McHugh
Witnesses:
Ms B Rodgers ) Minister of Agriculture
& Rural Development
Mr G McCracken ) Department of Agriculture
Mr L McKibben ) & Rural Development
217.
The Chairperson: I welcome the Minister and her officials.
218.
Ms B Rodgers: I welcome the opportunity to contribute to the Committee's consideration of the role of the Livestock and Meat Commission (LMC). I have provided a response to the questions raised by the Chairman in his initial letter about the inquiry, and I have sent the Committee a copy of the report of the quinquennial review of the LMC, completed last year. Although that report was not published, it has been circulated to the industry organisations that contributed to the review, and the main findings and recommendations were largely agreed by them.
219.
The specific functions and responsibilities of the LMC are set out in legislation - the Livestock Marketing Commission Act (Northern Ireland) 1967. Broadly speaking, its remit is to assist the development of the livestock and livestock products industries. In recent times the LMC has been operating in a difficult environment. The ban on beef exports; the resulting difficulties in securing commercial markets for Northern Ireland red meat; the relative strength of sterling; the unacceptable level of producer profitability; and the increased costs throughout the production, processing and distribution chain have all meant that the trading environment in which the LMC operates has been far from stable.
220.
Despite that, I note the broad support for the LMC across virtually the whole industry and the wish for the LMC to take a more active and central role in areas such as generic marketing and provision of services to the industry.
221.
Among the LMC's strengths are that it is independent of the Government and specific interests in the industry; it has a broad base of skills that are currently relevant to the industry; and it is broadly representative of the industry at commission level. Its problems include the level of funding available to the LMC through the levy income and the problems that the industry faces as a consequence of BSE and foot-and-mouth disease. However, a clear role exists for the LMC both in existing statutory functions and in developing other activities to serve the industry.
222.
The quinquennial review states that if the LMC had not existed prior to the circumstances of recent years it probably would have been necessary to establish such a body.
223.
I am aware of the concerns about the classification of carcasses at meat plants, and of the consequential criticism of the LMC and, on occasions, the staff involved in classification. However, classification is not a core function of the LMC. The industry requested that it be undertaken by the LMC, as it is an independent body. That was reaffirmed in a consultation on the quinquennial review. The LMC and everyone else want to move towards a more objective form of classification but the development of the necessary technology means that that is some way off. The LMC is not solely, or even mainly, about carcass classification.
224.
The Chairperson: One response to the inquiry suggests that money from sheep annual premium (SAP) payments under the modulation proposals could be used to support LMC activities. Can you confirm whether money for marketing could be drawn from the modulation funds, or more exactly from corresponding Treasury funds?
225.
Ms Rodgers: That is unlikely. We can only carry out what is contained in the Rural Development Plan. That is unlikely since that was not in the plan.
226.
The Chairperson: Will you confirm that to the Committee?
227.
Ms Rodgers: Yes.
228.
The Chairperson: In its submission to the inquiry the LMC recommended that the European Commission be urged to adopt modern technology and change its price reporting structure from subjective grades to one based on meat yield objectively measured. Would you support that line in negotiations with the Ministry of Agriculture, Fisheries and Food (MAFF) and the European Commission?
229.
Ms Rodgers: It will not be easy and they are looking at ways of achieving it. However, I would support that.
230.
The Chairperson: My other question relates to appointments to the LMC. According to the LMC's most recent annual report the chairman has been a member since 1992, was appointed as chairman in 1997 and was reappointed as chairman until October 2002. Two other members were reappointed from 1 January 2000 and a fourth member has been in the LMC since 1995. Are you satisfied that those reappointments have been sufficiently scrutinised? The guidance states that second reappointments are to be exceptional, therefore that means that some difficulties might loom in the future.
231.
Ms Rodgers: The Nolan procedures have been strictly applied to all appointments, and those procedures have been examined twice and were found to have been correctly applied. All new appointments are subject to the Nolan procedures, are advertised in the local press and relevant parts of the industry are notified about them. There is also an appointments procedure that includes shortlisting, and an interview panel that includes an independent person and senior people from the Department.
232.
The Chairperson: Would you consider allowing sector bodies to nominate members to the LMC rather than having every appointment made by yourself?
233.
Ms Rodgers: The legislation requires that I make the appointments. A change in the legislation would be required to do that. We try to ensure that the necessary expertise drawn from the different sectors of the industry is found in the LMC.
234.
The Chairperson: Would you be prepared to have the legislation changed so that sector bodies could make appointments?
235.
Ms Rodgers: We would have to be careful that nominations would be in accordance with the Nolan procedures. I am not sure that that would be the case if we insisted on sectoral appointments.
236.
Mr McHugh: Our inquiry is quite important in that it follows on from various reports that we have previously come up with. Some farmers would be happy with certain parts of the LMC's work. For a body that is partly responsible for increasing quality over the years - that was one of its main objectives at the start - it has not been able to do that on enough farms through encouraging farmers to increase quality by the returns that they receive.
237.
The worst Friesian beef could make as much for many farmers over the years as opting for high quality grading and classification - that is not good for the industry. The LMC has not achieved that and it has not been able to eliminate those things. Farmers would maintain that that is because of certain people's vested interests.
238.
That may also affect appointments. People who sit together on those bodies for too long develop a cosy relationship. They may find that because the same groups are paying them, they must stay and take orders rather than properly scrutinise. Moreover, I am not sure that they have the farmers' broad support.
239.
Ms Rodgers: I thank Mr McHugh for his questions. The reason we have the beef quality initiative, for which I have procured £2 million, is that beef quality has been recognised as a problem both by the LMC and by the Department. The LMC contributed to the debate and the proposal surrounding that. It is also responsible for the Northern Ireland farm quality assurance scheme, which is important from a marketing and quality viewpoint.
240.
There is ongoing dissatisfaction in the area of classification; that is a difficult issue. It is only natural that every farmer wants his meat classified as being the best. EU inspectors were over in 1998 checking on our classification procedure and were initially unhappy with it. They came back later in the year and expressed total satisfaction with the manner in which classification was carried out. Those who carry out the classification are trained and monitored by the Department, LMC officials and the EU. Those on one end of the scale will never be happy; it is a subjective process, which is continuously monitored. The current situation, therefore, is that EU inspectors have expressed satisfaction with it.
241.
Mr McHugh: It is not achieving the goal that we would have wanted for the overall industry.
242.
Ms Rodgers: There is no doubt that there is a problem with beef quality. That is why we have put £2 million into the beef quality initiative. One of the reasons is that subsidies are only based on headcount; there is no incentive for improving the quality. Therefore an absence of beef quality cannot be blamed on any industry sector. Farmers are anxious to improve the quality of our beef, as better beef quality will be an important marketing factor when our outside markets are reopened.
243.
Mr Dallat: Should a farmer have the right to appeal a classification to an independent body, rather than to a senior LMC officer? Would that not remove any controversy surrounding classification?
244.
Ms Rodgers: Controversy has surrounded classification. I am not aware of any evidence that the existing appeal mechanism is unsatisfactory. There will be additional costs if any other body were to take over the appeal function. There will be difficulties because there is no obvious body to whom that function could easily be passed.
245.
Mr Bradley: The three-year promotional plan undertaken by the red meat strategy development group will come to an end in 2002. Will the Department continue to fund the group after that date?
246.
Ms Rodgers: The Department has given no commitment to do so, but we will keep it under review and make a decision at the appropriate time. If necessary, we will seek funding.
247.
Mr Savage: One of the recommendations of the LMC's quinquennial review is to continue consultations, with a view to increasing the producer levy to a level that is equitable vis-à-vis the position in Great Britain. The general levy rates in Great Britain for cattle and sheep are 205p and 31p respectively, of which the processor pays half. Do you intend to increase the maximum levy as set out in the Livestock Marketing Commission (Maximum Levy) Regulations (Northern Ireland) 1976? Producers are concerned that any increase in that levy charged to the processor would eventually be passed back to the producer. How would the Department ensure that that would not happen?
248.
Ms Rodgers: The simple answer to the last part of your question is that we cannot interfere in any commercial decisions by any private companies. On your overall question, it is vital that the LMC is properly funded to carry out its statutory function. That requires levies to be paid, but, subject to comments from interested parties, plans to amend the legislation to increase maximum producer levy and introduce a processor levy are under way. That levy should be reviewed annually and amendments to the basic levy arrangements may be affected by subordinate legislation. However, any extension of the levy system to other parts of the food chain would require primary legislation.
249.
Mr Savage: A number of years ago - before the LMC became too involved with the situation - representatives from the various slaughterhouses visited farms and a price was given for the animals. That could have been 200p a kilo or whatever was appropriate. We should return to a similar situation; I do not agree with grading. I know there are Holstein steers, but a good cross-bred Friesian is as good as any Simmental or any breed that the Department will produce through artificial insemination. I have seen surveys from Great Britain that state that the Friesian cross-bred cattle are more profitable than continental cattle.
250.
When some graders see a Friesian animal - a black-and-white one - they adopt a completely different outlook. There must be a simpler way of doing things because some of the prime cuts from Friesian cattle end up on some of our top supermarkets' shelves. There must be a fair assessment. I am not blaming the LMC in any way - we have got to share that responsibility. At the stroke of a pen, the farmer is the fall guy every time. I am sorry, Chairman, for taking up time, but I will keep quiet later on.
251.
The Chairperson: That would be a miracle.
252.
Mr Savage: Four different Departments came before the Committee one day, and each one was living off the farmers' backs. The farmer is being screwed into the ground all the time and he cannot take any more. You have seen the last generation of farmers that will work for nothing. We need a fair assessment of what the farmer produces. The farmer does not want to rip anybody off, but he wants to be placed on a level playing field. I am sorry for taking up time.
253.
Ms Rodgers: You have taken it anyway. Thank you Mr Savage. I understand that farmers have a problem with the issue of pricing. Farmers are at the bottom of the chain, and they have no one to pass any problems on to. Those are all commercial issues that are outside my Department's domain. However, we hope to see co-operation along the food chain, and discussion about the food chain and its different links. We should then arrive at a situation in which everyone understands what each part of the chain costs, and whether the costs that are passed on are exorbitant. We must also arrive at a situation in which everyone gets a fair profit.
254.
With regard to classification, and what used to happen, I recognise that I am speaking to an expert practitioner and I bow to his better knowledge. However, there is an EU requirement for classification, which we simply cannot get away from.
255.
The Chairperson: I should have mentioned that Messrs Armstrong, Bradley, Douglas, Kane, McHugh and Savage declared an interest during an earlier evidence session. If there is anybody whom I have not mentioned, who needs to declare an interest, they can add their name to the list.
256.
Mr Kane: Minister, you must have noted that there are no women representatives on the LMC board? Does the Department of Agriculture and Rural Development perceive that as an oversight?
257.
Ms Rodgers: I assure Mr Kane that that has not gone unnoticed by me, and that I am very anxious to address that issue as soon as possible within the Nolan guidelines. At one time there was a woman on the board. She was from across the water, and I think her name was Margaret Percy.
258.
Leaving facetiousness aside, it is important that we have a gender balance on committees, because, otherwise we will not reflect society. I am pleased that Mr Kane is aware of that necessity.
259.
The Chairperson: Mr Kane belongs to a party that accepts that view.
260.
Mr Armstrong: Behind every good man there is a good woman.
261.
The Chairperson: Behind every good woman there is a good man.
262.
Ms Rodgers: Mr Chairman, there is also a saying that goes "Behind every good woman is a man who tried to stop her".
263.
The Chairperson: You could turn that around, and say that behind every good man there is a woman who tried to stop him.
264.
Mr Armstrong: In the light of the foot-and- mouth outbreak, the promotion and marketing of meat products from Northern Ireland will undoubtedly assume more importance if the industry is to regain lost ground. Does the Department have any plans to increase funding to attain that goal? Would you be in favour of a price based on meat yield, if the objective classification could be obtained?
265.
Ms Rodgers: We are keeping marketing under review, and we will be discussing that at a national level within the UK. A marketing strategy will be needed more than ever. We were looking at it in preparation for the lifting of our export ban, but given the further deterioration in that situation, the need for marketing will be much more to the fore when we return to normal. We will be keeping that under review and, from my point of view, it would be a priority.
266.
Mr Armstrong: Do we need more representation from farmers on the LMC, including farmers' wives?
267.
Ms Rodgers: I would go for the farmers' wives anyway.
268.
Mr Armstrong: I have noticed that meat now comes so fresh it does not have the taste, and the culture of meat has to be addressed. I do not know if that is a livestock problem, or whose problem it is, but meat has to be cultured before it is eaten.
269.
Ms Rodgers: My butcher always gives me well- hung meat, so I cannot complain. I accept that if it is not well hung it unnecessarily gives meat a bad name.
270.
There are two producers on the LMC out of the seven members, which, considering that it must reflect the whole industry, is a fair proportion. The report contains a proposition to increase the membership to nine. Consumers are not represented, which they would complain about. The technology end of the industry could also possibly be represented, as the report has mentioned. Producers are reasonably represented at the moment in having two members from the respective unions.
271.
Mr Armstrong: The farmer's wife and the consumer know what they want.
272.
Mr Douglas: Individual producers feel that they have had to pay the levy to have their stock classified, and on many occasions they are not satisfied with the grade received, especially for similar stock. At the same time the meat plants have freedom to sell their carcasses at premium prices once they are classified. That is the main problem for primary producers - they seem to be the loser every time. Meat plants have been expanding and are showing huge profits - that needs to be addressed. The classification needs to be changed as soon as possible.
273.
Ms Rodgers: Perhaps the problem to which Mr Douglas refers relates more to the pricing arrangements in Northern Ireland. The LMC has facilitated discussions between producers and processors on those issues. At the request and recommendation of this Committee, the Department has agreed to investigate the price differentials.
274.
Mr Douglas: It is well known that the cattle, and even sheep, were classified and went into the same container whenever they were going across to France. I have heard on good information that they were all going at a fairly good price. However, the producer was undoubtedly cut severely.
275.
Ms Rodgers: I cannot comment on that because that is a commercial issue.
276.
Mr Douglas: It needs to be addressed.
277.
Ms Rodgers: We are investigating the differential in prices and we are aware of the problem.
278.
Mr Ford: I want to follow up on Mr Armstrong's point about the size of the LMC. You acknowledged that there are two views as to how additional seats should be allocated, either to the producers or the wider commercial background. The quinquennial review appears to suggest the latter - bringing in a wider range of expertise. Are you inclined to move that way at this stage?
279.
Ms Rodgers: We will be consulting the industry on any changes that we intend to make. I have an open mind, and I am prepared to listen to other people's views.
280.
The Chairperson: Minister, why has it taken so long for the quinquennial review to be produced, even in draft form? When do you expect the final version to be published?
281.
Ms Rodgers: The review was being prepared under direct rule. It was finalised then, and it probably would have been published during the transition to devolution, but we had the suspension. There were several hiccups. I cannot explain that any further.
282.
The Chairperson: When do you expect to undertake the next quinquennial review? Will it be in 2003 - five years from the start of the current review - or will it be five years from the publication date of the current report?
283.
Ms Rodgers: That is a very good question.
284.
The Chairperson: My questions are all good.
285.
Ms Rodgers: The work was undertaken around 1999. Therefore I expect the next quinquennial review to be starting around 2004, based on the work that was done. However, I cannot give you a day and date.
286.
The Chairperson: That concludes the questions. Minister, as we are just beginning our investigation, we will submit other questions to you that will require answers. I would appreciate some response from your Department on evidence that we are hearing. I can assure you that they will all be good quality questions.
MINUTES OF EVIDENCE
Friday 27 April 2001
Members present:
Rev Dr Ian Paisley (Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Ford
Mr Kane
Mr McHugh
Witnesses:
Mr D Rutledge )
Mr G Lowe )
Mr C Duffy ) Livestock and Meat Commission
Mr M McCoy )
Mr I Mark )
287.
The Chairperson: I would like to bid the members of the Livestock and Meat Commission (LMC) welcome to this meeting. I understand that your members are here and in the Gallery. We have decided to have a look at the commission under four headings. The funding of the LMC, including the operation of producer and processor levies and core funding from the Department; the provision by the LMC of classified services in both the beef and sheep sectors; the LMCs promotional activity; and the Department's appointments to the Livestock and Meat Commission, including reappointments. We will also take account of the five-year review of the commission.
288.
Thank you, gentlemen, for coming. Does someone want to make an opening statement to us?
289.
Mr Lowe: Good afternoon, Chairman, and good afternoon to members of the Agriculture Committee. My name is Gerry Lowe and, as chairman of the Livestock and Meat Commission, I thank you for this opportunity to contribute to your inquiry into some aspects of our activities.
290.
Our chief executive, David Rutledge, has provided a written submission which we believe is a comprehensive response to the questions set out in your letter of 13 March. In it there are a number of matters raised that are of fundamental importance to the commission.
291.
First, the quinquennial review, although not yet published, has now, I believe, been forwarded to you in final draft form by the Department. I hope that is correct.
292.
Secondly, you raised the critical issue of LMC funding. It is clear from the submissions that we have made that the LMC will not be able to sustain all the activities with which it is currently involved if additional funds are not made available to us. It will be our objective, however, in the future to deliver the best value we can to our industry with whatever funds industry or Government provides. Our statutory role is to maximise returns to the Northern Ireland red-meat industry, and we shall continue to do this with whatever resources are available to us from whatever source.
293.
On the subject of classification, we provide a service to the industry as a result of encouragement to do so from farming organisations and processors. We have neither any right to that business, nor, indeed, any desire to continue to provide that service if a better solution can be found to meeting the European regulation. This regulation requires classification of all cattle offered for trade and sets down and controls the standards which are operated in every member state in regard to cattle and sheep carcasses.
294.
We have provided you with a very comprehensive response with regard to the activities with which we are involved. We felt it important to set this out in considerable detail, as it is, indeed, very much a core activity of the commission, involving a major expenditure item of levy income.
295.
Appointments to the commission are not the responsibility of the commission; they are the responsibility of the Minister. Our response to your inquiry is to highlight what we perceive to be the necessary qualities of persons appointed to the board.
296.
Finally, Mr Chairman, may I formally introduce the members of the commission to the Committee, beginning with myself. My primary interest is Lowe Refrigeration. As a global supplier of services to the food exhibition industry I have considerable experience in the promotion and marketing of agrifood products internationally. I also have strong family connections with the local farming sector. I have been a member of the LMC since 1992 and was appointed chairman in January 1997.
297.
Colin Duffy was appointed to the LMC in January 2000. He is the current chairman of the Northern Ireland Meat Exporters' Association (NIMEA). He is a board member of the Northern Ireland Food and Drink Association, and his main interest is in running the ABP plant in Newry, where he has been involved since 1996.
298.
Miceal McCoy has been on the LMC board since 1997. He is a specialist beef farmer running a herd of suckler cows. He combines his farming interest with off-farm employment as manager of his local South Down/South Armagh rural development partnership group. He is also chairman of the Northern Ireland Agricultural Producers' Association (NIAPA).
299.
Owen McMahon has been a member of the LMC since 1995. He runs a very successful retail butchery in Belfast and is past president of the Northern Ireland Master Butchers' Association and a founder member of the Northern Ireland Elite Butchers' Group. He also sits on a Department of Health advisory panel in London.
300.
Ian Mark has been a member of the LMC since 1997. His primary interest is in farming. He is a member of the Ulster Farmers' Union cattle and sheep committee and is the immediate past chairman of that committee. Some years ago he, along with others, formed a company called Lean and Easy, adding value to his specialist lamb products. The company is now very successful and has many prestigious customers.
301.
Richard Watson has been a member of the LMC since 1999. He is a director of the Foyle Food Group and a freeman of the Fellowship of the Institute of Meat Guild and a board member of the Meat Training Council.
302.
Gordon Orr is the most recent commission member and was appointed in October 2000. He is an independent management consultant specialising in strategic market planning, mentoring and training in the agriculture and food industry. He is a past regional chairman of the Chartered Institute of Marketing.
303.
You are already acquainted with David Rutledge, our chief executive, and Phelim O'Neill, our marketing manager. Mr Rutledge will lead the responses to your questions with support from Mr O'Neill or any commission member as is deemed appropriate.
304.
The Chairperson: I have already read out the terms of our inquiry. Thank you for the submission; it contained meat, not bone. It was very helpful as it covered some of the matters that the Committee is concerned about. In that submission you explained that the LMC was making a significant contribution to the budget of the Meat and Livestock Commission (MLC) in Great Britain. That was to help ensure full and proper qualification of the attachment of the British meat brand in Northern Ireland meat.
305.
I want to ask a few questions on that. Are the MLC's promotional activities accessible in Northern Ireland, and are they sufficiently generic to include Northern Ireland? Is the growth in beef consumption - 5% according to your paper - equally applicable to Northern Ireland as to Great Britain? The Ulster Farmers' Union has worries about media reports of widespread dissatisfaction among GB producers about the activities of the MLC. Can you comment on those concerns? Could the LMC not operate locally based promotional activity under the authority of the MLC, rather than accept its activities?
306.
Mr Rutledge: Regarding access to MLC promotional campaigns, it is important to be aware that our contribution is to qualify for the "British Meat" label in the GB market. That is not something that is used to any significant degree, although some of the GB multiple retailers do use that brand in Northern Ireland. Our interest is in securing the market share we currently enjoy in GB. We concluded that this is the most effective way of contributing towards that part of the market for Northern Ireland beef, which we have highlighted in our report as being of the order of 60% of our current slaughterings, and is the most critical market in which we operate. It is not necessarily to do with the Northern Ireland market that we chose to contribute to MLC. We do some of our own work in Northern Ireland, as described in our paper.
307.
The 5% market share is the order of magnitude of the growth that has taken place, comparing 1995 beef sales in Great Britain with the 1999-2000 figure. I am not exactly sure of the start point and end of those years - if you want that specifically, I will have to refer to my colleague. That percentage growth is monitored by the collection of statistics by sub-contracted organisations to MLC. We do not have past records of consumption in Northern Ireland to the level of detail that has been collected in GB. Therefore we cannot definitively say whether Northern Ireland has enjoyed the same growth since 1995. It probably has reflected a similar pattern, but I cannot say that in as definitive terms as the MLC can of the GB market.
308.
The recent dissatisfaction expressed in MLC by producers in that jurisdiction has focused mainly on the pig industry. The major distinction between our operations in Northern Ireland, and on behalf of the Northern Ireland industry, is that we do not have an interest in the pig sector. That was not allocated to us in the 1967 founding legislation, under which the LMC was created. The plight of the pig industry in Great Britain over the last couple of years has been widely publicised and is unfortunately shared by our own industry in Northern Ireland. That is the main core of the dissatisfaction. There will inevitably be criticism of any organisation attempting to do the work that both the MLC and ourselves do. It is not possible to satisfy 100% of the people, 100% of the time.
309.
We have recently experimented with buying some of the MLC television advertising and have run a campaign locally over the autumn and winter months. There is always a question as to whether that is specifically the right material for Northern Ireland. There is a draft report on an assessment of the Tim Nice-But-Dim campaign that may demonstrate to the Committee some of the responses to the use of that campaign in Northern Ireland.
310.
That, in essence, is a small part of the budget that we spend in promotional and marketing work in Northern Ireland. The majority of our promotional and marketing expenditure here is in the education sector and again that is significantly and, I hope, adequately described in our paper.
311.
The Chairperson: In your submission you say that you have £425,000 for the current year budget for international activities, but that this will reduce to £300,000 per year after that. What will the fall-off be from your list of activities? What activities will you have to cut down on because of that loss of £125,000?
312.
Mr Rutledge: There is a specific programme. A lot of that interrelates to the red meat strategy, which, again, is comprehensively referred to in the paper. There is a significant amount of promotional activity involved in that which, as that programme comes to an end, will reduce the quantum of expenditure that LMC will incur. It is basically matched funding from Government. As that programme comes to an end, so our contribution will diminish.
313.
We will clearly have to make final determination on all our budgets with regard to the available funding. If the funding that we would hope to be available is available then we will be curtailing some of that marketing. That will include point of sale promotions, cooking demonstrations, sampling in supermarkets, that sort of thing that we are currently involved with.
314.
The Chairperson: I want to ask one final question about the classification. The Ulster Farmers' Union has called for fundamental overhaul of the current rating appeals procedure to make it more user-friendly. The NIAPA representatives also said that there needs to be a system of appeals that is credible to the producers, graders and processors - perhaps an independent system. Can you add anything to the debate about this procedure further to your submission? In what ways might it be made more user-friendly or credible?
315.
Mr Rutledge: Other than to listen to specific ideas that might come from the industry, we have no particular view. We provide that service because we have been historically asked to do so by the producers and processors. The consultation of the quinquennial review, of which you have the draft, concluded that there was, as yet, no better solution to the meeting of the regulatory requirement for classification.
316.
We have an appeals procedure that certainly has some frustration expressed with it, mainly when customers require aitchbone hanging of carcasses. It basically denies the opportunity for classification of the cold carcass. The definitive classification has always under the European regulation been based on a cold carcass. If you aitchbone hang you are making the hot interpretation and therefore the appeal to the cold carcass is not available.
317.
The difficulty we have here is that customers, in specifying aitchbone hanging, are endeavouring to meet a regime to tenderise and provide what they perceive to be the best product for their consumers. We can do no other than try to assist with meeting the customers' needs. However, we understand the frustration with the carcasses which are aitchbone hung and therefore not available for an appeal. We would be happy to listen to alternative suggestions for an appeals process, but we do not see how we can achieve that.
318.
Mr Douglas: You advocate the setting of price to be placed on meat yield by mechanical means as opposed to subjective grades. If the technology were capable of such assessment, in your experience do you feel that this would be supported by the meat processors and more importantly by the farmers?
319.
Mr Rutledge: The majority of processors will not have any significant objection to this process when the technology is available and proven to a payment system based on a measurement of the meat yield. The trials performed in the Republic of Ireland that have been well publicised in the media concluded that the equipment tested was capable of making a reasonable assessment of meat yields. However, one would like to see that equipment at a higher level of sophistication - making a closer determination of value by measuring the yield of the high-value cuts. No doubt processors would seek to get up that hill. From my contacts with the processors they do not seem to have any objection in principle with regard to mechanical determination of the yield and value and a payments system built around that.
320.
Mr Armstrong: A regular in-house quality assurance scheme and regular training of staff would help to reduce inconsistencies in the classification process. What quality assurance scheme, if any, does the LMC currently operate in-house to ensure that classification officers produce consistently accurate classification of animals? Does ongoing training take place?
321.
Mr Rutledge: In regard to the classifications officers there is an initial training programme which LMC operates. Subsequent to that there is a licensing process that requires each classification officer to be subject to scrutiny by the competent authority personnel in the plants. Each one of those officers subsequently would be brought through with a review by our management. If it is found that they are drifting towards the boundaries set in the standard then ongoing training and development will take place. They are continually monitored by the competent authority, and there are between three and five Department staff employed with the sole purpose of monitoring the classification officers, which fulfils their duty as the competent authority in setting the standard.
322.
Mr Armstrong: On completion of that competence training do you then go out to the butcher to see if he is satisfied with the classification of the carcass?
323.
Mr Rutledge: We have more feedback from the multiple retailers. From time to time we will get comments from them if the yield of a Northern Ireland R3 departs from the yield that they will observe from a GB supplier. We do not have a formal process in place to determine that feedback. The classification is regulated ultimately by the European Commission. We have contact with butchers, but we do not sense that they have a great deal of complaint. However, from time to time we get comments about the standard drifting because we are not getting the yield.
324.
The Chairperson: What are the boundaries you mentioned?
325.
Mr Rutledge: There are boundaries set so that when a classification grade is put on an animal for its conformation, the officer is allowed, in the regulation, up to 20% of his classifications to be wrong. We have in the test programme and the supervision -
326.
The Chairperson: It is my understanding that the leeway in error is 20% of all cases.
327.
Mr Rutledge: He is allowed 20% of his grades on conformation to be wrong. He is allowed 20% of his grades on fatness to be wrong and still maintain his licence. There will be a monitoring process to bring him back within the boundaries where the percentage of those that are incorrect are closer to the norm. We have records that the Department will be able to present to you. Those records will show that on both fatness and conformation, our officers are drifting in the direction of the producers by an average of about 10%.
328.
The Chairperson: Is 20% not a very big leeway in error?
329.
Mr Rutledge: That is the European interpretation, Mr Chairman.
330.
The Chairperson: It is like something that would come out of Europe.
331.
Mr Armstrong: It could be the other way around.
332.
Mr Rutledge: I am not aware of any evidence of a competent authority or a European inspection showing that we had ever classified to the disadvantage of producers in Northern Ireland. It can, on a day, be wrong, but that is the regulation. That is a judgmental thing; it is a subjective thing on the boundaries between different grades. I cannot make it different. That is the way it is set up, Mr Chairman.
333.
Mr Armstrong: Will you give the producer the option?
334.
Mr Rutledge: No. We cannot. The producer is not a licensed classifier. It is required to be done by people licensed by the competent authority.
335.
Mr Armstrong: Will you give him the option to justify that his grade was lower than what he had anticipated?
336.
Mr Rutledge: Every producer is disappointed. The big producers understand the grading process and generally agree that the grades are consistent and right. They may disagree that it is harsh on them when the payment for their animal is determined by the classification. If they expected an R and it was an O+ they would be dissatisfied.
337.
Mr Kane: By how many grades was grading overgenerous in Northern Ireland, compared with other regions?
338.
Mr Rutledge: I do not know the statistics in regard to other regions. I do not understand the question.
339.
Mr Kane: As chief executive you should know the statistics.
340.
Mr Rutledge: In regard to other regions and other member states?
341.
Mr Kane: If you are doing your business you should know.
342.
Mr Rutledge: Thank you for telling me that. I do not know the statistics in regard to the individual classification officers' routines under inspection by the competent authority in other regions. I suspect that that would be private information, although I have not sought it.
343.
Mr Kane: Mr Lowe, you will be aware that the allegation of a price-fixing cartel is a regular topic of conversation amongst producers. Does the process by which you gather information for your weekly bulletin cause you to believe that there is insufficient price fluctuation between meat plants to suggest the existence of an organised price-fixing strategy between plants?
344.
Mr Lowe: Since joining the LMC in 1992, I have never been involved with an organisation that has tried to uphold integrity so well. I have never seen any indication whatsoever of there being a cartel. I have heard the talk, of course, but I have never seen any evidence of a cartel. If there were, rest assured that I, as chairman, would be the first to react.
345.
Mr Kane: Since Northern Ireland's beef has not been exported for some considerable time, what exactly is LMC's role?
346.
Mr Lowe: The role of the LMC is to attract the customers that we used to have and to keep constant contact with them to ensure that when markets are reopened to us we have still got the good relationship and product to provide to those customers. It is a very trying time, but we are on top of it.
347.
Mr Rutledge: We should add to that that, of course, we have continued to have a lamb export trade. So it is important not to forget that a significant proportion of lamb processed in Northern Ireland is exported and has continued to be exported through the years since the export ban.
348.
Mr Kane: Why are women or farmers' wives not appointed to the board of the LMC? Is this a perceived oversight on your part or is it another quango?
349.
Mr Lowe: It is the Minister of Agriculture and Rural Development who has the authority to appoint board members.
350.
The Chairperson: So you are not anti-women at all?
351.
Mr Lowe: I would be delighted if we had excellent women on the board. Indeed, if we achieve our ambition to increase the number of board members from seven to nine, I would be singularly disappointed if there were not more female members.
352.
The Chairperson: Is it the Minister who appoints?
353.
Mr Lowe: Yes, the Minister appoints.
354.
The Chairperson: Would you object to a sectional interest in the meat businesses - either producers or others - having the right to nominate to the board?
355.
Mr Lowe: That might take away from the independence of the commission. I suggest that it would be the subject of a consultation process.
356.
The Chairperson: Would you be opposed to it?
357.
Mr Lowe: To date I have seen no necessity for it. I am convinced that we now have the strongest commission ever. It is certainly the strongest since I was appointed.
358.
Mr Bradley: In 3·2 of the classification section you referred to a small number of producers and commentators giving sporadic abuse to the LMC and its staff because of their unwillingness to accept classifications. Do more producers complain than actually make an appeal to a senior officer?
359.
Secondly, regarding beef, how many purchasing grades and how many selling on grades are there?
360.
Mr Rutledge: There are a number of aspects to that. The number of appeals and complaints tends to reflect the price circumstances. When prices begin to fall in the marketplace, the amount of appeals increases. When prices are stable there are fewer appeals.
361.
Mr Bradley: Can you clarify that? Have you figures relating to complaints as opposed to appeals? What percentage of complaints are followed through to appeal?
362.
Mr Rutledge: An appeal is a formal process, and I am not necessarily drawing a distinction between an appeal and a complaint. A complaint is what we read about in the papers, and we may or may not have had an appeal from the person who is complaining in the media or elsewhere. The formal measure that we have of the number of producers who are unhappy with a grade is the level of appeals that we receive.
363.
Mr Bradley: My second point was about the number of purchasing grades as opposed to selling-on grades.
364.
Mr Rutledge: I do not know the number of purchasing grades. The majority of our product is purchased by the premium supermarkets. They are the most important customers, and the majority, by value, of what we sell is purchased by the premium retailers. They tend to specify E, U and R grades. Fatness levels 3 and 4L are the main purchasing specifications that we are formally asked for. Beyond that, it is more the determination of the value of the meat yield. That is mainly for customers who are buying red meat. They may buy more expensive cuts, but much of the meat will go for mincing to the burger trade, as will cheaper cuts from prime animals. In the beef industry about 50% of the value is product for mincing - from those grades that fall below the prime specification. The parts of the animals which are prime specification but not prime cuts are used for mincing.
365.
Mr Bradley: We seem to have 10 different grades that we pay out on and two grades that we sell on.
366.
Mr Rutledge: While customers will specify a range of grades that they want, they do not necessarily pay for U3 or R3. U3 to R3 is a measure of the yield and the value in the grade range that they want to buy. A supermarket will not just buy in R3; it will buy a range of grades.
367.
Mr Duffy: It could be argued, in the grading system as it is structured now, that the price being paid for cattle at the top end of the scale is too little vis-à-vis the price being paid for cattle at the lower end of the scale, which is too high. There is no formula to justify the present structure or the differences between the grades down to the last 3% or 4%. That is why this old classification issue is a very emotive one. Also, our farmers are not happy with the appeals procedure. If it could be replaced with something on an objective basis, that would be welcomed by all parties concerned.
368.
The Chairperson: What do you think about the 20% margin of error? Would you employ someone who could err up to a level of 20% and could still remain in employment?
369.
Mr Duffy: Definitely not.
370.
The Chairperson: You certainly would not do it in politics. You would be out through the door if you did.
371.
Mr Duffy: I could not afford to have errors of 20%.
372.
The Chairperson: It is an amazing figure.
373.
Mr Rutledge: It is to do with the subjectivity involved in the exercise. It is not a precise science. It is based on skill and judgement. We would be in severe bother if the European Commission found that we had an actual error level of 20%. It would not tolerate that.
374.
The Chairperson: It is not skill if you can have a 20% margin of error. A skilled man should be within 3% or 4%. The bone of contention among farmers is this classification and how it works.
375.
There is hardly a farmers' meeting where the issue is not raised. It is not raised in a nice way, but in a rugged Ulster way which shows how mad people are about it. If you were to argue one way, they would say that you were taking sides with those carrying out the classifications. I should have thought that if a man were skilled his margin of error should be less than 20%.
376.
Mr Rutledge: Indeed, they are. I described to you what the regulation permitted - I believe that was the question asked. I have answered by telling you what the regulation says. Our people are classifying within a margin of about 10%, but it is our policy - and perhaps I omitted to mention that this is agreed across the industry - that the producer be given the benefit of the doubt. When the European Commission team comes over, it does not want to do that. However, we do so, and it is agreed with the processors and the producers' organisations that we accord the producer that benefit when it comes to the boundaries between classifications.
377.
The Chairperson: Mr Rutledge, I would take you on before farmers any time and put forward the proposition that it is not to the benefit of the producer, because the farmers do not believe that it is. The perception is that grading is so subjective that it makes a proper, reasonable finding impossible.
378.
Mr Rutledge: I can only agree. We have our own producer meetings, and it can be very difficult, for we are "piggy in the middle". We provide a service to the best of our professional competence. If there were a better solution, we would be delighted to find it. There is a European regulation, and the service that we provide must operate within its constraints.
379.
Mr Dallat: With "bones of contention", "piggy in the middle" and my mind firmly fixed on the survival of Phoenix, I am not sure that I should ask questions at all. Given the importance of such gradings as E, U, R, U3, R3 and 4L, can you explain, in the context of your promotional activities, what they mean to the housewife visiting the local butcher? I emphasise "the local butcher" rather than the large supermarket, for which I have no time. How do the grades enhance the Northern Ireland product? In what way do they help to market it better and give it more added value than an import from South America? We have spent months arguing about grades, yet I have never once experienced them as a consumer, nor would I be able to understand them if I did. My question may sound frivolous, but it is absolutely genuine.
380.
Mr Rutledge: I appreciate the background to your question, which is by no means frivolous. Ultimately the grades should - and do - relate to the consumer, for they determine such matters as the size, shape and fat content of a steak bought across the counter. Therefore if a professional retail butcher has a prime customer base for which he must have a consistent product of a particular size, shape and weight, he will source to meet customer demand. That is how the grades ultimately reflect back to the consumer.
381.
Mr Dallat: In that context it is all the more surprising that you state in the report that your promotional activities may be curtailed because you are strapped for cash. I find it difficult to separate your two functions. How can you grade meat to reflect the preference of the Northern Ireland consumer while possibly facing a future where you are no longer involved in the promotional activity to deliver what you have identified on the production line?
382.
Mr Rutledge: We want to have an industry with the maximum number of prime grades - E, U and R are what our premium customers want. By interfacing with producers we seek to encourage and help them in every way possible so the maximum percentage of meat from the farms achieves those grades.
383.
If we find a prime customer - name any multiple retailer - it will want Es, Us and Rs. We want to promote Es, Us and Rs because we want to provide what the prime customer is going to pay for. We want that income for our industry. I do not know if that answers your question adequately, but that is how the two aspects ultimately interrelate. As the proportion of the bovine population attached to the dairy herd increases, we have a problem because we cannot produce a high enough percentage of the Es, Us and Rs. Therefore we are moving in the direction of producing - and fighting against having to produce - more and more commodity product for mincing.
384.
Mr Ford: You will be pleased to know that I am not going to talk about grading. In relation to the funding of the organisation, you highlight money that is available to An Bord Bia, to Welsh Beef and Lamb Promotions Limited and to Quality Meat Scotland. There is an implication in your submission that there should be similar funding from the Department of Agriculture and Rural Development. Have I taken the implication correctly?
385.
Mr Rutledge: We have tried to give a full reply on that particular aspect. There are difficulties at two levels. First, there is the difficulty that Governments in Europe giving money to organisations such as ours will have to have European state-aid approval for that. That can be difficult, but, given the experience of our colleagues in the Republic of Ireland, it would appear that there are means of doing that. They have a national development plan under which they are able to provide substantial funding. My recollection is that, out of a £20 million budget, some £14 million comes from Government in some form or other.
386.
The second problem is obviously a Treasury and Northern Ireland Budget problem. If money is to be made available to our industry, will someone else have to suffer? It then goes into the realm of politics as to whether it is justifiable to provide funds to us to assist in the promotion of beef and sheep meat.
387.
Mr Ford: Given the financial difficulties that you are going through at the moment in reducing the balances that you currently hold, and given the financial problems that primary producers have, if there is not state funding what activities will the LMC have to cut back on?
388.
Mr Rutledge: There are a number of facets to that. We had outlined in our strategic plans that we were going to deal with two of three significant problems. The three significant financial headings are levy income, farm quality assurance and classification. We have, over the last year, as we described to you, successfully introduced an income from the processing sector. The primary slaughterers are providing a voluntary contribution to LMC. We have almost completed an agreement on farm quality assurance scheme funding. We may be able to get that introduced quickly. We had hoped not to have to deal with classification this year. It is tough enough for producers to have to deal with the farm quality assurance scheme funding. Our strategy was built around our not having any additional levy income or any uplift in the classification until next year.
389.
The current foot-and-mouth disease outbreak does have some implications for LMC in that we are not generating as much income as we had budgeted. The problems of the industry created by foot-and-mouth disease are far more important than our little problems, but it is only appropriate to say that our budget may be affected by a shortfall in income arising from the knock-on effects of foot-and-mouth disease. Our plan may be thwarted to some degree.
390.
On cutting back on our activities, our biggest expenditure item is promotion and marketing. That is the one that we can most readily cut back on. Our information services cost significantly less, and farm quality assurance, which is the other major activity that we are involved in, is more or less being sorted out.
391.
Mr Ford: The report seems to agree with the idea of increasing the commission's total board membership. I am keen to hear the views of the board as a whole on that; I am particularly interested in what Mr Mark or Mr McCoy might say regarding the balance of interests if there were to be an additional two members.
392.
Mr Mark: If, as the quinquennial review suggests, we extended the commission's board to nine members, it would allow farmers' interests to be further represented by at least one additional player, giving them a proportion of three out of nine members, as opposed to two out of seven. That would go some way towards allaying the industry's perception that it is underrepresented. I feel that the current membership of seven gives farmers adequate and well placed representation. A further expansion to nine members will allow the board to remain manageable while also allowing a greater diversity of opinion from a broader spectrum of the Province's agriculture industry.
393.
Mr McCoy: The perception means a great deal in our industry and in Northern Ireland at large. The recommendation from the LMC board to increase its membership to nine reflects the perception among producers that there should be more representation. I concur with Ian Mark that running the LMC is a larger business than it simply being a producer-owned organisation. There are other issues, and the diversity of expertise and experience which comes to the board must always be respected.
394.
Being a member of the LMC board is an onerous task, for there is a fair amount of material and debate to go through, but I contend that having more producers on the board would lend it greater breadth. However, it cannot be overlooked that other individuals might bring complementary experience.
395.
The Chairperson: Mr Mark, what do you think about the 20% margin of error?
396.
Mr Mark: Mr Rutledge has referred to the fact of the European regulation. The difference with our operatives within the classification is that the actual difference he quotes - 10%, 5%, 4% or 9% - is still subjective, in that we put forward our grades and classifications for another subjective examiner to look at. The examiner then expresses a view that 10% or 9% or 8% are wrong. None of us is any better qualified to say whether he is more correct than the original examiner. The actual statistic quoted does not necessarily reflect what is happening on the ground on a given day.
397.
Mr Rutledge is absolutely right that there is no evidence whatsoever - and in all my time, both as a farmer and on the commission, there was no evidence - to suggest that any variation allowed on grading has not benefited the producer. If there is a debate in the classifier's mind about whether an animal is potentially an R or an O+, he awards it an R. One can argue that he is wrong or right to do so, but he will never give an R-grade bullock an O+ because he is in two minds.
398.
The Chairperson: Mr McCoy, what is your attitude?
399.
Mr McCoy: I should use the analogy of the 20% parameters. We all drive on roads that are wider than our vehicles. I take the chief executive's point that the commission's classification officers try to direct their assessment of the carcass within the 10% to maximum competency.
400.
In saying that, however, it is particularly difficult for me, as a farmer, or for anybody else. Not many people are competent to grade an animal live in the field, and then to grade it "undressed", with its hide taken off and hanging on a hook. There is therefore a discrepancy in some farmers' belief of what their animals were capable of achieving. In some ways, the livestock ring was always the best place to assess the net worth of the animal, because people were competing. In this case, the animal has been slaughtered, and it is hanging on a line. Human nature is not always correct.
401.
Mechanical classification is something which we should seriously consider in Northern Ireland to achieve a better system of payment for the farmer's produce. It should not depend on the existence of an EUROP classification based simply on the shape of the animal. It should be based more on the content and quality of the beef.
402.
Mr McHugh: The last time that we met there was some contention over whether farmers were satisfied with what the LMC and the meat exporters were doing on their behalf. I was almost told that I was a liar for saying that they were dissatisfied. Mr Rutledge said earlier that 100% of the people cannot be satisfied 100% of the time. The farmers, however, would be far away from 100%. At present, we do not have the marts, and there is very little competition in what the farmer can get. He can only go to the meat plants. I wonder how well the farmer is doing at the moment.
403.
In representations to this Committee, farmers have told us that they are not satisfied. Something, somewhere, is wrong with the system. If that is happening, the overall aim should be to have the best quality produce to sell and to export. We have not been able to achieve that over the last few years. The analogy is made that the larger farmer's understanding of the grading system, and the expectations from it, works to his advantage. All others are then almost incompetent in presenting animals. It therefore works to their disadvantage. I would contend, however, that one of the key factors which makes people move towards quality is the returns by way of pounds in their pockets. Farmers would say that that has not been happening on their side.
404.
The role of the LMC was one of the factors which we considered in relation to the profit reports and reports prior to this one. In relation to your aims and objectives for the next few years, what can you do, post-foot-and-mouth disease, to move to a different position in the relationship between the farmers and yourselves to achieve quality through returns to the farm? I do not think that it can be achieved in any other way. People will say that the subsidies have been a blockage, and that if farmers are being paid subsidies they will not necessarily produce the right animal. I do not believe that. If the farmers are getting the right returns from the meat plants or mart rings, they will come up with the goods. That must happen. We cannot afford to be in a position where we have a whole level -
405.
Mr Rutledge: I would agree with much of your comment. The first point you made was on the present situation.
406.
The Chairperson: I hope that you did not agree with the first part of it, because it was a criticism.
407.
Mr Rutledge: Thank you. Looking at the question, and the debate which Mr McHugh raised, the current situation - interestingly - demonstrates reasonably well that supply, demand and quality are driving prices. We saw in the early stages of the foot-and-mouth disease crisis in GB that there was a dearth of product. Northern Ireland product moved more freely. There were some weeks when the Northern Ireland price was virtually the same as the price in England and Wales.
408.
Great Britain is now slaughtering the majority of cattle that come forward, so that situation is being redressed. It is hard to get figures at the moment because everything is very disrupted; however, we think that the average price in Northern Ireland today is between 5p and 10p per kilo less than the price in GB. Two weeks ago the prices were almost equal. That is what the market is giving to the farmers.
409.
I agree with much of what you said about the issue of quality. It is in the interests of everyone to take whatever steps are possible to address the quality issue. Several initiatives have been talked about, the Department is working on some proposals, and there are some proposals being considered by the commission, to start initiatives to improve the quality again from the breeding herd into the commercial herd. The LMC is participating in that, and we are contributing towards it with our own resources.
410.
We have a specialist beef industry that, for the most part, continues to produce a very good product. There has been some slippage for a number of reasons - one of which might be the brown envelope. One of the problems is the commercial return that is available. People are not properly finishing cattle, for example, because they do not think that the return is good enough. Cattle are sold on when the farmers get their beef premium. We have to fight against that.
411.
There is also the increasing influence of the dairy herd. There has been a significant migration of milk quota from GB, and that is putting a dairy influence on the raw material that we have for our specialist beef industry. That presents everybody with difficulties, but there are things that we can do to improve that. We have spoken about creating a specialist bull business. There are efforts being made to produce specialist bulls as a dairy by-product.
412.
There is also the issue of getting a proper genetic mix, so that the dairy cow can produce a reasonable beef calf. There are things that can be done, but it is a continual battle to keep the quality high. The quality is determined by the grading classification.
413.
The Chairperson: We will have to leave the issue there, because we have run out of time. I thank the members of the LMC for coming along today and for helping us with the inquiry. There were some questions that we would like to have had time to discuss, but we will send those to you, if you would be good enough to reply to them. We do not want to dilly-dally over the investigation - we want to get the results out as quickly as we can.
MINUTES OF EVIDENCE
Friday 4 May 2001
Members present:
Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Kane
Mr McHugh
Mr Paisley Jnr
Witnesses:
Mr C Duffy )
Mr C Mathers ) Northern Ireland Meat Exporters'
Mr R Moore ) Association (NIMEA)
Mr C Tweedie )
414.
The Deputy Chairperson: You are very welcome. Before we begin, I must respond to a comment you made in the second paragraph of your submission on Livestock and Meat Commission (LMC) funding. You expressed concern that the Committee's inquiry was a duplication of the Government's five-year review of the LMC and that such double expense was not a good use of the public purse. I assure you that there is a big difference between a review that a sponsoring Department is required to carry out and one undertaken by a Statutory Committee set up under the Northern Ireland Act 1998 with powers to initiate inquiries and make reports.
415.
The Committee's inquiry is focused on four main issues of concern to Members and their constituents. Members of this Committee are directly accountable to their constituents. This inquiry is, therefore, entirely separate from that carried out by the Department. However, the Committee recognised that the five-year review had taken place and referred to it in its Terms of Reference. The Committee will take that into account as it prepares its report.
416.
On a different subject, I would like to ask Mr Duffy whether he believes there is any conflict of interest in his appearance today as a representative of the Northern Ireland Meat Exporters' Association (NIMEA) and having appeared last week as a member of the LMC.
417.
Mr Duffy: Absolutely none.
418.
Mr Mathers: Your letter to us referred to Government funding of the LMC. That was news to us. It was a useful comment, as it focused us on the source of funding for the LMC in comparison to similar meat promotion bodies in regions which are direct competitors. A previous Administration created the legislation under which the LMC operates and gave it a means of funding outside the Government purse. To date, all promotion of Northern Ireland beef and lamb products has been run by individual processor investment in conjunction with the LMC.
419.
The issue is timely, as we believe that as in every other region of the United Kingdom - and the other EU states - there now needs to be the same level of Government support for the promotion of these products as exists elsewhere even on this island. If we are to compete in the markets available to us, Government- assisted promotion similar to that which our competitors enjoy is essential.
420.
Secondly, we would like to draw your attention to the loss of LMC levies due to smuggling of sheep. The disposal analysis of Northern Ireland lamb production has shown that for many years, at least 500,000 lambs a year have been marketed as unrecorded exports to other parts of this island. Those lambs have been moved South in such a manner that they evade the LMC statutory levies, thus depriving the LMC of much- needed promotional funding.
421.
Over the years, NIMEA has raised the issue of illegal sheep movements to the Republic of Ireland with the Department of Agriculture. It also wrote to the Revenue Commissioners in Dublin in 1994. It is interesting to note that it is movements of sheep between Great Britain, Northern Ireland and the Republic of Ireland that have caused the present foot-and-mouth disaster on this island. For that reason, we propose the introduction of a transaction levy, similar to the scheme in Australia, whereby the LMC would draw levy funding from sheep every time they pass through market.
422.
My third point is that, as you are well aware, the whole area of classification and the LMC has been given some airing. Classification is a statutory EU requirement with which all member states are obliged to comply. When the Government decided to privatise the classification service in 1990, the industry was forced to seek an alternative body to perform that function. The entire industry requested the LMC to take on the function, as it was deemed the one single professional classification body across the country. It gave uniqueness to Northern Ireland and had a better chance of delivering a provincial standard.
423.
The LMC performs this service under the supervision of the competent authority, which, in our case, is the Department of Agriculture and Rural Development. In hindsight, the performance of this service by the LMC has resulted in it being maliciously scandalised by various groups. As a result, we are concerned that the LMC's promotional independence has now been tarnished as well. It has been forgotten that all parties in Northern Ireland requested the LMC to perform this function, even though the EU allows each plant to put their own classifier in place if they wish. If that were to happen in Northern Ireland there would be 11 classification bodies rather than one.
424.
It should not be assumed that if the current situation were changed, all plants would simply transfer to any new body. Is it not better to have one body across the Province doing the job to a single monitored standard rather than a plethora of bodies trying to operate a national standard?
425.
My next point is on the business of unco-ordinated promotion. It is our opinion that some Government and other agencies - for example, the Department of Agriculture, IDB, LEDU, and rural development authorities - are doing what we can only describe as unco-ordinated promotion in respect of the meat industry. Some District Council activities have also involved such promotion. On occasions this has embarrassed some of our premium customers.
426.
It is our opinion that there should be one single spearhead promotional body in respect of the beef and lamb sector, and that it should be under the umbrella of the LMC. That would ensure that a much more efficient and fruitful use of resources would be made. It is absolutely essential that Northern Ireland has an independent, professional promotional body to match those of our competitors in these islands.
427.
The LMC must become the driving force to spearhead quality initiatives and investigations into the branding of Northern Ireland beef and lamb. The LMC should also collate the available data to harness the knowledge gained through the farm quality assurance scheme and to make realistic forecasts on the availability of quality raw material for the industry to market.
428.
Armed with that type of information, the processing sector can perform a marketing function directly related to production, thus being more efficient and adding real value back down the chain. Currently, nobody can tell either the number of quality cattle or sheep available for any given time ahead. Only an informed guess can be made, therefore, in relation to the availability of quality raw material.
429.
In the age of electronic data interchange, that is surely a severe drawback to the entire marketing programme for beef and lamb from Northern Ireland. It is therefore essential that Northern Ireland has a professional and properly funded beef and lamb promotion body to ensure that the industry can match the activities of its competitors in the UK, continental and - it is to be hoped - world marketplaces.
430.
The Deputy Chairperson: You said that the LMC should have control of all promotions in the meat and lamb sectors. Can you describe the areas currently covered by the Department of Agriculture and Rural Development, LEDU and IDB? Why, in your paper, do you describe this as "meddling"? Can you give specific examples?
431.
Mr Mathers: Moneys are available through all the bodies I mentioned for the promotion of meat or lamb products, either in the UK or in other EU states, but there is no co-ordination. All of that does not work together in one spearhead to the direct benefit of all of Northern Ireland. Everybody does their own wee bit in relation to their own area, but it should be spearheaded, collated and pulled together in one driving force that represents Northern Ireland.
432.
Mr Duffy: The LMC is at the forefront in promoting Northern Ireland produce. It understands exactly what is required in relation to quality and what the customers want, along with the people who sell the produce. There are divergences as you go down the chain with the other agencies we mentioned. Co-ordinating those divergences and making sure that there is a focus on value for money is important. That also applies to research.
433.
The Deputy Chairperson: You said that the levy should increase from 80p per head of cattle to £3. When producers are already experiencing low or no returns, how do you expect them to pay this additional levy and still make a profit?
434.
Mr Duffy: The LMC requires enhanced funding. There are a number of options, and we suggested some of those. You only have to look at how similar bodies elsewhere - in England, Wales and other countries - are being funded. The main issue is that the LMC is underfunded. To be able to seriously compete with other bodies, for example An Bord Bia, it must have an enhanced funding portfolio.
435.
The Deputy Chairperson: It is easy to say that they must be competitive, but if the farmer in Northern Ireland is not getting a reasonable return, or, indeed, getting no profit at all, there will be no farmers here to compete with. They have come through a difficult patch. If there is going to be a levy increase, somebody somewhere along the line must bear the brunt of it.
436.
Mr Duffy: Yes, but if we do not continue to promote then the return will be even lower. We have a product that we have to promote on world markets. If we draw back from that just because there is an impending deficit in the LMC budget, it does not mean that we have to cut back. We should actually be trying to increase promotion, with greater emphasis on certain areas. The formula for where the money is found is a matter for further debate.
437.
Mr Dallat: The LMC's gross income in 1998-99 was £2·46 million. What would be an appropriate funding level for the LMC?
438.
Mr Duffy: You have to look at the markets, where they are going and what they are competing against. It could be five times the 1998-99 figure and still not be enough. You have to focus on value for money and what your competitors are doing. It is very hard to quantify the exact size of that. There are definitely more funds required.
439.
Mr Dallat: For what?
440.
Mr Duffy: Additional funds are required for promotion of our produce on world markets. You say that the figure is £2·4 million. However, if the funding is increased, which it has to be, it is for the LMC to look at that and to spend that money wisely and in accordance with the demands that are placed on it.
441.
Mr Bradley: One of the recommendations in the quinquennial review is to have annual reviews of the LMC levy, in consultation with producer and processor organisations. Do you think that a possible annual variation in levies would affect strategic promotional planning for the LMC, due to the variable income each year?
442.
Mr Duffy: It would be advantageous if it could be reviewed annually to take account of competitive factors in other countries. It is a very competitive market. The LMC has already said in its submissions that it is operating on a very small, tight budget.
443.
When you see what is being thrown at other retailers in these countries and the funds that are made available to the LMC's competitors, you realise how hard this situation is. The answer to your question is "Yes". I think that it would be a good thing to review the levy annually.
444.
Mr McHugh: The question of whether the LMC is providing value for money and so on is an ongoing debate. If I remember correctly, the last time we met with NIMEA we found ourselves on the receiving end of a list of questions from you, rather than vice versa. You may have caught us on the hop that time, but I think we have learned a few things since then.
445.
The reason we are inquiring into these things is that from our point of view, LMC's intention or purpose is to deal with classification and to try to be part of an industry that should be working in terms of our markets. When you talk about our competitors, I wonder how much of an impact we or the LMC are having on the market. Currently, farmers are inclined to say that they are not exporting anything anyway. What is the money being spent on now, and will there be any difference in the future?
446.
You mentioned factors like the movement of sheep from Britain as being the cause of foot-and-mouth disease. I contend that while smuggling may well have been the end result, it is only a symptom. Smuggling is going on because farmers are not getting a fair price elsewhere. In any case, that is how they see it.
447.
The meat plants are now in a situation where they do not even have marts to value their cattle. They have no outlets at all. We have seen lamb prices go through the floor in the last couple of weeks. Farmers are, therefore, up against the wall as primary producers. They are not seeing a lot of return for £35, or whatever considerable amount they have to pay. That is happening on an ongoing basis, so they are not seeing value for money; they are not seeing us impacting on the worldwide markets. Besides those set markets that have had to deal with us over the years, we must question whether we have impacted on the European market, for instance, even before the BSE or foot-and- mouth crises hit the industry.
448.
Fall-out from BSE is still a reality, although it is hidden behind the urgency of the foot-and-mouth situation at the moment. Can you tell us what you are going to do in the future, in terms of the LMC, when we get foot-and-mouth out of the way?
449.
My other question regards appointments and conflicts of interest. I think that there is a conflict of interest if people are seen to be more on the side of the producer. Indeed, from Mr Duffy's point of view it is almost necessary to have expertise in light of that. Certainly the primary producer thinks that there is a conflict of interest there. Indeed, one farmers' representative has been quite closely involved. Farm leaders should be independent, as should those who do that business and work on an LMC board as well.
450.
Mr Duffy: There were a number of questions there.
451.
It is unfair to say that the LMC had made no contribution to the European markets or, indeed, to the value that the producer was getting for his beef in Northern Ireland pre-1996. Prior to that year, Northern Ireland prices were probably the highest or second highest in Europe. You only have to look at the Albert Heijn business; all our members should be aware of how successful that was. I was not involved in that. However, from my previous experience in industry, I could see that it was definitely a very enviable position to be in. Northern Ireland's competitors were very envious of that. The facts bear that out.
452.
As for the question of whether the LMC is currently providing value for money or not, I was fortunate enough to be here last Friday when the LMC made us aware of how funds were being spent. Its submission made it clear that given the limited nature of those funds, it has already put a greater emphasis on the local market in educating the consumers of the future, namely young people.
453.
It also outlined its strategic alliance with the Meat and Livestock Commission (MLC) in ensuring that we keep a British label on our meat in Northern Ireland. You only have to look at the price differentials between Northern Ireland and the Republic of Ireland to see the success of that campaign. That does not take into account the promotional and marketing funding that has been contributed directly from the processors to the retailers in order to move the disproportionate amount of meat coming out of Northern Ireland that traditionally went to the European market.
454.
The LMC is currently working on identifying particular niche markets around the world, because we are a very high-cost producer of red meat. We have to identify niche markets. It already has one, and it has held on to the Greenfields brand to ensure that there will still be a premium place for Northern Ireland meat in that market. The LMC is identifying other markets. When those markets open, it will launch an attack with the increased funding that it will hopefully have at its disposal. That should work its way down through the chain.
455.
I sit on the board of the LMC and I am chairman of NIMEA, but that is not a conflict of interests. It is probably coincidental and it is not of my making that I want to take on those workloads, but it helps to bring greater focus. We can make decisions without having to go and consult and then come back again. We can make some very quick suppositions at board meetings on some things that are happening in the industry, like Miceal McCoy and his role in the Northern Ireland Agricultural Producers' Association (NIAPA). It is purely coincidental that he is now sitting on the board. I see it as an advantage, not a conflict.
456.
Mr Mathers: Mr McHugh said that the levy was £35; in fact it is 80p per head.
457.
Mr McHugh: I did not mean £35 per head. With regard to classification, I was saying that farmers were not happy with the way things were going for them the last time.
458.
Mr Duffy: Naturally they are not happy, because their returns are lower. When prices start falling for a number of reasons, appeals, et cetera, will rise. You have to look at what happens in the market in Great Britain. Most of you are probably aware that some meat plants pay for their own grading service. If that were to happen in Northern Ireland there would be uproar.
459.
My company's experience is that in a slaughtering of, say, 300 cattle in a day in England, 10-15 producers would be involved. One or two of them, or maybe none at all, would come to see their cattle being graded on that day by someone who has been employed by a grading service or directly by the plant. It is a task that the LMC is unfortunate to have in its remit. I cannot see any other way of having a standard that is as independent as it is at present. Unfortunately, it is very controversial.
460.
Mr Moore: Mr McHugh said that one of the purposes of the LMC was classification. The last purpose that the LMC would ever identify with is classification. It was asked to take the service on, but it would be delighted to be rid of it. It is providing a service that can only attract criticism. It will never attract praise.
461.
Mr McHugh: What is the purpose of the LMC?
462.
Mr Moore: Its purpose is the promotion and expansion of the industry. The classification service was something that it was asked to take under its wing, and it has administered it credibly. In criticising the LMC, its visible activities in Northern Ireland, other than keeping farmers happy, are irrelevant.
463.
Visibility in our markets is important. The fact that farmers do not know what the LMC is doing is not the issue. The issue is what the LMC is doing for the customers - the customers being the buyers of our product. That is where the achievements lie, and they are the people who should be giving their opinions.
464.
Mr Douglas: Although you say that NIMEA members are happy with the classification service provided by the LMC, you also say that it has not been as consistent or rigid as the service provided by the Meat and Livestock Commission (MLC) in Great Britain. What do you mean by that? What aspects of the MLC procedure could the LMC adopt in order to improve the service?
465.
Mr Duffy: There is definitely a problem in England surrounding the grading of cattle. England has a tighter form of grading than Northern Ireland. Hence, when the quality in the bands is compared directly, it is more advantageous to bone an R3-graded animal in England than in Northern Ireland. As the Chief Executive said, the difference is that the benefit swings towards the producer in Northern Ireland. The facts are there to bear that out.
466.
Mr Douglas: Should the grading in Northern Ireland be in line with that in Great Britain?
467.
Mr Duffy: Yes, but it will be harder on the farmer.
468.
Mr Paisley Jnr: I have sympathy with Mr Moore. He said that it is very easy to oppose the LMC and to give it a good kicking, but it will be very difficult to put something in its place. We have already seen as much in the evidence that we have received from other organisations, and we are examining that.
469.
Mr Mathers rightly said that illegal sheep movements are causing a great number of problems. It would be helpful to any future assessment of foot-and- mouth disease if NIMEA could produce the paper trail to establish the warnings that it gave to the Department of Agriculture and Rural Development, the Ministry of Agriculture, Fisheries and Food (MAFF), the Irish Republic and other organisations, well in advance of foot-and-mouth, about how illegal sheep movements could spread the disease. We are often told that hindsight is a wonderful thing. If you can produce evidence of foresight, that will be most welcome. It may open some people's eyes about the situation and give us the opportunity to ask different questions.
470.
Classification is causing problems for many people. Should the LMC look at finding alternative methods of classification, and should Government money be directed to that? Moy Park has developed an electronic classification scheme in the poultry sector that is speedy, efficient and cost-effective. Is there room for development there? What progress should the Government make to put in place such an efficiency drive?
471.
Secondly, do you agree that the figure of 20% wrong classifications is astounding, even though it is a European regulation? Do you agree that that should be reduced to, at most, 5%? If you had an electronic classification scheme, would you agree that you could get down to a 5% inaccuracy level? Would there be any benefit in carrying out a classification on the hoof and a classification on the hook, and then coming up with an overall classification? Would that result in a more accurate classification? Finally, do the producer, processor, retailer and consumer get value for money from the work done by the LMC?
472.
Mr Duffy: The LMC should forge ahead with developing an electronic grading system, and it should form a strategic partnership with an organisation that is pioneering and doing a lot of work in that field. It would be almost impossible for the LMC to independently fund it, but it would be beneficial if the industry got together on that issue. However, a lot of work is being done and phase one is up and running.
473.
A number of countries and organisations are spending a lot of money in that area, and it would be good if the LMC formed a strategic partnership with them. Funds will be required to obtain the latest technology, and NIMEA would be willing to operate those trials in its plants.
474.
Mr Mathers: As far as I know, I am the only person outside the Department of Agriculture and Rural Development and the LMC who has ever held a classification licence. Since 1990 I have been the only person on the island of Ireland, as far as I am aware, who is a registered meat surveyor with the international meat trade.
475.
As I have an interest in the automation of carcass classification, I went to Spain last year to follow it up and to see what is going on there. Carcasses of sheep, pigs and poultry are pea-in-a-pod carcasses. They have similar size and weight, et cetera. However, cattle have carcasses ranging from 190kg to 450kg and there is no classification equipment more accurate than the human eye.
476.
Mr Paisley Jnr: Is that to do with bone density?
477.
Mr Mathers: It is to do with everything, because the carcasses of beef animals are so diverse.
478.
Mr Paisley Jnr: I understand from Moy Park that its X-ray machines give bone density and fat content and that classification can be deduced from a photograph. However, I know that comparing poultry to beef animals is like chalk and cheese.
479.
Mr Mathers: You are talking about a 2 sq ft photograph compared to something that is 8 ft or 9 ft long and 3 ft wide.
480.
Mr Moore: The genetic diversity of a beef herd is as great as that in the human population. The genetic diversity in pigs or poultry is minuscule.
481.
Mr Mathers: The European report on mechanical classification stated that none of these machines would be likely to meet the proposed criteria for authorisation of mechanical systems by the EU. All the machines can classify, but none more accurately than the human eye. In a few years' time there will be more accurate machinery. Technology will advance and allow for that. When that happens, there will be nobody happier than the meat industry in Northern Ireland.
482.
About 90-92% of all cattle fall into a box on the grid without any dispute. The remaining 7-8% are borderline cases. They have two or three points that would recommend them for a higher grade, but they also have two or three points that would pull them into the lower grade. That is where the classification skill comes in. The error rate is 20% of that 7-8%; it does not refer to 20% of all cattle graded.
483.
Mr Moore: I have no problem saying that the LMC provides value for money. We have dealt with other promotional bodies in other countries at times. Going back to the original point, I am basing my judgement on the customer's opinion of the independence, integrity and the foresight of the LMC. I am not basing my judgement on my own opinion. I have seen the response of customers. We should send them out on their own to certain markets. In many cases, the LMC's foresight in developing and sticking with the farm quality assurance scheme without farmer support has been instrumental in winning a return that would be less today. I have no problem in saying that it currently stacks up well against any other international body. That is the opinion of some of the most significant customers of the industry. A service is being provided.
484.
Mr Tweedie: I will not say that the LMC gives 100% value for money, because no one does. I do not know whether the £2·4 million going in to the organisation goes out again, or whether they should have nine instead of 10 members - that is an internal thing. I know that underfunding has created a few problems. In the South of Ireland, a lot more money goes toward the promotional fund. Approximately £2·30 per share goes into the Meat & Livestock Commission (MLC) promotional fund in England, and in the South of Ireland it is over £1. We have more money.
485.
We supply meat to supermarkets. About two years ago we were giving them a lot of mince. Then they said that they would not be buying any of our mince for two weeks. Why was that? Was it to do with our prices? They said "Yes, but MLC is giving special promotions, therefore we have to sell all the meat from the mainland." I had a big problem with that. We had to put up the money out of our own pocket and pay that funding. That was because the MLC had more funding. It is hard for supermarkets to give value for money if they do not have the money to spend.
486.
The money put into promotional funding in the Republic and in GB is much greater than in Northern Ireland. As Mr Mathers said, we need a pointer. The funding should be put into one pot so that supermarkets can promote our goods and make us strong. In recent years we have been tied in with MLC, and probably half a million of that £2·4 million that comes in goes out every year to the MLC. Therefore, we are now part of the promotional work in the mainland, into which much of our business goes.
487.
The LMC loses a lot of levies through those half a million sheep that are being smuggled every year. I do not believe that they have been smuggled because of a lack of money, as Mr McHugh said. They are being smuggled because of a VAT and levy advantage. We have had a bucket here, and that bucket has had a hole in it for several years. Half a million sheep have been pouring out of that bucket into the South of Ireland.
488.
In the past we have not had enough lambs to supply to our customers in Northern Ireland, and therefore we have brought lambs out of England into Northern Ireland. That smuggling has caused foot-and- mouth disease (FMD). If those lambs had not been smuggled down South, we would have had enough raw material to avoid having to bring lambs out of England. Sometimes we learn lessons out of a disaster, and the lesson should be learned that because of FMD, we can now stop sheep moving, but we could not stop half a million sheep moving when there was a financial advantage to those smugglers.
489.
We can sell those half a million sheep. At the moment, the price of lambs in Northern Ireland is less than that on the mainland. That is because we have half a million lambs on the market that are no longer going elsewhere. We can market those lambs and level our price up to that of GB. The lambs have not been there for two years - they have been smuggled because of VAT and unpaid levies.
490.
The Deputy Chairperson: I take your point. Mr Mathers said earlier that the LMC, the Department of Agriculture and Rural Development, LEDU and IDB need to come together and pool their ideas. That is long overdue, and needs to be done.
491.
Mr Armstrong: You said that classification by human eye is most effective. Few of us classifying animals would have any qualms as to how to do it. There is always that 20% lean to the producer. Do you think that the price structure was leaned towards that possible 20% error rate?
492.
Mr Mathers: I do not fully understand the question.
493.
Mr Armstrong: When that 20% is leaned to the producer, the pricing structure for the meat plant could have been lowered to allow for that error in judgement of the stock.
494.
Mr Duffy: I see what you are trying to insinuate. In terms of grading, I have said before that not enough is being paid at the upper end of the scale and too much is being paid at the lower end of the scale. Those farmers who actually engage in quality production in a serious fashion are not being appropriately rewarded. The brown envelope is in no way related to quality.
495.
Should the price paid by the meat plants reflect the fact that the grading is in favour of the farmers? The meat plants basically pay what they can afford to pay, depending on the customers. It is an average price. It ranges from £1·70 to as low as £1·30, but it is an average price every week. That is the way it works.
496.
The differential is not directly related to the quality of the animal. I said that last week. If we could have an objective classification system, based on yield, that would take into account the prime parts of the animal - obviously a fillet or a loin has a much higher value - then it would be a lot easier for everyone concerned.
497.
Mr Armstrong: What can we do to promote that idea?
498.
Mr Duffy: As Mr Paisley Jnr said earlier, the LMC needs to forge strategic links with one or two of the bodies that are advanced in the science of objective classification. That would be money well spent. If the industry got together and decided to bring these machines into Northern Ireland on a trial basis, that would be a positive step. When this comes in, there will be a lot of doubt. People will look at the machine and say, "This is not what I want. I want what I had last week." A trial run of a year or so in conjunction with a major institution from another country would be a major advantage for Northern Ireland.
499.
Mr Armstrong: Would these machines come in and take the place of some of the graders in the long term? Would there be any extra expense to the farmer?
500.
Mr Duffy: Yes, the graders would be replaced. In fact, there would be a saving.
501.
Mr Kane: Mr Duffy, is it not the case that you are a member of the board of the LMC? How seriously are we to take any opinions that you might express to this inquiry? Are you not prejudiced in favour of the LMC? Is that not the case? Come clean.
502.
Mr Duffy: It is not the case. That is the simple answer.
503.
Mr Kane: That is not an answer at all. Come clean with us. Tell us.
504.
Mr Duffy: I have answered your question. You asked whether I was prejudiced and I said that I was not.
505.
Mr Moore: The Committee should be aware that both Mr Tweedie and I are former members of the LMC board. The membership of that board is not written in stone; it rotates to represent the entire industry. The intimacy of that relationship is a strength, not a weakness.
506.
Mr Kane: A lot of fingers in a lot of pies, gentlemen.
507.
Mr Duffy: Did you ask Mr McCoy of the Northern Ireland Agricultural Producers' Association (NIAPA) the same question?
508.
Mr Kane: I did not get a chance to ask Mr McCoy that question.
509.
Mr Duffy: The answer to your question is simply "No".
510.
Mr Kane: Mr Mathers, you were once a grader. Is there a natural progression through the ranks from grader to the top of the tree among the processors?
511.
Mr Mathers: Come again?
512.
Mr Kane: Are you not among the processors?
513.
Mr Tweedie: I can answer that question -
514.
Mr Kane: With all due respect to you, I put the question to Mr Mathers.
515.
Mr Mathers: When I was a grader, I was not working for the processors. I was a civil servant.
516.
Mr Kane: Is that your answer?
517.
Mr Mathers: Yes.
518.
The Deputy Chairperson: In the opening paragraph of your submission, you say that you support the core funding of the LMC by the Government, but in the second paragraph you say that the LMC should remain independent of Government subsidy. Can you explain what you mean by these apparently contradictory statements?
519.
Mr Mathers: What we are saying there is that you seem to be under a misapprehension. In his letter to us, Dr Paisley said that the Government were funding the LMC, but that is not the case. There is an opportunity to introduce that, and it should be given serious consideration in the light of what is done in the regions that we are competing against.
520.
The Deputy Chairperson: You also say that those people who have the industrial and business experience essential to the successful operation of the Commission would not apply for such positions. Can you explain further what you mean by that?
521.
Mr Mathers: The thinking behind that is that currently, when there is a vacancy on the LMC board, anyone can apply. The people that we believe should be on the board are people who have experience of industry - captains of industry - who understand the international marketing arena. Those people do not apply for those sorts of positions. It is just not in their nature. They operate in a different realm. They do not apply, and the people who are likely to apply are people who do not have the skills that are required, unless someone takes a suitable candidate and twists his or her arm.
522.
The Deputy Chairperson: You also say that the Nolan principles contribute to mediocrity in appointments. Assuming that the Nolan principles will continue to be the guiding principles for appointments to the LMC, how can people of the calibre and experience that you feel are required be encouraged to apply? Who would you like to see on your board in order to make it more compatible with the present situation?
523.
Mr Mathers: Our point is that we do not want to end up with a board of mediocre people who are not au fait with the professional marketing requirements of today's industry. We are stuck with the Nolan principles as far as public appointments are concerned at the moment, but in our opinion those principles are prejudicial to the real top professional people that we need on the board of the LMC.
524.
The Deputy Chairperson: Elected representatives get questions fired at them left, right and centre. When the thing is going well we are never approached, but when we start to hit the wall, that is when the muck starts to fly, if I can put it that way. Quite a lot of meat is imported into Northern Ireland from the South. I often hear that it is being brought in for one purpose, and that is to keep prices down. Is that the case? Is that meat of the same quality as our own produce, or is it of a better quality?
525.
Mr Duffy: The retailers have allowed a greater percentage of Southern meat on their counters because of the foot-and-mouth crisis.
526.
Two weeks ago we were out of the slaughtering arena. In order to ensure continuity of business, we had no choice but to bring in meat from the south in carcass form. It is an integral part of the farming sector for the producer, as well, that he takes store cattle from the western seaboard up into Northern Ireland. That has traditionally been the case. Some of the good feeders are actually suffering from that at the moment.
527.
In my opinion, Southern meat does not have as good a conformation as the carcasses that are produced in Northern Ireland. From a quality perspective, it is in no way inferior in terms of what it has been fed, et cetera.
528.
When the meat is taken in, it is labelled accordingly in the plant and on the supermarket shelves. During this week and next week, the percentage of Southern meat will quickly be reduced in order to take account of the slaughtering numbers that are coming on board at the moment.
529.
The Deputy Chairperson: Something that is in the minds of many people is that all these imports that come in are labelled, "Packed and processed in Northern Ireland." When those boxes go out, the Department of Agriculture has to put a label on the bottom of the box. There is a responsibility there on the Department of Agriculture. We know what was happening with the stuff that was coming in from Germany that time. I am only going on the evidence that is given to me. The people who told me about this know what they are saying. It was going on to other factories in GB and being processed there as Northern Ireland beef. Have you any control over that?
530.
Mr Duffy: Why do you, or any member of the Committee, not come to a meat plant and see for yourself? You have told me before about the work schedule of the Committee and I understand that you may not have the time. It is a pity that you cannot see it at first hand. There are so many labels going on boxes at the moment. We are the most regulated industry that I know of.
531.
If meat comes from a plant in the Republic in carcass form, say EC 300, and comes into Newry, it will be labelled, "Slaughtered in EC 300. Processed in EC 9001." It then goes to a retail packing plant, where "Retail processed in plant number x." is added to the label. It must be done in batch form, so you have a batch number on the label as well. That is how the meat can be traced right back to the farm of origin.
532.
The Deputy Chairperson: Even if it is German beef?
533.
Mr Duffy: It is the exact same rule.
534.
The Deputy Chairperson: I was not saying that is was German bulls.
535.
Mr Duffy: Are you referring to a particular incident?
536.
The Deputy Chairperson: I am referring to an incident that happened. I am only asking for information.
537.
Mr Duffy: It is exactly the same. If it comes from Germany or from Italy, it will have the slaughter number appropriate to that plant.
538.
Mr Kane: Mr Mathers, you said that skilled personnel must be appointed to the board. Do you have skilled personnel on your board at this moment?
539.
Mr Mathers: I do not have a board.
540.
Mr Kane: Do you not?
541.
Mr Mathers: What board are you talking about?
542.
Mr Kane: Forget about that question. It is not going to be answered anyway.
543.
The Deputy Chairperson: There are a number of further questions that we would have liked to ask. If we send them on to you, will you respond to them?
544.
Mr Duffy: Include Mr Kane's last question. We will endeavour to answer that for him.
545.
The Deputy Chairperson: I remember when Mr Mathers was a grader. The set-up now is completely different. I do not mean any offence, but we have a job to do and we have advanced 30 years since then. We are in a different set-up altogether. Thank you very much.
MINUTES OF EVIDENCE
Friday 11 May 2001
Members present:
Rev Dr Ian Paisley (Chairperson)
Mr Savage (Deputy Chairperson)
Mr Bradley
Mr Douglas
Mr Kane
Mr Molloy
Mr Paisley Jnr
Witnesses:
Mr H Marquess )
Mr J Carson ) National Beef Association
Mr T O'Brien )
546.
The Chairperson: Gentlemen, you have been with us before and we welcome you back to this meeting. Perhaps you would like to make a statement, and we will then ask questions.
547.
Mr Marquess: I thank the Committee for allowing the National Beef Association (NBA) to take part in this debate on the Livestock and Meat Commission (LMC). Robert Foster, our chief executive, is unable to attend. He is meeting Nick Brown and Baroness Hayman this morning with an independent delegation on agriculture. It has put us out a bit because we would not be up to the same standard as him. Arthur McKevitt, our secretary, had an accident and is unable to attend. I apologise for them both. We will endeavour to put our case, but you must realise we are only farmers who have the welfare of our industry at heart. We feel humbled by this distinguished company surrounding us in this Committee for Agriculture and Rural Development.
548.
Farmers cannot be expected to pay any more levies than at present, in their financial circumstances. The total levy depends on the meat plants, but 80p goes to the Livestock and Meat Commission (LMC) on levy and £1 goes to the LMC for grading, out of a total cost of approximately £16. Realistically, farmers would not be against higher levies if value for money were increased. Substantial funding, if needed, would have to come from the Department of Agriculture and Rural Development, processors or EU funding, to boost the £2.46 million required to run the LMC. Processors financing the LMC could pose a problem, as farmers may be obliged to pay for this by a drop in the price of cattle. We are all in this together, but farmers cannot afford to take another loss at the present time.
549.
Northern Ireland is at a disadvantage to Great Britain in that costs are higher and returns are lower. The National Beef Association fears that if the meat plants put more money into the LMC funding, they will become more dictatorial. The LMC has a thankless job running the classification service. We believe that meat plants have an influence on graders. This is backed up by a report that classification is wrong in 20% of cases. In circumstances where farmers do not complain, this could possibly rise by another 10%. We never have complaints from farmers slaughtering cattle at small meat plants. There are no queries about grading, yet the same people are grading these animals to the same level as in the larger meat plants. Graders should be more responsible, putting their names to classification sheets and tickets on each animal.
550.
Returning to the suggested wrong grades - in the range of 20-40% - if this were evident in any other practice, such as the health service, pay-offs would be the order of the day. There are different views on classification. If meat plants carry it out themselves, and it is not done properly, they would not acquire the cattle, as competition would be higher. The problem would be a price-fixing arrangement, as already suspected.
551.
The LMC should hold more direct lines of correspondence with farmers - be transparent and listen to proposals. The LMC bulletin could cover the total grid of cattle at each meat plant, in this way playing the price structuring off one against the other. For example, if meat plant A, say, killed 60 U3s, 200 R3s, and 120 R4Ls, its price could be quoted, and it would be shown against other meat plants rather than just one quotation for all meat plants. Bonuses could also be shown. This could possibly force meat plants to put grades together in some circumstances, such as a U3 and a U4L, an R3 and R4L, and O3 and O+4L. Although this would mean a slight fall in profits for the processors, the meat eating quality could be taken into account.
552.
The LMC should dissuade processors from aitchbone hanging, which results in the carcass being distorted. It then cannot be graded on appeal. The LMC and the Department of Agriculture and Rural Development should work together to show the realistic price of production. They should shame the meat plants into paying more to producers by publishing the loss margin to farmers in the bulletin. Farmers should not have to sell cattle at a price less than the cost of production, as is the case now. The LMC and the Food Standards Agency should assist in ensuring that imported meat comes up to the same standard of production and welfare that the farm quality assurance scheme requires of its members. As has been shown recently, free trade means free disease.
553.
The LMC have to be complimented on the work that has been done through schools. The NBA would suggest funding be kept available for home-based production of red meat and lamb to combat the effects of BSE and foot-and-mouth disease, and also to combat the effects of a booklet by Dr Vernon Coleman, circulated to 6,000 schools, desecrating the meat industry and farmers.
554.
Promotion of live auction marts should be ongoing, as either wittingly or unwittingly the LMC and the Department of Agriculture and Rural Development have promoted the meat plants until they have acquired a stranglehold on farmers. Meat plants need competition to raise the price of cattle to farmers. The Department of Agriculture and Rural Development has almost sounded the death knell for markets. Competition is always very evident in how Christmas fat stock sales boost the cattle prices, thus showing how much farmers need the live markets.
555.
Promotion of exports in the short-term should not be a further cost to the farmer, but should be the responsibility of the processors. In the long-term, if prices rise producers may be more willing to contribute to export promotion. It would be beneficial if the LMC were to throw its weight behind the auction marts in their quest for compensation, as they are the only group that has been ordered to close by the Government.
556.
Appointments to the board of the LMC do not include any full-time farmers. We suggest the appointment of four full-time farmers - not 'yes-men', four representatives from the Northern Ireland Meat Exporters' Association (NIMEA) and one independent chairman. The board needs at least 50% full-time farmers with a complete change after either one or two years. At present the board members are paid roughly £4,000 to £5,400 a year. There should be no salary for this job, just expenses and mileage. In this way only really interested parties with the interests of the industry at heart would apply. The Minister, who makes the final appointments, should be made more aware of this situation.
557.
The NBA feels that its has been deliberately kept off both the red meat strategy group and, lately, the farm quality assurance standing committee. Although application has been made to both in the past, we do appreciate that the red meat strategy was instigated before the NBA was formed in Northern Ireland. It seems possible that the reason for NBA not being invited on to either of these groups indicates the cosy relationship existing among the present members.
558.
The Chairperson: Gentlemen, I have to leave the meeting for a few minutes and my Deputy Chairman, Mr Savage, will be taking over. I had just one question, which you have answered. It related to the membership of the present system and you have answered that very fully. This is important because if we do not have a proper representative body to run this organisation, we are not going to see fair play. We need to put farmers on the board, people who are not 'yes-men'. I have wide experience in political life, and if you put a chain on a man's neck and give him a salary, he becomes somebody else's man. In the case of a quango, where it is the grace and favour of the Minister, there is a lot of 'keeping in' with the Minister. These people should only be reappointed for one term, after which their services should be terminated. They should not have security of tenure, which is important.
559.
I will return to the meeting. Mr Savage will now take over.
560.
The Deputy Chairperson: I listened to Mr Marquess cover these relevant points, and it is fair to say that unless farmers receive a fair return for their produce, then they are on a hiding to nothing. Your concern about an additional levy is that it will ultimately be passed on to the producer, and you referred specifically to the possibility of this occurring through the overall reduction in the price of prime cattle. What steps can be taken to ensure that the levy paid by the processors is not passed on to the producer?
561.
Mr Carson: In Great Britain they are talking about us paying £35 - they pay roughly £70. It is not an argument in Great Britain because for some time they have been paid £70 more per animal than us. If we were getting value for money out of the LMC I would prefer to pay the £70 and not have the meat plants involved.
562.
Mr Marquess: We will be in difficulties for as long as cattle remain in surplus. There will be problems until meat processors have to go out and look for cattle. Farmers have been dragged into the situation where they go to the meat plants rather than the auction marts. The problem arises if there is a surplus of cattle, and that is the crux of the matter. Supply and demand will rule the price.
563.
Mr O'Brien: Meat plants have the monopoly, and are still using their wherewithal to find out what cattle are ready and what cattle are coming up to the 30-month limit - there is evidence of that. That area should be scrutinised.
564.
Mr Carson: I do not know whether or not it is a good idea if a newspaper headline were to say that the NBA has suggested to this Committee that farmers should be asked for £70 rather than £35 at this time. As you know, farmers are living in a state of gloom, doom and despair. The beef industry has not been in a profit-making situation for the past four to five years - no other industry has suffered as much. This has been going on for four or five years, but other agriculture sectors have had their good and bad years in between. Therefore it is not acceptable to ask the farmer for £70 at this stage, but that is how the NBA would prefer it.
565.
The Deputy Chairperson: Farmers do not mind paying the extra expense providing that they get a good return for the end product.
566.
Mr Carson: It is a similar situation to the MLAs. The public does not mind the salaries MLAs receive providing that they are doing the required work. I do not care if their salaries are doubled so long as their work comes through to the agriculture industry.
567.
The Deputy Chairperson: The processors are making a voluntary contribution to the promotion of meat products in Northern Ireland. Do you welcome that, and what other sources of income do you suggest in order to promote meat from Northern Ireland? Do you have any other ideas on how to promote Northern Ireland meat?
568.
Mr Marquess: The Department of Agriculture and Rural Development will have to provide money and, if possible, the EU. The LMC acquired European money for the promotion of the export of beef. At present meat needs to be promoted at home.
569.
The Deputy Chairperson: We have to encourage people to eat more meat - go back to their roast at the weekend.
570.
Mr Molloy: You had mentioned a book circulating around schools. Who promoted that, and how did it get around schools?
571.
Mr Marquess: I do not know. 'Farm Week' recently printed an excerpt from this book, which decimated the beef and farming industry. It called farmers "blackguards and slaughterers", and to be honest it was hate mail. I brought it up at an industry meeting and asked the Minister if she could get the LMC to combat it. She said the time was not right, but she would look at it in the future. I wanted to bring it to your attention. It was just hate mail, and if I wrote the same sort of material as Dr Vernon Coleman I would be in the High Court. I cannot understand why no one has taken him to task.
572.
The Deputy Chairperson: We have to encourage our young people in the schools to start eating meat, because our meat is the best quality in Europe. This sort of propaganda does not do the industry any good.
573.
Mr Kane: Do your complaints about classifications stem from perceived inconsistency in grading, the complexity of the classification grid or the generous level of mistakes that LMC are allowed to make? Also, what are your opinions, as a farmer's organisation, on the practice of aitchboning?
574.
Mr Marquess: This is when a side of beef is hung through the aitchbone instead of straight down by the ankle - the carcass is doubled over. This must be done when the beef is fresh, and it is the supermarkets and the processors who are trying to go down this line. Someone across the water carried out a survey for LMC, which said that this process enhances the tenderness of the beef. As a butcher for 30 years I totally disagree with that. It distorts the texture of the beef, and just allows fresh beef to go into the supermarkets sooner. A butcher would hang the hindquarter of a beast for three weeks. It does not help the industry by sending fresh beef into a supermarket.
575.
As soon as possible after grading the beast is taken and hung by the aitchbone on the hook. This distorts the whole carcass - it is hanging over instead of straight up. If you have an appeal on a grading problem, you cannot go back to that beast again to appeal it because the shape of it is distorted - they will tell you your appeal is over-ruled.
576.
Mr Kane: Is that what is behind the whole issue?
577.
Mr Marquess: That is correct. It is to get another catch on farmers, to put it in layman's terms. They can downgrade your beast and once it is aitchbone hung you have absolutely no way of getting that beast upgraded again.
578.
The Deputy Chairperson: Do farmers have any comeback?
579.
Mr Marquess: Farmers have no comeback - absolutely none.
580.
Mr Kane: What about the classification and consistency in the grading?
581.
Mr Marquess: The classification is good enough, but the people who carry it out are not coming up to the required standards. They would always have it in the back of their mind that a meat plant manager is looking over their shoulder, because managers would like a beast down graded so that they pay the farmers 6p less on the grade.
582.
When that happens, it should be brought to the attention of the LMC, and a senior representative should be sent out to check that beast. However, in many cases farmers do not follow their cattle through, and they often do not find out about a bad grade until they get their docket two days later. Farmers should be on site to see their cattle graded, but processors do not encourage that.
583.
Mr Kane: Why does your organisation seem more dissatisfied with the LMC than other mainstream farmers' groups who have given submissions to the inquiry?
584.
Mr Marquess: I do not think that we have damned the LMC. We are trying to encourage them to make some changes. The crux of the matter is that there should be four full time farmer members in the LMC. The LMC should also ensure that the meat plants cannot organise a fixed price. It is very obvious to me that prices have been fixed. I have been surprised by the attitude of the Minister, the permanent secretary, and everyone that we have contacted to look into the issue - there is a relationship there that does not want to be kicked. That is the plainest way that I can answer the question.
585.
Mr Carson: People seem to have got the wrong end of the stick - we are not against the LMC. Farmers should look upon the LMC as their organisation - their headquarters. Farmers should be encouraged to use rather than abuse the LMC. Every time farmers have a complaint, they should get on the phone and make an appointment to see them. The LMC are employed to serve the farmers as well as the rest of the meat industry. In some instances farmers are to blame for not contacting the LMC. They should be on the doorstep and on the phone, and they should look upon the LMC's headquarters as the headquarters of the beef and sheep industry as well. I would encourage farmers to use the LMC - it is a good organisation because the men in charge of it and the men who work in it come from a farming background and know a lot about farming. However, the LMC needs to be dictated to and pressurised by farmers.
586.
Mr Douglas: You said that the LMC should publish grades for each plant. Have you ever asked for that to be done, and do you think it is attainable?
587.
Mr Marquess: I do not see any reason why that should not be attainable because there are so few plants in Northern Ireland. It would be a different matter across the water where they have about 70 or 80 plants - in Northern Ireland we would only need to cover five plants. The LMC might be loath to take on the job, but they might do it if this Committee put them under pressure. It would be a good way of comparing plants.
588.
Mr Douglas: I thought there might be unfair competition because there are so few plants. However, I suppose you want to encourage competition. Perhaps we would then be able to clarify the situation and have a closer relationship regarding the grades.
589.
Mr O'Brien: A factory in my area, ABP Newry, actively discourages people from following their cattle around in order to see them graded. My son was in a factory last Thursday or Friday and was more or less told to go home by the people from the meat plant and the graders. Nobody wanted him around the place. This should be highlighted. The LMC is doing a good job but it is not very helpful in that sort of instance. On our farm we do not have a lot of beef animals so I would not be there very often. This was my son's only visit there in the past year and that was how he was treated. He was as much as told to get the hell out of the way.
590.
Mr Carson: Farmers are not good at marketing themselves. I am a farmer and at the market I hear farmers asking each other if they have got rid of their cattle or sheep. The priority is on getting the animals out of the way rather than marketing them. Farmers will have to start to market their product coming off the farm.
591.
The Deputy Chairperson: Mr Carson has made a valid point. The cattle produced in Northern Ireland can compete with anywhere else, but marketing is our weakness. We have to get to grips with that or the farmer will lose out.
592.
Mr Molloy: My question relates to the perceived relationship between the LMC and the processors, which is as it is because of the controversy over the classification and the low price. Will that be made worse because the marts are closed due to the foot-and-mouth outbreak? As a result of those closures, is there any likelihood that the processors will become the only outlet?
593.
Mr Marquess: About three weeks ago I spoke to a man who had put cattle into a meat plant. He phoned the meat plant for his grades because they did not want him to come into the plant. He tried to get an appeal done on his cattle. He was told that if he wanted an appeal, he could come and take his cattle away. He had six cattle put into the abattoir and he did not know what to do. He said that the meat plant would not take his cattle if he kicked up any more of a tirade. I told him that I would phone the meat plant and see what I could do - I was told the same.
594.
The live auction marts need to be actively engaged again. I understand that due to the present situation that cannot happen. When they do reopen they will have to be actively used, which they have not been. There used to be 4,000 or 5,000 cattle at the markets around the country. Nowadays you can count on two hands the remaining markets, and the cattle numbers have also decreased. That is not because the cattle are not there, it is because they are not being marketed properly. It all goes back to the same thing; there is an over supply and that leaves things open to manipulation.
595.
Mr Bradley: Over a couple of Committee sessions I tried to establish how many selling-on grades the meat plants have when selling off their product. I got longwinded answers, but I never got a satisfactory answer. What benefit would there be to reducing the number of grades, and who would benefit if they were reduced?
596.
Mr Marquess: It all goes back to supply and demand. If there is surplus cattle the grades can be manipulated. I would like to see a bonus for the top grades. We are trying to promote good quality cattle, so there needs to be a bonus for those grades. The problem is getting the meat plants to give that proposed bonus. If there was a realistic price structure on what it costs to produce an animal - and the LMC could do that - the meat plants not offering the production price could be named and shamed. I think that would be a big help.
597.
Mr Carson: It is with regard to the R3 and R4L grades that we are asking for a 6p differential. In some cases we are actually paying the same, if not more, for the R4L grade. That grade seems to be the problem one.
598.
Another problem is that many people believe that the NBA is against meat plants and NIMEA, - everyone except the farmer, which is far from the truth. We need everybody playing their part in the game. Problems occur when a farmer sells an animal for £500, and within two weeks the value of that animal has doubled. The farmer has kept that animal for two and a half years and within two and a half weeks its value doubles. The cake is not being divided up properly, and that is hard to accept. Farmers are taking swipes at the LMC and at meat plants. Everyone needs to sit at the table and sort this matter out once and for all. The cake is big enough, and farmers should get more than just the crumbs.
599.
Mr Bradley: I presented evidence to the Committee regarding prices. There were eight cattle sold in a factory in Scotland, and through the Assembly research department I discovered the price that those cattle would have made had they been sold on the same day in Northern Ireland. The result was an average of £65 less than in Scotland.
600.
Mr Marquess: Some members of our group took cattle across to Scotland at one stage because prices were so low here. It worked well for about three weeks, and then prices started to come down slightly in Scotland and began to rise here. I do not know if the situation was manipulated or whether it just happened. However, within three weeks the exercise had to stop because it was no longer cost effective.
601.
The Deputy Chairperson: You suggest that the LMC be divested of its classification responsibilities and the service offered for private tender. While the subjectivity of the classification process is indicative of transferring the problem somewhere else, why should the potential for bias in classification be any less with a private organisation as opposed to a non-Government public body? You have suggested that such an organisation would be paid for by the factories, so is it not likely that the relationship between the factory and the classifier would be perceived as being less independent than it is at present? For me as a farmer, what benefit would there be in a private body taking over the LMC responsibilities?
602.
Mr Marquess: The only problem is that the graders would get into the same position as the present LMC graders. They need to be held responsible for their actions. If someone worked in a café and slipped up on health regulations, then he would be held responsible. Our suggestion that graders' names be put on the carcass classification would make them more responsible.
603.
The Deputy Chairperson: Years ago at the beef sale in Portadown, I saw you, and people like you, coming in to buy your cattle for the Christmas market. Your eye was your judge, and you bought what you wanted - both you and the seller were satisfied. Is there no way that we can get back to that system again? About three months before the foot-and-mouth crisis, cattle were getting scarce and factories needed them for export orders. Their agents were coming round the farmyards - I know this for a fact, because they were in my farmyard. It was so much per kilo for the animals - no grade, no nothing. Is that is a fair system?
604.
Mr Marquess: If the processors are forced in to the situation where they have to buy cattle, they will go out and pay more. They will not do it unless they are forced in to that situation.
605.
The Deputy Chairperson: Are we back to a situation of supply and demand?
606.
Mr O'Brien: We need the auction marts back as soon as possible. We know it is not practical at the moment, but someone has suggested that they could be open in September or October. If we get rid of foot- and-mouth, marts should be allowed to open far sooner than that. People should be encouraged to go to the marts and this Committee, which is doing a good job, should encourage that. Factories can dictate their own terms and you have no say. You can go out with your cattle today, if you want to sell them, and the plant can tell you that the price will be 156 or 158 pence. If you could go to the mart, other people may buy them there. The factories are going to have to pay more money.
607.
The Deputy Chairperson: As far as I am concerned, it is a good opportunity to test the market.
608.
Mr O'Brien: If these markets are re-opened within the next week or two, how do people know what value their store cattle are? There is no guideline and dealers will go for the lowest price. Farmers want money now - they need money - and that is something that should be pointed out. The marts should be opened as soon as possible.
609.
Mr Carson: We need to encourage consumers to put their hand on their heart, before putting it in their pocket, and encourage them to buy produce from Northern Ireland. We need to get that across, and also do something about imports. I do not know what amount of beef is used in restaurants and such places, but it is said that there is a lot. They should be buying produce from Great Britain and Northern Ireland.
610.
The Deputy Chairperson: That is an area that certainly needs to be investigated.
611.
Mr O'Brien: Labelling has been talked about quite a bit. There is one particular place that I have been told about, where beef is packed. It is packaged in Northern Ireland, but it comes from Germany and elsewhere. That should be made clear - "Packaged in Northern Ireland" tells you nothing.
612.
The Deputy Chairperson: There should be more use made of our traceability.
613.
Mr O'Brien: Definitely so.
614.
The Deputy Chairperson: In order to balance the subjectivity of the classification procedure, there is an appeals procedure. This appeal is made to a senior classifier employed by the LMC. In your opinion, does this reflect a truly independent assessment?
615.
Mr Marquess: It is according to the senior member. I know quite a few cases where farmers have had their appeal upheld. I know of some occasions when it has not happened. If you put too much pressure on the meat plants, they do not need your cattle the following week. They leave you until your cattle are perhaps coming to 30 months of age. They have ways and means of manipulating you - to keep you waiting on the sidelines. They just do not need cattle this week. There are so few of them, all they have to do is lift the phone and say "Harry Marquess has ten cattle, do not take them this week. Hold them back a couple of weeks, and we will fix him". You are so glad to get rid of them at the end.
616.
The Deputy Chairperson: Whenever you are down to five, it is a serious situation. The final question that I want to ask is what would you like to see happening to make the LMC more streamlined for the farmer and yourselves. What changes would you like to see being made?
617.
Mr Marquess: This comes back to appointments. If full-time farmers were on the body of the LMC, they would have the opportunity to make changes, and they could force change if they were prepared to do so. They do not need to be "yes men". I can think of half a dozen men that could be put onto it tomorrow, and they would straighten things out.
618.
Mr Carson: At the same time everything that the LMC does is not wrong. If you get the name of rising early, you can lie all day. LMC does a lot of work, and has done so in the past. It did a good job on the promotion of beef to Europe before BSE. Perhaps it could have done more to try and sell beef in mainland Britain. We would criticise it for that, but on the whole, it needs to be used rather than abused - we cannot do without the organisation.
619.
The Deputy Chairperson: If farmers have complaints they have got to go to the LMC and make it aware of them.
620.
Mr Marquess: That is the reason that we put our submission forward to you - we hope that you can impress that on the LMC, because the farmer cannot impress upon it any more. We have done all that we can. In certain circumstances, the LMC members are not prepared to listen, but if a body such as yourselves approached them and said that you are breathing down the back of their necks, that would be an entirely different story. I am sure that if they saw Dr Paisley breathing down the back of their necks, they would sharpen themselves up a bit.
621.
The Chairperson: I do not know about that. When you are dealing with quangos, you always have the motivation of self-preservation. The LMC members know that they are not going to preserve themselves because they have friends on the Agriculture and Rural Development Committee. They are going to possess their position and keep it as long as they have the patronage of the Minister and the Department. I never in all my days met any quango with a degree of independence. Often you cannot even get elected Members of Parliament to be independent, and they must go to the electorate. I can pick a number of names out of a hat and, by patronage, put them into such a position - they will not bite the hand that fed them. The trouble is that they are biting the hand of those that do feed them - the farmers.
622.
There is one question that I would like to ask. Perhaps it has already been covered, but it disturbs me. It concerns the system of classification, whereby a man looks at an animal and he decides its well-being, its value and where it should be placed as far as money is concerned. Can that be altered?
623.
Mr Marquess: There is electronic classification, which is presently being worked on. It was subject to some discussion, and has been tried out in the Republic of Ireland. The classification was good but it did not come up to the right fat cover. It is in the advanced stages and perhaps in a short time it may come about. I still think a good man is equal to any machine providing that he is straight and does not respond to a meat plant manager looking over his shoulder.
624.
The Chairperson: The LMC has told us that graders are allowed a 20% error in everything that they grade. I asked them if they would employ someone permanently and allow them a 20% error - they said "certainly not". I could understand 5%, but they are working on a system of 20%. They then hide behind the European mask, saying it is European law. I would query whether it is European law. They do not have to abide by it - it is only a guideline from Europe and not a law. A 20% mistake is too much.
625.
Mr Marquess: It is too much.
626.
The Chairperson: Would you like your employees to regularly make so many mistakes?
627.
Mr Marquess: I would not.
628.
The Chairperson: It always favours everybody except the farmer. They tried to tell us that the farmers were quite happy about that.
629.
Mr O'Brien: They are admitting 20%, but what is the actual figure? It could be 40%.
630.
The Chairperson: I cannot get that information because there is no way to measure up every cow afterwards. In my opinion it is a system that cannot be monitored. How can you monitor that system, and at least get fair play? At the very most you should have a 5% error rate, but 20% - a fifth - is too much. That was the most revealing information to come out of their examination. The LMC try to say that the farmers like the system. They were trying to evangelise our poor heathen souls to believe that the farmers all agreed with it, while the farmers raise this matter everywhere my colleagues and I go. No one has ever come to us endorsing the system of classification.
631.
Mr Carson: You will have made farmers more unhappy, as I did not realise that they were allowed 20%.
632.
The Chairperson: Neither did we until we found out.
633.
Mr Carson: LMC say that they are taking their guidelines on grading from the Department. Would the Department be making the balls, and letting LMC throw them? Some graders want to keep on the right side, rather than lose their job. That is a matter that should be investigated.
634.
The Chairperson: They ran to Europe for cover. It is a guideline in Europe, not a law, and I am looking into the matter. A lot of European legislation is guidelines-[inaudible]
635.
When you take the price he has paid for that commodity, and the price of feeding stuffs, et cetera, it is amazing.
636.
We may want to send you some written questions in the near future. Thank you very much for attending.
MINUTES OF EVIDENCE
Friday 11 May 2001
Members present:
Rev Dr Ian Paisley (Chairperson)
Mr Savage (Deputy Chairperson)
Mr Bradley
Mr Douglas
Mr Kane
Mr Molloy
Witnesses:
Mr E Adamson )
Mr I Gibson ) National Sheep Association
Mr S Wharry )
637.
The Chairperson: I welcome you here today, gentleman. If you would like to give a summary of your evidence, the Committee will then have some questions.
638.
Mr Adamson: I am Edward Adamson, secretary of the National Sheep Association. Ian Gibson is the chairman and Samuel Wharry is the treasurer. The National Sheep Association does not lobby as much as the National Beef Association. We try to advise sheep farmers on technical matters. There are other people out there to do the lobbying for them. We never really get involved much in lobbying.
639.
Classification in the lamb trade is slightly different than for other animals. There are grumbles about it, but perhaps not quite as many as there might be - it is a different animal and is graded in a different way. The grumble is mostly that in the South standards are much less severe than here. A lamb in the South would be a grade higher than it would be here. I have witnessed this, and there is no argument about it.
640.
The Chairperson: What is the reason for that?
641.
Mr Adamson: I do not know. It should not be that way because the Livestock and Meat Commission (LMC) is an independent body here. In the South the graders are paid by the meat plants. Suspicious farmers might think that if a meat plant is paying a grader, the sheep would be given a low grade so that the meat plant would not have to pay as much for them. Perhaps they think that if a lamb is given a higher grade it can be sold more easily. There is definitely a difference.
642.
The Chairperson: We have found that such differences occur throughout the South. The bias is towards the farmer there.
643.
Mr Adamson: Yes, it is.
644.
The Chairperson: We have had evidence of that from all sections.
645.
Mr Adamson: My other main point is about farmer representation on the LMC board. If farm producers like ourselves are funding the LMC we ought to have a say in it. We would not want all the say, but I think we should have more say than we currently have. There are what I call "part-time farmers" on the board, but there are no full-time farmers depending on farming as their only income.
646.
The Chairperson: They refuted that. They said there was one or two.
647.
Mr Kane: They are only part-timers. I am sure they do other things.
648.
Mr Adamson: Yes, I am sure that they have to spend time on the other matters that they are involved in. Their income from those matters is probably more than that from their sheep enterprises.
649.
Mr Kane: They have a lot of fingers in the pie.
650.
The Chairperson: Are you ever consulted when they are appointing to the LMC board?
651.
Mr Adamson: No. We are not consulted. When there is a space to be filled on the board it is advertised in the press. None of our members saw the last advertisement; I do not know where it was advertised.
652.
Mr Gibson: The advertisements are usually in the 'Belfast Telegraph' on a Thursday. There would be a much higher chance of farmers applying for it if an advertisement was placed in 'Farming Life' or 'Farm Week'. Farmers are less likely to check the 'Belfast Telegraph' for advertisements.
653.
Mr Wharry: The first time that farmers are aware that there is going to be an appointment to the board is after the appointment has been made. It is a fait accompli before we even know about it.
654.
The Chairperson: It is probably the same with this Committee. Maybe we can get that rectified. The Department is totally opposed to appointing anyone who is a nominee from a body. It might write out and ask - which it does not do to you. It might ask the Ulster Farmers' Union; it might ask NIAPA. I do not know whether it told us that in evidence. The Department of Agriculture and Rural Development will do this on its own -it is a grace and favour matter. It is an appointment of the Minister, and we have no say on that.
655.
Mr Gibson: Our main problem is that it is funded with farmers' money, and yet farmers have no say in the running of it.
656.
The Chairperson: Fifty per cent of the commission should be full-time farmers, people whose main means of support is from farming. Then they would have an interest in protecting their own interests and those of the farming community.
657.
They argue that they are all great businessmen and that they are getting you a good deal. I have never met a farmer yet who thought he was getting a good deal from them. I was thinking of writing to them and asking them if they could bring me some of their constituents who voted for it. They paint such a rosy picture. They should take me out and show me where these people are.
658.
Mr Adamson: We are not totally against them. They are doing their best, but it could be better, and they could communicate better. They have a very bad communication system with farmers. If they had farmers on the board, it would help to improve their image.
659.
Mr Gibson: Things might not be better, but it might look better.
660.
Mr Adamson: You could bluff them better.
661.
Mr Gibson: Yes, it would look better if there were, say, two beef farmers and a sheep farmer on it. I would suggest someone from a company like Moy Park, which is a world leader now in Northern Ireland in meat production and meat exports. Someone like that should have an outside input.
662.
Moy Park itself was not going well. There was the directors' buy-out 10 or 12 years ago. Since then it has probably been the most successful agricultural company in Northern Ireland.
663.
Mr Savage: Not if you are talking to the broiler producers at the minute.
664.
Mr Adamson: The company itself has done well.
665.
The Chairperson: If you want to get down to what root people are thinking, you have to have representatives of the grass roots. They were not in that body. That was the first time that any commission brought everybody, and they were all well-heeled gentlemen. I do not think the bank manager has had a personal talk with any of them for a long time.
666.
Mr Adamson: Their salaries were in the published accounts. What the chief executive gets would pay quite a number of farmers.
667.
The Chairperson: They would settle for it?
668.
Mr Wharry: Most of us would settle for it quite happily.
669.
Mr Gibson: The brochure produced every year is another gripe. I am sure it costs a fortune to produce that number of copies. In the middle there is an appendix of 10 glossy pages. The Department of Agriculture and Rural Development sends me all that information. You can get it anywhere - and it is all in the Ulster Farmers' Union diary. There are a lot of other things in it, and a lot of blank pages. A lot less would do. To be honest, it is all padding.
670.
Mr Wharry: The complaint is that there is never enough money to fund promotional work, then that sort of money is spent on that. I know the argument would be that it is a small amount for promotion, but every little bit has to help.
671.
Mr Gibson: I do not think even a political party could produce a brochure like that.
672.
The Chairperson: Political parties are very poor beasts and always suffer from foot-and-mouth disease. You cannot get them to canvass or speak out.
673.
I can only say that the feedback on classification has been fairly serious and fairly critical of the personnel who run the commission. I do not think there has been anybody who has been against them altogether, and quite a few people said that they did some good things. However, no one came in here carrying a flag for them. They were not eulogised in any way. There was a series of criticisms which, for their own sakes, they need to face up to, but I did not see a great willingness among them to do that. They did defend classification here, but then they hid behind Europe. They certainly defended the composition of the board, and I think that composition was very good.
674.
Mr Kane: As far as I am concerned, the meat plants and the processors have them in the heart of their hands.
675.
Mr Wharry: There is a feeling among farmers that the LMC is controlled by meat plants. LMC makes no effort to counter that.
676.
Mr Savage: We note your suggestion that the broadening of levies away from the dead weight lambs to the number of ewes might be more fair across the lamb and sheep sector and would provide a broader basis for levy collection. Do you consider that such an extension would gain widespread support in the Northern Ireland sheep industry?
677.
Mr Adamson: It would from those who sell dead weight because they already pay it. However, those who sell their lambs live - if that ever happens again - do not have to pay. According to human nature, they will not like it. The lamb levy would amount to £38,000 or £40,000, but we cannot expect a lot to be done for the sheep industry on that sort of money. Money is needed from somewhere, but it is hard to find, and we cannot afford it.
678.
Mr Savage: Are things tight at the minute?
679.
Mr Adamson: Yes. We are in big trouble this summer. We have nowhere else to go but the meat plants. We are at their mercy, and it would appear that they are going to pick our bones.
680.
Mr Savage That is likely.
681.
We note your concern that a statutory levy on processors may be indirectly passed on to the producers. What steps do you think should be taken to ensure that the producer is protected from this?
682.
Mr Adamson: That is out of our hands. It would be a decision for people above us. When the processors have costs they automatically come back to the producer. There have been other costs in the past that we have had to pay, and this would just be another one.
683.
Mr Savage: The cost to the producers would not be so bad if they were getting a good price in the first place. They could put up with that.
684.
Mr Adamson: At the minute the percentage that is taken out of the lamb price is larger. If it were a smaller percentage we could cope with it.
685.
Mr Wharry: That is why we feel that it would be better for the processors to be involved in promotional work along with LMC. Let them go for joint promotion or something like that, rather than charging on the basis of cost per lamb. If it is done on a cost per lamb basis, it will be passed directly back to the producers. There is no doubt about that. If they are spending money on promotion and joint ventures with the LMC, there is a chance that it will come out of a different budget.
686.
The Chairperson: Following that point, you suggest that a levy should be collected on all ewes, rather than lambs at slaughter. The funds collected using your figures would only just top £100,000 at current levy rates. Is it possible to run any real promotional campaign with that amount of money?
687.
Mr Adamson: No, not really. However, it is more than they were using, and it would have to be done in conjunction with the levies lifted on beef. We have to work in co-operation with beef producers.
688.
Mr Bradley: I will comment on the appointments. Although we would all like to see four or five full-time farmers on the board - whether they produce sheep or beef - it might be impossible to achieve that. However, the LMC might have difficulty in keeping us from getting one or two farmers onto the board. We should keep that in mind for the future.
689.
In your submission you raised issues about the branding of Northern Ireland lamb products. Can you describe the main issues and problems that you perceive with the branding in the Northern Ireland lamb sector?
690.
Mr Adamson: Before the BSE crisis there was a Greenfields brand for beef, which was quite successful in Holland. One of the Dutch supermarkets, Albert Heijn, was buying Greenfields beef. If something similar could be developed to promote Ulster lamb, perhaps under the Greenfields label, those producers who use that stamp would then have to pay something for the privilege. Would that bring in money? However, there is a chicken-and-egg situation. You would have to prove that Ulster lamb was something special. There is a long-term problem there, but it worked for beef, and it could work for lamb. Would it not be possible for the producers or the promotional body to get some money to raise capital to promote it better? We hear about Scots lamb and Welsh lamb. Those brands seem to be doing well, but we do not have an Ulster lamb brand.
691.
Mr Savage: We have got to promote our lamb.
692.
Mr Adamson: Yes. It is not being done at the minute. The bulk of our lamb goes into the supermarkets' own-brand packaging.
693.
Mr Wharry: A lot of supermarkets would be interested in having a branded product. The Ulster lamb groups who attended the SIAL food fair in Paris said that they got very positive feedback from the French supermarkets. They were keen to source lamb from here, which would be branded as Ulster lamb.
694.
The Chairperson: I can confirm that. I went with the other MEPs to certain stores where French people were asking for Ulster meat. We were amazed when we stood at the counters, and they said that we should be labelling all our goods because we have a good name.
695.
Mr Adamson: We have a good image and a good name which we need to try to build on and keep to the fore. The only way that can be done is with branded products.
696.
The Chairperson: Would it not follow that the LMC should have endeavoured to achieve that long ago? Mr John Taylor was still a member of the European Parliament, and that is some time ago now. John Hume and I were amazed by what was said to us when we entered the store and the French women came up and asked for Ulster meat. That was not arranged. Ulster meat is very popular there.
697.
Mr Adamson: We do not need to be humble about our products.
698.
The Chairperson: The people said that Ulster meat tastes good.
699.
Mr Adamson: Our product, both beef and lamb, is grass-fed, whereas French lamb is intensive house-fed, which is a totally different thing.
700.
Mr Wharry: If you query the LMC on that programme it would tell you that it cannot afford the programme and has not got enough money.
701.
The Chairperson: There has been a lot of money over the years. We are not asking the LMC to do it in three months. One would have thought that it would be concentrating where there is a need. We sold over £1 million worth of meat to Holland, and we lost that, although we are getting a bit of that market back. Having lost a market, it is hard to get that trade back again.
702.
Mr Adamson: None of our present problems are helping the matter.
703.
Mr Molloy: In the submission you state that we need better information with regard to grades. What are the specific problems that you have encountered in terms of the LMC's grading groups? What improvements would you recommend?
704.
Mr Adamson: The problem would be one of reporting. We receive feedback that there is a percentage of Es, Us and RS and that there is 80% of 2s, 3s and 4s. When one slides those two together they do not match. It is not a case of E2s, E3s and E4s. The individual grades are E1, E2, E3 and E4. The grading would need to be split up more to make it more useful. It does not mean a lot at present. It is rounded up into big lumps. If it were to be split up we could then see where they matched each other, where the conformation grade and the fat levels were together. Sorry if I have not explained that too well.
705.
Mr Wharry: If lambs are going to be tagged with individual numbers - [inaudible due to mobile phone]
706.
Mr Adamson: It looks like individual tagging is going to be forced upon us, so we might as well make use of it.
707.
The Chairperson: It is a very costly business.
708.
Mr Wharry: If we have to do it we might as well get some benefit out of it.
709.
The Chairperson: Is the farmer going to have to pay for that? The Department of Agriculture and Rural Development will not pay for it.
710.
Mr Adamson: We cannot afford to pay for it.
711.
Mr Wharry: It will lead to a contraction in the sheep flock - a lot of sheep farmers are going to say that it is not worth the hassle and get out of the business. That is happening already and this is just going to accelerate that process.
712.
The Chairperson: What benefit is that to you if you do not hear the result?
713.
Mr Wharry: That is what we say. If we have to do it, we have to get some benefit from it.
714.
The Chairperson: The results will have to be some fresh financial help to farmers. What if the Department of Agriculture and Rural Development proceeds to tag three million sheep?
715.
Mr Wharry: The current APHIS system is nearly at its limit, and that is a problem. How will the Department cope with that if three million sheep hit it?
716.
The Chairperson: The Department of Agriculture and Rural Development wants to be the giant that holds us by the throat. That Department takes great exception to anybody putting legitimate arguments against it - everyone there is defensive. You touch them, and they immediately get back at you, even if you have made no charge against them. That Department is now going to establish a dictatorship over three million sheep. This is not the time to invest in the tagging of three million sheep.
717.
Mr Adamson: That is right, and it will make a lot of sheep farmers break the law.
718.
The Chairperson: When everything has been taken into consideration, it must cost approximately £1 to tag one sheep.
719.
Mr Adamson: To tag correctly, you have to double tag. The cost of that, plus our paperwork, means that the cost would not be far short of that sum.
720.
The Chairperson: That is £3 million out of our industry.
721.
Mr Adamson: We are on £22 per week.
722.
Mr Wharry: It will cause a lot of stress, especially for smaller sheep farmers, and probably older sheep farmers. They may say that it is not worth it.
723.
The Chairperson: The overall policy of the Department of Agriculture and Rural Development is to put smaller people out of business, and if there is a way that it can do that, it will. I am worried about that, but the cost might prohibit the Department.
724.
Mr Douglas: It was highlighted that there are two people on the LMC who are involved full-time in meat plants. There should be at least two from the farming community, with one from the sheep sector. That was highlighted, and it is important that we bear that in mind.
725.
You mentioned that prices are slightly higher in the South and are graded to the benefit of the farmers. At the same time, it appears that a percentage of our lambs are slaughtered in the South. Whether that is legal or illegal is another matter. That fact is well known, and I know that a lot of lambs go to the South from my end of the country - I am talking about lorry loads that have gone. That points to the fact that the LMC's meat plants promotion is not doing its job properly. At the same time, we have to ask where we would be if we did not get rid of all those lambs.
726.
Mr Wharry: We will find out in the summer.
727.
Mr Douglas: A man in my area exports a lot of sheep to the South. People say that he does not give the best prices, but that he clears a lot of sheep - the market would be distorted if those sheep were not going.
728.
Mr Adamson: Again that is not the answer - it is another question. Those lambs go to the South and the Southern plants are probably putting them into the same markets as the Northern plants.
729.
Mr Douglas: They are then being sold on as lamb from the Republic, rather than from Ulster. That means that the promotion cannot be right.
730.
Mr Adamson: That appears to be the case. Lamb production in the South is currently not near capacity. Northern meat plants are starting to have trouble coping with lamb numbers - we are only into spring, and there are few lambs there. Later in the season we will have full production, but that does not bear thinking about.
731.
Mr Douglas: Are you saying that the lambs will go to the South?
732.
Mr Adamson: I do not know where they will go, unless the plants here makes a better effort to get them into GB. The problem is that there are too many lambs [Inaudible due to mobile phone]
733.
The press last week said that the chief executive of the NSA in England spoke to Meat New Zealand, and it has agreed not to target GB in its promotion to sell New Zealand lamb. That promotion will shift to Europe. However, I think that if a supermarket were to ask for New Zealand lamb, Meat New Zealand would probably supply it.
734.
The Chairperson: Meat New Zealand can supply the lamb because it has succeeded in getting the name "New Zealand" into the housewife's mind. If you have the market, you do not need to target it. New Zealand has that market. It became an issue when we joined the EC. Roast lamb is a very big political hot potato. It was a big issue in New Zealand, and the company had to negotiate a special arrangement with the EC so that we could eat New Zealand lamb. New Zealand lamb was asked for - the housewife demanded it. That lamb was also at a good price. I ate New Zealand lamb as a boy.
735.
Mr Adamson: We cannot compete pricewise with New Zealand lamb. However, you might notice a quality difference between the two.
736.
The Chairperson: There is a definite difference between New Zealand lamb and the lamb that is brought up here. I do not know if any of you have been to New Zealand, but it is a different terrain.
737.
Mr Bradley: Are they subsidised in New Zealand?
738.
Mr Adamson: No. The point is that the operation is large. You could be talking about one man looking after 10,000 ewes.
739.
Mr Wharry: It takes 8,000 to 10,000 ewes to justify one man's wages.
740.
Mr Bradley: The point is the sheer numbers.
741.
The Chairperson: There is a special arrangement for getting them in. There is no tariff.
742.
Mr Adamson: That was an arrangement that was made.
743.
Mr Wharry: Although Meat New Zealand is not subsidised, the New Zealand Government spend a great deal on promotion. The Government pay for all the promotion of New Zealand lamb.
744.
Mr Bradley: There is a quality scheme in place there.
745.
The Chairperson: Australia is the clearing place for New Zealand lamb outside that country. That ensures that it gets to Britain. That is why I said that they have already established a good system.
746.
Mr Adamson: We have welfare codes in place, and there are standards which we have to keep to. If one man looks after 10,000 ewes, then I am afraid that there are no codes.
747.
Mr Wharry: They use easy-care systems where during lambing time you leave them for three weeks.
748.
The Chairperson: Did New Zealand ever have foot-and-mouth disease?
749.
Mr Wharry: No. The import controls in New Zealand are stringent, and there are even controls on people coming into the country.
750.
Mr Adamson: Sheep that are imported into New Zealand go onto an island for quarantine. The sheep that are eventually allowed into New Zealand are about three or four generations from that importation. Stock will not be directly imported into New Zealand - farmers only breed from what is there.
751.
Mr Bradley: Is there no tagging in New Zealand?
752.
Mr Adamson: No. I do not think so.
753.
Mr Kane: Does the complex nature of the current classification grid lead to greater difficulty when making a determination?
754.
Mr Adamson: It probably does. We commented that we could cut those classifications down. I mentioned that we were going to talk about four grades of lamb - a super lamb, premium lamb, the base lamb and penalty. We have the five European grades, and the five fat levels. If you multiply five by five you have 25 grades. Lambs are not sold like that. The EUROP system is only a guide to the meat yield. An E lamb will produce more meat than a P lamb.
755.
Mr Gibson: The EUROP system was devised to standardise grading in Europe. We mentioned the size in the North; the system was meant to make an R3 the same shape of beast in France, Ireland, and England. There was to be a uniform classification system in Europe. It does not seem to be working.
756.
Mr Adamson: They do not sell that number of grades.
757.
Mr Wharry: It does not make sense because when a housewife goes to the supermarket to buy a lamb chop she does not ask whether it is an O3, an R3 or a U4L. The taste and the eating quality are more important. The grading system is more complicated than it needs to be. It should only be there as a guide to producers to see how their own stock is producing.
758.
Mr Kane: Mr Chairman, all the points made by the National Sheep Association and the National Beef Association need to be taken into consideration, and the Committee must hammer them home to the Department.
759.
The Chairperson: The classification system falls down because nobody benefits. The housewife does not say "I want a classification of that type of beef"; consumers do not know what they are buying. I would be in total ignorance if those grades were quoted to me. You said that valuable information is withheld from farmers, and they do not get the feedback that they should.
760.
There are two questions that we must get an answer to. We note that you would welcome information on objective classification methods. What level of support should there be for a development of objective classification in the Northern Ireland sheep industry?
761.
Mr Adamson: There would be plenty of support for it, but do you mean financial support?
762.
The Chairperson: Would you say that people would be prepared to say, "Yes we should have this"?
763.
Mr Adamson: How will the cost issue level out?
764.
Mr Wharry: Would there not be a case for funds that are being modulated from sheep annual premium to go to rural development?
765.
The Chairperson: Modulation funds?
766.
Mr Wharry: Funds from the rural development budget could be used for that and for promotional work.
767.
Mr Savage: You will see something along those lines.
768.
Mr Wharry: That money is going out of the sheep industry, and we feel strongly that it should be spent on something that will benefit the sheep industry.
769.
The Chairperson: The Minister promised us that at Westminster. Money that was taken from the farmer's pocket would be given back. Modulation was the great argument that was put. The Committee argued that you are taking money out of the farmer's pocket and saying that is a good thing. What benefit will the farmer have?
770.
Mr Adamson: Our worry is that the money goes back to the pockets of rural dwellers but not necessarily the farmers' pockets.
771.
The Chairperson: That worries the Committee too. There is the rural development craze; nobody ever defines what rural development or rural proofing is. The Committee cannot get definitions, and if it does not know what the terms mean it cannot help. What issues do you envisage a specialist sheep subcommittee dealing with specifically? Would local industry be prepared to support the work of such a committee?
772.
Mr Adamson: That committee would deal with subjects that we mentioned earlier that are specific to sheep. The industry would initially support the committee to see how it was getting on; if it does not do the job the industry will soon pull the plug. The committee would have to produce the goods. It sounds good, but unless the committee is of use the industry would soon lose interest in it.
773.
Mr Savage: The farmer must be given a decent return for what he has produced. We have not been getting that for the past three or four years. We must get the price stabilised. We are doing our best to promote the product, but it has to be promoted from both angles. This gentleman said today that he is trying for good quality lambs, but while there is no grading, it is very difficult to do that. There has to be a two-way effort here. The LMC and the Department must co-operate with the farmer and the producer.
774.
The Chairperson: What you are really saying is that the place and priority of sheep goes to the wall because the commission is more interested in meat than it is in lamb. While it concentrates on that, the sheep just come in on the tail of the cattle.
775.
Mr Adamson: When BSE first hit, we understood that there was a priority towards beef. We have got used to that now, but it should not forget about us. The beef industry is a bigger industry. However, the sheep industry cannot be neglected; there is no option in the hills other than sheep.
776.
The Chairperson: I agree with you. I believe that it is all-important because there are people who will buy Ulster lamb. I told farmers years ago that they needed to watch the young people. They are very peculiar in their eating habits now. A terrible lot of young people do not eat meat now. There are young people who will not eat beef, because of BSE, and have not gone back to beef, but they eat lamb. If the commission is concentrating on meat, then the lamb goes to the side. That suggestion is a good suggestion, but there is nobody on the LMC board at present that is able to advise about sheep.
777.
Mr Adamson: I suppose Ian Mark is involved with sheep, but the problem is that he has a foot in each camp. I know which one is the heavier.
778.
Mr Douglas: Do you have representation throughout Northern Ireland? I know that you represent all Irish producers. There are eight regions, and you are just one, here in Northern Ireland. Do you have a fair representation?
779.
Mr Adamson: We have representation throughout the Six Counties, but if I am honest, the sheep industry is focused more in Counties Antrim and Down. The membership runs parallel with sheep numbers.
780.
Mr Douglas: What sort of membership do you have?
781.
Mr Adamson: About 350.
782.
Mr Douglas: That is a lot of members.
783.
Mr Wharry: Whilst there are a lot of farmers who keep sheep who are not members of the National Sheep Association, for most of that 350, sheep would be an important part of their farming.
784.
The Chairperson: Gentlemen, thank you very much. We will probably write to you and ask more questions. We will also send you a copy of these proceedings so that you can make any corrections.
[1]Submission of 21 April 2001 (Annex F1) and paragraph 585 of Minutes of Evidence
[2] Submission of 6 June 2001 (Annex G3) and paragraph 675 of Minutes of Evidence
[3] Submission of 27 March 2001 (Annex A1) and paragraphs 38-39 of Minutes of Evidence
[4] Submission of 1 May 2001 (Annex I2)
[5] Submission of 16 April 2001 (Annex E1)
[6] Submission of 23 May 2001 (Annex C3) and paragraphs 220-221, and 285 of Minutes of Evidence
[7] Submission of 12 April 2001 (Annex D1)
[8] Submissions of 21 April and 8 June 2001 (Annexes F1 and F3) and paragraph 568 of Minutes of Evidence
[9] Submission of 18 April 2001 (Annex G1) and paragraphs 676-677, 681-682, 685-687 and 764-769 of Minutes of Evidence
[10] Submissions of 27 March and 11 May 2001 (Annexes A1 and A3) and paragraphs 7, 76 and 121 of Minutes of Evidence
[11] Submission of 4 April 2001 (Annex B)
[12] Submission of 5 April 2001 (Annex I1)
[13] Submissions of 16 April and 15 May 2001 (Annexes E1and E3) and paragraphs 419, 430-432, 437-438 and 441-442 of Minutes of Evidence
[14] Submissions of 12 April and 23 May 2001(Annexes C1 and C3) and paragraphs 219, 224-225 and 245-248 of Minutes of Evidence
[15] Submissions of 12 April and 17 May 2001 (Annexes D1 and D3) and paragraphs 287-413 of Minutes of Evidence
[16] Submissions of 21 April and 8 June (Annexes F1 and F3) and paragraphs 549, 552, 574, 581-582, 589, 593 and 615 of Minutes of Evidence
[17] Submissions of 18 April and 6 June (Annexes G1 and G3) and paragraphs 645, 650-653, 661, 771-772 and 775 of Minutes of Evidence
[18] Submissions of 27 March and 11 May (Annexes A1 and A3) and paragraphs 8-10, 20-21, 24, 26, 45, 50-51, 71, 79 and 97-98 of Minutes of Evidence.
[19] Submission of 4 April 2001 (Annex B) and paragraphs 136, 138-141, 146-147, 166 and 170 of Minutes of Evidence
[20] 5 April submission (Annex I1)
[21] Submissions of 16 April and 15 May (Annexes E1 and E3) and paragraphs 422-423, 459, 464-465, 475, 482, 494 and 497-498 of Minutes of Evidence
[22] Submissions of 12 April and 17 May 2001 (Annexes C1 and C3) and paragraphs 223, 228-229, 243-244 and 272-273 of Minutes of Evidence
[23] Submissions of 12 April and 17 May 2001 (Annexes D1 and D3) and paragraphs 287-413 of Minutes of Evidence
[24] Submissions of 21 April and 8 June 2001 (Annexes F1 and F3) and paragraphs 553, 555, 557, 590 and 618 of Minutes of Evidence
[25] Submission of 18 April (Annex G1) and paragraphs 669-670, 690-695, 700 and 725-730 of Minutes of Evidence
[26] Submission of 11 May 2001 (Annex A3) and paragraphs 12-14, 92 and 103 of Minutes of Evidence
[27] Submission of 4 April 2001 and paragraphs 185-188 of Minutes of Evidence
[28] Submission of 5 April 2001 (Annex I1)
[29] Submissions of 16 April, 15 May and 4 June 2001 (Annexes E1, E3 and E4) and paragraphs 418, 425-428, 435-436, 451, 453-454, 463 and 483 of Minutes of Evidence
[30] Submissions of 12 April and 23 May 2001 (Annexes C1 and C3)
[31] Submissions of 12 April and 17 May 2001 (Annexes D1 and D3) and paragraph 346 of Minutes of Evidence
[32] Submissions of 21 April and 8 June 2001 (Annexes F1 and F3) and paragraphs 556 and 617 of Minutes of Evidence
[33] Submissions of 18 April and 6 June (Annexes G1 and G3) and paragraphs 645, 650-653, 661, 771-772 and 775 of Minutes of Evidence
[34] Submissions of 27 March and 11 May 2001 (Annexes A1 and A3) and paragraphs 15 and 118 of Minutes of Evidence
[35] Submission of 4 April 2001 (Annex B)
[36] Submission of 5 April 2001 (Annex I1)
[37] Submissions of 16 April and 15 May (Annexes E1 and E3) and paragraphs 455, 505,520-523 of Minutes of Evidence
[38] Submissions of 12 April and 23 May 2001 (Annexes C1 and C3) and paragraphs 232-235, 256-258, 270 and 278-279 of Minutes of Evidence
[39] Submissions o 12 April and 17 May (Annexes D1 and D3) and paragraphs 351, 357 and 392 of Minutes of Evidence
[40] Launched on 15 December 2000 ISBN no. (Volume 1): 0-33-960019-5 and (Volume 2) 0-33-960020-9
[41] Submission of 2 April 2001 (Annex H)
[42] Launched on 5 July 2000 ISBN no. (Volume 1) 0-33-960000-4 and (Volume 2) 0-33-960001-2
ANNEXES TO THE MINUTES OF EVIDENCE
LIST OF PUBLISHED MEMORANDA
|
Ulster Farmers' Union |
ANNEX A1 |
|
Additional questions to Ulster Farmers' Union |
ANNEX A2 |
|
Response to questions from Ulster Farmers' Union |
ANNEX A3 |
|
Northern Ireland Agricultural Producers' Association |
ANNEX B |
|
Department of Agriculture & Rural Development |
ANNEX C1 |
|
Additional questions to Department of Agriculture & Rural Development |
ANNEX C2 |
|
Response to questions from Department of Agriculture & Rural Development |
ANNEX C3 |
|
Livestock and Meat Commission |
ANNEX D1 |
|
Additional questions to Livestock and Meat Commission |
ANNEX D2 |
|
Response to questions from Livestock and Meat Commission |
ANNEX D3 |
|
Northern Ireland Meat Exporters' Association |
ANNEX E1 |
|
Additional questions to Northern Ireland Meat Exporters' Association |
ANNEX E2 |
|
Response to questions from Northern Ireland Meat Exporters' Association |
ANNEX E3 |
|
Northern Ireland Meat Exporters' Association |
ANNEX E4 |
|
National Beef Association |
ANNEX F1 |
|
Additional questions to National Beef Association |
ANNEX F2 |
|
Response to questions from National Beef Association |
ANNEX F3 |
|
National Sheep Association |
ANNEX G1 |
|
Additional questions to National Sheep Association |
ANNEX G2 |
|
Response to questions from National Sheep Association |
ANNEX G3 |
|
Mr John E Dobson |
ANNEX H |
|
Northern Ireland Agricultural Producers' Association Ruling Council |
ANNEX I1 |
|
Northern Ireland Agricultural Producers' Association Ruling Council |
ANNEX I2 |
Annex a1
committee for agriculture and rural development
inquiry into the livestock and meat commission
written submission by:
ULSTER FARMERS' UNION
27 March 2001
Thank you for your letter of 13 March 2001 seeking the views of the Ulster Farmers' Union on the subjects covered by the Terms of Reference for your Committee's inquiry into certain aspects of the operations of the Livestock and Meat Commission for Northern Ireland. As you will no doubt be aware a Quinquennial review of LMC has recently been carried out by a Steering Group (compiled of DARD and LMC officials) and involving detailed consultation with industry representatives. In May 2000 a preliminary report of the Steering Group's findings was circulated for further comment by industry. At this time the Union submitted a detailed response to the Group's preliminary report within which we outlined our organisations views on many aspects of the LMC portfolio of activities. In order to address the various questions posed in your letter I have enclosed a copy of our response document, which I think should answer most of the issues raised.
I hope this will prove useful as your Committee conducts its inquiry and I would expect that we will be able to appear before the Committee in due course if required.
Yours sincerely,
DOUGLAS ROWE
review of the livestock and meat commission for northern ireland:
ulster farmers' union response to steering group report
In response to a DARD Consultation dated 5 May 2000 on the above issue, the Ulster Farmers' Union submitted the following response. This was in addition to comments already provided in a previous submission of 9 March 1999 as part of an initial consultation exercise.
The Union is broadly supportive of the main findings and recommendations of the Steering Group established to conduct the quinquennial review of the LMC. There are, however, a number of fundamental aspects of the report of particular concern to the Union and which should be explored much further before their implementation, if at all. (Where specific items are not addressed in this response the Union accepts the conclusions of the Group.)
- The single major issue raised by livestock producers within the Union's membership when consulted recently on this review, was do they continue to support the operation of LMC and provide funding for its activities accordingly. Following much debate it was ultimately concluded that no other body currently existed within NI that could satisfactorily adopt any of the roles performed by LMC. Several of the core activities of LMC were, however, the focus of severe criticism and the need for rationalisation of these activities was considered paramount.
- Information Services: The provision of all technical information to producers whether in the form of price data and market analysis reports or, whether policy updates, research results or simply informative material, is considered beneficial. However, the current accuracy and delivery of some of this information was deemed very unsatisfactory.
- Regarding the reporting of livestock prices at marts and meat plant premises the reflections given in the "bulletin" and in the media in general, were considered to be widely inaccurate of actual trading conditions. It is the Union's considered opinion that much more in-depth examination of livestock marketing for purposes of price reporting is required. Collation of data for entire daily sales for example, on targeted days at Livestock Marts, would be particularly beneficial to producers especially where store livestock purchasing is concerned.
- With regard to the forecasting of future trading conditions it was again considered that LMC performance in this aspect was very poor, particularly where the sheepmeat market was concerned. It is recognised that the prediction of future trading conditions is very difficult to do accurately. However, the Union considers that deployment of sufficient resources in analysing local and international markets could greatly benefit the entire red meat sector.
- The Union also considers the LMC could play a much more constructive role in the collation and distribution of research results and specific technical information in its newsletter that could assist producers greatly in improving the breeding and marketing of their livestock
- Marketing: It is clearly recognised that a strong promotional body is required to create a high profile for the red meat sector in Northern Ireland. In this regard it is the Union's consideration that LMC performed this function well throughout Europe prior to the onset of the BSE crisis. However, since the BSE crisis and the reconcentration of beef sales on the GB market, producers have been somewhat disillusioned at the performance of LMC in promotion of the quality, diversity and saleability of locally produced beef on the home market. It is clear that much of the work in this area has been undertaken directly by the individual meat processors in recent years. The Union, therefore, recommends much more emphasis is placed in this area given the current dependence on GB multiple trade, until such times as beef export restrictions can be relaxed.
- Much more work in the promotion of Northern Ireland produced lamb is also deemed essential by the Union.
- Regarding the LMC's sister organisation in GB (The Meat and Livestock Commission) the Union would recommend that more clarity in this relationship is made available to producers, given the recent significant financial contribution to MLC from within the LMC budget, for promotional services in GB. Clear definition of this relationship is particularly relevant with recent media reports of widespread dissatisfaction amongst GB producers at the activities of MLC at home and abroad.
- Classification: The classification work of LMC continues to be a major area of frustration to producers given the subjective nature of the exercise. It is, however, still the opinion of the Union that an independent body carries out this service, and that LMC is best placed to continue to do so. The Union recommends that LMC actively engages in the analysis of objective classification trials and progresses the introduction of such systems into Northern Ireland at the earliest possible opportunity.
- One area of particular concern to producers is the operation of the grading appeals procedure in practice. It is the Union's considered opinion that the existing procedure needs to be fundamentally overhauled to make it more 'user friendly' to producers, in order to address all genuine enquiries and concerns both comprehensively and speedily. Recent developments in the methods of hanging carcases in meat plants (Aitch-Bone hanging) have also rendered many appeals practically impossible.
Issues Arising in Review
- Funding and Levy Arrangements: The Union recognises that adequate funding of LMC is central to the continued development and enhancement of its range of activities. It is also recognised that some sources of income, in particular that component derived from acting as an agent of the Intervention Board, is likely to significantly decline in the future.
- The issue of levy collection from producers is always a difficult subject to address. In the current financial circumstances in farming circles in the Province, the Union considers that any increase in levies to be collected from producers, at this stage, would be totally unacceptable. The Union does, however, accept the recommendation of the Group that details of the processor levy contribution are finalised and implemented as soon as possible.
- Reviewal of levy payment rates from both producers and processors should be conducted on an annual basis with the full consultation of industry stakeholders, and rates fixed accordingly.
- Regarding the collection of levies from producers it is the Union's considered opinion that levies should continue to be collected only on finished animals at point of slaughter. The Union does not support the introduction of a levy on dropped calves at this stage. Nor does it support the collection of a levy on exports of live animals from the Province. The practical implications of either of these two latter alternatives were considered at some length and dismissed as unworkable.
- FQAS Funding: The funding arrangements for the NI beef and lamb FQAS have been the subject of some intense debate within the Scheme's Technical Advisory Committee (formerly Industry Standing Committee) and, indeed, the Union as a whole. It is the Union's considered opinion that discussions on this issue should continue to be a priority of that Committee, particularly with recent developments in moving the Scheme towards an EN45011 Accreditation standard. In this respect it is crucial that all retail parties accept the standards of the scheme and cut out the huge costs of additional farm audits. The introduction of an annual fee for producer participation in the scheme, which is just one component of a current consultative proposal for its future funding, is contentious and more work on this issue is therefore required.
- Marketing: The Union accepts that the promotion of Northern Ireland beef and lamb is fundamental to the work of LMC. It is the clear determination of the Union's sheep producing members however, that enough resources are not deployed by LMC in the promotion and marketing of the diversity of Northern Ireland lamb and lamb products. It is recognised that levy income generated in the sheepmeat sector is small in comparison with beef levy income. The Union cannot however, support any increase in the levy generated on lamb slaughterings due to the very critical state of the sector at present which is exhibiting a declining trend. No simple answer to this problem of levy income is therefore evident at this stage.
- Size of Commission: The Union continues to recommend that there must be more representation of producers on the Board of the Commission. It is considered essential to have at least three livestock producers on the Commission, two of whom should be nominated by UFU. Not only would an increase in producer membership help to alleviate the concerns of producers as to how budgets are apportioned but could also lead to greater accountability for what are limited financial resources.
- The Steering Group must take into account the overall cost of the Commission membership when determining its size. The Union agrees with the principle of payment to Commission members based on actual attendance at meetings. It also recommends to the Group that procedures are put in place to inform LMC stakeholders of the attendance record of Commission members.
- Management Statement: The Union agrees with the Group that a Management Statement for LMC should be developed which denotes strategic aims and objectives and sets performance targets and monitoring procedures. It is considered, however, that the setting of targets should be monitored very closely in terms of how productive and achievable they would be, and in as cost effective a manner as is possible.
- Review Process: The Ulster Farmers' Union is concerned at the length of time taken between the previous review and this most recent review of LMC NI. It is the Union's firm belief that reviews should be conducted rigorously every 5 years to enable stakeholders the opportunity to appraise LMC performance in each of its activities and to contribute to the enhancement and profile of LMC's work on behalf of the red meat sector.
annex a2
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
Additional QUESTIONS FROM THE COMMITTEE TO THE:
ulsters farmers' union
12 April 2001
Thank you for your attendance, with your colleagues, at the meeting of the Committee on 6 April 2001. You will recall that the Chairman stated that the Committee would seek answers to a number of additional questions that could not be covered in the time available.
The questions, some of which were briefly touched on at the meeting, are as follows:
General
1. In any review or inquiry into the operation of the LMC, what are the key priorities or most pressing issues for the UFU?
Funding
2. You have indicated that any increase in levies to the producer will be unacceptable. However, you also welcome the introduction of levy on processors. Do you believe that such a levy on processors can be implemented without being passed on or impacting on the producers?
3. The LMC claim that producer levies have not been increased in 12 years and it may therefore be difficult to argue against some level of increase. Under what circumstances, if any, would an increase on producer levies be acceptable to your members?
4. Do you consider that there is clarity in relation to the overall funding sources of the LMC?
5. What is your understanding of the balance of funding within the LMC between its core funding from DARD and income from its service activities? Is the funding mix acceptable to your members given that funding from one particular source may be used to subsidise another activity?
6. What consultation arrangements would you like to see in place in relation to review mechanisms for levy payment rates?
Provision of classification services
7. In your paper you recommend the investigation of objective classification trials and the introduction of these systems to Northern Ireland. Do you consider that the introduction of such systems would solve all of the problems inherent in the current system or are there other factors, which need to be addressed?
8. What are your general thoughts on the skills of LMC classification staff?
9. Can you draw on any experience or knowledge of 'best practice' in classification services from elsewhere which might add value to the position in Northern Ireland?
Promotional activities
10. Overall, do you consider that your members obtain value for money in relation to the promotional activities undertaken by the LMC? Has any research been undertaken to attempt to 'quantify' the impact of promotional expenditure on your members' business performance?
11. Does the UFU get sufficient opportunity to provide input on the promotional plans of the LMC? If not, how might this be improved?
12. Who do you consider benefits the most from LMC promotional work: the producer, the processor or the retailer?
13. What does the UFU consider to be the main strengths and weakness of current promotional activity undertaken by the LMC?
14. Does the UFU envisage any new market opportunities, which could be exploited by future LMC promotional work? In contrast, are there any market threats, which should be proactively tackled by the LMC's promotional activities?
Appointments to the LMC
15. We note from your paper your assertion that there should be a greater representation of producers on the Commission. What is your overall impression of how the Department makes appointments to the LMC?
16. In the past, what has been the role and position of the UFU in respect of appointments to the LMC? How would you like to see this role developing or changing?
I would be grateful if you could provide a response as soon as possible, preferably within the next two weeks.
annex a3
committee for agriculture and rural development
inquiry into the livestock and meat commission
Response to Questions from:
ULSTER FARMERS' UNION
11 May 2001
Thank you for your letter of 13 April 2001, which sought answers to a series of supplemental questions relating to the Committee's Inquiry into Certain Aspects of the LMC. Further to our comprehensive discussions with the Agriculture Committee on 6 April 2001 we have attempted to answer your additional questions as fully as possible. Each question will be dealt with in turn:
General
1. In any review or inquiry into the operation of the LMC, what are the key priorities or most pressing issues for the UFU?
In the review of LMC operations the Ulster Farmers' Union's main priority has been to ensure that an independent and accountable body continues to operate in as efficient and streamlined a capacity as is possible to carry out the varied portfolio of activities that is required by the red meat industry in the Province. With a portfolio ranging from promotional and marketing activities to provision of carcase classification services it is vital that sufficient representation of producers at board level in the LMC is accommodated to give proper accountability at ground level on direction of LMC activities.
Funding
2. You have indicated that any increase in levies to the producer will be unacceptable. However, you also welcome the introduction of levy on processors. Do you believe that such a levy on processors can be implemented without being passed on or impacting on the producers?
The introduction of a voluntary processor levy has since July 2000 been collected by LMC. The Union continues to support the collection of levies from processors for funding of LMC. Regarding whether or not this would be passed back or have an impact on producers this is difficult to gauge. It could be said that the only revenue stream available to processors comes from raw material initially supplied by producers so the same principle applies for all other costs related to meat processing.
3. The LMC claim that producer levies have not been increased in 12 years and it may therefore be difficult to argue against some level of increase. Under what circumstances, if any, would an increase on producer levies be acceptable to your members?
Producer levies in any shape or form are by their nature always going to be contentious, however the red meat sector in the Province does have a need for the various activities which are currently performed by LMC. Given the increasingly challenging market places in which the local beef and sheep sectors must compete the resources required to capitalise on and indeed develop new market opportunities are likely to grow. For this reason it is important that levy rates are kept under constant review and amended as necessary, with full co-operation of all sectoral participants, if circumstances dictate. If levy rates in Northern Ireland are compared with other regions of the UK (eg MLC levies) then the resource issue falls into context.
4. Do you consider that there is clarity in relation to the overall funding sources of the LMC?
Yes, the Ulster Farmers' Union would be reasonably satisfied with the openness of LMC with regard to its funding sources. These mainly comprise producer and processor returns, income from acting as agents for outside organisations (eg Intervention Board), and carrying out work on behalf of private sector clients. Specific details of LMC income and expenditure are published each year in their annual report and accounts which is freely available on request.
5. What is your understanding of the balance of funding within the LMC between its core funding from DARD and income from its service activities? Is the funding mix acceptable to your members given that funding from one particular source may be used to subsidise another activity?
The Ulster Farmers' Union was not aware that LMC had any core funding from DARD. Regarding the funding mix it is inevitable that each component of income may not necessarily always be used for the same purpose. For example surplus income from the provision of classification services has in the past been used to subsidise the operation of Farm Quality Assurance Schemes. Monies available for lamb promotion would be fairly limited if that activity was curtailed to levy income generated from sheep alone.
6. What consultation arrangements would you like to see in place in relation to review mechanisms for levy payment rates?
Consultation should be conducted fully with all interested parties.
Provision Of Classification Services
7. In your paper you recommend the investigation of objective classification trials and the introduction of these systems to Northern Ireland. Do you consider that the introduction of such systems would solve all of the problems inherent in the current system or are there other factors, which need to be addressed?
The current system of carcase classification based on subjective application of the EUROP grid has undoubtedly given much cause for concern amongst producers and clearly an alternative mechanism needs to be found for grading carcases on which payments can be based. Trials on objective classification have been performed in the Republic of Ireland recently at some expense and with a limited degree of success - the automated systems which were used in the trials were developed for much leaner animals than those typically found in UK or RoI and as a result showed up some unacceptable biases for fat class and conformation scores (results for prediction of carcase meat yields were more encouraging). Much more development work is therefore required. A further alternative to subjective classification which could merit some further investigation and development is that of the Meat Standards Australia Total Quality Management System - under this system beef is graded according to eating quality to the consumer through analysing critical control points in the production, processing and value added sectors.
8. What are your general thoughts on the skills of LMC classification staff?
LMC classification staff are trained professionally for the role which they perform. Monitoring of their performance is undertaken by senior LMC field staff, who are in turn monitored by DARD, who are in turn monitored by European Union inspectors to make sure that the EUROP grid is being properly administered in the Province.
9. Can you draw on any experience or knowledge of "best practice" in classification services from elsewhere which might add value to the position in Northern Ireland?
It is the Ulster Farmers' Union's understanding that regular comparisons between graders in Northern Ireland relative to those in Great Britain and RoI are undertaken to ensure standards are similarly applied, in addition to those checks which are carried out by DARD and EU inspectors.
Promotional Activities
10. Overall, do you consider that your members obtain value for money in relation to the promotional activities undertaken by the LMC? Has any research been undertaken to attempt to "quantify" the impact of promotional expenditure on your members' business performance?
Measurements of benefits arising out of any organisation's promotional activities would be extremely difficult to quantify. Regarding the promotional activities of LMC for beef and lamb there are considerable constraints limiting these activities. Firstly as far as beef is concerned the only market available, due to BSE export restrictions, is the UK and therefore a significant proportion of the LMC beef budget is channelled via MLC for promotional services in Great Britain. Regarding the promotion of Northern Ireland sheepmeat the budget obtained from sheep slaughterings in the Province is limited and this tends to have a knock-on effect on the promotional capacity for sheepmeat.
11. Does the UFU get sufficient opportunity to provide input on the promotional plans of the LMC? If not, how might this be improved?
The promotional plans of the LMC are largely determined at board level and as such the Ulster Farmers' Union has no direct input.
12. Who do you consider benefits the most from LMC promotional work: the producer, the processor or the retailer?
Any promotional work that enhances the image and sales of Northern Ireland beef and lamb is likely to benefit all parties concerned.
13. What does the UFU consider to be the main strengths and weakness of current promotional activity undertaken by the LMC?
The main weakness of current promotional activity is undoubtedly the inability to export beef or beef products outside the UK marketplace. On the positive side the relationship of LMC with its counterpart in Great Britain (MLC) has helped to facilitate the tremendous growth of Northern Ireland beef in the British market.
14. Does the UFU envisage any new market opportunities, which could be exploited by future LMC promotional work? In contrast, are there any market threats, which should be proactively tackled by the LMC's promotional activities?
The main market threat to Northern Ireland's beef and lamb producers is undoubtedly the globalisation of the food industry. With producers representing the lowest link in the food supply chain the growing competitive pressures coming from overseas food imports, currency differentials, demand for cheaper and cheaper food all have untold effects on local farm production. The threat of globalisation is all too real when the effects of the current Foot and Mouth disease outbreak are considered. Regarding the exploitation of new market opportunities it will be imperative that bodies such as LMC continue to seek out new niche markets for foods produced locally and to promote the very considerable advantages that Northern Ireland produce has to offer over the global commodity players.
Appointments to the LMC
15. We note from your paper your assertion that there should be a greater representation of producers on the Commission. What is your overall impression of how the Department makes appointments to the LMC?
The Ulster Farmers' Union continues to support an increase in representation of producers on the board of LMC. Our understanding on the procedures for making appointments to the board of LMC are fairly rigorous with the ultimate responsibility now resting with the NI Minister for Agriculture and Rural Development.
16. In the past, what has been the role and position of the UFU in respect of appointments to the LMC? How would you like to see this role developing or changing?
In the past the Ulster Farmers' Union has undertaken to nominate producers to serve on the board of LMC. Current appointments to the board are only made following advertisements in the press, short-listing and interview of potential candidates and selection on the basis of merits. If changes to the structure of the board are to be made in the future the Ulster Farmers' Union would prefer to be able to nominate suitably qualified candidates for the producer participants who could readily input the views of beef and sheep producers on the ground.
I trust these answers to your questions will prove useful as you continue with your inquiry.
IAN STEVENSON
Assistant Secretary
annex b
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
WRITTEN SUBMISSION BY:
Northern Ireland agricultural producers' association
4th April 2001
Thank you for the opportunity to provide a collective view from NIAPA on your inquiry into certain aspects of the operation of LMC (NI), and I would wish to accept your invitation to provide a written response and also the opportunity to provide a formal response in person to the Committee on Friday 6th April 2001 at 12.15pm. Due to the fact that I am currently a Board Member of the LMC Commission, appointed by the late Baroness Denton for a three year period and re-appointed for a three year period by Minister Brid Rodgers MLA, and in order that there is not a conflict of interest, I have requested the NIAPA Executive to individually answer the questions posed by your Inquiry and the accompanying document, in relation to Livestock & Meat Commission, is a product of this consultation.
As the LMC have been also requested to participate in the inquiry, I would consider it appropriate that I would not appear personally to the Committee on Friday 6th April at 12.15pm, a view which has been endorsed by the NIAPA Executive. The representatives selected by the Executive of NIAPA to attend are Nigel McLaughlin Vice-Chairman, Vincent Boyle Vice-Chairman and Oliver Cunningham, County Down Chairman.
Trusting that you find the information provided acceptable to your inquiry. If you require further information or indeed clarification, please do not hesitate to contact me.
Yours sincerely
MICEAL MCCOY
Chairman
Background
The LMC (NI) was founded by statute in 1967, charged with responsibility for the provision of services to the Northern Ireland beef and sheep meat industry and with advising Government on matters relating to the sector. The LMC acts as a system for adding value to the red meat industry's activities through the acquisition, allocation and commitment of resources and drawing on a network of relationships between contributing participants.
Its' Mission Statement is:
"LMC will endeavour to maximise the return to the Northern Ireland economy from its beef and sheep meat industries, through the provision of quality services to aid and support producers, processors, retailers and consumers and through the creation and implementation of appropriate strategic marketing initiatives in premium and niche markets".
1. Views of NIAPA on a substantial increase in levy?
An increase in levy at this time may be the proper thing to do and NIAPA accept that, in principle, the industry requires to ready itself for increased exports i.e. to regions outside Northern Ireland (primarily GB in the short term, and then the European Market whenever export status is achieved). The timing of this needed increase (not substantial) in levies is inappropriate given that farmers do not wish to pay additional funds whenever incomes are virtually zero. We fully understand the requirement to raise the levy and believe that the inequitable distribution of margins in the red-meat sector (NI) have lead to this problem of an under-resourced Livestock & Meat Commission (LMC). Farmers expectations for the output received from LMC will need to be met before an increase could be agreed upon. The suspicions by farmers that processors are gaining, and have consistently gained, large profits from the sector without providing funding to LMC (before July 2000) make the situation unbalanced to request further funds from producers. Government need to ensure, by whatever means, that imported red-meat is prevented from entering Northern Ireland (raise animal health standards etc.) otherwise an increased levy on local producers to further fund LMC against a backdrop of increasing imported product would be ridiculous.
2. Views of NIAPA on an annual review of levies?
We would not anticipate a yearly review process, however a three year period would reflect a more balanced analysis, as environmental and economic factors may reflect upon market performance over a 2-3 year period. The review would be on the basis that need for the levy was identified by the industry.
3. Do you believe that there should be a processor levy?
During 2000, following the pickets placed on meat plants in January, NIAPA entered into dialogue with the processors to ensure that the industry began to discuss issues of commonality and as a result the major processors in Northern Ireland agreed to a voluntary levy (from July 2000) which equates to the levy provided annually by producers. The contribution is welcomed by NIAPA and we believe that efforts are being made by LMC and DARD to introduce legalisation to bring statutory effect to this processor levy as soon as possible.
4. Is it possible to raise a levy on processors which is not passed back to the primary producer?
There is no contribution from the processors which does not emanate from the efforts of the primary producer, whether it be an increase in wages to factory workers, rates, electricity or a financial amount to LMC. The reality of the situation is that LMC was funded in 1967 and the processors had made no contribution to LMC, until July 2000, and the important factor in developing Northern Ireland's red-meat industry is to involve the processors in paying an equitable amount towards the regions market opportunities.
5. What is NIAPAs understanding of how LMC is funded?
The LMC is funded by levies (statutory) since 1967 on all cattle and sheep slaughtered in Northern Ireland, the classification fee for grading of cattle and sheep and other services to IBEA, and Farm Quality Assured Scheme (FQAS) contribution from farmers. Other revenue is received through a European Quality Beef (EQB) Initiative and government funding as a result of the BSE crisis (1995) to present, although this is allocated through liaison with the Red Meat Strategy. Some funds from Peace & Reconciliation have also been allocated recently to assist with the Red Meat Strategy and this is also apportioned by LMC, however it must be realised that government provide no core funding even though the LMC is a Non-Departmental Public Body (NDPB).
6. Are these funds fair and equitable?
NIAPA believe that an unfair burden is being placed and targeted at those (producers) who can ill afford to contribute at this point in time and that the processors should be assisting the LMC to a greater extent, perhaps through a windfall tax procedure (a mechanism to be agreed between producers, processors, LMC and DARD) which should be a graduated (tiered) basis commensurate with profitability. This would effectively realise the consensus of opinion currently available that a greater equality of contribution should be achieved in the industry (reference Tony Blair statement) about the "armlock which retailers etc." have on the industry and specifically comments by Minister Rodgers at the opening of Lissue House last year.
7. Are the services provided fair and equitable in relation to levies changed?
Services provided by LMC are needed and have to be provided to allow the industry to perform and achieve satisfaction, particularly market information and classification. There should however be a situation whereby LMC should be held to account for the services they provide to the industry and the issue about farmer participation at Board level is crucial to receive industry support (see item 20).
Classification (Beef & Sheep)
8. What is the level of satisfaction amongst NIAPA members with regard to the services being provided by LMC?
Farmers believe grading (classification) is getting tighter each year, yet they consistently spend more resources on improving breeding, to no avail. It appears that there may be a case of seasonal grading being provided, in that, grades are much harder to achieve in an oversupplying situation. The consistency of the service is problematic.
Because classification relates to the pricing policy conducted by meat plants then farmers invariably blame LMC for pricing. Need to change the pricing payment structure by plants.
9. What are the main difficulties with the service?
There still remains the problem that FQAS cattle are not being given a premium, therefore by having no quality assured, then farmers would be no worse off at the moment. This needs to be resolved and NIAPA have been involved in discussions with the industry to resolve this situation. The reporting of historical processor payments and indeed what the processors deem themselves to be able to pay, should be changed to what LMC anticipate the market place to be capable of paying and particularly (item 10) the proper analysis of pricing differential between regions of the UK. Also (item 11) the subjective analysis by graders is a problem.
10. Have you any information to allow comparison with the grading service offered in GB and in Republic of Ireland?
According to Irish Farmers Journal, recently, the percentage of higher grades for EU classification is 50% higher in Republic of Ireland than in Northern Ireland. Why have we similar rules for Republic of Ireland yet a more farmer friendly atmosphere? Although prices compared in GB with Northern Ireland are not measured in a comparable way (Northern Ireland has full reporting whilst GB are only a sample) most of the evidence is anecdotal and therefore is useful to relate. NIAPA believe there needs to be a comparison by LMC developed with producers and processors which is fair and equitable and equally understood by all. LMC quoting the top grade price by factories (this has recently changed) is not an acceptable system, there should be a pricing bulletin which equates to the most common grade i.e. 0+3.
11. What are your views on objective mechanical methods of classification?
This would be desirable, but it would need to be able to be positively demonstrated to provide a more uniform product (grading) and not be able to be tampered with. A pilot exercise in Northern Ireland would be a good first step to examine its capability. Associated with this should be the ability of LMC agricultural department to initiate more live grading demonstrations so farmers would have a better grasp of both live and slaughter carcase information.
12. What are your comments on the capabilities of staff employed by LMC to provide classification?
The consistency of the service provided by LMC personnel is important therefore the procedures put into place from the Chief Executive down to graders is a crucial element in obtaining a consistent classification system. The staff employed by LMC to provide classification are all experienced and capable people, however the problems over graders arise whenever the efficiency is less than adequate. This is a management role and should be identified as so, and the human variability is evident in all employment situations.
13. What recommendations could you make on any shortcomings perceived within LMC classification?
A proper appeals system i.e. one that is treated properly, as there can sometimes be peer pressure on the overseeing appeals grader to stand by the original grade, again this comes down to the human variability and the requirement to have proper management procedures in place. NIAPA believe that the influence of the Holstein cattle into beef production plays a large part in the lesser grades being obtained and too great a variation in grades also provides confusion. It would be more acceptable to have less grades, for processors to pay a larger amount towards the higher grades (U Grade and R Grade) as this would better reflect the returns to farmers who are producing what the market place requires. This has been advocated by NIAPA for some time.
Promotional Activities
14. Can you confirm whether or not NIAPA plays an active role in LMC's activities in this area (Promotional activities)?
The presence of NIAPA members on the Board of Commissioners, the liaison committees, FQAS/NIFCC boards, Technical Advisory Committees and the constant contact and relationship with the Agricultural and Classification sections are evidence of a role in LMC. To what extent NIAPA play a role in promotional activities, outwith comments above, is unclear. NIAPA certainly believes that it exerts influence on LMC promotional activities.
15. Can you give an assessment on the value for money achieved by expenditure in this area (Promotional activities)?
In the absence of quantitative data, NIAPA can only speculate, aspirationally and anecdotally, and opinions arrived at through collective discussion. We believe that promotions need to be sustained, particularly at point of sale, and that education and schools should also play a role in marketing Northern Ireland products. The LMC already utilises MLC expertise and documentation/publications which we believe to be an effective rate for value for money however we believe that modern promotions may not always address the present consumers and that there needs to be a balance between more short term output and the longer time frame promotions allocated to the younger generation. A suggestion is that NIAPA as with other organisations concerned in the Northern Ireland industry should be used to impress upon the local population as to the attributes of Northern Ireland lamb and beef and that peer pressure at the local level could increase consumption.
16. Has NIAPA made any assessment of the direct benefits to producers of this activity (Promotional activity)?
The Greenfields brand (prior to 1996) was stated to have had a considerable input on consumption with Dutch customers, yet unless quantitative data is available then an informed opinion is not able to be provided. The best direct benefit to a producer from the industry in increased return from the product produced.
17. Has NIAPA assessed the balance of benefits between the producer and the processor (Promotional activity)?
The historical information is that the processor appears to be the largest benefactor and can benefit quickly in comparison to the producer. The farmer has a long lead in time, probably a three year period, and this time factor does not allow the same versatility of management decisions which processors and retailers enjoy. Perhaps the promotional activity should be managed more closely by farmer representatives on LMC than processors as the benefits to accrue need to have a long-term return rather than the processors quick return. If any levy was increased this would be NIAPAs stance in the future, a two tiered responsibility for management of LMC.
Appointments to Livestock & Meat Commission (LMC)
18. Are you satisfied with the current composition of the LMC Board as being representative of the agri-food industry?
NIAPA believe that there is a good mix on the Board of LMC however an increase in members from seven members to nine would be preferable. This expansion should be recruited in line with recent (post 1995) procedures (adherence to Nolan Principles), and be people who should be fully conversant with the agricultural industry aspects, and have personal skills, expertise, experience and knowledge that would allow them to take an industry view rather than a sectoral view. We do not believe that particular associations, groupings or unions should necessarily have exclusivity however commissioners should be able to have general industry endorsement. LMC should however continue to only represent the red-meat sector and not be diverted from its important task by taking on new responsibilities for other species.
19. Is NIAPA satisfied with its involvement in the appointments process?
NIAPA have never been involved in the appointments process. The appointments process, since 1996, has been dramatically changed for the better and NIAPA will at all times be available for comment in the process.
20. Has NIAPA any comments to make on a possible recommendation to increase the size of the LMC Board from seven to nine persons?
NIAPA believe that the Commissioners should be increased to nine with a minimum of four farmers directly involved in the agricultural industry.
NIAPA trust that the comments provided will be useful to the Committee, however if there is a requirement for further information, or clarification we would be willing to provide this.
MICEAL MCCOY
Chairman
5th April 2001
annex c1
committee for agriculture and rural development
Inquiry into the livestock and meat commission
written submission by:
Department of agriculture and rural development
12 April 2001
Thank you for your letter of 13 March indicating that you were instigating an inquiry into the Livestock and Meat Commission and seeking my views on certain aspects of the operation of the LMC.
It has since been agreed that the LMC will be one of the issues covered when I attend the Committee on 27 April. In the meantime I enclose a Memorandum responding to the specific issues raised in your letter. A copy of the report of the Quinquennial Review of the LMC has been appended to the Memorandum.
BRÍD RODGERS
1. The letter of 13 March from the Chairman of the Committee sought comments on a number of aspects of the operation of the Livestock and Meat Commission.
2. Attached is a copy of the report of the Quinquennial Review of the LMC which was finalised during the period of Assembly suspension last year. While this covers all aspects of the LMC operational activities information is supplied below in respect of particular issues raised in the 13 March letter.
LMC Funding
3. The Department is supportive of the need for increased funding for the LMC as indicated in the Quinquennial Review Report. Processors have agreed to provide funding on a voluntary basis pending this being made a statutory requirement. Consultation is taking place on the subordinate legislation to give effect to this and to an increase in the maximum levy. While this can be achieved by subordinate legislation there may be a need for primary legislation to extend the scope of levy collection beyond producers and primary processors.
4. The Department does not provide core funding to the LMC. However, funding has provided on occasions related to specific programmes or projects. For example, £2m was provided by the Department to the LMC for implementation of the red meat strategy on behalf of the industry, while previously £250,000 was provided for red meat marketing support in the aftermath of the BSE export ban in 1996.
5. The LMC has certain statutory duties to perform. Over the years the LMC has carried out functions related to the industry including operation of beef intervention arrangements on behalf of IBEA the revenue from which has assisted the LMC to exercise its statutory functions despite a relatively low income from the producer levy. This has been accepted by all parts of the industry as being beneficial. Without this additional source of revenue the LMC would not have been able to sustain activities such as the Farm Quality Assurance Scheme unless there had been a significant increase in industry funding.
Carcase Classification
6. EU legislation introduced mandatory beef carcase classification from 1 January 1992. Similar legislation was introduced later in 1992 in respect of sheep. The purpose of carcase classification is to provide a basis for fair payment to producers and is carried out on the basis of conformation and fat cover in respect of cattle and on meat colour and fat class in respect of sheep.
7. The classification of cattle and sheep in Northern Ireland is carried out under a formal contract between LMC and meat plants. LMC officers are licensed by the Department to undertake classification. These staff undergo training before taking a test for approval as a licensed classifier. The standards they apply are subsequently monitored by LMC senior staff, DARD technical inspectorate, IBEA and the EU.
8. EU inspections in February and May 1998 found that beef classification standards were not being properly applied. Following this the Department reviewed the classification by LMC staff to ensure that standards were being followed correctly. One outcome of this review was that in marginal cases producers were to be given the benefit of the doubt. Subsequently monitoring by DARD and IBEA technical inspectors has ensured that the EU standards are being properly applied. A further EU inspection visit in November 1998 confirmed this and a copy of the report of that visit is attached.
9. Carcase classification is essentially a subjective judgement and while every effort is made to ensure consistency of approach it is recognised that there can be disputes from producers who are concerned about the effect on their returns. Appeal arrangements allow producers to have a classification decision review by a senior member of LMC classification staff. However, the Department has no evidence to suggest that classifiers are being influenced by processing plant management.
10. The Department is aware that the classification system is being properly applied in GB by the close relationship of DARD technical inspectorate and their GB colleagues. There is also involvement in UK-wide IBEA standardisation exercises. The Department has no specific knowledge of the application of classification standards in the Republic of Ireland other than that the EU also inspects and is satisfied with classification standards there.
11. The Department is aware of developments in relation to objective mechanical methods of classification and supports the move towards the EU adopting such a system when it is proven that this is fully reliable. Developments on such a system are being closely monitored.
Promotional Activities
12. The Department's overall responsibility for the LMC's promotional and other activities is exercised in a number of ways. The LMC draws up a 3 year strategic plan which is agreed with the Department prior to being adopted by the Commission. The strategic plan sets out the main objectives of the Commission and how it is proposed to meet these. Where public funds have been provided to support marketing or promotional activities the LMC submits to the Department specific proposals for approval. A condition of that approval normally is that a report is provided on the extent to which the programme has successfully met the set objectives. Promotional activities undertaken on behalf of the industry as a whole and the evaluation of these would not distinguish between the benefits to the different parts of the beef supply chain. It is doubtful whether such benefit could be separately identified. In any case the fact that processors do pay now a levy contribution to the LMC means that they are contributing to LMC promotional activities.
Appointments to the LMC
13. Appointments to the LMC are carried out in accordance with the Nolan procedures. These have been reviewed by auditors appointed by the Office of the Commissioner for Public Appointments on two occasions and found to be in compliance.
Regarding the most recent appointment in accordance with the Nolan procedures the Department:-
(a) Identified a field of candidates:-
- Through public advertisement in the main Belfast newspapers;
- By writing to industry organisations with an interest in the activities of the LMC, the General Consumer Council for Northern Ireland and the Health Promotion Agency; and
- By drawing on the current list of available people held by the Central Appointments Unit.
(b) Assessed candidates on merit by means of a panel which included independent representation.
Reappointments have also been considered in accordance with the Nolan procedures. In particular, the Department seeks an assessment by the Chairman of the performance of each member.
BRÍD RODGERS
Minister of Agriculture and Rural Development
report of a quinquennial review of the livestock and meat commission for northern ireland
Chapter 1:
Executive Summary
report of a quinquennial review of the livestock and
meat commission for northern ireland
chapter 1 - executive summary
1.1 Government Departments which sponsor Non-Departmental Public Bodies (NDPBs) are required to carry out a periodic comprehensive review of each NDPB at least every five years. The last review of the then Livestock Marketing Commission for Northern Ireland took place in 1989.
1.2 Reviews of NDPBs involve a rigorous test of a wide range of options for the future delivery of functions including abolition, privatisation and contracting-out as well as continuation as a NDPB. The potential for merging bodies or transferring functions between them are further considerations in the review process. In addition specific issues of relevance to the efficient operation of the body in question are examined.
1.3 This review of The Livestock and Meat Commission for Northern Ireland (LMC) was conducted by officials from The Department of Agriculture for Northern Ireland (DANI) under a Steering Group comprising the heads of the relevant policy and finance divisions within DANI and the Chief Executive of LMC. The review was conducted in accordance with the guidelines for the review of NDPBs recommended by the Cabinet Office and HM Treasury. Paragraph 2.4 contains the Terms of Reference for the review.
1.4 The review process began with a consultation exercise in which interested organisations were asked for views on LMC. In addition, a Press Release was published widely inviting comments from anyone who wished to contribute to the review. Each Commission member was interviewed as well as the Chief Executive and the manager of each functional area within the Commission staff.
1.5 Follow up interviews were held with The Ulster Farmers' Union (UFU), The Northern Ireland Agricultural Producers' Association (NIAPA), The Northern Ireland Meat Exporters' Association (NIMEA) and The Ulster Agricultural Organisation Society (UAOS) who had responded to the initial consultation document.
Background to LMC
1.6 LMC was established by the Livestock Marketing Commission Act (Northern Ireland) 1967 for the benefit of the livestock and livestock products industries in Northern Ireland. The non-executive Chairman and six non-executive Commissioners are appointed by the Northern Ireland Agriculture Minister in accordance with the guidelines issued by the Commissioner for Public Appointments for Northern Ireland. Commissioners normally serve a 3-year term with the possibility of reappointment for a further term.
1.7 LMC has the general duty of examining and recommending improvements in the marketing of livestock and livestock products and the particular functions set out in Annex 1. Chapter 4 of this Report contains a more detailed account of LMC activities.
Funding Arrangements
1.8 LMC's core funding is derived from a statutory levy paid by producers on cattle and sheep slaughtered in Northern Ireland. In the 1998/99 accounting year the levy generated 16% of the Commission's £2.46m gross income from activities. Activities carried out by LMC as agent of The Intervention Board (IB) realised 58% of its income while the remaining 26% was generated by the carcase classification service provided by the Commission at all Northern Ireland cattle and sheep slaughter plants. LMC also benefits from partial reimbursement of expenses incurred on generic beef promotion activities under the European Quality Beef Promotion Programme.
Internal Organisation
1.9 Overall policy is set by the Commissioners. The running of the organisation in accordance with statutory requirements is delegated to the Chief Executive, who is also the Accounting Officer. The managers of six functional areas - Information Services, Marketing, Agricultural Services, Field Services, Accounting and Secretarial - report to the Chief Executive. A Strategic Plan, produced by management and approved by the Commissioners, is the main vehicle through which policy is implemented.
Prior Options
Continued need for LMC activities? (Paragraphs 5.2 - 5.8)
1.10 Producer and processor organisations strongly endorsed the need to have the red meat marketing function concentrated in a body such as LMC as the industry endeavours to recover from the effects of the beef ban imposed following the March 1996 BSE crisis. LMC has a crucial role to play in the delivery of DANI's aim "To improve the economic performance of the agri-food.sector" and has been charged with a pivotal role in co-ordinating the delivery of the Red Meat Strategy.
1.11 A few individual producers failed to see any benefit in LMC's activities, primarily because of a perceived absence of a tangible return for their levy payments.
1.12 Abolition of LMC would send a very negative message to the industry given the generally supportive response to the consultation and would run contrary to the views of the producer and processor organisations. The Group concludes therefore that the clear balance of opinion is for LMC to continue.
Public or private? (paragraphs 5.9 - 5.17)
1.13 With the exception of one producer group, the clear message from all organisations was that LMC should remain in the public sector with the legislative power to collect levies. It was acknowledged that a voluntary scheme would be unworkable due to the difficulties in collecting levies.
1.14 Producer organisations welcome LMC's NDPB status as somewhat removed, but not divorced from Government while also independent of the meat plants. Its status has also been perceived to have advantage in opening new markets and in accessing funding from, for example, the European Quality Beef Promotion Programme.
1.15 From Government's point of view a public body is preferable in relation to the delivery of its aim to promote the agri-food sector and implement the Red Meat Strategy which has received substantial Government support. The Group recommends that LMC continues as a NDPB.
1.16 LMC's NDPB status provides a bridge between Government and the industry. It serves both the aims of Government and the industry and in doing so is subject to strong public and market disciplines.
1.17 The hoped for recovery in export markets remains delicately poised following some further future easing of the beef export ban, and the industry needs to consolidate its position and work together to move forward. Given the need to secure a sound financial base on which to build the recovery of the industry NDPB status is essential to enable the levy to remain on a statutory basis. The Group concludes that LMC's activities are essential to the future development of the Northern Ireland red meat industry and are best delivered through the framework of a NDPB.
Contracting Out and Market Testing (Paragraphs 5.18 - 5.21)
1.18 The "commercial" work undertaken by LMC as agent of IB has provided a vital source of income in recent years. The medium term prospect however is for much reduced LMC activity and a consequent reduction in revenue in its agency role. This reduced earning potential would make the provision of these services less attractive to the private sector.
1.19 In addition, there is a high level of interdependency among many LMC activities. Fragmentation of these services would carry the risk of "cherry picking" and could lead to difficulties within the industry if the present integrated suite of LMC services was to be sourced from a range of service providers.
1.20 Given the current uncertainty regarding export potential following some easing of the beef export ban, this is not considered the appropriate time to introduce further uncertainty and possible fragmentation by recommending the privatisation or contracting out of any LMC functions. The Group concludes that none of the activities currently performed by LMC is appropriate for contracting out or market testing at the present time. The Commission should however continue to monitor industry developments with a view to assessing the potential for achieving better value for money through alternative arrangements.
Merger with another organisation (Paragraphs 5.22 - 5.24)
1.21 Outside of Government there is no other organisation within Northern Ireland with a sufficiently broad remit to subsume LMC's range of activities. In UK terms LMC's activities could be merged with those of The Meat and Livestock Commission (MLC) and run on similar lines to the MLC Scottish Forum or MLC Welsh Council.
1.22 Such a move has no obvious benefits but numerous disadvantages given the geographical separation of the regions, the different levy arrangements and the reservations Northern Ireland producers and processors would have about contributing to a UK wide levy.
1.23 The recent quinquennial review of MLC considered the transfer of responsibility for export promotion to Food From Britain (FFB) but concluded that the function should remain with MLC who have the required specialist knowledge of and contacts in the red meat sector. Similar considerations apply to LMC's export promotion activities. The Group concludes that there is no scope to merge LMC with any other organisation.
Extension of LMC remit to include pork promotion (Paragraphs 5.25 - 5.27)
1.24 While the processors' organisation expressed some merit in having one body with overall responsibility for promotion of Northern Ireland meat, no convincing arguments were advanced in support of such a move. Neither producer organisation was in favour.
1.25 Given the Pork and Bacon Forum's promotional role in Northern Ireland and MLC's activities in Great Britain (which is the main market for pigmeat from Northern Ireland), it is difficult to see what benefit would be derived from extending LMC's remit to include pork. The Group recommends that LMC's remit should not be extended to include responsibility for pigmeat promotion.
issues arising in review
(a) Funding and levy arrangements (Paragraphs 6.1 - 6.14)
1.26 There is a clear need for an increase in LMC funding to finance the necessary development of the red meat sector and to facilitate the substantial marketing and promotional activity required to enable the industry to recover from the beef export ban. While funding from Government, LMC and processors will be available under the Red Meat Strategy for an initial three-year period, increased levy funding is essential to provide a sound financial base.
1.27 LMC has reached agreement in principle for the introduction of a processors' levy and intend to pursue an increase in the producers' levy which, in the Commission's judgement, can be delayed until April 2001. The Group recommends that negotiations to finalise details of the processor levy arrangements are concluded as soon as possible and consultations continued to increase the producer levy to an equitable level vis-à-vis the position in GB.
1.28 It is further recommended that levy rates should be reviewed annually by the Commission in consultation with producer and processor organisations.
1.29 It was noted that the Commission intends to explore the potential for generating income in respect of dropped calves. Since LMC services benefit the entire industry it is inequitable that only the beef finisher and not the calf producer contributes to LMC funding by way of levy. The Group recommends that the Commission should endeavour to complete its examination of this matter so that any legislative implications can be considered in parallel with other legislative amendments arising out of the review.
1.30 Although current legislation provides that the levy should also be payable by the owners of cattle and sheep exported from Northern Ireland, in practice the levy has not been collected on exports.
1.31 Arrangements are in place in both GB and ROI to collect levy on their exports and it is noted in LMC's Strategic Plan that the Commission plans to introduce measures to collect the levy at live markets.
1.32 The Group noted the difficulties involved in ensuring that a levy was collected in respect of animals other than simply at slaughter. The Group endorses LMC's decision to seek to extend the scope of levy collection and recommends that the Commission considers how the difficulties involved in applying a levy to live exports of all cattle (once live exports resume) and sheep from Northern Ireland could be overcome. Apart from the financial benefit accruing to LMC, this would mean that producers who pay levy on their livestock slaughtered in Northern Ireland would no longer be disadvantaged compared to those who export their animals and do not pay levy.
FQAS Funding (Paragraphs 6.15 - 6.18)
1.33 Increasing membership and associated administration, inspection and audit costs has placed a considerable strain on FQAS funding which is supplemented by the surplus funds generated by the operation of the carcase classification service. While the Commission intends to review charges in the long term, the Group recommends that the Commission refers the matter to the Industry Standing Committee for early review and that the Commission considers the introduction of an annual fee for continued membership of the Scheme.
Marketing (Paragraphs 6.19 - 6.23)
1.34 There was general support for LMC's role as leader of the generic promotion of Northern Ireland beef and lamb. Producer responses indicated a desire for increased lamb marketing and more liaison with producer and marketing co-operative bodies. Expenditure on lamb marketing already significantly exceeds levy income generated on slaughterings, further reinforcing the need for a levy increase to fund lamb promotion.
Links with MLC and Food From Britain (Paragraphs 6.24 - 6.25)
1.35 The Commission is currently engaged in the development of a contractual arrangement with MLC which is expected to assist LMC in developing its marketing strategy and provide access to MLC expertise and promotional material. In addition LMC will avail of MLC's Brussels based office accommodation and facilities.
1.36 The Group recommends that the Commission, in furthering its export marketing activities, should continue to liaise with FFB on behalf of Northern Ireland companies seeking to export and develop speciality red meat products.
Overall Food Promotion Body (Paragraphs 6.26 - 6.27)
1.37 Some consultation responses recommended that red meat marketing should become a responsibility of an overall food promotion body similar to An Bord Bia in the Republic of Ireland. While individual Commissioners had differing views on the proposal, the majority were opposed mainly because of the risk that funding for red meat promotion could be diluted within such a body
1.38 LMC has a specific and well defined role in the generic promotion of Northern Ireland red meat. One of the issues raised during the development of the Strategy 2010 document was the need for an overall Northern Ireland food marketing body. The Group recommends that LMC should participate fully in any consideration which is given to the establishment of such a body.
Carcase Classification (Paragraphs 6.28 - 6.34)
1.39 Consultation responses were overwhelmingly in favour of carcase classification being carried out by an independent body. LMC's NDPB status is a significant advantage, identifying it as independent of the meat plants. Classification arrangements in GB and ROI were considered in discussion with producer and processor organisations in an attempt to devise alternative arrangements in Northern Ireland. However, no satisfactory alternative system was identified. Despite the criticisms levelled at LMC in the provision of the classification service, all sectors acknowledged that LMC remain best placed to carry out the function at the present time.
1.40 LMC are currently monitoring prototype objective classification systems being tested in the Republic of Ireland. In addition to removing the subjectivity of the present arrangements, objective classification may facilitate revised payment arrangements based on the meat yield of the carcase. In addition to the significant capital investment involved with such systems, EU approval will be required before their introduction on a commercial scale. The Group recommends the continuation of the existing classification arrangements at the present time but LMC should continue to monitor developments on objective classification with a view to the eventual introduction of objective classification procedures in Northern Ireland.
Size of Commission (Paragraphs 6.35 - 6.40)
1.41 There is general agreement that the Commission should be enlarged from 7 to 9 members in order to expand the range of skills and experience available and to share the workload involved with membership. However, industry interests favour an increase in the representation of their respective sectors to counter what each perceives to be an imbalance on the present Commission.
1.42 The Group recommends that:
(i) the number of Commission members be increased to nine in order to broaden the scope of the business experience and expertise available to the Commission and to provide a greater measure of flexibility for members;
(ii) the likely time commitments of membership should be made clear when advertising for new members and the importance of meeting these commitments should be clearly spelled out to newly appointed members;
(iii) the Department should consider the merits of a change from the present annual payment arrangement to payment on a daily basis linked to attendance at commission meetings;
(iv) the Chairman's assessment of a member's attendance and contribution to Commission meetings should be an important factor when the re-appointment of members is under consideration.
Relationship with Levy Payers (Paragraphs 6.41 - 6.47)
1.43 A small number of responses from producers indicated a perception that producers generally have not been kept sufficiently informed of LMC activities on behalf of the Northern Ireland red meat industry. In addition, producers tend to feel penalised by LMC through its role in carcase classification.
1.44 The weekly Bulletin has traditionally been LMC's main method of communicating with producers. Producers generally welcome this publication but some feel that its presentation of price data tends to "talk down" prices. A similar criticism was levelled by some at the LMC's slot on the Friday "Farm Gate" radio programme although responses on the Commission's media image were generally favourable.
1.45 The Commission recognised the need to improve its profile among the farming public and to better inform them about its activities and responsibilities. The series of producer meetings conducted by the Commission over the last two years have been very well received and were commented on favourably during the review. The Commission intend to maintain an annual schedule of such meetings.
1.46 The review identified scope for LMC to assist producer groups including UAOS in understanding the role of LMC. The Group recommends that the Commission should continue its more proactive approach in conducting meetings with producer groups.
Relationship with DANI (Paragraphs 6.48 - 6.51)
1.47 Individual Commissioners reported satisfactory relationships with DANI but felt a greater degree of autonomy would enable the Commission to perform more effectively in the commercial environment in which it operates.
1.48 Government guidelines, which encourage the delegation of responsibility within an agreed policy framework, require the terms and conditions under which a NDPB operates to be set out formally in a Management Statement. The Group recommends that the relationship between LMC and DANI be formalised and set out in a Management Statement and an accompanying Financial Memorandum.
1.49 The Group recommends that at a convenient time it would be appropriate for the statutory functions of LMC to be restated in the light of the current industry structure.
Financial Management (Paragraph 7.1)
1.50 The quinquennial review of a NDPB normally includes a review of the system of financial management and control within the body. However, existing arrangements provide for the review of LMC's system of internal control by DANI's Internal Audit Division. An audit review was carried out in May 1999 and a further examination of these aspects as part of this review is therefore considered unnecessary.
Management Statement (Paragraphs 7.2 - 7.6)
1.51 Government guidelines require the terms and conditions under which each NDPB operates and the arrangements for setting its performance targets and measurement to be recorded formally in a Management Statement. Such measures should seek to demonstrate that LMC is endeavouring to obtain best possible value for money. The Group concludes that a Management Statement should be developed in consultation with DANI and should include DANI's responsibilities in agreeing strategic aims and objectives for LMC, together with performance targets and procedures for monitoring performance. The accompanying Memorandum should also document the responsibilities and financial duties of Commission members and the Chief Executive and include details of delegated financial controls and authorities.
1.52 The Group recommends hat LMC's Strategic Plan should include, in addition to the aims and objectives of the various functional areas, performance targets against which actual performance can be measured. These performance targets should cascade downwards from the Strategic Plan into individual Business Plans for the various functional areas. Actual performance against the targets should be measured regularly and reported on within the Commission's Annual Report.
1.53 Government guidelines place a responsibility on NDPBs to implement Government policy in areas such as the Citizens' Charter (now renamed Service First - the new charter programme) and the application of Open Government principles laid down in the Code of Practice on Access to Government Information. In addition each NDPB is required to maintain a register of Board Members' interests in accordance with the Code of Best Practice for Board Members of Public Bodies. The Group recommends that the Department should ensure that procedures are in place to inform LMC of all such requirements and that they are implemented by the Commission as appropriate.
summary of recommendations
1.54 The following is a summary of the Group's recommendations:
- the Group concludes that the clear balance of opinion is for LMC to continue (paragraph 5.7);
- the Group recommends that LMC continues as a NDPB (paragraph 5.14);
- the Group concludes that LMC's activities are essential to the future development of the Northern Ireland red meat industry and are best delivered through the framework of a NDPB (paragraph 5.16);
- the Group concludes that none of the activities currently performed by LMC is appropriate for contracting out or market testing at the present time. The Commission should however continue to monitor industry developments with a view to assessing the potential for achieving better value for money through alternative arrangements (paragraph 5.20);
- the Group concludes that there is no scope to merge LMC with any other organisation (paragraph 5.23);
- the Group recommends that LMC's remit should not be extended to include responsibility for pig meat promotion (paragraph 5.26);
- the Group recommends that negotiations to finalise details of the processor levy arrangements are concluded as soon as possible and consultations continued to increase the producer levy to an equitable level vis-à-vis the position in GB (paragraph 6.9);
- the Group recommends that levy rates should be reviewed annually by the Commission in consultation with producer and processor organisations (paragraph 6.10);
- the Group recommends that the Commission should endeavour to complete its examination of the potential for generating income in respect of dropped calves so that any legislative implications can be considered in parallel with other legislative amendments arising out of the review (paragraph 6.11);
- the Group recommends that the Commission considers how the difficulties involved in applying a levy to live exports of all cattle (once live exports resume) and sheep from Northern Ireland could be overcome (paragraph 6.14);
- the Group recommends that the Commission should review FQAS funding arrangements making reference to the Industry Standing Committee and the Commission should consider the introduction of an annual fee for continued membership of the Scheme (paragraph 6.17);
- the Group recommends that the Commission, in furthering its marketing activities, should continue to liaise with FFB on behalf of Northern Ireland companies seeking to export and develop speciality red meat products (paragraph 6.25);
- the Group recommends that LMC should participate fully in any consideration which is given to the establishment of an overall Northern Ireland food marketing body (paragraph 6.27);
- the Group recommends the continuation of the existing carcase classification arrangements at the present time but LMC should continue to monitor developments on objective classification with a view to the eventual introduction of objective classification procedures in Northern Ireland (paragraph 6.34);
- the Group recommends that the number of Commission members be increased to nine in order to broaden the scope of the business experience and expertise available to the Commission and to provide a greater measure of flexibility for members (paragraph 6.39(i));
- the Group recommends that the likely time commitments of membership should be made clear when advertising for new members and the importance of meeting these commitments should be clearly spelled out to newly appointed members (paragraph 6.39(ii));
- the Group recommends that the Department should consider the merits of a change from the present annual payment arrangement to payment on a daily basis linked to attendance at Commission meetings (paragraph 6.39(iii));
- the Group recommends that the Chairman's assessment of a member's attendance and contribution to Commission meetings should be an important factor when the re-appointment of members is under consideration (paragraph 6.39(iv));
- the Group recommends that the Commission should continue its more proactive approach in conducting meetings with producer groups (paragraph 6.47);
- the Group recommends that the relationship between LMC and DANI be formalised and set out in a Management Statement and an accompanying Financial Memorandum (paragraph 6.49);
- the Group recommends that at a convenient time it would be appropriate for the statutory functions of LMC to be restated in the light of the current industry structure (paragraph 6.50);
- the Group concludes that a Management Statement should be developed in consultation with DANI and should include DANI's responsibilities in agreeing strategic aims and objectives for LMC, together with performance targets and procedures for monitoring performance (paragraph 7.4);
- the Group recommends that LMC's Strategic Plan should include, in addition to the aims and objectives of the various functional areas, performance targets against which actual performance can be measured (paragraph 7.5);
- the Group recommends that the Department should ensure that procedures are in place to inform LMC of all Government policies to be implemented by NDPBs and that they are implemented by the Commission as appropriate (paragraph 7.6).
EUROPEAN COMMISSION
Directorate-General VI
Agriculture
Brussels, 07/12/98
RL/IGC/bv- Orig. EN
G-D2\verbiel\rapport\Ireland.doc
Mission Report
by the Control Committee on
Beef Carcase Classification
in the United Kingdom (Northern Ireland)
17th to 20th November 1998
_________
During the mission, three abattoirs, two cold stores and two intervention centres were visited. (List of premises visited and participants in Annex I)
1. Classification
1.1 Introduction
Classification and identification by labelling or by stamping (for intervention only) is carried out by officials[1] of the Livestock and Meat Commission (LMC), operating in nine approved abattoirs (see Annex II).
The cost of the classification is supported directly by the producer who pays a grading fee of £1.00 (+ VAT 0.175) per animal.
In addition to this fee and other costs[2], the producer pays also a part of LMC costs amount to £0.80 per animal.
Control of classification is carried out within the LMC, the senior field officers checking, at least monthly, the slaughter books, the dressing, grading and weighing, operated by the classifiers. Structure and duties of the field services is given in Annex III.
In addition to these controls, the fatstock officers[3] of the Department of Agriculture of Northern Ireland (DANI) are charged with the supervision of operations as provided for in Regulation (EEC) No 344/91. Structure and technical inspectorate of the DANI is given in Annex IV.
Sub-classes are used for specifying fat and conformation scores. Northern Ireland does not sub-divide all classes, only conformation class O is divided in two sub-classes using the symbols "+" (high) and "-" (low) and similarly fat class 4 divided in two sub-classes using the letters "L" (low) and "H" (high). As regards the dressing, the national specification is now the same as the EEC reference dressing, except for steers where codfat remains attached.[4]
1.2 Findings
1.2.1 The Committee carried out three classification exercises at Granville Meats Dungannon and Ballymena Meat Plant on twenty cold carcases and at Omagh Meats on forty hot carcasses. As N. Ireland only uses two subclasses for conformation O and fatclass 4 and the control committee always uses three subclasses, the graphics of Annex V do not reflect always exactly the level of agreement between the Committee and the abattoirs.
In general the results of the Commission and the experts of the member states were very much in line. Where differences were to be seen they were limited to one subclass.
a) At Granville Meats Dungannon the results of the classification showed, on conformation eight carcases overscored and one subclass and one underscored by one subclass.
The fat assessment showed an overscoring of four carcases by one subclass, two carcases being underscored by one subclass and one by two subclasses.
b) The second exercise at Ballymena Meat showed on conformation one carcass overscored by one subclass and one carcass underscored by one subclass.
The fat assessment showed an overscoring of two carcases by one subclass, five carcases being underscored by one subclass and one by two subclasses.
c) The last exercise at Omagh Meats showed on conformation an overscoring of twelve carcases by one subclass, two carcases being underscored by one subclass.
The fat assessment showed an overscoring by one subclass of seven carcases and an overscoring of two by 2 subclasses; sixteen were underscored by one subclass.
To conclude, the classification of the slaughterhouse and of the Committee showed an excellent degree of convergence. Only four carcases differed by more than one subclass (5%).
1.2.2 As regards control of the classification, they are performed at different levels.
a) Internal Controls are regularly carried out by LMC senior field officers on 20 hot carcases. These checks cover classification and dressing of the carcases. An example of a check form is given in Annex VI.
b) General Beef classification checks are operated by the DANI technical inspectorate at least twice per quarter on regular classifiers (40 carcases). The controls cover classification, category and dressing specifications. Joint DANI/LMC controls are also operated. An example of a check form is given in Annex VII.
c) Standardisation exercises are carried out twice a year by the DANI on irregular classifiers (ie which are not regularly classifying). The most recent exercise was conducted on 29 July 1998 on the full classification team (see Annex VIII).
The Committee understands the need to have those different levels of control carried out, since in nearly all the abattoirs most of the carcases were being hung from the hip directly after slaughter thus making the check of the conformation in chillers impossible.
1.2.3 As shown in Annex IX a), on the first ten months of 1998, each plant was checked in average 15 times by the DANI technical inspectorate, ie one inspection every three weeks. Number of errors amounts for conformation and fat respectively on 12.0 and 10.6% with a bias for conformation of + 10% (i.e. overscoring) and for fat of - 6% (i.e. underscoring). As can be seen from Annex IX c), errors are in general limited to one third of a class and the classification results can be considered as very satisfactory. Inspection reports were produced for the nine abattoirs of Northern Ireland and the controls carried out each time on 40 carcases give an inspection of reliability.
1.2.4 In all plants visited, identification is done by labelling. Except for the weight[5] the required information on the labels and their position on the carcass comply with EU ruling, although more uniformity should be welcome (see examples of labels in Annex X). The new type of label (the so-called Australian label) is now used in all abattoirs.
1.3 Conclusions
The Committee was impressed by the high standards of classification found in all the plants visited. The majority of differences observed were within one sub-class.
The Committee welcomed as well the frequent spot checks performed by the DANI as well by the LMC, to monitor the activity of the classifiers. Repeated inspections explain the good results of the classification; their importance is also highlighted by the practise of hip hanging hot carcases at the end of the kill line, thus making checks necessary prior to the new hanging method.
2. Price Reporting
2.1 Introduction
2.1.1 There are currently eleven centres involved in deadweight price reporting in Northern Ireland (see list under Annex XI). Prices are reported by six private abattoirs, one co-operative (Granville meats) and four wholesalers who slaughter at the two municipal plants of Ballymena and Newtownards. As can be seen from the example given in Annex XII, deadweight prices are collected weekly by the Livestock and Meat Commission (LMC), on the basis of the daily classification sheets. Prices of all cattle are reported including those purchased at livestock markets (code M). The price reported for the latter must be the cost for the slaughterer of an animal delivered to the plant, i.e. it should include commission paid to agents and cost of transport. All weekly sheets are computerised on Tuesday by noon[6] and a report is produced by LMC on Wednesday morning; after examination for accuracy it is sent to Brussels via the DANI IDES link.
2.1.2 Since all plants and wholesalers are now fully computerised, an important change in the price reporting occurred recently (since 1996) by calculating the weekly prices on the basis of all prices transmitted by all the price reporting centres. In the past, the LMC used only prices collected by four price reporting centres which were to be considered as a representative sample of the average weekly prices. This sample was taken randomly each week. The former system was criticised by the Committee because it could result in up and down fluctuations in prices according to the different price approaches followed by the plants used in the sample, their size or structure, or their geographical location.
2.2 Findings
2.2.1 In all abattoirs visited, the result of the classification and the category of the animals were given on the invoices and passed back to the producers (see example in Annex XIII).
2.2.2 No correction coefficients were used for the prices transmitted to Brussels due to dressing specifications, except of the hot/cold rebate of 2% and the correction of 0.5% for the non removal of the codfat (on steers only).
2.2.3 Regular checks are carried out by the DANI on the prices submitted by the price reporting centres to LMC, against the producers remittance advice records. These controls consist in:
a) Random joint visits with LMC senior field officers;
b) Independent quarterly spot checks of four price reporting centres selected at random for a selected week.
Annex XIV gives all details of the price reporting check on prices submitted for week No 23 (W/C 1/9/98); during the controls performed in four centres, on a total of 1906 prices reported, discrepancies were noted on 7 carcass prices representing a discrepancy of 0.37%.
2.3 Conclusions
Price reporting conforms with EC ruling. The Committee was pleased to notice that the recommendation made during the last visit was taken into consideration (the Committee had criticised the sampling method used in calculating the average prices as unsatisfactory). The Committee was impressed by the thorough and regular controls performed in order to reconciliate with the plant records the prices supplied by the price reporting centres.
annex c2
committee for agriculture and rural development
Inquiry into the livestock and meat commission
Additional Questions from the committee to:
Department of agriculture and rural development
4 May 2001
The Committee is grateful to you and your officials for your contributions in writing and in person to the Committee's Inquiry. As indicated by the Chairperson at the end of the meeting on 27 April 2001, there would be further questions. I now submit those which have arisen to date, some of which were touched on at the meeting.
General
1. At the meeting with the Committee on 27 April 2001 you said that the report of Quinquennial Review of the LMC has been circulated to the industry organisations that contributed to the review, and the main findings and recommendations were largely agreed by them. What is causing the delay in publication and when do you expect a final agreed version of the report to be published?
LMC Funding
2. In paragraph 3 of your submission and at the meeting on 27 April you referred to the need for primary legislation if the scope of levy collection is to be extended beyond producers and primary processors. Is the Department considering such a course of action? If so, who else would be targeted for levy collection? How much additional funding would this raise?
3. Although we acknowledge that the Department has, from time-to-time, provided the LMC with funding for specific programmes, it does not provide core funding to the LMC which therefore necessitates a range of levy charges to producers and processors. An Bord Bia in the Republic of Ireland is generously supported by the Irish Government. Why has the Department not considered a similar support programme for the LMC which would remove, to some degree, the financial burden on producers during this difficult time in agriculture?
4. The LMC is incurring an annual operating deficit that has serious implication for its ability to perform its statutory duties as well as its involvement in programmes such as the Farm Quality Assurance Scheme. From where do you see the LMC obtaining additional funding that will allow it to carry out its important functions but will not place undue strain on farmers?
5. In the case of the MLC in Great Britain, costs of Commission members are paid for by MAFF. Should DARD not do the same thing, freeing up some funds for marketing or other activity?
6. Your submission did not answer the point raised in the Chairperson's letter of 13 March when he asked for your comments on the principle of the LMC subsidising one activity through charging for another. For example, should those who bring animals to slaughter be the only ones paying for activities which have wider benefits?
Carcase Classification
7. Staff of the LMC are trained before taking a test for approval as a licensed classifier. Successful candidates are subsequently licensed by DARD. How regularly are LMC staff members checked by DARD officials to ensure they are maintaining a high skill level as a classifier?
8. The contractual arrangements for classification are between the LMC and the meat plants yet the fee is paid by the producer. In your opinion should this situation be reviewed?
9. The Quinquennial Review of the LMC indicates that the current classification arrangements should continue (p.38) given that there are no viable alternatives at the moment. Assuming this to be the case for the foreseeable future how can the Department help the LMC to ensure that its other good work is not undermined by the ongoing controversy surrounding classification?
10. How far do you consider farmers' complaints regarding the 'misclassification' of animals to be justified?
11. Do you believe that a farmer should have the right to appeal a classification to an independent body rather than a senior officer of the LMC? Wouldn't this, to some degree, remove the controversy surrounding classification?
12. Are you of the opinion that we have an open competitive market in livestock in N. Ireland?
13. Would you be in favour of pricing arrangements based on meat yield if objective classification could be obtained?
14. In the event that another independent body assumed the responsibility for classification the operating surplus on the classification service, which helps finance, FQAS would be lost. Has the Department given any consideration to this possible scenario and specifically how the FQAS would be funded?
15. Your submission did not answer the Chairperson's question as to whether you believe that the classification services provided by the LMC fully meet the needs of the agri-food industry. Can you comment now?
16. You provided the Committee with results of an EU inspection visit in November 1998. When would you expect the next EU inspection to take place? Has DARD made any attempt to monitor the application of the EU standards in the period since?
Promotional Activities
17. Your submission stated that DARD's approval for marketing or promotional schemes is normally conditional on the provision of a report on the extent to which the programme has successfully met the set objectives. You did not, however, give any assessment of value for money achieved or refer to the findings of any reports. Can you do so now? Does DARD actively pursue receipt of these reports?
18. The processors and the Department currently contribute to a promotional programme. Should the Department not actively encourage retailers to also contribute to such activities?
19. In light of the foot and mouth situation the promotion and marketing of meat products from N. Ireland will undoubtedly assume more importance if the industry is to regain lost ground. Does the Department have any plans to increase funding to attain this goal?
20. How can the LMC in your opinion improve communication with farmers to explain some of the tangible benefits that they receive in exchange for their levy payments?
Appointments to the LMC
21. Could you outline what level of consultation the Minister has with the Chairperson/Chief Executive of the LMC in relation to appointments to the Commission?
22. The role of the independent assessor is important in the selection process. How is an independent assessor chosen?
23. The Code of Practice relating to the public appointment process indicates that reappointment to the same post should not be automatic and that the performance of the post-holder should be reviewed. A second reappointment should be exceptional and normally subject to a scrutiny process, including considering other candidates. In the fourth report of the Office of the Commissioner for Public Appointments, 1998-1999, auditors stressed that 'it was essential that Departments demonstrate, with concrete evidence, the individual's suitability for reappointment'. How is the performance of members of the Commission who may be up for reappointment assessed?
24. The Commissioner stated in his report that Departments should look at ways other than newspaper advertising in order to attract a broad range of applicants. You have indicated three ways by which you seek candidates - such as drawing on the Central Appointments Unit, writing to industry organisations, and advertising in the three Belfast papers. This seems like a limited approach that might produce the same names again and again. Has the Department looked at alternative ways to widen the field of potential candidates for appointment to the LMC e.g. advertising or trawling posts outside of Northern Ireland?
25. What criteria does the Department use to ensure that it does not, even accidentally, discriminate against certain groups when advertising the appointments?
26. With the Quinquennial Review recommending that the Commission members be increased to nine, what steps does the Department intend to take to ensure there is an appropriate mix between producer, processor, retailer and consumer, assuming that this change takes place?
27. The Quinquennial Review has indicated the occasional problems with the Commission obtaining a quorum. Will the Department consider the option of payment to members of the Commission being linked to attendance at meetings as suggested in the review?
I would be grateful if you could provide a response as soon as possible, preferably within the next two weeks.
annex c3
committee for agriculture and rural development
inquiry into the livestock and meat commission
Response to Questions from:
department of agriculture and rural development
23 May 2001
Thank you for your letter of 4 May setting out questions in respect of the LMC. While, as you say, much of the ground has been covered previously both in writing and at our meeting on 27 April I have set out below my responses to each of your questions.
General
1. The Quinquennial Review Report was completed during the period when the Assembly was suspended and the Report was circulated at that time to all those who had contributed to the Review. I will be publishing the Report in the context of the outcome of your investigations into the LMC.
LMC Funding
2. The Review Report notes the wish of the LMC to extend the scope of the levy to producers other than beef finishers. This was because there is a view that it is unfair that the burden of levy payment falls solely on finishers and nothing is paid by other parts of the beef production chain. The Report recommended that consideration of this issue be taken forward by the LMC. When this has been completed I will consider the need for legislation. In bringing forward any proposals I would expect the LMC to specify where the levy should be targeted and how much funding might be raised.
3. The core functions of the LMC are to provide services to the Northern Ireland red meat industry and to advise the Department on matters relating to this sector. As such the LMC is acting on behalf of the industry and it is entirely appropriate that the core funding should come from industry itself rather than government. This position is consistent with that of the GB Meat and Livestock Commission and with similar organisations in most other EU countries. The ability of the LMC to generate income from certain of the services it has provided, for example on behalf of the Intervention Board, together with government support for specific programmes, has enabled the Commission to operate very effectively in recent years. There is no financial provision for the payment by the Department of core funding to the LMC.
4. As the Committee will be aware the LMC is seeking to increase its levy income in order to prevent a significant deficit emerging. Given the clear differences in levy arrangements between Northern Ireland and GB there is scope for levy income to be increased. I note that processors have begun to pay a voluntary levy and this will be given statutory effect in due course.
5. I am prepared to consider the costs of Commission members being met from public funds though I would wish to have clear reasoned arguments as to why this was appropriate at this time. I would have to take account also, with Executive colleagues, of the implications of what would be a change of policy in respect of payments to NDPB members.
6. At a time when the Commission had built up significant surpluses I believe that it was entirely appropriate that these reserves be used for the benefit of all in the industry particularly where these surpluses were obtained for services provided to eg the Intervention Board. The surpluses from classification fees (which were passed on by the plant to producers) were used solely to offset the costs of the Farm Quality Assurance Scheme thereby benefiting the very same group of producers.
Carcase Classification
7. All carcase classifiers are subject to supervisory checks by the Department at least twice per quarter. This is in addition to the checks carried out by LMC senior field officers. The Department also holds standardisation exercises twice a year for those LMC staff who spend less than 50% of their time on classification work. Over the past 2 years over 300 supervisory checks were carried out by the Department.
8. The question of who should pay the classification fee is entirely a commercial matter between those who provide and those who receive the service.
9. The Department will continue to supervise the operation of the classification system to ensure that the EU standards are being applied fairly and as uniformly as possible. It will also continue to explain to producers the nature of both the classification system and the supervisory arrangements. In this it will work closely with the LMC itself as well as with producer representatives.
10. It is entirely understandable that in any system which relies on subjective judgement some producers will be unhappy with the classification of individual animals. That in itself does not mean that there are fundamental flaws in the operation of the system. I am satisfied that on the basis of the supervisory checks undertaken by the LMC itself, by the Department, by the Intervention Board and the EU Classification Control Committee, the standards are being applied fairly with the benefit of the doubt in marginal decisions being given to the producer.
11. I am not aware of any evidence that the existing appeal mechanisms are working other than satisfactorily. If any other body was to take over the appeal function there is likely to be additional cost and, in any case, there is no obvious body to whom the function could be passed.
12. I am not clear as to the relevance of this question of the activities of the LMC. As the Committee will be aware the allegation about anti-competitive behaviour in the red meat sector have been considered by the Office of Fair Trading without sufficient evidence emerging to warrant formal investigation.
13. The adoption of a pricing system related to meat yield is a commercial matter though I would support any system which is fully transparent, market driven and related in quality. It should be noted that EU legislation links price reporting to the current classification grid and if any new pricing system were adopted commercially it would be necessary to ensure that the EU price reporting requirements could be met.
14. The LMC is not projecting a surplus on classification charges and hence the question posed does not arise in practice. Future funding of the FQAS is a matter for the LMC and the industry and it is, I understand, currently being addressed.
15. Classification is an EU requirement and I am satisfied that the EU standards are being applied fairly by the LMC. I am not clear as to in what way in the operation of the system the LMC might not be meeting the needs of the agri-food industry.
16. The current programme of visits to Member States by the Classification Control Committee has been abandoned because of workload pressures arising from Foot and Mouth Disease. In any case the programme for this year did not include a visit to the UK. It is not clear therefore when the next visit to Northern Ireland may take place. As indicated previously there is ongoing supervision and checking by the Department of the application of EU standards and I am satisfied that the standards are being applied correctly.
Promotional Activities
17. Evaluation reports of marketing promotional activities are sought by the Department and the information available does indicate that the activities are cost effective and represent value for money. For example the report on the LMC's promotional activities in 2000 part-funded by the EU Quality Beef Promotion Scheme indicated that consumption of beef in Northern Ireland increased by 6.5% over the period of the programme and that, in terms of awareness, a significantly high number of people have been reached through the campaign. Pricewaterhouse evaluated expenditure in 1997 under the EU funded Beef Promotion Scheme and concluded that the LMC promotional activity was properly targeted and represented value for money.
18. While I am happy to work with the LMC, processors and producers in promoting Northern Ireland beef in any way I can, I suspect that retailers will be reluctant to contribute to LMC promotional activities even though they may benefit indirectly from them. Retailers do engage in marketing and promotion activities through point of sale material, in-store promotions, special offers etc and no doubt would argue that this indirectly benefits their suppliers including those from Northern Ireland.
19. Consideration is being given to action that might be necessary to help the agri-food sector, in particular the livestock sector, to recover from the impact of FMD. This work has both a national and local dimension. At this stage it is not possible to say whether the marketing of meat products, or any other individual proposal, might be an area to which additional funds could be allocated if available.
20. I believe that the LMC should continue with its policy of being fully open and transparent in all its activities thereby demonstrating to producers the full range and impact of its services. I welcome the fact that in recent years, as well as the extensive contact with the producer associations, the LMC has initiated a series of meetings with producers throughout the Province. It is by making the industry more aware of its services and activities, by identifying and responding to the needs of the industry, and by engaging in constructive dialogue that the LMC can build on what has been achieved to date.
Appointments to the LMC
21. My officials discuss with the chairperson of the LMC the nature of the skills required in any particular appointment before the procedures begin. There is also consultation on issues such as timing and the identification of candidates who might be suitable for appointment.
22. The independent assessor is chosen having regard to the central list of people who have been identified as being willing and suitable to serve in such a capacity and Departmental knowledge of other suitable persons. Account is also taken of the balance of the panel with regard to equality issues eg gender and the nature of the particular appointment.
23. Assessment of candidates for reappointment is undertaken in conjunction with the chairman. A report is sought covering issues such as attendance, involvement in Commission activities beyond board meetings and the performance of the individual in terms of the contribution made to the overall work of the Commission.
24. The approach to appointments to date has produced a wide range of candidates for consideration and has not been limited therefore. While I do not rule out actively seeking candidates from outside Northern Ireland (and there is no barrier currently to such candidates applying) where the necessary skills or abilities may not exist here. It is necessary to bear in mind that an outside candidate might be perceived to be less than fully committed to the success and development of the Northern Ireland red meat sector.
25. It is by ensuring that vacancies are widely notified through advertisement in the 3 main Northern Ireland newspapers, and by writing to all industry organisations with an interest in the activities of the LMC, in addition to drawing on the Central Appointments Unit list of suitable people, that the Department ensures that there is no discrimination in making all groups aware of the process of appointment. The Department is an Equal Opportunities Employer and all advertisements carry a statement that appointments are based on the merit principle and on equality of opportunity of employment. Where appropriate specific encouragement will be inserted in advertisements to bring forward applications from under-represented groups.
26. If membership of the LMC is increased there will be consultation with the Commission and relevant industry organisations on the additional skills or background that may be necessary to ensure a fully effective Commission.
27. While the possibility of linking payments to attendance will be considered I will want to be satisfied that in so doing there would be no adverse implications in terms of the ability to attract a range of candidates of sufficient calibre. Payment by attendance may not be entirely fair unless there is some mechanism for taking account of time spent on LMC activities outside of formal meetings.
I trust that the above information will be helpful to the Committee.
BRÍD RODGERS
Minister of Agriculture & Rural Development
annex d1
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
WRITTEN SUBMISSION BY:
livestock and meat commission
12 April 2001
Thank you for your letter of 13 March on the above subject. The Livestock and Meat Commission (LMC) is happy to note your Committee's inquiry into some aspects of our operations and we attach herewith responses to the specific matters where you have sought our views.
We have dealt with your series of questions under the headings:
1. Quinquennial Review
2. LMC Funding
3. Classification
4. Promotional Activities
5. Appointments to LMC
In answering your queries, we have attempted to describe in fairly full terms the rationale behind our responses, and we hope that this will be helpful to the members of your Committee in the conduct of your inquiry.
We note the likelihood that the Committee will invite us to give evidence to the inquiry on Friday 27 April. I have indicated to your Committee Clerk that since we would like a significant participation by Commission members on the occasion, we would have preferred a couple of additional alternative dates. We are prepared, however, to proceed on the date indicated if alternatives cannot be provided.
Yours sincerely
DAVID RUTLEDGE
Chief Executive
Enc.
1. Quinquennial Review
1.1. Your letter refers to the unpublished Quinquennial Review of LMC carried out by DARD. This Review was initiated in the autumn of 1998 and Commission members have repeatedly expressed their disappointment that it has not yet been published. Although LMC has had the opportunity to contribute to the Review process, we see the Review document as being the consensus conclusion drawn by DARD from the consultation which took place across our industry sector. As a body set up to serve the industry, it is the Commission's intention to seek to implement as fully as we possibly can all of the recommendations of the Review document when it is finally published. You should note that a number of the core recommendations contained within the draft Quinquennial Review have already been acted upon by LMC where they are within our remit.
2. LMC Funding
2.1. The capacity of LMC to serve the industry has at its very core to be based upon the resources available. Your Committee members may be aware that in the years prior to the BSE crisis of 1996, LMC had built up considerable cash reserves. These reserves had been built up in an era when:
- very little marketing and promotional activity was carried out within Northern Ireland;
- virtually nothing was spent in our largest market for beef and lamb - GB;
- the focus of LMC marketing and promotion was in export markets;
- significant surpluses were generated from Intervention Board activities.
2.2. Some criticism had been levelled at LMC for its failure to use these surpluses at the early stage of the BSE crisis. An evolution of LMC activities towards more activity in both the local and GB markets with consequent increases in expenditure has ensued. As a further contribution towards reducing cash surpluses, no increase in the levy funding had been sought between 1988 and 2000. It is appropriate to highlight, however, that we are now approaching the stage where the cash surpluses of LMC will be depleted and we need to determine whether we will significantly curtail our activities or whether increased resources will be available from the industry. We would welcome the Agriculture Committee's contribution to this debate.
2.3. In order to clarify LMC's funding for the Committee, we have prepared the attached Table 1 which shows on a pro forma basis a schedule of our projected annual income ignoring non-core activities. Table 2 shows a similar pro forma expenditure schedule based broadly on sustaining our existing activity level. These schedules exclude Intervention Board activities, classification and Farm Quality Assurance administration, certification and inspection. Where these headings appear, they reflect only the projected surplus or deficit of income against costs.
2.4. The schedules highlight that we do have a significant deficit between income and expenditure, based on our ongoing activities.
2.5. In presenting the above figures, we confirm to you that Northern Ireland slaughtering companies have agreed to the introduction of a "voluntary levy". This voluntary levy has been in place since July 2000 and is being contributed to by all of the major processors. It is our understanding that DARD are in the process of introducing legislation to give statutory effect to this source of income for LMC.
2.6. In regard to your specific question as to how the processor levy can be applied without it being passed back to the primary producer, we would comment simply that this levy should be put in the same category of processor costs as electricity, rates, labour, etc. One can argue that these are all passed back to the primary producer or that they are never passed back to the primary producer, depending on the perspective which one chooses to take. At the end of the day, it is LMC's view that in a free market, the distribution of margin throughout the chain will be based on the competitive forces operating. We believe strongly that the only proper mechanism in the absence of specific legislation for ensuring a fair distribution of the spoils of our industry is to ensure as far as we can a competitive market for livestock. This is why LMC continues to work on the market opportunities and to ensure that the maximum possible percentage of our livestock is suitable for the premium markets which are available.
2.7. Your letter refers to core funding from DARD. It is with regret that we must advise that while the Department is responsible for setting the level at which statutory levies are applied, they do not provide any core funding to LMC. Committee members should note that under the Red Meat Strategy Agreement, some funding from Treasury has been made available through DARD against a specific programme of activities. This funding amounts to 50% of an agreed programme of expenditure over a three-year period, beginning in 1999. In addition, back in 1996 at the onset of the BSE crisis, UK Government provided £250,000 of support, again routed through the then DANI and for allocation towards a specific programme of activity proposed by LMC. Other than these two, we are unaware of any other occasions when LMC received any Government funding. There is no ongoing or routine core funding from Government to LMC.
2.8. It is of course easy for LMC to claim that it should receive Government support. We do note that in regard to the Meat and Livestock Commission (MLC), our sister organisation in GB, a small support through the funding of the costs of Commission members by the Ministry of Agriculture, Fisheries and Food (MAFF) is provided. No further support other than in line with the sporadic allocations received by LMC is available to that organisation. We believe that both the Welsh Development Agency and the Scottish Executive provide some support to Welsh Beef and Lamb Promotions Ltd and Quality Meat Scotland respectively. These organisations are affiliated to MLC and as such these contributions may represent additional Government funding in the respective regions.
2.9. We note that An Bord Bia in the Republic of Ireland continues to receive very significant Government support. The support, we understand, is fully cleared by the European Commission under State Aid rules. This example is somewhat unusual, if not unique, in regard to the quantum of Government support which is provided.
2.10. Committee members may be aware that throughout Europe, and indeed in most significant meat-producing countries throughout the world, an organisation of similar standing to LMC is in existence. Most such organisations are funded through levies applied to the industry, usually at point of slaughter but also in a number of instances as a transaction charge on every livestock transaction throughout the chain. Looking at similar professional organisations across the world, significant Government support tends to be the exception.
2.11. Surpluses from beef and sheep classification charges made by LMC have never been used to support general LMC activities. Under an agreement set up in the early 1990s, it was determined between LMC, the Northern Ireland Meat Exporters' Association and the Ulster Farmers' Union that surpluses from classification activities of LMC would be specifically directed towards the costs of running the Northern Ireland Farm Quality Assurance Scheme for Beef and Lamb (FQAS). This practice has continued right up to the present day. By the end of the current financial year, however, these surpluses (which have been specifically highlighted in our annual reporting to the industry) will be virtually exhausted. Any balance remaining will be available to Northern Ireland Food Chain Certification (NIFCC), who from 1 April 2001 are being contracted to provide inspection, certification and membership registration services to the Farm Quality Assurance Scheme.
2.12. During the year just ended, we anticipate that our classification service will just about break even and will make no contribution to our overheads. Our budget for 2001-2002 anticipates classification to be loss-making at direct cost level. Sheep carcase classification in particular has become significantly loss-making.
2.13. In summary, the funding of LMC has and will continue to be completely transparent to the industry. Annual Reports are available each year to any industry participant on request to our Secretary. It is important that the fullest possible debate is encouraged to ensure that LMC, if it is to continue, is, on the one hand, held properly to account for the value which it is expected to add to the industry but, on the other hand, expectations are set at a level that is commensurate with the resources made available.
Livestock and Meat Commission for Northern Ireland
TABLE 1 -Proforma Income Schedule (Excluding Turnover From Non-Core Activities)
|
|
£'000 |
||
|
Levy |
Producer |
Cattle |
385 |
|
|
|
Sheep |
60 |
|
|
Processor |
Cattle |
380 |
|
|
|
Sheep |
75 |
|
European Quality Beef Fund |
100 |
||
|
Intervention Board |
60 |
||
|
Northern Ireland Food Chain Certification |
40 |
||
|
Total |
1,100 |
||
TABLE 2 - Proforma Expenditure Schedule (excluding expenditure from non-core activities)
|
|
£'000 |
|
Information Services |
325 |
|
Marketing/Promotion |
1,150 |
|
Agriculture |
100 |
|
Classification |
125 |
|
Total |
1,700 |
3. Classification (Beef and Sheep)
3.1. It is a requirement under European law that all beef carcases offered for trade must be classified in accordance with the European Classification Grid. There is no regulatory requirement for sheep carcases at this time. It is further a requirement that the competent authority in each Member State puts in place measures to ensure that the standard set down in the regulation is properly applied. The delegated competent authority in the case of Northern Ireland is the Department of Agriculture & Rural Development. In offering a classification service to the industry, LMC has responded to requests by producers and processors for an independent body to undertake this service. As mentioned above, this activity has always been separately accounted for within LMC finances and by agreement surpluses, when they existed, were applied to the costs of running the Farm Quality Assurance Scheme (FQAS).
3.2. The operation of a classification service presents LMC and its staff with considerable difficulties. These difficulties relate primarily to sporadic abuse from a small number of producers and commentators who are unwilling to accept the validity of our classifications. On the other side, we have difficulty with some meat plants who perceive our classifications within Northern Ireland to be more lenient towards producers than classifications applied in GB. In providing the service, LMC operates an appeals system whereby if a producer is in disagreement with the grade applied by the Classification Officer, he/she can appeal to a Senior Officer to review the grade. We do maintain a full record of the appeals and we note a very strong correlation between the volume of appeals received and the price movements in the marketplace. (When prices move downwards, the volume of appeals moves upwards.) By way of example, in the month of February 2001 we had a total of 68 appeals involving 478 carcases out of total cattle slaughterings for the month of 37,281. Of these carcases, 19 were upgraded. Please find attached a bar chart (Figure 1) setting out the number of appeals over a period of approximately two years. It is perhaps also worth noting that the increasing prevalence of aitchbone hanging required for some customers eliminates the opportunity to appeal a cold carcase. This does occasionally cause some frustration.
3.3. In regard to your question as to whether LMC inspection staff are able to operate without undue influence from processing plant management, we have little record of complaints from our Field Staff in this regard. To be fair to processing plants, it is in fact unusual for them to complain to classification staff. Their natural inclination is to voice their complaints at a corporate level rather than at an operational level.
3.4. As a service provider, LMC does periodically arrange visits by Senior Classification Staff to plants in both GB and the Republic of Ireland to compare the interpretation of standards. Likewise, we receive visitors of similar standing from both GB and the Republic of Ireland from time to time. It is the view of our own staff and visitors that the classification service is operated to a very similar standard across the British Isles. Committee members are aware from our earlier evidence sessions that it is the responsibility of the competent authority in the Member State to ensure that the classification standard is properly enforced. Whilst DARD represents the competent authority locally within Northern Ireland, the superior expertise is provided by MAFF in London. As a service provider, it is incumbent upon LMC to be fully co-operative with the competent authority both locally and in London in meeting the regulation. There is a comprehensive record available from DARD regarding our performance as a service provider. This record highlights a small bias on the part of LMC towards the producer in regard to both fatness and conformation. This bias, however, is deemed to be within acceptable limits, bearing in mind the subjectivity of the process, particularly on the boundary between each conformation and fatness grade.
3.5. Committee members are further aware that the European Commission (EC) periodically visits every Member State to carry out an inspection of the implementation of the regulation. To the knowledge of LMC, there has never been an EC inspection in Northern Ireland where the EC experts have found the competent authority to be setting the standard other than in the producer's favour. On the contrary, a proposal by the EC for intervention disallowance in regard to 1998 is still, we believe, under debate as a consequence of the alleged over-leniency to the producer in the interpretation of the standard.
3.6. As mentioned above, there is a subjectivity on the boundary between grades which is inevitably subject to the frailty of human judgement. LMC would be strongly in favour of the adoption of mechanical classification arrangements if the technology were available. It has been well-publicised that trials were conducted last year in the Republic of Ireland on the three most advanced systems available to determine whether the technology was at a stage where it could be adopted to replace Classification Officers. Regrettably, the conclusion was that none of the manufacturers' equipment tested could accurately and reliably allocate a grade, which is necessary to meet the requirements of the European regulation. However, the equipment did seem to have some merit in its capacity to make an accurate determination of the yield of meat in a carcase. It therefore seems to LMC that the European Commission should be strongly urged to consider the adoption of modern technology, to move with the times, and change its price reporting structure from that based on subjective grades to one based on meat yield objectively measured. It would therefore probably be more fruitful to abandon any further development work to try and make the equipment predict a grade, and instead to concentrate on harnessing the equipment to predict yield, with further refinements to predict the distribution of the yield in the high value cuts. This technology is already being investigated in competitor countries.
3.7. If and when the equipment is developed to meet this requirement, LMC will be strongly encouraging its adoption throughout the slaughtering plants of Northern Ireland.
4. Promotional Activities
4.1. In expanding on the promotional activities of LMC, it is important to highlight initially two guiding principles on which we feel it appropriate to operate:
- Strategically, we must recognise that Northern Ireland is not a low cost producer of red meat and, as a consequence, we have concluded that we must seek to position the industry to supply the maximum possible percentage of our production into the highest value premium markets accessible to us.
- We must recognise that LMC can only function at a generic level and that all of the promotional work which we do needs to be complementary to the specific activities of both processors and retailers who are essential participants in the chain of distribution.
4.2. In order to maximise the impact of all of our promotional work, LMC does on all occasions seek to supplement our levy income through obtaining supports and grants from other sources as far as possible. It is particularly relevant to highlight that in the aftermath of the 1996 BSE crisis, on encouragement from LMC, the then Department of Agriculture and Department of Economic Development jointly drew together a cross-section of the red meat industry to form a "Red Meat Strategy Group". This group, as well as LMC, Department of Agriculture, IDB and LEDU, had participation from NIMEA, NIAPA and the Ulster Farmers' Union. The group produced a Red Meat Strategy designed primarily to assist recovery of our beef market with specific emphasis on re-engagement in exports. It also sought to address opportunities for better positioning across all of our red meat in the marketplace. The strategy document, submitted to Government in 1998, resulted in eventual European Commission approval for financial support of the expenditure programme of that strategy to the extent of 50% by Government over a three-year period, starting in 1999. (This programme is the same as mentioned earlier in this letter under the funding section.) The other 50% is from industry through LMC levy income. The Red Meat Strategy Group continues to meet regularly and contributes significantly to the formulation of LMC marketing and promotional activity.
4.3. It is appropriate also to highlight that in addition to our internal resources, LMC draws on the expertise of outside professionals where appropriate to assist in the formation of polices. As an example, on matters of advertising, it is normal to consult with relevant advertising agencies. In particular, since the commencement of a collaboration agreement with MLC in April 2000, it is normal also to access the research data which is available from that source.
4.4. In responding to your question on the value for money achieved by our expenditure in this area, we would first of all comment that it is generally a requirement, where either European or UK Government money has been used to supplement our own funds, that an independent assessment is carried out on the effectiveness of the individual programmes. There are some areas, however, where the outcome is either too long-term to be immediately assessed, or alternatively the value is immediately clear and does not require independent evaluation.
4.5. As a core function within LMC, our Marketing Department divides its promotional and marketing activities into three geographic areas:
(a) Northern Ireland
(b) Great Britain
(c) International
(a) Northern Ireland
4.5.1. As mentioned earlier in this letter, prior to 1996 and the impact on consumer confidence in beef resulting from the BSE crisis, LMC engaged in little activity in the local marketplace. On the basis of the limited funds available and the fact that within Northern Ireland only approximately 20% of our red meat production was consumed, it was believed that resources were best targeted towards export market development.
4.5.2. When the BSE crisis arrived, a clear need arose to communicate with local consumers in regard to the standing of Northern Ireland beef in particular. Questions in regard to our standards of production, our quality assurance arrangements and the general excellence of our red meat required a response to reassure Northern Ireland consumers. Red meat as a whole within Northern Ireland, if it were a branded product, would represent the biggest food brand in terms of turnover. LMC has concluded that there is a strategic importance in ensuring that lines of communication are kept open to consumers, local retailers need to be supported and there is an important role on behalf of the Northern Ireland industry in ensuring that retailers in, and distributors to, the catering trade are encouraged to use locally-produced product. In essence, LMC since 1996 has assumed the role of "brand guardian" for Northern Ireland beef and lamb.
4.5.3. The resources available to our sector for promotion, relative to most fast-moving consumer goods categories, are very limited. It is not possible for us to engage in the widespread advertising and high profile sponsorship campaigns that might be the norm for large multinational companies producing drinks, breakfast cereals and confectionery. We do, however, have vitally important messages in regard to the nutritional attributes, the provenance and, increasingly, the health benefits of red meat which we believe must be conveyed as well as possible given the constraints placed upon us. Additionally, our industry needs to actively promote through recipes, demonstrations, etc. modern preparation and cooking methods that fit in with modern day lifestyles, where time spent in the kitchen in most households is reducing in favour of work and increasing leisure activities.
4.5.4. Most market research highlights the difficulty of retaining young people as consumers of red meat. Changes in school curricula, changes in lifestyle and the massive weight of promotion and advertising of "junk food" lead us to conclude the necessity for our industry to actively engage, through every possible means, in portraying the benefits and the attractions of red meat, particularly to a younger generation. This has led us in our local promotional activities to focus the majority of our activities within the education sector. We have succeeded in developing a very productive working relationship with the schools, both in regard to meal-providers and in regard to the teaching side. LMC provides support to the sector through:
- provision of subsidised meat for use in Home Economics classes;
- input to Home Economics curriculum;
- education resources - CD ROM, publications;
- professional development events for teachers;
- advice on meat specification for school meals.
4.5.5. Our annual expenditure within the Northern Ireland marketplace is of the order of £400,000 of which two-thirds is attributed to our activities in the education sector. While this expenditure is supported currently by European Quality Beef subsidies, this funding is under considerable pressure and has been cut back significantly in recent years. At the current time, this outside funding is under debate at European Commission level and may or may not be available to LMC in the future.
4.5.6. Annual evaluations of most of the elements of our programme within Northern Ireland are undertaken by independent consultancies. By way of example, we enclose under Appendix 1 the most recent example of such evaluations (still in draft form).
(b). Great Britain
4.5.7. Great Britain has historically been the major market for Northern Ireland red meat. Prior to 1996, LMC estimates that approximately 30% of our production went into this market. Since the BSE crisis of 1996, this has grown to account for in the order of 60% of our production (still based on total slaughterings including OTMS). Within the GB market, the best returns are available from the premium multiple retailers. The Northern Ireland processing industry, since its export markets were removed through the export ban, has made substantial progress in building business with these premium retailers. In order to achieve this, however, it is critically important to our industry that we have the capacity to brand our product as "British Meat". This is the brand which is attached to the vast majority of beef and lamb sold by the major multiple retailers. The brand is essentially owned by the GB industry and supported and promoted by our sister organisation, MLC in GB. In order to secure full and proper qualification for the attachment of this brand to Northern Ireland red meat, LMC has entered into a two-year agreement with MLC whereby we make a significant contribution to the promotional budget of MLC for beef and lamb. The financial contribution which we make is essentially a pro rata contribution to the MLC promotional budget to the share which we enjoy of the "British Beef" and "British Lamb" market within GB.
4.5.8. Our budgeted expenditure for the years 2000 and 2001 is £450,000 per annum.
4.5.9. No formal independent evaluation of this expenditure is carried out. It is clear that MLC's promotional campaigns in GB are highly effective as this is the only market in Europe since 1995 that has achieved growth in beef consumption (of the order of 5%). The benefit to our local industry can be readily calculated on the basis of the average premium on Northern Ireland cattle over Republic of Ireland cattle. This premium we estimate at 9p/kg or £27 per beast over the last year. This is equivalent to a benefit to Northern Ireland beef producers of over £10 million per annum.
(c) International
4.5.10.LMC, like the rest of the red meat industry, continues to be frustrated by the ongoing beef export ban. More recently, the ramifications of losing our Foot & Mouth Disease-free status are likely to be significant. The Red Meat Strategy, however, and our own aspirations on behalf of the industry are very much built around the expectation that at some point in the future we will be able to re-engage in the exports which have historically accounted for approximately 50% of the production of our industry. We believe that it is, in this context, vital that we remain active in sustaining contacts in export markets, keeping abreast of customer developments and looking for new opportunities for customers who in the medium-term have the desire to source premium high quality beef and sheepmeat. The Red Meat Strategy described earlier and the Red Meat Strategy Committee are very much at the core of our international activities. The activities of the strategy, however, have had to be varied to reflect the continuing beef export ban which was not envisaged when the strategy was produced. Activities on this front can be summarised as follows:
Market research
4.5.11.A programme to build a "world map" of the red meat industry is ongoing. Countries that have been investigated range from North America, Australia, New Zealand, Middle and Far East to a number of European countries. A comprehensive report has been produced on each country investigated and, where appropriate, contacts are made and visits to Northern Ireland by potential customers arranged. Reports prepared are made available to all participants in the NI red meat industry.
International Trade Fairs
4.5.12.LMC seeks to co-ordinate and support red meat industry participation at major international food fairs. This consists primarily of SIAL and ANUGA, in alternating years. It is appropriate to acknowledge the work of Trade International and the support that they provide to the broader Northern Ireland food industry in participation at such events. In addition to the co-ordinating role played by LMC, we generally provide some enhancement of the basic stand provided by Trade International specifically to facilitate our sector. While the financial contribution is not insignificant from an LMC perspective, it is small in comparison to the total cost. At these events, LMC has also assisted financially and organised programmes for groups of producers participating in market awareness visits.
Development of Greenfields Brand
4.5.13.Prior to the beef export ban, Northern Ireland enjoyed the best cattle prices in the British Isles and amongst the top in Europe. The strength of the Greenfields brand in the Netherlands was a major contributor to this situation. After the ban, the major Dutch retailer involved with us lost access to beef from Northern Ireland and the brand lay dormant until 1999 when we agreed that the brand would be relaunched using beef from Northern Ireland and the Republic of Ireland. At the time of this decision, we were beginning to re-engage in export markets through the Export Certified Herds Scheme, but this subsequently was lost to Northern Ireland as a result of the identification and traceability problems revealed about mid-1999. On the positive front, the relaunch of the Greenfields brand has been a great success with Dutch customers, but unfortunately, other than some benefit to a Northern Ireland processor, no ongoing benefit to our industry has as yet materialised through the use of Northern Ireland cattle.
Brand Research
4.5.14.Following the very positive experience of the Greenfields brand in the Netherlands, there has been much debate about the potential for branding of Northern Ireland beef in other markets. The Assembly Agriculture Committee in particular, in its recent report on the beef industry, highlighted the importance of investigating branding within our particular sector. As a consequence, LMC are in the process of commissioning a study which we hope will give a definitive understanding of the merits and feasibility of branding of Northern Ireland red meat.
4.5.15.Within our marketing budget, we have allocated approximately £425,000 for the current financial year to provide the full range of international activities described above but we anticipate that this will be reduced to about £300,000 per annum thereafter.
Evaluation
4.5.16.A formal evaluation of activities supported by the Red Meat Strategy is required as part of the implementation process.
4.5.17.We have already identified a significant new business for lamb which has been generated in Switzerland where we estimate an annual turnover value of in excess of £1.5 million per year.
4.5.18.We can also highlight the value of the Greenfields brand in the Netherlands in January 2001 when Dutch cattle at farm gate level were on average worth £1.09/kg as against equivalent Republic of Ireland cattle for Greenfields at £1.50/kg.
4.6. In regard to your questions on assessment of the balance of benefits from LMC's promotional activity as between producers, processors and retailers and the merits of spreading the costs further along the chain, we would advise that no assessment of this has been carried out. We do not believe that it is possible to make a definitive determination in regard to such a balance.
4.7. There are, however, a number of observations which we would like to make:
- In dealing with major multiple retailers, it must be understood that Northern Ireland processors already make a significant contribution to promotional campaigns by their customers.
- These retailers themselves will argue that at point of sale, through promotion and advertising in their in-house magazines and through special offers, they already make by far the largest contribution towards promotion of beef and lamb.
4.8. We need to be aware, furthermore, that retailers in particular, but also to a significant degree processors, in a free market economy have the right to source their raw material as they choose. It can therefore be argued that the only beneficiary from LMC's promotional activity is in fact the producer. If Northern Ireland producers through our work are assisted in positioning their output in the best possible markets available, then the producers of Northern Ireland are indeed the major beneficiary. It is important to note, for example, that following the recent BSE crisis across European markets, Northern Ireland producer prices have held remarkably well and this, we believe, is solely attributable to the quality of markets which we are serving. Commodity beef has been freely available in the UK market at a producer equivalent price of well under £1.20/kg. Throughout this period, Northern Ireland beef has sustained an average producer price of almost £1.60/kg.
4.9. It is also interesting to note that the funding of our sister organisation in GB is mainly from two separate levy streams, one a general levy and the other a promotional levy. While we are not privy to the debate within that organisation, it is interesting to note that the promotional levy is entirely funded by producers, although the general levy is funded by both producers and processors.
4.10. In conclusion, we are convinced that the marketing and promotional work of LMC adds significant value to our red meat industry. The independent evaluations which are available on individual elements of our activities, although not for our activities as a whole, are supportive of this view. We are very pleased to note the support for LMC's work recently provided by Northern Ireland processors through the introduction voluntarily of a "levy" payment from that source, but we think that it is unlikely that retailers will willingly contribute even though they do inevitably benefit, in particular from the educational work carried out by organisations such as LMC. Throughout the world, where professional organisations equivalent to LMC exist, their primary funding comes from producers. In many instances secondary funding is provided by processors, but we are not aware of an example where core funding comes from retailers.
5. Appointments to LMC
5.1. Appointments to the Board of LMC are entirely the prerogative of the Minister having responsibility for Agriculture in Northern Ireland. It is our understanding that the level of consultation on appointments with either the Chief Executive or the Chairman of LMC has varied considerably over the years.
5.2. It is the view of the current Board that Commission members should have the following qualities:
- Skills, knowledge and experience of the industry at either producer, processor, distributor, retailer or consumer level, or professional expertise in a discipline that is relevant to the activities of LMC.
- Be of independent standing, capable of rising above sectoral interests and taking a view which is for the greater industry good.
- Be of independent means and not be substantially reliant on their Commission fees as a significant part of their income. Commission members should operate across all of their business interests to the highest ethical standards and be open and transparent in regard to any possible conflicts of interest which might arise.
- Be able to demonstrate a continuing enthusiasm, interest and support for the red meat industry, should be available and prepared to attend the vast majority of Commission meetings and should be prepared to fully engage and contribute their skills, knowledge and experience to the benefit of policy formulation at the LMC Board table.
5.3. In addition to the above, Commission members feel that it is critically important that the three major interest areas across the industry are represented on the Board:
- Producers
- Processors
- Retailers/consumers
5.4. In regard to the proposal contained within the draft Quinquennial Review document, to increase the Commission membership to nine, LMC is generally supportive of this proposal. It would help to ensure that all of the interest areas were covered, it would better facilitate the availability of a quorum for Commission meetings and it would, we believe, help to guarantee that a full intellectual rigour was applied to debates on policy issues in regard to LMC activities. We would highlight, however, the importance of reaching a clear understanding as to the appropriate mix of representation. It is noted that considerable damage to the standing of LMC with the farming community was done when a previous Minister, ignoring the advice of Department officials, made appointments to LMC which failed to recognise the importance of having skills, knowledge and experience at producer level at our Board table. The current Board, we believe, demonstrates a more appropriate mix.
annex d2
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
Additional Questions from the committee to:
livestock and meat commission
3 May 2001
I would like to thank you and your colleagues on behalf of the Committee, for appearing before them on Friday 27 April as part of their Inquiry into certain aspects of the Livestock and Meat Commission. The session was very useful and will help the Committee considerably when they come to consider their final report.
At the end of the meeting the Chairperson informed you that due to time restraints the Committee was unable to put to you and your colleagues all the questions that they had hoped. The Chairperson suggested that these questions should be sent to you for a reply. Please see below a list of those questions, some of which were touched on at the meeting, and contain references to your written submission to the Inquiry.
LMC Funding
1. You have indicated in Paragraph 2.2 of your submission that the cash surpluses of the LMC will soon be depleted and that it will be necessary to determine whether the LMC's activities will be significantly curtailed or if resources will be available from the industry.
a. Although at the meeting with the Committee you mentioned cutting back on promotion and marketing, could you say exactly what activities might be curtailed; whether there are any other areas or activities that might be considered; and how these would affect the farmer?
b. From where might you expect increased resources, given that farmers are currently facing the total loss of their livelihoods, and consequently agriculture is facing, potentially, a long-term recovery?
2. On page 5 Table 1, the projected annual income of the LMC, ignoring non-core activities, is outlined. What effect would the inclusion of non-core activities have on these figures?
3. For how long do you believe the LMC can continue to operate based on ongoing activities?
4. In paragraph 2.5 you refer to a 'voluntary levy' contributed to by all the major processors in N. Ireland. Why would processors wish to make a voluntary contribution to the LMC? In your opinion what return do processors get from making such a contribution?
5. It is easy to make a voluntary contribution if you know that it will be returned to you in the form of increased charges to the primary producer. Do you think that the cost of such voluntary contributions is being passed down to the farmer?
6. The Department does not provide you with core funding. Given the current situation that many farmers currently face and their inability to contribute to any additional levies to help fund the LMC's activities, wouldn't the provision of core funding even in the short to medium term help alleviate the financial pressure on them and at the same time allow the LMC to continue with its activities? Have you considered making representations to the Minister in respect of the financial situation faced by farmers and your organisation?
7. You refer to the 'distribution of margin throughout the chain' depending on the competitive forces operating, and that in the absence of specific legislation to ensure a fair distribution of margin you must work to ensure 'as far as we can' a competitive market for livestock.
a. To what extent do you think you are being successful in maintaining a competitive market and hence a fair distribution of margin? .
b. Where in your procedures or strategy do you think you could make improvements, given the appropriate resources, in order to ensure a competitive market?
8. You have indicated that income generated through classification services is directed towards the costs of running the N. Ireland Farm Quality Assurance Scheme for Beef and Lamb and not to support general LMC activities. How will this scheme continue to be funded if, as you say, the surpluses will be exhausted at the end of the financial year?
9. It is unreasonable to expect any organisation to continue operating if it is generating an annual deficit and you yourself have noted in paragraph 2.13 that it is necessary to set expectations of the LMC at a level commensurate with the resources available. Could you describe how a future LMC would operate with no further increase in funding?
10. In the quinquennial review of the LMC there is a suggestion that an annual fee should be considered for continued membership of the Farm Quality Assurance Scheme in order to address the operating deficit i.e. £327,000, incurred by the combined classification and FQAS activities in 1998/99. Would you support this approach to maintain the scheme? Were any alternative funding sources considered?
11. The 5 year review appears to be recommending that you look at generating income from dropped calves and notes that you intend to collect levy at live markets to secure funding from export animals. The UFU does not support a levy on dropped calves and has dismissed as unworkable the collection of a levy from live animals. Can you explain further the LMC's current thinking on these proposals and explain the difficulties that would need to be overcome.
Classification Services
1. You indicate on page 6, paragraph 3.1 that there is no regulatory requirement for classification of sheep carcases at this time. However, there is:
Council Regulation (EEC) No. 2137/92 of 23rd July 1992
concerning the Community scale for the classification of carcasses of ovine animals and determining the Community standard quality of fresh or chilled sheep carcasses and extending Regulation (EE) No. 338/91
that is currently in force. DARD has also confirmed in their submission that there is a carcase classification of sheep and that it is based on meat colour and fat class. Could you explain why you state that there is no such classification?
2. It is indicated in paragraph 3.2 of the submission that there is an avenue for appeal to a senior officer to review a grade. Is there a similar appeals process for the meat processor if it is felt that the grade is too generous in favour of the producer? If so what proportion of these appeals are upheld?
3. The basis of any appeals process is that it should be independent. To what extent do you feel that the independence of the appeals process is compromised by the fact that it is a Senior Officer of the LMC to whom a producer must appeal? How long does the appeals process take e.g. is a Senior Officer always on site to conduct an appeal and thereby facilitate the efficient processing of animals?
4. You refer in paragraphs 3.4 and 3.5 that bias has been recognised in favour of the producer. How have you attempted to convey this information to farmers and their representatives in order to address the perception among producers that your classifications are biased towards processors?
5. Any classification method must involve assessing an animal in relation to a set standard otherwise the subjectivity of the process is exacerbated. Isn't it true to say that if the quality of animals on any particular day is higher than usual then an animal that might get a high grade on an 'average' day would get a lower grade if assessed in relation to the high quality animals? Similarly, an 'average' animal might get a higher grade than expected if poor quality animals have been graded before it. How do you ensure that an animal receives a fair grade no matter what the quality of the animals that have preceded it?
Promotional Activities
Within N. Ireland
1. In paragraph 4.4 you state that an outcome from a promotional project may be too long-term to be immediately assessed. How and when, will the expenditure programme for the Red Meat Strategy initiated in 1999 be assessed?
2. The draft evaluation of the N. Ireland promotional programme estimates an increase in beef consumption over the contract period of 6.5%. Does this meet your targets for the programme? Do you anticipate that there will a further application for funding submitted to the European Union in order that this marketing and promotional activity can continue?
3. If European funding is no longer available for such programmes what contingency plans do you have to continue with the marketing and promotional activities?
4. Your submission doubted whether retailers would willingly contribute to promotional costs even though they invariably benefit. In terms of a 'levy' this is undoubtedly correct. However, in giving evidence to our debt inquiry, retailers did offer to participate in new bodies or schemes and to offer advice using their knowledge of the market. Would you agree that there is potential which could, indeed should, be tapped?
Great Britain
5. In paragraph 4.5.7 you indicate that it is important to brand our product as 'British Meat'. Could you briefly outline the advantages/disadvantages of having our meat products branded as a product of N. Ireland e.g. 'N. Ireland Beef' as opposed to 'British Beef', considering, for example, that N. Ireland has a much lower incidence of BSE than Gt. Britain?
Would it not be more beneficial to the livestock industry in N. Ireland to have a N. Ireland brand to market our products?
International
6. To what extent have the activities of the Red Meat Strategy been reassessed in light of the beef export ban and the current ban on the export of animal products due to the foot and mouth situation?
7. The Greenfields brand in the Netherlands is referred to as being a major contributor to the high cattle prices in N. Ireland prior to the export ban. Do you expect in the long term that N. Ireland cattle producers will benefit from the relaunch of the Greenfields brand?
8. When can we expect the results of your commissioned study into the merits and feasibility of branding of N. Ireland red meat?
9. You have identified that there should be an evaluation of the activities supported by the Red Meat Strategy (paragraph 4.5.16). When will this happen and do you expect an independent source to undertake the work?
Appointments to LMC
1. How do the qualities required of Commission members that you outline in your submission vary with the criteria used by the Department?
2. The quinquennial review has indicated that there have been 'occasional difficulties' in achieving a quorum (p.39). Considering that members presumably knew the requirements the Commission would have on their time before accepting the position and given that meetings take place only once a month, why have there been difficulties in achieving a quorum? To what extent is the recommendation to expand the Commission to nine members a move to address the problem of not achieving a quorum?
I would be grateful if you could provide a response as soon as possible, preferably within the next two weeks.
annex d3
committee for agriculture and rural development
inquiry into the livestock and meat commission
response to questions from:
Livestock and meat commission
17 May 2001
Further to our previous submission on the above subject, to our appearance before the Committee on Friday 27 April and specifically to your further communication of 3 May, I am pleased to provide further responses to Committee questions as follows:
LMC Funding
1a. Commission members have not yet given detailed consideration to the areas of LMC activity that might be curtailed if additional resources are not made available. For clarification, we would advise that the Commission has agreed a budget for the current year which broadly sustains all of the activities at a similar level to the year just ended. On the presumption that this budget is adhered to, we will run down our cash balances to the minimum level which could reasonably be contemplated by the year end (31 March 2002). It follows, therefore, that if additional resources are not forthcoming, a curtailment of our activities under the headings
- Information Services
- Agriculture
- Marketing and Promotion
will have to be implemented. As our Marketing and Promotion expenditure is significantly greater than Information Services and Agriculture expenditure combined, the curtailment will inevitably have to fall most heavily on this area.
Dealing with each of the possible areas for curtailment of activity in turn:
Information Services
Information Services is the functional Department responsible for collecting, analysing and distributing data on markets for beef and sheepmeat. We also provide information on all legislative and other developments in Northern Ireland, Republic of Ireland, UK and Europe which might have a relevance to the Northern Ireland beef and sheepmeat industries. The main interface of this activity with farmers is:
- Publication of "The Bulletin"
- Provision of the Answerphone Service
- Media interviews
- Calls to our office
Of these, the greatest cost by a considerable margin is "The Bulletin" publication. We have noted that requests for "The Bulletin" have increased considerably over the last couple of years and its circulation has grown from circa 7,500 per week in 1999 to over 11,000 per week in 2000.
Agriculture
Our activities within the Agriculture Department relate primarily to providing services to producers which will enable them to produce to farm gate the highest quality of beef animal and sheep appropriate to the needs of the next customer in the food chain. Thus we attempt to develop our understanding of the market needs from our beef and sheepmeat industry, develop these needs into practical application at farm level and seek to communicate to producers the types of livestock and production systems which they should be aiming to produce and practise. A major part of this activity is the development of quality assurance standards, the promotion of the Northern Ireland Farm Quality Assurance Scheme to customers, and maintaining the standing of this scheme as a competitive tool in the marketing of Northern Ireland beef and sheepmeat as against products and quality schemes from other regions. Within this Department, we also seek to support farm group initiatives. Our help tends to be in the area of developing production protocols that will assist with marketing finished livestock and in helping to leverage sources of funding which become available from time to time for such groups.
Future budgeted expenditure in this area is relatively small and is limited to salaries/office overheads and some publications. Part of this expenditure will continue to be supported by Farm Quality Assurance income under the formula recently agreed between producers and processors.
Marketing and Promotion
From our earlier correspondence, you will have noted that our Marketing and Promotion budget is split into three roughly equal parts:
- Northern Ireland
- GB
- Export
Northern Ireland
Our focus in Northern Ireland is primarily to educate the local population in regard to the benefits of red meat. The nutrition and other health benefits are at the focus of this work but we seek also to promote the convenience aspect of our products and their fit with modern-day lifestyles. This work is for the most part long-term in its nature. It is not readily possible to measure the return from this work other than to highlight the relatively high red meat consumption of the Northern Ireland population and, through our work with focus groups etc., to cite the very high level of enthusiasm for the consumption of beef in particular within Northern Ireland. The impact on farmers of ceasing this work is likely to be modest in the short-term, but if we do not seek to sustain current eating habits and to build similar habits in the next generation, the slippage in consumption levels is likely to be extremely difficult, if not impossible, to reverse.
GB
As highlighted in our previous correspondence, the GB market is currently critical for Northern Ireland. The availability of the GB multiple retailer market is the one attribute that sustains Northern Ireland producer prices substantially above commodity prices. Our entering into an agreement with MLC so that we could benefit from the circa £12.8 million annual promotional budget for beef and lamb of that organisation and enjoy the use of the "British Beef" brand was concurrent with a very substantial development of market share by Northern Ireland processors in this segment, subsequent to the BSE-related export ban. If, as a consequence of not renewing our agreement, Northern Ireland producers lost this premium market segment, we have estimated that Northern Ireland producers could lose of the order of 10p/kg from finished cattle prices. This is based on the gap between Republic of Ireland and Northern Ireland prices. The likelihood is that we would be in a worse position than the Republic of Ireland given their access to international markets and possibility of live cattle exports. The loss in regard to sheepmeat, however, is unlikely to be of such significance.
Export
Our investment in export marketing could be deemed to have no short-term impact on beef producers, although we do work actively to support the marketing of sheepmeat. Our consideration in withdrawing from this area, however, will be the need for our industry, including producers, to be able to operate in a much larger marketplace than the UK in the longer term. The process of building and sustaining relationships with past and potential future customers is important, particularly with premium customers, since business with such customers is not normally part of daily or weekly trade but is based on long-term confidence and long-term relationships.
Committee members will note from the above the very considerable difficulty which the Commission will have in determining where the curtailment of expenditure should be applied.
1b. LMC has the expectation that increased resources should be made available from the following:
(i) Giving statutory effect to the currently voluntary processor contribution so that its application becomes universal for every animal slaughtered within the Province.
(ii) The introduction of legislative measures to ensure collection of all current levies due. While it is currently part of the legislation on levies that livestock leaving Northern Ireland live are eligible to pay, LMC has no practical or economic means of collecting such levies and therefore these have substantially remained unpaid. The main loss is in regard to sheep and we anticipate that legislation requiring the collection of this at livestock marts is the only viable solution.
(iii) We do anticipate that producers will make an increased contribution to LMC. While we appreciate the difficulties that many producers are experiencing in achieving profitability, producers' representative bodies must decide whether they believe that the activities of LMC can contribute to maximising their return from the marketplace.
- Do producers benefit from a sustained high level of red meat consumption in Northern Ireland?
- Do producers benefit from access to premium multiple retailers in GB?
- Will producers benefit in the future from access to premium markets across Europe and beyond?
While it may be difficult for individual producers to draw a positive conclusion to each of these questions, we believe it is incumbent upon those involved in leadership of the farming community, those involved in Government and those who are opinion-formers across our industry to think seriously on these matters and to discuss them comprehensively with LMC, with our processors and with our customers and consumers.
If at the end of such a process the conclusion is negative, then it will be an obligation on LMC to operate within whatever level of resource is forthcoming.
While we believe that the above comments adequately respond to your specific question, we believe that it behoves us to comment further on your suggestion that our red meat sector is potentially facing "a long-term recovery". We would highlight to the Committee that under Agenda 2000, it should be expected that yet a further decline in beef market prices in particular is likely to occur. Since the commencement of the Agenda 2000 reforms and the increase in subsidies, we have not seen the expected decline in market returns. It would be over-optimistic to assume that this trend will continue as the CAP reforms proceed.
Committee members should note also the Department of Agriculture and Rural Development statistics in regard to the cost base of Northern Ireland beef production, which highlight the massive difference in production costs between our most efficient producers and our least efficient producers. These figures highlight that the best producers in Northern Ireland in the current marketplace can produce beef profitably. As we have stated in previous submissions to the Committee, while the level of profits may not represent an adequate return for the investment in both labour and assets, a positive return from both beef and sheepmeat production over recent years and up to the present-day has remained possible.
We would further highlight to the Committee that Northern Ireland red meat prices remain very substantially above world prices and if we cannot sustain a presence in premium markets for our output, then the prospects for profitability of even our best producers will come into serious question.
2. The inclusion of non-core activities add to both the income (Table 1) and the expenditure (Table 2) tables of our earlier letter as follows:
(i) Classification circa £500,000 (depending on numbers).
(ii) Intervention Board circa £1,000,000 (depending on levels of activity).
3. As stated above, our budget for the current year has been prepared on a basis broadly of continuing with all ongoing activities. At the end of the current year, our liquid assets will be equivalent to roughly two months of expenditure.
4. This question should be more correctly addressed to Northern Ireland processors. It is our opinion, however, that the following factors have influenced processors in reaching their decision:
- All of the major processors contributing have from time to time sought and gained assistance from LMC in dealing with particular markets or particular customers.
- Processors have recognised the need for equivalence within Northern Ireland to the contributions made to MLC in GB by their counterparts there.
- Processors agreed under Red Meat Strategy (RMS) discussions to make arrangements which would ensure that both producers and processors were jointly funding the industry portion of RMS expenditure.
- Processors recognised the work of LMC in undertaking generic-level promotion and marketing work in Northern Ireland, GB and export markets.
5. The capacity of processors to pass on their costs to farmers is, as we have stated earlier, solely dependent on market circumstances. During most of the period since the introduction of the voluntary levy, we have noted that there has in fact been quite a shortage of livestock, cattle in particular. In these circumstances we have noted a general closing of the gap between Northern Ireland producer prices and GB producer prices. This gap has from time to time been less than our estimate of the additional costs to a Northern Ireland processor of serving the GB market as against a GB-based counterpart. As there has not been a reduction in producer price against sales value (in fact the opposite) which might have serviced the processor voluntary levy, we are confident that the cost of the voluntary contributions has not been passed down to the farmer.
6. Consideration has not been given to an approach to Government for core funding. We do note and agree with the Committee's suggestion that such funding, depending on its quantum, would indeed be helpful in shielding farmers from requests for additional contributions. If it were to transpire that such a recommendation was forthcoming from the Committee's report, we would indeed be very willing to pursue such a course. We would caution, however, that given the priorities of Northern Ireland Government, and given the fact the our sister organisation in GB does not receive significant core funding from Government, it may be imprudent to assume a positive outcome from such representations.
7. In the period up until the BSE-related export ban, it is LMC's view that the distribution of margin throughout the chain was perhaps favouring the producer as against the processor. Competitive forces were delivering to Northern Ireland producers some of the highest prices for cattle across Europe. Prices for most of 1995 were the best in the British Isles. Following the BSE export ban, the industry was highly dependent on intervention, but as intervention purchasing was gradually withdrawn due to a combination of improving prices and currency movements, we came through, towards the end of 1998, a period of considerable imbalance between supply and demand and the differential between Northern Ireland livestock prices and GB was sustained for considerable periods at levels of the order of £70 per head for average steers. On the positive side, this price differential did facilitate a major growth in GB multiple retailer business which, once established, has been broadly sustained as the differential has returned to significantly lower levels.
7a. At this stage, it is our view that we have not yet been as successful as we would wish in achieving a competitive market and the sort of distribution of margin which we feel would be appropriate. On the one hand, we note the considerable differential in price in favour of Northern Ireland farmers over Republic of Ireland farmers. On the other hand, we feel that the differential between Northern Ireland farmer prices and England & Wales farmer prices should approximate to the incremental transportation cost associated with the boat journey to GB mainland. We would estimate this to be 3-4p/kg (carcase deadweight equivalent price). Realistically, to move beyond this sort of benefit to producers will require the opening up of export markets. This will not be a guarantee of better margin as factors such as exchange rate and a depressed mainland European market continue to make GB the most lucrative market in Europe at the moment for beef. However, it is a fluctuating business and it is essential from a Northern Ireland perspective that we have access to all potential markets. The law of supply and demand will determine which is best.
7b. At a strategic level, the major deficiency which our industry has is the considerable volume of cattle which do not meet E, U and R conformation grades, which tend to be the core specification of premium retailers. The high preponderance of dairy genetics, the low levels of returns, etc. all conspire to the presentation of too low a percentage of our production falling into commodity product specifications. We strongly believe that the maximum possible resource from Government, ourselves and the industry should be directed in an effort to increase the percentage of our beef falling into E, U and R grades. The pay-off of this for farmers and for the entire industry will, in the long term, be quite massive. Processors tell us time and again that poor grading carcases presented to them by farmers can only be offered to the commodity market at very low prices relative to the premium retailer level, and the cost of "disposing" of poor quality carcases holds back any further premia for high quality cattle.
8. The Farm Quality Assurance Scheme Standing Committee consists of Ulster Farmers' Union, Northern Ireland Agricultural Producers' Association, Northern Ireland Meat Exporters' Association and LMC, together with DARD representation. The industry side of this Committee has been debating for most of the last year new and sustainable funding arrangements for the Northern Ireland Farm Quality Assurance Scheme. We are pleased to report to the Committee that industry agreement has been reached whereby the Farm Quality Assurance Scheme is being upgraded to achieve EN45011 accreditation and a more sustainable funding arrangement is being put in place. The agreement reached is that producers will be asked to subscribe £35 per annum as a membership fee and processors will contribute a membership fee equivalent to £1 per animal for every animal slaughtered on their premises. This will yield approximately equal funding from the production and processing sectors. Our estimates indicate that this will generate sufficient funding to fully meet the costs of administration, certification and inspection as well as providing some resources for the proper marketing of the scheme, including the generation of appropriate literature and support documentation for farmers. There will be an undertaking by processor members of the scheme that they will appropriately differentiate prices paid to Farm Quality Assured producers presenting animals for slaughter as against non-FQAS producers to encourage scheme membership. The implementation of this agreement has been thwarted through the curtailment of meetings because of the Foot & Mouth Disease crisis, but we are on the threshold of formally communicating these arrangements throughout the industry, including the approximately 11,000 producer members.
9. It is for the Commission members to make the final determination on policy matters but the writer would anticipate that the most likely out-turn will be the withdrawal of LMC from Northern Ireland marketing and promotion activities, the discontinuation of contributions to MLC for GB promotion and the curtailment of export marketing activity to attendance at international exhibitions and possible hosting of international visitors to establish the credentials of our industry.
10. Our estimate for the annual running cost of the Northern Ireland Farm Quality Assurance Scheme for Beef and Lamb, and operating that scheme to EN45011 standards with the current level of membership, is £750,000 per annum. The arrangements described at 8. above will, we believe, provide sufficient income and, since this is the consensus view across the industry, LMC is fully supportive of the arrangements.
Early in the discussions, the alternative of fully funding by farmers, necessitating an annual membership fee of the order of £75, was considered. In Scotland, England and Wales, where separate beef and lamb quality schemes already exist, membership costs are fully funded by producers at this level. However, this was rejected and the principle of equal joint funding by producers and processors was agreed.
11. The approach of generating levy by imposing a levy on every bovine and ovine animal born in Northern Ireland has indeed been considered. The rationale for pursuing this was based upon the need to spread the levy burden across the sectors to include participants other than livestock finishers. The benefits of LMC activities, it is argued, accrue to all producers throughout the chain, including dairy farmers producing calves which are reared for beef but not usually on their farm of birth, and we had concluded that it would be a laudable objective to spread wider the burden of funding LMC's beef and lamb activities. The implementation of this suggestion, however, is exceedingly difficult, and it may be cumbersome to collect such levies until the animal is ultimately presented for slaughter when all accrued dues might be collected.
Of more recent times, we have been considering that a better alternative for spreading the levy burden more widely would be to seek legislation that would change our levy structures towards a "transaction levy" requiring a payment on each occasion when livestock changes ownership, whether at a slaughter plant or at an auction mart. This is the system which is operated in Australia and, from our understanding, it works quite successfully.
We do very much appreciate that the Ulster Farmers' Union view on these matters is likely to be critically important to ourselves and to Government as we seek agreement on the best way forward.
Classification Services
We noted at our appearance before the Committee the concern expressed by Committee members at the extent of the 20% latitude allowed in the implementation of the classification regulation. We were surprised to note this concern in the Committee and feel it appropriate to expand a little further, since Committee members have not taken up our invitation to view classification in practice.
Classification is not a precise science; it is based on a judgement. As Mr Mark highlighted in his evidence to the Committee, the extent of the latitude recognises that the correct classification is an opinion of experts. The European Classification Control Committee periodically visits Northern Ireland to review our classifications. The Committee, consisting of the order of twelve members who are deemed experts, from a range of European Member States and from the Commission, is the ultimate authority on the interpretation of the standard. This Committee visits plants in Northern Ireland and each of the experts carries out his/her own personal classification of a range of cold carcases in a chill. The Committee then reviews the expert opinions which, we must highlight, do vary from one another. The classification grade which is deemed correct is the consensus grade agreed by the Committee after discussion of their individual grades. The Control Committee is usually joined also by both a Member State expert and, in the case of Northern Ireland, a local representation from DARD. LMC would normally have only observer status.
It is against this background that a 20% deviation from the consensus is permitted by individual Officers. The Classification Control Committee would, however, expect the deviation to be a deviation on both sides of the norm and not to be skewed in any particular direction either favouring or otherwise the producer interest. LMC Classification Officers can maintain their classification licences even if they disagree with up to 20% of carcase grades against the competent authority (DARD) classification - the system recognises that the competent authority itself can be in error in regard to a percentage of carcases.
LMC has evolved with the industry an understanding that on the boundary between two grades where the judgement is difficult, LMC Officers give the benefit of the doubt to the producer, and this benefit of the doubt results overall in the competent authority (DARD) deeming LMC classifications to favour producers by a grade increment in approximately 10% of carcases.
It may be of benefit to the Committee if we yet again repeat our invitation to Committee members, either collectively or individually, to visit with us one or more meat plants to view the classification process and to discuss with our Senior Officers any concerns which might remain. It is perhaps appropriate also for us to apologise for the absence of a contribution to the discussions at our evidence session of our Chief Field Officer. Our Chief Field Officer has been absent on medical leave now for a number of months and his condition has not permitted him to make a contribution to the current debate.
Moving on to your further questions:
1. By way of further clarification of our earlier letter, we intended to convey that regulations do not require the classification of sheep carcases offered for trade, but where classification is operated in sheep slaughter plants, the regulation cited in your letter does indeed set out the standard. The sheep classification service in Northern Ireland has therefore evolved from the needs of local processors and producers rather than from the needs to classify under regulation. The service is helpful to local processors both in determining value in sheep carcases but also more importantly, in many instances, in meeting the requirements of their customers where particular grades form part of their purchasing specification. Committee members will be aware that sheep carcase classification is also extremely useful to producers and to producer groups. We are continually asked to report to both individual producers and to producer groups details to allow improved selection of breeding stock and to facilitate selection of best size, weight and finish of animals for the particular market.
2. Technically, the appeals process is indeed available to meat processors but our Senior Staff can recollect only a couple of instances of such appeals over the last few years and there is recollection certainly of one incident where that appeal was indeed upheld by the Senior Officer.
3. It might indeed be argued that because the appeal is carried out by LMC, it is not fully independent. We would argue, however, that the Senior Officer is tasked with determining the correct grade only on the basis of the evidence of the carcase and not on the basis of support for a subordinate member of staff. The appeals process does add significantly to the cost of our service provision and any alternative appeals process to another party while saving LMC costs would inevitably have to be separately funded.
A Senior Officer is not always on site to conduct the appeal, but this is not in any way prejudicial since the definitive classification should always be performed on a cold carcase and is more correctly conducted after overnight chilling. The hot carcase classification carried out on the slaughter line at the weigh-point in the slaughtering plant is designed to predict the final classification and experience determines that this can be satisfactorily done. We would highlight, for example, that the European Classification Control Committee always make their determination on cold carcases.
4. In reporting to the Committee that we give benefit of doubt to the producer, we would highlight to you that such benefit could not be officially sanctioned and the matter of publicity is a sensitive issue. We have, however, fully conveyed the facts to the farmers' representative bodies at the various meetings which we conduct each year with them. We have also highlighted this matter in our annual producer meetings. The difficulty is, therefore, to disseminate such information in a manner which is, on the one hand, not prejudicial to LMC or the competent authority (DARD) with the European Commission and, on the other hand, allows Northern Ireland farmers to understand that they do indeed get benefit. Striking the balance is very difficult.
5. In publishing the regulations, the European Commission has provided definitions of each class and a pictorial guide to help practitioners in the provision of a classification service. This guide is provided by LMC to all of its Classification Officers whilst they are in training and a copy is enclosed herewith. Furthermore, Senior Staff of LMC moving across a variety of abattoirs will seek to take out any human judgement issues which might arise. Thirdly, the competent authority (DARD) officers act as a further leavening force in overseeing the implementation of the standard. Finally, the circumstances which you describe, in the view of our Senior Staff, are not what we find in practice. The average does not change significantly from day to day and only moves very gradually upwards or downwards as quality changes with season, feeding or as a consequence of genetic developments, etc. We believe therefore that within the boundaries of human judgement, every animal receives a fair grade from the service which we provide. On average, we are absolutely confident that Northern Ireland producers benefit from a professional service offered to the industry by LMC.
Promotional Activities
Within N. Ireland
1. It will be for the independent agency appointed to decide how best the assessment is carried out. Ultimately, any assessment will consider the strategy, the programme of activity carried out and if the programme of activity achieved the objectives of the strategy. Such assessments are normally completed within six months of the programme being completed.
2. LMC set a target of 2% growth in consumption of beef during the period of the current Strategic Plan, using 1998 National Food Survey data as a base.
A further application for funding has been made to the European Union; we have been advised that a modified programme of support will be forthcoming later this year.
3. In the meantime, LMC have continued the programme of activities funded entirely from LMC resources, and it would be the intention of LMC to continue this work so long as resources permit.
4. LMC too have found retailers "willing to participate in . schemes, and offer advice using their knowledge of the market." We would cite Tesco's collaboration with LMC in the promotion of Northern Ireland Aberdeen Angus beef in January as being a particularly good example.
Great Britain
5. The strength of the British Beef brand in GB is derived from the fact that:
(a) It has been promoted extensively, with MLC investing in the order of £8m per annum in consumer marketing the brand for several years. It doesn't make sense for us to try and compete with this given our resources and the fact that we currently receive the benefit of being able to sell under the British Beef label.
(b) Part of the strength of this brand is derived from the anxiety of the GB multiples to be seen by British farmers as being supportive of British agriculture.
Whilst Northern Ireland has many positive attributes in terms of production, we must be extremely cautious in highlighting superior disease status as this can be a hostage to fortune. Past experience in Europe has shown where one particular country tried to reassure consumers by being negative about non-national product, they only succeeded in undermining consumer confidence in all beef, their own included.
Of particular relevance also is the fact that our best customers - the GB multiple retailers - have no interest in confining themselves to sourcing beef or lamb in one region only. Northern Ireland could not supply the full beef requirements of even one of the top four GB retailers.
As we have touched upon before with the Committee, the cost of developing and maintaining a Northern Ireland consumer brand in a market of the scale of GB has been estimated at £3-£4 million per annum. It is difficult to envisage Northern Ireland producers funding such a development. The branding issue across a selection of markets will be addressed more fully in the research project currently being commissioned by LMC and the Red Meat Strategy Committee.
We would not wish to prejudice the outcome of a commissioned report, but we would draw your attention to a consumer survey, conducted by the General Consumer Council for Northern Ireland, of the factors that are important to the consumer when shopping. Even to our own Northern Ireland shoppers, the origin of the product from Northern Ireland did not rate highly (graph enclosed).
6. The Red Meat Strategy Steering Committee is scheduled to meet again on 17 May, when the industry will be able to decide if changes are necessary as a consequence of the Foot & Mouth Disease situation. As indicated in our earlier submission, some changes have already been made due to the continuing BSE-related ban.
As much of the activity is of a long-term nature, it can continue. The beef export ban has been around since the strategy was produced; in the meantime we have sought to position Northern Ireland in the best possible way to "hit the ground running" when the opportunity arises.
7. Yes, otherwise we would no longer invest in the brand.
8. October 2001.
9. The evaluation will be undertaken by an appropriate independent consultancy and will commence when the funding allocated by Government has been spent.
Appointments to LMC
1. While the qualities which we have outlined in our submission are the qualities which we in the Commission have defined, we believe that the approach by the Department is in reasonable accord with our views.
2. The "occasional difficulties" in achieving a quorum would not be deemed to be sufficient in itself to require expansion of the Commission. It is important for Committee members to understand that Commission members function as "Non-Executive Directors". They have therefore, by implication, other business interests which constitute their main source of income. It is not unreasonable, therefore, that from time to time every Commission member will meet circumstances where priority has to be given to these other interests and the member will have to absent him/herself from a meeting. Very occasionally, this can occur with several Commission members simultaneously. There has only been one occasion in the last seventeen years when a quorum was not available, although occasionally the start of a meeting has been delayed due to late arrival of one or more Commission members.
We apologise for the length of this further response, but we have again, given the importance of these matters, sought to give as full a response as possible. We do hope that these further contributions will be helpful to the Committee in its consideration of a final report.
DAVID RUTLEDGE
Chief Executive
Encs
annex e1
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
WRITTEN SUBMISSION BY:
Northern Ireland meat Exporters' association
16 April 2001
In response to Dr Paisley's letter of 13th March 2001, NIMEA offers the following information regarding your committee's inquiry into the Livestock & Meat Commission.
By way of introduction the Northern Ireland Meat Exporters' Association represents some 16 cattle and sheep EU Export approved slaughtering and processing companies in Northern Ireland. It should be noted that not all slaughterers are members of the Association.
I am responding under the four main headings as set out in the letter from your Chairman.
Yours sincerely,
T.C. MATHERS
Chief Executive NIMEA
1. LMC FUNDING
Point 1 in the terms of reference attached to Dr Paisley's letter of 13th March 2001, mentions core funding of LMC by the Department of Agriculture. This is news to us, for as far as NIMEA is aware LMC do not receive any funding from Government. However having raised the matter in your terms of reference NIMEA would fully support Government funding of LMC equivalent to the support from the ROI Government to Bord Bia. As far as MLC in GB is concerned we understand that Government pays the MLC Commissioners' fees and expenses something which does not happen in NI as far as LMC is concerned. NIMEA would therefore support and welcome any added Government funding to equip LMC to tackle promotion of NI products in similar terms to our competitors. We also believe that LMC needs greater funding and powers as part of a centralised food agency. LMC should have the overarching control of all promotions within the meat and lamb sectors, including areas that are currently carried out by DARD, LEDU and IDB. It is our observation that there are similar bodies established and supported by Governments in every beef producing country in the world. It also has to be stated categorically that the main beneficiary of beef and lamb promotion is the primary producer.
NIMEA expresses concern that the result of the recent Government Quintennial review of LMC has not been published and that this further inquiry is a duplication of what has already been done and thus a double expense and not good use of the public purse.
When it is considered that over 75% of our beef and lamb production have to be marketed outside NI it is of the utmost importance that a promotion agency such as LMC exists. There is a similar body in the ROI in the form of Bord Bia and a similar body in GB in the form of MLC. When we look at the rates of promotional levy funding that both of our competitors get, Bord Bia in ROI [£Ir 1.50+ £1.00 for cattle and £0.20 for sheep] and MLC in GB [£4.35 for cattle and £0.63 for sheep], we are by far the poor relation. Yet we are equally if not more so dependent on product promotion than either of them. [See point 5 below for details of levies] Our levy funding must come more into line with GB at least and should be at the level of around £3 rather than £0.80. The movement of half a million sheep to ROI evading the LMC levy is also a point that needs addressed so that LMC is properly funded to fulfil its full task. The LMC should remain independent of Government subsidy but should be able to attract and utilise the amount of Government money currently spent by other Government agencies meddling in the area of meat promotion.
LMC have demonstrated to the industry that their income comes from three main sources, [a] a levy paid by producers and [b] by agency duties carried out by LMC on behalf of other UK agencies and [c] projects undertaken by LMC on behalf of specific clients.
It is our belief that LMC is seriously under-funded at the moment from the levies collected from SOME farmers. Farmers who choose to operate through livestock markets do not contribute to LMC operations yet demand attention from the LMC. Farmers currently market around 500,000 lambs per year through livestock markets which are subsequently "exported" to the ROI with the evasion of LMC levies when leaving NI. Thus it is not accurate to say that all beef and sheep farmers are contributing to LMC. It is our opinion that as in Australia, the Government should introduce as part of the Statutory levy, a "Transaction Levy". Every time livestock, cattle and sheep, are sold through a market a levy per head should be paid to LMC. This levy could be at a lower rate than the final slaughter levy and would mean that all producers and the entire production chain would be contributing to the promotion of the product in which they were involved. Due to the excellent promotion work being done for the product in our main export markets the processors agreed last year to contribute a voluntary levy to LMC of £1 for each animal slaughtered and £0.10 for each sheep slaughtered. This was agreed to as voluntary as the devolved administration was not in place for the necessary legislation to be introduced to implement a processor contribution in line with GB and ROI.
Deductions made from producers in respect of LMC levies are clearly indicated on the payment documents and the processor contribution would be clearly paid from company accounts and therefore be clearly demonstrated that producers were not funding the processor contribution.
If the NI beef and sheep industry is to give the highest returns to producers it is absolutely essential that there is a promotion agency doing the generic marketing function. The current rate of levy contribution to such a body only demonstrates that producers themselves do not have the desire to promote their own product.
The result is very simple, no promotion = lowest returns. Whether LMC is needed is not the question. The question is how much do we want to promote NI beef and lamb. The returns will be commensurate with that investment.
In our submission to DARD some time ago NIMEA included points on post devolution changes that we believe are required in respect of LMC support and these are re-sated below.
(a) LMC should have a much stronger and direct access to impacting Government policy in respect of the beef and sheep industry, in both NI and the UK.
(b) LMC should have direct accessibility to NI Ministers without necessarily having to go through DARD channels.
(c) In view of the need for more direct links with Brussels, LMC should have a definite link into the EU policy-making structures in MAFF.
(d) LMC should also have direct links into any cross border agricultural body, which may be established as part of the new Assembly arrangements.
(e) The statutory legislation should be changed to allow LMC to operate in the ROI under particular circumstances where there is a marketing need for their services on both sides of the border, particularly in border counties.
2. CLASSIFICATION [beef and sheep]
Classification by its very nature is a controversial issue and no doubt LMC at times would rather not be involved and indeed as an independent body may well be better without the task in the interests of developing transparency in the supply chain. To fully appreciate the debate on Classification of sheep and cattle carcasses the full EU Classification legislation has to be read, understood and appreciated. This permits a number of options as follows
(a) ALL classifiers have to be licensed and operate to the required EC standard by the competent authority in each Member State, which in the case of NI is DARD
(b) The slaughterhouse can appoint it's own classifiers.
(c) Any group of individuals or industry body can offer to supply such a service to the industry.
(d) Classification can be done by inspectors of the Government Departments in Member States.
In GB classification is done by a combination of [b] plant classifiers and [c] MLC classification service and in the ROI it is done as at [d] by Government inspectors.
In NI prior to 1990, classification was carried out by the Department of Agriculture, who at that time, decided to shed and privatise that function. A number of individuals offered to provide such a service to the industry and discussions took place between the producers and processors. In the interests of having a fully independent service all parties agreed to request LMC to provide the service as a totally independent body with no axe to grind with any of the parties involved. Today LMC still carries out this function under licensing and supervision of the Competent Authority in ALL slaughterhouses in NI and is still accepted as the most independent means of performing this function. Classification is much more than just applying a Grade to an animal. The legislation also includes the checking of the weighscales, the confirmation of the accurate weight, the confirmation of the carcass dressing specification of which there is only one in NI as compared to 5 or 6 standards in GB. It also includes the determination from carcass inspection of the correct category of the carcass i.e. steer, heifer, cow, bull or young bull.
Individual classifiers themselves are mostly from farming backgrounds and at times lean towards the producer rather than administer strict EU standards.
However on the whole, year on year since 1991 NIMEA members would agree that the LMC has provided a professional classification service but perhaps not as rigid or consistent at times as the service provided by MLC in GB.
NIMEA can see benefits of cost to the larger plants in providing their own classifiers. However, even though they worked to the standards of the Competent Authority this would not be seen as independent and therefore for the time being the LMC is the only fully independent body offering an established classification service in NI. There is no desire to change that until a more professional body or method displays itself. As a further service to livestock producers, this may well be an opportunity for the Assembly to establish and provide under the European Legislation a separate, exclusive and totally independent classification service, thus relieving LMC of an extremely arbitrary function.
The EUROP grid classification we believe has now outlived its usefulness and the industry needs to move to a more sophisticated method of evaluating carcass value and saleable lean meat. The problem is that nowhere as yet is there a more cost effective or more efficient method than the human eye. However, being aware of tests and research being done across the world we believe that within 5 years this function will be more accurately performed by advanced technology. All NIMEA members would welcome that advancement as soon as possible.
As far as "grading disputes" are concerned there is an appeals procedure in place that is constantly made use of by any party who disagrees with the classification result. It is accepted from NIMEA's point of view that there has to be a final adjudicator and once the appeals procedure has been properly implemented a final result which is accepted perhaps at times on an "agree to disagree" basis is reached. Problems arise when the EU inspectors arrive to carry out their community checks and experience has shown that at these times there can be a slight tightening of standards which disturbs the normal operating of the service. NIMEA has no major problems with grading disputes.
LMC Classification staff attend plants in a "third party guest" role to carry out their function. They are at all times under the employment and management of LMC and therefore are not under any obligation to the plant in which they operate. At times however there is considerable influence and pressure exerted on classifiers by producers to have carcasses graded higher than warranted. It is at this stage if things go astray that the appeals procedure is invoked and things levelled out again. Those who oppose the classification system most ferociously are usually the "once-a-year" producers or the cattle dealers who are really out of touch with the normal flow of operations.
Classification in GB is carried out as stated earlier by plant classifiers or by MLC classifiers. NIMEA members who have operations in ROI and GB are well placed to compare classification in all three regions. In each region there would be what could be termed "regional quirks" but in the main the system operated across the two islands is relatively parallel. There are certainly no wide variations of interpretation of the standards but because of the human element there will always be small individual differences. All classification bodies work hard at eliminating these differences but it is deemed that it takes 10 years for a classifier to be fully conversant and confident in the job.
LMC perhaps could do more to instil into its classifiers the importance of being an accurate independent service. It is accepted that in the main the best foundation for the job is someone who has a beef and sheep producer background with college training. However by virtue of that, this type of individual comes with a built in bias towards producers. It is the changing of that attitude to be totally independent and unbiased that leads to a competent classifier.
The members of NIMEA are all keen to move as soon as possible to objective classification. However as stated earlier there is nothing available as yet that can give a better assessment of cattle and sheep carcasses than the well-trained human eye. This is partly due to the fact that there is such a wide range in both cattle and sheep shapes, weights, lengths, and sizes. These species are unlike pigs which are much more uniform and where a degree of objective measurements has been implemented. The further problem that the EC insists that any mechanical means must transcribe the results into the EUROP grid is a serious and in our opinion unnecessary hindrance to the development of such equipment. However we believe it is only a matter of time until such equipment is available and our opinion is the sooner the better.
3. PROMOTIONAL ACTIVITIES
Promotional activity is seen as one of the LMC's strongest points and they and only they are best equipped to do this work. They are working independently yet on behalf of the industry and perform this necessary function extremely well, especially since the last Board has been appointed. This activity needs to be better resourced and further strengthened and developed to meet the needs of the industry in a new millennium. Like marketing it is an area that needs to be seen by the public to be divorced from the agricultural and agency sides of LMC's activities, yet professionally co-ordinated under the Board's management. LMC policies are determined by the Board which is representative of the entire chain, Producers, Processors, Marketing and Business.
The function of the LMC has changed immensely over the past 10 years with the acquisition of functions and services previously provided by Government. The LMC performs a number of essential activities in the promotion of the beef industry in N.I. Due to N.I. dependency on markets outside the Province and indeed the UK, an independent body like LMC is a very necessary part of the entire quality assurance chain and acts as the catalyst between customer and supplier and indeed producer and supplier. It is the only, and indeed very necessary body which provides a co-ordinated integration between producer and processor. The current Board of LMC is much more relative, capable and focused on their task than may have been the case in the past and being much more attuned to the activities of a fast changing meat industry, have enhanced their standing considerably. Some recent staff appointments with years of experience in the industry have been excellent choices and placed LMC in a much stronger position to fulfil their role. However there is still some way to go and the future of the Board needs to be made up of strong senior experienced meat industry personnel. The LMC must rise to a level of its competitors, i.e. An Bord Bia and MLC.
4. APPOINTMENTS TO THE LMC
NIMEA's position for some time is that because of the development of the industry in NI over the past 15 years that the current Board of 7 is rather restrictive in terms of the width of experience required on the Board. The Board should be increased in size from 7 Commissioners to 9. The Board should not necessarily be representative of the Agri-Food industry per se but should be those who can demonstrate marketing vision and contribute to the marketing potential of the beef and sheep industry of NI.
DARD has informed NIMEA in recent years when vacancies on the LMC Board are being advertised in the press and in return NIMEA has encouraged potential candidates to apply for appointment. However further than that NIMEA has had no input to the appointments.
The structure of the LMC should be adapted to more represent the industry needs of the 21st century. It should continue to be managed under a Board of appointed Commissioners made up of people nominated by the various industry sectors. The day to day running should be under a Chief Executive with two deputy Directors, one for Agricultural services and one for Processing and Promotion services. This would at least give some perception to the "separateness" of functions co-ordinated under the Board. The current Board of 7 should be increased to 9 and be more specific to allow wider and proportional representation of the groups involved. There should be three reps from the processing sector, two farming reps, one retail butcher rep, one other meat sector related person, one food industry related independent chairman. There should be one person from the Food Service sector, for instance a retired manager from one of the major multiples. The appointees would act in their own right and not necessarily be muzzled by their own particular sector opinion. The various sectors should have input into the appointments and the Board Members must have a sound experience of at least their relative sector. Because of the sensitive commercial activity of the LMC and the future viability and survival of the NI Beef and Lamb Industry, and due to the very commercial nature of the LMC, appointments to the Board should be by Ministers from nominations, but should be exempt from the Nolan principles. We see the Nolan principles in the case of LMC as contributing to mediocrity. By nature the type of person with industry experience and essential business competence, who is essential for Board Membership of LMC would not apply for such positions.
5. LEVY RATES
(a) MLC Levy Rates IN GB
|
Cattle |
Total |
Producer |
Processor |
|
MLC Levy |
£2.05 |
£1.02.5 |
£1.02.5 |
|
Promotion Levy |
£2.30 |
£2.30 |
£Nil |
|
Total Levy |
£4.35 |
£3.32.5 |
£1.02.5 |
|
Sheep |
Total |
Producer |
Processor |
|
MLC Levy |
£0.31 |
£0.15.5 |
£0.15.5 |
|
Promotion Levy |
£0.32 |
£0.32 |
£Nil |
|
Total Levy |
£0.63 |
£0.47.5 |
£0.15.5 |
(b) Rates Of Promotion Levy In ROI
|
Cattle |
£1.50+ £1.00 promotion levy |
|
Sheep |
£0.20 |
(c) RATES OF PROMOTION LEVY IN NI
|
Cattle |
£0.80 + VAT |
|
Sheep |
£0.08 + VAT |
annex e2
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
Additional Questions FROM THE COMMITTEE to:
Northern Ireland meat Exporters' association
11 May 2001
At the end of the meeting with you and your colleagues on Friday 4 May the Deputy Chairperson informed you that due to time constraints the Committee was unable to put to you and your colleagues all the questions that they had hoped. He suggested that these questions should be sent to you for a reply.
Please see below a list of those questions, some of which were touched on at the meeting, and contain references to your written submission to the Inquiry.
LMC Funding
1. In GB there are two elements to the levy - a General levy and a Promotional levy. The slaughterhouse pays 50% of the General levy while the producer pays the balance of the General levy and all of the Promotional levy. While you have said that the levy funding in N. Ireland should be brought into line with GB you have not indicated who should contribute to the fund and how much. Could the Committee have your views on this?
Classification (Beef and Sheep)
2. In your experience are producers broadly accepting of classification grades?
3. In order to balance the subjectivity of the classification procedure there is an appeals procedure. This appeal is made to a 'senior' classifier employed by the LMC. In your opinion does this reflect a truly independent assessment?
Promotional Activities
4. What are your views on encouraging the retailers to subscribe to promotional activities for N. Ireland meat products?
5. The LMC has indicated that much of its budget for promotional work in N. Ireland is spent on education. Considering our main market is through export, is this money well spent in your opinion?
6. What in your opinion are the priorities for the LMC in relation to their promotional and marketing work? Are there aspects of their promotional/marketing programme that do not represent good value for money ?
7. The LMC has the primary role in co-ordinating promotional activity on the industry's behalf. The IDB aims to improve the competitiveness of individual companies in the red meat sector while the DARD role is mainly to improve skills and competencies of workers in the industry as well as enabling producers to respond to market demands. You also referred to LEDU and rural development authorities and the need for one single spearhead promotional body under the LMC umbrella for the beef and lamb sector. What are your views on how this might be successfully achieved?
8. The processor's levy paid on a voluntary basis towards promotional activities is a welcome development i.e. £1 for cattle and 10p for sheep. You have raised what you perceive is the reticence of producers to pay for promotional activities. What do you think would be an acceptable levy for producers to pay towards the cost of promotion?
9. You state "categorically" that "the main beneficiary of beef and lamb promotion is the primary producer". How can this be the case if the primary producers are not getting a decent return on their animals?
10. To what extent is the reticence of producers to contribute to promotional activities through levies due to lack of communication of the ultimate benefits to them through contributions?
11. You make the point that we are more dependent on promotion since approximately 75% of our beef and lamb is marketed outside N. Ireland and have suggested a levy of around £3 rather than £0.80. What would this mean in terms of increasing our meat exports?
Appointments to the LMC
12. You have said that an increase in the size of the Board of the LMC from 7 to 9 would allow wider and proportional representation of the groups involved, yet you envisage only 2 farming representatives. How is this proportional, considering that it is farmers who, to the greatest extent, are paying for the Commission? What steps can be taken to ensure all sections of the industry are represented on the Commission?
I would be grateful if you could provide a response as soon as possible, preferably within the next two weeks.
annex e3
committee for agriculture and rural development
inquiry into the livestock and meat commission
Response to Questions from:
northern ireland meat exporters' association
15 May 2001
I will reply to your questions in the order in which you ranked them in your letter of 11th May 2001.
1. LMC Funding
When we said that the levy funding in NI should be brought into line with GB, that is exactly what we meant, i.e. the funding would be generated in the same percentage basis as in GB between producer and processor. While it may appear that the producer is paying the lion's share from the GB breakdown, that is in fact not the case because funding retailer promotions is a matter directly between plants and retailer and outside the generic promotion by LMC. One example being the money NI plants have individually had to put up in relation to in-store promotional activity by Albert Heijn in Holland on top of the generic promotion and traceability work done by LMC. The producer is always the beneficiary of positive promotional activity no matter who pays.
2. Classification [Beef & Sheep]
It is our experience that the professional beef and sheep producer has briefed himself well on the classification system and understands the standards and accepts the limitations of the human element and over the year he probably "gains on the roundabouts what he loses on the swings." This type of producer is also keen to adapt to supply what the market wants in terms of weight and quality.
It is also our experience that those who shout loudest and complain tend to be those who produce the poorer quality cattle and want the quality price for the poor quality product. The main complaints area is in the division between the O and R grades which coincidentally is the dividing line also between beef bred animals and dairy bred animals. It tends to be the mixed farmers rather than professional beef producers with animals which come from the dairy herd that appeal grades and who least understand the classification standards.
3. Classification Balance
If a classifier is inconsistent it must be remembered that inconsistency can be in both directions and like the "share buyers warning" the result of an appeal can lead to downgrading as well as upgrading. It has been a matter of principle that plants do not appeal grades where the appeal could result in "downgrading".
The appeal system in the first instant should be to the original classifier, and only after he refuses to change should the appeal be made to the Senior LMC official. He is regarded as an independent assessment as both he and the original classifier are both subject to standardisation exercises and control by DARD, the competent authority. Given the personnel in place in LMC and DARD currently, while the final authority lies with DARD, the higher competence would be in LMC.
PROMOTIONAL ACTIVITIES
4. Retailer Subscriptions
The fact that you ask this question displays the fact that you do not even have a basic understanding of the trading contract relationship between a supplier and a retailer. It "costs" to get space on a retailer shelf, they are not queuing up for our business, it is hard fought, hard earned, competitive servicing from which many of our competitors would aim to dislodge us. It is our view that this is outside the normal commercial contractual relations between supplier and retailer. However, there is nothing to stop either the LMC or political approaches to retailers, but nothing should be done that would prove divisive to the current retailer relations with NI meat and lamb suppliers.
5. Educational Spending
Market research shows that there is a swift increasing percentage of the younger generation becoming pro-vegetarian, and survey figures suggest this to be in the region of 5% and rising annually. It is therefore absolutely essential that a strong educational programme be pursued to accurately display both the health and nutritional values of beef and lamb and encourage it as a regular ingredient in meals.
It has to be remembered that NI has not exported beef for over 5 years and there is still no indication that there will be an imminent return to exporting. There is therefore little use in promoting the products in export markets that cannot be supplied. The only markets available to NI at the moment is the home market [absorbing about 18% of production] and GB marketplace [which absorbs the remainder] and it is across the UK that the younger generation are moving away from meat eating.
This is a very wise use of current promotional funding. Processors are very aware of the importance of this activity and have supplied meat for schools educational programmes at discounted rates to supplement this. The educational seminars conducted by LMC for the HE teachers across NI have been an excellent promotional activity for beef and lamb and have resulted in a much higher awareness of the value of a balanced healthy diet within the community. This is an initiative for which LMC is to be congratulated. Perhaps you should ask the HE teachers who have attended the seminars to contribute to your inquiry and allow them to give you their own evaluation of the meat education programme. As I understand it, this programme was made available through joint funding from the EU and displayed LMC initiative in securing EU funding for a worthy project.
6. Promotional Priorities
LMC have been forceful in exploring many potential markets for both beef and lamb. Just because this exploration most of the time does not yield business is no reason to adjudicate it as not representing good value for money. The market place is ever changing and so LMC must be proactive in discerning where to focus its attention. That activity must be left to the marketing experts on the Board of LMC and within the ranks of LMC. If the correct people are appointed to the Board, then this activity should not be shackled by Government or anyone else, dictating what they should or should not consider as priority for market research.
7. Spearhead Focus
NO agency from Northern Ireland should go off anywhere in their independence or consign taxpayer's money to companies of whatever size without going through and getting approval for their activity from the generic promotional body, LMC. On occasions in the past agencies have spent money bringing potential meat buyers to NI to introduce them to suppliers only to the embarrassment of themselves and those already doing business with them. We are simply saying that any agency who wants to engage in the promotion of NI beef and lamb should have to operate through, and be directed by, one overarching spearhead body, and with its understanding of the wider world meat markets, that body should be LMC.
8. Acceptable Producer Levy
This question is answered at question 1 above, if the activity and promotional rates used in Scotland, Wales, ROI and England are anything to go by [and we are dependant at the moment on the GB marketplace], then our promotional rates and activity should at least mirror theirs.
9. Beneficiary of Promotion
The answer to this question is simple. Returns at the moment are relative to the quality of beef cattle being produced, the current market and the promotion being undertaken. When the NI promotion budget is compared with those with whom we compete within these islands it can be seen that we are the very poor relation and ours is but a fraction of what others are spending. A clear case for improving both cattle quality and the promotion budget. There are times that promotional activity is required simply to be able to "stand still" in the market place.
There is a rhetoric and misconception around that the world is queuing up to buy NI beef and lamb. NI beef and lamb enjoy their current market position due simply to both the generic promotion by LMC and the product promotion and supplier services marketed by individual companies.
The simple means of demonstrating the value of generic promotion of NI beef and lamb is to stop all promotional activity and then watch our market outlets being taken over by others and producer prices spiral down further and further. [This would actually be suicide for the NI Red Meat Industry.]
10. Producer Reticence
The professional beef producer fully understands the requirement to promote his produce and is willing to do so. This brings us back to the question of vision for the NI industry and where we want to see ourselves positioned in the market place. If the producer is not willing to be involved in the promotion of the product he produces and thus his own livelihood, then he cannot expect to get premium prices. If the producer wants to do his "own thing" rather than be market led then again he cannot expect the premium for his product.
Processors continually feed market requirement information back to the producer directly or through LMC and their own producer club or web-site communications. The professional beef and sheep producers tend to keep themselves well informed and adapt accordingly. Most of the "griping" comes from those who tend not to familiarise themselves with the market they are supposed to be producing for. There is a serious educational programme here for DARD to change the attitudes and practices of producers who view a world class retail market place as the "enemy" rather than one of the sources of their livelihood. The LMC is also to be congratulated on taking groups of producers to SIAL and ANUGA each year to let them see what others are placing before the food buyers of the world and against which NI producers have to compete.
11. Return on Levies
It is difficult to quantify the amount of return from promotion in terms of £ and p. The increased levy would simply allow the NI industry to match the promotional activity of our competitors rather than us lying behind as the poor relation. It may be that the real return in terms of increased levy will simply be that we retain the market share we have fought for and secured to date. Do we really want to be in the premium market sector or are we content to be an "also ran?" As a NI industry where do we want to position ourselves? That then determines to what extent we promote ourselves.
12. Appointments to the LMC
With the greatest of respect to the farming sector, they are not the best people to be involved in marketing. Look at what has happened to the farmer-controlled marketing boards of the past. The Pigs Marketing Board, The Potato Marketing Board, etc. Those who are engaged in the marketplace must do the marketing and win the contracts and provide the customer service. The generic promotion must be done on behalf of the entire industry by a professional team under the direction of a professional Board that understands that market place. That is not to say that farmers should not be represented in the generic promotion, as they need to determine where they as producers want to be positioned. If the LMC is to become a farmer dominated body then there is a real fear for the future vision of the beef and sheep industry. Remember 80% of the product has to be marketed outside NI.
In our submission we clearly stated what we believe the correct balance of the LMC Board should be. From our own experience in the past, discrimination in favour of either producer or processor will cause imbalance and a lack of co-ordinated determination in respect of the entire beef and sheep industry in NI. The focus must be removed from "perceived sector representation" to a NI industry marketing perspective for the benefit of "NI Beef and Lamb plc."
Your comment that the farmers are "paying for the commission" is hurtful, inaccurate and discriminatory in the light of the voluntary levy contribution being made by processors. It clearly again displays you committee's lack of understanding to appreciate or recognise the vast amounts of money, time and activity being invested annually by individual processors to simply retain their current markets. It also does nothing to recognise the strides and efforts that all parties have made to achieve a consensus and progressive benefit for the NI industry. It demonstrates that your Committee has a narrow and prejudicial view of how the LMC is currently operating and what has been achieved. It appears your committee is more interested in divisive activity of those relationships that many have worked hard at establishing. It also ignores the fact that the farmers are the largest and main beneficiaries of the Commission's activities.
The fact that your committee is determined to make recommendations on the future of this industry, but still has not taken up our invitation to visit any meat plant to see at first hand what is involved in the day to day marketing of NI Beef and Lamb, just further confirms these opinions.
annex e4
committee for agriculture and rural development
inquiry into the livestock and meat commission
Further written submission by:
northern ireland meat exporters' association
Further to my supplementary response of 15 May 2001 on the Committee Inquiry into the LMC, I attach below some information that backs up the need for education on the use of red meat in a balanced diet and justifies the emphasis that the LMC are directing towards schools and teachers.
T.C. Mathers
It is well recognised that people in the UK just do not eat enough grain in their diets and there is also a very big interest and swing to a Vegetarian diet. (Almost with religious fervour) The Vegetarian Society of the UK says:
" There are currently about four million vegetarians in the UK, representing some seven per cent of the population. Amongst younger people, that figure rises to 12 per cent. It is estimated that a remarkable 41 per cent of people in the UK are now including far less meat in their diet. In the UK alone, approximately five thousand people each week are choosing to give meat a miss and join the veggie revolution. "
- 5000 people a week in the UK are joining the veggie revolution and dropping meat completely from their diets.
- There are about 4 million vegetarians in the UK - 7% of the adult population.
- 10 million people in the UK no longer eat red meat.
- An amazing 12% of young people are vegetarian.
- In the last ten years, the number of vegetarians in the UK has more than doubled. http://www.vegsoc.org/21cv/ and http://www.vegsoc.org/
annex f1
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
WRITTEN SUBMISSION BY:
NATIONAL BEEF ASSOCIATION
21 April 2001
Preface.
The Northern Ireland Council of the National Beef Association is once again grateful for the opportunity it has been given to present a submission to the Committee for Agriculture and Rural Development.
It apologises for failing to meet the deadline. It always intended to do otherwise but was continually sidetracked by crises in the anti-Foot and Mouth Disease efforts both here in Northern Ireland and on the mainland.
Summary.
It is very easy for producer funded lobby groups like the National Beef Association to take casually considered potshots at industry funded organisations like the Livestock and Meat Commission which must, by virtue of its statute, be even handed in its approach to producers, processors, retailers and consumers and demonstrate that it has no bias towards any particular sector.
However like similar levy funded, multi-functional, meat and livestock industry bodies working elsewhere in the UK and in other EU states the LMC has found its most regular critics are producers and it is the NBA's view that if more is not done to avoid this then the potential for the LMC to do more work to the mutual benefit of producers, processors, retailers and the industry will be unnecessarily undermined.
Several influences prevail against the LMC having as comfortable a relationship with producers as it, and the producers, would like. Organisations that rely on levy income, particularly levy taken from farmers who in strict accountancy terms (their labour is entered in the balance sheet as a properly costed item) will not have sold a beef animal profitably since early 1996, are never popular.
Similarly its function as a co-ordinator of the classification service, always a point of abrasiveness because the demotion of a carcase into the lower paid sections of the classification grid automatically results in reduced income from the animal killed, will inevitably and consistently prevent many producers taking as positive a view of the LMC as they ought to.
And the tendency of organisations like the LMC to react to the fact the interface between them and the processor or retailer organisations is very often smoother than it is between individual producers (and at times producers' representatives) also mitigates against the proper development of the fullest possible relationship with farmers.
This is in part the result of the routine antagonism directed against organisations like the LMC by producers who are aggrieved by regular levy offtakes or what they regard as harsh carcase classifications - which is difficult to combat and is an almost permanent obstruction to both casual and constructive dialogue.
However it also reflects the relative ease with which the LMC can communicate with small, tightly knit, groups of single interest processors or retailers compared with a highly fragmented body of 110,000 farmers which are in turn divided by their speciality (beef, pigs, sheep) or by their location (LFA breeder or lowland feeder).
(The fact that the entire redmeat processing sector in Northern Ireland is almost entirely covered by just five slaughter companies, operating almost exclusively through a single umbrella organisation, NIMEA), emphasises this point.)
The latter is most easily overcome if producers are themselves properly represented through their own organisations - of which the Ulster Farmers Union and the Northern Ireland Agricultural Producers Association have been longest in existence - and these are able to keep their members fully in touch with LMC strategy and other industry thinking.
(As an aside the NBA would point out that although it represents specialist beef producers across the Province and is recognised by both DARD and yourselves as a point of consultative contact for the beef sector, it has still to be offered a place on the Red Meat Strategy Group and the FQAS Industry Standing Committee - even though it has twice put in requests through the LMC to do so.
It regards this as an easily remedied failing and, for the reasons outlined two paragraphs earlier, would like to its ongoing request to represent its members on these two committees to be received positively by the industry and its administrators.)
However the NBA believes that if the LMC could be separated from its current classification function, or a method was found of reducing the aggravation that surrounds the current classification process, it would find it easier to communicate more effectively with producers.
Similarly if its income could be secured other than through a levy paying process there would be comparably positive results - although this would be more difficult to achieve.
But perhaps the most urgent challenge facing the LMC in its bid to enjoy higher regard from producers would be for it either to prove that the producer perception it is "too cosy with NIMEA" is not justified by identifying a range of strategies that openly demonstrate this is not the case - or if after due self-examination it accepts it may have allowed its relationship with the meat side of the industry to assume proportions that are unfair to producers, to take steps to correct it.
Foremost among these would be to re-arrange its Board so that it has fuller farmer representation, make sure the farmer representatives are genuine full time farmers, and that the method in which the LMC functions puts farmers on its Board in a position to influence LMC policies in a manner that correctly reflects the weight of the sector of the industry they represent.
It is assumed that if the Board of the LMC is re-vamped that it would contain at least four full time farmers, all of them holding full voting rights so their representation of their sector was real and not either flimsy or a facade.
It must also be pointed out that the LMC's unbending enthusiasm for deadweight purchasing, which is still reflected in its lack of interest in the function of the auction system, is seen by many as one of the principal reasons for the now institutional absence of price competition for Northern Ireland's prime cattle and the reason prices paid for prime cattle have been persistently lower than those realised elsewhere in the UK for the past five years.
It is the NBA's view that the LMC's reputation with producers would immediately improve, to the benefit of both parties, if it set out to encourage more competition for prime cattle.
This welcome development would be advanced if it quickly substituted its current, generalised market summaries, with an advance listing each week of the prices to be paid by named factories against the EUROP classification grid along with their routine premiums, penalties and deductions.
LMC Funding.
The NBA firmly believes that if an organisation like the LMC is performing well and is successful in pursuing policies which work to the equal advantage of all sectors of the meat industry (including the consumer) it is worth supporting and that a really successful organisation would deserve even more support.
In other words it would encourage producers to take the view that if the LMC is doing a good job it would be wrong to resist a levy increase and that in certain circumstances it would be sensible for farmers to volunteer additional funds on the basis that a relatively small investment that is well used should generate an easily identified and substantial return.
Unfortunately it believes the current mood among producers towards a levy increase is decidedly negative - not least because of persistently low incomes which in return reflect persistently low prime cattle prices.
In these circumstances the NBA welcomes the prospect of an income contribution from processors who, without putting to fine a point on it, have enjoyed considerably better fortune since 1996 than the producers who supply them and who up until now have also benefited from a range of producer assisted LMC efforts - including attempts to secure improved classification, efforts to counter the influence of the Holstein in beef production and of course promotional activities which have encouraged beef consumption within the Province - without making a direct input to the fighting fund.
However there is genuine concern among producers that if processors are required to make a levy contribution it will immediately result in a matching, cross the board, reduction in the price of prime cattle and they will end up paying an LMC levy twice.
In view of this the NBA would suggest that alternative ways of securing processor funding should be found and that these should be paid in direct proportion to profits - although it understands such a method may not be as straightforward as it could be because some slaughter companies have recently revoked their plc status and their profits are no longer open to public scrutiny.
Classification.
Running a classification service and maintaining regular good relations across a broad band of primestock finishers are contradictory practices - as the NBA has already explained.
It would therefore be better from a public relations point of view if the LMC gave up the service. The manner with which it replaces any lost income or manages its business in the absence of this income are an issue that should be addressed outside this specific consultation exercise.
However it may be to the mutual benefit of both the LMC and the industry if the remit of a similar classification service to that it currently operates was properly defined and then presented to a number of private companies for tender.
In this way the current classification service could be maintained but it would no longer be incumbent on the LMC to manage the operation.
What would be most likely to happen would be that entrepreneurial elements would recognise an opportunity to provide a classification service and employ classifiers currently acting under LMC instruction to continue the current style of service under different management.
The NBA believes that if the service was put out to independent operators for private tender (they were paid by the factories not by the LMC) that, for the sake of consistency and ease of management, just one company should take over the entire day to day operation of the Northern Ireland classification service.
However it also thinks that the LMC could begin to improve its position as neutral body operating without bias on an all-industry basis if it took on the role of inspector, was in charge of the disputes procedure, and employed authorised master-graders.
This position would allow the LMC to keep a close eye on how classification was being conducted (without itself being directly involved) and be in a position to advise the industry on how classification could be improved through automatic scan classification - for example.
Putting the classification service out to tender and putting the operation in the hands of a single independent company would be preferable to allowing each factory to employ its own classifier as can be the case on the British mainland - although the strength of the system would ultimately depend on the determination of the inspector (the LMC) to make sure all classifiers operate correctly within the templates of the grid system at all times.
In this respect aitch-bone hanging is an impediment because it does not allow post-classification inquests as a result of the audit trail being broken as soon as the carcase enters the chill room.
The NBA believes that banning aitch-bone hanging should be recognised as a legitimate point for consideration if there are continued suspicions it is masking poor classification.
It also concedes that as long as classification remains a subjective exercise in which carcases on the margins of a classification grid may or may not be moved up or down depending on the grader's perception at the time there will inevitably be criticism and disputes.
It believes that automatic scanning as tested in the ROI should be introduced as a replacement as soon as possible. In-abattoir trials in the Republic showed that just as computers can beat most people at chess the automatic scanner could classify carcases better than most graders,
However it marginally failed to beat the master graders of the ROI on fat cover classification although it more than held its own on carcase conformation.
In our view this must mean that automatic classification is almost ready to replace individual graders on a commercial basis and that the introduction of suitably secure scanning machines run by independent operators should be encouraged at the earliest possible opportunity.
Another refinement would be to simplify the payment system by reducing the number of grades. There is a strong argument to suggest that current payment grids are much too complicated and help to generate unnecessary confusion.
The NBA would suggest that they were reduced to U, R, 0+, 0- and P for conformation and 4, 3, and 2 for fat cover.
Promotional Activities.
The NBA would like to play a full part in the Red Meat Strategy Group and the FQAS Industry Standing Committee but is prevented from doing so because the groups themselves determine which organisations are represented and the current incumbents, NIMEA, the UFU and NIAPA, have twice rejected representations by the NBA to take a seat at the table.
It would be fair to say that the Association is both mystified and dismayed that it can be prevented from taking a consultative place at an industry meeting by other industry representatives. It believes it has a contribution to make, would like to make it and would hope that if it re-applied to take a place on both committees the barricades would be lifted.
It is therefore impossible for the NBA to comment with any authority on any aspect of the LMC's red meat promotion activities
Nevertheless the NBA supports the principle of the Farm Quality Assurance Scheme because it recognises it as a valuable tool with which to sustain purchasing interest for Northern Ireland beef from British supermarkets and also as a useful lever through which to regain entry to Continental supermarkets when the EU's export ban on NI beef is eventually lifted - particularly now that market security acquired as a result of previous campaigns will have been undermined by FMD.
However it is disappointed that the commitment of most beef producers in Northern Ireland to farm assurance is not reflected in the price for prime cattle, which lies well below the UK average, and would hope to see the effort made by producers to meet FQAS standards to be quickly reflected in a positive premium for farm assured cattle - which by definition are the only animals qualified to provide beef that is sold into high standard and demanding markets.
Unfortunately farm assurance qualification is currently presented to producers as a means of avoiding a £12 per head discount - which the NBA thinks is completely the wrong way round and carries more than a hint that the dominant factory concern that ex-farm prices should always be as low as possible has greatly influenced the way in which the LMC has presented FQAS to finishers.
The NBA would also like to see a suitable proportion of LMC funds be directed into the promotion of auction markets and underline the useful function that the auction system plays within the beef industry in the Province - not least being an efficient assembly and distribution point for all types of store cattle as well as offering open price transparency at its primestock sales.
Appointments to the LMC.
The NBA sees the current composition of the LMC Board as the most visible example of its fundamental weakness. It is an organisation that has a wide interface with farmers through its classification service, FQAS, its efforts to assist in a variety of downstream projects and of course its reliance on a producer levy for a significant portion of its funding.
However even though the LMC claims to have producers on its Board it would be difficult to describe either of the two current incumbents as a typical full time farmer. Furthermore the Association also feels that even if they were replaced with candidates regarded by mainstream farmers as more suitable producer representation would still be disproportionately low when measured against that enjoyed by other sectors less involved with the LMC and its activities.
This underpins and encourages the persistent complaint from grass roots farmers that attitudes within the LMC lean too far towards the meat trade in particular and does not take enough cognisance of working farmer attitudes because working farmers are not included among their representatives.
It is the NBA's view that the LMC Board should be expanded from seven to nine people and that four of them should be full time producers - and not, as is the case at present, individuals too easily described by critical farmers as being too deeply involved with the meat industry (either in the past or at present) and too easily seen as unrepresentative of the full time working farmer.
If the LMC Board was raised to nine and its composition was altered so the two additional members were working farmers the NBA believes this would quickly result in the LMC being subject to less routine criticism from producers and it adopting policies which although still suitable progressive much more likely to be in tune with grass roots aspirations.
The NBA at present has no involvement in the appointments process within the LMC.
annex f2
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
Additional questions from the committee to:
NATIONAL BEEF ASSOCIATION
17 May 2001
I would like to thank you and your colleagues on behalf of the Committee, for appearing before them on Friday 11 May as part of their Inquiry into Certain Aspects of the Livestock and Meat Commission. The session was very useful and will help the Committee considerably when they come to consider their final report.
At the end of the meeting the Chairperson informed you that due to time restraints the Committee was unable to put to you and your colleagues all the questions that they had hoped. The Chairperson suggested that these questions should be sent to you for a reply. Please see below a list of those questions, some of which were touched on at the meeting, and contain references to your written submission to the Inquiry.
LMC Funding
1. The levy charge in N. Ireland is significantly less than that in Gt. Britain. In GB there are two elements to the levy - a General levy and a Promotional levy. The slaughterhouse pays 50% of the General levy while the producer pays the balance of the General levy and all of the Promotional levy. It could be argued that a similar approach in N. Ireland would level the playing field in terms of funds available for promotion, which would ultimately benefit the N. Ireland producer. What is your organisation's opinion on this?
2. One of the reasons you give for producers' reticence for increased levies is the persistently low prime cattle prices. Why in your opinion are prices so low?
3. The gross income for the Commission in 1998/99 was £2.46 million. What do you believe would be an appropriate funding level for the LMC regardless of the source of income?
4. One of the recommendations of the quinquennial review is to have levy rates reviewed annually by the Commission in consultation with producer and processor organisations. What is your view on this?
Classification (Beef and Sheep)
5. You mentioned putting grades together in some circumstances. Could you clarify this and say what benefit you would see in reducing the number of grades?
6. You referred to error rate in the current classification system and touched on the subject of electronic classification. Such objective classification, if/when further developed to a reliable degree, is one possible way to address the perceived inconsistency in classification as well as the problem of independence. If instigated, this will initially mean an investment in equipment and training etc. and will require an organisation to manage the operation. Could you outline how an operation could be best managed e.g. who should fund it, who should manage it, how much should the service cost the producer/processor and should the LMC still receive finances from the service?
Promotional Activities
7. Reference is made to the Red Meat Strategy Group and the rejection of a place on it for your organisation. Farmers are represented on this group already by the UFU and NIAPA. Why do you feel it is necessary to have more farming representatives on the Group?
8. You say that it is impossible for you to comment on any aspect of the LMC's red meat promotion with any authority. However you must have an opinion on whether or not the promotion of meat co-ordinated by the strategy group has been to the benefit of your members. (a). What feedback if any have you received from your members concerning the promotion of their meat? (b). What in your opinion should be the priorities for the LMC in relation to their promotional and marketing work? (c). Are there aspects of their promotional/marketing programme that you feel do not represent good value for money?
9. Where would the NBA target resources for the promotion of red meat?
Appointments to the LMC
10. Would it be beneficial if the LMC held more direct and regular consultations with producers e.g. in an open forum so that there could be more transparency and debate on LMC Board decisions?
11. You mentioned that LMC members should only receive out-of-pocket expenses in respect of their duties as members. Do you think that that, and the current procedure for making appointments and the rewards for taking up a position on the LMC, can attract appropriately qualified and experienced people? If not, what would you suggest?
I would be grateful if you could provide a response as soon as possible, preferably within the next two weeks.
annex f3
committee for agriculture and rural development
inquiry into the livestock and meat commission
Response to Questions from:
NATIONAL BEEF ASSOCIATION
8 June 2001
The National Beef Association regrets that it was unable to respond to the secondary written questions raised by the Committee in the time span it preferred. Once again the problem was the many demands on resource raised by the continuing FMD crisis - particularly in mainland Britain. We hope you are able to accept our apologies.
Our response to the queries raised by the Committee are as follows:
LMC Funding
1. The National Beef Association is not convinced that mainland producers benefit from the promotional levy they pay to the Meat and Livestock Commission.
The introduction of this funding has made the MLC less hands on in livestock, meat and general agricultural terms than the LMC is at present and much more of a promotion orientated organisation.
It is our view that Northern Ireland's beef farmers would prefer the LMC, which is much closer to the farm gate than the MLC, to remain in this position and not to become as sleek, suited and distant from mainstream farming as the MLC has become since its promotional work has taken it closer to corporate, retail and marketing environments.
The NBA also feels that mainland beef producers benefit less from their promotional contribution than they ought to because EU constraints on the management of the marketing funds require them to be aimed at generic promotions rather than concentrate on beef produced specifically from GB.
This not only means that generic MLC beef promotions lift the consumption of imported beef (indeed because GB is only around 75 per cent self-sufficient any rise in consumption as a result of a successful promotion automatically means an increase in imports) but also that it is impossible to use farmers' money to encourage premiums to be paid for GB beef because it is against EU law.
We would also suggest that because 80 per cent of Northern Ireland's beef production is sold on the mainland that there would be little point in spending more money on promoting generic consumption in Northern Ireland and that the money raised by GB farmers for the MLC is doing more to help the consumption of the NI beef on the GB market than money raised and spent by the LMC ever would.
Similar arguments might apply to the promotion of beef in Continental EU countries when export markets are re-opened - although it might be both prudent and sensible for the LMC to have funds on hand to assist with the promotion of NI beef in specific retail locations.
In this respect the short term question is whether there are enough funds on hand for the LMC to cover this expense, especially when NI exports need to be re-launched, or whether it might need more funds on a temporary basis.
If the latter is true it could be assisted by factories selling their beef to specific retail outlets or by special NI regional funds that might be available for this type of short term promotional work.
In the longer term however it may be necessary to re-examine the LMC's promotional structures and strategies in the light of future innovations of the type we have outlined in our response to questions 7 and 8.
2. An essay could be written on this question but the basic reason is that NI beef producers suffer from lack of price competition made possible as a result of a small number of large processors seeking out similar types of cattle to supply beef sold onto a restricted market without acknowledging that producers have a right to enjoy a fair share of the beef industry's overall profits.
A fundamental improvement in producer returns had been expected when NI beef could once again be sold to a wider range of specialist retail outlets on the Continent and this on its own may have been enough to restore producer incomes to something approaching reasonable levels.
This may still happen but since the eruption of BSE problems on the Continent last November the EU beef market has become hugely oversupplied and an overnight leap in NI prime cattle prices immediately after the resumption of exports, which should be possible from late 2002 to early 2003, is unfortunately less likely now than it was.
The NBA has consistently accused NI meat factories of operating a price cartel that creates excess profit for themselves but greatly diminishes producer incomes and still believes this to be the case.
Evidence that NI cattle are under priced compared with similar animals produced elsewhere in the UK and sold into the same retail markets is overwhelming - and the routine protestations put up by the processors in their defence are thin in substance and loud on rhetoric.
The Association would like to encourage the NI authorities to thoroughly examine this issue but is disappointed at the lack of enthusiasm for this that exists within the Department of Agriculture, yourselves, the LMC, the Ulster Farmers Union or NIAPA and suspects that for many reasons there is little or no political will to launch an investigation and that there is therefore unlikely ever to be one - unless there is an overwhelming shift in their or your position or the EU authorities can be persuaded to take an interest.
The NBA has therefore been forced to accept it cannot on its own succeed in having a much needed enquiry into excess factory profits and unnecessarily low cattle prices instigated because those in charge appear to prefer to keep the doors tightly shut but nevertheless regrets that its recent efforts to bring these issues into the public domain have failed and still believes that NI beef producers have a right to expect this problem to be properly addressed.
Farmer profits could be slightly increased if their costs could be reduced as a result of their management becoming more efficient. In this respect research work undertaken on a number of fronts by agricultural colleges is to be welcomed.
However we fear that the future for the NI beef industry is more likely to be driven by the hunger of factory owners with spare packing capacity (currently it is roughly twice as high as slaughter capacity) to import either sides or primals for de-boning and packing from a range on non-NI sources than it is by their hunger for live NI cattle for slaughter.
This means that factories will continue to demonstrate that their greatest enthusiasm is for beef (from whatever source) rather than live NI cattle and as a result the payment of realistic prices for live cattle will be of only secondary interest.
If this is correct then Northern Ireland's cattle numbers will continue to dwindle and the income of the LMC with it unless the LMC can demonstrate in the most vigorous and positive terms that it stands on the side of an NI beef industry that is based on live NI cattle rather than imported beef primals, provoke a rise in producer profit, and as a result of this give producers both the will and the financial capacity to be able to volunteer a lift in LMC levels.
3. The NBA believes that the income of the LMC and the work it undertakes at present are roughly in balance - as long as expected annual cost increases are taken into account and provision made to maintain its incomes in real terms.
If however the LMC wished to put forward a plan in which it demonstrated both the need for, and its capacity to meet, new initiatives and programmes which would be to the overall benefit of the NI beef industry, especially including the farmer, then the possibility of funding it with additional money from non-farmer sources should be thoroughly examined.
4. As long as LMC levy payments are a source of aggravation between the LMC and producer levy payers there should be no annual review of levy payments because it would only lead to near permanent hostilities which would further undermine the relationship between the Commission and a principal source of its funding.
It would be much more sensible to agree to levy payments being increased annually on an index linked, inflation proof, basis - although provision should also exist for the Commission to approach the industry whenever it wished if it felt moved to put forward ideas for entirely new projects and seek additional funding for them.
Classification
5. This is an idea best discussed on an all-industry basis but the principle behind the NBA's observation that there is a need to reduce the number of classification grades is that the differences between them are too fine - which is in direct contrast with the price penalties which are significant and give factory owners even more opportunity to pay less for cattle that are entirely suitable to them than they ought to.
For example it can be shown in meat yield terms that there is very little difference between an R3 and an O+3 carcass yet the latter is penalised by 6p per dwkg - or around £19 per animal.
Or that in retail presentation terms there is very little practical difference between an R3 (on which is hinged the base price) and an R4L (which carries slightly more fat) which once again is penalised by 6p or about £19.
The NBA would suggest that there ought to be a target specification which includes R3, R4L and O+3 (and perhaps one or two other grades like a U2 or an O+4L) which are all paid the same price.
By the same token we think there should be no differential between U3 and U4L carcasses which at present is 6p or £19.
Basically the NBA is saying that the proliferation of grades is unnecessarily fussy and is of no overall benefit to the producer because it gives processors an opportunity to discount the value of perfectly acceptable carcasses and make more profit at the expense of the farmer.
And that this would not be as easy if the industry agreed on four or five groups of grades that were subject to payment differentials instead of the 10-12 price/grades that are listed at present.
6. The NBA thinks that the operation of a national classification service should be put out to tender irrespective of whether classification is determined electronically or by human assessment and that the service, which should be operated by a single company, should be inspected by the LMC.
We would suggest that a classification/weighing charge of £1 a head would be fair because actual cost is likely to be in the region of 75p. Factories killing less than 75 cattle a week should be exempted from classification requirements - unless a solution to the higher cost of overseeing such operations could be found. Some of the training cost for electronic classification could be met by the successful company and some met from a one-off government assistance programme.
The cost of installing the equipment should be met by the factory and the LMC should be given central funds by the government to cover the cost of its inspection. It would be most important that the LMC was not paid by the factories to cover the cost of its inspection service because this could disastrously undermine its independence.
Promotional Activities
7. Sensibly put views from a range of individuals or organisations will always stimulate discussion and encourage a level of debate more likely to produce the correct result.
The NBA is made of individuals with slightly different views to those in NIAPA or the UFU and therefore are being prevented, at present, from making informed contributions which the Red Meat Strategy Group ought to consider both legitimate and welcome.
The Association would also argue that its members in Northern Ireland benefit from direct contact with the wider organisation at UK level that may on occasions allow it to make valuable contributions springing from its wider UK perspective.
It must also be said that the Committee for Agriculture and Rural Development appears to appreciate the need to consult as widely as possible within the beef industry and beef industry matters - and therefore includes the NBA in it consultations.
We would hope that members of the Red Meat Strategy Group could be persuaded to take a similarly proper position.
8. It is difficult to comment on promotion strategies in detail if you are not aware of the strategy behind their implementation. With this in mind the NBA's comments must be regarded as uninformed.
However NBA members do feel that more work should be done to raise the value of their beef on the domestic retail and catering markets by properly identifying its regional origins and working on the sympathies and appreciation of Northern Irish consumers for home produced Northern Irish beef to sell more of it as an added-value branded product and less as a bog standard, discount led, commodity.
Indeed the promotion of the greatest possible proportion of Northern Irish beef as an added-valued product on the British market, and on the wider export market when it is at last re-opened, is the only way that current beef production structures can survive because it opens the way to higher priced cattle on the back of higher retail value beef - assuming of course that retailers and processors are prepared to pass back a fair proportion of their profits.
The NBA has therefore no hesitation in recommending this approach as well as counselling the Committee and the LMC to recognise that in Northern Ireland in particular equal or even greater mileage could be enjoyed if more beef was sold to catering outlets, particularly hotels, which were encouraged to sell it at a premium as a product of Northern Ireland - although this would of course require that the processing of the beef and its cooking were of a standard able to deliver the beef to the consumer in a condition that would not disappoint them.
9. Beef is a product that can be easily damaged at any point of the production, processing, retail or cooking chain so it is essential to establish an all round strategy to ensure that improved incomes can be sustained on a cross-industry basis on the back of consistent delivery of a high quality product.
With this in mind the NBA would suggest that the LMC should make the securing of an integrated national system its priority and pursue it through a national brand that was subject to strict quality monitoring and such strong disciplines that farmers, factories, and retailers who fell short of its requirements were no longer allowed the privilege of being members of the brand's production chain.
This would require the establishment of production blueprints for farmers, processing protocols for the factories that included strictly monitored bone-in maturation periods (this could be demonstrated by them having sufficient chill room space to accommodate the necessary number of carcasses) and for caterers, butchers or multiple retailers to demonstrate that they too can meet the handling protocols before they were allowed to take delivery.
Our view is that this is the only way to reverse the creeping reduction of the beef cattle population in Northern Ireland as a result of persistently poor producer incomes and it should be made a national priority - unless it conflicts with the idea some factories have of generating wealth and employment in the Province through the cutting and packing of huge volumes of beef produced in the ROI, elsewhere in the EU or even South America and the government supports the latter.
Appointments to the LMC
10. It would undoubtedly be beneficial for the LMC Board to hold more direct and regular consultations with producers in open forum, perhaps in the style adopted by the newly formed Food Standards Agency, and we would encourage it do this.
11. After due debate the NBA had decided that the beef industry in Northern Ireland would be better served if LMC Board members received only out of pocket expenses and not a reasonably substantial stipend as they do at present.
In this way they would move from being seen, or perhaps even thinking of themselves, as employees of the LMC and therefore obliged to accommodate its views rather than their own and become genuinely independent representatives of their sector.
The Association dismisses the idea that without financial encouragement the LMC would not be able to attract individuals of sufficient calibre to its Board. Indeed we would observe that, with some notable exceptions, the constitution of the current Board does not provide compelling arguments in favour of current financial arrangements being sustained - and this is in itself a powerful argument in favour of them being scrapped.
It would be depressing indeed if there were not enough community minded individuals in Northern Ireland to represent their sector of the beef industry on the Board of what we would hope would become an increasingly influential strategy co-ordinating body without the lure of direct payments into their bank account.
Indeed it could be argued that the LMC would be more likely to secure the services of free thinking, independent and public minded individuals with suitable knowledge of the beef industry if it rejected current arrangements and opted for an out-of-pocket-expenses-only policy instead.
We are sure the great majority of Northern Ireland's beef farmers would agree.
ROBERT FORSTER
National Beef Association
annex g1
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
WRITTEN SUBMISSION BY:
NATIONAL sheep ASSOCIATION
18 April 2001
COMMISSION
The National Sheep Association (NSA) is an independent body representing the interests of U.K. sheep farmers. There are eight regions, each with their own chairman and committee responsible for sheep farmers in their own particular region. All regions have representatives on the main NSA Council and Executive which meets regularly in London or NSA Headquarters based at Malvern in Worcestershire.
N.I. Region Chairman Ian Gibson Broughshane
Vice Chairman Francis CurraghDonaghadee
Secretary Edward Adamson Carrickfergus
Treasurer Samuel Wharry Carnlough
The Sheep Farmer magazine is published bi-monthly (6 issues per year) and is circulated free to all members.
Outline of sheep industry:
1,332,600 Breeding Ewes
10,727 Farms with ewes
FUNDING
Not sufficient
No E.U. support limits LMC effectiveness
Increase fairness of levy by removing from slaughter lambs and placing on ewes
CLASSIFICATION
At present no alternative to visual assessment of carcasses Suggest simplify grid into ¾ categories:- (Super) Premium, Base and Penalty.
PROMOTIONAL ACTIVITIES
N.I. lamb is not effectively marketed on it's own merits
Little home market support
No support in the promotion of N.I. Sheep Genetics
APPOINTMENTS
More producer representation required
DETAILS
1. FUNDING
a NSA feel that funding is inadequate but, unfortunately it is doubtful if producers can afford to pay higher levies. However we feel that a processor levy may be paid indirectly by the producer.
b Processors should be involved in promotional work as they benefit from increased sales.
c Is there a place for joint LMC, processor and possibly Bord Bia (may be too political) to promote branded lamb?
d At present, levy is collected on 559,100 lambs If the levy was collected on number of ewes (1,332,600) it would mean all producers contributed to LMC rather than only those who sold lambs deadweight in N.Ireland. The larger number would also increase potential levy collected.
e If N.I. lambs were ' branded', processors could pay for the use of the Brand Label.
f Could money from Rural Development Funds siphoned from modulated S.A.P. payments be used for LMC activities?
g LMC does provide several services e.g. FQAS etc. where an impartial body is required to operate such services.
2 CLASSIFICATION
a Human nature decrees that producers will always consider their lambs are better quality than the grader. Some inconsistency in grading causes dissatisfaction amongst producers but we do understand that the graders are only human and cannot produce as exact a measurement as a mechanical method would. Unfortunately we do not know of an accurate and consistent mechanical method of grading at present, but would be interested in seeing such a development.
b From comments and observations made by some of our members there seems to be a different standard of grading in The Republic of Ireland. It would appear a more lenient set of standards prevail in the meat plants in The Republic.
c It would be helpful if LMC provided information on individual grades e.g. U2, U3, U4L etc. as well as the grading groups e.g. E,U,R's and 2,3,4's. Sometimes LMC information may be out of date.
d Would a star rating system indicating eating quality be useful to give a guide to the consumer rather than the EUROP system which is really only a guide to the yield of meat? We believe this system is in operation in some countries (Australia).
3 PROMOTIONAL ACTIVITIES
a LMC agreed a programme of in store sampling opportunity for Dutch consumers to taste lamb from N.Ireland in 2001. Doubtful if this can proceed due to FMD.
b LMC state that promotion of lamb at ANUGA Trade Show in Germany proved successful. How did they measure their success?
c Households in G.B. purchase a much higher percentage of lamb than in N.Ireland. We need to promote lamb better on our home market. Why is lamb so rarely seen on Hotel or Restaurant menus?
d Could lamb promotion be subsidised with assistance from E.U. funds?
e Is there a place for joint promotions with The Republic of Ireland (Bord Bia)?
f The NSA does not and has not been asked to take an active part in L.M.C promotional activities but LMC has taken part in NSA activities.
g As stated earlier, because of limited funds available to LMC the sheep industry probably does get good value for money.
h More needs to be done to encourage initiatives like The Ulster Lamb Groups and branding of lamb.
i LMC is not good at communicating and explaining their activities to producers which creates some resentment. We need more feedback and communication between LMC processors and producers.
j The M.L.C. in G.B. give assistance to pedigree breeders in promoting British Pedigree Stock at overseas events. NSA feel that N.I. breeders (both beef & sheep) have stock capable of competing and improving animals anywhere in the world and would recommend that LMC should look at ways in which they could help our pedigree breeders.
k LMC should look at innovation required within the industry. Examine eating quality health benefits of lamb and new ways of preparing and eating lamb.
l The sheep industry is a price taker rather than a price maker. LMC should examine costs and highlight returns required by the producer.
m NSA appreciate help given by LMC to The Ulster Lamb Groups in co-ordinating and subsidising their presence at The SIAL Food Fair in Paris and to Meadow Valley Farmers in G.B. Also for their role in the success of the lamb carcase competition at The NSA Lamb 2000 Event.
4 APPOINTMENTS
a NSA is not very satisfied with the composition of the LMC Board, bearing in mind that LMC is funded with producers money.
If we look at the make up of The Board:-
Chief Executive of a refrigeration company
An employee of ABP Newry (Meat Plant)
Manager of local Leader group, Chairman of NIAPA and part time farmer.
Butcher, publican and boxing promoter.
Director of Lean & Easy lamb processing company and part time farmer.
Director of food processing company
We have no complaints about any of the board members but we feel it shows a bias towards processing industry. We feel that there should be provision for a representative from sheep producers and one from beef producers on the board. Alternately, a sub committee could examine and focus on sheep issues only.
b NSA is not involved in the selection of the board members or given any notice of vacancies.
NSA welcome this opportunity to comment on LMC and hope the Committee finds our reply useful.
Please acknowledge receipt of our comments
Yours Sincerely
EDWARD ADAMSON
Secretary
annex g2
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
Additional questions from the committee to:
NATIONAL sheep ASSOCIATION
17 May 2001
I would like to thank you and your colleagues on behalf of the Committee, for appearing before them on Friday 11 May as part of their Inquiry into Certain Aspects of the Livestock and Meat Commission. The session was very useful and will help the Committee considerably when they come to consider their final report.
At the end of the meeting the Chairperson informed you that due to time restraints the Committee was unable to put to you and your colleagues all the questions that they had hoped. The Chairperson suggested that these questions should be sent to you for a reply. Please see below a list of those questions, some of which were touched on at the meeting, and contain references to your written submission to the Inquiry.
General issues
1. In any review undertaken of the work of the LMC, what do you consider are the key priorities or most pressing issues for the membership of the National Sheep Association?
2. Could you describe the main liaison arrangements or relationship between the NSA and the LMC? Are current arrangements to the benefit of your members, if not how would you like to see your relationship with the LMC develop?
Classification
3. You referred to the need for proper quality grading for the consumer. How do you envisage such a system might operate between the producer, processor and the LMC?
Promotional activities
4. You have raised a series of questions with regard to the promotional activities of the LMC. You state that the NSA has not been invited to take part in the promotional activities of the LMC but that the LMC has been involved in NSA activities. Given that you have a range of ideas in respect of marketing and promotions, what type of forum do you consider would be appropriate for such ideas to be communicated and discussed?
5. You make a call for improved communications between the LMC and the sheep industry. Ideally what system of communication would the NSA like to see in place?
6. You refer to the MLC provision of support for pedigree stock in GB. Have any of your members approached the LMC to assess the opportunities for such support? If made available, how do you envisage such support being used by pedigree stock sheep farmers in Northern Ireland?
7. Does the NSA consider that there are any new market opportunities, which could be exploited by the future LMC promotional activities? In contrast are there any market threats, which should be proactively tackled by the LMC's promotional activities?
Appointments
8. You have expressed concerns about the current make up of the Board of the LMC and your desire for an opportunity to focus on the sheep sector and your submission said that you do not receive any notice of vacancies to the Board of the LMC. What role, if any, would you like the NSA to play in any appointments procedures of the LMC, and what action could you undertake if you did receive such notice?
I would be grateful if you could provide a response as soon as possible, preferably within the next two weeks.
annex g3
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
Response to Questions from:
NATIONAL SHEEP ASSOCIATION
6 June 2001
Please thank the Committee for giving the NSA the opportunity to put forward their views on the LMC.
In reply to your further questions:-
1. (a) NSA members would like to see a sheep producer on the commission board.
(b) They feel there should be visible promotion for lamb.
(c) There should be targets set and full accountability if targets are not met.
2. At present there is very little liaison between LMC and NSA, but NSA would welcome a closer relationship. It would be useful if NSA representatives could meet with LMC and receive objective reports on LMC activities.
3. Producers are improving the quality of their lambs but standards set seem to rise as quality improves.
4. See reply at 1.
LMC should appoint someone to deal specifically with lamb and the sheep industry.
5. LMC should have meetings with the sheep industry i.e. representatives (suggest two) from NSA, Ulster Lamb Groups (ULG) NIAPA and UFU. These meetings would be more productive if they are not too large. Discussion could be more focused and controlled with representatives able to report back to their main bodies.
6. We know of no direct requests to LMC for support to pedigree sector but would welcome the opportunity to do so. A representative who was not bias towards any breed with knowledge of the pedigree sheep industry could promote NI Genetics alongside MLC and possibly Teagasc and Bord Bia the Republic of Ireland. We should keep an open mind and seek co-operation in any corner we can find it.
7. It is the job of LMC to actively promote and identify threats. As indicated earlier a sheep specialist working within LMC would be best placed to tackle promotional activities.
8. NSA would welcome the opportunity to advise on the selection of a board member or even propose a candidate they thought would fulfil all that is required of a board member.
NSA feel that there is a lack of transparency in the present selection process.
Hoping our answers will be useful to you.
EDWARD ADAMSON
Secretary
annex h
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
WRITTEN SUBMISSION BY:
Mr j e dobson
2 April 2001
I have been a beef farmer for over twenty years and have slaughtered thousands of cattle. I believe this gives me the right to submit evidence and my voice, which I am certain is not a lone one to be heard.
I wish to make my comments known directly to this committee about my concerns about the LMC, as it affects me directly and other farmers like me.
The main objective of the LMC is to perpetuate its own existence by ever trying to increase its revenue first and foremost. It has no concern whatsoever for the farmer.
My reasons are as follows:
1. The funding of the LMC is thrust upon the beef producer irrespective of whether they support this outdated organisation or not. The levy payers have no input whatsoever as regards the LMC. We should be able to opt out of supporting this organisation which is more a hindrance than a help.
2. We no longer need classification service as it was originally introduced to facilitate intervention buying which has become obsolete. A much better system existed in the past were by the processors used their buyers to buy cattle live in the farmers yard at a flat rate price.
This enabled the farmer to achieve a better price for his animals. By continuation of this grading system the farmer losses out to the processor who uses the grading system to penalise the farmer.
3. The big supermarkets are selling the greater proportion of the meat nowadays and using their own top promotion and advertising agencies, thus making the LMC's minor attempts at advertising very amateurish and totally unnecessary.
Their quality assurance scheme is primarily designed to encompass all farmers, the standards are set so low that anyone could join. The LMC designed the scheme so that all producers are included regardless of beef produced so that the processors would buy into the scheme, thus ensuring the continuance of the LMC.
4. The LMC was only ever a government quango, I have no interest as to whoever is appointed to it, it is my opinion that it should not have existed in the first place.
In conclusion beef producers have seen prices steadily decline over the past six years. As an organisation designed to market livestock by promoting increasing sales of meat the LMC has failed miserably.
I can see no need whatsoever in continuing with the LMC as it has been like a parasite, feeding off the beef industry for too long.
Yours faithfully
JOHN E DOBSON
annex i1
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
WRITTEN SUBMISSION BY:
NORTHERN IRELAND AGRICULTURAL PRODUCERS'
ASSOCIATION Ruling Council
5 April 2001
We acknowledge receipt of your letter of the 13th March, on the above subject, at our Offices in Cookstown, you will appreciate that it has not been possible for our Association to have normal meetings since the onset of the FMD crisis.
NIAPA Ruling Council met on Tuesday the 3rd of April where this correspondence was discussed. It was clear that the nature of the matters is clearly significant if not also contentious in some aspects.
We are at an immediate disadvantage in that it has not been possible to schedule a Beef & Sheep Committee Meeting in order to ventilate the issues and seek more detailed information, which would allow NIAPA to make an informed submission.
The following points were raised in consequence of the nature of your enquiry. These of necessity are the views only of the NIAPA Ruling Council.
LMC Funding
1. Members would certainly not welcome an increase in the LMC levy at this time.
2. NIAPA would hold to the opinion that any 'so-called' producer levy would be almost certainly be laid off or discounted against the returns to the primary producer by way of additional charge by the processor.
3. NIAPA has very little information with regard to the funding of the LMC notwithstanding the fact that Miceal McCoy; a former chairman of NIAPA sits on the Board of the LMC.
Classification
4. NIAPA Council members are not impressed by the performance of the LMC by any standards, and felt that by comparison to their counterparts in the UK where equivalent prices are known to be up to 22p per Kg above the NI prices in some situations.
5. We are not able to offer information on grading comparisons with ROI or other UK areas at this time but it is beyond any shadow of doubt that members are acutely aware of the subjective nature of grading and generally dissatisfied with the present variable standards.
6. NIAPA members would certainly welcome a mechanical approach to grading, on the understanding that this methodology would be both accurate and fair to all producers.
7. NIAPA would not be in a position to assess the competence or otherwise of LMC staff at this time other than comment upon the obvious subjectivity of the present grading procedure.
Promotional Activities.
8. NIAPA has neither involvement nor feedback with regard to Promotional activities conducted by LMC. Once again Miceal McCoy has not involved NIAPA in these matters. NIAPA Council members would be of the opinion that any direct benefit to producers by way of marketing promotion is at best insignificant if at all measurable.
Appointments to LMC
9. NIAPA would not be satisfied that present representation on the LMC Board is either balanced or adequate in terms of producer need. NIAPA would not see a cost benefit to producers in expanding the number of Board members.
Conclusion
10. NIAPA Council would consider it imperative that they be given opportunity to investigate and discuss these issues in much more detail in order to assess the totality of them. We would welcome an opportunity to draw together as many interested members as possible, in order to fully explore and investigate this particular aspect of livestock marketing. We are of the opinion that marketing is a major weakness within the agri-food sector. We would ask at this point for consideration for a further extension of the consultation period until FMD restrictions have been eased.
LAWRENCE SMYTH
Acting Secretary and NIAPA PRO (by appointment of Council)
annex i2
COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT
Inquiry into the livestock and meat commission
Further WRITTEN SUBMISSION BY:
NORTHERN IRELAND AGRICULTURAL PRODUCERS'
ASSOCIATION Ruling Council
1 May 2001
We thank the Committee for their consideration and fully appreciate the position adopted by the Chairman, in regard to remaining distanced from the current situation which has temporarily overtaken our organisation. We would indeed wish that others would also follow this example of propriety.
The paying members of NIAPA will, by virtue of the authority and process of democratic governance, as laid down within the NIAPA constitution, ultimately resolve all outstanding matters, in regard to proper and authorised representation, regarding the pursuit of the lawful affairs and aspirations of the Association.
Of necessity we had to postpone our 2001 AGM, at the end of February, which we are confident would have finally removed some of the impediments to progress and resolved outstanding matters. We seek only objectivity, not outside interference in matters of representation. Unfortunately our experience has in the main, tended to confirm the latter.
At a well attended NIAPA Ruling Council Meeting, on the 3rd of April, a delegation of four was appointed, to deal with matters arising in consequence of the proposed inquiry into the workings of the LMC. Those proposed and elected were and are, Sean Clarke, Gabriel O'Keefe, Sean Murray and the undersigned. Once again, of necessity, we have been restricted, in terms of not being able to host localised NIAPA meetings to facilitate debate amongst members, on this very sensitive and important subject, as a consequence of current FMD movement restrictions and precautionary measures.
Notwithstanding these immediate limitations in regard to wide consultation we nevertheless welcome the proffered opportunity to discuss and place on record some of our immediate concerns, with regard to what we would perceive to be shortcomings, within the present workings of the LMC.
I am pleased to advise that whilst perhaps we may presently be somewhat disenfranchised we are not disabled and therefore do not require special access facilities.
Having spectated at the earlier 'presentation' by those using the NIAPA name but significantly neither having been elected nor appointed by our Association but otherwise, perhaps, 'pre-approved and strategically selected' by others, whilst also conveniently furnished with a 'pre-prepared written submission', emanating or originating from a 'sitting' LMC director, we are in fact now familiar with the protocol.
MATTERS ARISING:
We would propose to adopt something of a 'kipling' approach to our analysis of the LMC situation, through perhaps providing more questions than answers, at this point.
What is fundamentally wrong with our livestock industry which seemingly prevents primary producers from having confidence in an organisation (LMC) which is supposedly independent and impartial but in effect is more often perceived by many primary producers as being more aligned with the needs and objectives of the processing industry?
Why do we have such instability within the pricing and marketing structure of the meat industry, as it affects producers, but which significantly, is not necessarily mirrored or paralleled by equivalent fluctuations in the retail sector?
When can we expect to see a focus upon developing and implementing a more orderly and structured approach to primary agricultural production, specifically in regard to livestock farming, which will have the capacity to instil long term confidence and provide economic sustainability?
How long must primary producers wait until they can expect to receive, as of right, a proportionate share of the benefits arising out of the production and marketing of top quality meat products, which have secured and sustained a rising plane of nutrition for consumers over many generations.
Where can primary producers turn to have their long standing problems of industry instability addressed or resolved, when the competing interests of macro economic interest and global commerce seem geared and positioned to erode the very fabric of the primary agricultural community?
Who will have the courage to pursue openness and accountability, in regard to every aspect of commerce, and the totality of wider community need, which are perceived to be both pre-requisite and inextricably linked to ensuring necessary balance for sustainability, throughout the community and the chain?
We would wish to see a truly objective analysis of the present situation, as it currently obtains throughout the livestock industry, with a focus upon true objectivity with genuine commitment to achieving equilibrium, along with the prospect of achieving long term sustainability for the overall benefit of everyone associated with the food chain, including consumers.
LAWRENCE SMYTH
Acting General Secretary and NIAPA PRO (by resolution of the NIAPA Ruling Council 8/2/2001)
[1] The work is performed by 18 field officers responsible for beef, and supervised by a team of 5 senior field officers (MESSRS. Boyd, White, Hill, Shannon, their chief being Mr J Wilson). The field officers are moved every two weeks.
[2] Vet fee amounts to £3.68 per animal and insurance to £3.00 (£4.00 for cows)
[3] This inspection team, conducted by M. Freeburn, consists of 5 controllers (Messrs. McCormick, Hamilton, Hanna, Deighan and Kinney).
[4] Codfat must indeed remain attached up to the point of acceptance when intervention deboning takes place in a cutting plant connected with the abattoir (see Article 17(5) of Regulation (EEC) No 2456/93).
[5] Weight should be given by carcass and not by side.
[6] A single price per conformation and fatclass is obtained by aggregating O+ and O- as well as 4L and 4H on the basis of an arithmetic average.
LIST OF UNPUBLISHED MEMORANDA
THE FOLLOWING EXTRACTS WERE RECEIVED AS PART OF MEMORANDA WHICH ARE PUBLISHED AS ANNEXES TO THE REPORT. THE COMMITTEE AGREED THAT THEY NEED NOT BE PUBLISHED IN THE REPORT.
THE EXTRACTS HAVE BEEN LODGED IN THE ASSEMBLY'S LIBRARY
Department of Agriculture and Rural Development.ANNEX C1
Chapter 2 - Chapter 7 from the (draft) Report of A Quinquennial Review Of The Livestock And Meat Commission For Northern Ireland.
Chapter 3 - Chapter 4 and associated Annexes from the Mission Report by the Control Committee on Beef Carcase Classification in the United Kingdom (Northern Ireland) 17th to 20th November 1998.
Livestock and Meat Commission
ANNEX D3
Community scale for the classification of carcases of adult bovine animals (photographs).
