Jackie Cahill (Tipperary, Fianna Fail)
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I propose that we go into private session. Is that agreed? Agreed.

Tim Lombard (Fine Gael)
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I welcome our guests. Before we begin, I remind members and witnesses to turn off their mobile phones.

I bring it to the witnesses’ attention the fact that when giving evidence from within the parliamentary precincts, they are protected by absolute privilege in respect of the evidence they give to the committee. This means that witnesses will have full defence in any defamation action arising from anything said at a committee meeting. However, witnesses are expected not to abuse this privilege and may be directed to cease giving evidence on an issue at the Chair’s direction. Witnesses should follow the direction of the Chair in this regard and I remind them of the long-standing parliamentary practice to the effect that, as is reasonable, no adverse commentary should be made against an identifiable third person or entity.

I invite Mr. O'Toole to make his opening remarks. He has five minutes.

Mr. Jim O'Toole:

I thank members for the invitation to address the committee today. First, I acknowledge that the Irish sheepmeat sector has had a challenging year so far, driven by several factors, not least higher input costs and lower consumer demand due to overall food price inflation. In relation to carcass weight requirements, I emphasise to the committee that Bord Bia can speak to the market, customer and consumer requirements that we encounter and how these impact product needs, but as is understood, we have no commercial or trading remit.

Ireland currently exports 85% of the lamb produced here, with the largest majority of this destined for customers in mainland Europe and the UK. There is a small but growing proportion of Irish sheepmeat being exported to international markets. Lamb produced from carcasses within the desired weight ranges can be used to service the widest range of customer specifications in the marketplace. All current export markets have a strong preference for cuts of lamb from carcasses weighing between 18 kg and 21 kg. Carcass weight, along with conformation and fat cover, is also particularly important when lamb is being exported in carcass form. Until recently, the proportion of lamb being exported in carcass form had been in long term decline, with more value being achieved by reducing the carcass to individual cuts. The volume share of carcass exports was as low as 27% in 2019. However, this increased to 38% of all Irish lamb exports in 2022. Reduced lamb exports from the UK increased market demand for carcass lamb in key mainland Europe markets. The additional costs of processing and labour availability issues during and post Covid have also contributed to this trend. Also, over time there has been a growing consumer demand for lighter lambs and more versatile cuts arising from smaller household size and less time available for cooking, which has had a direct negative impact on demand for heavier carcass weights. This trend can be observed in the domestic and export markets.

Heavier carcases require a greater level of processing either at home or abroad. This adds to the costs, and the cuts of lamb produced tend to be of lower value as they are outside the preferred market specifications.

Meeting specifications in terms of specific cut sizes, unit costs and the aesthetics are also key factors when engaging with the retail sector in the home and export markets. These are all impacted by carcase weight, with those within the desired weight range best meeting requirements. Heavier lambs are more likely to be over-fat when processed. To meet the customer and consumer preferences, over-fat carcases need to be trimmed, which reduces meat yield and increases processing costs. Even after trimming, cuts from such carcases may still have a higher than desirable fat content and, consequently, are at risk of being less visually appealing to the consumer, which is a particular concern in an environment where lamb is seen as a high-cost protein.

Bord Bia’s focus is on supporting and enabling our producers so that customers around the globe recognise that Irish food and drink is world class, of high quality and distinctive, and our producers set the global standard in sustainable production and meet the responsibility we all have to the planet, to society and to future generations. I have previously stated to this committee, and am happy to reiterate, that our largest and most important stakeholders are Irish farmers. Ultimately, our goal is to help develop and grow the best and highest paying markets for our primary producers, which in turn can help them to deliver value.

In 2023, Bord Bia has committed a total spend of €3.5 million on sheepmeat sector development, including spending on market insights, consumer promotions and business-to-business marketing and communications. Bord Bia’s export market promotion of sheepmeat is primarily focused on the priority European markets of France, Germany, Belgium, Italy, Switzerland and the Nordic countries, although there has also been engagement in other markets where opportunities have arisen. Activities include partnerships with leading retailers to promote lamb, special activation events around St Patrick’s Day, print and digital media campaigns targeting consumers, and engagement with buyers through trade fairs and market study visits to Ireland. Outside of Ireland and Europe, Bord Bia continues to raise awareness of Ireland as a supplier of safe, high-quality, sustainable lamb through our EU co-funded multi-species campaigns. The current €4.78 million campaign launched in 2022 is active in South Korea, Japan, China and the US. Conscious of the need to increase lamb promotion with the younger consumer category in this challenging inflation-driven market, Bord Bia has focused a portion of its marketing on highlighting the health benefits of consuming Irish lamb and on highlighting the versatility and ease of preparation through social media platforms and recipe development.

Organic lamb production in Ireland accounts for 1% of overall lamb production. However, we expect and are preparing for this to grow substantially. Approximately 50% of current product is consumed on the domestic market, with the balance being exported, primarily to Germany, Belgium and the UK. We are acutely aware of the immediate challenge of product leakage in organic lamb due to seasonal supply. We are committed to identifying and capturing new potential customers for this and future supplies and we are actively assisting the sector.

I thank the committee for inviting Bord Bia to address it this evening. My colleagues and I are eager to respond to the questions of committee members. If we are unable to provide the required details, I assure them we will follow up with the individual members.

Mr. Philip Carroll:

I am chair of Meat Industry Ireland, MII, and I am joined this evening by my colleague, Mr. Dale Crammond, who is the director of MII.

The primary sheepmeat processing sector in Ireland is an important indigenous industry with widespread production throughout the country. The value of sheepmeat exports increased last year by 17% to €475 million, and we exported 75,000 tonnes into some 30 markets. This is the third consecutive year in which Irish sheepmeat recorded value and volume growth. The processing sector supports in excess of 34,000 sheep farmers and a further 2,000 jobs in processing and related industry services. Our industry has a strong customer focus. This has enabled significant added-value sales in many of the leading retail markets on the Continent, which has been a key driver of market returns.

In meeting market demand, a key requirement has been our responsiveness to providing the domestic and international retail and food service sectors with lamb products that best fit the demands of the customer. Unless we fulfil these requirements customers will look elsewhere. The growth in sales values in recent years is proof of our responsiveness to the demand of the marketplace.

In its invitation, the committee asked us to provide some background information on why the industry applies market specifications associated with the weight and suitability of lambs for processing. The weights paid for lambs at the factory gate are specification dependent and are driven by the requirements of the marketplace. The lamb trade is composed of two separate markets. These are the carcase trade and the retail market. The lamb carcase export trade is driven towards grade 1 lambs. These are animals in the weight range of 18 kg to 21 kg and this applies to all export markets. A much lower level demand exists for heavier lambs. The consequence of participation in this market with regard to heavier lambs is an overall loss of market value, which delivers diminished returns. It is much more challenging for processors to market these heavier carcases when the returns from a carcase that falls within the specifications are more valuable overall to the sector.

At the retail level the requirements are clear, driven in the main by retailers and how they can best market this high-value protein to their customers. The cuts and boned business is continuously driven towards fixed weight, fixed price cuts of meat. For example, full legs in stores are generally sold at weights of between 2 kg and 3 kg. With retailers charging around €10 per kilogramme for legs, this is equivalent to a €20 to €30 purchase. Compared with other proteins, this is an expensive meal option. With leg specifications ranging from a 25% to 28% yield from a carcase, a 3 kg leg will come off a carcase of just 21.4 kg. The same principle applies for racks or loin products. When they get too big in size, the cost to the consumer becomes prohibitive and they simply will not sell at the level required to sustain profitability. As a result, overall returns at all levels of the supply chain are negatively impacted.

Moreover, the processing of heavier carcases invariably involves removal of the bone from the meat and thereby reduces the yield and increases the input costs. Some extra meat ends up being minced at a lower sales price. There is little demand for lambs of more than 21 kg at this time of the year. Most suppliers are responsive to this and fully understand the differential available in the market between those animals within the specifications and heavier animals.

As the season progresses and we go into 2024, for example, processors will pay for slightly heavier carcases as the bone structure of the animal becomes heavier. However, the meat yield increases at a disproportionately lower percentage. Therefore, what they pay the farmer for a higher weight reflects the meat yield versus bone yield. Nevertheless, this does not reduce the challenge faced at retail level where consumer sentiment remains focused on affordability.

The industry has experienced some significant challenges in terms of the cost-of-living crisis over the past year. Consumption levels have fallen, alongside beef and pork, with only poultry showing any sort of consumption uplift in recent months. We acknowledge the difficulties some producers are facing as a direct consequence of the impact of higher input costs associated with the illegal Russian war in Ukraine and the consequential impact on global inflation, including energy costs, for example. This is why it is so important we continue to work towards marketing lamb products that return the best value to Irish producers from the international marketplace.

We must always remember that consumer behaviour influences the retailers, and this has an impact on the specifications demanded by processors. Together with the Department of Agriculture, Food and the Marine and Bord Bia, we remain focused on driving further international market opportunities. We are actively engaged with the Government on securing access to the Chinese and US markets for sheepmeat, given the scale of demand from these two giants of international trade. I thank the committee and we are opening to taking questions.

Mr. Dale Crammond:

I will start. First, this is not a new issue. It has been around for a long time. The trade in sheep globally, as the chair of MII, Mr. Carroll, outlined, is based on the grade I lamb which is in that 18 kg to 21 kg range. If we are getting in lambs that are significantly over that weight at this time of the year, there are extra processing costs. You might have to take the bone out. The leg might have to be cut in half. There are a number of extra costs that are built into the system that would create inefficiency. As an industry, we do not want to encourage that. We want to be able to return the best price back to the farmer and the way you do that is by providing the retailer or customers what they ultimately need.

Mr. Jim O'Toole:

I am happy to intervene, if that is okay with the Senator, to attempt to answer that.

Senator Daly is correct, of course, that there is a very significant food service market and, indeed, a manufacturing market where specification is less demanding, but it is discounted. The issue in terms of trying to return the best prices from the marketplace to the producer is that the highest paying price is for the in-spec. lamb.

Mr. Jim O'Toole:

In a lot of cases, it is a wholesale market. There are obviously big-contract catering contracts out there. Their specifications would be as demanding as retail. When you get beyond that to a more distributed food service market, it tends to go into the wholesale markets in continental Europe. Of course, one has to remember that we are not supplier into that market. There is competition from the UK. There is competition from local sourcing, be it France, Spain or wherever else. It is not a case where we are the only players in the market and that is what drives the differentiation in price.

Mr. Jim O'Toole:

I understand.

Mr. Jim O'Toole:

There are a couple of things at play and I am happy to hand over to MII to elaborate on this. Often in that wholesale market, it is a carcase that is bought rather than cuts and the first buyer is looking at the degree of fat cover on an overweight animal on a visual inspection. When there are heavier-carcase lambs, the amount of saleable meat - the amount of muscle that is available - is probably equivalent to what it is in the lighter carcase. The amount of waste, from a consumer point of view or, indeed, from the chef preparation, is why there is a discount on it.

Mr. Philip Carroll:

If I can add to that, if the overall market is looking for that in-spec. animal that we talk about of 19 kg to 21 kg, that, in itself, discounts the value of the heavier one. You are looking at 75% that are in that category.

If you look at the various cuts from an individual carcase, they are all exported. They are exported, as the Senator will be aware, to multiple customers abroad. We export to approximately 30 countries. You have 30 customers in different countries. Within those countries, you have multiple purchasers. We are focused to a large extent, and Bord Bia in all of its marketing efforts is focused, on getting the blue-chip customers that are in those markets or as many of them as we can. They are setting the standard and if we are not striving to get the highest volume within that in-spec. category, then we are risking losing out on a proportion of that higher value market because we are supplying not lower quality meat product but a different specification of product than that market is looking for, and we lose the value of that. That value lost is in the trade. If that value lost then impacts farmers, it is directly because there is a greater value in the market for the higher in-spec. product.

Can I come back to the other question the Senator asked around market returns?

We fully acknowledge all of the challenges that the primary sector has faced across all sectors, and not just the sheep sector, over the last couple of years, particularly when we were not operating during Covid for various reasons. We lost the food service market across all of the sectors during that period, and it was difficult. Looking right across the value proposition in the market, the price of sheep and cattle over that period and the pricing structures versus the markets within which we have been trading, and specifically where we are now compared to a year ago, overall, the average price has not changed, but it had grown significantly into 2022. We had hit record sheep prices, as members are aware. Looking at the markets into which we are exporting, we are exporting into the major markets in Europe. We face competition in those markets. For example, the French pay the highest price for lamb; they always have. They have a domestic market which is very significant and they favour the domestic producer. We are the interloper, as it were. We are probably one of the importers of choice, but we are not equated with the domestic market. When a retailer wants to sell lamb products, and the representatives of Bord Bia can address this more than I can, like the UK with beef, to a large extent they show their retail facings as domestic product, so we fall into another category. The other aspect - and it applies to the other markets we are engaged in - is that we have costs that are different from the costs that we face against a competitor in that domestic market. We have all the costs associated with transport, distribution, marketing and all of that stuff that the internal customer does not face. There are additional costs-----

Mr. Philip Carroll:

Can I just mention the pricing stuff?

Mr. Philip Carroll:

Correct.

Mr. Philip Carroll:

The rise in exports is a direct response to the demand in the marketplace that has come from that. Looking at where we are in terms of the comparison between what we are paying, on average across the market, and our biggest competitors in the markets in which we want to participate, the French pay the most. We are on a par with Britain, Northern Ireland and Spain, which is one of the biggest producers in Europe. We are significantly ahead of both New Zealand and Australia, which are putting a huge amount of product into the European market. They are specifically targeting the UK market as well. We face vulnerabilites because of that, yet we are able to pay prices that compete with the top prices, other than with France. That is quite significant, given the extra challenges and costs associated with them. It it important to note that, notwithstanding the fact that we also accept that primary producers are having a difficult time too.

Tim Lombard (Fine Gael)
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I ask the witnesses to reflect on the trade deals that have been agreed between New Zealand, Australia and the UK on the importation of lamb. They are quite significant. It is a different style of product, given that most of it is frozen. What pressures or quantities are going to be involved? Is the industry concerned about the backdoor effect, and lamb potentially being brought into the Republic through Northern Ireland?

Mr. Jim O'Toole:

My colleague, Mr. Burke, might address that.

Mr. Joe Burke:

The UK-Australia and the UK-New Zealand trade deals came into force at midnight on 31 May this year, having been signed a year and a half ago and a year ago, respectively. Those trade deals will result in Australia and New Zealand obtaining tariff-free access to the UK via tariff rate quotas for lamb, beef and dairy. The volumes will increase gradually, over a ten- or 15-year period for beef and lamb and over a five-year period for dairy, eventually resulting in the complete liberalisation or removal of tariffs. The import levels into the UK will increase over that time. We know, historically, that the EU had tariff rate quotas and free access to a certain amount of New Zealand lamb already. The deal opens up opportunities for higher volumes of Australian product as well. As the Senator mentioned, it will lead to a more competitive UK market. Obviously, Irish lamb does not tend to be diverted in large quantities into the UK. It is mainly a market for our mutton and some manufacturing lamb product.

Tim Lombard (Fine Gael)
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What percentage of our lamb product goes to the UK?

Mr. Joe Burke:

Some 75% of our lamb goes into EU markets. It tends to vary year on year, but between 15% and 20% of our sheepmeat exports go to the UK each year. However, the UK itself is a significant exporter of lamb, so the Senator's point is a valid one. If the UK is importing more product from New Zealand and Australia, even at competitive prices as it is now, it means it will have more lamb available to export into the continental European market that is taking 75% of our lamb already. That becomes more competitive, potentially, as a knock-on impact of these trade deals. It is something that we need to be mindful of. We need to defend our position in those markets.

Tim Lombard (Fine Gael)
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On the quality of the lamb that is coming into the UK, I take it most of it is frozen?

Mr. Joe Burke:

It is a combination of frozen and chilled. We can come back to the committee with figures on the exact split. The proportion that has come in in frozen form has actually increased since the latter end of last year. That is mainly as a result of difficulties in other international markets for the southern hemisphere exporters. In recent years, they would have been exporting higher volumes to China and, to a lesser extent, to the US market. Partly because of Covid and other competitive pressures, those markets weakened, which led to them diverting more frozen lamb into the European and UK markets. More of it has come in frozen.

Tim Lombard (Fine Gael)
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Is the industry fearful of the backdoor effect of lamb coming into Ireland through Northern Ireland? What is Bord Bia's marketing strategy to take into account the changing and volatile market in the UK at the moment?

Mr. Jim O'Toole:

I might comment on that. I think the more likely scenario is that the imports from the southern hemisphere will be consumed in the UK, and that we will meet UK lamb on the Continent, when we are marketing our product there. I do not foresee the displacement of UK lamb into the Irish market directly. I think it is more likely that we will meet more UK lamb on the Continent. There is some evidence of that already this year. That is why the marketing activity that we undertake with buyers and consumers in continental Europe is so important in building that premium position for Irish lamb as the imported product of choice.

Tim Lombard (Fine Gael)
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Can Mr. O'Toole give me an idea of Bord Bia's marketing strategy for lamb in continental Europe? How does it propose to market the lamb abroad, and how is it doing that at the moment, in the EU markets in particular?

Mr. Jim O'Toole:

I might ask my colleague, Mr. Murray, to comment on this. As was mentioned earlier, 75% of our exports go to continental Europe and 40% of that goes to France. After that, Germany is a significant market, as are Belgium and Scandinavia. We have a portfolio of activities and we do business-to-business activity, trying to work with the industry in recruiting commitment from retailers in continental Europe to stock the best of Irish lamb when it is in season, because it is a seasonal product. We also run consumer promotions with those retailers and do inward buyer visits to make sure that they understand the quality and production system that we have in Ireland.

We engage with media and are always on social media. We have a whole suite of activities that we constantly rotate around the different markets when the seasonal peak is available. Mr. Murray might like to add to that.

Mr. John Murray:

Mr. O'Toole has largely covered it. Over the years, it has been about trying to build up a sustainable and strategic business with key customers. As Mr. O’Toole mentioned, it is about that direct work with key retailers, building things like meat academies, which is around bringing knowledge to the individuals within their businesses on the quality of Irish lamb, making sure they choose that going forward and impart that to their consumers as well. We reflect on our plans around promotion on a year-on-year basis, looking at what is happening in particular markets and whether we need to adjust accordingly, so it is not just turning on the same thing every year, and it is about making sure we are responding as the market is responding.

Tim Lombard (Fine Gael)
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With regard to sporting and cultural events, there are some things that we are very proud of in Ireland – St. Patrick's Day was mentioned and there are also the rugby internationals. Do they become part of the Bord Bia marketing campaign in working on the Irish brand when it comes to a product like lamb in particular?

Mr. Jim O'Toole:

St. Patrick's Day is very important because, in our world, St. Patrick's Day is a month. It is a key time for activation because it is coming ahead of peak supply. It is a great time to engage in continental Europe with buyers and given the coincidence with the time of the year and the sporting events around rugby in France, the industry often works with the retail suppliers and it is a way of engaging in-store butchers with retail chains. There is a whole suite of activities that we use where we can in order to leverage that.

Tim Lombard (Fine Gael)
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The domestic market is very important. Can the witnesses give an indication of what Bord Bia is trying to do to improve the domestic market? Lamb is a different and expensive product. It is a very capable and good product, but it is expensive and considered to be so. Can the witnesses give an indication of what Bord Bia is doing domestically to help that domestic market to increase? Can they give an indication of the figures? Where are we going with the domestic market? Is there an uptick at the moment or is it stagnant with regard to the product itself?

Mr. Jim O'Toole:

We finished a television promotional campaign in the domestic market at the end of June. We tend to try to focus our activity in the domestic market around peak supply, so that June period is an important one in terms of growing awareness of quality-assured Irish lamb on the domestic market. We will have another burst of activity again in September or October. We try to balance those television campaigns and promotional campaigns to raise awareness and attract audience.

Tim Lombard (Fine Gael)
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Are chefs ever involved in that promotion?

Mr. Jim O'Toole:

Absolutely. We have a range of activities and we work with social media influencers. One of the things that is a concern for the sector in total is that given the profile of consumers now and given it is a relatively expensive product, as the Senator said, it is important to try to recruit younger consumers into the category. That is why we have put particular emphasis on delivering a different suite of recipes, different types of cuisine and the different cuts that are used, again using online platforms and chefs who appeal to that younger cohort, to try to recruit them into the category so we continue to grow our consumer base.

Tim Lombard (Fine Gael)
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I ask the witnesses to clarify a statistic in the opening statement. Was it stated that 1% of sheep production is currently organic? Are the witnesses surprised that it is just 1%?

Mr. Jim O'Toole:

I will defer to Mr. Murray but it is the case that 1% is the current figure.

Mr. John Murray:

It is 1%. This is something we are eagerly working with other agencies to try to develop.

Tim Lombard (Fine Gael)
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Lamb appears to be as organic a product as we are ever going to get, given the short lifespan. It is a standout figure. I was taken aback to think it was just 1%. Does Bord Bia believe there is a body of work to be done to increase that? It would obviously add value to the product.

Mr. John Murray:

Yes. This year alone, we have invested in a full-time resource specifically to try to develop our organic options and to push more into markets. We have a big leakage problem with lamb, so it is not just that it is 1%, but 70% of that is not even being sold as organic lamb because it is coming at us in a seasonal peak and not necessarily allowing us to build the maximum opportunity with customers.

Tim Lombard (Fine Gael)
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Is there a market for organic lamb?

Mr. John Murray:

Absolutely. There is a very well-established market for organic lamb in export markets. It is becoming a bigger piece of market opportunity and even within conventional players, there is a suite of opportunities.

Tim Lombard (Fine Gael)
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Is a higher price paid for it?

Mr. John Murray:

Yes, a higher price is consistently paid for it. We often get asked about the level of that higher price and it is in the region of 10%, not the 15% or 20% that certain farmers would ideally like to see. Nonetheless, there is a steady 10% premium on that. At the moment, the market is challenged and inflation is a challenge for organic, but we expect it to continue through that and to revert back to a steady growth market, and we have seen consistent growth in the organic market across Europe in recent years.

Tim Lombard (Fine Gael)
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Is there a special marketing campaign for organic products?

Mr. John Murray:

Yes. This year, we are working with the Department and we have secured additional Brexit adjustment reserve, BAR, funding to focus on organic, both in the domestic market and export markets. The domestic market is very much about trying to grow awareness among consumers around organic and really build that market for the future, and in export markets it is very much about trying to connect us with the right customers that can secure us in the future. We will have more lamb coming on and we expect that 1% to move up to 2%, 3% or 4% over the coming years as we see more of those farmers convert to the organic scheme this year.

Michael Collins (Cork South West, Independent)
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I have four questions, two for Meat Industry Ireland and two for both Meat Industry Ireland and Bord Bia. The first is a more serious question so I will ask it on a stand-alone basis. We have heard from sheep farmers and marts, and also on various media, about how the factories are raising or lowering the price of lamb. We are hearing rumblings and calls for a full investigation into the whole area of the factories and Meat Industry Ireland processors on several issues as farmers are not getting the best price for their products. Do Meat Industry Ireland and Bord Bia think this is fair on the farmer, the primary producer?

Mr. Philip Carroll:

I have just talked about the prices we are paying, and I think I have given a fairly detailed account of where we are in the marketplace and where we have been over the last number of years. We hit record prices in the marketplace at close to €8 at some stage last year. We have been consistently at the top level of pricing against our competitors, who, in most cases, have significant internal markets that they serve. As processors, they are using domestic supplies in their own markets and they have the advantage of that, just as I mentioned earlier the advantage the UK supplier has in the retail market there.

The numbers are quite significant. We can compete on price, we are competing on price and we have continually competed on price with the main suppliers, apart from France. We are behind France because of the significant market it has. As Mr. O’Toole said earlier, we export about 40% of our product or, rather, 40% of the 70% that goes to the Continent, which is 30% or thereabouts of product that goes into that market. We are competing with a heavyweight domestic supply base in that market. If we compare that with the Spanish, who are the biggest producers across Europe, the Spanish have a situation where they are currently on par with us in terms of price. When we look beyond that, Britain and Northern Ireland are on par. Britain is exporting a significant amount of its product into the French market but we must bear in mind that it has a huge domestic market itself, where it trades into the retail sector constantly.

When we consider the risk that Mr. Burke talked about, we note that the big risk we face is from the imports coming from New Zealand under quota, and under tariff for the quota for that matter, and more specifically from Australia, where the volumes could be significant. We are paying prices that are probably 40% higher than the price of that surplus produce. Putting all this into the context of where we are regarding an EU-wide balance, we have a self-sufficiency level of 85% to 90%, meaning Europe is a net importer. That is a reality we face. That is why other countries that have surplus product and a trade agreement, such as those I have talked about, have significant opportunities to trade into our market and have a displacement effect. Therefore, I dispute the point in question. It is a matter for people to do whatever they want regarding it, but what I am really saying to the Deputy is that I do not believe the facts support the claim.

Michael Collins (Cork South West, Independent)
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I fully respect what Mr. Carroll is saying but I would like independent evidence regarding the prices. Factories are dictating the price of lamb. Some people feel there should be a full investigation into the whole processing business under Meat Industry Ireland. That is what the farmers on the ground are telling me.

What is the monetary value of sheep offal? Where does it end up in the processing chain, be it used at home or exported?

Mr. Philip Carroll:

I do not have that detail now but I will be happy to provide it to the Deputy.

Michael Collins (Cork South West, Independent)
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I appreciate that.

We have been listening to proposals from the Minister and the Department on how the sheep sector will improve and on what is needed to improve it from the perspective of farm organisations. In practical terms, when can sheep farmers expect to see an improvement in the whole sector, putting more money into their pockets for their product and with a working plan for the wool sector? There is an urgent need to have the serious issue of attacks on sheep addressed in full. This process is going slowly. We do not want to see farmers leaving the sector.

Mr. Jim O'Toole:

I am happy to address that in the first instance. We completely share the Deputy's contention that we need to see as many sheep farmers as possible staying in the sector. There are several things that Bord Bia believes will assist in that regard. One is trying to maximise the return from the marketplace, as we have outlined. We have a reasonably good position, notwithstanding the competition we encounter in continental Europe, and that is why we are also trying to have activity in international markets. I mentioned in my opening statement that we have an awareness campaign in markets to which we do not yet have full access, but we are building the case. These markets include Korea, Japan, China and the United States. As in other meat sectors, and as is true regarding all our food exports, the more export options we have to try to sell different cuts and products in different markets at different times of the year to maximise our return, the better. That is the work we have to do and that we do undertake.

Another important factor is that we are promoting all food and drink exports from Ireland on the basis of the sustainability credentials we have. Approximately 70% of our current lamb output is part of our quality assurance programme. That programme provides evidence to our customers – this is becoming increasingly important – and it also provides a bonus of between 10 cent and 20 cent per kilogram to farmers. It is important at all times to be able to give an additional reward for the endeavour. In the two areas I have mentioned, that is how we will work to improve market conditions.

Michael Collins (Cork South West, Independent)
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My final question, which is for the representatives of both organisations, is on when a processing plant takes in a delivery of lamb carcasses from abroad to be processed. Where does that lamb end up? Does it end up in Irish shops or is it exported again? Is the place of origin stamped on it? Is Bord Bia's stamp on any of these products?

I am concerned that lamb imports, despite our free trade, have an immediate effect on our home trade in lamb and sheep. How do the representatives of both organisations envisage this being addressed? It is a major concern for our sheep farmers.

Mr. Jim O'Toole:

I will open the response and let my colleagues from Meat Industry Ireland comment also. There are two elements. There is country-of-origin labelling, as the Deputy is aware. If the carcass originates outside a member state, there is a legal requirement to record the place of origin accurately. It cannot be recorded as being of Irish origin. Again referring to our own quality assurance programme, I emphasise that only quality-assured lamb going through a quality-assured processor will be able to bear the Bord Bia quality assurance mark that has "Origin–Ireland" on it. This is rigorously audited and examined by our team. Any of the imported lamb product may be used on the domestic market or exported to other market destinations, but it is not designated as Irish or quality assured by Bord Bia. Maybe my colleagues from Meat Industry Ireland would like to give their perspective also.

Mr. Dale Crammond:

I do not really have much to add. About 6,000 or 7,000 tonnes of carcasses come into the country for further processing. I guess that helps to spread the overheads and throughput across the factory. Given the size of the sector as a whole, this is not very significant.

Martin Browne (Tipperary, Sinn Fein)
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I, too, welcome the guests. Bord Bia is trying to promote our lamb and spending €3.6 billion on developing the sector. The representatives have said we are exporting to 30 countries, with 75% going to Europe. At the same time, the EU is doing a deal with New Zealand to bring in 38,000 tonnes of the same type of meat. When we have such good quality here, it must be very frustrating for Bord Bia that the EU is working more or less against what it is trying to promote. Given Bord Bia's expenditure, what is the view of the representatives? The question is related more to Bord Bia than Meat Industry Ireland.

Mr. Jim O'Toole:

I will let my colleague Mr. Joe Burke comment in full but will first make a general point. A factor is that the EU market is not self-sufficient. We are seeking to develop export markets ourselves and to gain access to markets outside the EU. Therefore, in some respects we cannot be upset too much when other countries try to gain access to our market for their products. It is free trade. I will let Mr. Burke comment further.

Mr. Joe Burke:

With regard to New Zealand's exports to Europe, there had already been in place a fairly comprehensive and significant deal, even prior to the additional volume and tariff arrangement. Thankfully, New Zealand has not really targeted the European market over the past few years. Its quota for 2022 was only 56% utilised. There is additional capacity should it choose to utilise it, and we have to be mindful of that.

In reality, however, New Zealand used only 56% of the previous quota in 2022. It is one to keep an eye on. The volumes into Europe grew slightly, particularly in the latter half of 2022. That was based mainly on difficulties in other markets, including China and the US. We have been a little more hopeful in recent months that those markets are recovering post the Covid pandemic. We see a slight recovery in prices in the southern hemisphere as well, although, as we heard earlier, those countries' prices are still significantly below ours. They have come up by a couple of percent a month over recent months, but yes, it is certainly one to keep an eye on. The market will remain competitive in the near future anyway.

Martin Browne (Tipperary, Sinn Fein)
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How optimistic-----

Jackie Cahill (Tipperary, Fianna Fail)
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I will have to suspend the sitting. We have a vote in the Dáil.

Martin Browne (Tipperary, Sinn Fein)
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How optimistic is Bord Bia about its efforts? We know the challenges we face; they are mounting all the time. How is Bord Bia presenting its case in light of all of that? How does it view the balance between the benefits of the added exports and the challenges relating to the significant volume of imports?

Mr. Jim O'Toole:

As my colleague, Mr. Burke, outlined, the EU quota from third countries so far is underutilised. Greater access is being given because of imports from New Zealand and Australia to the UK, which we would see as a threat, but there is also some trade between New Zealand and China, albeit at a lower price point than we would like. They may not divert to China because the European market is more attractive. On balance it is probably neutral enough in the immediate term in the threat from imports into the EU versus the exporting opportunities we are developing.

Martin Browne (Tipperary, Sinn Fein)
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Bord Bia does not see any major challenge to our exports at this stage?

Mr. Jim O'Toole:

Not in the medium term but that is a dangerous place in which to speculate because of the current indications. My colleague, Mr. Burke, might want to elaborate.

Mr. Joe Burke:

The competitive pressures, which we have touched on there, have been more intense since the latter part of last year. The UK in particular grew its meat exports. Even in the first quarter of this year, exports of lamb from the UK into the EU grew by just over 20% to more than 21,000 tonnes. While that was a higher figure than the previous year, it is just a recovery in comparison with the couple of years post Brexit when they began to keep more of their lamb at home and to import less southern hemisphere product. We are seeing, as we have touched on in the figures, what might be a return to the more trade-focused approach of importing more and exporting more. It is not that we are anywhere near record levels in the UK's exports but we have seen that higher trend for the year to date. That has had an impact on trade and if you look at the prices, for the year to date Irish farmers have got an average price of €6.81 per kilo. That compares with €7.20 for the same period last year, which is a decline of about 6%. We are in a period of higher farm gate costs, which is a challenge and one we are mindful of in our marketing efforts and promotional plans.

Martin Browne (Tipperary, Sinn Fein)
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There is no great worry at the minute with 38,000 tonnes. When do red alarm bells start ringing?

If that were to double or more, at what figure should we start to get worried?

Mr. Joe Burke:

The 38,000 tonnes is the potential volume; it is the potential quota on top of the existing access they have. We will be closely watching their utilisation of that. For example, if they continue to only use half of their previous volume and run around along those levels, the impact on the market will not be that significant. However, if they start to utilise more and send in bigger volumes, it will get even more competitive, unfortunately. We will continue to monitor that situation.

Martin Browne (Tipperary, Sinn Fein)
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I have two quick questions for MII representatives. In their opening statement, it was said they are working along with the Department and Bord Bia in pursuing the Chinese and US markets. How far down the line or at what stage is that work in progress?

Mr. Dale Crammond:

I am happy to address that. Obviously, we can control the controllables. We are incredibly interested in seeking to improve the market access situation for our own producers and it is very important for us. On China, it was raised at the recent trade mission. We were in China in May with the Minister, Deputy McConalogue. We are working through a Chinese protocol for lamb. It will be difficult and we are trying to understand it a little bit better. We got a first draft of a protocol from the Department as recently as last week and we are working through it.

On the US, it is a similar challenge. We have access now in theory but we have to make it work commercially. The US has a certain way of doing things from a food safety perspective and we have to prove now that our plants are equivalent to its food safety standards. That work is ongoing. The US could be a good market for the industry. There is a growing consumer demand for and interest in lamb there.

As I said, let us control the controllables. We cannot control what New Zealand does but let us try to maximise the markets that we have available to us.

Martin Browne (Tipperary, Sinn Fein)
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Finally, I know the farmers are being paid up to 21 kg, but there are heavier lambs out there. The processors are not discarding that extra meat. Do we have any indication how much extra processors are cleaning off of farmers by not paying them above the 21 kg, even though they are using the extra meat on the heavier lambs? Do we have a figure on what the processors are gaining there?

Mr. Dale Crammond:

As I said, at the moment, we are working on in-spec lamb. We are in season now and it is 18 kg to 21 kg. As we move into the winter and spring of 2024, we increase the weight. The weight restriction is lifted perhaps up to 23 kg. There is some flexibility but it still creates challenge at the retail level because there is increased processing cost there.

Martin Browne (Tipperary, Sinn Fein)
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How much extra cost would be involved in a 23 kg lamb rather than a 21 kg lamb? I would imagine there would not be whole pile of extra cost.

Mr. Dale Crammond:

If you get into a situation where you have to debone the leg – remember, the leg is only one part of the animal and carcase; it does not represent the entire value – in order to make it saleable at a retail level, clearly there are costs involved in that. I do not have the precise figures here.

Martin Browne (Tipperary, Sinn Fein)
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Does the weight of lambs that farmers have fattened up go much above that 21 kg or 23 kg? What would be average heavy lamb?

Mr. Dale Crammond:

We do not tend to see lambs coming in much heavier than 23 kg or 24 kg. The vast majority of farmers and suppliers understand the specs that we are working to. As I said, at this time of year, the vast majority are coming in at 21 kg and then there is that bit of flexibility as we go through the season.

Claire Kerrane (Roscommon-Galway, Sinn Fein)
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I thank the witnesses for coming in and for their opening statements. All the questions have been asked, so I wish to focus on two areas. When it comes to the market, we have talked a lot about imports and exports. I wish to speak a little bit about sheep imports - live sheep and carcases that are being imported. What is happening when they go to the processors? We need greater transparency in all of that in respect of traceability and labelling. I think there are many questions out there on sheepmeat, lambs and lamb carcases imported into Ireland. What are the most up-to-date figures the witnesses have on imports? Why, at those levels, are we importing what we are importing?

I have one other question after this but I will ask this first of whosoever wishes to respond.

Mr. Dale Crammond:

I can address that. First, about 6,000 to 8,000 tonnes per year, give or take, tends to be the level of carcase imports into the country, I think mainly coming from Northern Ireland.

Claire Kerrane (Roscommon-Galway, Sinn Fein)
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Separate to carcases, what about live animals?

Mr. Dale Crammond:

Live animals tends to be up around 400,000 sheep - again, nearly all from Northern Ireland. So far this year, we have imported about 197,000, which will be on track for that annual figure of around 400,000. Virtually no imports come from any other country in the EU. It is all from Northern Ireland and a very small amount from mainland UK.

Claire Kerrane (Roscommon-Galway, Sinn Fein)
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Why is this happening? Is there a shortfall there?

Mr. Dale Crammond:

There is always a demand. Having these carcases processed in the plants enables processors to spread their overheads and costs over a wider volume of sheep. They are coming from the UK market, where the price is incredibly similar to our own. There is no advantage there and it does not really have any impact on the price that the Irish farmer will ultimately get. It is just part of the functioning all-Ireland economy that occurs in the beef and dairy sector and it has been ongoing for quite a while.

Claire Kerrane (Roscommon-Galway, Sinn Fein)
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If demand was there by further processors and if there is a shortfall, it would be better to give it to the local producers to fill that shortfall rather than relying on imports, would it not?

Mr. Dale Crammond:

We have to acknowledge that trade is a two-way street. This has gone on for a while and it is an important part of the sheep trade. The processors need it in order to spread their costs over a long time. We have to note the self-sufficiency point with regard to sheepmeat as well.

Claire Kerrane (Roscommon-Galway, Sinn Fein)
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I have a final question for whoever is willing, if anyone wants to answer it. It has been recognised that the sheep sector and sheep farmers in particular have been under pressure. Many of them have sought support through the Brexit adjustment reserve fund. I think sheep farmers were quite taken aback that they could not seem to access funding under that, given they have been impacted. We spoke much about England, imports, exports and the impact of all of that, as well as New Zealand and Australia. With regard to the witnesses’ knowledge of the sector, imports, exports and all of that, as well as the impact of Brexit, do they see an argument for that level or kind of funding to support sheep farmers and that sector? Would they see a rationale for that, given the situation the sector is in? If the witnesses do not wish to respond, that is okay.

Mr. Philip Carroll:

From our perspective as an industry operating in the commercial sector, we see the funding support coming through BAR as a matter for the Department. However, we recognise the challenges the sector is facing. We support any of those measures the sector requires, particularly around existing sheep schemes and the associated funding.

We support the primary sector in accessing those funds, quite specifically, Brexit adjustment reserve, BAR, funding because it is not national funding. It is part of an EU-wide scheme and is directly associated with the Brexit situation. The only problem with that is it does not have durability, as such, because of the fact it will run out of time towards the end of this year. Maybe some sort of combination model is required where BAR, to the extent that it can be made available, would be made available, but it might require some other accompanying measures as well.

Jackie Cahill (Tipperary, Fianna Fail)
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I will ask a few questions. Stakeholders representing the sheep sector have been before the committee regarding the profitability of the sector The figures we were given indicate that €7 per ewe is the average return, which makes it very hard to make any kind of viable income from sheep farming.

A couple of questions come to mind. What is the percentage divide between mountain lamb versus lowland lamb? I was very surprised to hear the breakdown showing the small amount of organic lamb that is there. Surely, virtually all mountain lamb would qualify as organic, if it were labelled as such. While the reasons for the carcase weight have been very clearly stated, it is obviously a huge barrier to the financial return for the flock owner. When a lamb gets to that weight, it will put on a few extra kilos very quickly and easily. Is there any potential, through genetics, for us to produce a lamb of leaner quality at a higher weight that would manage to give a better return per ewe? We have seen the genetic potential in dairy, beef etc., where genetic improvements have seriously improved the economic breeding index, EBI, of cows. We see in cattle that genetics have improved to show what animals have the greatest meat yield. Is it possible we can do the same with sheep? Can we produce a lean lamb at a higher weight?

Mr. Jim O'Toole:

I will open the remarks and will ask my colleague, Mr. Burke, to talk a little about the breakdown in respect of hill lamb. On the Cathaoirleach's comment about the organic percentage, and it is something that many people struggle with a little, our perception of hill lamb and lamb generally is that it is produced very naturally. However, in order to qualify for organic markets, it has to be certified as such and, therefore, as my colleague-----

Jackie Cahill (Tipperary, Fianna Fail)
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Surely, virtually all mountain lamb would qualify easily enough.

Mr. Jim O'Toole:

It must be certified.

Jackie Cahill (Tipperary, Fianna Fail)
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I accept that point but there would not be many hurdles to jump to qualify.

Mr. Jim O'Toole:

The Cathaoirleach is quite correct. I will ask Mr. Burke to comment on the composition of the flock in respect of hill and lowland, if that is okay.

Mr. Joe Burke:

Just more than a third of the lamb output originates from hill flocks but based on lower fertility rates, and lower weights and carcase weights and so on, it is lower than that on a volume basis in terms of the throughput going through the meat plants. We work very closely with a number of the hill lamb producer groups to differentiate that product and maximise the opportunity in order to call out hill lamb. We have had some successes, including through the development of the Atlantic hill lamb brand in conjunction with an Irish processor and an Irish retailer and through, thankfully, some good collaboration. In practice, however, many of those lambs coming from the hill flocks tend to be marketed later in the year as store lambs. They then end up being finished by store lamb finishers and put into, in fairness to them, similar carcase weights, albeit at the slightly lower end of the range, at maybe 16 kg to 19 kg of carcase weight. They tend to end up in similar market outlets as the lowland lambs, towards the end of the marketing season, as hoggets.

Potential exists, through genetics, to produce heavier carcase weights that are also still lean without going over-fat but, unfortunately, we then end up with these higher weights of cuts that will result in higher price points. It is not so much the fatness in that instance as the sheer weight of those cuts, although the industry has the expertise in order to break cuts, debone them, and present them in different forms, including around breaking the leg into two parts and so on. A labour cost is associated with that along with a certain amount of yield loss. The preference has always tended to be around this grade 1 lamb. We have seen the development of muscular sheep breeds and efficient producers going down that route but where that has resulted in heavier carcase weights, it has definitely continued to present difficulties at factory and market level.

Jackie Cahill (Tipperary, Fianna Fail)
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One of the opening statements indicated that all export markets are uniform and all want this lamb of a specific weight. Are the representatives saying no market out there wants heavier lamb? Even 2 kg would make a huge difference to the lamb producer. Are the representatives saying that every market is the same, whether it is Iranian or in the US?

Mr. Joe Burke:

Forgive me for jumping in, but the exception we saw in recent years was when we visited the US market. That is one where we would have an opportunity to sell heavier cuts, many of which end up in the food service market that we discussed. At relatively high price points, that is one that has offered potential. Although it will not take every lamb or every heavy lamb, there will be opportunities for certain cuts. Some of them may even be outside the ideal specification that the European market, in particular, is looking for. It is fair to say that, in general, the retail market in particular wants a certain size of cut and to hit a certain price point. The food service market may be more forgiving as regards the specification, but that is a more competitive market that does not pay as high a price. That also has been part of the rationale for the lower prices or discounts that are available for those heavier sheep and heavier carcases.

Jackie Cahill (Tipperary, Fianna Fail)
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The reason the carcase weight increases as the year goes on is that the bone structure increases. Is that correct?

Mr. Joe Burke:

Yes. It is the yield. MII touched on this. The kill-out rate reduces as the season goes on. In addition, as the animal matures, the saleable meat yield from that carcase will not be as high. There will be a higher proportion of bone in those cuts. Having looked at those more mature lambs as the season goes on, the loin and the leg become a little longer but the saleable meat yield from it declines slightly.

Danny Healy-Rae (Kerry, Independent)
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Is MII aware of the number of farmers who are getting out of mountain production and producing sheep on hills, such as the hills of Kerry? There is a mass exodus out of the-----

Jackie Cahill (Tipperary, Fianna Fail)
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I did not expect the Deputy to talk about any other hills than the hills of Kerry.

Danny Healy-Rae (Kerry, Independent)
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Well, it is true. People are getting out altogether and people are reducing in number. Will that have an impact on driving up the price of lamb for the consumer? I will qualify what is happening in that regard. Even part-time farmers who have jobs give a lot of time every week to dosing sheep. So much has to be done to them, and the cost of dosing and vaccinations has increased by 30%. Dipping, shearing and everything that is involved mean it is getting harder and harder to keep younger farmers at that job. While the old fellas are still at it because they do not know anything else, younger fellas are raring heifers for beef and dairy.

They are buying heifer calves. They see the way the upper part of the hills are going. You could see them now; there is stuff on them now that had not been on them before at all. They were eked down and they were kept right. Maybe the Minister, Deputy Eamon Ryan, and people like that might be glad about that, but in a few years when there is all of this growth, it will burn. That is invariably what happens to it. Something will start a fire and then it will be no good for anything.

The committee should be asking the Minister to try to subsidise the ewe. People are saying to me that they need €30 per ewe to ensure everyone does not get out of it. The representatives know, and I know it especially, that if one farmer goes out in early February with a fertiliser spreader, before the evening everyone around will have gone out. They will see that such a fellow got out of it and they will wonder what they are doing.

Are the witnesses in any way worried or concerned that too many people will get out of it? It is a tough game because it involves climbing mountains. I know they have quad bikes, but there are parts of these places where you could not travel with any quad bikes. Good dogs are harder to get and people do not have the time to train them. You cannot do much around sheep without a good dog. They are costly to get. Are our guests concerned about this development? I see it happening and I am being told it is happening. Are they worried that it will have an adverse impact on their businesses? I refer especially to Meat Industry Ireland. Are they concerned about that?

Mr. Philip Carroll:

I thank the Deputy for that. We are aware of that and we can see similarities between that and what is happening in the suckler herd. There is a natural decline occurring there as well. We would be concerned about that and the impact it may have. As we have said all evening, we are competitive when it comes to the price in the main markets in which we are operating. There is a reasonable proposition there for sheep producers. We recognise equally that they have faced enormous costs. This is probably less so on hills than in the lowlands, but nonetheless, these are significant costs. The Deputy mentioned some kind of a premium that might be made available. This came up previously. Some suggestion was made in an earlier conversation about the potential for BAR funding of some additional premium. My response was that it might form part of what the Government could do, although there is a limited time period within which BAR funding can be allocated in any event. That is running out. Some other accompanying measures might be required to give support to the very farmers the Deputy is talking about.

Regarding the market returns that are there, they are pretty strong, they are very competitive and they have been for quite a while. From that commercial perspective, there is a relatively good return depending on what point of view you take on it. The more production we have, the more quality lamb we can process and export. There is an exportable volume. We are a net exporter. We could potentially fill a gap in the market and attempt to displace some of the imports that are coming from places like Australia and New Zealand. That would be a challenge in itself because these are much cheaper importers into the European Union. However, we are still only approximately 90% self-sufficient in Europe, so there is a bit of space in the market for that. Yes, it would concern us if there were to be a significant decline in the level of output at a farm level.

Danny Healy-Rae (Kerry, Independent)
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I forgot to mention that the cost of meals and ration has gone up considerably.

Mr. Philip Carroll:

Correct.

Danny Healy-Rae (Kerry, Independent)
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That is impacting on that. Some of them are saying that they will not even pay for the stuff. I thank Mr. Carroll for the answer. It is a concern that we need to remind the Government about, or ask them about when we are coming up to budget time. Could we write to them as a committee to ask? If we do not ask, we will not get. These people are asking me. We have quite a lot of sheep farmers. We have room for this activity. We are talking about natural production, and the hills are ideal for that kind of production.

Jackie Cahill (Tipperary, Fianna Fail)
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I have one final question for Mr. Burke, who said that the US is a better market for the heavier lamb. Is there much tonnage going into the US? Is Bord Bia focused on establishing a better presence in the US?

Mr. Joe Burke:

We have not yet managed to get in there in terms of our ability to access the US market. I know the Department, along with Meat Industry Ireland-----

Jackie Cahill (Tipperary, Fianna Fail)
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Is a tariff going in there?

Mr. Joe Burke:

No, there is not a tariff for lamb. There is a quota on the beef side. The opportunity that exists with lamb appears to be very promising, if we can manage to break into that market. As the CEO, Mr. O'Toole, alluded to, we have an active EU co-funded campaign. We have been using that to establish our reputation, as well as to tell buyers and the market about the top-quality product we produce and we have available to them to export. However, as of yet, the industry has not been able to break in there. I might ask Mr. Crammond or Mr. Carroll to expand a little more on some of the barriers that have prevented us from being able to get in there so far.

Mr. Dale Crammond:

I touched on this earlier in the session. The US market is a key priority for us. We are doing everything we can to engage with the Department to figure out how it will work. In terms of US equivalence, they set high standards and they have a certain way of doing things. We need to be able to show that our food processing standards are equivalent to theirs. They might have a critical control point in a slightly different place so we have to work through some of those complexities. We are doing that and we are hopeful that we will be able to make progress in the very near future because it is a market that our members are very much interested in.

Jackie Cahill (Tipperary, Fianna Fail)
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On behalf of the committee, I thank the witnesses for their contributions this evening. They gave us a very good background on why the weight restrictions are where they are. They answered our questions fairly and constructively. On behalf of the committee, I thank them for their contributions.

The joint committee will next meet on Thursday, 13 July at 5.30 p.m., when we will undertake an examination of governance issues at the Irish Horseracing Regulatory Board.