Paul Lawless: Farmers Facing Devastating Price Volatility

to the witnesses here before us. The central issue here is around not necessarily price but it's it's actually price volatility for farmers and that is price volatility is creating a major major financial exposure for farmers because farmers are making commitments months in advance or years in advance in terms of purchasing cattle, buying store cattle, committing to winter feeding, fertilizer, all of the input costs that arise and then all of a sudden the factories combined collectively pull the prices and that is leaving enormous financial exposure on farmers and we talk about sustainability across every single sector but the only man we don't talk about in terms of making his business sustainable is farmers and like it is shocking that we are doing this and every few years it happens and we had a good year last year and farmers invested heavily in farming systems and purchasing cattle and so on and this year we're back to square one and the saddest thing is that I know farmers who have purchased at a very high price who have put input costs at a very high price and they now they now are going to make a loss. When they bring their cattle to the factory gates they're going to make a loss. That's devastating. It's devastating for the farmer individually but it's devastating for a farm family, it's devastating for a son or daughter watching his father or mother in this cyclical cycle where he is the last man to be looked after because what I'm interested here is that you will no doubt make the point that these are international markets etc etc but my question to Meat Industry Ireland is have you taken a cut of your profits and if so are you making a loss because there's farmers across Ireland that this summer and at the back end of the year will be bringing cattle to the factory gates at a loss. Now what percentage of your contracts have you made a loss on? It's a major issue and we have to address it and I'm very interested to hear what your plans and suggestions are around making this model sustainable. That's an obvious challenge Deputy and look we addressed that earlier with Deputy Eard. Meat processors last year in certain times a year did make a loss because the agri-food regulator clearly shows that in terms of the hind quarter and the forequarter selling price compared to the price of cattle at that time. Obviously then there was a recorrection in terms of the retail contracts later in the year and so that happened. So yes processors are exposed to the vagaries of the market also from time to time. As we said there's a lot of product going into cold storage at the moment. Now it's going to be very difficult to make a return from that product once it goes in and once we have to pay for that. So we all accept the challenges that this issue creates, particularly for the farmer. What can we do about it? We'd be happy to have a conversation around that to see how we could kind of manage that a little bit better. Philip has talked about contracts there between finishers and processors. A lot of farmers do have contracts and they are paid above the market rate at that time when they go to sell their cattle and that might even have been referenced in the farming media recently. So you know that is the reality, that is happening out there. But it's very difficult, it's very difficult in other sectors also. We see it in the pig sector and certain years they're very good, certain years then they're very bad and that's farming, that's the business we're involved in at the moment. In terms of the contracts, what is the typical duration of a contract from a MII? The plants in your organisation. Obviously we don't have contracts. What's the typical duration of a supply contract from a meat processing plant? So look I wouldn't be privy to all the commercial details that the members would have but typically if you're talking about a farmer bringing in cattle in September, October to feed them over the winter period, it would cover that period you know into the selling point in the spring. So are there, in your view, are there any price signals or market signals that you can signal to farmers across the country to outline that we expect prices to increase or decrease? That's the point I'm making is like the length of your contracts, how long are they typically and how can we restore some sustainability in the market? Yeah so look typically as I said that the contractor is very much focused on the winter finisher so it covers that you know six to seven month period over the winter. How can we give signals? You're asking about the customer down the street, the contract with his customer and you're answering about the contract with your supplier. I'm answering about the contract with the supplier, with the farmer. You're asking about the contract with in the UK and... Well both to be honest like I'm interested in... Because there's no answer coming on the contract with the guy in the UK that you're supplying to. No so the contracts in terms of the contracts yeah with the purchasers, well look we have contracts there clearly but that's my question it's the contracts with the purchasers that's what we're trying to get to is that's what we're interested in because that will if you can if there's transparency in relation to contracts in the meat industry over two, three, five years with the suppliers in the UK and European markets that will give an indication to farmers. It will give confidence to farmers or perhaps it will outline to farmers actually let's be cautious here there are headwinds ahead. So look in terms of giving signals back to the farmer look there's a role for everyone in that and obviously BORBIA do a lot of work in that space as well and updating their market analysis. I don't have BORBIA here I have yourselves and I'm asking you it seems to me that your job primarily is to look after the plants but if you do not take a longer-term view of this and you are going to essentially and the farmer is continually suffering as a result of this market ultimately there will be no plants because there'll be no farmers to take cattle to the plants and I think you need to take a longer term view of this and I think you need to also ensure that the market is fair for the farmers as well. There are two issues there maybe that are being conflated as you say Chair. One is the the relationship with the farmer and the processor on the one hand and the processor and the retailer on the other hand and there are different provisions in contracts and Delos has covered the one on the farm level processor. You talked about there needs to be transparency in contracts between processors and retailers or wholesalers or whoever they are that are purchasing. Why would any commercial company reveal the terms of their contracts with each other? A. It would require both parties to agree on that and B. Why would we give all of that information to our competitors? Where's the logic in that question? Can I answer that Chair? Or can I ask a very brief question? Because I need to get every... Chair, I just wanted to ask a question then around why are quoted beef prices dropping by about 30 cents a kilo but the actual prices paid per kilo are moving much slower so there's quite a significant difference. Why is that happening? As I just alluded to Deputy, that may well be a result of some contracts finishers had with their processors over that winter period. Quotes have been falling back. I don't think they've been falling back anywhere like 30 cent a week but we have seen a decline and we accept that in terms of where cattle prices were. Thank you. Deputy Cal? Thank you.