Seanad Éireann - Volume 102 - 30 November, 1983

State Guarantees Act, 1954 (Amendment of Schedule) (No. 2) Order, 1983: Motion.

[729] Mr. Ferris: I move:

That Seanad Éireann approves the following Order in draft:

State Guarantees Act, 1954 (Amendment of Schedule) (No. 2) Order, 1983.

a copy of which was laid in draft before the Seanad on the 10th day of November, 1983.

Minister of State at the Department of Agriculture (Mr. Hegarty): The draft order proposes that the Pigs and Bacon Commission Ltd. be included in the schedule to the Act in respect of a sum of £500,000. The Pigs and Bacon Commission Ltd. is a private company set up by bacon curers and pig producers to take over the role of centralised marketing of pigmeat handled previously by the semi-State body the Pigs and Bacon Commission. The new company has been trading since 1 August 1983.

Central marketing of pigmeat is essential if the industry is to operate successfully on export markets. The amount of pigmeat which this country exports is small compared to total supplies on these markets. If our pigmeat exporters were to operate individually there would be a duplication of effort and a waste of resources. A unified marketing organisation provides a stimulus to the maintenance of good standards of quality and presentation and a single focal point for overseas customers. This has positive advantages in promoting and selling the product.

It was for these reasons that the semi-State Pigs and Bacon Commission was established in its present form in 1961. However, in May 1981, the Supreme Court ruled against the PBC in a case in which the commission had sued for non-payment of statutory levies. Following that decision talks were held with the industry which resulted in the Government agreeing to take responsibility for a very sizeable deficit which existed in the PBC accounts. This deficit had been [730] building up for a number of years while the case about the levies was going through the courts. The industry in turn agreed to pay the running costs of the PBC from 5 April 1982 and to form a new private centralised exporting company financed entirely by the industry. From 5 April 1982 to August 1983 the PBC continued to operate under this arrangement, with all costs being met by the industry. The actual transfer of trading operations to PBC Ltd., a private company, took place on 1 August 1983.

There was close co-operation between producers and curers alike in setting up the new company and I am pleased to be able to say that it is going ahead well and carrying out effectively the marketing work previously done by the semi-State PBC. If I were asked to cite one single instance of the benefits of centralised marketing achieved through the agency of the PBC it would be the valuable contract for pork exports to Japan, a contract that we are holding in spite of extreme difficulties. We might never have got into that market in the first place but for the fact that we had a centralised agency handling pigmeat. Pork exports to Japan are expected to reach a record level of £30 million this year. Intense competition makes Japan a difficult market but it is important that we keep a share of that market. I would also like to put on record that pig production accounts for about 8 per cent of gross agricultural output and is valued at about £170 million per year.

The total value of our pigmeat exports is of the order of £70 million per year. The processing industry employs over 4,000 people. These figures do not take account of other activities which are very strongly supported through pig production, in particular the growing and production of feedingstuffs.

But to return to the business in hand, the semi-State PBC had, for some years, enjoyed a letter of sanction under the Pigs and Bacon Acts which enabled it to borrow from the banks for working capital. In recent times the level of borrowings on foot of this facility had been about £500,000. It would not be open to me under these Acts to give a similar letter of sanction to PBC Ltd. since it is a [731] private company. In the absence of a letter of sanction the new company would not have been assured of getting the loan facilities needed for working capital, hence the need for the measure now before the House.

The draft order provides for a guarantee by the Minister for Finance for borrowings of up to £500,000 by PBC Ltd. It is not the intention that this guarantee should be provided indefinitely. I would expect the PBC Ltd. within a reasonable period of years to build up a capital base of its own. I commend the draft order to the Seanad.

Mr. T. Hussey: I agree with the order before the House which is an effort to provide a guarantee by the Minister for Finance for borrowings of up to £500,000 by the Pigs and Bacon Commission. It is important that they are given this facility because the Pigs and Bacon Commission are doing a very good job in selling our bacon and pork abroad. From the figures produced by the Minister today they can be complimented on the efforts they have made in such a short time to secure markets not alone in Britain but also in Japan where they have sold £30 million worth of pork this year. I am quite satisfied that the competition for that market must be great.

It is important that we sell in this type of market. We have our near neighbour, Britain, who buy possibly the bulk of our bacon every year but it is also important that the Pigs and Bacon Commission search for additional markets on the Continent. I am happy that they have secured such a good contract from Japan.

Have they gone into France and Germany? Here, too, there is a lot of goodwill towards Ireland and I am sure they are areas that could be explored. They are areas where the CBF have established a strong base in selling prepacked Irish beef to the Germans. I am sure these are areas that could also be explored by the Pigs and Bacon Commission.

The pig industry as we knew it in the past has completely changed. No longer have we the small producers as we used [732] to have, particularly in the west where in the past every small farmer produced a certain number of pigs and bonhams each year. That is no longer the case. It is now left to the bigger producer. Some of those producers who in the past ten or 15 years went to the trouble and expense of building pig units have now, because of the small profit margins obtaining in the industry, closed down those units. This is an unfortunate situation when they had gone to the trouble and expense of erecting them in the first place. We realise that the profit margin is very small; the cost of meal, electricity and so on is very high and those extra charges have to be borne by the producer.

In the pig industry there is always the danger of big losses unless producers are very well informed and are capable of detecting diseases, and so on. I do not know whether the Pigs and Bacon Commission would have any advice to offer in that area, or if their responsibility is mainly in securing markets and promoting the sale of Irish bacon on the continent. We should always think of the producers, because they are the people who have to produce the goods and in many cases their profit margins can be very small.

We have established a very good name for our bacon in Britain, and I would like to see that standard maintained at all times. It is very important that the Pigs and Bacon Commission ensure that only the best quality Irish bacon is exported. That is something they should always insist on. Exports of bacon, according to the Minister's figures, amount to £70 million a year. That is a sizeable amount but I am sure that could be improved. Now that the newly constituted Pigs and Bacon Commission have been established and have got down to do their work of market research I am sure that in the years ahead they will be able to improve on that market and possibly in a few years exports will be greatly increased.

The Minister said he would expect the Pigs and Bacon Commission Limited to build up a capital base of their own within a reasonable period of years. I would like to know how he expects that base to come about; where does he expect the commission [733] to get the capital, from the commission from sales or what? Perhaps when he is replying he would enlighten us.

Mr. McDonald: I welcome this motion and join in the thanks to the Minister for introducing it. I would like to take this opportunity to pay a tribute to the great pioneering work done by the old Pigs and Bacon Commission over the years. I welcome the new body, that is, the Pigs and Bacon Commission Limited, and wish them every success. I hope they will achieve the goals that were set for the old Pigs and Bacon Commission when it was reconstituted in 1961.

As Senator Hussey said, the margins of profit for the farmer/pig producers are extremely slim even though there has been a tremendous improvement in efficiency and in the husbandry standards of Irish pig farmers. They have very little control over the costs of feedingstuffs they have to buy to produce bacon. The efforts of the pig producers and increased productivity of the bacon factories provide our people with bacon, pork and pork products and give the Irish housewife very good value, but we do not always appreciate that.

I would like the Minister to tell the House how much co-operation exists between the Pigs and Bacon Commission Limited, Bord Beostoic Feola and Córas Tráchtála. If we are to continue to compete effectively in what can be described as an increasingly difficult market situation, we require dynamic efforts on the part of all our exporting agencies to retain our foothold in the market, especially the markets in the Far East, those the old Pigs and Bacon Commission captured against all the odds some 20 years ago.

Some effort should be made to facilitate Córas Tráchtála in grant-aiding Irish export agencies, or Irish representatives who may not be manufacturers or producers themselves. This is something which has been excluded in the Acts that set up CTT and it is time the Government reviewed the situation. Every effort must be made, and should be made, to ensure that the high quality products we are producing are exported. The people in [734] the export business should be facilitated to promote and carry those lines to the greatest number of markets possible. Under the State Guarantees Act the sum included in the Schedule is adequate and we will be able to ensure that this relatively new body, the Pigs and Bacon Commission Limited, will not be hindered in any way, and will be adequately financed to tackle the challenge facing them.

Again I thank the Minister for bringing in this measure.

Mr. Ferris: In the initial days, the old Pigs and Bacon Commission, under the guiding hand of Reddy Day, did Trojan work. At that time the industry had tremendous confidence in this organisation. However, as the Minister said in his opening statement, following the Supreme Court ruling when the payment of statutory levies was contested, and as a result of possible EEC legislation, their future as a State-sponsored agency was obviously in doubt. It was good to see that the industry, which had the interests of the bacon and pork producers at heart, came to the rescue and set up their own marketing agency. That was a welcome move when such an important role as exporting to the Middle East and to other countries was involved. When the crash came, the Government quickly, and rightly so, came to the rescue to try to ensure that the company were helped out of their financial difficulties.

Recently I read that one of our Ministers said that in future these letters of credit would be restricted in regard to people over whom the State, in reality, does not have sufficient control. I am wondering what level of control, if any, will the Government have over the Pigs and Bacon Commission Limited? Are we setting a precedent where the Government are now underwriting the borrowings of a private company? I know it is for a very good reason, which I support wholeheartedly, but so that we will know exactly what we are doing, will the Minister say how are they funded at present? A previous Senator asked if the Minister intended them to build up their own capital base. How are they funded? Is it [735] still from the producer? Because we are now giving a letter of credit to a private company to do a very important job, admittedly, what control, if any, has the State? I realise that this is intended as an interim measure, but we do not have any control. Perhaps the Minister would clarify these few points for my own information.

Minister of State at the Department of Agriculture (Mr. Hegarty): I will deal with the points as they were raised. I believe that the Pigs and Bacon Commission Limited are doing a good job. Senator Hussey asked how our exports trade is getting on. We have a good market in Japan. We have a very good name in Britain both for bacon and pork, and the supermarkets are very keen on Irish produce. I saw some of these products on sale recently. They looked good; they were very well presented and were selling well.

Last year our total sales to France were in the region of £7.3 million, about 5,500 tonnes and in the case of Germany, we sold 3,800 tonnes, worth about £5 million. The German market is getting more and more difficult because of the very high positive MCAs. It is getting to be a tougher market by the day. The Pigs and Bacon Commission are free to export to all markets.

There is excellent co-operation between the Pigs and Bacon Commission and Beostoic Feola, for beef and for bacon and pork products. We reckon that the level of borrowing is adequate for the trading involved.

Senator Ferris asked about letters of credit. Any change will have to be voluntary. At the moment, there is a voluntary levy both from the curers and the producers and in due course that levy will build itself up. What is being provided now is a guarantee. Senator Ferris was worried that we were creating a precedent, but there are many precedents for what we are doing. The accounts will be examined annually and we envisage that over a period of time the industry will build up its own funding.

[736] Mr. T. Hussey: How will the Pigs and Bacon Commission build up a base over the years?

Mr. Hegarty: From within the industry; and that is happening at the moment.

Mr. T. Hussey: Can the commission do anything about the presentation of bacon on the home market? At present it is presented in a very haphazard manner in many supermarkets throughout the country.

Mr. Hegarty: One of the big problems on the home market is the lack of cohesion in slaughtering. We have initiated centralised slaughtering and experienced a lot of difficulty getting people to agree. At long last the industry have agreed to centralise slaughtering, and when the pigs are slaughtered, presented and prepared to very high standards, that will improve the appearance and quality of our products on the home market.

As Senators are probably aware, I am working on the horticultural side. When we get the horticultural and potato side moving, we should do a similar operation on buying home produced meats and advising people about the value and quality of Irish meat and reassuring them that they will not damage their health by eating Irish bacon and pork.

Question put and agreed to.