BACKGROUND PAPER

MEAT

Note: The views expressed in this background paper do not purport to reflect the views of the Minister
or the Department of Agriculture, Food and the Marine

1
This paper will cover beef, sheep, pigmeat and poultry.

Beef Analysis 2025

Background

Economic contribution

The Beef Sector, with its almost uniquely widespread geographical coverage, is among the
most important Irish indigenous industries. There are over one hundred thousand farms
contributing to cattle output in Ireland. The Irish Beef sector is mainly broken into Suckler
producers and cattle finishers, with nearly 1.5 million head of cattle sent for slaughter in Irish
meat processing plants in 2013 alone. At over €2.1 billion, the production of bovine animals
accounted for 30% of the gross output of the agriculture sector in 2013, making it the most
important primary agriculture product in Ireland at farm level.

Beef Exports

Ireland exports 90% of the beef produced here. It is the biggest net exporter [by value/volume
or both] of beef in the EU and the 5 th biggest in the world. Exports in 2013 amounted to
470,000 tonnes worth over €2.1 billion. This represented a 37% increase in the value of
exports since 2010. The United Kingdom remains the dominant export market for Irish beef,
representing 53% of exports or 250,000 tonnes. Most of the rest of our beef exports (214,000
tonnes or 45%) go to Continental Europe, particularly France, Italy, the Netherlands, and
Scandinavia.

2
Irish beef prices relative to non-EU International Competitors (Brazil and US)

Irish prices increased substantially from 2009 to June 2013, where they hit record highs. Prices have
fallen since then as a result of a number of factors, including increased supply and falling
consumption. A tightening of supply should lead to some rises towards the end of 2014 and into
2015.

Prices in the USA also have been on an upward trend for a number of years, with weather related
supply constraints having a particular impact. The USDA expects prices to continue to rise in the
short term as a combination of the drought in 2012 and the dry conditions affecting beef producing
states of Texas and Oklahoma continue to have an adverse effect on beef output..

Brazilian beef prices have been rather more variable since 2009 but have been on a steady increase
since 2013 as drought has affected their grass based production system. Increased exports to Russia,
on foot of the Russian ban on EU imports, is expected to continue to push Brazilian prices up, at least
in the short term. Competition for land use from arable crops may limit production increases.

However it is believed that Brazil is now exploring a rapid intensification of its beef output and
analysts predict that their output from feedlots could double by 2022. This reflects the belief in Brazil
that they are best placed to take advantage of growing demand for beef products in markets such as
Russia where EU and Australian beef is currently excluded.

3
Live animal trade

In addition to beef exports, Ireland also has a strong live export trade to Europe and beyond.
In 2013 209,000 head of cattle were exported to our main markets in the UK, particularly
Northern Ireland, Spain, Italy and the Netherlands. A large number of young calves are
exported to Belgium, Spain and the Netherlands, while the UK and Italian markets are
important destination for weanlings, stores and finished cattle. Last year, nearly 20,000
animals were exported outside the EU, with most of these going to the Libyan market.

Current Sectoral Goals

The medium term policy for the sector has been shaped by a combination of the strategic
goals laid out in Food Harvest 2020 and, following on from that, the recommendations of
Beef Activation Group established to oversee the implementation of FH2020. The Beef
Activation Group focused on areas such as breed improvement, technology transfer, animal
health concerns, processing efficiencies, and market development.

The Beef Activation Group recommended increasing the headline target contained in
FH2020, in the value of beef output from 20% to 40% by 2020. This more ambitious target
has already essentially been met, with the value of output having increased by 39% by the
end of 2013, however it is noted that the 2013 output levels were buoyed by all-time price
highs and the sector continues to face a number of challenges.

Economic Analysis

Price volatility

The marked decline in beef prices in the last 12 months follows a period of unprecedented
price increases. Price volatility and fluctuations in returns to producers will continue to be a
feature of the marketplace. The graph below demonstrates the evolution of beef prices in
Ireland over the last 10 years, relative to GB and the EU15

4
Farm incomes

There is huge variation in profit levels between farmers in the beef sector. Nonetheless, the
average beef farm is a loss making enterprise when income and investment supports are
excluded. Direct payments, which incorporate all public farm supports, account for an
average of 165% of family farm income on suckler farms and 119% of family farm income
where beef finishing is concerned.

Teagasc’s National Farm Survey (NFS) publishes detailed annual data on farm level
economics. It is a national survey of over 900 farmers, representing a population of circa
79,000 farms, though it is important to note the NFS only includes farms with a standard
output of €8,000 or more (equivalent of 14 suckler cows)

The National Farm Survey in 2013 shows average family farm incomes of €20,019 and
€7,988, for full and part-time farmers respectively, in cattle rearing enterprises (suckler
farms). The figures are higher for other cattle (fattening) farms with average full-time family
farm incomes of €30,999 and part-time family farm incomes of €11,141. This is compared to
an average €65,287 family farm income for full-time dairy farmers.

5
Sectoral heterogeneity

The beef sector is made up of very diverse types of farming enterprises based on the progeny
from both dairy and suckler cow herds, with a higher prevalence of suckler cows (50% of
beef production) than many other EU member states where about 2/3 of beef production
comes from the dairy herd. Suckler production systems vary from production of weanlings to
calf-to-beef systems, with a variety of different beef fattening enterprises finishing steers,
bulls and heifers at different ages and at different times of the year. These enterprises vary by
scale, structure, degree of specialisation, intensity, and whether they are operated with other
farm and non-farm economic activities. These alternative production systems result in
different production dynamics and associated economic returns.

Graph: Number and category of cattle slaughtered at meat plants

Grass based production

Grass based beef production gives Irish farmers an important competitive cost advantage over
international competitors. Teagasc notes that, on average, the cost of producing 1kg of live
weight from grass is 80-85% less when compared to an intensive concentrate-based system.

6
When a calf is weaned from the cow in Ireland, there is potential to achieve 80% of its live
weight gain from weaning-to-slaughter from grazed grass.

International Trade Agreements

The EU consumes about 7.8 million tonnes of beef each year, with the key high value cuts
segment of the market amounting to about 500,000 tonnes. Currently imports into the EU
amount to over 300,000 tonnes and the import requirement in the coming years is not
predicted to go much beyond 400,000 tonnes.

In addition to ongoing deliberations in the WTO, the EU is currently negotiating bilateral

trade agreements (incl. with US, Mercosur and Canada) with which will impact on beef
supplies in Ireland’s primary export markets in the EU. This will particularly impact
competition in the high value cuts end of the market which, while small in volume terms,
accounts for over 25% of returns in terms of value.

Processing sector

The Irish beef processing sector comprises 32 major slaughtering facilities, which are
supervised by DAFM and are approved to export from Ireland to local, EU and third country
markets. There are 195 low-volume slaughterhouses supervised by the Local Authority
Veterinary Service that may export within the EU. In addition, there are a significant number
of standalone (i.e. no slaughtering) beef boning and beef added value processing businesses.
While annual throughput in 2013 was 1.5 million cattle, implying a weekly average of
28,800, in actual fact however there are seasonality influences in livestock production which
means that in reality weekly cattle slaughtering ranges from 24,000 to 33,000 head.

While some of the excess capacity and scale issues in the industry were addressed by the
Beef and Sheepmeat Investment fund, slaughtering on 3 or 4 days per week is still the norm
in many slaughter facilities.

7
Social Analysis

Size and Distribution of the National Herd

8
While the beef sector is ubiquitous in Ireland, with suckler and beef finishing farms spread
throughout the country, the size of these farms tends to get larger when moving from west to
east. The 2010 Census of agriculture showed that there was an average of 12 cows in the
NUTS 31 west, border and south western regions compared to regions such as the midlands
mid-east and south east which had an average of 19 cows.

The long term tendency of rising sucker cow numbers and declining dairy cow numbers has
altered slightly in recent years. The increased interest in dairy production post quotas will
result in some farmers shifting from beef to dairy production in the coming years; mainly
younger, better educated farmers on larger holdings.

Effects of more beef supply from the dairy herd and possible reduction in suckler numbers

The number of beef animals coming from the dairy herd is expected to increase substantially
in the coming years as the sector expands in response to the abolition of dairy quotas in 2015
with Teagasc estimating that a c330k increase in dairy cows numbers will be necessary to
achieve the 50% increase in milk production targeted in FH2020. This level of increase will
produce an 150k male calves per annum. However an increased use of sexed semen could
cause this figure to drop substantially. The use of sexed semen by Irish farmers is still in its
infancy and results in 2014 are believed to have been mixed (lower conception rates than
some expected.

The additional progeny not used as replacements in the dairy herd will impact on the beef
market. The direct implication for suckler cow numbers is difficult to predict and is
dependent on a range of internal and external factors. FAPRI-Ireland projections suggest a
decline in suckler cow numbers by over 200,000 animals to around 800,000 for the period to
2030. The reduction in suckler numbers is less than the anticipated gains on the dairy side.
Overall, this leads to a marginal increase in the volume of beef produced, although the type of
animal going to slaughter will change to reflect the greater influence of the dairy herd in
supplying the source animals; this has implications for the beef supply chain and market
returns.

1
EU Nomenclature of Territorial Units for Statistics. In Ireland it is classified hierarchically from Level 1 (Ireland)
with Level 3 consisting of the Border, West, Midlands, Mid East, Dublin, South East, South West and Midwest
regions.

9
The above predictions will be obviously be influenced by a number of factors including:
 The absence of any EU bilateral trade deals
 The introduction of a well-funded RDP scheme for the suckler sector which will also
impact the evolution of suckler numbers.
 The take-up of sexed semen by Irish farmers.

Market Demands and Pricing

Irish beef is now listed with more than 75 high-end retail chains across EU markets. This
wide portfolio of customers has contributed significantly to higher returns for Irish beef in
recent years and reflects the success of Bord Bia’s differentiation and premiumisation
strategy, which focuses on the key attributes of Irish beef: environmentally sustainable, grass-
based production systems, full traceability, quality assurance at all stages and superior eating
quality.

The pricing structure for beef animals in Ireland reflects market demands around the fat (1-5)
and conformation (EUROP scale) scores of the animals based on a carcase classification grid.
The Quality Payments System (QPS) is a payments system agreed between farmers and
processors in order to incentivise and reward the production of higher quality animals. In
addition, a bonus is paid for animals from quality assured farms that are under 30 months of
age and have resided on no more than 4 holdings. Retail preferences for smaller steak cuts
also results in reduced price per kilo for animals above defined weight levels.

Technological Analysis

Genomics

Animal genetics is a powerful tool that aids farmers in identifying superior animals as the
parents of the next generation. A central focus of improving on-farm profitability is on
optimising animal growth and reproductive performance by using high genetic merit animals.
Knowledge of the DNA profile of calves at birth, and how the DNA profile affects
performance, can facilitate a more accurate prediction of how an animal will perform –
known as genomic profiling. Investment in this area can position Ireland at the cutting edge
of genetic selection and herd development.

10
Increased output and efficiency

There are considerable opportunities to improve the output and efficiency of the National
beef herd through a range of new technologies and herd management techniques as outlined
below:

● Improving grass management and utilisation

● Reducing the national average calving interval from its current level of over 400 days
● Increasing the number of calves born per cow per year from current figure of 0.8
● Increasing percentage (currently less than 25%) of cows producing a calf within a 12-
month period.
● First-calving at 24 months of age in a higher proportion than the 10% of heifers where
this is presently achieved.
● Continuing advancements in well designed herd health programmes
● Collaborating with other farmers to achieve scale or share facilities.

Breed policy

Charolais and Limousin sires accounted for 73% of calves in the beef herd in 2013. 90% of
beef calves born in Ireland came from 5 breeds of Dam - Charolais, Limousin, Angus,
Hereford and Simmental. 69% of beef sired calves in the dairy herd came from early-
maturing Aberdeen Angus and Hereford sires, mostly because of ease of calving and short
gestation traits of these animals.

ICBF research shows that selection of animals based on replacement and terminal indices
should be the key determinant of animal selection as there is as significant a variation within
breed as there is across breed. At the same time, producing the right animals with the
appropriate breed and genetic traits for the production systems in place, and with a view to
market specifications, is vital for the sustainability of suckler enterprises

Environmental Analysis

Greenhouse Gas Emissions from Beef Farming

In a European context, Irish greenhouse gas emissions from Beef farming is very low
compared to many of our fellow member states. Ireland’s emissions per kg of beef are 18.4

11
kg/kg2compared to an EU average of 22.2kg/kg. Our traditional grass fed production system
allows animals on the land for longer periods and relies less on intensive feeding months
indoors. However, at 32% of national emissions, agriculture is also responsible for a greater
share of national emissions in Ireland compared with our EU neighbours. This reflects the
considerable importance of agriculture to the Irish economy and the significance of the
livestock industry.

Under the 2008 climate and energy package, Ireland is required to deliver a 20% reduction in
non-ETS GHG emissions by 2020 (relative to 2005 levels). Agriculture is the largest source
of emissions in the non-ETS sector and a high proportion of its emissions come from
agricultural livestock where cost effective mitigation is limited. In January 2014, the
European Commission brought forward a Communication on proposals for a 2030 policy
framework for climate and energy3. Under this proposal, emissions from sectors outside the
EU ETS would need to be cut emissions by 30% below the 2005 level. This effort would be
shared between the Member States although details on how the effort-sharing would take
place have not yet been elaborated upon.

Origin green

Origin Green is a national sustainability programme developed in Ireland by Bord Bia – the
Irish Food Board. It offers an independently verified structure for Irish farmers and food
manufacturers to demonstrate their sustainability performance and develop plans for further
improvements. The target for the programme is to have 75% of food and drink exports
coming from farms and food manufacturers that are members of Origin Green by the end of
2014.

At manufacturing level, Food companies can become a verified member of the programme by
developing a multiannual sustainability plan focussing on sourcing, resource efficiency and
social sustainability.

The focus of the programme at farm level is to incorporate issues such as greenhouse gas
emissions, water, biodiversity, energy, waste, animal welfare and soil health. . Carbon foot
printing has been central to the rollout of a sustainability audits, funded by DAFM, across all

2
European Commission’s JRC Report of 2010 “Evaluation of the livestock sector's contribution to the EU
greenhouse gas emissions (GGELS)
3
http://ec.europa.eu/clima/policies/2030/docs/com_2014_15_en.pdf

12
43,000 beef farms that are members of the Beef & Lamb Quality Assurance Scheme
(BLQAS)

Regulatory Analysis

Dairy Herd Expansion

The number of beef animals coming from the dairy herd is also expected to increase
substantially in the coming years as the sector expands in response to the abolition of dairy
quota in 2015. The additional progeny not used as replacement in the dairy herd will impact
on the beef market

Labelling

Beef in the EU must satisfy both mandatory and voluntary labelling requirements
Mandatory labelling requires that all marketed beef must include inter alia the origin of the
beef i.e. the country where it was born, reared and slaughtered. The Voluntary labelling rules
will come under general labelling rules from December 2014.

These labelling requirements are particularly important for an export dominated industry,
including in markets where there is a clear preference for national products. This also impacts
on the market outlets for live exports from Ireland when they are eventually slaughtered.

Producer Organisations

DAFM has recently conducted a public consultation on the possibility of legislating for
producer organisations in the Beef Sector. Producer Organisations provide a vehicle for
producers to co-ordinate and collaborate in a range of areas such as quality improvement,
product development, promotion and marketing. It is widely accepted that beef producers are
in a poor bargaining position when it comes to selling their beef animals; producer
organisation offer the potential to join together in negotiating terms and conditions with meat
processors, while also assisting processors in ensuring a continuous year round supply.

Market Access

13
In recent years there have been noteworthy successes in securing beef market access from
authorities in Japan, Singapore, Egypt and Iran. In 2014 alone, Ireland agreed access terms
for beef with the Lebanon, Philippines and Namibia. Ireland is finalising technical
arrangements with the US authorities which should see exports of Irish beef to the US
commence shortly, while good progress is being made with the Chinese authorities.

Market Outlook

Based on EU Commission projections, the net production of beef and veal in the EU –
currently about 7.6 million tonnes carcase weight equivalent in 2013 – is expected to increase
slightly in the short term, before declining again to just under 7.5 million tonnes in 2023. The
OECD-FAO projections are roughly similar.

Consumption in the EU, the market which accounts for over 98% Irish exports, has declined
by 5% since 2010 to under 7.8 million tonnes in 2013. Consumption levels are expected to
increase in the coming years to over 8 million tonnes in 2016 before declining slowly again to
under 7.8 million tonnes in 2023.

In contrast with the EU, global beef production is forecasted to grow by over 12%, which in
volume terms would result in an increase that is above the full amount of EU production.
This increased production is forecast to lead to an increase in global exports by over 2 million
tonnes from about 9.9 million tonnes to 11.9 million tonnes. Like with global production,
global consumption is forecast to rise substantially – by over 12% and by more than the full
amount of beef consumed in the EU.

Demand for beef will continue to grow in Asia with consumption expected to rise by 8% over
the next 5 years. By 2019, Asia will account for 45% of global beef trade with China
absorbing much of the rise in globally traded beef. Beef exports from Brazil, Australia, USA,
Uruguay and Argentina are projected to rise by 400,000 tonnes by 20194.

4
Bord Bia Meat & Livestock Market Outlook Autumn 2014.

14
 Sheep Analysis 2025

Background context from the Food Harvest 2020 report

In common with all major producers across the EU, Ireland’s sheep sector has witnessed
downward pressure on production over recent years with reductions in flocks and pressure on
income. However, it is expected that over the coming years, demand on the European market
will outstrip production levels, which could provide opportunities for exporting countries
such as Ireland. This should provide the potential for better returns provided the industry can
continue the market and product diversification evident over recent years. At producer level
there is likely to be improved price prospects provided an increased focus on production
efficiency and product quality is evident.

Sectoral goals from the Food Harvest 2020 report

When domestic consumption is included, it is estimated that the Irish sheep industry is
currently worth about €250 million, with over two thirds of output exported. With a renewed
commercial focus by the sector, building consumption on the domestic market and through
the implementation of the recommendations listed underneath a growth in output value of
20% is achievable by 2020.

Current sectoral analysis

The market diversification evident over recent years was largely maintained with a third of
shipments destined for markets other than France and the UK in 2013. These high value
markets such a Belgium, Germany and Sweden continue to outperform others both in value
and volume growth. Bord Bia has intensified its promotional support in developing this high
value markets particularly with regards to the development of an Irish branded lamb offering.

In 2003 Ireland exported €156 million of sheepmeat product, equivalent to 44,000 tonnes.
Almost 80% of these exports were shipped in a carcass form, the balance of 9,000 tonnes was
exported as a boneless, higher value product. Since then the value of our sheep meat exports
have risen by 41% to €220m. A significant factor which has driven this value growth has
been the move towards boneless product. It is estimated that 65% of our sheep meat exports
is in the form of boneless/break out product.

15
The National Sheep Census conducted in December 2013 showed there were 34,304 sheep
flocks with an overall total of 3,530,802 sheep. This represents a decrease of approximately
50,000 head on the previous year.

The Teagasc National Farm Survey for 2013 shows that there were approximately 12,650
sheep farms with an average family farm income of €11,731 in 2013, a very large 36%
decrease on 2012. Although these farms may operate a number of other farm enterprises,
sheep production is the predominant system on these farms.

The income decrease on Sheep farms in 2013 of 36% was due to a combination of increased
direct costs and lower output driven by lower levels of agricultural activity on farms. Average
lamb prices increased marginally from an average of €94 in 2012 to €95 in 2013. Input
expenditure on Sheep farms increased in 2013, with direct costs up 15%. This increase was
almost entirely due to increases in feed costs. Concentrate feed expenditure increased by
almost 20% while expenditure on bulky feeds increased by 62%.

The average Single Farm Payment per hectare is €229 for sheep farms, the lowest of all farm
systems and considerably lower than the national average of €302 per hectare. On about 29%
of sheep farms the farmer has off-farm employment. The SFP for most sheep farmers will
improve over the course of the new CAP as they stand to be amongst the beneficiaries of
convergence in addition to availing of RDP schemes such as GLAS.

About 31% of Sheep farms produced a family farm income of €5,000 or less in 2013, with a
further 21% earning between €5,000 and €10,000. About 8% of sheep farms produced a farm
income of €30,000 or greater. The larger and more profitable flocks are in lowland areas
while the less profitable flocks would be in hill areas.

Future market prospects

Bord Bia produced a document entitled “Sheep Outlook” for the 2014 National Ploughing
Championships which is at Annex 1 below. The sector has performed well over the past 5
years and this trend is expected to continue for the next 5 years.

Specific actions undertaken/planned

Rural Development Programme
Funding of €8m has been allocated and committed under the Rural Development Programme

16
2007 -2013 to aid approximately 3,400 sheep farmers under the current Sheep handling /
Fencing Scheme. The scheme closed on the 31 December 2013.

Under the new Targeted Agricultural Modernisation Scheme included in the Rural
Development Programme for the 2014/2020 period it is proposed to continue to support
investment in sheep with funding to be provided for animal housing targeted at beef and
sheep farmers and a farm safety scheme including the provision of sheep handling facilities.
The overall available budget is €395m over the lifetime of the Programme. The sheep
measures to be funded will be included within this allocation.

Sheep Technology Adoption Programme

The Sheep Technology Adoption Programme commenced in 2013 and was continued for a
second year in 2014. It provides for the establishment of discussion group among sheep
farmers, similar to model previously used for dairy discussion groups and the Beef
Technology Adoption Programme (BTAP). Funding of €3m was provided for the programme
in each year and the number of producers participating and the positive feedback from
participants attests to the success of the programme. Under the proposed new Rural
Development Programme (RDP) provision has been made for improving efficiency and
profitability in sheep production under the knowledge transfer measure and the lessons
learned from STAP will inform the development of this measure. The RDP programme will
provide support to farmers by means of a range of measures across a number of priorities,
including environmental objectives.

Breed improvement
Sheep Breed improvement functions were traditionally carried out by the Department under
the Pedigree Sheep Breed Improvement Programme (PSBIP). The Sheep Industry
Development Strategy (‘Malone report’) recommended the transfer of these duties to ICBF in
its report launched in July 2006. Industry discussions took place for many months on the
recommendation to transfer sheep breeding functions from the Department. The interim
board of Sheep Ireland was established in July 2008 and this board adopted the report of the
strategy project team lead by Dr Peter Amer who was commissioned to complete a review of
sheep breeding in Ireland.

A totally new breeding infrastructure was developed (database, data collection facilities,
designing appropriate breeding indexes, breeding schemes to identify the best terminal and

17
maternal genetics) in conjunction with all Industry stakeholders. The new breeding
infrastructure was designed along the lines of the very successful dairy and beef programmes.
A new organisation; Sheep Ireland was established in 2008, having a close relationship with
ICBF.

Processing
The Beef and Sheepmeat fund was launched in 2008 and provided grants to various meat
processors mainly on the beef side but including some for Sheep. Enterprise Ireland
administers the scheme and DAFM provides the funding. The scheme is still ongoing. The
objective of the Beef and Sheepmeat Fund is to support capital investment which is expected
to:

a. Increase scale and efficiency in primary processing without increasing overall

national capacity.
b. To increase added value in further processing by way of moving output beyond its
primary form to nearer the end user ie retail, food service and manufacturing outlets.
The progression of a number of strategic change initiatives is a priority of the Beef and
Sheepmeat Fund.

The scheme focuses on efficiency gains by reductions in fixed costs due to scale and
improvements in capacity utilisation, Yield improvements derived from improved
technologies in primary processing and in particular boning activities and utilisation of by-
products which heretofore would have been rendered at a cost to the business.

Promotion
In 2013 the EU Commission agreed to include sheep meat as an eligible product for support
under the Generic EU Co-Funding of Food Products. The decision was in response
to growing concerns around the decline in both sheep meat production and
consumption which have fallen by almost 25% since 2000. The Agneau Presto
promotion which ran for seven consecutive years (2007-14) was also instrumental in
influencing the Commission to allow sheep meat to be eligible for funding under the
EU co-funded promotion.

In June 2014, Bord Bia together with Eblex and Interbev submitted a joint application for a
proposed EU-Funded Generic Lamb Campaign. The campaign which will run over three

18
year (2015-18) has a clear and ambitious target of reaching out to consumers (18-40yr olds)
across a number of European markets to include, Belgium, Denmark, France, Germany,
Ireland and the UK. Key messages of the campaign will focus on

(i) Establishing a role for lamb for everyday consumption and

(ii) Stressing the provenance and importance of European lamb production.
The Bord Bia Lamb Quality Assurance Scheme (BBLQAS) logo is growing in importance as
95% of all lamb facings in Irish retail carry the mark. Applications for the BBLQAS have
surged in recent years, membership stands at over 12,500, equivalent to 65% of national
throughput

In terms of home market promotions the objective focused on increasing the frequency of
purchasing of lamb among relatively heavy lamb purchasers during peak season and to
encourage them to choose lamb with the Quality Mark when shopping. Coinciding with the
peak availability of new season lamb, a series of promotional activities covering PR,
publicity and social media activities were undertaken. In addition, a TV advert highlighting
the unique flavour of our lamb was aired for a total of eight weeks during the summer months
and again in August and September.

Sustainability considerations

Following the development of an accredited carbon footprint model in late 2013 for the Irish
sheep meat processors and the successful piloting of the carbon footprint at farm level in
2014 (currently seeking accreditation from Carbon Trust) it is proposed to progress routine
carbon assessments for lamb producers in BBLQAS.

There is clear evidence that European retailers are putting a stronger emphasis on sourcing
from more sustainable producers. The buying policy of one large retailer on the continent has
shifted away from New Zealand and instead sources one hundred per cent of their lamb from
within Europe provides an important signal on their commitment to securities of supply and
sustainability

19
 Annex 1

Bord Bia Sheep Sector Outlook (Sept 2014)

SHEEP OUTLOOK
New Season Lamb Supplies Reach 6 year High
Total sheep supplies for the first eight months of 2014 are running 2% higher, equivalent to
an additional 45,000 head above the same period in 2013. With fewer lambs carried over
from 2013, throughputs during the main hogget season were back 6% on the previous year at
734,000 head. However, in sharp contrast new season lamb supplies reached a six year high
largely due to an exceptional good lambing season and a plentiful supply of grass throughout
the spring and summer months. For the period May to August total new season lamb supplies
stood at 984,000, representing an 8% increase on last year.

Graph 1: Sheep Throughputs 2014 v’s 2013

5% increase in sheep meat production

With reports of good breeding sales and brisk trade for the store lambs there is a growing
sense of optimism at farm level. In line with this renewed confidence it is expected that the
breeding flock will increase by 2-3% to 2.72 million. On the basis that sheep disposals
continue to hold strong for the remainder of the year total throughputs for the 2014 will
approach the 2.7 million head. With average carcase weight rising by 1% during the year
production is forecast to reach to just over 53,000 tonnes.

20
Absence of Libya impacts on Live Trade
Exports in live sheep have fallen significantly on the record highs of last year this was largely
down to the absence of live trade to Libya. Up until the end of July 2014, live exports stood
at 10,768 back 27,164 head, equivalent to 72% drop year-on-year. In 2013 almost 60% of
our total live exports were destined for Libya however with the growing instability in the
market, live exports has ceased. Looking ahead, live exports should pick up in the lead up the
Muslim festival of Eid-al-Adha which falls on the 4th October.

Average Sheep prices up 3%

At €4.88/kg average prices for the first eight months of the year were up 3% or 15 cent. A
significant part of this price gain was achieved during hogget season (Jan-April), where
average prices reached €4.91/kg up 38c/kg on the previous year. Prices remained strong
throughout May and June at a time when traditionally the seasonal price adjustment normally
kicks in. By early July, sheep meat prices eased as weekly throughput levels both in the
Ireland and the UK increased. For the season to date (May – mid Sept) average prices for
new season lamb were marginally back by 6 cent at €4.87/kg.

Graph 2: Average Sheep Prices (2014 v’s 2013)

Average Prices
(Jan – Aug)

2012 €4.81/kg
2013 €4.73/kg
2014 €4.88/kg

21
 Ireland & UK buck the European decline in production

Sheep meat production in the EU has been through a period of decline, with the four of the
largest producers (UK, Spain, France and Ireland) recording a fall in production over the last
decade. However similar to Ireland production in the UK has increased over the last five
years. With a 2% increase in the UK breeding flock and improved lambing rates in 2013
sheep disposals for 2014 is forecast to be up 5% year on year to 13.06million head.
Combined with higher carcase weight the supply of new season lamb for the remainder of
2014 would see UK production above 300,000 tonnes for the first time since 2009.

Production continues to stall in New Zealand

Australia and New Zealand are clearly the dominant sheep meat exporters, representing 86%
of global trade in 2013. Their export volumes have fallen in recent years as a knock-on effect
of drought and the competition for land from more profitable enterprises such as dairy.
According Beef and Lamb New Zealand the 2014-15 export lamb slaughter is forecast to
decrease by 3.3% to 19.5 million head. The decline reflects an increase in hoggets retained
with the flock expected to show a slight recovery in the year to 30 June 2015.
As confidence builds on the back of improved prices the medium term outlook is that gains in
production and export availability will be directed towards Asia. It is worth noting that 2013
was the fourth successive year that New Zealand failed to fill their EU quota. Coincidentally
2013 was also the year that China became New Zealand’s largest export market by value and
volume.

China Capturing a Hold on the Global Sheep Meat Market

Demand for sheep meat has been strong in Asia and in particular in China where growth is
expected to increase by 3.6% in 2014/15. China has developed an insatiable appetite for
sheep meat and even though China boasts the biggest sheep flock in the world demand has
outpaced domestic supplies.

22
Graph 3: Chinese Sheepmeat Imports

China’s sheep meat imports are primarily sourced from New Zealand and Australia, with
Uruguay contributing to a small share of import volumes. The volumes and values of Chinese
imports have risen sharply – as shown by direct imports. There is strong demand for lower
value cuts as they are popular in hotpot dishes in China, these are typically frozen and then
thinly sliced. Imports to China are very largely frozen due to poor logistics for chilled in
China, and a preference for frozen by traders. While China places a bigger draw on sheep
meat from the southern hemisphere suppliers, the Irish sheep meat industry is set to gain from
the ripple effect of global demand outpacing supply. Securing market access into China
remains a priority focus for the industry.

23
 Pigmeat Analysis 2025
Background Context:

Food Harvest 2020 set a headline target of increasing value output by 50%, largely
underpinned by worldwide growth in demand for pigmeat and improved sow productivity
and a significant increase in the size of the national sow herd.

The Irish pig sector is cyclical in nature with periods of lower prices and production followed
by recovery and this has remained the case for many years. The industry supports
approximately 7,000 jobs including production, slaughter, processing, feed manufacture and
services. There are approximately 340 commercial pig producers, with output value in the
region of €475 million in 2013. The sector accounts for 5% of the output from the total agri-
food sector and is the 3rd largest sector by value.

2013 was a year of challenge for the sector with feed prices remaining near record highs.
Given that cereals account for up to 75% of pig feed, the impact of cereal price increases
since 2009 on the pig sector has been considerable. While there has been some easing of
soya and other cereal prices in recent months thus ameliorating some of the consequences,
they continue to remain significantly above historic averages.

Ireland is 228% self sufficient in pig meat with the result being that export markets are sought
after and valuable. During 2013 export volumes were largely unchanged but values increased
by 3% to over €525 million, continuing the growth seen in recent years. The shift in focus
towards international markets was again a feature with values and volume increasing
considerably, particularly to Russia and China. It is important to note that the domestic
market remains the primary volume outlet for Irish pigmeat and consumption in this
marketplace was largely unchanged in 2013.

The closure of the Russian market to pig meat since January 2014 has posed difficulties for
exporters. This trade was valued at almost €60m in 2013. However the availability of other
spot markets helped to alleviate the difficulties caused by the Russian ban, which coupled
with disease outbreaks in the key producing Countries of the US and Japan, sent pig prices in
Ireland to a three-year high in Q2 2014. These prices have since been largely reversed by
approximately 30c/kilo.

Spot markets are markets such as the Philippines and Vietnam which serve as valuable
alternative markets when other more mature markets for Irish product, such as Russia, are no

24
longer available to take exports at short notice. Having such alternative markets available is a
key element of the DAFM strategy for exports as it helps to alleviate a crisis when
established markets close at short notice. It can also be the case that the spot markets
themselves go on to serve as key market outlets through Irish exporters putting greater focus
on the opportunity there.

The new pig welfare rules on loose sow housing which entered into force in January 2013,
posed a significant challenge for operators. During 2013 the Department worked closely with
the sector in order to achieve compliance with the new requirements and a significant amount
of grant aid was provided under the TAMS grant aid mechanism.

Sectoral Goals:

Food Harvest 2020 set a headline target of increasing value output by 50%, largely
underpinned by worldwide growth in demand for pigmeat and improved sow productivity
and a significant increase in the size of the national sow herd.

Future Market prospects:

Pig meat remains the most consumed meat worldwide with consequent opportunities for Irish
exporters given our self-sufficiency. Significant progress was made in recent years in
regaining market access and share following the product recall in 2008. This was
accompanied by new markets being opened and a shift in export destination share towards
third country markets, particularly in South East Asia, notably the Philippines, Vietnam as
well as China and Japan. Securing market access to China has been of particularly benefit
given their demand for 5th quarter products which have been estimated to add 10% to the
value of a carcass.

Pigmeat production, both in Ireland and the EU as a whole is forecast to increase slightly in
the coming years, with per capita consumption also rising. The domestic market is the largest
individual volume outlet for Irish pigmeat. This has been underpinned by promotion of the
Bord Bia Pig Quality Assurance Scheme and growing consumer awareness of and loyalty to
the PQAS.

Specific Actions Planned:

Approved by the EU Commission and launched in October 2013, this Teagasc/IFA Pig Joint
Research and Advisory Programme is funded by a levy on each pig slaughtered and/or

25
exported. Through the Joint Programme, Teagasc will support Irish pig producers by
providing advice, research and education across a range of issues of importance to the sector.
This work has commenced and will be extended in the near future.

The programme has enabled Teagasc to employ four additional advisors and researchers to
support producers and the sector through advice, research and education across a range of
issues of importance to the sector. Almost €230,000 was collected during 2013 and
commercial pig producers in Ireland will benefit from this initiative.

Ongoing research by Teagasc in areas such as profitability and competitiveness, carcase feed
efficiency, reducing piglet mortality, manure management and salmonella control are all
expected to deliver positive impacts for the sector.

Areas for further research include genetic progress, antimicrobial use, enhanced salmonella
control, loose farrowing systems options and methodologies for sharing knowledge and best
practice are also being considered by Teagasc.

The continuation and further development of marketing and promotional programmes by

Bord Bia will contribute significantly to putting the sector on a more solid footing. The Pig
Quality Assurance Scheme has greatly enhanced the positioning and placement of Irish
pigmeat in the domestic market.

All stakeholders, including DAFM, are part of a Pig Consultation Group which discusses
matters of interest which affect the sector.

Sustainability Considerations:

It is recognised that, as well as the ‘green’ benefits of sustainable production, it can often
deliver significant economic returns. Given the increase in input costs experienced by
producers in recent years, producers are seeking measures which could potentially minimise
such inputs. Measures to achieve better feed conversion ratios are being studied throughout
the EU and in Ireland with Irish researchers actively involved. At present models are being
tested by Teagasc which attempt to advance both pig and broiler chicken breeding
programmes for improved feed use efficiency, thus reducing feed costs and increasing
profitability.

26
Challenges up to 2025:

The Irish pig sector competes in an international environment. Producers and processors face
ongoing challenges from both other EU and international competitors and they must
continually innovate and improve to maintain their presence in the international marketplace.
The research and targeted promotional work being carried out by a wide range of
stakeholders, together with the acknowledgement of the quality, sustainability and
competitiveness of Irish pigmeat, all combine to best position the sector to avail of the
opportunities presented.

The reliance on imported feeds poses a challenge for the pig sector in Ireland. The volatility
in cereal prices evidenced in recent years arises from a number of factors. The shift in
production towards ethanol has resulted in upward price pressure on quantities produced for
animal feed and human foodstuffs. Extreme weather events in recent years have led to
restrictions in output and a reduction in stocks although these have recovered somewhat since
last year. These issues, together with exchange rate fluctuations and significant increases in
transport costs, although falling in recent months, have made for difficult times for livestock
producers, who are among the largest consumers of cereals.

In addition, the ever-present threat of disease outbreaks and public health considerations,
underscore the ongoing focus on animal health and disease prevention and control strategies.
Included in the draft RDP is an on-farm capital investments scheme, TAMS II, with a
provision of €37m. Amongst the areas identified for initial funding are investments on pig
farms for energy, water meters and medicine dispensers. Other elements of the RDP, such as
targeted on farm animal health and welfare scheme will also be of benefit to the pig sector.

27
 Poultry Analysis 2025

Background Context:

The emphasis of Food Harvest 2020 is to achieve a 10% increase in value by 2020..

The Irish poultry industry consists of the rearing of birds for meat, the keeping of table-egg
laying flocks, a network of breeding flocks and hatcheries to support these activities, the
packing of eggs and the poultry slaughter and processing sector.

Approximately 800 farms are involved in commercial poultry production broken down
between 400 rearing poultry for meat, 230 involved in table egg production and
approximately 170 breeding farms and hatcheries. Following the closure of a number of
slaughter plants in recent years, there remains 7 export-approved plants, with six of these in
the northern half of the country. There are also a number of Local Authority approved plants
which slaughter product primarily for the domestic market. In total the industry supports in
the region of 6,000 jobs, primarily in rural areas.

The farmgate value of the poultry sector was in the region of €175m in 2013, with meat
accounting for €145m and eggs a further €30m. At just over 2% of gross agricultural output,
the sector’s share has declined slightly in recent years. The poultry sector has faced
considerable challenges in recent years with rising input and energy costs combined with
significant pressure from lower cost imports.

The predominant outlet for Irish chicken is the Irish retail market for fresh raw product.
While the majority of poultry meat sold at retail level is Irish, the vast majority of poultry
meat sold in the food service sector is imported. Given that Ireland is 111% self-sufficient in
poultry meat, the industry is not export driven, although hen meat and chicken cuts for which
there is a poor market here (wings, legs) are exported. In the current economic climate
consumers regard poultry as a value for money food and this has been reflected in a small
increase in consumption in the last few years. Export values grew by almost 4% between
2012 and 2013, reaching €230m last year.

Sectoral Goals:

28
The emphasis of Food Harvest 2020 is to improve efficiencies and reduce costs such as
transport and energy to achieve a 10% increase in value target by 2020.

Future Market prospects:

It is expected that the domestic sector will remain under pressure from competitively priced
imports into the future.

While Ireland remains less than self-sufficient in poultry meat production, export
opportunities will not present themselves to the same extent as in other meats. However, a
growing understanding and utilisation of so-called 5 th Quarter products, such as feet, together
with international demand for cuts which are not in demand domestically, will ensure the
continuation of export opportunities.

Specific Actions Planned:

A new Knowledge Transfer Programme for the poultry sector is planned as part of the new
Rural Development Programme. Poultry farmers who participate will be required to
collaborate with a facilitator in developing a Farm Improvement Plan. This plan involves the
completion of a Profit Monitor, Carbon Navigator, Herd Health Plan and Breeding Plan.
Following on from this, each farmer will attend 5 Knowledge Exchange Group meetings
annually in order to share best practice and knowledge.

Sustainability Considerations:

It is recognised that, as well as the ‘green’ benefits of sustainable production, it can often
deliver significant economic returns. Given the increase in input costs experienced by
producers in recent years, producers are seeking measures which could potentially minimise
such inputs. Measures to achieve better feed conversion ratios are being studied throughout
the EU and in Ireland with Irish researchers actively involved. At present models which
attempt to advance both pig and broiler chicken breeding programmes for improved feed use
efficiency, thus reducing feed costs and increasing profitability are being tested by Teagasc.

Challenges up to 2025:

The poultry sector in Ireland is small scale and highly vertically integrated from breeding
stock to final processing. The sector has consolidated in recent years with the number of
commercial operators declining. Input costs, both of a feed and non-feed nature pose a

29
considerable challenge, together with significant competition from imports. The size of
enterprises in Ireland makes it difficult, in the main, to avail of economies of scale. It
competes with international enterprises which are many multiples in size and which
consequently, can produce large volumes of product at lower marginal cost. The sector has
benefited in the past from a number of support initiatives, most notably the provision of
capital investment grants to assist in compliance with welfare regulations, and ongoing Bord
Bia promotional campaigns and the development and operation of the Bord Bia Poultry
Quality Assurance Programme (PQAS).

In addition, the sector is vulnerable to cheaper imports from countries such as Thailand and
Brazil which is re-constituted in the Netherlands and Germany on arrival in the EU. The lack
of country of origin labelling regulations for poultry can cause particular difficulty for Irish
processors given their reliance on the domestic market and the presence of a large multi-
national producer in Northern Ireland.

30