Farmers feel let down by CCPC

Farmers and their representatives feel let down by the Competition and Consumer Protection Commission (CCPC) investigation of approximately 200 complaints against meat factories over the past year. The complaints are grouped under five headings: factories operating a cartel to buy cattle, criteria for specification bonuses, imports, role of feedlots and monopoly in offal processing.

An eight-page letter was sent by the CCPC to the complainants late last week. This followed the IFA sending a solicitor’s letter to the CPCC challenging the organisation’s failure to respond.

The CCPC letter addressed the main issues of complaint in some detail and in some of the cases such as imports, provided a clear explanation on why they wouldn’t pursue.

Nature of investigation

The cartel allegation is a long-running sore, and one that Jim Power in his report for the IFA said should be investigated by the CCPC to deal with the issue once and for all. The CCPC said it needs to have “tangible proof, such as written agreements between competitors to fix prices to show that a cartel exists”.

Factory-owned feedlots do provide a buffer supply of stock, allowing them either stop or ease back on buying farmer-supplied cattle

It would be extremely naïve to think that if a group of businesses were operating as a cartel they would have a file ready for inspection neatly named “cartel agreement”. The CCPC is on more secure ground when it says similarity of quotes doesn’t in itself mean a cartel and the issue of specification bonuses is also open to debate.

Similarly, factory-owned feedlots do provide a buffer supply of stock, allowing them either stop or ease back on buying farmer-supplied cattle. This would reduce open market demand but the scale of factory feedlot ownership is still low enough for this effect to be temporary. Similarly, the offal trade is very much based on legislation and changing this is within the control of Government.

What was required?

The CCPC response is unsatisfactory for farmers because a full investigation wasn’t undertaken on the cartel allegation. The reasons for not doing so set out in the letter are all long in the public domain and hadn’t satisfied farmers before, and restating them wasn’t going to now.

It would have been so much better if a full investigation had been undertaken to address the cartel issue once and for all

There is also the possibility that if a full investigation had been undertaken, no evidence of a cartel might have been found. Returning to the Power report, it would have been so much better if a full investigation had been undertaken to address the cartel issue once and for all.

Wider problem

That the CCPC were called on to investigate is in itself evidence of a problem in the lack of confidence many farmers have in the Irish meat processing industry. We have arrived at a point where three large, privately owned companies control almost three-quarters of the Irish cattle kill. We have scant information on the finances and margins of these companies that dominate Irish beef and sheep processing.

Farmers believe these companies earn huge margins from the livestock they supply, and in the absence of financial information there is little to rebut this in the case of the ABP, Dawn and Kepak groups.

The problem between Irish farmers and factories is one of trust and irrespective of the findings of any CCPC investigation, trust is something that has to be built between factory and farmer. The basis for trust is the concept of fairness that farmers can believe that whatever the price being paid, it is fair.

That has not been the case in the beef industry, where transparency basically ends when the farmer drops his animal off at the factory lairage

That doesn’t exist in the beef sector whereas in dairy with the co-op structure and greater transparency on publication of financial information, there is a belief that in general fairness is achieved in farmgate prices.

That has not been the case in the beef industry, where transparency basically ends when the farmer drops his animal off at the factory lairage.

Bord Bia has introduced a beef price index and a composite price calculation but we are far from where the industry in the US is, with wholesale beef prices published daily as well as stocks and sales records. Their major processors publish annual accounts which show healthy margins, but the system creates a level of trust that is absent in Ireland.