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Why Northern Ireland's big food debate must start with small farmer

By John Simpson

Published 03/11/2015

Most farms work with larger businesses
Most farms work with larger businesses

Farm and food production in Northern Ireland is a complex matrix of supplies sourced from up to 30,000 farms and processed by a large number of plants, some of which are large traders in national and international markets. The era of public influence through marketing boards has ended, and the organisations are mainly participants in a private sector-dominated market place.

The impact of market surpluses and shortages, which in recent years were buffered by the existence of EU intervention stocks and intervention trading, as well as dairy quotas, is now an item of recent history.

In the current environment, trading results are more vulnerable to the ebb and flow of international trade and prices, bringing reassurance but also distress, particularly for individual farmers. The recent misfortunes of dairy producers as world prices strengthened before falling sharply, is an example of the new reality.

Northern Ireland is an acknowledged source of good food. The supply chain from farm to production and processor efficiently converts a wide range of products into market-ready goods.

The current inter-relationship between farmer, processor and final customer has evolved, but it is weak in terms of potential expansion and is fraught with commercial tensions.

An assessment of the success, or otherwise, of food production in Northern Ireland needs greater clarity on the objectives and constraints. Is the objective to maximise the value (and the volume) of food products produced here? Or, alternatively, is it to maximise the income generated (and therefore the employment) of farmers, producers and processors, even if that means prioritising policy choices?

These are difficult policy questions. The latter would call for a radical approach to restructuring for scale and capacity. The former could co-exist with a farming sector where some owners are frequently on low incomes.

Linked to the objectives, what assumptions should be made about the institutional arrangements, including the possible impact of constraints affecting economies of scale? And if there are too many small farms that are unable to generate an acceptable level of income, should Government policy then become much more directly interventionist?

The long-term future of the European Union support mechanism through the Single Farm Payment is a critical factor in any reconsideration of policies. If the UK opts to leave the EU, the Single Farm Payment system seems unlikely to survive in its present form. A UK Government separated from the EU is likely to revert to a less costly farm support system.

For the years immediately ahead, some form of farm income support is likely to remain significant. However, that does not guarantee that there will be no change.

Northern Ireland demonstrates two contrasting structures in farm and food arrangements. Food processing has become more linked to larger-scale units. Smaller scale processors remain significant but, bit by bit and year by year, larger units are succeeding. There is no surprise in the consolidation of dairy processing in a group of co-operatives or stand-alone commercial subsidiaries. Production in the red meat and white meat sectors is now focused more in larger successful units.

Also, alongside the emergence of larger processing and production units, there has been investment by international businesses in key products. A large part of poultry processing is now in the ownership of a Brazilian company. Much of the other local meat is traded through UK-wide firms, some of them owned in Northern Ireland but integrated into UK businesses.

Increasingly, the food sector is a combination of small suppliers and large national processors. The inhibiting factor, reflecting local social priorities, is that support for the small family farm is implicitly officially endorsed. Is that where the debate should end or begin?

Company report: Moy Park

Moy Park was a wholly owned subsidiary of the large Brazilian company Marfrig. It operates a wide range of commercial interests in meat and meat products. The (then) parent group also had interests in supplying western Europe from Brazil. 

Early in 2015 Moy Park was bought by another Brazilian company, JBS SA.

The new owners have restated the accounts for 2013 consistently with the incoming International Financial Reporting Standards (IFRS) standards. This means that, following a restatement for 2013, the accounts are not directly comparable with earlier periods including 2012.  

As part of the revised governance arrangements before the sale of the group, the holding company, Moy Park Holdings (Europe) paid a dividend to the shareholders in the Marfrig Group of £175m.

The Moy Park group is itself a large international organisation with 11 processing sites across the UK and France. The main activities of this Craigavon-based group are in locally farmed poultry and poultry processing. The group also produces and sells a range of complementary convenience food products and brands.

Moy Park is one of the largest local private sector employers controlled from Northern Ireland with an average of 8,954 employees in 2014. This is an increase from 8,651 employed in 2013.

Turnover has enjoyed increases in the each of the last seven years. Group turnover in 2014 rose by just over 2% and, for the fourth successive year, exceeded £1bn. 

Operating profits have increased in the last three years and reached a new high level of just over £50m in 2014. Operating profits recovered from a low in 2012 and in 2013 there was a big increase to reach £41m, compared to less than £27m in 2012.

The balance sheet value of shareholders’ funds was £192m at the end of 2014 which was just 1% higher than a year earlier.

External bank borrowing by the group fell by over £20m during 2014.

Belfast Telegraph

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