Examination of Witnesses (Questions 340
- 359)
TUESDAY 3 MARCH 1998
MR BOB
BANSBACK,MR
ARCHIE SAINS
and MR HUW
THOMAS
340. Getting back to the issue of the specific
costs, do you think the extra costs are here to stay? If so, is
there anything the Meat and Livestock Commission can do to alleviate
the effects on the producers?
(Mr Bansback) The current cost structure and the measures
we are having to take on beef and lamb are particularly to do
with the BSE situation and SRM and the need for additional measures,
and insofar as it is important that we give a message as an industry
to the consumer and to the international market that we are attaching
the highest possible importance to food safety issues, those measures
are going to have to a large extent be maintained for the time
being. It is essential for the industry that we get over the message
to the consumer that even if we are not the lowest cost element
in the market because of our quality and because of our safety
standards and all the other measures which are taken in the industry
it is worth while paying perhaps a little more in price because
of the assurances we can give, and that relates to some of the
assurance schemes in the industry. As to what we are also doing
to help the producer, I mentioned in answer to the Chairman's
question earlier, we provided at the beginning of the year a beef
information note to producers which provided 12 pages of practical
tips on how in the current climate they can survive and how they
can make adjustments to their systems and returns in order to
survive in the current situation. The other thing we can do and
we are doing is that we introduced a promotion and marketing campaign
at the end of January which was designed to increase and improve
the return and demand for British beef. By actually promoting
our product in the market, we can help the producer because he
should get a better price.
Mr Thomas
341. You represent as an organisation a wide
cross-section of different interest groups within the meat industry,
do you think that perhaps means that you are unable at the present
time to act as the champion of the producer because of course
you have to bear in mind the interests of the supermarkets? I
note, from looking at the members of the Commission, that supermarket
interests are represented on the Commission.
(Mr Bansback) I think it is important to understand
on that latter point that in providing advice on how we operate
strategically we have a broad spectrum of commissioners with experience
at all sectors of the meat chain. I can say from my own experience
of the Commission this is extremely valuable in making sure we
make the best decisions. I would say that although we do cover
all sectors of the industry, we recognise that when a particular
sector is under-going particular problems, and we recognise the
producer of beef and lamb at the moment is in that position, then
we do perhaps need to look at that sector and help it. I think
our track record over the last few months has actually supported
the fact that despite the problems of the industry we have been
working exceptionally hard on the livestock producers' behalf.
Some have been very surprised that the cattle price over the last
six weeks or so—up until towards the end of last week when
it slipped a bit—has been maintained as high as it has in
the face of a 5 per cent increase in meat supplies, which usually
produces a much bigger drop in price, and we feel we can claim
some credit for that.
Mr Bercow
342. Forgive me, Mr Bansback, if the MLC has
made statements on this matter which I have failed to pick up,
but in view of your expertise perhaps you can tell the Committee
this morning whether, if the decision had been yours, you would
have banned beef on the bone?
(Mr Bansback) We have come out in support of the Government's
decision on this issue. The reason that we did so was because
of some consumer research we did on the one hand which showed
the wavering consumer, the wavering beef consumer as we call them
(and we segment the market in our consumer research) would have
been very concerned about this issue. Secondly, we attach a tremendous
amount of importance to getting back into the beef export market,
and this signalled a very positive message to Brussels, to Mr
Fischler and others out there, that this country attaches the
highest possible importance to food safety issues. Can I add as
well, because we were also very concerned that the 5 per cent
of beef products which were being sold on the bone might upset
the market, we have been very active in helping the industry adjust
to this new situation with new recipes and new ways of presentation
and everything else, to help the industry get over the very real
adjustment that it had to do at the time.
343. I think it is quite important to follow
this point up, because you did refer earlier to your support for
farmers and you will forgive me saying in the circumstances that
very few farmers, who feel strongly about this matter and are
opposed to what the Government has done, will derive any sucker
from the answer you have given or from the position the MLC takes.
Just to be absolutely clear beyond peradventure, what you are
telling the Committee is that despite the fact—and I have
not seen this fact contradicted—the chances of dying from
consuming beef on the bone by getting new variant CJD is 100 times
smaller than the chance of dying after being struck by lightning,
nevertheless the demands of what might be called the appeasement
of Brussels in these matters are more important than a recognition
of the science?
(Mr Bansback) Just so our position is clear, I said
we supported the Government in this decision because of the consumer
research we had and the European issues. We recognise that consumer
opinion has taken the swing that it has but we still feel if in
the long-term this decision contributes in any way to bringing
forward the export ban actually coming off, then it will have
played an important role in this. I have also said in terms of
the actual effect on the market, we can mitigate with the sort
of work we do this effect for the consumer, so on reflection (and
I have already mentioned the trend in the cattle price) we feel
the impact of this was not nearly as bad as was made out at the
time. Also we feel in terms of risk analysis this is not a measure
which need stay with us forever. It is something which can be
reviewed in a relatively short period of time, and if the risk
analysis is such that the Chief Medical Officer and others feel
comfortable about removing this particular ban we can come back
to normality in the market, and that would be very strongly our
position on this.
344. When?
(Mr Bansback) We do not know. Within a year or two,
we would hope.
Mr Edwards
345. Could I ask you about the labelling of
meat in supermarkets? You will know there has been a lot of concern
amongst farmers about what they see is inaccurate or misleading
labelling of meat and a belief that, to quote some of the farmers
I speak to, "muck from places like Botswana" is being
sold under labels which are quite misleading. To re-quote what
I put to ministers, if it is possible to know the country of origin
of every bottle of wine we buy, why can we not know the country
of origin of every joint of meat we buy? Have you got a view on
this?
(Mr Bansback) Yes, we have. We support the introduction
of the new EU beef labelling regulation, and it is going to start
applying in the UK and as far as I am aware all the major supermarket
multiple retail groups have taken it up from April of this year.
Because it is a very complicated and rather bureaucratic labelling
regulation, the MLC has been in the forefront of trying to provide
advice to retailers and others throughout the meat chain to try
and make this effective. One of the requirements will be country
of origin. So I think in terms of labelling at the retail level
and certainly at the multiple retail level, we are hopeful that
in terms of country of origin the situation will actually be made
clearer over the next few months as the effect of this regulation
comes in, and we shall certainly be wanting to see it be as effective
as possible.
Mr Livsey
346. You have a category of imports which says
"other", it is not specified which these countries are
and where the "other" category comes from. Could you
give us a run-down on this?[2]
(Mr Bansback) Sorry, are you referring
to a table?
347. Where you have imports of meat, you have
Australasia—New Zealand, et cetera—and then you come
right to the bottom of this list and it says "other".
I was just wondering where the "other" category is coming
from.
(Mr Bansback) The other categories are from the 13
or 14—if you are talking third countries—
348. Third countries, yes.
(Mr Bansback)—they are the 13 or 14 countries
we can actually import from. That includes South American countries
and it includes one or two countries like Botswana in Africa,
but they have to comply with the regulations for imports at the
moment.
349. Is it true that meat is coming in from
Uganda?
(Mr Bansback) I am not aware of this happening. Occasionally
in customs import figures there are anomalous curiosities. It
may be marked down on a trade return somewhere but frequently
when you explore these things, reality turns out to be different.
So the answer is, I am not aware whether or not it is.
350. It is my understanding that there are imports
coming in which are in fact illegal imports into this country.
Could you investigate that?
(Mr Bansback) We can do our best to pursue that, yes.
Chairman
351. Thank you. Can I go back to your memorandum,
Mr Bansback? The data you refer to in Tables 4 and 5 relate only
to the fourth quarter of last year. Do you have any serial data
which covers the period 1995-97? If so, do the figures vary?
(Mr Bansback) Yes, Chairman, we actually have some
figures for January. The position has not changed significantly
enough for me to show them to you but we will be getting the February
figures available in seven to ten days, and I was suggesting that
perhaps we could provide you with both January and February figures
as soon as they are available, if you would like.[3]
352. That would be very useful but I meant historical
figures, 1995-97. How do they vary over that period?
(Mr Bansback) That was reflected in the comments we
made, that the actual price in terms of costings and everything
else, the actual margins both at the wholesale abattoir sector
and the retail sector, we feel over the two year period did not
significantly reduce except in the case of the abattoir sector
to reflect some of the additional SRM costs. Perhaps I could add
one point here because it is important. We have been talking a
bit about how we can help the industry. We believe that the regular
publication of these figures is very important and we have started
to do that as a service so that everyone is aware of what the
price spreads are and when they are widening and when they are
reducing and that puts the burden on all sectors of the industry
to explain why. In the United States they have a very similar
series of price spreads and every now and again when there is
a controversy between whether the retailer is making too much
money or whether the producer is there is a necessary explanation
coming from retailers as to why that is and it acts as a healthy
constraint on any particular sector doing anything extreme against
the overall interest, and it is our policy to publish these and
we started last October and we feel that that is a service to
the industry[4].
Mr Livsey
353. I would like to address this question to
Mr Huw Thomas because it seems a pity that you have come all the
way from Aberystwyth and you have not had a chance of speaking
yet. First of all, I wonder if Mr Thomas can give us an overview
of the livestock industry in Wales at the moment. It is certainly
our perception that things are extremely serious. Could either
he or his colleagues tell us why the price of certain forequarter
cuts has been exceptionally depressed? Perhaps he could give us
an overview of the situation in Wales first.
(Mr Thomas) We have 19,000 full-time farmers in Wales
currently having been reduced from 25,000 some 15 or 20 years
ago. The general consensus is that this decline will accelerate
within the immediate future and the medium-sized farms are particularly
worried at the moment. In my own particular home area very very
few farmers' sons can now afford to return to their farms and
that is probably the greatest sadness that we can witness in the
Welsh countryside. Over and above that, Chairman, I think farmers
recognise that their costs have escalated over the previous few
years and different to what happened in Scotland is where we have
taken advantage of government subsidy and so on over several decades
in the past to improve the hill land as opposed to farms getting
bigger. That means that we are at saturation point in terms of
stocking and we cannot possibly stock any more which means that
we are tied in terms of size and output. The general consensus
of opinion is that farms will inevitably have to get much bigger
and the general fabric of the countryside will deteriorate as
a result of it. I think that would be an overview which would
probably spread from south-east Wales to north-west Wales and
diagonally opposite. It is a whole industry thing. I think perhaps
the one light that people really can see is the fact that we are,
because of the rainfall, geography and so on, pretty good grass
growers and therefore the future of livestock farming is going
more and more towards forage-based systems as opposed to cereal-based
system. The optimum is that we do have the fundamentals in Wales,
we have the stockmanship and we have the expertise and, dare I
say it, we have the stock as well, but that is the only chink
of light we have. I have never seen so much depression within
the industry.
354. Could we move to the situation of forequarters.
Why has the price for certain forequarter cuts been so exceptionally
depressed?
(Mr Bansback) The fact is that the immediate aftermath
of BSE saw a collapse in confidence for beef in general, but consumers
quickly recovered their confidence in steaks and joints and visible
cuts of beef and remained suspicious at mince and certain processed
products and burgers and those come mainly from the forequarter
sector of the market. That situation has improved a bit over the
past few months but we still have a situation where the steaks
and roasts are seen much more positively than the forequarter
sector. MLC have been very active in promoting both our mince
beef mark and our burger mark. Indeed, you may have seen some
posters on railway stations recently, which are quite prominent,
trying to build up confidence in the burger mark because we see
that as a very important element of building up the back business.
We have got some way to go but we are confident that we can do
that.
355. On the mince front you have done well.
In figures which we were given last week in the session we had
with the Co-operative Retail Society we saw that beef prices in
retail had only dropped by about 2.5 per cent or 4 per cent, it
was not very much. Given that as a fact and the fact that there
has been such a depression in forequarter meat, somebody somewhere
is making quite a lot of money, are they not?
(Mr Bansback) We are going back to an earlier point
in some ways. I am suggesting that there are other elements that
come into that, the costs at the abattoir sector and also the
fact that 40 per cent is sold outside the retail sector. Quite
a lot of those forequarter cuts are going for very cheap prices
if you have an overall realisation price of the animal that has
to take account of all these factors. Our reading of the market
is as I have said earlier on, but there is no evidence to say
that somebody is making a lot of money out of the beef sector
at the moment.
Mr Bercow
356. As you pointed out in your submission,
the relationship between abattoirs and multiple retailers is a
complex relationship. Can you outline for the Committee what the
main supply chains are? What are the most important trends here
and how are they likely to affect the distribution of prices and
costs?
(Mr Bansback) The situation has changed a lot over
the last few years and major multiple retailers these days in
all cases are wanting to link up with a limited number of major
abattoirs and processors and they want to source their supplies
exclusively from those particular plants. That has been a trend
that has developed recently. It has developed for two reasons:
firstly, the need to cultivate long-term supply relationships
right down the food chain; secondly, the increasing demand of
traceability and assurance, and because of this the retailers
have been pursuing this particular trend. Within that context
we cannot disguise the fact that there are some other forces at
work and these come to influence the price. One is that we still
have chronic overcapacity in our abattoir sector and that includes
Wales in the context of Great Britain as well. We have very strong
competitive pressures between the multiple retailers and those
pressures have to be seen in the context of them needing to deliver
shareholder value to their shareholders. If you put those two
points together and add a third point, which is that in the fresh
meat sector of the market there is very little branding as such
of fresh beef and lamb other than own brands of the major multiples
themselves, you have two issues emerging. One is a positive thing
from the industry's point of view in that the multiples themselves
have taken on to some extent the role of providing the reassurance
to the consumer through their branding the product and people
going into a particular outlet feel that it is quite safe and
they can feel very confident in buying the product in terms of
safety and quality because of the own brand nature of it and this
is a positive thing for the industry. The other side of things
is that it means that the multiple retailers are in a very competitive
position in terms of sourcing their supplies. Both of those issues
clearly have an impact in terms of power within the meat chain
and it affects prices in the way that I think I have explained
earlier on in the context of our tables.
Mr Thomas
357. Why do you think the major retailers have
decided to use their own branding? Surely that is a function you
should be performing. Have they supplanted your function?
(Mr Bansback) No. We are working very hard ourselves
at seeing what the opportunities are in the market and where we
are looking at overseas markets there is an opportunity in some
cases for us to encourage branding of our own products. We feel
at the moment from a branding point of view that the supermarkets
are playing a very important part in reassuring the public at
large on the products. We can still add to this through the labelling
system a certain amount of additional information in terms of
nationality and country of origin and names as well. We see this
as very much complementary to what we are doing.
358. Mr Bansback, we are going to be hearing
evidence later on from Marks & Spencer who will be telling
us that they have encountered problems finding animals meeting
their specifications with regard to the ratio between muscle and
fat, etcetera. I can give you a figure because it is going to
be public evidence shortly. The national proportion of finished
beef animals that meet Marks & Spencer's specifications is
now as low as 40 per cent. Firstly, do you regard that as a serious
problem and, secondly, how do you intend to address that?
(Mr Bansback) Firstly, we would like to see a speedier
improvement in the number of animals in the right carcass classification
grids not just for Marks & Spencer but for a wider range of
outlets and that is a priority of what we are doing in terms of
our breeding work, about our improvement work, about our commercial
advice on farms and everything else. The movement is too slow,
but we have an industry in crisis at the moment so we are addressing
what I would call short-term fire fighting issues with the industry.
This is part of a longer-term trend and we are working very closely
with Marks & Spencer and with multiple retailers—
359. They are one of the most major retailers
of meat and they are saying the industry is not able to get anywhere
near meeting its requirements. One appreciates the problems that
have been encountered. This is not meant to be critical. Is that
not a real issue given that you are there to match the industry
with what the consumers want?
(Mr Bansback) It is a real concern. I wonder if my
colleague could come in and tell you something about it.
(Mr Sains) The Marks & Spencer specification is
a particularly rigorous one and it has particular breeds associated
with it. They are predominantly concerned with beef-cross cattle
where we have suffered a substantial reduction in numbers. They
also have additional requirements in their specification. I have
been very closely involved with their English supplier base to
try and increase the number of animals that will meet the M&S
specification through their selected farms operation. You are
right in as much as they do not have sufficient numbers to meet
their requirement, but in conjunction with them and their abattoir
and producer group suppliers—because they use producer groups
quite extensively—we have been working together to try and
increase the number of cattle which will meet their specification
now and in the future.
2 See table on page 86. Back
3
See table 3 page 89. Back
4
See table 2 page 88. Back
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