Committee Reports::Report No. 13 - Comhlucht SiÚicre Éireann, Teoranta::21 May, 1980::MIONTUAIRISC NA FINNEACHTA / Minutes of Evidence


(Minutes of Evidence)

Dé Céadaoin, 21 Bealtaine, 1980

Wednesday, 21 May, 1980

Members Present:

SENATOR EOIN RYAN in the chair


Austin Deasy,


William Kenneally,

Barry Desmond,

Liam Lawlor,

James N. Fitzsimons,


Patrick M. Cooney.


Mr. Maurice C. Sheehy, Managing Director and Chief Executive, Mr. Christopher K. Comerford, Group General Manager and Deputy Chief Executive; Mr. John D. McCarthy, Group Financial Controller; Mr. John F. Hughes, Company Secretary and Mr. Tony Brown, Economic Adviser, of Comhlucht Siúicre Éireann Teoranta called and further examined.

Chairman.—Today we are dealing with organisation and personnel, agricultural trading, food division, profitability, capital structure and financial management. Members should try to deal with one area at a time. We will start with organisation and personnel.

100. Senator Cooney.—Are you happy with your relationship with Government Departments?

Mr. Sheehy.—We are totally happy. Actually in every working relationship there will be problems to be sorted out from time to time but there is no lack of co-operation from the Government Departments.

101. Senator Cooney.—You do not find too much supervision or anything like that in your day to day activities?

Mr. Sheehy.—We do not.

Senator Cooney.—I am interested to hear that because my recollection is that, when we put this question to your colleagues from other semi-State bodies, their answers were broadly the same. I was surprised to read the NESC report which was so positively the other way. That is why I was interested to have your views.

102. Deputy L. Lawlor.—There has been a reference to a change of administration. Responsibility is transferred from Finance to Agriculture. Is that so?

Mr. Sheehy.—Yes, that was effected recently. We always had a relationship with more than one Minister. Whereas the Minister for Finance was the Minister primarily responsible for the company, at the same time we always had a relationship with Agriculture and Industry and Commerce. The Minister primarily responsible for the company some years ago was, in fact, the Minister for Agriculture. We are reverting back to that situation.

103. Deputy Fitzsimons.—You had an examination recently of the structure of the company. What major weaknesses did you discover in the examination? What steps are you taking to rectify those weaknesses?

Mr. Sheehy.—We felt that the company had developed over a long period and grown from a single sugar company with other things being tacked on to it, and the structure had developed correspondingly. Management practices had changed and there were developments in that area. We felt the time had come for a major review of the structure. We had consultations with the relevant Departments, and we agreed that this was necessary at this time. We did get the assistance of some outside people who helped in that work both in regard to objectives and organisation. We had two reports that are now being dealt with by the Board and were sent also to Government Departments. The reports showed the weaknesses we expected would be shown up arising from the history of the company. The Board have arrived at some agreements in principle. We have not communicated these internally to the staff as yet. I can let you have the basic principles that are involved. When you want to introduce changes you have to be very discreet and have consultations with the various interests involved. That process will take a little time, but we see the need for change. We can let you have the reports of the consultants and the reports on questionnaires.* We consulted a very big number of staff in the initial stages. We can let you have all those findings and the final approach we are adopting. They have to be implemented in consultation with the people involved. They can only be implemented successfully after consultation. There might be changes on the way.

104. Senator Cooney.—Who are your consultants?

Mr. Sheehy.—We had Cooper & Lybrand interviewing for us. It was necessary to have this done confidentially, so that people could speak openly about what they saw around them. People in management could speak openly about what they thought was wrong, and still remain anonymous. That is why we involved outsiders and they submitted a report.

105. Senator Cooney.—Who set their terms of reference? Had they any specific terms of reference or just broad terms of reference?

Mr. Sheehy.—They were pretty broad. They were set by myself after consultation with the Chairman and other senior management people. They were set after having preliminary surveys done by three further firms of consultants.

106. Senator Cooney.—You say that you were aware yourselves within the company of certain weaknesses in the structure. Do I take it that the consultants’ report was to recommend remedies for those weaknesses rather than to identify weaknesses? Were you aware of those?

Mr. Sheehy.—We were aware of them, yes. We felt there were weaknesses. They came up with the same conclusions almost as we did. They suggested a certain line of approach.

107. Senator Cooney.—What generally speaking is the attitude of the board of senior management to their recommendations for rectifying these weaknesses?

Mr. Sheehy.—Virtually whole-hearted support for them.

108. Senator Cooney.—They agreed with your own thinking?

Mr. Sheehy.—Yes.

109. Deputy Fitzsimons.—The measures you are taking are sub judice at the moment. Would you expect them to be fruitful?

Mr. Sheehy.—Yes, I have no reason to feel they will not be fruitful. We have to go through the process of consultation. We have a long history of good relationships with our people. We have not lost a day through industrial disputes for over 30 years because we had consultation and participation in changes like this.

110. Deputy Fitzsimons.—To what do you attribute your good industrial relations? Your track record is very good in that area.

Mr. Sheehy.—We are very conscious of the need for everybody in a management role to play a part in this. By tradition we have not followed the pattern that personnel policy and industrial relations were assigned to a separate department. We look on every manager, at whatever level in the organisation, as having a part to play. Very early we were able to establish written agreements with the unions setting out procedures that had to be followed in regard to any dispute that arose, how it was dealt with first at local level and then referred up the line, and then referred outside of the organisation. We found this worked generally. Naturally there were a few instances where there were problems. In general it worked and was respected by the company and the unions. As well as that, we had a system of works committees for a long number of years in the company. We consulted more with people than perhaps other companies do. We reveal more information to the workforce than other companies do, not only on past performance but future plans and problems. These works committees meet in each of the factory areas every month. I meet delegates from the the factory areas approximately every three months, and once a year for two days I have a meeting with all the works committees totalling 240 to 250 people.

We are not satisfied that we are developed enough. We are recommending to the workforce, and they are responding, that we take that a stage further and convert those factory meetings into Works Councils. It is slightly different from a works committee concept, in line with the need for change and updating things in the management structure and we are getting a favourable response from the unions in that regard.

111. Deputy Fitzsimons.—I take it that you intend to develop further the consultation procedures with your employees?

Mr. Sheehy.—Yes, not only consultation but perhaps categorising certain things as well. There will be participation in decision making, categorising what they will have to be consulted on and maybe requesting their presence when decisions would be taken. We are involved in all that kind of dialogue with the unions at the moment in a very constructive way. The unions are putting forward suggestions that I feel are very constructive and practical in these areas.

112. Deputy Kenneally.—You have four worker directors on your Board. Is that working out to your satisfaction?

Mr. Sheehy.—Yes. We believe that there is need to support that. As far as I am concerned they are contributing very constructively to the operation. They are an asset to the Board. We believe that for the moves we are contemplating the support of the unions is necessary. We need to strengthen the organisation underneath so that there will be a better means of reporting back and getting it speeded up. We have so many factories, different unions and locations, that it is not easy for the directors to keep in touch.

113. Deputy L. Lawlor.—On visiting Carlow one definitely got the impression that the management showing us around were very familiar on a personal basis with the staff and you got to feel that there was a very flexible arrangement. The record proves that there has been an excellent relationship between all levels of staff, and speaking to operatives and technicians and to the management who were showing us the different processes seems to confirm this. Would you say the works committee system leads to this familiarity between the management and staff? It was definitely very impressive. They seemed to be very familiar with each other.

Mr. Sheehy.—The Works Committees considered the formal agreements we have with the unions. The overall philosophy of the company in this respect contributed more than we expected. We still expect the management people to remain familiar with what is going on in the work place itself. The management responsibility as far as we are concerned is not just to produce sugar or machinery but to manage the factory in a satisfactory way and if we cannot have productivity and co-operation of the workforce, this could not be attained. That would be the major aspect.

114. Deputy Kenneally.—Have you any idea about the level of employment in the future and the problems that you would foresee?

Mr. Sheehy.—We foresee problems. If we succeed in modernising the sugar industry to the extent desirable for the requirements of the future that in itself would mean less labour in the sugar process. However, we feel that we have a commitment to the people working with us. For that reason we feel that we must begin to look to other things. That is why we have this separate division attending to the development of other business and diversification, in order to take up this potential slack. We see a fall in employment there and much the same pattern perhaps in the food division. Modernisation and maybe other markets might alleviate this. We regard ourselves as having a responsibility to employees and to growers.

115. Chairman.—Is there already a slack? Could you do with slightly fewer employees than you have at the moment?

Mr. Sheehy.—No, because the work we are doing in modernising the factories is being done between campaigns. In that way we have work for everyone. If that ended we would have many problems.

116. Senator Cooney.—You are reducing the numbers employed in Head Office. Has that been conscious or has it been accidental?

Mr. Sheehy.—It has been conscious. We are not totally happy with the balance between one type of employee and another. We have to introduce more up to date techniques in the office and that will affect employment. There is a very small proportion really in Head Office. In the longer term, further rationalisations will probably be needed, because we built on the basis of four sugar factories for regional reasons originally. Our profit structures were built on those regions and this may not be an active proposition in the future.

117. Senator Cooney.—Generally speaking then, even if you get the investment finance you need, it will not result in any significant increase in the numbers employed by the company?

Mr. Sheehy.—No, in a reduction.

118. Senator Cooney.—The biggest throughput has been achieved in Carlow. Was there a substantial rise in employees in other areas of the operation?

Mr. Sheehy.—Yes, but the figures in recent years do not reflect the true picture. If you now look at the employment situation during the processing season you will see the true overall picture because with modernisation we are carrying those people over the year. When you get down to staffing for shifts during a campaign you get a different picture.

119. Chairman.—To move to the agricultural trading division, what is the position in respect of volume and profitability of beet pulp sales? Is that a satisfactory area?

Mr. Sheehy.—In respect of volume, we have to handle as a by-product of the sugar industry, about 130,000 tons of feedstuffs. Progressively we are upgrading more of that in line with research findings. Research has established that the beet pulp when fed on its own has one value but a substantially higher value when fed in a balanced diet. If incorporated in a balanced diet the beet pulp has the nutrient equivalent of barley. There is a big economic advantage nationally and also an advantage for ourselves in upgrading the product. We are progressing more and more on that. That is in response to the demand from our own farmers; they are looking for more of the upgraded products. Built into the beet price—under EEC rules—the farmers have a certain claim on the balance of the pulp. We have to compensate the farmers for that. All this has to be integrated into sugar pricing. We have a breakdown for our own control purposes. We are not entirely satisfied with the profitability in it. Nevertheless it is largely bound up with EEC regulations. The farmers are entitled to a certain amount of the pulp. As the wet pulp comes out of the process it is dried; it is, in fact, the drying charges that you can charge them for. This procedure is laid down in EEC regulations and we are not free to be very flexible on the matter.

120. Deputy Kenneally.—What is the supply and demand for that? Does the supply fulfil the demand of farmers for beet pulp?

Mr. Sheehy.—It depends again on the yield in any year; it fluctuates. Likewise it depends on demand. For last winter which was mild you had one situation but the year before was a difficult winter and everybody wanted to get beet pulp. We had no difficultly in moving the quantity we had last year which was about 130,000 tonnes.

121. Senator Cooney.—You mentioned the consideration concerning the EEC in building in a pulp element into the farmers’ price. I gather that inhibits the general profitability of feedstuffs. Is it going to be a permanent inhibition or is there any way of escaping from it or compensating for it at the other end of the operation?

Mr. Sheehy.—The more we upgrade the product the better because when we upgrade the product the pulp element in the upgraded product has a higher value. It puts about 20 per cent higher value on the pulp element itself. That gives room for sharing more between the farmers and ourselves. Our ambition and the farmers wishes would be that we would upgrade more of it.

122. Senator Cooney.—There is potential for greater profitability in animal feedstuffs?

Mr. Sheehy.—Yes, definitely.

123. Senator Cooney.—When would you hope to achieve that?

Mr. Sheehy.—We have gone up very considerably in the past three to four years in that. We went from virtually a nil quantity upgraded to quite a substantial amount; probably 30,000 to 40,000 tonnes of upgraded products since last year.

124. Senator Cooney.—Is it going up the whole time?

Mr. Sheehy.—Yes.

125. Senator Cooney.—You do some speciality feed for horses?

Mr. Sheehy.—To a very small extent.

126. Senator Cooney.—Has it commercial significance?

Mr. Sheehy.—It is profitable on its own and the volume is small.

127. Senator Cooney.—There is no danger of it being dropped from your range?

Mr. Sheehy.—No.

128. Deputy L. Lawlor.—On the molasses trading section, could you outline the link with Tate and Lyle? Has any progress been made in a deep sea port and your probable need for that? Has any port been identified yet? I have two questions really—the link with Tate and Lyle and the port facilities.

Mr. Sheehy.—We have established very clearly the need for a deep sea terminal to have profitable trading in molasses. There is a substantial difference in price when you bring in molasses in bulk in large cargo ships. Therefore, we are working on a port and we are in negotation with a port authority at the moment about a site. With regard to the question of Tate and Lyle, we have been looking at the desirability of having involvement with somebody else in planning a total Ireland marketing arrangement. A subsidiary of Tate and Lyle happens to have a satisfactory reception point in Northern Ireland so there would be some logic in distributing from the two ends of the country to get the most economic return.

129. Deputy L. Lawlor.—Would you say that there will be a joint equity basis or an agency arrangement?

Mr. Sheehy.—In as much as there is nothing finally agreed yet it is difficult to say. We have always been purchasers from a subsidiary of Tate and Lyle but not solely from them. We have been buying from other firms as well. Tate and Lyle are by far the biggest organisation in this activity in the world.

Deputy L. Lawlor.—I would say it would be very desirable if you could work out some satisfactory relationship.

130. Chairman.—I think you also have a relationship with Ceimicí Teo with regard to molasses?

Mr. Sheehy.—We sell them very little. Again, they are too far away from our factories. They get supplies from a Northern Ireland port; it is more economic for them. We have had a relationship with the Pfizer people where we gave them some beet molasses and we used their facilities for bringing in cane molasses.

131. Deputy Kenneally.—Will it be profitable?

Mr. Sheehy.—It is a growing market. It has grown very significantly in recent years. We have a major share in that growth and we see it growing more. It depends of course on current prices of molasses and that fluctuates very much. It is inclined to be in some way related to world sugar prices which fluctuate but it is also inclined to be related to oil prices. There are some chemical processes where molasses can substitute for hydrocarbon in feedstock. All of these factors come into play.

Chairman.—It is a very profitable and a growing market.

132. Deputy Fitzsimons.—In relation to the agricultural engineering business, sales of £4 million were very considerable sales yet the profitability here has been doubtful. In view of the set backs in the past year in this area, what prospects have you in the near future in relation to this.

Mr. Sheehy.—The agricultural engineering business on which we have spent some considerable money in recent years grew up in what is essentially a factory maintenance workshop. It grew up as a service business to the beet industry. It grew up within the sugar factory, not a separate venture out on its own. We have specialised in the beet and vegetable machinery area to support our own industry and in supporting it, where we saw opportunities for selling abroad, we expanded on that. We would not have been able to give the service to our own industry if we had not gone after that because the volume at home would have been too small. A volume factor entered into it. Unfortunately, in the past two years there were some problems. We ran into a problem with some machinery destined for Iran and we ran into problems in the UK market which has been depressed in that sector in recent times because of the uncertainty surrounding sugar quotas; for instance, the announcement last September, of the possible closing of eight of the 17 Sugar Corporation factories this autumn if the beet situation went a certain way. That was not conducive to British people investing in new machinery and everybody in that business suffered accordingly. We feel, however, that it is a good business to be in; and it is essential for us to be able to support our own industry. We can make an important impact on the export business as well.

133. Deputy Fitzsimons.—Would it have a better chance of survival if it was structured and capitalised to do, say, a wider range of engineering products?

Mr. Sheehy.—Certainly. It grew in our industry not as a separate business but as a service to our own beet crop. When it got to a certain size it was worth looking at as a separate business. It was never capitalised and structured as one would structure it if one were looking at it as a purely engineering business in its own right. As well as that, the range of products we are in has been largely confined to the crops that we were dealing with ourselves.

134. Deputy B. Desmond.—Why has it been so confined? Has any thought been given or has any feasibility study been done in the company on the prospect of establishing a national agricultural engineering or machinery entity on a quite separate but nevertheless related structure? Have any Government Department ever said “For decades now you have had your agricultural engineering sector, and it has had its ups and downs, why have you not branched out in a major ancillary way?” Is there any inhibiting factor in that regard?

Mr. Sheehy.—As far as we were concerned the inhibiting factor was the cash and the structure needed to go into it. People in our organisation who have been closely involved have always seen that opportunities have been missed on a national basis for the establishment of a viable and substantial agricultural engineering business. It has never been really tackled in that way. We have gone after one sector of it but other major areas have not been tackled and the country has been rather smothered with imports often of an inferior quality.

135. Deputy B. Desmond.—In that regard I recall a former Minister for Industry and Commerce expressing very considerable concern both privately and publicly at the impact on the balance of payments of major imports of, not just CKD, but fully assembled completed units coming in right across the agricultural range. These were substantial imports and yet there was no great prefabrication and assembly done here. I got the impression that somebody or other had a halter around the company’s neck in not either encouraging the company or getting the sense of entrepreneurial initiative to get the thing off the ground.

Mr. Sheehy.—The impact could have been made on the agricultural engineering business, not in recent years but many years ago, maybe 20 or 25 years ago, when it was possible to protect it until it got going. The growing interest at that time in forage harvesting machinery, for instance, meant that there was a basis, a framework for a viable entity in its own right. It is more difficult to tackle it now as it is difficult to give it the protection that it would need to get it together. There are a number of people in it in a small way, some of them doing essential but simple work. We are by far the biggest in this business in the country, although I consider that we are in it in a very small way. We are the only people doing something with a high technological input. It is only in that area that it would be possible to compete with the others outside. That is why I mention this forage harvesting, because here we have the type of growth that would really test the forage harvester. If one was developed here for sale it would certainly work very successfully in any part of the world.

136. Deputy B. Desmond.—Has there been any downturn in the past eight or nine months in the sales of equipment because of high interest rates? Are farmers slowing down in their purchases?

Mr. Sheehy.—Farmers are definitely slowing down but not just here. That is the pattern as far as the sugar industry is concerned, at any rate in the UK. People are just not investing. We are tied with the UK which comprises about 50 per cent of our market. That is largely due to the scare about what quotas they are going to get. The managing director of the British Sugar Corporation has declared that eight of their factories will have to close down if the EEC proposals in that instance go through. That has taken the confidence out of the farmers; they are just not buying.

137. Deputy Fitzsimons.—Would farmers purchase these products on hire purchase through the banking sector?

Mr. Sheehy.—In relation to machinery a lot of that would be done through the ACC or that kind of arrangement. They would not get the credit from our company for that, although we might help in the arranging of the credit. The credit would be provided by somebody else.

138. Deputy Fitzsimons.—Where they are paying tax, they would normally be in a write-off situation in buying the company’s products to improve their farms?

Mr. Sheehy.—Yes.

139. Deputy Fitzsimons.—Even though there are restrictions in the banking sector at present, if a farmer was in a tax paying situation, it should not inhibit him really in purchasing your products.

Mr. Sheehy.—One would imagine that, but we find that farmers are not in the humour for buying this year. It is reflected more in the ground limestone area than in the case of other products. They are really damaging themselves in the long term, but there is a very substantial fall of the order of 50 per cent from last year.

140. Senator Cooney.—In the company’s submission, they indicated that all aspects of the agricultural engineering sector were being rationalised. Has the company considered a possible rationalisation in the feasability of merging with any of the private sector interests in this field?

Mr. Sheehy.—We have not.

141. Senator Cooney.—Is there any room for it, or is the company’s machinery area too specialised?

Mr. Sheehy.—Our machinery area is too specialised and it is no way wide enough a range to give the kind of protection needed because, our customers are all at one time of the year. The huge bulk of our machinery is harvesting machinery, whether it is beet harvesting or vegetable harvesting and that is all autumn work. We have a small business in springtime but it is mainly in the autumn, so that we have not got a very good spread across the year.

142. Senator Cooney.—You do not see any room for using your engineering and technological expertise in the present situation?

Mr. Sheehy.—I see that the whole structure of the agricultural engineering industry in the country is one that is causing problems. It would be impossible to restructure that without a major involvement from ourselves because of our size. The private sector would be rather suspicious about the State sector making a move in that direction.

143. Senator Cooney.—Would there be room for an initiative by you if you had not other problems of restructure in management and so on? Is there a possibility that you might be able to take an initiative in this whole agricultural engineering sector?

Mr. Sheehy.—There is one body that we are in dialogue with in the country but I would not like to say any more than that.

Senator Cooney.—I understand.

Mr. Sheehy.—Our restructuring will reflect the kind of needs that you referred to of enabling an enterprise like this to do things more on their own.

144. Deputy Kenneally.—Could I move on to fertilisers, with particular reference to the enterprise of the company in Waterford. Would Mr. Sheehy refer to the objections about this enterprise? Is it costing the company a lot of money at the moment?

Mr. Sheehy.—The history of that is that we acquired a plant in Waterford with a view to blending fertilisers there. We have not gone ahead with that. There were problems. When we acquired it there were a lot of objections to a State company becoming involved in that area and then pressure was put on Government Departments and so on not to have it gone ahead with. It is very significant that the same pressures have not been put on when several other private sector firms have done precisely the same thing.

145. Deputy B. Desmond.—Where is the contradiction? Could you elaborate on that? Was there an actual Government directive?

Mr. Sheehy.—The situation developed that it was impossible for us to do it. As to whether there was anything ever so positive as a directive, I do not know if you could interpret it in such a way. There was total opposition from many quarters, other people with interests in the fertiliser business and that spread over to the trade unions. It was mounted on the basis that a State owned company was getting involved in that business.

146. Deputy B. Desmond.—Were the unions used against a State sponsored company?

Mr. Sheehy.—Their voice was heard anyway. The point is that nobody heard, either from other interests in the fertiliser business, or from the unions, when other people became involved in the same business since then.

147. Senator Cooney.—Would you not be as well out of that business having regard to the down turn in demand at the moment?

Mr. Sheehy.—No. The farmers depend on us being able to supply fertilisers for the beet crop when they want it. We have to be in that position each year. Also, we have to be in a position to supply the necessary type of blend that is needed.

148. Senator Cooney.—Is there a special blend of fertiliser?

Mr. Sheehy.—Yes.

149. Deputy Deasy.—Would you answer the question put to you about direct Government intervention, because the view is prevalent in Waterford that there was pressure put on the Sugar Company not to go ahead with their fertiliser blending because of representations to the Government from private enterprise in a neighbouring town? Is it correct that there was pressure from the Government not to go ahead with that project?

Mr. Sheehy.—Yes, pressure, without a directive. I would need to look up the documentation. There was pressure not to go ahead with it. It was as a result of the pressure that was put upon the Government by the other interests involved in the business.

150. Deputy Deasy.—What are your intentions with regard to the premises in question?

Mr. Sheehy.—At present nobody could contemplate starting up. As far as we are concerned that opportunity is virtually gone.

151. Deputy Deasy.—Have you any alternative?

Mr. Sheehy.—We are using the place as a store at the moment for animal feed stuffs and so on but we have not any plans for going into production or manufacturing of anything in that area.

152. Deputy B. Desmond.—Why did you not go ahead? You have as much right to be in this field as anybody else.

Mr. Sheehy.—I believe we have, but a company like ours is exposed to more pressures than others.

153. Chairman.—Despite the difficulty you had there, apparently you are making blending arrangements and you have something like 11 per cent of the market. Is that so?

Mr. Sheehy.—We do it on contract work with other people.

154. Chairman.—Other people blend it for you?

Mr. Sheehy.—That is right.

155. Deputy B. Desmond.—Would you have been able to produce a blend cheaper than the private sector?

Mr. Sheehy.—We felt we had a good economic case for going ahead at the time.

156. Deputy B. Desmond.—Would the farmers have got comparable value or perhaps better value?

Mr. Sheehy.—It was on that basis that our decision to make investment in the first instance was made.

157. Senator Cooney.—Would you have confined your production to the speciality fertiliser you need for beet growers or would you have gone into general fertilisers?

Mr. Sheehy.—We sell general fertilisers as well to the same people at the moment. They usually buy the range of fertilisers they require and we supply them with special fertilisers for the beet crop.

158. Senator Cooney.—Could you tell us how much less per ton the farmer would have to pay for the speciality fertiliser if you had been able to go ahead with this project?

Mr. Sheehy.—I can make available to the Committee the working papers that we had at the time on the issue.* It is two or three years ago or more now since this came up and I think that would be the most satisfactory way to do it.

159. Senator Cooney.—The rationale behind it was to supply your growers with a better value fertiliser for their speciality needs?

Mr. Sheehy.—Apart from that, the rationale was that it would be better for the company from a financial point of view.

160. Deputy Deasy.—What was your capital outlay on the premises in question?

Mr. Sheehy.—Again in round figures approximately £500,000.

161. Deputy B. Desmond.—What is your net loss?

Mr. Sheehy.—We are using the premises as a store. It is probably worth more than we paid for it.

162. Deputy B. Desmond.—You have not worked out cost-benefit in relation to it. Property is substantially appreciated.

Mr. Sheehy.—Property has appreciated.

163. Deputy Deasy.—In a business sense it is a loss making project whereas substantially you had a profit making project up your sleeve which was stopped by private enterprise pressures?

Mr. Sheehy.—That is correct.

164. Deputy B. Desmond.—Have you any plans to attempt to revive the project?

Mr. Sheehy.—At this time because of the fertiliser market, one could not contemplate doing it. Projections that we had then for growth and so on were all achievable in the time but the opportunity is not there for us now. Since then new plants have come into the picture. At that time the opening was there, the same opening is not there today. Additional plants are available and in operation now in the country.

165. Deputy Deasy.—Did you realise that there might be such pressures put on you before you went into the business of buying the premises?

Mr. Sheehy.—We did not realise it.

166. Senator Cooney.—I take it the Department were aware of your intentions in this regard?

Mr. Sheehy.—Yes.

167. Senator Cooney.—And that when you indicated those intentions early on, there were no inhibitions put in your way?

Mr. Sheehy.—No. I am not saying that I do not appreciate the problem that was caused. I am not being critical of it. Circumstances so evolved that apart from the Department, it would have been impractical for us to go ahead because we would not know where it would impinge on our other businesses. It had gone to those proportions.

168. Deputy Deasy.—What affect on the viability of your sugar beet factories would the closing of railway lines have?

Mr. Sheehy.—We feel it would have a major impact. I did touch on this in relation to some other question last week. If some of the lines were closed it would make the situation for, say, the Tuam factory virtually impossible.

169. Deputy Deasy.—What about Carlow and Thurles?

Mr. Sheehy.—Thurles depends to a large extent on the beet from the south Wexford area and that depends on that line coming from south Wexford where we have a depot now. Carlow would have problems also.

170. Deputy Deasy.—Did you suffer any losses as a result of the closing of the line from Waterford to Mallow? It was closed some 13 years ago. Did it have any effect on you?

Mr. Comerford.—We transfer the beet from the Waterford area by road to Thurles, so it did not affect us very much. We understand that there is no question of closing the Wexford line. There is a depot there. We have invested a lot of money in south Wexford. We feel that there is a good service and the growers are happy with it. In the Tuam area there would be very serious effects if the lines were closed.

171. Deputy Deasy.—There were moves to close the Wexford line a couple of years ago, but it was resisted. Correct?

Mr. Comerford.—We put in a depot since to get over that problem.

Mr. Sheehy.—If that had gone ahead at the time there would have been a most serious situation for the Thurles factory.

Chairman.—I do not wish to go too much into the question of transport. We did deal with it last week.

Deputy Deasy.—Did the Committee deal with the sugar company’s own haulage fleet last week?

172. Chairman.—There were some answers on that question.

You have been doing some Third World consultancy—some consultancy contracts in Zambia and the Middle East. Is this a once-off situation or do you think you may develop it in the future?

Mr. Sheehy.—We are hoping to develop it. We have been involved in a company involving firms of consultants here in Dublin and in association with An Foras Talúntais, the four of us are now involved in that company who are exploring further business.

173. Chairman.—You are actively canvassing business?

Mr. Sheehy.—Within the past two or three months we have been involved with the firms to which I have referred on this and we have formal association with AFT.

174. Deputy Kenneally.—Are you satisfied with the limestone situation? Is there a downturn in sales?

Mr. Sheehy.—Ground limestone has always been profitable for the group but there is a serious downturn in sales this year. We hope that this is a temporary affair. We are developing other lines of business in our quarries because we see that ground limestone is only one of the products that should come out of a limestone quarry, that that is an advantage that other people in the quarrying business have. We have been developing in that way for the past four or five years and that has been very welcome in the areas where we have done so. We now give some service in crushed stone and so on.

175. Senator Cooney.—Did the withdrawal of the transport subsidy for the lime make any impact?

Mr. Sheehy.—It did. It put a dent into it last year but the big problem has arisen only this year. Last year was satisfactory enough.

176. Senator Cooney.—What is the reason this year? Are farmers’ incomes down so that they are not spending?

Mr. Sheehy.—I would not agree with the attitude they adopt. They are cutting back, to an unnecessary extent in my view, on any expenditure that they can put off. They do not see in all cases an immediate return from the lime application. Therefore, they are cutting that off. This is going to have very serious long-term repercussions.

177. Deputy Kenneally.—Would you think this is just a passing phase; that the upturn will come in the sales again?

Mr. Sheehy.—In relation to ground limestone—this year’s situation falls so much short of what is needed on a national basis because of leaching alone, that one would hope in a national context that it was going to be temporary. If the weather continues this year the way it has been, the farmers’ incomes will be much better by the end of the year, anyway.

Deputy Deasy.—I would not attribute the entire situation to the weather.

178. Senator Cooney.—Are you selling a fair amount of chemicals on an agency basis or have you considered producing any of these yourselves?

Mr. Sheehy.—We have this year erected a new store in Cherry Orchard for that business and in building this new store we have put in a packaging plant as well. Therefore we will progressively be doing more in the packaging end. We are inducing the people concerned from outside to do more packaging here now that we have the facilities. The first moves in that direction are satisfactory.

179. Senator Cooney.—A bit of added value.

Mr. Sheehy.—Yes, and it is all bringing in more money to the country.

Chairman.—We will move on to the food division.

180. Deputy B. Desmond.—In a broad way here, could I ask for the company’s objectives for the division? I am particularly interested on a historical basis in the background. Is it not unfair to say that in the past 15 or 20 years with the preoccupation of some of your predecessors in relation to the food division, Heinz-Erin and with the losses which were incurred in that market, that the sugar end of the company suffered in terms of capitalisation and in terms of reserves and in terms of maintenance and development? I know that you cannot precisely comment on policies followed by your predecessors, but beneficiaries tend to get the outcome of the wills. I am wondering what kind of beneficiary you turned out to be in 1980?

Mr. Sheehy.—It is certainly true to say that over the years the food division has been a drain on the industry. That has gone on and we could go back over the years and supply you with the trend. There has been a substantial drain on the industry and it continues to be so. That does not say that the whole thing is a disaster. There are positive sides to it, too. It is a fact that the food division of the sugar company has been a drain on the company over the years.

181. Chairman.—Could you say why this was?

Mr. Sheehy.—There is no one reason, but I will cover it in a general way. In the early stages, the initial aim was that there should be an Irish-owned food business, based on vegetables, and that it should be in the branded foods area. That was the aim. It was as a result of encouragement at the time for diversification into contiguous areas by the Government. It ran into problems from the beginning. One of the problems in the early stages was that there was a restriction on what we could sell in the home market. That did not apply for too long but that was a restriction in the early days. Difficulties were experienced in becoming involved in branded markets abroad. Two serious efforts were made in that direction in 1960 and 1970. Both of these failed to get off the ground. This was a major setback. The business has developed largely as a dehydration business. There certainly is a very viable core in the business. To cover the overall situation and the drain on the company, the development has been in the dehydration field; we are very substantial people in that regard. That is a business that is perhaps in much the same situation today in the European market as, maybe, butter and beef and other things were before the EEC. It is a business which is exposed to a lot of competition from outside the EEC. It is a business where total EEC production has fallen very considerably in recent years. In the type of products we are in now, the dehydration business in the EEC context is only about 60 per cent of what it was four to five years ago. Within that category, we are very major people. In some products we are in, we would be 50 per cent of the production. In the entire range of products in dehydration, our business would be about 40 per cent of the total EEC output. So we are very sizeable people in this non-protected EEC business. We are exposed to a lot of competition from Hungary, Egypt, Kenya, Israel, China, North America and so on.

182. Chairman.—Are you talking about competition from dehydration plants or competition from other methods of production?

Mr. Sheehy.—I am confining myself to dehydration. We are very substantial in EEC terms. In volume terms, the EEC home production is falling and imports are rising. For different reasons, these other countries get in. This is a problem for us that there is a falling volume which has an impact on us. It leaves us with considerable excess capacity in the food business. That has its own implications for our plants that are under-loaded.

183. Chairman.—Is it not true that you are suffering even more severe competition from other forms of food as well as from dehydrated foods? Is the market not going to frozen foods or other types of preserved foods? Is that not correct?

Mr. Sheehy.—Yes, there is a big growth in frozen foods. That is correct. But the total EEC production of dehydrates is falling. Imports are rising. There is no major change in the total volume in that business, but there is less of it remaining in Europe than there was in the past and the prices are dictated rather by world prices than by European costs of production. We are not the only dehydrate business in Europe that has problems. I think every dehydrator has problems and many firms had to close down in recent times.

184. Deputy Kenneally.—You stated that frozen food sales have increased. Do you intend going into the frozen food business?

Mr. Sheehy.—To get into any of these businesses is very difficult. The food business is characterised by the predominance of many multi-nationals. If you look at the frozen food business that, to some extent, is also the case. You have major firms with a wide range of products and big depth within the range. Even though the frozen food business in this country is sizeable, I think the frozen vegetable business is not so sizeable. It might be worth only £5 million in frozen vegetables. But you have other areas in it. For instance, you have hamburgers, chicken, ice cream and other things. A lot of firms who are successful in it would have a branded presence and would be able to give the entire span of products.

185. Deputy Fitzsimons.—The one product I think of straightaway is frozen chips. Frozen chips have been imported from places like Canada in recent years in considerable quantity. A factory set up in County Louth produced that product. Did you ever consider producing that product?

Mr. Sheehy.—That has been debated in the past in connection with the Tuam plant. There is a considerable volume of growth in the importation of frozen chips in recent years, particularly in the last 12 months. A couple of firms now are looking at that possibility. Producing them here is one thing, distribution is another thing and whether they can fit in with the distribution through the channels that are there at the moment may be the problem.

186. Deputy Fitzsimons.—There seems to be a big market in that area. The average housewife going into a supermarket buys these things in big plastic bags, and they are all imported at the moment. The IFA in consultation with a British company are setting up this factory near Ardee, so they must believe that there is a market for it. Comment?

Mr. Sheehy.—For instance, there is a factory in Northern Ireland. They are making it in bulk for one of these strong branded multi-national companies that I mentioned and it is being sold and distributed under their label. They found they were not able to do it on their own.

187. Deputy L. Lawlor.—On frozen food sales, the company are marketing under the brand name of “Harvestime”. Their competitor appeared to find it necessary in their County Offaly base to supplement with meat products and other products, which I gather now is a profitable operation in general. Is it profitable or realistic to stay on the narrow base of frozen vegetables only, which I think the company are doing? In regard to marketing the chips from a new plant in County Louth or from the North of Ireland or from a possible facility in Tuam, do the company foresee themselves expanding the range of products in the frozen food sector, as we all agree that the consumption of this type of product is on the up-turn?

Mr. Sheehy.—The consumption is on the up-turn, but the end of the market that we are in, vegetables, is small. We have a figure of £5 million in a £70 million market, so it is a small sector in the total market. Without the branded presence we do not see it as being an economic proposition. We feel you need a branded presence to enable you to offer across-the-range products to make an impact. We have no plans to become so involved.

188. Deputy L. Lawlor.—Organisations such as the IMP group are doing the frozen meat products and the company are doing the frozen vegetables. Is there a possible complementary co-operation there which would broaden the base? The branded products are mainly imported. Can we get an Irish identity on a range of frozen foods to compete with the imports as such, which is the only way we are going to face the competition if we are going to be ever able to compete?

Mr. Sheehy.—It is regrettable that foreign owned firms dominate not only the frozen markets but a lot of the other end of the food market in the country. I do not think that alone either ourselves in vegetables or somebody else in chickens can develop that business. If there is to be any chance it will be one single large brand against some of the others. Erin is the only major food company in this country that is purely Irish owned.

189. Deputy L. Lawlor.—Is there any way the company can get the other Irish-owned food processors in the meat sector and in poultry processing to come in with them in developing a broad brand of Erin products, so that we can tackle foreign competition and give the comprehensive range of products that are necessary? Somebody has to initiate the discussions. A lot of groundwork and preparation will be necessary to get together the meat people and the poultry people, and they all have their own brand names at the moment. Will it be feasible in the future for somebody to pioneer this Erin quality foods range?

Mr. Sheehy.—You would probably have to put a lot of money into it to initiate it in the first instance to establish a brand identity that people would be loyal to. The two or three major brands that are there are very well known at the moment and to get into their territory would need a bit of muscle. A fair investment in marketing would be needed in the first instance. It would not be too easy to bring about what the Committee suggest, desirable though it would be to support home industry, such a major portion of this is imported.

190. Deputy L. Lawlor.—We all have the theory of the Irish quality food product high on our list, but in practice it has not come to fruition. Probably the company are the only organisation who might undertake endeavouring to look at it with the meat processors and the poultry people to see if, at least, submissions could come forward to the Minister for Agriculture on marketing a range of Irish products. We want to try to get in to competing with them on our own home market and our export market, but at the moment we are allowing them take our home markets, which is all wrong.

Mr. Sheehy.—Even in our dehydration operations we have to fight this battle. We are trying to maintain an Irish brand against multi-nationals here in the home market and a lot of effort has to be put into that. In spite of the problems, Erin have contributed a lot to the nation in that regard, not only in having at least some major Irish brand on sale, but we are responsible now for roughly one-third of the vegetables that are grown in this country and we consider ourselves small. The entire vegetable industry would be very small if we had not an Erin operation.

191. Chairman.—You have about one-third of the vegetables that are grown in the country?

Mr. Sheehy.—We have about one-third of the vegetables that are grown in the country.

192. Chairman.—Are they grown specially for you?

Mr. Sheehy.—Yes.

193. Deputy Deasy.—Are we less importers or exporters of processed vegetables?

Mr. Sheehy.—Potatoes are a substantial amount themselves.

Mr. Comerford.—10,000 tons of frozen potatoes, gone up from 3,000 tons three years ago.

194. Deputy Deasy.—Do the company see any prospect of reducing their losses and becoming a profit-making enterprise in this regard?

Mr. Sheehy.—I touched on the overall dehydration, and we have over-capacity in that all our dehydration factories are under-utilised. That is a serious excess cost. We have some developments and improvements that give us a lead over others in this area in specialised products that require less reconstitution time. We are making substantial development there and there is a lot of test marketing going on by the people to whom we supply these goods. Hopefully that will develop. We are depending on that and we will have to have a review of our operations in 12 or 18 months’ time. At the same time we will be developing products based on that technology ourselves, branded products. That is our strategy for that bulk business. At the same time we will be endeavouring to strengthen our presence in our existing range of products on the home market. We do believe that within these two things there is a core business there that may ultimately be made profitable.

195. Senator Cooney.—In the UK market you are engaged in a very competitive business. You sell to Heinz in the UK. I take it that Heinz are also a competitor of yours in that same market? Is it not a serious disadvantage that the competitor selling your products would naturally give precedence to his own product before he produces your particular product?

Mr. Sheehy.—Heinz are selling our products, but we are not in the retail business in the UK. We tried that before and we pulled out of it. We have looked several times at the possibility in the last couple of years of launching in the UK a branded product ourselves. We were frightened off because we established that the launch cost is of the order of £3 million, that a half-minute spot on TV on the national network in the UK is of the order of £36,000. For the introduction of a new product in the UK the risk money is enormous. With Heinz in the catering business there is not that serious competition between ourselves and Heinz. They have a range of soups but we do not regard it as being a serious disadvantage. The other people who are in that catering sector would be considerably more in conflict.

196. Senator Cooney.—I take it you have done sums to try to decide the question as to whether it would be more profitable to set up your own sales force for that sector as opposed to continuing with Heinz? They have come out wrong?

Mr. Sheehy.—They have come out wrong.

197. Senator Cooney.—Is it profitable? Selling to caterers in England?

Mr. Sheehy.—It has been reasonable in the past. It is a very tight business. It would not be our major problem area except that the volume is not substantial. The major problem area for our food business is in the bulk dehydrates.

198. Senator Cooney.—What is the benefit of the joint sales for Heinz? Why should they sell competing goods?

Mr. Sheehy.—I suppose it spreads their costs to some extent. They are not involved in dehydration and so it is complementary.

Mr. Comerford.—We sell their products in this market, so there is benefit for them.

Mr. Sheehy.—And there is benefit for us.

199. Senator Cooney.—You are locked into that market, in a way?

Mr. Comerford.—Yes, it is of benefit to us and to them.

200. Chairman.—It is a quid pro quo arrangement?

Mr. Sheehy.—Yes.

201. Deputy L. Lawlor.—The sales you generate of Heinz products gives you a recovery here and you would not have that business at all otherwise. But on this marketing philosophy and your own agreement that you want to advance the Erin image—is it not contradictory within your own situation that you market under the Matterson label rather than Erin? Bearing in mind the cost of a launch in the UK or on the Continent, the fragmentation of the Kerrygold advertising campaign, Irish beef promotions and so on, now that you are reporting to the Minister for Agriculture—would you see the situation where you might recommend that all Irish products would come under one brand name and maximise the advertising going into one particular range of Irish foodstuffs? There are two questions: first, there is the Matterson marketing name and secondly will you see yourselves putting forward any suggestions to the Minister for Agriculture to ask these other sectors to come together for even exploratory discussions on marketing an Erin range of food products across the board?

Mr. Sheehy.—With regard to the Matterson brand, this is a very old company. It has a lot of very loyal customers. We did examine and do tests to see whether it would be desirable to change from Matterson to Erin labels for peas and beans. Those tests came out negative. We felt that it might be advantageous to change but Matterson being on the market for 150 years retain a strong association in some people’s minds. The tests came out against going that route. A substantial amount of their business is in the meats end. There, the name is very definitely linked to Mattersons. It is also largely a local business. We do a good business in Limerick/Kerry where Mattersons is very strong. Again we have decided as a result of tests done that it would not be profitable for us to change the name. We are having a look at that whole business of further strengthening of that, putting investment there to make that business more secure in the future.

Deputy L. Lawlor.—On the broader point?

Mr. Sheehy.—On the broader point, we were involved with other people in the agribusiness in seeing what might be done to improve the overall image of Ireland as a food producer, to see what further steps should be taken to exploit that in the marketing sense. We were involved in such a study and did a report for the Minister on that but that was very much in an overall sense, in seeing how Ireland was perceived as a food producer and to see how that could be worked on in a marketing sense in future. It is very unlikely that some of the other brand names that are well established would want something else tacked on to them.

202. Deputy L. Lawlor.—The taxpayers’ money is supporting all three or four of them. We have a marketing man going to South America selling butter so why not sell Erin products and Irish beef? There would appear to be a rationalising possibility there. I appreciate it is a complex area but if they are State supported organisations——

Mr. Sheehy.—Some of these might regard themselves as not being State-supported.

203. Deputy L. Lawlor.—I think of Bord Bainne and the co-operative movement.

Mr. Sheehy.—I could not speak for them; they are a co-op now and they are that much more independent. They might not want their own names used.

Deputy L. Lawlor.—I appreciate you cannot speak for them but I think it is an area that should be pursued. You might consider this at a future date.

Mr. Sheehy.—Very well.

204. Chairman.—Does the fact that Erin’s production is carried out in seven different locations contribute to the lack of profitability?

Mr. Sheehy.—Yes, very much so. We have this over-capacity at the moment. None of our dehydration factories is used to capacity.

205. Chairman.—Can you not close down some of them? What are the pros and cons?

Mr. Sheehy.—If we could identify some other activity that would discharge our obligations to the work force in the area, we would certainly have to give very serious consideration to moving them to some of those locations.

206. Chairman.—Is it a major factor?

Mr. Sheehy.—Yes.

207. Deputy Deasy.—What attempts have you made to broaden the range of products that would use up the spare capacity?

Mr. Sheehy.—We are doing something there but nothing that will have immediate significance. In the frozen business, there are certain inherent disadvantages that we have to bear—in relation to the UK market, the cost of transporting frozen products there and the fact that the home market is very small and would not support our dehydration factories very long.

208. Deputy Deasy.—Is that not all the more reason why you should draw from Europe?

Mr. Sheehy.—It takes resources to do that. We feel that whatever resources we have at the moment should be directed as much as possible towards the sugar end of the business and, as a result of the drain on the food side of the industry and a number of other changes in circumstances, it urgently needs the availability of funds for further modernisation.

209. Deputy Deasy.—Is this something you have in mind for the future?

Mr. Sheehy.—Certainly. It is something we have in mind.

210. Senator Cooney.—What gross margin do you aim for in the UK?

Mr. Sheehy.—I can give you a breakdown in the market and products.*

211. Senator Cooney.—How successful are you in maintaining your gross margin? Have you much control over that? Are you very much subject to external factors? Do you end up having to take what gross you can get?

Mr. Sheehy.—Yes, in some products. A product from China appeared in the bulk market recently. If we were to sell at the same price, we would not be getting our direct costs or anything like it from the factory. We have to weather that situation until that batch of goods goes off the market. That is a feature of this bulk business and the imports that are permitted into the Community.

212. Senator Cooney.—Do you have to hope for the best in that general area of your business? Is it nearly as bad as that?

Mr. Sheehy.—That business has the same disadvantages and the same kind of external pressures as butter had before we entered the EEC. An effort is being made to have the Community give attention to this matter but it is such a small fraction of the European business that it is hard to draw attention to it. As far as we are concerned, our 40 per cent of the total European business in this sector is very big, but as I said, it is so small in relation to the total European market that it is hard to get people in Brussels to pay attention to it.

213. Chairman.—Short of EEC intervention of that kind, do you see any real prospect of the food division being profitable in the next four or five years?

Mr. Sheehy.—In what we call the traditional bulk business, I do not see any prospect of it being profitable. If we can exploit this rapid re-constitution technology we have developed, it is worth going after, as long as the other countries do not have this technology too. It would be wrong to give any hope that traditional dehydration technology can be the basis of a profitable business as long as conditions are as they are.

214. Chairman.—Are you seriously considering the possibility that you may have to close down the food division at some time in the future? Do you have a time limit so that if the industry does not develop in a certain way within two, three, four or five years, you would have to seriously consider closing down?

Mr. Sheehy.—This is something the Board will have to keep before them constantly. They will have to constantly review progress in this new technology over the next 18 months to see the impact it will make. At the moment, we would regard our obligations as being satisfied if we could substitute other types of business in some of these factory areas. That is one reason why we have a special division on new opportunities outside their present business.

215. Deputy Deasy.—What facilities are there in this country for training people in food technology?

Mr. Sheehy.—We have not found any difficulty in that regard. Take a place like Carlow where there is a technical college. They provide us with an exceptionally good service. We could not complain about the support we are getting.

216. Deputy Deasy.—You do not have a problem?

Mr. Sheehy.—No, we do not have a problem. I should stress that in the food business, our problems are not associated with the branded business we have in the home market. That is a viable business in its own right, but if we wanted to expand that business into the UK we would not have the resources.

217. Chairman.—Roughly speaking, how much of your turnover is sold on the home market?

Mr. Sheehy.—About two-thirds, but the big loss maker is in the remainder.

218. Chairman.—Does that mean you would not be seriously considering closing down the food division, but that you would merely be cutting down in the areas where you rely on exports?

Mr. Sheehy.—Yes, it would be a question of rationalising it. That is what we have to bear in mind as we keep under review the developments in this new technology area.

219. Senator Cooney.—The Tuam potato plant closed in 1978. Am I right in thinking that the straw that broke that camel’s back was the failure to honour potato contracts in one of the preceding years?

Mr. Sheehy.—That was one of the contributing factors. There was a flood of American and Canadian dehydrated potato products into the Community. That is what establishes the price. The Community did try to put up some barriers against it but we had problems and the UK had problems at the same time.

220. Senator Cooney.—So it would be wrong to blame the farmers exclusively?

Mr. Sheehy.—It would be wrong to blame them exclusively.

221. Senator Cooney.—In relation to the co-operative that was mooted for Tuam last year, what stage is that at? Is it going to get into operation?

Mr. Sheehy.—It is concentrating to a large extent on packing a branded pack for the fresh market. It is building its business slowly but in a pretty rational way. It is concentrating on quality control of seeds and so on. Last year it did produce a very good quality potato. We are only involved in the processing of the surplus potatoes, the ones that cannot find an outlet in their branded pack.

222. Senator Cooney.—So, essentially the co-op is selling ware potatoes?

Mr. Sheehy.—That is the main business they are in.

223. Senator Cooney.—I thought it was intended to re-open the processing part at Tuam. Is that not the intention behind setting up the co-op?

Mr. Sheehy.—Yes, but only to handle that fraction of the crop that cannot be dealt with in the other markets. This is a traditional way of dealing with the potato business in North America. It is more successfully done where the entire crop is fed in and it is divided into what is suitable for chips or suitable for the ware potato market. The off-cuts from those processes are sent into the dehydration whether it is flake or granular.

224. Senator Cooney.—Has the potato processing plant at Tuam re-opened?

Mr. Sheehy.—In the past season it handled a small quantity again which was the fraction that they were not able to dispose of in the other markets, the ones that were too small and too big and so on. They were processed into flake.

225. Senator Cooney.—Are you happy with the way the co-op is going?

Mr. Sheehy.—The situation is much better than before. Farmers are very firmly linked into it now and are very committed. We believe the rationale is right. One cannot just stay at the low end of the market which is the dehydration end of it if one wishes to be competitive. One must be able to get some of the high end of the market as well. That is their approach. The quantity they are handling may be very small but they may be right in this because they say they are only going to develop in accordance with a plan so that they can supply seed and services that they are satisfied with. They did get significant improvements in their yields last year by this method and they are determined to continue and build their supply of seed.

226. Senator Cooney.—Is there a hope that this project will develop to such a stage that they will be able to supply enough raw material for the processing plant to re-open and to get back into full production?

Mr. Sheehy.—That is what they envisage.

227. Senator Cooney.—Is it realistic?

Mr. Sheehy.—Anyone who is involved in the potato business here must find some outlet for the off-cuts. If somebody up in Louth is going into chips he will have the option to convert the off-cuts into animal feed. That is the overall concept. There are further possibilities but we must await the outcome of the work being done on this new technology which will be involved. That may open some new markets for a type of potato product.

228. Senator Cooney.—Is the co-op viable at the moment?

Mr. Sheehy.—It is a marginal type of operation.

229. Senator Cooney.—What about the prospects?

Mr. Sheehy.—If they can grow in volume and control their members in the way they have done so far they could make it.

230. Senator Cooney.—Are you able to see the plant in Tuam getting back into its stride?

Mr. Sheehy.—In the last campaign the raw material that went into the processing had an entirely different price structure than it would have had if we were buying by traditional methods from the farmer. We would be paying the full price for the entire crop. They were selling ware at one price and then selling the lower quality fraction into the processing at a different price structure.

Chairman.—Anything else on the Food Division? We have a few more items to deal with and we probably need another hour. We will hardly finish this evening. I am afraid we will have to ask you to come to see us again. What about next Wednesday?

Mr. Sheehy.—Could it be this day fortnight?

Chairman.—Then we shall adjourn this session until this day fortnight at 4 o’clock. We hope to finish it that day.

The witnesses withdrew.

*Documentation supplied in confidence to the Committee.

*Working papers supplied, in confidence, to the Committee.

*Information supplied, in confidence, to Committee.