Economy, Trade, and Rural Affairs Committee

I'll ask you now to introduce yourselves and the organisations you represent, please, and then we'll go straight into questions. Thank you for the paper that you provided prior to this meeting today. That's been helpful for Members to consider and, obviously, align their questions accordingly. I'll start with Dylan first and work across to Gareth. If you could name yourself and, obviously, the organisation you're representing.

Dylan Morgan, head of policy, National Farmers Union Cymru.

Gareth Parry, head of policy for the Farmers Union of Wales.

Thank you, both. Is HCC fit for purpose? Dylan.

It's extremely important that we have a levy body in Wales to deal with the marketing, promotion and development of the industry, to address a number of market failures that, obviously, we have in the industry, and issues that individual producers or processors wouldn't be able to achieve on their own. So, the value and the use of a levy body in terms of undertaking that activity is extremely important, and it's for all of us as an industry to work together to make sure that we deliver and that our levy body can help to deliver a productive, progressive and profitable red meat sector in Wales.

Gareth.

Yes, I completely agree with Dylan's remarks, really. If you were to ask whether the structure of Hybu Cig Cymru is fit for purpose: yes. There is always that question to ask in terms of what the red meat market and industry would look like in Wales without Hybu Cig Cymru. So, it's a difficult question to answer in one word, but, of course, we can't underestimate the importance of having an effective red meat levy board in Wales.

It's not that difficult. At the end of the day, the last review was done in 2016 into this organisation. People want to know is it fit for purpose and can it meet the challenges of the red meat sector, and marketing the red meat sector to the consumers that, obviously, put their hard-earned cash through the tills. So, the answer you gave, Dylan, was that you think it's fit for purpose. If you had a clean sheet of paper, what would you change for the next 10 years so that it is still relevant for the industry?

Obviously, Chair, it's an extremely challenging time and we've been through an extremely challenging time. You mentioned the last review 10 years ago. If you think of where we were then, that was pre Brexit and pre COVID. Obviously, the changes and everything that we're dealing with at the moment in terms of the implications of Brexit, new markets around the world potentially, the sustainable farming scheme, inheritance tax, regulation, policy environment—there are a huge number of challenges and changes going on at this moment in time, so we need to make sure that the levy body does deliver that.

In terms of the key functions of Hybu Cig Cymru, obviously, from our perspective and our members' perspective, they want to see a focus on marketing, promotion and making sure that we grow those markets at home across the UK, throughout the European Union and further afield. Alongside that, then, there's that industry development role—that focus on production and efficiency.

The challenges we've got at the moment are obviously around funding. The levy, as you say, is absolutely crucial, and levy payers across Wales pay that whether they're a producer or processor, and it's vitally important that they get value for money for that. But there is a challenge at the moment, obviously, in terms of critical mass in Wales in terms of the amount of livestock, and that is a huge concern to all of us involved in the farming industry—the loss of critical mass in terms of both our sheep flock and our cattle herd at the moment.

Historically, again, HCC would have had significant funding through the EU rural development plan. That, obviously, has come to an end, and we haven't seen that funding replaced by domestic funding through Welsh Government. That is a challenge, I would say, for any organisation in terms of delivery compared to historic funding streams, and you can see that from the most recent financial accounts.

Just before I ask Gareth to speak, Jenny, you indicated you wanted to—

Destocking isn't necessarily a bad thing because it can raise the price, and it has raised the price. So, that could be a benefit.

I was interested in one of the recommendations in the 2016 report, which was around looking at the levels of organic produce required in the food chain, and I wondered if that was ever taken forward, as far as you're aware. Because with concerns around the amount of fertilisers continuing to be put on the land and how it exhausts the land, I just wondered if the industry, along with the Government and Hybu Cig Cymru, have done any work on whether there's any elasticity in the market for organic produce.

Just going back to destocking and critical mass, I'm extremely concerned about any loss of livestock production in Wales. It's extremely important. We're looking—. I think we've got a fantastic product in Wales in terms of the red meat we produce. We can be world leading in terms of environmental and climate change.

In terms of climate-friendly food, it's extremely important that we continue to grow that industry. The red meat industry is worth well over £1 billion on farm and throughout the whole supply chain, and any continuing loss in terms of livestock numbers would be extremely concerning and put all that under threat.

In terms of market prices, yes, they are strong, but if you look at farm income figures, they are still barely above £20,000 generally for a beef and sheep producer, as a result of record input costs as well.

In terms of the organic sector, yes, it's a small but vitally important sector for the industry in Wales, and it's right that Hybu Cig Cymru look to support that in the same way as they support all livestock production systems within Wales. I believe, in terms of how they market and promote their product, their work is to support the processors in terms of accessing and developing markets across the UK and further afield. Obviously, organic is an important part of that, alongside conventional agricultural systems.

So, was that taken forward? [Inaudible.]

I think, in terms of the specifics in terms of what Hybu Cig Cymru have done specifically in terms of the organic sector, that's probably a question that you need to ask specifically within Hybu Cig Cymru. From our perspective, we see them using the levy to promote red meat in its entirety, and, as I said, organic is a small but very important part of Welsh red meat production.

Gareth.

I'll try and summarise some of the points that have been made over the last couple of minutes. I think the variety of challenges that Dylan outlined there around the sustainable farming scheme, inheritance tax and the various challenges the industry is facing at the moment do reflect in the current confidence levels of the industry, and that then is reflected in reduced stocking levels and the problems that we're facing.

There is an opportunity now to look ahead for Hybu Cig Cymru. The next five, six years for the industry is going to be crucial. I think we're all aware in this room today around where we'll be in terms of the sustainable farming scheme transition period, and also the national targets and messaging that are coming from bodies such as the UK Climate Change Committee at the moment around reducing stock numbers and things. So, the next five years are going to be transitional and quite crucial for the future of our industry, and Hybu Cig Cymru has to play a really important part in that transition.

And just to reflect on the points around destocking and organics, you're quite right that red meat prices at the current levels are quite high, and are reaching record high levels at the moment, but that will only exist to a point. Now, we're seeing increasing levels of imports coming in from countries such as New Zealand and Australia, and there are questions to be asked around the carbon footprint of those imports. Dylan's rightly mentioned critical mass; processors will only be able to pay up to a certain price for the efficient running of those plants. So, we cannot lose our processing capacity from Wales because, if we do, then it does put into jeopardy, perhaps, the protected status of our red meat—lamb and beef.

And just on the point around organics, the agricultural landscape and political landscape that we're dealing with since the previous review, in 2016, has changed drastically, I'm sure we'd all agree, around Brexit, COVID et cetera. We have seen organic support schemes at a Wales level, so perhaps not necessarily driven by Hybu Cig Cymru, but there have been additional support schemes there for organic producers, and I think it will play a part in the direction of travel in terms of the sustainable farming scheme that I've mentioned as well. So, there are initiatives ongoing and will be coming down the path for those organic producers.

Okay. Because this is in the context of the Climate Change Committee, which says that we should be eating less red meat but better quality. So, these are important issues for the industry to be addressing.

Again, I think, if you look at consumption in the UK, it would suggest that, in terms of red meat consumption in the UK, we are eating the right amount in terms of a balanced diet. Again, when we're talking about red meat and production in Wales, we have got the opportunity to be world leaders in the production of climate-friendly food. It's extremely important that we build on that, grow on that, and build those markets, because red meat is an integral part of health and nutrition for the population.

Hybu Cig Cymru produced 'The Welsh Way' a couple of years ago, which is an extremely important document. That highlighted, in terms of our sheep production systems, they're amongst the lowest in the world, and we are producing beef to around 40 per cent of the average—. We're 60 per cent better than other parts of the world in terms of reducing the impact on climate change. So, we have got fantastic opportunities here to be able to build and grow the red meat sector in Wales, and we should be proud of that, and we should be pushing that, not knocking it.

The final question from me is in relation to whether HCC has historically targeted the right markets: domestically, the European market—the near market you can call that—and then the global market. We've got the trans-Pacific partnership that's just been announced, and, obviously, that agreement opens up new markets. So, looking forward, which is what we're trying to do by following the experience of previous initiatives, has HCC, historically, got its marketing right? And if it hasn't got it right, what should it be looking to do for your members to bring greater value back to the product that they produce on their farms? Gareth first, then Dylan.

Thank you for the question, Chair. Global markets are extremely complex, particularly when it comes to red meat, as we've experienced, particularly around the trade deals that have since been agreed over recent years. Now, we mustn't underestimate the importance of our domestic markets for Welsh red meat, which is our biggest market, and, of course, then, our nearest neighbours in the close markets, as you've explained. Both of those markets are extremely important for the sustainability of our sector, and it comes back to things like carcass balance as well. We can't just look at this through a single lens of our domestic market; we've got to look elsewhere, where the demand for different cuts is. We are well aware of Hybu Cig Cymru's work trying to explore other markets across the world, such as the US and in Asia. The question around whether they have the balance right between those three markets is extremely difficult. Who am I to say, and who's the FUW to say, whether more resources—limited resources, as Dylan has alluded to—within Hybu Cig Cymru should be targeted at each of those three separate markets? So, it is an extremely complex area.

What I would say, looking ahead, is that there are opportunities to use resources, combined resources, with other levy boards, such as the Agriculture and Horticulture Development Board and Quality Meat Scotland, to look at ways in which the UK can benefit from markets further afield across the globe, which then, of course, will encompass benefits for Welsh red meat. But that market analysis and seeking those gaps in markets at a global level is extremely resource intensive. So, what we have pushed for over recent years, particularly since Brexit, is really emphasising the importance of our European market as our huge market on the doorstep, effectively.

Dylan.

It's a really good question, Chair, and as you say, put very simply, if you're looking in terms of where we sell our meat, probably 60-odd per cent is within the UK market, 30 per cent is to the EU, and the rest, then, would be further afield. So, you could argue simplistically perhaps that's how we should be sharing out the balance, really. But I think, exactly like you said, it depends on the situation at the time, doesn't it? Obviously, we've opened a new market in the last few years in Japan. There are opportunities with the comprehensive and progressive agreement for trans-Pacific partnership, the gulf states, and various things like that. So, I think you need that flexibility, really, to be able to move funds around depending on the situation, maybe depending on the wider political situation, and when opportunities arise, to get into new markets and maybe be one of the first in there to be able to capitalise on them. There may be an opportunity to move funds and focus some more there for a certain amount of time, but without forgetting, as you say, the importance of the UK market and the EU market in terms of both volume and in terms of price as the main market for us.

Thank you. Hefin.

You've said—you've made it clear—that HCC is fit for purpose. That's correct, isn't it? That was the response to the Chair. So, can we just look at the relationship with levy payers? Because, in your evidence, you said that HCC could engage more effectively with levy payers. So, can you just characterise that kind of relationship and what needs to be made better?

Yes. Thank you, Hefin. This builds on the responses that we had from our members in response to the 2022 levy increase consultation that Hybu Cig Cymru held. I do believe that, during that process, the engagement with the industry was less than expected—from our experience, at least, attending various meetings. I think there's a huge opportunity there for Hybu Cig Cymru to seek new opportunities to engage with their levy payers through initiatives like, for example, attendance at livestock markets—you know, being more visible, being more accessible—where levy payers don't necessarily have to attend meetings to raise their opinions; they can do so on an ad hoc basis. And, coming back to a previous question, I think this is crucial for looking ahead to the next five years of Hybu Cig Cymru and the Welsh red meat industry, making sure that levy payers are on board and that there is a feedback loop thereafter as well. It's one thing agreeing on a vision and a strategy for the next five years for the red meat sector, but it's also important then for levy payers to be involved in that progress-reporting process and for them to be involved in where they're going.

So, as a follow-up to that, you talked about a feedback loop, what about transparency in how levy payers' money is spent? Is there enough transparency at the moment, and how would that be improved? And Dylan, I'll bring you in in a second, but, Gareth, your input.

You know, we're well aware that Hybu Cig Cymru publish their annual reports, financial reports, so that information is available. But, again, I think visibility is the key word here, bringing levy payers with them in terms of their direction. The FUW and, I'm sure, other industry organisations are here to be involved in that process as well. We're more than happy to be involved in an industry stakeholder group, for example, that can be part of that process in which updates and progress reports and things can be fed back to levy payers.

So, it's an issue of structure, but you're confident that there's transparency about where the money is spent?

Yes. As I said, the transparency is there in terms of their annual reporting of their finances, yes. But coming back to a previous question around whether resources are being applied in the right places moving forward, I think levy payers could be involved in that process and making sure that those resources are being targeted—

Which is the structure issue, yes. Dylan, did you want to comment on any of that exchange?

Again, in terms of the relationship between HCC and levy payers, as you say, from our perspective, our NFU Cymru livestock board will meet on a regular basis and they will regularly receive updates from the chair and senior executives of HCC. So I would say at that level there's a pretty good relationship.

I think, as Gareth's alluded to, maybe on the ground sometimes you don't quite have that relationship, and I think there is an important point there about the visibility of HCC. And I think that's maybe something that came out of that review that Jenny talked about 10 years ago as well, really, in terms of increasing the visibility in places like livestock markets. They do often hold meetings to share what they're doing, but they're not often the most well attended, so maybe, again, they need to look at things like that.

Historically, when Welsh Government had their Gwlad magazine that went out to every member in Wales, I know, on an annual basis, they put an insert into that. When Gwlad finished, for a couple of years they used our respective magazines to do a similar insert. A significant proportion of the Welsh farming industry still see magazines as one of their main sources of communication. That's why both of our organisations still take great pride in what we produce, really. And potentially, again, HCC need to look at the wide range of communication channels there are to make sure that they can get that information across. Because, as the Chair alluded to at the start, producers in Wales pay a significant amount of money through the levy each year, and they want to make sure that there's a return on that investment. So, it is crucially important that HCC do that, and—

I appreciate receipt of your magazines, as well. They're very helpful to receive.

That's good.

So, what we're talking about is levy payers getting a satisfactory return. It isn't about whether there are any issues with transparency about where that money's spent. You agree with Gareth that that is published and clear.

In terms of HCC, as Gareth has alluded to, they publish their annual reports each year, and as a limited company, obviously they're required to do that. So that's—

Is it sufficient?

Does everyone know where it is and how that money is spent? Again, I've got a copy of their business plan for 2022-26, which explains in the different bar charts about how they use their money and where it goes to. But, you have to go quite deep into the website to find that.

So, again, it is about how you engage with your constituents as such, which, from Hybu Cig Cymru's perspective, is obviously the levy payers, whether they be producers or processors. And we know that. As unions, each and every year, we rely on our members to voluntarily pay a subscription to us, so we're continually highlighting the work that we do to justify that payment. I think HCC need that same mindset in terms of levy payers and being able to justify to them how that money is spent, and that they are getting a return on that investment to ultimately improve the viability and profitability of their businesses.

Okay. That's very clear. Thank you.

Just briefly from myself: is HCC providing value for money to levy players, yes or no? Dylan.

I can't speak on behalf of every levy payer. Obviously, they need to make—

No, but in your opinion, talking to your members, are they providing value for money, yes or no?

In terms of what HCC deliver, they are delivering an important role that individual levy payers on their own are not able to achieve, where there is a sort of market failure, isn't there, in terms of the research and development they do, in terms of the industry support, in terms of supporting the producers, in terms of marketing promotion. When we last had a consultation on this in 2022 around increasing the levy, the general feeling from our membership across Wales was that they supported the priorities of HCC and, at that time, they supported HCC's request for an increase in the levy. So, the last time—

So, yes—?

—the last time that we had a consultation, they supported that. But obviously, shortly, HCC will surely consult with us again with regard to that future vision going forward, and we'll have an opportunity then to have a wide discussion with our levy payers in terms of the future strategy and direction of HCC.

Gareth, yes or no?

It's not as simple as a 'yes or no' answer, but I will just refer to a point that Dylan made. When we responded to the 2022 consultation on levy increases, our members opposed the increases. Now, I'm unable to answer your question in the 'yes or no' format, but I think there is a question in terms of whether levy payers do understand the work that Hybu Cig Cymru do on their behalf. I think there's definitely an education process involved there for the next five years, particularly. And I would almost flip the question, in a way, in terms of whether they are providing value for money, because, what is the definition of value for money in this space? We'll hear quite often that levy payers aren't seeing the marketing material and the promotional work that Hybu Cig Cymru are doing, and the response that we've often had in the past is that that's because that promotional effort is happening in cities or in urban areas or other locations where maybe the levy payers are not situated.

So, there's a question—again, this comes back to your point, Chair, earlier on—looking ahead, looking forward, in terms of which direction we're going in, in terms of the red meat sector and in terms of Hybu Cig Cymru, we really need to pin down what exactly the industry and levy payers need Hybu Cig Cymru to do on their behalf. If it's being visible at the Royal Welsh Show, for example, and another shows, that does cost money, and Dylan has already alluded to the increased cost pressures that Hybu Cig Cymru are under due to the lack of funding from other sources. Or do they become invisible, perhaps, from a levy payer's perspective, but they carry out more promotional activity in urban areas where consumers, maybe, are more situated? So, there are some fundamental questions around what the aims and objectives are for the levy board moving forward, which can then, hopefully, answer your question on whether those objectives are being met in the future.

That was one hell of a 'yes or no' answer, in fairness. Any other quick supplementaries before I ask Sam?

A quick supplementary: how good are they at marketing the whole carcass? Because, clearly, the most expensive meat will have destinations, but the cheaper cuts are often the most nourishing. How much of the cheaper cuts are going into our school meals, as we've got the school meal caterers in at lunch time?

That's a very good question and I think HCC do a lot of good work around education. NFU Cymru's got a live lessons tomorrow, a programme that is going out to many thousands of key stage 2 school pupils, and Hybu Cig Cymru are supporting with that, with recipes around that. So, I think targeting the fifth quarter and also ethnic markets is extremely important, because there are some potentially growing markets there, and it is extremely important that we get the maximum amount of value for every possible part of the carcass, Jenny. So, I think that is potentially an area, going forward, that Hybu Cig Cymru should look—the two areas, then—that Hybu Cig Cymru should look to focus more on, to make sure that we get the maximum possible value for every part of the carcass.

Again, not all of those—. Particularly in terms of the of fifth quarter, there is a question mark in terms of, obviously, a lot of the work of Hybu Cig Cymru is around building the protected geographical indication status, the PGI brand. I'd say the premiumisation there is probably for the better cuts. So, you're not talking about necessarily branding the fifth quarter, but I think it is important, for our processing sector and all of us, really, that we do maximise the value of the whole carcass.

Gareth, briefly, did you want to reply?

Just very briefly. It's a very valid question. It comes back to the importance of carcass balance, in that sense, that we can't just look at this at a domestic market level. That's why our European markets, for example, are so important, and other markets elsewhere. But we have to also acknowledge that, even within situations where there'll be certain cuts that’ll go into the PGI market, for example, there will always be a part of that carcass that goes into the commodity market. So, it's a very valid question, and perhaps it's something we'll look into in the future. But, again, it's coming back to that value for the pound spent in terms of promotion, isn't it? Will that deliver return on investment equal to maybe the promotion of other cuts? As you quite rightly say, some of those are the cheaper cuts, but, actually, given the current situation of the red meat market, the cost of promotion might outweigh the return on investment. So, yes, but an important question to ask.

Okay.

Thank you, Gareth. Sam.

Thank you. Just before I move on to future strategy, I just want to conclude the discussion at the moment. Would it be an assessment, a perception, that Hybu Cig Cymru have played it safe over the last couple of years? Dylan.

In what respect?

In their developing, promoting and marketing. Is it that they’ve played it safe, and that’s where the perception is, that they’ve played it safe, rather than pushing the boundaries and really trying to advocate for the red meat sector?

I think in terms of 'The Welsh Way', the document they produced back in 2021 or so, in terms of sustainability, I think that really gave us a platform where we could really push and move on. I’m not saying it’s necessarily playing safe as such in terms of what it's done. It has been an extremely challenging and turbulent time in terms of marketing and promotion. For example, if you just look at the UK market, COVID and such saw fundamental changes, really, in terms of the way that consumers buy and purchase meat. The food service sector was huge in terms of added value pre COVID, but now you’re seeing a lot more return to supermarkets and people buying and dining out at home as such, really.

So, is it the case then that those who are slightly frustrated with HCC are underappreciating the impact that COVID, Brexit, changing eating habits et cetera, have had on it, so they’re looking at HCC to do something that’s quite impossible in the landscape?

It’s a challenge. I think it’s also the funding issue as well, Sam. I think we’re talking about a levy that is around £4 million, £4.5 million collected last year. And as the Chair has alluded to in his question, really, we want to be able to maximise our markets in the UK, in Europe and further afield, and there are some great opportunities there as well. So, there’s always the frustration from all of us, isn’t there, because, again, we’re all sure that we have got the most high-quality, environmentally friendly, climate-friendly food in the world, and we see huge opportunities for that, and we want to make sure that we are really maxing out in terms of that. But it is a constant battle, really, in terms of having that necessary funding to be able to achieve absolutely everything that you want to achieve. So, yes, I can certainly understand the frustrations put out there, because all of us want to do far more than possibly we can sometimes with the funds that we’ve got.

Okay, thank you. Gareth.

Yes. Thanks, Sam. I don’t mean to be negative here, but in the current context and direction of travel that we are seeing in terms of agri-environment schemes and agri-support schemes moving forward—the transition, effectively, from what we had under European CAP mechanisms to what will be the sustainable farming scheme—and various other pressures around, pressures to reduce meat intake, for example, environmental demands, land use demands—. The number of challenges facing the red meat sector is increasing because of the way in which policy development is going.

Now, again, through a vision of looking ahead, we almost have to appreciate how important it is to maintain current stock levels and maintain current market access. There’s always that appetite, isn’t there, through business plans and strategic plans to promote, to sell more, to increase price, but we’ve seen the impact that reduced livestock numbers is having on price at the moment, and that is as a result of many policy changes and challenges that we’ve seen over recent years. So, we mustn’t underestimate the importance of trying to maintain what we have in future, let alone promote and increase. But let’s not go further down the path of reduced stock numbers as well. So, it’s a fine balance, as Dylan says.

Okay, thank you. And, obviously, HCC is due to review its strategic 'Vision 2025' document; there's a new chief executive been appointed. Have your unions been able to meet with the new chief executive yet and discuss this review? Gareth.

Thanks, Sam. Briefly, we have been able to meet with the new chief executive, not necessarily just to discuss the next five years, but, definitely, it was something that was discussed. And yes, hopefully they'll consult with industry bodies and levy payers now throughout that process. And as I said earlier on, that to us is crucial, to get the levy—to rebuild this relationship, really, between the levy board and levy payers so that, for the next five years, we're all working towards the same goal. And keeping that relationship going throughout that process will be crucial, rather than doing a process of six months' consultation, for example, to come up with a vision and then seeing a dip; it's got to be a continuous conversation.

Okay. Dylan.

NFU Cymru has also met with the new chief executive in terms of a preliminary discussion. In terms of the vision, yes, obviously HCC have alerted us to their proposals to produce a new vision and, obviously, the chair mentioned it in the Hybu Cig Cymru conference back in November. So, it has been promoted to the industry as well. We think it's a really important time to do this, because, as previously mentioned, we've come to this inquiry today without really having the opportunity to consult with our membership since the levy increase back in 2022. So, I think it is a really opportune time for HCC to come out to the industry to discuss their priorities for the coming years and, really, for our members who are levy payers to be able to strongly input and, hopefully, shape that new strategic vision going forward, because, as we've both alluded to, the challenges at the moment are immense for the red meat industry. And whilst there are challenges, we think that there are great opportunities for the Welsh red meat sector as well, and we've got to make sure that we capitalise on those and improve productivity and efficiency on farms in Wales, and really build and grow markets that we've got at home and abroad for PGI Welsh beef, lamb and pork.

Thank you. This question is specifically to you, Gareth, on your paper, in which you say that HCC has a role in ensuring that, and I quote,

'the industry in Wales does not succumb to developments at a UK level that apply retrospectively to the devolved producers.'

I'm just wondering if you could elaborate a little bit more on what FUW mean by this. And HCC, what should they be doing?

Yes, of course. Thanks, Sam. We mustn't hide behind the fact that the UK retail market is complex and the asks of retailers are increasing. There is a greater focus on environmental data—unique selling points, for example—throughout the market, to try to, again, increase the consumption of not only red meat, but that's the wider retail direction that we're facing. And what we mean by that statement as the FUW, really, is that we need to ensure that Hybu Cig Cymru are at the forefront of those discussions, representing the views and position of Welsh producers. What we wouldn't want to see is a position where retailers, for instance, in most parts of the UK and in England and Scotland, for example, decide on an approach to go down the route of environmental labelling, for example, or the use of environmental carbon footprints on producers' farms, and that Welsh producers have to be taken down that same route due to the asks of the retailers, as opposed to doing what is right for Welsh producers. So, it's just essential that Hybu Cig Cymru are at the forefront of those discussions to make sure that whatever future direction we do see—those discussions are ongoing, I suspect—that our hand isn't forced, basically, particularly in the environmental space.

Okay. That's helpful. Both of you have mentioned decreasing livestock numbers driving record prices and how this is unsustainable for processing plants. Now, HCC, you both say, have a role in addressing this, but I'm just wondering what practical steps can HCC take in this, and what further steps can Welsh Government take, given HCC's relationship with Welsh Government, to address falling livestock numbers? Dylan.

There's a range of issues that are obviously impacting on that. From a Welsh Government perspective, obviously, we need to make sure that we have the policies and regulatory environment that are right to encourage growth in terms of Welsh agriculture, really. And, obviously, we're looking at things like the sustainable farming scheme, we are looking at regulations like water quality, we're looking at disease like bovine TB, to name just a few. So, it's important that Welsh Government get that right.

In terms of Hybu Cig Cymru, I think one area, possibly, where we would look for them to do some more around is around impact and analysis of potential Welsh Government policy and the regulatory environment. If, for example, you look at the Agriculture and Horticulture Development Board throughout Brexit and throughout their transition away from historic CAP policies, AHDB undertook a lot of intelligence work, commentary, analysis on behalf of the industry. Clearly, they've got more resources in AHDB than we do have in Hybu Cig Cymru, but I think there possibly are opportunities for Hybu Cig Cymru around the red meat sector to look more at that analysis and provide that evidence base, for both Government and for the industry, really, in designing and developing policies going forward.

In terms of what else they can do, obviously industry development is extremely important, and how we can support efficiency and productivity improvements on farm as well to be able to support our livestock producers to be able to build their herds and flocks.

Thank you. Gareth.

We have to accept the fact that the promotion of red meat will only go so far; that’s got to be underpinned by a sound policy framework that Welsh farmers can operate under, which allows them to produce the product to meet demand. But I think the biggest message here from our perspective is that there is a huge role here for Hybu Cig Cymru to make sure, and through their input into Welsh Government, that they build the confidence of the sector, and I think that’s reflective of where we are in terms of policy development at the moment, particularly at a UK and Welsh level. And that’s partly why we’re seeing such a reduction in livestock numbers. So, if we are able to build the confidence of the sector, effectively, there would be more red meat there to be promoted. But we can’t in reality expect Hybu Cig Cymru to do that on their own—it’s got to be an industry approach.

Yes. Just a final point from me, then. We've mentioned the review of 2016. Do you have any views on how the recommendations from that review have been implemented, or was it a case that Brexit and COVID have just sidelined a lot of those recommendations?

I think obviously, again, the implications of Brexit and COVID did impact, because I think one of the big recommendations was around that focus on export and the promotion of export markets, and obviously there was a lot of turmoil for a number of years. In terms of the recommendation on levy repatriation, we’ve obviously seen that come to fruition, which has been extremely important. I think we were losing out by over £1 million a year in terms of loss of levy from Wales because of livestock moving out of Wales to be slaughtered; that’s been dealt with. I think one of the key recommendations back from 2016 was an improvement in collaboration between HCC and partner organisations, and I think Farming Connect was mentioned there. I don’t believe that we’ve seen the improvement in collaboration there that we would have liked to have seen.

Yes. So, a balance in terms of spend home and abroad in the promotion of red meat. Again, a key focus from our members has always been that focus on promotion, so, I believe that that is probably in place. But I think collaboration is certainly an area where there could be significant improvement in Wales between the numerous organisations out there supporting the industry.

Thank you. Gareth.

I haven't got a huge amount of knowledge about the time of the review, but the redistribution of levy moneys of the stock that is slaughtered outside of Wales is clearly a big win. But I think it does perhaps demonstrate the importance of reviewing the previous objectives and aims of Hybu Cig Cymru; when looking ahead, looking at the next vision, the next business plan strategies, for example, there’s always a need to look back.

Again, it comes back to the question: is Hybu Cig Cymru fit for purpose? Well, having that analysis and evaluation of previous iterations of reviews and strategic documents would allow for that question to be answered, effectively. That’s why it’s so important to have a vision that’s measurable, effectively. Yes, it’s good to have those high-level values and principles, but there needs to be something that you can really measure when it comes down to red meat levies, and it comes back to that point that being able to justify the value of that levy to the red meat producer is actually paramount.

Lovely. Thank you, Chair.

Hannah.

Diolch. In terms of governance and the relationship with Welsh Government, I think both of your papers to the committee argue for maintaining HCC's current governance structure and independence from Welsh Government, but are there any things that you think could be strengthened, and are there things we can learn perhaps from models elsewhere outside of the UK?

If you look at Hybu Cig Cymru—a limited company with a board of directors, but it is wholly owned by Welsh Ministers—and if you look at governance structures in other countries, then I would say that there is potentially an opportunity to move towards a Bord Bia-type approach that you've got in the Republic of Ireland. I think the first time I presented evidence to a Senedd committee was back in 2008 on the Welsh food sector, and we talked then about maybe the opportunity in Wales to have that similar type of approach for our food and drink sector in Wales. So, Bord Bia is a semi sort of state agency, but it is very much industry led. The levy contributes to the funding there, but also the Government puts in a significant amount of funding to be able to support in terms of the marketing and promotion of Irish food and drink, as well as undertaking industry development measures on farm and in the processing sector.

I believe that we should be looking at how we can maximise funding and resource into Hybu Cig Cymru to support us in terms of achieving all those activities, and one of the benefits of potentially being owned by Welsh Ministers is that Welsh Ministers then should be able to put public funding into it. I don't believe that the organisation is completely sustainable purely on the levy. Historically, they received significant support from the EU rural development programme, as I mentioned earlier; when that's come to an end, we're not receiving that funding. So, I believe that if you look at Bord Bia in Ireland, and they came to present to our most recent NFU Cymru conference, and I think our members were extremely impressed, really, in terms of how they operate on that basis. So, I'd like to see us consider opportunities like that. And it is important we do that, because ultimately, we are competing in domestic and international markets with countries like that, who are significantly investing, putting public money into the marketing and promotion of their produce as well.

Yes, the only other example that we've come across where we do believe that there are opportunities to learn from, really, is the mechanism that the AHDB operates. Their levy payers, across their various industries, are at liberty to raise a ballot in any areas on the way in which those levies are paid, and we saw an example of that a few years ago, where their potato levy, I believe, was disbanded due to the views of the levy payers.

So, I'm not saying that we should exactly follow such a model, but there is scope there to make sure that levy payers fully understand how they can express their views to Hybu Cig Cymru. It doesn't necessarily have to be a Hybu Cig Cymru-led consultation; there needs to be that opportunity for levy payers to have their views when they see fit.

Thanks for that. You've brought me on to one of my next questions, actually, because I think both of your organisations advocate for levy payers having more of a say in the decision-making process. I think you suggest different things, but I guess my question is: in an ideal situation, what would that look like to you, and are there examples under the current structure where you feel that levy payers haven't had the say that you think they should have done?

We've spoken already this morning around engagement and ways in which Hybu Cig Cymru can be more visible to levy payers, and this is a strong view that came through from our members three years ago in response to their latest consultation. So, there are definitely opportunities there to make sure that there are processes in place in which levy payers understand how and are able to raise concerns or ask questions around where levy money is being spent, for example.

Does there need to be more transparency, then, about that?

In terms of our support for the red meat industry or how Hybu Cig Cymru was set up, it's always been on the basis that it's an industry-led body that reports back to the industry, and obviously that's through the board of directors. In terms of the directors, obviously, in terms of the appointments to that, it is based on the Nolan procedure. People apply, and they are elected on the basis of their skills and expertise, and, over the years, there have been significant skills and expertise and some fantastic people on that board and on that board now, and many of them are members of our respective organisations. But it is important to note that they are there as individuals; they are not there representing us as industry organisations or the processor organisations either. So, it's quite a difficult situation for them in that respect, and, ultimately, they are appointed by Welsh Ministers.

I think we feel quite strongly that levy payers should have a greater say in terms of the appointment process to the board. I think you could potentially even go a step further and suggest, in terms of the board, whether there should be direct representation from organisations such as ourselves and such as the processors in Wales, who represent levy payers in terms of the producer and processor sectors. So, maybe that is something that could be potentially considered, going forward. But I think it is very important, again, going back to what the Chair said at the start: the body is funded by levy payers, and levy payers need to make sure that they feel that they're completely and utterly involved in the process, in the work and setting the direction for how their money is spent.

Did you have anything to add, Gareth?

No, I'm fine.

Just in terms of the relationship with Welsh Government, do you think Welsh Government currently has sufficient oversight of HCC and could that be strengthened?

As we've alluded to in our paper, we strongly support the way in which Hybu Cig Cymru is an arm's-length body to Welsh Government, and it's absolutely fundamental that we retain that level of independence. As our members have expressed over previous years, any suggestions of it being taken within Welsh Government would raise serious concerns among our members, who are, of course, levy payers. So, we do believe that the current structure in that sense is correct for the future.

Before I bring Dylan in, because in your paper, Gareth, it says that HCC should be able to openly challenge UK and Welsh Government policies that they feel go against their objectives and the interests of those levy payers. Are there any examples where you feel, perhaps, that they have not been able to do that, or was it more of a generic observation?

As we've explained, Hybu Cig Cymru, particularly over recent months, has been a huge asset and a really important stakeholder from our perspective in various stakeholder groups. But I suppose it's a forward-looking position, in the sense that, despite being an arm's-length body to Welsh Government, they should be able to entirely express the views of their levy payers when it comes to the policy developments that we've previously alluded to that do actually threaten, perhaps, the viability of the red meat sector. So, even if they are Welsh Government policy proposals, they must be at liberty to do that, whether through consultation processes or through direct representation to Welsh Government.

Thanks.

Just in terms of the position with regard to Welsh Government, again, our historic position, going back to the setting up of HCC, was that our support for it being wholly owned by Welsh Ministers was contingent on HCC's powers and responsibilities being delegated to the board of directors and for them to run it. So, we very much feel it's important that there is that gap and that separation between the levy body in Wales and Government.

Just touching on Gareth's point, again, in my response to Sam, what we are looking for HCC to do is just to be that body who can provide independent analysis and commentary, really, on policies and regulations being developed by Welsh Government. We don't expect them to enter the political arena and become lobbyists, that's obviously for us to do, but I think they've got a role to play in terms of understanding the position and providing advice and guidance to both the industry and, potentially, also to Government. The way that they're set up allows them the opportunity to do that.

Thanks.

Luke.

Diolch, Cadeirydd. I'm just conscious of the time at the moment, so I'll try and keep my questions brief, and if you can be brief in your answers as well, that would be great. We've touched on funding quite a few times through this evidence session, so what are your views on the way in which Hybu Cig Cymru is funded?

Again, obviously the majority—well, pretty much all of the funding now comes from the levy. In terms of funding, again, we are very clear that we believe that the majority of the levy money should be spent on marketing and promotion, and we need to look to alternative income streams, really, to carry out much of the industry development work. Again, I think we feel very strongly that there's a role for Welsh Government in terms of inputting into that funding. And there are also opportunities for collaboration with HCC, as well. And I think, in my paper, I've touched on that I think there are pretty competitive elements where we can collaborate with levy bodies across the UK on things like research and development, nutritional status, environmental credentials and climate change. So, we've got to make sure that we get best bang for every penny that's spent by HCC.

Sticking with your paper, because obviously, in your paper, you mention, for example, research and development activities being something that should be funded by Welsh Government. Could you just explain a bit more as to why that should be the case?

I think where I'm looking in terms of research and development is to look outside the levy for funding streams, so that could be Welsh Government, but also there are UK Government streams in terms of research and development, as well, aren't there? So, I know in the past, HCC have linked up with universities in terms of drawing down funding for PhD students. I think it's looking at those opportunities, really, to pull funding down for the benefit of the Welsh red meat industry. The problem is that research and development can be very expensive and a significant proportion of the levy could easily be used up just on that, so it's looking to see the opportunities outside of the levy, really, to pull in funding for that, and looking at—. As you say, there are various calls for funding and we need to make sure that HCC can link up with our universities—Aberystwyth, Bangor and the like—to be able to pull in money to support that. As I say, they have done that in the past and we need to make sure that we continue doing that, going forward.

Thank you. Gareth.

Yes. Diolch, Luke. I won't repeat too much of what Dylan has said, but the FUW has raised concerns many times in the past, particularly around the time of Brexit, where we had a structured rural development programme through the European structures; we had a programme monitoring committee, for example, and it was scrutinised by the industry; and yet, despite the fact that we do have elements of that that still exist through small grants and various other investment schemes available to the industry, that structure that we previously had is no longer there, and this is an example of where that support did work for Hybu Cig Cymru, and that's no longer available.

But, I think there is definitely scope for Welsh Government to provide some funding here to support the workings of Hybu Cig Cymru, because there is often a great deal of focus around the success and value of the food and drink sector here in Wales, and there's a huge focus on processing and retailers and things. And the work of Hybu Cig Cymru and the producers is fundamental to that food and drink industry. So, it does need to be considered in the round and how important that is and how we consider what Hybu Cig Cymru can deliver in terms of the funding constraints that they're currently under, really.

Defnyddiol. Diolch.

In the interests of time, Chair.

Thank you, Luke. Jenny.

I want to look at collaboration. Obviously, you've already mentioned the Agriculture and Horticulture Development Board. They're levy payers as well; where does their levy come from, because it's obvious that Hybu Cig Cymru's come from people who use abattoirs? The levy comes from the throughput of livestock into the abattoir, doesn't it? That's where the levy is taken out. So, where does the Agriculture and Horticulture Development Board get their funding from?

Okay. So, basically, what you've got is you've got Hybu Cig Cymru in Wales, which is the levy body for the red meat sector in Wales. So, again, as you say, between the producers and processors, they pay a levy for red meat in Wales. AHDB, then, is a levy body that operates in England only—

In England only. Okay.

—for beef and lamb, but it operates across GB for dairy and for cereals and oilseeds. And then, in Scotland, you've got Quality Meat Scotland, which is their levy body there. So, it's a similar structure, but obviously—. Yes, so that's what they need to—

Okay. That's helpful. So, given that you've already spoken about Bord Bia, which is obviously an overarching approach, what discussions have you had about working in collaboration with the other UK levy bodies?

So, there is collaboration being undertaken between QMS, AHDB and Hybu Cig Cymru, and historically there always has been, really. I think it has intensified a little bit in the last couple of years. I think, from our perspective, there are a number of areas—it’s what I call these sort of pre-competitive areas, where we’re not actually in competition with each other—so, things about the nutritional value of red meat are a prime example of that. A lot of work on production and efficiency on farm, again, can be done, and potentially we could go even further on that. I think it’s just making sure that we’re making best use of every penny that levy payers in Wales and across the UK put into this. It’s more important than ever, obviously, given the tightening purse strings, but that doesn’t mean that there aren't areas where we want to go it alone. Obviously, in terms of our brand, our PGI, Welsh beef and lamb, and Welsh pork, that is certainly an area where we need to build, and obviously we can only do that in Wales.

Okay. Obviously, we want to retain the Wales focus, but you also mention in your paper that there might be more closer collaboration with Farming Connect and Hybu Cig Cymru.

Again, I mentioned this in one of the previous questions, it was one of the key elements of the 2015-16 review. I believe that there is a lot more collaboration that could take place, particularly between Hybu Cig Cymru and Farming Connect. Because, quite often, you almost see competition between them and duplication. I think it goes back to when they were probably competing for funds under the historic EU rural development programme. We can’t afford that any more. We’ve got to make sure that they work together. They do work together on some things, but I think, at a very senior level, Hybu Cig Cymru and Farming Connect need to be meeting regularly. I would see, with my simplistic terms, Hybu Cig Cymru providing the technical and scientific expertise, and Farming Connect using their expertise in terms of knowledge exchange and knowledge transfer to deliver that on farm. We can’t afford to have any of the duplication that we’ve historically had, and we need to make sure that we are working as a team Wales. I think there are probably greater opportunities for working with ourselves as unions, and with Welsh lamb and beef promotion in terms of farm assurance as well.

And with an operational deficit last year of over £0.5 million, clearly, collaboration is going to be essential, isn’t it?

I’d 100 per cent agree with you. We’ve got to make sure that there are efficiency savings wherever possible, and that we’re focusing support on the ground in terms of supporting farmers and in terms of building markets in terms of supporting those processers. So, we’ve got to make sure that every possible penny is used wisely.

Okay. Gareth, anything you want to add?

No, in the interest of time, I just want to highlight that I completely agree with everything that Dylan has said in that space.

Okay, thank you.

Thank you, Jenny. Any other questions from anyone, or are we done and dusted? Okay. Thank you, gentleman, for your oral evidence this morning, and also the papers, as I said in my earlier remarks to you, which proved so helpful in the line of questioning as well. If, as the inquiry continues, we find other areas where we’d like maybe some reference to, I hope that we’ll be able to write to you and seek clarification on any of the evidence you might have given or opinions you might want to express. The Record will be sent to you for your convenience to look at, from today’s meeting. If you have any concerns about that Record, please liaise with the committee clerk. But, thank you very much for coming this morning.

Thank you.

Diolch yn fawr.

I draw Members’ attention to the papers to note that I constantly forget to mention in my opening remarks. I take it that Members are content with those papers to note.

I now ask for a motion to move into private session. Second? Thank you.