Mr. Michael Barry:

Senator O'Keeffe asked about country of origin. We are proud of "Irish". We want the freedom and flexibility to brand and differentiate ourselves as Irish. The Kerrygold brand is an example of this. That will apply to finished foods we are bringing directly to the consumer. The vast majority of our additional product will be dairy powders such as whole milk and skimmed milk powders and caseins for high value-added products such as infant nutrition and sports nutrition. These products are mission critical.

We do not want mandatory country of origin labelling because we want to make it easy for global customers to use our ingredients, irrespective of the country in which they operate. They will not have those restrictions if they are using powders from New Zealand. That is the thinking behind our argument. We are trying to have jam on both sides of the bread. We want the freedom to use country of origin labelling when we want to. For the majority of our ingredients, we do not want a customer to be obliged to include country of origin. We want to remove those barriers.

Greening is our unique selling point. We are strong on that issue and we are completely committed to addressing sustainability across the food chain. We have systems such as REPS and AEOS and our farms have very good and green metrics. Some of the greening measures proposed by the Commission in the CAP may not be sufficient and would move us back to environmentally unsustainable activities.

That is what I mean about the pragmatism. Deputy Ó Cuív referred to this as well. As regards the type of pragmatism we are talking about, one of the proposals within the CAP discussions is a menu of green activities, so if somebody was involved in a Bord Bia sustainability audit, for example, that would be sufficient to count as that person having complied with the greening requirements, rather than asking them to go through two or three hoops. I agree with the Deputy that it would be terrible and unsustainable if there three or four fellows with clipboards walking around looking for different aspects of greening. That would be really unfortunate. It would not be fair to devise such a system as it would impose a cost on the system.

I will comment briefly on some of the other points raised. Deputy Ó Cuív asked what we have in mind in terms of climate change. It is a very complex issue. The National Economic and Social Council, NESC, report is worth considering. It should be considered by this committee because it is very important. If and when we do greening activities at farm level or within the food processing area, be it a biodigester or the cultivation of micanthus or other such green crops, we do not get credit for it. The credit for that generation goes to other sectors. In an ideal world there would be a balance sheet approach, whereby the emissions from the cow are offset by the savings in emissions from these other activities. That is the type of thinking we are considering. That is not to say we do not want to be part of the effort to address climate change and sustainability. We want to do that, but we need to get into that type of area. There will be a similar type of discussion in the context of water foot printing, which will be a bigger issue for us in years to come. Again, it is a case of looking at what is really sustainable, green and sensible and trying to package it in a way that is accountable, whereby it makes sense to other member states. That is the approach we are taking in this area.

Deputy Ferris mentioned the quota abolition. There is definitely a concern about that. We have had quotas for almost 30 years but, on average, 5% of European farmers per annum left dairy farming. Even within the quota period, 5% of farmers left dairy farming every year. The quotas have not kept farmers on the land. The other issue is that even with milk quotas we have seen milk prices fall to 20 cent per litre for sustained periods of time. That is not a sustainable price either. The supply management part, we believe, failed to become an effective means of protecting family farm income once we changed the other elements of the CAP and let the EU price come down to the world price. Once we set ourselves on that course, the volatility issue arose and many smaller family farms could not sustain themselves purely because they were not generating enough income, so they left.

The Deputy is correct to highlight the social impact of this, because there will be a social impact. I would go further and suggest there is probably a social impact whereby a farmer might have to produce 50% more milk, and do all that additional labour, to get the same income. Deputy Barry quite correctly referred to this. We must be careful because there will be a social aspect to this. How hard can one push people? In terms of the farmer's share of the price, which is built into that same message, look at the example of what happened in the UK. In the liquid milk market in the UK, people pushed it so hard that for a while the UK was importing liquid milk from France. It ran out of milk. The UK suddenly started to worry about whether there would be sufficient volumes of milk to put on the retail shelves. That brought the retailers in the UK into contracts with farmers.

That part of the discussion relates to the comments made with regard to the feed sector. Deputy Barry commented on that. There are lessons for the dairy industry from the contract experience of grain farmers this year. The Deputy was correct about that. The dairy package that was discussed and agreed - it was discussed almost two years ago but is only becoming law now - made a provision for mandatory contracts between processors and producers, but it had an exemption for co-operatives. That was correct, because there is a different rule for how co-operatives deal with their individual members. The CAP is trying to re-write the provisions for mandatory contracts and producer organisations and get rid of those derogations and exemptions for co-operatives. That will be a terrible own goal because it will remove the security and ability of a co-operative to protect its members and suppliers. The Deputy is correct to point that out. Unless we have those derogations and let the co-operatives look after their members, we could walk ourselves into the type of difficulties the Deputy correctly points out have happened within the feed sector. That is a place where nobody wants to go.

Deputy Heydon mentioned that the scale of growth is colossal. He is correct. However, if we did not have a quota factor this year and if we did not try to slow down Irish dairy farmers, Ireland would have increased production by 20%. That is a huge figure, and that is purely on the basis of the capacity. We could have increased our production by 20% this year without the quota. Then there was the weather factor as well. There is a tremendous opportunity there. Are we becoming too dairy dependent? I do not believe so. This does not mean that the dairy expansion will come at the cost of other sectors. There is plenty of room for those. Even if one takes the existing herd, what we are talking about is getting more from that herd, allowing those cows to milk and getting rid of the quota factor. As I said, there is probably 20% more milk there without a quota factor in any case. Our yields are low and much of that is due to the quota factor as well. There is tremendous potential in that area. However, it does not mean that Ireland will become the new New Zealand. There is plenty of room for other farming activities. The Deputy is correct that it is good to have a good mix for a host of reasons. It is important to have dairy, tillage, beef and so forth.

The Deputy posed a question about the volatility and competitive advantage. The feed price in Ireland as a percentage of our total costs is quite small relative to many of our global competitors. When one looks at some of the competitors in other zones and areas, one can see we have that advantage. There were some predictions suggesting the feed prices will stay at these levels. If they do, it may herald an advantage for us. The problem is that we need good weather to get fodder to feed the animals as opposed to having to buy the stuff in the trucks. That is the reality.

Deputy Barry asked about the Asian dependency. It is important because Asia is hoovering up huge amounts of milk. It has become the most significant outlet for New Zealand dairy products. Heretofore, New Zealand was one of our biggest competitors in the European market. Now, it is our big competitor in the Asian market. I do not believe Asia will ever become self-sufficient. Water is the biggest issue. It does not have sufficient agricultural land. It has land and soil depletion issues and water shortages. That is the case even in some of the surplus dairy countries. In Australia today there is a big debate as to whether people should have a shower or leave the water on the farm for the cows to drink. It is as chronic as that, so an opportunity exists for us out there.

I agree wholeheartedly with Deputy Deering that the soft landing is an issue. We must be careful of the soft landing. The ideal situation for Ireland is that there is a phased gradual increase in milk quotas up to quota abolition in the 2014-15 quota year. That would be the right way. It would devalue milk quotas throughout Europe and assist farmers. We do not wish to pay any more superlevies in this country, especially when we have a strategy for growth. It would appear to be counterproductive to levy our farmers with superlevies in 2013 or 2014 and then take the brakes off in 2015. That does not make sense. There is an interesting statistic. Ireland has paid €850 million in superlevy since quotas were introduced. That is the price of an industry investment by itself, so the Deputy is right to be concerned about the soft landing. If we can reach a stage where there is a gradual annual increase, it could help us dramatically.

I hope I have covered all the questions.