Pat Deering (Carlow-Kilkenny, Fine Gael) | Oireachtas source

I also welcome the delegation here today and thank them for the very informative presentation. This is going to be the big agricultural story of the year. The superlevy is going to be the number one difficulty starting off the year. The witnesses are right to point out that we are facing huge penalties and unfortunately those who are going to be penalised are more than likely those who are depending on a drive in milk production in the next number of years in particular. If they are going to be facing these serous penalties, we are at a very delicate starting point. Something has to be done. To follow on from Deputy Ó Cuív's point, deferral rather than reduction is not going to sort out this problem. How do we get around this issue and the difficulties that we seem to be having and which have been outlined by Deputy Ó Cuív? Are we the only country experiencing this issue? Are there other options we could be looking at with regard the reduction of the penalty?

We seem to have been continuously facing penalties over the past years and this year seems to be the worst year ever. Would that be correct? Over the past years there would have been substantial penalties but this year the penalty seems to be the most substantial to date. Are we being penalised now, or potentially being penalised now, because of our faults in the past and because we have not been hitting our quota or thereabouts? We have been over the quota and because we have been over the quota continuously, and the pressure is coming now, are we being excluded from support at EU level?

There was a statement made about too much production internationally. We are going to have a 50% increase in production in Ireland, we are set for that and we have all been talking about it for the past years. How do we square that circle? If we increase production we will immediately drive down prices. Supply and demand always results in the same outcome. How are we going to balance that equation? This is the big question we need to address and there needs to be more discussion on this.

On the price range, the witnesses spoke about the spot price and the actual price at the moment, which is 20 cent per litre. The witnesses spoke about the cost of production. We have a low base cost in Ireland, given our grass-based production and so forth. but unfortunately, we do not produce all our milk off grass. There was a discussion here prior to Christmas with regard to liquid milk, for example. At 20 cent per litre, we will not have liquid milk production in Ireland. It is as simple as that. It would not be possible. Gone are the days when it was a hobby to turn in the cow's milk and a person would get 20 cent per litre, with an expression of appreciation and a request to do the same the following year. This will not happen. How are we going to overcome that issue?

That is the big challenge we will face in the new term post-2015 and it is a longer term challenge. The issues will balance out in terms of where we are in the world market. The bigger challenge for Ireland will be the cost of liquid milk production going forward over the next period, and not just in the short term. That big issue needs to be tackled in some form or another. Are there plans to deal with it? I would like to hear the view of the board on the matter.

As the delegation rightly said, consumers always want value for money. However, quality was not mentioned. The quality of milk here is as good as anywhere else, an aspect which should be sold to consumers. I like to think that consumers will always opt for quality rather than a cheaper offering. In my opinion as a milk producer, we have substantiality increased the quality of milk over the past 20 years and now test for everything and anything. Obviously the producer must bear some of the cost. We should make more of our quality product. We are not doing enough to promote the quality aspect. Perhaps, due to the recession, consumers will opt for a cheaper product but it is not always the best product.

As Deputy Ó Cuív mentioned, volatility in prices is the biggest issue to face the dairy industry for the next period. Can the board state what it believes will be the average price range for the next five years? In 2008, a specialised dairy farmer's average income was €45,000 per year but within a year it fell to €23,000 which was almost a 50% decrease. A number of farmers have invested substantially and are investing substantially. I am afraid they will get into serious financial difficulty trying to meet the liabilities generated by such investment, be it increased numbers or increased infrastructure. My comment follows on from the point made by Deputy Ó Cuív.

Earlier it was stated that only 60% of farmers have no or low debt levels. Is that an old percentage figure? What is it based on? The reason I ask is because farmers, in the past year or two, have invested substantially and had to borrow. I do not mean to be alarmist but a 50% reduction in farmers' income is similar to what happened when the construction bubble burst. We need to address the matter and make plans. Are there plans to tackle the matter?