Mr. Tadhg Buckley:

Finance Ireland.

On whether we have examined the cost of production, we take a long-term view of prices. We take a milk price of 30 cent per litre, including VAT, at 3.6% fat and 3.6% protein. We regard that as a relatively conservative price but we also apply stresses on that. The stress tests we apply are to allow for increases in input prices or decreases on output prices. We feel that at that level of analysis, we are covered, even taking the current increase in feed prices into account. That is not to say that this year will not be heavily impacted, but it is one year within a cycle.

On the debt levels on dairy farms, one can look at averages but they often hide levels of debt on farms. About one third of dairy farms may have only very little working capital facilities. Our heaviest indebted dairy farms would still only be at what the average debt levels are in New Zealand and would still be below the levels in Denmark and Holland. While there are some farmers with a lot of debt, those farmers are mainly quite well structured in terms of long-term facilities, often 15 or 20 year facilities, to allow them to reduce the repayment burden on their business to allow them to trade. Farmers who have expanded are under a lot of pressure this year but we have seen that in many cases expansion has helped them improve their overall efficiency from where they were in 2014, for example, when they worked under quota restrictions.

I will finish on this point. Today there are 1.4 million dairy cows in Ireland; in 1983 there were 1.5 million dairy cows. Sometimes that message can get lost. There has been an increase in dairy cows but we are still only at the numbers where we were in 1988. Those dairy cows are producing 62% more than they were in 1988, which is also a point that can be lost.