Michael Creed (Cork North West, Fine Gael) | Oireachtas source

I am pleased to accept this invitation to discuss the 2019 budget priorities. I have met many representatives of farming bodies and organisations, as has the Minister for Finance, Deputy Donohoe, to listen to the issues at the heart of the farming community. As the 2019 Estimates process is not finalised, members can appreciate that I am not in a position to discuss the finer details of my Department's proposals. I will focus on expenditure so far in 2018, and in the coming months as well as the challenges for 2019.

It is important to note the ongoing vital contribution the agrifood sector makes to the economy, particularly the rural economy, as well as the important role the international trading environment plays in sustaining this contribution.

It is important to note the ongoing vital contribution that the agrifood sector makes to the Irish economy, particularly the rural economy, as well as the important role the international trading environment plays in sustaining this contribution. It is clear the biggest challenge comes in the form of Brexit. The sector employs 173,000 people, including those involved with primary production and processing and in the food and beverages sector, which has a total of almost 8% of total employment in 2017. One of the unique strengths of the agrifood sector is our shared vision for the sustainable development of the sector in Food Wise 2025, and having direct input from all stakeholders in the agrifood supply chain, along with the Department and State agencies in strategy formation and implementation, is crucial.

In terms of responding to the significant challenges we face as a sector, from Brexit to climate change to geopolitical developments outside our control, doubling down on the key Food Wise themes of market development competitiveness, innovation, human capital and environmental sustainability is more important than ever. Brexit poses enormous challenges for the agrifood and fisheries sectors by virtue of their exposure to the UK market. The United Kingdom is Ireland’s largest export market for agrifood products at €5.2 billion in 2017, while Ireland is the UK’s largest export market at €4.1 billion of products in 2017. The most immediate impact of Brexit has been the difficulties caused by the significant drop in the value of sterling against the euro. Possible long-term impacts relate to the potential need to apply import controls in respect of animals, plants and products of animal and plant origin imported from the UK, the certification of Irish agrifood exports to the UK and the possibility of a hard Brexit resulting in tariffs on trade. The challenge has been to take effective steps to mitigate the immediate impacts and to intensify market diversification efforts in order to reduce our exposure to the UK market. These challenges are being addressed through budgetary measures covering building competitiveness and resilience on and off farm, and through market diversification and development.

Brexit preparation is complicated by uncertainty surrounding the current negotiations and the potential final trading relationship between the EU and the UK. Nevertheless, my Department’s Brexit planning, guided by recent Government decisions, is well advanced. Officials have been working with other Departments and agencies to ensure they are prepared to fulfil their legal obligations as efficiently as possible when the UK exits the EU. I am pleased that significant progress has been made in the development of a long-term investment loan scheme for Irish SMEs, including farmers. This scheme has been developed by my Department in co-operation with the Departments of Business, Enterprise and Innovation and Finance, the European Investment Fund and the Strategic Banking Corporation of Ireland. By its nature, the detail of this scheme has taken time to develop and negotiate between all the parties involved.

This scheme will be of particular benefit to the Irish agrifood sector, including farmers, the seafood sector and agrifood businesses. It will enable them to invest in their businesses and innovate for future growth. This is a key Brexit response for which I made financial provision in budget 2018. This will bring longer term unsecured investment finance to the Irish market in the region of eight to ten years, with interest rates typically less than 5%. This type of long-term unsecured investment finance is not currently available for many farmers and food businesses or the seafood sector. This has been identified as a critical need. The loan scheme will be of particular benefit to young and new entrant farmers, as well as smaller scale farmers who typically have less bargaining power with their banking institutions.

In terms of efforts towards market diversification, Food Wise 2025 outlines the huge potential for growth in agrifood exports to new and emerging markets, particularly in Asia and Africa. My Department will continue to seek out and identify new markets and I am ready to respond to other opportunities that may arise. In keeping with Food Wise 2025 priorities, I led a successful trade mission to the US and Canada in February, while in May I led a trade mission to China. For the remainder of 2018, I will lead a trade mission to Indonesia and Malaysia at the end of October. The Minister of State, Deputy Doyle, will travel to China in November. These and other missions planned for 2019 will serve to enhance and improve existing levels of market access in these destinations. It will also promote Ireland’s reputation as a producer of high quality, safe and sustainably produced meat and dairy products. The destinations are in keeping with the market prioritisation exercise completed by Bord Bia in December 2017 at my request. Bord Bia's resources have been increased significantly over recent years, together with an increased focus by my Department’s market access team on opening new markets, particularly for meat exports. In terms of product diversification, I am pleased to note that the funding provided for the prepared consumer food centre at Ashtown is making good progress.

This is to address the situation where, traditionally, investment in research and development within the sector has been low throughout the industry given that 76% of prepared consumer food companies in Ireland are small. The €5 million is being used for the purchase of specialist processing and packaging equipment, which companies can pilot with a view to scaling up their production and-or their operations.

Overall in 2018, the Exchequer contribution to the Vote of my Department amounts to €1.557 billion. Our expenditure to date is €977 million, which is €113 million ahead of the same time last year.

We are now entering year four of our seven-year rural development payment, RDP, scheme and many of our schemes are reaching peak payment rates. Earlier this year, I presented a review of our RDP expenditure to this committee. As I stated then, projections are that the RDP will not just be fully spent but will require €105 million of transitional funding from the next programme, additional to the €4 billion provided for if implementation continues at current levels.

Delivering on the RDP is challenging and I am delighted that Ireland is performing well. Ireland leads in implementation and has the second highest rate of drawdown of EU funds among member states. The allocated budget for 2018 for the RDP is €625 million and I expect this to be fully spent. This includes the increased allocation of €25 million to the areas of natural constraint, ANC, scheme announced in budget 2018. A sum of €186 million was issued for 2018 ANC payments in September, an increase of €23 million compared with this time last year, and the vast majority of the additional allocation is distributed. Some 19,000 farmers continue to participate in the sheep welfare scheme in year 2. Advance payments are due to commence in November 2018. It is estimated that expenditure in 2018 will total €18 million. I will make full provision in the Estimates for our commitments to participants under the RDP schemes in 2019.

This year has proved to be exceptionally difficult year in terms of weather, with storms early this year turning to drought conditions with consequent implications for fodder availability. In supporting farmers through this time, I implemented a number of measures. I allocated funding to support the importation of up to 85,000 tonnes of fodder and €2.75 million towards incentivising the production of fodder on up to 25,000 ha of arable lands that would normally lie fallow over the winter period. These measures, coupled with additional flexibilities for later application of fertiliser granted under the nitrates regulations and additional flexibilities under the green low-carbon agri-environment, GLAS, scheme, are maximising fodder availability. While many farms remain in deficit, these measures have resulted in improving the fodder situation throughout the country.

The seafood industry faces ongoing challenges, including the significant Brexit challenge. In 2018, by providing world-class landing facilities for our industry such as the Department's investment for a major quay extension in Castletownbere, County Cork, which will double landing facilities on Dinish Island, we are protecting our coastal communities. Together with a range of investments in products and markets funded under the European Maritime and Fisheries Fund, EMFF, seafood development programme, we are creating the opportunity for the seafood industry to continue to expand and prosper. I recognise that such support has never been more important given the particular challenges faced by the sector.

The Common Agricultural Policy, CAP, post-2020 reform presents a different set of challenges. It comes against the backdrop of Brexit and other newer European Union priorities such as security and migration, and the global challenge of climate change. The European Commission's proposals involve new ambition, in terms of the environment and climate change, an increased emphasis on knowledge transfer, technology adoption and competitiveness, and new incentives for young farmers, all while maintaining vital supports for farm income. The budgetary allocation for the 2021 to 2027 period will be a critical determinant of how those challenges can be met.

I have been working hard with my European colleagues to secure agreement on the restoration of the CAP budget to current levels in the next period. This effort has paid dividends as up to 20 member states have joined this alliance and we will continue to work together to build consensus on this point. As we go into another reform, I will continue work with my colleagues in Europe to ensure the best deal is secured for farmers, the agricultural sector and the rural economy as a whole.

As mentioned earlier, I am conscious that this has been a difficult year for the beef sector in the context of weather and the associated range of challenges. My Department is continuing to examine appropriate measures to support all agrifood sectors, including the suckler sector. This is a particular focus in terms of our policy negotiation objectives in the next CAP reform and we will be informed by stakeholder consultation on the needs of the sector.

I would like to make an important point. As a community, we in Ireland must embrace the challenge of addressing climate change and other environmental imperatives.

Agriculture will have to make its contribution, and it is clear that any new CAP must be configured to help us to do that.