Mr. Denis Murphy:

The Chairman mentioned concentration and the five largest processors. This is a feature of the milk business worldwide, where some processors are processing the equivalent of the total milk supply of the Irish dairy industry. The Chairman also mentioned that processors of liquid milk in the State also produce manufacturing milk. This is a benefit to the agency, because winter milk supplies of liquid milk producers, which are not used in the liquid milk trade, are all being absorbed in other contracts. For example, the Bailey's Irish Cream contract would be a particular type of contract here. Therefore, in the winter period the non-liquid produce is important and processors are conscious of that, because it means we will not have a situation where there will be a total wipe-out of the liquid milk producers within the State. As we have seen, there is extraordinary stability within that group of producers and Teagasc has done some excellent work in this sector. It emphasises that it is not the scale or the system, but the efficiency with which milk is being produced by the farmer that is the real criterion of our cost effectiveness and profitability at farm level. There is huge work to be done in this area.

Another question raised concerned the quotas and whether they would involve the wipe-out of family farmers. Teagasc has done projections based on the 50% increase in milk production in the State and it believes that by 2020, we could end up with approximately 16,500 dairy farmers, with an average herd of approximately 85 cows. There is stability in that, but there must be efficiency at farm level in order to survive. In the current year, in the month of September the milk price was back by 8 cent a litre on last year's prices. This must affect producers. The collapse in milk prices has been occurring since June, but the average price for the year will only be back about 1 cent a litre or slightly over that on 2013. It is next year the crunch will be felt, because the price we have mentioned, 38 cent a litre in 2013, will reduce in 2014 to around 37 cent a litre on average and this will reduce further to 29 cent a litre in 2015, if the 8 cent a litre drop in price continues into 2015.

Senator O'Brien raised questions in regard to why we are getting so much milk from Northern Ireland. Dr. Ó Céidigh has already referred to the fact that Northern Ireland has, basically, had its Harvest 2020, because its milk supply has increased by approximately 700 million litres since 1993 - all due to the transfer of quotas from the United Kingdom - and some 500 million litres of that milk comes into this State.

A full 70% of it is being processed into manufactured dairy products and 15% of it is going into the liquid milk trade. Basically, capacity has not been installed in Northern Ireland to process the additional milk resulting from their own increase in supply. That is another factor.