Mr. Aidan Cotter:

I will first address the question on optimism. I like to think that if members look back on my presentation they will see that everything I have said is referenced. For example, there is projected growth in the world population of 75 million people every year up to 2015, with the middle class growing by 150 million people per year. The projections come from the OECD and the United Nations. The percentage growth in milk demand of 2.4% per year came from the UN Food and Agriculture Organization and the OECD. Everything that I have put forward is based on projections by reputable third parties. Therefore, members can have confidence that projections for the future are as good as we will get in terms of what is available.

The forecast for the future is very positive. The world's population is expected to grow to 9.6 billion from where it is today at 7.3 billion. As a result, there will be a huge growth in demand for dairy products over the period. If we do not supply the products then other countries in the European Union and countries such as Australia, New Zealand and the United States will do so. This is an opportunity for Ireland. The Irish dairy industry - farmers and dairy processors alike - have recognised the opportunity and invested.

They envisage a very difficult year, but they are all taking a longer-term view in the belief that there is a future in the industry because Ireland is good at what it does. Ireland produces its dairy produce from grass. It is one of the most competitive countries in the world at producing milk. It has an opportunity from which it cannot turn away.

With regard to the specific questions, we saw an increase in global production of 9 billion litres last year. There was an increase of 4.8% up to the November period, at a time when demand was growing at 2.4%. This was exceptional and based on the very good weather that all of the leading producers around the world have been experiencing. It is a very unusual situation which means that Irish farmers will face difficult circumstances this year. Prices will certainly be under significant pressure, as everybody has acknowledged. Dairy farmers everywhere will have to face these difficult circumstances. Arguably, Irish dairy farmers are in a better position than many to withstand the difficulties and survive this very difficult period to be ready for the better times ahead.

Not everything is in our favour in terms of free trade agreements. China serves as an example in this regard. As Deputy Ó Cuív rightly pointed out, New Zealand and Australia now have agreements with China, which places them in an advantageous position vis-à-visIreland. The United States does not have such an agreement. Such an agreement would have to be forged between the European Union and China directly rather than between Ireland and China. As far as I know, there does not seem to be any immediate prospect of this. However, the Deputy rightly focused on a development that would be very positive for the industry were it to occur.

Deputy Pringle mentioned the family farm and asked whether we are facing the prospect of the industrialisation of farms. Family farms and grass-based production systems are what put Ireland in its advantageous position today. That is what is encapsulated in our Origin Green programme and the sustainable dairy assurance scheme. With regard to our international competition, we have something unique that nobody else has. We have green credentials that nobody else can emulate and which we demonstrate every day. Every 18 months, every dairy farmer submits himself for audit under a unique scheme that includes carbon footprint measurements in respect of water and biodiversity, in addition to food safety and animal health and welfare. We have something that nobody else in the world can point to - namely, our uniqueness. We are green and can prove it, and Irish farmers can compete with any country not only in terms of cost competitiveness and efficiency but also in terms of how we present our unique position and how we differentiate ourselves on the global market.

On the question of whether China and India will replace Irish produce with their own eventually, it must be noted that China has 1.3 billion people and is struggling to feed them. When one considers that the world's population will grow by an additional 2.3 billion by 2050, one realises the market is also growing. China will never be able to feed itself in the manner one might envisage. While it produces milk, it is doing so under very difficult constraints. It may need approximately 40 cent per litre in order to compete and produce profitably. The ICOS representatives, who are to contribute after me, may have more information on that.

Ireland is very competitive in China, just as it is in any other location. It is important that we build our market position while we have an opportunity. There is a window for us to do so. The industry has been very successful in this regard. Everyone involved in it should be encouraged to continue to embed the progress in China.

There are more Irish brands in the Chinese market which are familiar to consumers. This gives us a certain security compared to brands that are not as well known to the consumers.

On the question of whether lessons can be learned from New Zealand, Deputy Deering will know that there are. Ireland can learn and is learning in terms of what New Zealand has done as it expanded over the past 30 years at a time when we were held to our current ceiling. A positive consequence of the difficulties may be that it will make everyone think twice about the level of investment needed in the family farm system and the risks that need to be taken. There are lessons to be learned from New Zealand. I have no doubt but that Irish farmers will take them on board.

On the question of whether we have put all our eggs in one basket with regard to China, out of a total €3.8 billion in exports last year, if dairy-enriched powders are included, €400 million of that €3.8 billion went to China. It is still a relatively small part and we are not dependent on that market in that we sold into 137 other markets last year. Our industry is globally distributed and that will stand to it.

The industry's main competitors are other suppliers in the European Union, those expanding their production, as well as Australia, New Zealand and the United States. We are all competing in a global market and we have to differentiate ourselves in whatever way possible to stand out from those competitors.

With regard to Bord Bia staff levels, members will be aware that Bord Bia has been constrained by the public sector embargo on staff recruitment. We have approximately 90 people and 11 international offices. We are spread thinly but I believe that by undertaking a range of measures we have managed to expand our global footprint. We have approximately 100 auditors working full time on our behalf. They are outsourced but they are working directly as Bord Bia auditors. We have a marketing fellowship programme which puts 20 experienced graduates into the market every year and they are linked into our offices. We have ten Origin Green ambassadors and also graduate staff. We leverage other resources in the marketplace. We have a small core staff but in my view we have a much bigger global footprint that is efficiently distributed in support of the industry. Everybody works to support the food industry. We also have specialist staff for the dairy sector, including my colleague, Mr. David Owens, who is sector manager for dairying.

Senator Mooney has put his finger on the matter with regard to the Origin Green ambassadors. They are opening doors in leading global organisations that would never have opened before. Such organisations are very reliant on the reputations of their brands in the global market. The ambassadors have gained access for the industry. As a result, some of those organisations have visited Ireland for the first time and others plan to visit in the coming months. They are discovering that we have a dairy industry in Ireland that is unique, something they had not previously realised. It may be a surprise to some that companies such as PepsiCo and Coca-Cola, who are global leaders, are involved in the dairy industry.

The sanctions on Russia have presented a difficulty for the dairy industry in particular last year. It has put pressure on dairy markets and when combined with the slow down in Chinese buying, these situations have had a significant impact on the industry's current situation. Senator Mooney also mentioned investment in Africa.

Senegal was one of the markets in which we undertook consumer ethnography research, in which our researchers live with consumers to understand the marketplace. This is an important market for Irish dairy products. We are working with the dairy industry in identifying such markets where we need this type of understanding. We will continue to do this into the future in Africa and south-east Asia in particular. The reason we conduct that ethnographic research is because of the importance of understanding different cultural practices in such different markets.

I will now address our plans for the UK market. The population of Europe will peak in 2020 and will then start to decline, but uniquely the population of the UK is set to grow by 10 million in the next 25 years. That is a market right on our own doorstep. Irrespective of the other markets around the world, we must look at this major important market right on our doorstep. It is the largest deficit market and with the recent depreciation of the euro, we have an extra advantage and a window of opportunity that will last for some time to rededicate ourselves to building our position in the UK market. The Senator is absolutely correct; it is an important market and we must develop it. We cannot ignore it.

My colleague, Mr. David Owens, will address the farmhouse cheese sector which is relatively small in terms of the total cheese output.