Mr. Joe Collins:

I will start with the first question, from Deputy Pringle. In fairness, if one goes back to the strong production in late 2013 and 2014, that was pre-quota. Obviously, the China and Russian situations are on the demand side. They would have happened anyway. The current situation is not the fault of the quotas being abolished. The delay in recovery could be associated with quotas being abolished but certainly the epicentre was well before that, both on the supply side and on the demand side with Russia and China.

In terms of the United States of America, one will note the increased interest in dairy. Interest in dairy has been growing steadily over the past three years. Some of it is to do with dairy now being seen as a healthy nutritional product, particularly butter, and some of it is to do with the fact that maybe American dairy products are not as tasty and flavoursome as European products or, indeed, Irish products. There is a growth in dairy but there is certainly a big growth in imported dairy into the United States because of the quality of Irish products.

With regard to Food Harvest 2020 and the 50% target, we are getting there a lot quicker than we thought. Farmers had certainly put plans in place and at this stage of the cycle volumes are a lot higher. Some of that is a function of the weather being very good this year which allowed things to push on when quotas were abolished. Some of it is a function of the pre-planning and cows going in on the ground.

The Chinese market will undoubtedly remain very important but it will not be like the boom we saw in 2014. It will still be a key market where disposable income and consumption are still growing. The relaxation of the one baby policy will help milk powder imports into that country. We know from other countries that China will move on from milk powder to importing other dairy products like cheese and butter, so while it will be an important market China will not have the huge boom in imports as in 2014. China's domestic supply has recovered back towards 2012 levels. The question must be asked if it will continue to grow. There will be some growth for China's domestic supply but it is an expensive place in which to make milk and it imports many of the raw materials which are needed to make milk for feed and so on. It will be expensive for China to do that and, while its domestic supply will grow, that growth may not be at the same rate at which it bounced back.

With regard to Russia, I do not wish to comment on the geo-political aspect. It has the capability to grow its milk production. It is government policy to try to reduce Russia's dependency on imports and grow a domestic output. Unlike China, Russia probably has more capability to do that and more of a history of making milk.

I will now turn to the issue of purchasing power. It is clear that over the last 18 months low oil prices have put certain emerging markets under pressure, particularly in the Middle East and north Africa region, whereas low oil prices benefit the developed world of Europe and the United States. If one breaks that down further one could probably say that low oil prices are good for cheese and butter consumption in general as these are consumed in the developed world and that low oil prices are probably not so good for milk powder consumption and market growth because the powder is mainly imported by Africa and the Middle East. An optimal oil price might be around $70 to $75 a barrel and while that price would not be too punitive on the developed world it would certainly help the developing world to import dairy products.

With regard to the guaranteed milk fixed price contracts, Ornua has been involved in these for the past four years and supporting the various co-ops and processors on the contracts. Ornua thinks it makes sense for a farmer to do a percentage of his or her milk on the fixed price contracts. Looking at the markets and at the competitive pressures, Ornua believes that a good price of somewhere between 29 cent and 31 cent per litre, including VAT, is probably going to be a fairly decent return over the next three years.

A question was asked about the recovery in 2016. We believe it will be in the second half of 2016 unless there is a fairly sharp supply correction. For a correction to be sharp one would probably need a weather event. There is talk of an El Niño developing in the Oceania region. We are not sure of its extent, how powerful it will be or if it will hit the key milk producing regions. If an El Niño developed it could shorten the recovery period. I invite my colleague Ms Anne Randles to comment.