Dr. Anne Finnegan:

As the Vice Chairman quite rightly states, the challenges are completely different when coming from the tillage sector to dairying. The fundamental thing AIB looks for in a new entrant from the tillage sector is his or her experience in dairying. If he or she does not have any experience, there is capacity to hire it in and to manage the dairy operation successfully. That is the very first thing we look at before we look at anything else. The barriers to entry in terms of investment are much more significant for a tillage farmer and that is a real consideration as well.

In many respects, one is looking at probably a higher level of equity coming in with a tillage conversion into dairying as opposed to a suckler or beef conversion, where there will be equity in the stock. In reality, in terms of new entrants to dairy production and people who would have received quota under the Department of Agriculture, Food and the Marine schemes, conversions from the beef and tillage sectors have been at the lower end of the numbers. The most significant proportion of new entrants, if one wants to call them that, have come from the dairy sector. They have had some level of dairy experience within the home or extended family farm, which has really seen them through. Our experience of that has been quite positive.

To pick up on Deputy Penrose's question on dealing with young farmers coming into the industry and how we are supporting them, first and foremost, we have had a strong focus on the young farmer market for well over a decade. Deputy Penrose cited the statistic that less than 7% of the farming population is a young farmer. On trying to encourage and foster young farmers, we work very closely with Teagasc in its agriculture colleges on its level 6 and green certificate programmes. We have a financial planning programme in place with Teagasc as part of its curriculum and every year, we run a best farm plan of the year award. This has been really good for the bank in building financial acumen in future farmers and an understanding on the part of those farmers of what it is a bank will look for from them when they come to see us with their business plans and what a good plan looks like. For the first time, this year the College of Agriculture, Food and Rural Enterprise at Greenmount in Northern Ireland was part of the initiative as well. It is a cross-Border initiative which is working very well.

When we are interacting on the ground through our branches and business centres and through direct banking with young farmers, as a prerequisite, any young farmer or new entrant to dairying will meet an agri-adviser. For capacity reasons, that is not the case for all lending cases across the board in the bank. We prioritise new entrants to the sector when arranging these meetings with the agri-advisers. Specifically, we want to get an understanding of their experience and financial acumen. How do we deal with them? We give them interest-only periods, in recognition of the challenges in the start-up phase. Typically, initially it starts with a one year interest-only period which is reviewed when necessary.

It is important to bear in mind that while this is our first episode of volatility post-quota, realistically we have to bear 2009 and 2013 in mind as well in terms of the form that dairy farmers and the entire industry have in dealing with volatility. Our view would be that dairy farmers and the industry itself are better positioned now. We have a greater understanding of the impact of the cycle, be it the cycle related to price or a cycle related to weather, and dealing with it. In terms of budgeting through the cycle and taking account of the volatility, we are comfortable with taking a long-term through-the-cycle budget milk price. However, this is only one half of margin on a farm. The other half is the cost base, which is very important for us as well. While we keep the milk price under review, it is important that we carry out rigorous financial assessments of proposals in front of us and that we get an understanding of the cost base on the farm because this really makes a difference. When one looks at the Teagasc profit monitors, the variance between different farms is quite frightening. Mr. Burke alluded to this already.