Mr. Brendan Gleeson:

It was trading at a low level at any rate. There is an imbalance between butter prices and skimmed milk powder prices. As Deputy Cahill is more aware than I, having over 300,000 tonnes of SMP in storage has a potential impact on the market. It is a weight on the market. At some stage, it must be wound down but that must be done carefully to ensure it does not imbalance the market. I agree with Deputy Cahill in that regard.

I have dealt with capping. We can cap at €60,000 but there is an issue in regard to the deduction of salaries and unpaid labour such that it is not practical.

Senator Mulherin raised the issue of the balance between food production and the environment. Critics of the Commissioner's proposals on CAP - who do not include me - point out that he went back to protect the Pillar 1 payments, which are the essential components in protecting farm incomes.

In terms of the balance of the budget, there is a 3.9% cut in direct payments and a 15% cut in rural development payments. We do not want any cut, but we were anxious to protect the direct payments because they are the basic pillar of farm incomes. Some member states, Austria for example, are up in arms about the cuts in rural development payments. They have a different balance of payments, about which they are more concerned. Under the new regulations, there is flexibility to move 15% of the budget in either direction. It would be possible to take 15% from the direct payments and move it to pillar 2 measures if one wanted to do so.