Denis Naughten (Longford-Roscommon, Fine Gael)

I wish to share time with Deputy Wall.

I thank the Ceann Comhairle for the opportunity to raise this important issue. Dairy farmers' incomes are declining rapidly as a result of falling milk prices and escalating farm costs. In 2005, dairy farmers are less well off compared with 2000 by €10,000. In 2000, the standard size dairy farmer generated the average industrial wage. However in 2005, the standard size dairy farmer generates half the industrial wage, that is, €15,000 compared with €30,000. In that period, the burden of input costs has gone up dramatically. The cost of feedstuffs has gone up by 7%, fertiliser by 9%, fuel and electricity by a massive 35%, much of which is due to a lack of Government intervention and a lack of competition in the electricity market, and veterinary expenses by a whopping 44%. If the Minister gets her way later this year in regard to prescription only medicine, they will increase significantly again.

The falling milk price is due to a combination of the Common Agriculture Policy reforms and lower market returns from cuts in the EU dairy market supports. Unless definitive action is taken at EU level, profitability of the Irish dairy farming sector could be heading to zero, or non-profit, by 2008 when the single farm payment is taken out of the calculation. It must be recognised that the dairy sector is a hugely important element of our economy. In 2003, the dairy sector accounted for the largest share of gross agricultural output at 30.5%. In monetary terms, this gross output at producer prices came to €1.4 billion. However, the future is bleak.

Existing dairy farmers face a situation where non-active dairy farmers, merely by taking their single farm payment, could end up better off than those actively farming. New entrants without a decoupled payment will find themselves in a situation where it will not be viable for them to enter the dairy sector. When the current differential between those leaving the dairy sector and those new entrants coming in is taken into consideration, there is a massive fall off in the number of active dairy farmers and it could lead in future to regional quotas not being filled.

It is imperative action is taken at European level to ensure there is an adequate EU budget for the dairy sector and that it is maintained at market levels which will sustain dairy farming into the future. Dairy product prices cannot be allowed to fall to intervention prices as set out by the mid-term review. We need urgent sustainable market prices to be put in place for dairy products to ensure there is an adequate return on the huge investment which many dairy farmers have put into dairy production.

Since January of last year, there has been an 88% cut in supports for casein and a 77% cut in supports for skimmed milk powder. Unless immediate action is taken at European level, the Commission will keep the budgets at this level and will not support these products going forward. It is important we have a price equivalent to the Irish Dairy Board of 31 cent. That is set as the baseline going forward in regard to supports for the dairy sector. The debate between the UK and the EU in regard to budget rebates should not be used to fudge this issue and reopen the negotiations on CAP. Agreement has been reached and it must be maintained and the 31 cent level must be our target going forward.

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