Michael Moynihan (Cork North West, Fianna Fail)

I welcome the opportunity to speak on the motion before the House this evening. At the outset, I compliment the Minister, Deputy Coughlan, and Ministers of State, Deputies Browne and Smith, for the excellent work they are doing in the Department and indeed, the Chairman of the Joint Committee on Agriculture and Food, Deputy Johnny Brady, for the work he is doing in steering agriculture.

In the few minutes available, I would like to discuss, under the auspices of the motion, the future of the dairy industry at a time of extreme challenges internally and externally. We are all aware of the growing pressures to complete the new WTO trade negotiations in December. The EU is being faced with unacceptable demands from other international partners in the world trade talks, where Europe is expected to make concessions that others appear reluctant to match.

The Commission is a negotiating body for the purpose of the world trade talks. Its handling of the negotiations so far has not been as self-assured as I would like. Too many concessions have been made which have not been matched by other groups and there is a danger that a deal may not be secured. The risks in such an approach have been pointed out to the Commission and again today in Luxembourg the Minister and her Council colleagues have once more put pressure on the EU.

Our concerns are reasonable. We face challenges in the dairy sector from both the internal market and external world markets. An agreement at WTO level, however, that fails to recognise the importance of agriculture to the EU will neither command the support of the Union nor enhance the capacity or our dairy industry to develop internationally.

Developing internationally is crucial for the Irish dairy sector because of the enormous export surpluses we produce in dairy products. We have proven our capacity to stand with the best in doing so and coped with enormous changes. When the Luxembourg agreement on the reform of the Common Agricultural Policy was settled, we understood clearly that it would form the basis of agricultural policy for the foreseeable future. No further elements of reform would be conceived as part of the world trade negotiations. That remains the Minister's position. Having come through periods of adjustments in internal market supports and export refunds, necessitated by the Luxembourg agreement, the Minister is not prepared to allow Ireland's competitiveness to become further eroded by unilateral trade concessions that expose us to unfair and unjust competition while limiting export opportunities.

We face challenges on the dairy side in the WTO negotiations. We have already faced similar challenges during the past year when the Minister continued to criticise the Commission's handling of the sensitive dairy market management and won support from a number of other concerned member states with which she had bilateral agreements. Decisions taken at EU level were causing severe pressure on the ability of the dairy sector to compete on international markets. The Minister told the Commission that the reductions made on subsidies represent a far too aggressive market management approach and that what the industry needed most was a period of stability. Since then there has been a sustained period of stability that has enabled the industry to continue sales contracts and set raw material prices within a stable, economic and commercial environment. While aids and subsidies at European Union level are essential to competitiveness on world markets, internal competitiveness is the key for Ireland and the area we directly influence. Internal structural difficulties in our domestic dairy sector must be addressed to remove the factors which inhibit growth and development. These matters need to be addressed in a more direct manner at both primary and secondary level in terms of matching product mix with emerging market and consumer demands. At farm level we must consider increasing the scale of operations, reducing costs where possible and providing a profitable future in the sector for the next generation of dairy farmers.

Although the quota regime has been extended until 2014-15, it is imperative, now more than ever, to assist those who wish to expand their operations within the new environment. The Minister has taken a series of initiatives in this area. In announcing the new milk quota restructuring scheme this year, she deliberately set about framing a two-year restructuring programme providing a fixed price for the purchase and sale of quota. The price will be progressively reduced each year, thus allowing dairy farmers to plan ahead with greater certainty and enable the restructuring programme to operate more efficiently, having regard to the need for more competitive milk production.

The Minister also changed the regulations to enable the transfer of quota within families without the need to transfer the associated lands. This facility will consolidate dairy enterprises within families and protect the single payment entitlement of family members exiting the dairy sector. It must be welcomed given that the main difficulty in trying to ensure young people enter and remain in the dairy sector is the requirement that a farm is capable of supporting two families. This measure and the rules governing the new entrant-parent milk production partnerships have also been modified to allow large producers to establish such arrangements. This will encourage more young, trained farmers to commit themselves to dairy farming and 350 partnerships are already in place.

In changing the flexi-milk schemes, the Minister set about providing for much more equal distribution of quota between over-quota suppliers in 2005 and 2006. The availability of quota in each co-operative will be allocated according to two categories, namely, those above and those below the 350,000 litre category. Some 90% will be allocated to the over-quota category 1 producers — those producing fewer than 350,000 litres — with the balance allocated to category 2 over-quota producers, although the latter will not be allowed to exceed the allocation to category 1. These changes were made to give further recognition to active and committed dairy farmers who manage their production efficiently, having regard to the available quota. Producers who have continually relied on the annual flexi-milk allocation to offset regular patterns of over-production will have to consider other methods, such as restructuring and temporary leasing, and show greater prudence in their production decisions.

Greater rationalisation is always necessary at processing level. I am not convinced, however, that complete rationalisation is necessary in the dairy sector. A report published in 1989 indicated that Ireland required just three milk processing units. In the years thereafter, co-operatives continued to operate because they were controlled and owned by farmers as shareholders. Figures show that smaller co-operatives which refused to take the rationalisation route paid the best prices to farmers this year. Carberry and Newmarket co-operatives, the two processors which paid the highest prices, have demonstrated that small units can be competitive and cost-efficient. We should not throw out the baby with the bathwater but instead examine all issues before opting for rationalisation.

I make these points to highlight the strength of the dairy industry and ensure its viability is maintained. It faces an uphill battle on some issues. Nevertheless, the Minister and her team in the Department are looking after the best interests of agriculture. I wish them well.

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