Mary Coughlan (Donegal South West, Fianna Fail)

Following a number of successful years for the Irish dairy industry on international and EU markets, 2006 is proving to be more challenging for the industry. The butter market, in particular, is under severe pressure on both the EU and international markets. Exports of dairy products, except cheese, are considerably lower than in 2005, with EU butter exports 35% less than the volumes exported during the previous GATT year.

The euro-dollar exchange rate has a significant impact on our competitiveness and the current weakness of the dollar is adding to the difficulties of EU traders. The internal butter market is also weak and butter prices in most member states are at or below intervention level. The intervention limit of 50,000 tonnes is likely to be reached within the next month after which a tendering system for intervention purchases will be introduced.

As this situation developed over recent months, I have urged the Commissioner on several occasions to use the market management tools in a more effective manner to ensure the overall stability of the milk sector. In particular, my key concern was to see the export refund regime used to maximum effect to dispose of product onto international markets outside the EU. I am pleased the Commission responded by increasing export refunds for butter and whole milk powder at the end of April and again at the last milk management committee when the tender refunds were accepted at a higher level for butter and butter oil. I have again asked the Commissioner to keep the focus for 2006 on the need to maintain the competitiveness of EU dairy exports, with particular reference to butter and to manage the introduction of the new tender arrangements for butter intervention in a manner that avoids causing further instability in the market.

I would of course emphasise that dairy farmers' incomes are not alone dependent on EU market supports although I fully appreciate the importance of internal aids and export subsidies for competitive trading conditions. Other elements impacting on farmers' incomes include direct payments, scale, efficiency and returns from the market. This year's milk price, taken together with the single payment entitlement of 3.6 cent per litre, is similar to recent years although clearly there is greater pressure on producer prices than heretofore.

Since the Luxembourg agreement of 2003 the dairy sector is operating in a new policy framework where market forces have an even greater influence on the price paid for milk. It is critical that we continue to manage the market so we maintain relative competitiveness. I will continue to focus on managing the transition to the next stage of intervention price reductions in July with the aim of maintaining and enhancing industry competitiveness and, ultimately, farm incomes.

At national level I have already announced my intention to move to a more open market system of transferring milk quotas between producers with the ultimate aim of increasing the scale and long-term efficiency of dairy production in Ireland. My Department also has a number of support schemes providing grant assistance to dairy farmers with the aim of facilitating dairy farmers to increase efficiencies and improve their facilities, thereby safeguarding their long-term farm income. These include the dairy hygiene scheme, whereby grant aid is available to assist dairy farmers in the upgrading of their dairying facilities. In addition, dairy farmers are eligible for grants under the new farm waste management scheme, while young dairy farmers are also eligible for a grant under the installation aid scheme. Collectively, these grant schemes are designed to assist farmers who wish to upgrade, modernise and increase the efficiencies of their operations.

I am confident as we complete the final phases of the 2003 Luxembourg agreement and make the necessary market adjustments intended by that agreement, instability in the dairy market will recede. In the meantime I will continue to impress upon the Commissioner the importance of maintaining a competitive market for EU dairy products.

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