Trevor Sargent (Dublin North, Green Party)

On Tuesday night I returned from the 34th international conference of the Food and Agriculture Organisation, FAO. I am aware of the issues raised in the FAO's food outlook November 2007. The FAO forecasts high international prices for all major foods and feedstuff this year. Of particular note are the conditions on world cereal markets. Supplies are much tighter than they have been for years, as unfavourable weather conditions in some of the main cereal producing countries, reflecting the latest UN climate change report, hampered production and the low levels of stocks worldwide have not been sufficient to meet demand.

There is increasing competition for cereals to meet demand from China and other parts of Asia, as well as demand for grains used for feedstuffs and the emerging liquid biofuels industry. Other factors making an impact on international cereal prices are increased input costs due to rising petroleum and freight rates, reflecting a pending peak in oil production.

Rising output prices are a double-edged sword. Depending on the combination of factors, higher output prices could give rise to higher farm incomes in this part of the world but some of the increase will be offset by rising input costs, especially feed costs, and unfavourable exchange rate movements.

Given current market conditions, some level of food price inflation is inevitable. While consumer food price inflation in Ireland has increased, particularly in the past month, it remains below the overall rate of inflation of 4.8%. This trend of rising food prices is common across EU member states, where food price inflation has increased in recent months. Retail prices are also affected by a variety of other factors, including the cost of wages, services and other materials.

In order to help alleviate some of the market difficulties, the Council of Ministers decided in September to set the obligatory set-aside rate at zero for autumn 2007 and spring 2008 sowings. This is expected to lead to an expansion of EU grain production by at least 10 million tonnes next year.

Additional information not given on the floor of the House.

Irish cereal farmers, following the decoupling of direct payments from production, are now in a position to respond to market signals. With the cushion of the single payment, they can focus on supplying markets, concentrating on minimising production costs and maximising their incomes.

My Department continues to operate a range of services aimed at improving the efficiency, quality and viability of cereal production. These services include seed certification, seed testing, recommended lists of varieties etc. In addition, Teagasc provides comprehensive research, training and advisory services for cereal producers. The value of all these support services is reflected in the fact that Irish cereal producers have consistently achieved some of the highest yields in the world. I am satisfied that the outlook for cereal growing in Ireland is positive and that cereal producers here are well positioned to respond to the challenges ahead.

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