Brendan Smith (Cavan-Monaghan, Fianna Fail)

Dairy farmers' incomes comprise the market price paid for milk and direct income support from the EU. Market forces have a significant and increasing influence on the price paid for milk. World market prices determine the returns received by dairy processors and these in turn are reflected in the price paid to farmers. In essence, farm gate prices normally reflect the returns from dairy product sales in international markets. Dairy product prices reached record high levels in 2007 and early 2008, and producer prices also peaked at that time. Since then, international prices have fallen back considerably, although the average Irish producer price for 2008 was similar to the 2007 price. The indications are that markets will remain weak in the first half of 2009.

I made it clear to Commissioner Fischer Boel that a range of supports would help to restore confidence and put a floor under market prices. The Commission initially responded by commencing the 2009 butter private storage scheme two months early. Subsequently, on 15 January, the Commissioner announced further measures to assist the dairy sector, which included a commitment under the intervention system to purchase more than the fixed quantities of butter — 30,000 tonnes — and skimmed milk powder — 109,000 tonnes — if the market situation requires it. In addition, she announced the reintroduction of export refunds for butter, milk powders and cheese, and these were reinstated at the milk management committee meeting on 22 January.

Irish operators can now avail of these refunds and my Department will continue to examine the position and urge the Commission to set the refunds at an appropriate level to support the dairy sector. During the health check negotiations, I argued strongly in favour of keeping critical market instruments in place and using them effectively. These support measures can now be used to respond to price volatility in the current market situation and will help support the dairy sector in Ireland. While we are facing short-term uncertainty, analysis shows that the long-term outlook is bright. The main international forecasting organisations predict global growth in wealth and population in the medium term. This will present new opportunities for high-quality producers such as Ireland, and all areas of the dairy sector can expect to reap the rewards.

One of the major challenges in the medium term is to ensure that Irish farming and the agrifood sector is at the heart of an evolving high-value food market which is focused on quality and innovation. As part of this overall strategy, the Department provided funding of €140 million towards investment in dairy processing. A total of 19 capital investment projects were approved and awarded grant assistance under the fund, which will generate an estimated capital spend of €286 million at full production. In the meantime, I assure the House that I will continue to monitor developments in the dairy sector closely and intervene again with the Commissioner as the market situation evolves and in view of the particular difficulties facing the market at present.

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