Brendan Smith (Cavan-Monaghan, Fianna Fail)

The EU Common Agricultural Policy provides a range of measures that can be used to assist the dairy market. In the health check negotiations last year there was pressure to remove or weaken these considerably. At the time I fought hard to keep the key market instruments in place and these are now being used to help support the market.

Dairy farmers' incomes are made up of the market price paid for milk and direct income support from the EU. Supply and demand have a major bearing on the price paid for milk. World market prices determine the returns received by dairy processors and this is reflected in the price paid to farmers. Export refunds and internal subsidies were suspended by the EU in 2007 as prices were at exceptionally high levels. As the market situation deteriorated towards the end of 2008, I called on the Commissioner to reintroduce support measures to help stabilise markets. The Commission initially responded last November by bringing forward the operation of the private storage scheme for butter.

In January, the Commissioner announced the reintroduction of refunds to support the export of dairy products outside the EU. This was an important step and signalled an intention by the Commission to put a floor under the market. In March, the intervention schemes for butter and skimmed milk powder were opened, thus allowing the purchase of product up to set limits at a fixed price. At that time I met with the Commissioner to discuss the market situation and stressed the importance of continuing to accept butter and skimmed milk powder into intervention at levels close to the intervention purchase price. I am pleased that the Commission has continued to buy butter and skimmed milk powder into intervention at prices close to the fixed price. I also called for the continued use of export refunds at viable levels to move significant quantities of product from the EU.

I raised this issue with my colleagues at the Council of Agriculture Ministers in April. I drew attention to the serious difficulties on the milk market where the severe slump in demand has led to a dramatic fall in milk prices. I urged the Commission to continue using the existing measures to support the market and to consider introducing additional methods where appropriate. Milk will feature on the agenda of the Agriculture Council next Monday and I will once again reiterate my views to the Commission and to the Council of Ministers.

The EU Commission's actions in utilising available support measures have helped to stabilise the market. However, as the milk price is greatly influenced by the forces of supply and demand, support schemes have a limited effect on milk prices. The short-term outlook for the dairy sector remains uncertain and I continue to monitor closely the Commission's management of the dairy market. In this regard I will again discuss the matter next week with my colleagues in the Agriculture and Fisheries Council.

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