Tony Killeen (Clare, Fianna Fail)

Like all sectors of the economy, agriculture is facing very challenging times at present. The world recession is having an impact both on demand for agricultural products and on the cost base under which farmers are producing their goods for the market.

We have seen a severe downturn in the dairy sector which has not been helped by the international financial crisis. The Minister, Deputy Brendan Smith, recognises that dairy farmers are facing tremendous difficulties, with their prices below the cost of production and the prospects for recovery in the short term poor. Indeed, it is for this reason that the Minister has consistently urged the European Commission to make all efforts to support and stabilise the situation and to take effective measures that will stimulate the market.

There are also a number of difficulties in the sheep sector. Sheep numbers are declining, demand continues to fall in our main export market and while generic promotional campaigns have been put in place, there continues to be an uphill struggle for our producers. Our cattle sector is not immune from these difficulties either. It faces challenging times ahead with increased competition from low cost producers in third countries who will inevitably at a particular point in the future manage to meet the very high standards of production and quality required by the EU. Against this background, in the negotiations last year on the CAP health check, the Minister managed to secure access to additional EU funding to fund a suite of measures under the single payments regulation, targeted at vulnerable areas, particular sectors under pressure, improvement of animal welfare and-or agri-environment measures.

The use of unspent single payment funds is a new concept. Deputy Smith was the first Minister to raise this possibility in the context of the health check negotiations. We were delighted to have the support of most of our counterparts from other member states and the agreement of the Commission for this idea. The funds arise because the rules surrounding the single payment system mean that not all entitlements to payment can be drawn down. The amount of unspent funds available each year is based on the difference between the fixed annual ceiling for 2007 for these payments and the actual draw-down for that year, less a safety margin. The actual draw-down will vary from year to year, depending on the number of entitlements claimed. However, broadly speaking, the outcome means that Ireland will have access to approximately €25 million in additional funding in each of the next three years from 2010 to 2012, to spend on these targeted measures.

We have already secured an amount of €7 million in respect of 2009. The Minister decided some months ago that these funds should be directed at the sheep sector in the form of an uplands sheep payment. Under the scheme, approximately 14,000 hill sheep farmers will benefit from the new payment this year. On the basis of data available for 2008, the level of aid will be of the order of €35 per hectare with a maximum payment of €525 per farmer. Payments will commence on 1 December 2009.

In introducing this payment our main objective was to address the difficulties and specific costs, including compliance costs, facing the sheep sector. In reaching his decision the Minister was mindful of the need to ensure that it created no additional burden for farmers and was simple and low cost to administer. This payment, for which we sought and secured the agreement of the Commission, is for 2009 alone. In respect of 2010 and beyond, we have consulted widely with stakeholders on this matter and are well aware of their wishes. The Minister will be making his decision in the coming weeks and he will then submit Ireland's plans for use of these funds to the European Commission for approval.

These are not the only funds that will become available to Ireland over the coming years. Funds totalling €134 million will also become available over the four years from 2010 to 2013, from additional modulation agreed in the CAP health check and the rural development element of the European economic recovery package. These funds must be directed at measures addressing the new challenges of climate change, water management, bio-energy, biodiversity and diary restructuring. We are close to finalising the consultation process on the use of these funds and the Minister will be announcing his decision in due course. Our proposals for spending must also be agreed with the European Commission in a revised rural development programme we will be submitting to the Commission next month.

While I am not in a position to announce detailed funding proposals today, it is worth noting that this means EU funding of some €216 million for the Irish agriculture sector. The injection of this level of funding into the sector will have a significant positive impact on Irish farming and will assist our farmers in meeting the challenges facing them in the years ahead.

See this speech in context