Shane McEntee (Meath East, Fine Gael)

I thank the Deputy for raising this issue at the right time of the year, the beginning of the quota year. We know that if it were not for the price of fattened cows and the prices secured for the export of cows to England that young farmers in particular would have been badly affected. They were encouraged by dairies and others in the industry to enter the industry and then they were abandoned when got into a super levy situation. We all have to join forces to ensure something is done about it.

The decision to abolish milk quotas with effect from 1 April 2015 was made in the context of the CAP Health Check in 2008. Ireland strongly supported their abolition on the basis that quotas were widely regarded by both the Irish dairy sector and market analysts as a brake on the potential of the Irish dairy sector to respond positively to market opportunities. In addition to bringing an end to the quota regime, the health check also provided for a soft landing towards the post-quota situation, with an expansion in annual production allocations through five 1% annual quota increases and an adjustment in butterfat content calculations, the results of which mean an overall increase of about 9.3% in the 2014 national quota allocation compared to that of 2007.

Strong market prices over the past year and the prospect of a quota-free environment post-2015 have meant that remaining within quota has been a challenge for farmers who are preparing for the new regime. This combination of factors has resulted in high milk production levels in particular during the past month and Ireland is likely to incur a super levy fine for the first time since the 2007-08 milk quota year. The precise level of the oversupply has not yet been established but the Department expects to be in a position to publish an estimate shortly. The levy is 28.6 cent per litre over quota and hopefully it might be around half of the figure the Deputy mentioned. Ultimately, responsibility for the management of milk quota rests firmly with milk producers whose responsibility it is to ensure that the enterprise produces within quota. It is on the basis of this clear understanding that the milk quota regime has operated since its establishment in 1984.

Since entering office, my colleague, the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, has been working hard at EU level to seek additional flexibility in the milk quota regime to allow Irish farmers to respond to the increased demands without incurring super levy fines. To that end he discussed the matter extensively last year with other EU agriculture Ministers, both bilaterally and at the Council of Ministers, and with the Commissioner. Furthermore, officials from the Department have raised and continue to raise this issue at every available opportunity at appropriate EU level meetings, and at bilateral meetings with other member states.

Among the options discussed in regard to a soft landing are to have the front-loading of the remaining quota increases, a reduction in the super levy, a further reduction in butterfat correction levels, or a kind of EU flexi-milk arrangement which the Deputy mentioned, which would operate provided EU production overall was within quota.

Most attention has been focused on the butterfat correction, primarily on the basis of administrative and procedural simplicity, which has the potential to increase the quota available to Ireland by approximately 2%. A coalition of member states involving Ireland, Denmark, the Netherlands, Belgium and Cyprus formally put a specific proposal to the Special Committee on Agriculture for an adjustment to the butterfat correction mechanism. Unfortunately, the Commission has consistently resisted attempts to reconsider this issue, as it has resisted attempts to revisit the outcome of the 2008 CAP Health Check agreement in an overall sense. This is a view which is supported by many member states, who are firmly opposed to any further adjustment to the health check agreement.

It is also the case that only a minority of member states are likely to be adversely affected by the current quota restrictions. Therefore persuading a qualified majority to agree to an adjustment of the current regime, which was itself agreed after a protracted and difficult negotiation, represents a significant challenge. There are currently no signs of a breakthrough and it is critically important that milk producers have realistic expectations in this regard.

Consequently the Minister and his Department have consistently advised Irish dairy farmers to continue to operate on the assumption that no further changes will be made to the milk quota arrangements agreed in the context of the CAP Health Check. This is extremely important and I cannot emphasise strongly enough that farmers must continue to make this assumption in arranging their affairs in 2012.

During the health check process the Commission undertook to carry out market reviews before December 2010 and December 2012 to further consider the conditions for the smooth phasing out of milk quotas. The 2010 review concluded that there was no reason to revisit the health check decisions with regard to the gradual increase in quotas. This is not a view with which either the Minister or I concur, and it is intended to keep this issue high on the agenda, to ensure that the change in the milk market situation, both within the EU and globally in the intervening two years, and this year's events which will result in farmers from a number of member states suffering super levy fines, are fully taken into account by the Commission.

Exports of dairy products in 2011 were valued at €2.66 billion, an increase of 17% on the previous year. Ireland already has access to markets worldwide and exports dairy products to more than 80 countries. My ministerial colleague, Deputy Simon Coveney, has been extremely active in increasing the profile of Irish dairy products in international markets in order to ensure there are profitable outlets for the increased production after 2015. He is at present leading a trade delegation to China and dairy features significantly on the agenda.

While there has been some moderation in dairy prices globally in recent times, the medium and long-term prospects for the sector are strong, and I am confident that with the abolition of quotas, the Irish dairy sector can position itself to take advantage of the increases in global population and demand over the next ten years. I can assure the Deputy that the Department of Agriculture, Food and the Marine and its agencies will continue to play their part in providing an appropriate framework to support the development of this critically important industry, and that the Minister will continue to press at EU level for a further adjustment to the milk quota regime in order to ease the transition to the post quota-situation for Irish farmers.

It is important in the next six months that everybody concerned, including the Deputy who is totally committed to agriculture, continues to raise this matter on a daily basis. We have a responsibility to do this and to get other member states to support us because many dairy farmers, particularly young dairy farmers, need that help.

See this speech in context