Martin Ferris (Kerry North-West Limerick, Sinn Fein) | Oireachtas source

The Minister was right when he stated at the outset that we are living in exciting times. The abolition of milk quotas on 31 March no doubt will be a major change for Irish dairy farmers. While we in Sinn Féin do not call for their retention and realise this is a decision that comes, like many others, from Brussels, we are concerned by the many consequences of this development. It is forecast that there will be a massive increase in production and this could herald a drop in prices. I do not refer to an increase in production in Ireland alone but right across Europe, which could have detrimental effects if it affects the price the farmers are getting. It stands to reason that an increase in production would do this and it could leave more vulnerable those who operate on a more modest level such as the small family farmers with small dairy herds mentioned by the Minister. Where the profit margin is small, a drop in prices could endanger the livelihoods of small farmers. The Department and the advisory bodies have advised farmers to invest and prepare for the abolition of the quota and, as the Joint Committee on Agriculture, Food and the Marine heard recently, banks are really up for making money available for this purpose. It was interesting to hear the Minister state that at present, approximately 23% of the value of bank loans is going into capital investment to prepare for the abolition of the milk quota. As the Minister also mentioned, much of that is based on a business plan worked out in advance. Obviously, to secure one's business plan, one will be operating on the assumption that one's production will be profitable. However, there is no absolute guarantee in this regard.

That brings me to the European Milk Board, EMB, which represents producers across the European Union and which includes the Irish Creamery Milk Suppliers Association, ICMSA, among its members. The EMB is so concerned about the consequences of a drop in price that it is lobbying hard for a cut in production to be imposed across the European Union. It states that supply will be obliged to adjust to demand in circumstances in which EU farmers will be obliged to deal with higher production and to compete with cheaper imports from outside the EU. The EMB goes so far as to propose protectionism for dairy farmers and I seek the Minister's views on that proposal when he responds. The European Milk Board has produced a market responsibility programme, which is designed to deal with impending crises and, all going well, to offset any crisis. It would start by implementing accurate monitoring of production, prices and production costs. The plan is to apply the programme in three phases, the first being an early warning mechanism that would kick in were the price to fall by 7.5%. According to the EMB, what would happen is that private storage would be opened and incentives for extra consumption would be introduced, such as suckler production and milk-fattening of heifers. This would continue until the market index returned to 100. There are many positives to this mechanism but part of it would entail ascertaining how it would work structurally. Only if that failed and were the market index to fall by 15% would the next phase be introduced. That would roll out restraint of supply by giving bonuses for reducing production, levying over-production and, of course, a defined reference period. The third phase suggested by the EMB would mean that production would have to be obligatorily cut back by 2% or 3% for a period, which they suggested could be of six months.

These proposals deserve proper consideration. The Minister has stated his intention to set up a structured dairy forum and I imagine those suggestions which were within its domain would form part of its deliberations because the last thing one wishes to see is overproduction and a cut in prices that again would make the weaker family-farmer producer far more vulnerable. There may be other suggestions and perhaps these proposals need some fine tuning but the Minister should raise these suggestions in Brussels and not allow this risky situation to continue.

All Members realise there are farmers who may not survive the abolition of quotas. In addition, there are larger farmers who, on foot of problems with the superlevy or from previous borrowing, may be heavily in debt. While they may be trying to prepare for what some quarters suggest will be a bonanza, they may be unable to realise the capital borrowing that would be necessary to make them as productive as they could be. The dairy sector is the largest of our food and drink sectors. It is worth approximately €3 billion per year to this economy and is far too valuable to be allowed to swing at the whim of the market into a boom-bust cycle. While I can accept that quotas could not go on forever, at the same time their abolition must be heralded with caution and precaution. The first possibility after this month is an massive increase in production with a consequential drop in prices, leaving those who operate on a more modest level, such as small farmers with small dairy herds, more vulnerable than those who can afford to expand their herds and get credit from the banks to so do. Smaller family farmers are far more vulnerable to the price margins. They are fine when there is a price margin and a credible profit to keep their viability sustained. However, when the margin goes below that, it creates many risks.

Getting credit has its own risks and there are many who already have borrowed to expand their enterprise and increase their production without having any guarantee about how the industry will develop in the near future. The Minister made the point that banks have indicated their intention to look favourably on the sector for borrowing for capital investment. Some farmers think they may get rich quickly but they could go broke equally as quickly. Members should consider the huge disparities in income that were evident one and two years ago. In addition, I recall the projections made by Teagasc in the fall of last year, which suggested farmers might be getting a price as low as 27 cent per litre. While that projection sent shock-waves, Teagasc has revised its position subsequently.

It is the job of the Government to take some control of this situation and it cannot be allowed to turn into another disaster for Irish farmers. Projections under Food Harvest 2020 indicate that Irish milk production could increase by up to 50% in five years. However, a recent Bank of Ireland report suggested it might be 30%. Whatever the projections, it is clear there will be an expansion in production over the next five years, depending on how everything goes. I have mentioned the superlevy and the concerns it will cause to those who will be obliged to pay it. Some people who may be obliged to meet their superlevy penalty also may be attempting to borrow to improve their enterprises and therefore will find themselves in a precarious position. There already have been appeals by the Irish Dairy Board to the Minister to talk to the EU about getting this superlevy reduced, if not abandoned. In his opening remarks, the Minister stated it cannot be abandoned and that he will not be allowed to so do. I would not give up on that because its imposition will inhibit investment for some. A crisis could result with the combination of the superlevy imposition and the uncertainty about prices in the short term, coupled with the borrowings of those who have tried to rise to the occasion and expand.

While dairying is the most valuable of the food sectors, worth more than €3 billion per annum, there also is concern that the biggest and most valuable market, China, to which the Minister has brought several delegations, is not yet secured for Irish farmers. In this regard, given the access afforded to New Zealand and so forth, one would be competing with them, which could create its own difficulties.

The value of exports has increased by 8% by the weakening of the euro. It is likely to take some time before producers feels the trickle-down effect of this, however. Sinn Féin believes a price structure should be put in place to protect the most vulnerable in the sector.

The processors too have a role. They cannot be allowed to call the shots without any intervention from the Minister. Many of the processors were once co-operatives owned by the farmers but are now plcs. A stable contractual price with the producers would be desirable, if not even essential, for the abolition of quotas not to create chaos in the sector. The introduction of a guaranteed minimum price for production up to a certain level with the rest going by market trends might be an option. There could be a 50-50 split on this to afford some guarantee to farmers facing into this new scenario. Some processors have indicated they might look favourably at such an option. This is an opportunity for co-operatives to negotiate with farmers on a fixed-price structure which would be a welcome move.

An essential feature of all this will be planning and caution for what is going to happen. There could be a tsunami of milk coming our way. We must ensure the small farmers who have played their part in building a fine reputation for Irish dairy produce abroad do not drown in it. We are hopeful that new markets in Asia will open up to Irish dairy produce, boosting the milk producers of this island.

We are hopeful too the opportunity will be taken by the Government and the dairy processing industry to create more jobs here at home. The Minister indicated 10,000 jobs could be created out of the increase in the milk quota. If handled properly in a structured way, with precautions to protect the producer, this could very well be the case. Those co-operatives which have become multinational operations should be encouraged to look to their own country for labour, as well as developing and expanding their operations here rather than going abroad to set up factories. It is well-known, as well as saddening, that many of the plcs are chasing cheap labour. The end of quotas should bring new prosperity to those in rural areas, including to those not directly involved in agriculture. These are people who have often been forgotten and who are the most likely to have to emigrate. We all know the stories of small towns and villages hard-pressed to field a football team. It is an old story but a new one too. Many of those in the Skype generation want to come home. The end of milk quotas, along with a bit of patriotism and encouragement to the large indigenous dairy companies, could result in healthy job creation in rural areas.

Jobs in the processing and manufacturing of dairy produce are all under our own control, as well as the raw materials involved, the skills and the expertise. They should not be jobs here today and gone tomorrow because of cheaper labour somewhere else. Real industrial development in Ireland will begin with the agrifood sector. The forthcoming increase in milk production could be the start of a new focus on the sector which will bring benefit to all our people. It has to be structured with incentives in place. Above all, we have to keep as many of our 18,000 milk suppliers active. To allow otherwise would be to fail and contribute to the decline of our rural population with the social consequences associated with that.

While I give this development a cautious welcome, I have concerns around the weaker and smaller family farm. The Minister stated 6% of our dairy milk producers are under 35 years of age, an alarming statistic. Incentives such as the early retirement scheme for farmers, installation aid and so forth tried to address that terrible age imbalance in the wider farming communities. We need to look again at how we can encourage younger people to be more active in farming. I am aware from presentations from the Minister that the agricultural colleges cannot cope with the large number of entrants, which is good news. The possibility of exciting times for the sector lie ahead. Sinn Féin wants to see this working to the advantage of the greater common good. In that light, we will be giving our support to the Minister’s endeavours to ensure a positive outcome for the dairy sector which every Member wants.

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