Dáil debates

Wednesday, 4 March 2015

5:15 pm

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent) | Oireachtas source

I welcome the opportunity to contribute to this debate this evening. As I do not have a background in farming, Members will have to pardon my ignorance on some matters.

Only last year at the agriculture committee and in the House there was much discussion about how positive the end of the milk quotas would be in 2015. There was going to be no downside, only an upside for the dairy sector. Several weeks before the end of the year, however, the commodity price for milk collapsed on international markets and, next, we were overrun with doom and gloom, crises and predictions that 2015 will be a bad year for farmers. It shows the vagaries of the market and how prices can fluctuate. This will be a feature of the dairy sector for the next several years.

There are some positives in this change which are to be welcomed on a national basis. However, I come from Killybegs, a fishing port. In the 1970s, there were up to 90 boats fishing from there. Today, there are only 25, mainly due to rationalisation and increased capacity. I know more ex-fishermen than fishermen in Killybegs now. Will this be a feature of the dairy sector over the next several years? Of the 18,000 dairy farmers, 6,000 produce 60% of the milk. I cannot see any other way but that there will have to be some rationalisation in the sector. Some farmers will, through no fault of their own, end up being squeezed out, as will others through their inability to significantly increase production and maximise their income. While preparing for the positives to the end of the milk quotas, we should also be preparing for this development. The Minister outlined the significant investments in the sector planned to take place in the south to gear up for this increase in production. At the same time, we will see a change in the farming and dairy sectors where some farmers will have to move out and farms will have to increase in size and capacity to be able to avail of extra production.

Prices too will settle out at a lower rate than they have been over the past several years. Quotas are ending right across Europe. In every other European country, dairy farmers are gearing up to increase production and to capitalise on the ending of quotas. This will bring on pressures on price. It was outlined that we are at an advantage in this regard because of our predominantly grass-based production which helps keep costs down. Several weeks ago the Positive Farmers group made a presentation to the agriculture committee on how farmers could maintain and increase their margins positively by becoming more grass rich in terms of production.

I always understood that our agricultural sector was already very grass rich and that was one of its big selling points. I am wondering how much more capacity there is to improve on that for the dairy sector. Perhaps the Minister could expand a wee bit on this in his response. In order to be able to maintain incomes and avail of the benefits of increased production, farmers have to be able to increase the amount of grass they are using in production while keeping their input costs lower. I do not want to see a situation where farmers have to endlessly increase production just to stand still and that is a real risk following the end of the quota regime.

We recently visited the agricultural committee in Stormont and heard a presentation on the dairy sector in the Six Counties. It effectively has not had quotas for the last twenty years. Because the UK did not use up its full quota, there was extra quota available for Six Counties farmers. They increased production to take up that slack and are suffering from very severe price pressures and input costs. I saw comparisons whereby the cost of feed was over €1,000 per hectare in the North and about €260 per hectare here in the South. That leads me to think that we already have very grass-rich production, and I wonder how much more can be squeezed out of increasing production in that way.

Inevitably, there will have to be rationalisation within the sector. The tradition we have in our dairy sector of the small family farm providing an income for a family will change, although I do not know by how much, and that presents challenges. Progress always brings change, as does increasing production and production methods. We have to try to minimise those changes and if the big selling point for our dairy sector is that it is based on green, grass-led production, how does that marry with the rationalisation that will take place? There could be in the region of a couple of thousand farmers who would end up out of dairy production and possibly out of farming completely. There will be other opportunities for other jobs in the rural sector because of the investments that are taking place but it is something that will have to be managed and will lead to change across rural Ireland.

The Minister has been fairly active in terms of things the Government can do, and the dairy forum will help to smooth out some of those problems. Taxation measures have been brought in and increasing the five-year averaging, which allows farmers to ease out their taxation bill, will help them to compete. I would be worried about how we are pressing the banks to be flexible. If we are relying on the banks we are in big trouble. The experience people have of banks across the country is not that they are there to serve the interests of those who are in debt. The banks have always looked favourably on lending to farmers because they have assets that can be leveraged against debt. When those assets come under pressure we will really see what faith the banks have in the sector. I hope it will work out okay but we cannot set too much store in the banks to look after people.

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