John Deasy (Waterford, Fine Gael) | Oireachtas source

I appreciate the willingness to have this debate on the Irish dairy sector. It is very hard to encapsulate in ten minutes what is going on because a great deal is happening. The Minister was struggling to cover everything given the amount of information on what is going on in the industry right now.

Deputy Creed and I asked for this debate because even though an enormous shift will occur at the end of the month in our domestic dairy industry, my experience here is that when it comes to agricultural issues, they are not dismissed in any way but they tend not to inspire as much political interest as the likes of the sale of Aer Lingus, for example. That is fair enough as farming is not for every political correspondent. It is not their area of expertise but if one spends a little time looking at what is about to happen in our dairy industry and what the implications are for the entire country, people might agree this is very significant and that it requires very careful management because of the financial potential alone.

To a certain extent, the Minister probably pre-empted much of what Deputy Creed and I are going to say because he pretty much accepted the proposal for the new structure and a new forum for the dairy industry to be created. Perhaps I will give an idea as to how we arrived at that point and why we believed it was important for that to be set up. However, we appreciate the Minister's comments.

When it comes to rural Ireland, in many parts of the country, agriculture is the predominant industry. It is the only show in town and it is the mainstay of our rural economies. Over the past couple of weeks, I noticed many people writing about the demise of rural Ireland and, to a certain extent, I have seen that in Waterford also. What interests me in a county like mine, which has, by and large, 752 large dairy operations, is the enormous potential for rural Ireland if it is the case that milk production increases by 50% between now and 2020. That is an estimate but according to some of the people I met over the past few weeks that 50% figure is conservative. It depends on who one asks but that has been put to us in our meetings with different people are say it could be a much higher.

In terms of job creation, the study Cork Institute of Technology did mentioned a figure of 4,000 jobs in Cork alone, which gives one an idea of the kind of figures one is talking about when it comes to jobs.

When quotas were introduced in the early 1980s, there were a lot more dairy farmers than there are now. I listened to Deputies Tom Fleming and Pringle give the statistics. They are pretty astounding figures and the contrast between where we were back in the 1970s and 1980s and where we are now is stark. The figure was 65,000 in 1983 while it is 17,000 or 18,000 now. Deputy Pringle is right that one of the challenges, which I think is being dealt with, is to keep as many people in this business as possible. The steps are being taken and what can be done is being done but the Deputy is right when he says that keeping as many people as possible in this business is the major challenge for us. If one looks at where the figures were and where they are now, they are stark.

One of the critical factors in milk, which started to emerge in the mid-2000s with the ending of key supports from Brussels, is volatility. Suddenly with supports being withdrawn, we saw milk prices go up and down and the trend has continued. In 2009, we were back down to 19 cent per litre while a couple of years ago, we were at 40 cent per litre. We are in the high 20s now and maybe the figure will be 30 cent per litre soon.

In the discussions Deputy Creed and I had over the past few weeks, it was agreed that there will be volatility which will, and almost has to, continue. We asked how we are prepared to manage that volatility or how can we react as best we can as an industry and country in the most efficient way possible. Somebody in the IFA said to me it is about capitalising on our competitive advantage, which is correct.

When the decision to have this debate was finally taken, we decided to meet different farming groups dealing with dairy producers, including the Irish Farmers Association, processing groups and also the banks, which are critical in the post-quota era. It is fair to say the banks are ready and willing. Collectively, they have identified the Irish dairy sector as one which has incredible growth potential and are financing it accordingly. Deputy Dooley said we need to encourage the banks to lend. One cannot stop them at this point. We met AIB and Bank of Ireland and they are competing. If anything, the new forum will need to take a look at their lending practices over the next three years and keep an eye on that. There is no stopping the banks when it comes to lending as they see this as a good bet and a massively growing industry.

Critical elements for the offering of credit, such as low farm debt, are good compared to other countries. There is sufficient farm efficiency across the dairy sector to allow for expansion and the financial requirements that go with that. Notwithstanding issues such as superlevy payments, the dipping of milk prices recently and certain tax considerations, the banks made it clear to us that in their opinion, the fundamentals for a large expansion of the dairy sector are in place. To make a long story short, they are in serious competition with each other to get a piece of an expanding industry which they have analysed. Their conclusions are similar that there will be volatility but if managed correctly, the gains massively outweigh the downside.

The most productive meeting we had was with the Irish Farmers Association and I thank Elaine Farrell, Rowena Dwyer and Catherine Lascurettes, the head of the dairy section. I will mention two points from that meeting and explain why we proposed a new oversight structure for the dairy sector. I refer to the issue of fixed milk price contracts. Glanbia is the leader in this area and is opening up Belview tomorrow. In my area of the south east, 15% to 20% of Glanbia suppliers have taken up the contracts and the scheme is now its fifth year. In some respects, banks are more likely to give credit when that kind of financial underpinning is in place. However, these fixed milk price contracts are not the norm and have not worked everywhere for various reasons. They are an example of the variances that exist in the relationships between the different co-operatives and their customers. Others have expressed the view that the co-operative scene is slightly fragmented in some respects.

I also refer to the level of collaboration and information throughout the dairy sector.

The IFA is a very good example of this, working with Teagasc and the banks to hold seminars and workshops around the country. That dynamic is occurring and the elements for increased production, such as the new technology centres, have been put in place. I can be critical. I looked at this sector. I am not being critical in any respect. The Minister has done a very good job. What we are proposing and what he has accepted is just something that could assist in this.

I do not see any weaknesses so far in this strategy. We are talking about a centralised and structured oversight system for the dairy sector to manage the volatility we expect to occur, the value this industry has for rural Ireland and the potential gains we will accrue across the board. The other organisational change that leads us to believe that would be a constructive step is the sizeable number of people within the Department dealing with milk quota issues. They should be used to co-ordinate and assist in managing the growth and change in the sector. Their institutional expertise would be maximised by incorporating that kind of expertise into a structure that manages the type of volatility we expect to see, for example, in the superlevy discussions the Minister mentioned earlier. This structure could deal with the policy aspects that come up in the next five to ten years efficiently and quickly. We talked about the Minister chairing this new forum. Our idea was to have the Secretary General chair it, but that is a better idea. Our idea was to call it the dairy industry partnership, but the Minister can call it anything he wants. Our idea would be that this would evolve. Once put it in place, one of the roles of that forum would be to evolve over time as the industry changes and to react to volatility if it occurs. The idea is simple, to bring all the players in the sector together. It would meet on a quarterly basis and include all the groups from the dairy sector - co-ops, the banks, the IFA, other farmer representative groups, etc. We will have little control over the global markets, but if such a group were formalised within the sector, it would assist in managing the volatility, the unknowns and the uncertainty by identifying the changes and trends that will occur in the dairy industry in the years ahead. There will be no quangos, no new budgets, just a reorganisation of the sector to fit the completely new environment the dairy industry finds itself in.

See this speech in context