Pat Deering (Carlow-Kilkenny, Fine Gael) | Oireachtas source

I am grateful for the opportunity to contribute to this debate. While I welcome the presence of Deputies Mattie McGrath and Healy-Rae, it is disappointing that, on the eve of the abolition of milk quotas, the main Opposition spokespersons and members of their parties are nowhere to be seen.

This is an exciting time for the agriculture sector, specifically the dairy industry. I welcome this topical debate, which I suggested shortly after Christmas at the Joint Committee on Agriculture, Food and the Marine. At that time, the idea of abolishing milk quotas was starting to become a reality. It is important that we engage with all the stakeholders involved, as the joint committee did when it heard from representatives of farmers organisations, Teagasc and the banks.

My family has been involved in the dairy industry for a long time and I am not afraid to tog out and milk the cows at the weekends. I remember when my father moved on from milk churns to mobile milk tanks, which has given rise to increased production. I remember my father telling me that he built his first bucket plant milking system in 1947 and this was the main modern type of plant at the time. He was also involved in the Dublin District Milk Board at an early stage and tried to galvanise farmers to come together to ensure they received a fair price.

Restrictions have been applied to milk production since 1984. Now, for the first time in 30 years, farmers have an opportunity to increase milk production. This presents major opportunities and challenges, with production set to increase by 50% in the coming years. Some weeks ago, I attended the opening of the new Glanbia facility in Belview in south County Kilkenny. The Minister of State also attended the event. Glanbia is a forward thinking company which decided to invest €200 million in a rural area. I was taken by remarks of Mr. Jim Bergin, the chief executive office of Glanbia Ingredients Ireland Limited, on the amount of money his company's investment would inject in rural areas. He noted, for example, that the increased production of 79 milk producers in the small rural area of Ballyragget, County Kilkenny, would inject an additional €10 million in the local economy in the next five years. All of us seek jobs for rural parts of our constituencies. We hear a great deal of negativity from the Opposition benches about rural areas, for example, that they are dying and no one is doing anything about it. If a factory with a projected turnover of €10 million were to locate in a rural part of any Deputy's constituency tomorrow morning, he or she would jump up and down and shout about it. It is commendable, therefore, that the agricultural industry will result in €10 million being injected into a small area. This is a worthwhile and exciting opportunity.

The dairy industry can be the driving force for the reinvigoration of rural areas. We must ensure the finance that becomes available as a result of the current opportunities is harnessed in a proper manner. With opportunities come challenges, however, and some of these will be serious and require addressing. The first challenge facing us the super levy, which has been in place for some years and generally affects the same farmers. Unfortunately, the milk quota had been exceeded by slightly more than 5% by the end of February. This is worrying for some farmers as it could result in the imposition of significant fines which would have a negative effect on production from a cashflow point of view. The recent decision to spread super levy liabilities over three years provides the soft landing that farmers had been seeking. It is an important and welcome step which will ensure the super levy does not have a significant effect on cashflow.

Another challenge facing milk producers is the role of the banks, about which all of us speak from time to time.

Deputy Mattie McGrath or Deputy Healy-Rae may have made reference to the fact that many young farmers or farmers coming from a different enterprise into the dairy industry have invested a lot of money to make themselves efficient and practical in the dairy industry. These are the people who need to be watched and nurtured over the coming years by the banks in particular. In the event of a difficult financial time arising in respect of milk, banks must be flexible in their attitude. I welcome some attitudes shown by banks at present where they are prepared to have extended the term of a loan or to have principle-only or interest-only payments for a period. Such measures must be extended and monitored over a period. While I welcome the banks' attitude in this regard, I encourage them to make sure they do not come down hard on those who are investing heavily for the future.

One of the biggest challenges will pertain to the efficiencies associated with the entire system. Twenty years ago in 1995, farmers were getting 28 cent per litre for milk while today, they are getting 32 cent per litre. In the same intervening period of 20 years, the cost of production has risen by 50%. Those who are involved in farming will be aware that in 1995, the cost of one tonne of fertiliser for grass was €155 and it now costs €330 per tonne. That is an increase of 112% over 20 years and this is where the major challenge lies, namely, the cost of inputs over that period and this must be addressed. It is something of which people must be extremely wary and it is important that the efficiencies that will be required do not push people over the line. People must be extremely conscious of this point.

In addition, the lessons people must learn are extremely important. Over the past 20 years, our competitors in New Zealand, for example, increased their milk production from five million litres per year to 20 million litres per year, which has created its own difficulties. Despite the significant increase in numbers and production, New Zealand currently is going through a difficult time and obviously, the world price is having a huge effect on its producers. The price now has fallen to a low 20 cent per litre for their milk, which is far below the cost of production and that cannot continue. They are having difficulties with animal welfare at present and despite their increased production, they have not increased the profit from their milk production, which is a serious problem and people here must be able to learn from that. As for producers in Northern Ireland, in 1996 they gained free access to milk because producers in England did not take up the same opportunity. Again, the producers there are going through a difficult time and basically for the same reason, which is they have not concentrated on the grass-based system. During the hearings held by the Joint Committee on Agriculture, Food and the Marine, its members heard a presentation from the Progressive Farmers group, which included a former editor of the Irish Farmers’ Journal, Mr. Con Hurley, and a colleague of his who had conducted a special report on both the Northern Ireland and the New Zealand experiences. On foot of the evidence they provided, it became evident that producers there have not learned the lesson that they were concentrating on high input costs the whole time, instead of on what we have best, that is, grass-based production. We must produce milk with grass-based production to make sure it is increasingly efficient as we go along.

I will make one further point on the area of liquid milk, about which not much has been said thus far. Huge costs arise for those who produce milk all year round, which are far above the prices producers currently receive. We must be careful because we are heading into a situation in which there will be no milk available to put on one's cornflakes on Christmas morning. People will be dependent on UHT milk, that is, those little cartons one gets in restaurants or hotels unless this issue is addressed. While it is not a simple issue, it must pay to produce milk in the liquid sector. This is a huge issue that must be addressed and when the Minister of State is responding to the debate he might revert to this issue.

It is important that Members are having this discussion today. It also is important to have continuous engagement throughout this year in particular when quotas will be abolished immediately after the end of March. It has been important that the Oireachtas joint committee has held its hearings. The joint committee will compile a report in the next few weeks and it will be important that this report be made available. Similarly, it is important that the debate in this Chamber today and the previous day also be made public. I also welcome how the farming organisations are beginning to row in and to hold regional meetings nationwide to inform those who have entered the system or who are expanding within the system about the challenges that exist. While these challenges are important, the opportunities also are huge. This is an exciting time in which to be involved in the dairy industry but it also is important to realise there are difficulties that must be addressed in the future.

See this speech in context