Willie Penrose (Longford-Westmeath, Labour) | Oireachtas source

I join colleagues in offering my sympathy to the families of everyone injured and bereaved in the horrendous acts of terrorism in Brussels this morning. I hope the perpetrators are brought to justice as quickly as possible.

As far back as we can go in our history, this country has been a farming nation. It has a very proud tradition of people making a living from the land, of families continuing the work of their parents and of a rich rural community based on the vital work of farmers. Action on agriculture has been a consistent feature of our economy, and the Labour Party wants to ensure it stays this way. Many challenges face our farmers and producers. Global forces demand change from us all, whether we have a volatile global market place, the need to tackle climate change or simply the demographic pressures which are changing how our society works. Irish people are emerging from a long and difficult downturn, and every group has made real sacrifices to get to this point.

An issue which has been very important for farming is volatility in the milk market and the outlook for same. Volatility has increased in the dairy sector for various reasons. Generally it is a question of mismanagement between supply and demand, but other factors are at play. Dairy and food in general are unusual because minor changes in supply and demand, scarcity or oversupply can lead to major changes in price. The reason for this is the time lag involved, which is generally one to three years, unlike other industries which can be changed overnight and turned off.

Since 2007, the frequency and magnitude of change has increased quite dramatically. There are a number of reasons for this volatility. We have moved from a regulated dairy market to a free market with very little product subsidisation and no refunds. Intervention, at 21 cent, is well below market levels, with the cost of production at 27 cent, and this will be a huge shock. Weather shocks are also having a major impact. A further complication in the Irish context is the seasonality or grass-based nature of our milk production. We have a peak to trough ratio of 7:1 whereas the rest of Europe is quite flat. Somebody pointed out to us one time that if 75% of milk is produced over a short period, perhaps 50% of the year, and the market is very firm, much of the milk will be bought at that price, but if the market is very weak, it compounds the volatility. The flat curve which occurs in the rest of Europe almost has a natural hedge built into it. An issue is that European production has been very strong. EU milk production increased by 4.5% in 2014 and 1.6% in 2015. This is a 6.1% cumulative increase in two years. We must remember that Europe is seven times the size of New Zealand when it comes to milk output, so what happens in Europe is key.

There are also a number of issues on the demand side. The Russian ban has had a huge impact on EU exports, especially cheese. Russia imported approximately 30% of EU cheese and butter, or 240,000 tonnes per annum. This is huge and accounted for 15% of EU exports. The second big demand player was China. In 2014, when it imported a large volume of powder, the equivalent to an additional 2.2 billion litres of milk over 2013, everyone thought it was genuine demand, but it was not. Approximately 1.5 billion litres had to be taken out because of foot and mouth disease, poor weather conditions and stricter farm regulations. Since 2014, this has been corrected and domestic supply has recovered. Imports in 2015 reflected this. A number of issues have affected where we are in the milk trade in terms of the world market, and we must be cognisant of this.

What is very important, but very unusual in terms of milk, is that overall Europe exports approximately 10% of its milk but closer to 40% of Ireland's volume is exported outside Europe, so there is a high dependency outside Europe and these are the markets that we will grow and focus on from now on. Daily consumption, especially of butterfat, is increasing in the US. That is a bit of positive news. Ten years ago, butter was the villain in respect of health but now it is seen positively, which shows how things can change.

I notice what has happened with Commissioner Hogan. States are now being allowed to subsidise agriculture which will put a significant strain on us. It is an important deviation from the Common Agricultural Policy, CAP, that we are now moving to state-backed subsidisation, which would mean that very wealthy states are in a position to do that as opposed to Europe taking the role itself. That may be the first step to something that may come back to haunt us, so we have to be very careful. What we wish for might happen.

I wish to talk about beef, which is a very important, but first I will discuss an issue regarding the failure to meet commitments agreed on for farmers in the farmers' charter in respect of no-notice inspections and so on. It is time interest was payable to farmers for the failure of the Department to make timely payments because that applies for small businesses and so on. There must be tolerance regarding cross-compliance. We cannot have huge penalties for small inadvertent breaches. One of the things I noticed in terms of the Bord Bia quality assurance scheme was that trivial reasons were cited. I know it is being reviewed but a bit of common sense must be introduced and farmers must be given time to address minor omissions or failures rather than being locked out for three months. Approximately 7% of those who failed beef quality assurance did so because of record-keeping issues. Farmers used to get a month to correct the oversight in cases of non-compliance and the same should apply for the revised beef scheme. That can lead to a loss of 12 cent on cattle, so it is extremely important.

The mid-term review of CAP will offer opportunities to build and expand some of the existing schemes. We certainly need a new scheme for sheep. If I do not mention this, Eunan Bannon will give out to me. The €20 was agreed many years ago by a committee chaired by Deputy Bobby Aylward's brother, Liam. That €20 has been hanging around since being recommended by a cross-party committee. It is about time that Europe stepped up to the plate and honoured the commitment that was given many years ago in this regard. It is extremely important.

In regard to beef, Ireland's livestock sector plays a key role in the national economy and there are more than 100,000 farmers involved in cattle production. From a supply base of more than 1 million sucklers and 1.3 million dairy cows, the industry produces more than 550,000 tonnes of beef annually, of which almost 90% is exported, so there is a 9:1 ratio of export to domestic consumption. As a result, Ireland is the largest net exporter of beef in the northern hemisphere and the fourth largest in the world. Irish beef exports exceeded 500,000 tonnes last year and according to Bord Bia, it is valued at €2.4 billion. Following a difficult back end for cattle prices, market conditions since the beginning of 2016 have been poor. That can happen for various reasons, such as changes in consumer preferences and patterns of purchasing behaviour. Recent analysis of the Department's agriculture and animal identification and movement database suggests that during the first half of 2016, prime cattle availability will be the same as 2015 but recovery of supplies will materialise in the latter half. We will have approximately 60,000 to 80,000 additional head of cattle for slaughter and the impact that will have on the price must be factored in. It should be noted that the European cow herd has increased by 0.5 million cows since 2012; there are now 32 million cows right across the European economy. We have to be very cautious in that regard.

We have Bord Bia's quality assurance scheme but I cannot but note - I am not a bit surprised at the recent statement from the Irish Co-operative Organisation Society ICOS - that the beef grid as currently constituted is anti-trade and urgently needs to be reviewed. The beef forum discussions have clearly failed to address this and it is a long-standing and thorny issue - the quality payment system, where penalties are significant at farm level, losing up to €75 or €80 per head, with a strict 420 kg carcass weight limit. It is clear there are issues with weight limits and age and quality assurance restrictions. The 70-day pre-slaughter movement restriction can impact on price achieved and the 12 cent bonus can be wiped out. I know from where I come that it is clear that the vast majority of cattle from the suckler cow herd would exceed the 420 kg carcass weight limit and it would be impossible to achieve this restriction on a grass-based system. We will end up losing the competitive advantage we have always enjoyed through grass-based production. We have now arrived at a situation where, as Edmund Phelan from the ICSA said recently, the weight limit of 420 kg hits hardest on the better U-grade carcasses, with a bonus of up to 20 cent per kilogram being lost. One was of the view that the quality payments system, QPS, rewarded quality. It is time the beef forum facilitated a full review. The Minister should ensure Teagasc has a significant input into that. We need a full and thorough independent investigation of the type and level of competition across the sector and to continue the availability of markets for live exports. There is an important role in sustaining competition. I know the Minister has fought hard to get the north African markets open and like us, all beef imports must meet the same safety, traceability, animal health and welfare and environmental standards as applies to all beef produced within the EU. There can be no concession for any trading bloc in this area; we are entitled to the same standards that apply everywhere else.

We have looked at the disproportionate power of the retail corporations and it is of major concern. We need legislation at EU level to curb the power of the multiple retailers and corporations in order to improve the lot of primary producers, so they can get a fair return from the marketplace. We need to ban below-cost selling of food produced by farmers. I believe it is going on this week, with carrots and so on. How can we expect farmers to continue to survive in a climate that is undermining their efforts and why should they be expected to survive in markets where there is obviously a distortion of that nature?

See this speech in context