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

At the outset I join colleagues in congratulating Mr. Joe Healy on his elevation to president of the Irish Farmers Association. He has a new broom and will help to restore trust in this important representative organisation. I also wish Mr. Eddie Downey well; he is a decent man who put his heart and soul into the job. He is a person of great integrity and I wish him and his family well into the future.

I also want to signal my support and that of the Labour Party for the Irish Cattle and Sheep Farmers' Association, ICSA, whose members have for too long been treated as Cinderellas and jilted bridesmaids by previous Governments. I acknowledge that the Minister brought it into the fold and I am glad he played a pivotal role in helping it achieve its deserved status in terms of equal treatment and access. I am very proud of the role it has played as a strong farming advocacy organisation, especially on behalf of the drystock farming community. I remember in the 1990s when it was a lone voice advocating its case and not too many wanted to hear it, but I persisted along with them and I am very proud of the role that Eddie Punch and all those people have played in farming representation since then.

I am glad to hear everybody talking about quotas and everything else because I was one of the people who spoke at length in the agriculture committee about the danger of having unlimited production and allowing it so quickly. It was portrayed as a panacea for Irish farmers; that is how it was presented to them. I had a view that it was extremely dangerous for farmers to proceed on this path and invest huge sums of money. Indeed, I warned the banks at the time that it was a recipe for disaster. They were predicating it on the idea that the price would take off at 27 or 28 cent and continue to rise forever. The fact that something is bigger does not mean it will be better. That means that eventually we will have fewer farmers. They will all be industrial-sized farms across the rural landscape. That is exactly what will happen. That is ultimately what results from the abolition of quotas. Milk production will be brought on by corporations, and the individual farmers and their sons and daughters, who work long hours, as Deputy Ferris has said, and who work extremely hard right through the night during calving season, will be the sacrificial lambs in the rush.

It reminded me of when I was a young agriculture student in the 1970s. I remember the clamour across the country when every Minister for agriculture had to descend from a plane and bring the goodies - six or eight pence per gallon, and so on. If the Minister did not do so, he or she was denigrated in here. There were debates in which it was said that Ministers were good for nothing and that they had failed. I remember doing a study as part of my undergraduate research. At that time - the very early 1970s - we mostly had shorthorn cows and very little else, averaging 480 gallons per cow. Every time we got an increase, of course, it was Europe-wide. The Dutch at that time were at about 720 gallons per cow and they had the benefit of cheap manioc, tapioca, maize and so on coming into the port of Rotterdam. The increased price might incentivise people and we might go up 40 gallons over a period of two years, but they actually went up by 100 gallons because they had cheap food and everything else. The more we got, the wider the differential in terms of ultimate production at the end. That is always the danger.

The danger was present with sheep as well. I remember the time when one could not go across the midlands of Ireland without seeing the whole place dotted with sheep. There were people who got into sheep who did not know them. Some of them did not know the difference between a ewe and a lamb. I warned about that at the time. Rooks come home to roost. I am always very worried about what happens in those situations, particularly for the farmers who have invested. They were warned; the likes of myself gave warnings. I have experience of it: I was an agriculture consultant for a number of years and I studied economics in agriculture as well.

I am deeply concerned about the way things are moving at this point in time. Volatility has increased in the dairy sector for various reasons, but generally it is a question of a mismatch between supply and demand. There are other factors at play. As I said before, dairy is unusual in that minor changes in supply and demand, or scarcity or oversupply, can lead to major changes in price. The reason is that the lag time in dairy is one and a half to two or three years, unlike other industries. If someone has a car business and demand falls off, it can be closed down straight away. One cannot do that in dairying - there is no tap that can simply be turned off. Since 2007, the frequency and magnitude of change has increased quite dramatically. In that period up to now, there has been a 240% sway. That is what happens: people respond. It is like the spider and the fly. We respond to what is out there. Weather shocks are having a bigger impact and we have moved from a regulated market to a free market, with little product subsidisation and very few refunds nowadays. As most Members have said, intervention is well below the price now, with some of them still paying 22 or 23 cent across the country. I urge the co-ops to be farmer-friendly at this time and release some of that money. There seems to be a lot of money swirling around, but now is the time to help people in respect of fertiliser costs and everything else.

A further complication for us is the seasonality of the grass production. We have a huge comparative advantage in our milk production, but we have a peak-to-trough ratio of 7:1, whereas the rest of Europe is quite flat. We have peaks and troughs, and that is part of the problem. If 75% of milk is produced over a short period - maybe half the year - and the market is very firm, then much of the milk is bought at that price, or if the market is very weak, it compounds the volatility, whereas the flat curve that occurs in the rest of Europe almost has a natural hedge built into it, so they will not suffer as much. We have all of that. That is why we are different and that is why the release of the quotas and unlimited production must be handled with great care.

I said here before that EU milk production was up 4.5% in 2014 and 1.6% last year. That is a cumulative increase of 6.1% and it represents a lot of milk. Why is it a lot of milk? Europe is seven times the size of the New Zealand market when it comes to milk output, so what happens in Europe is key. Everybody looks at the New Zealand market and the trade that is going on there, but the European market is a mall. On the demand side, the Russian ban has had a significant impact on EU exports, especially cheese. Russia was importing 30% of EU cheese and butter; that was 240,000 tonnes per annum, or 15% of EU exports, which was substantial. Then there was the Chinese market. In 2014, it took in about 2.2 billion litres of milk more than in 2013, and all of that collapsed. It is a funny thing.

The one thing I said here the last day was that the economic conditions in the US are improving and quantitative easing and low prices are helping to increase disposable income there and hopefully increase milk production, but dairy consumption, especially butterfat consumption, is making a recovery, which is positive news. Ten years ago, butter was the villain of the piece from a health perspective, with cholesterol and all of that, but now medical science is going the opposite way. That may be an opportunity. Ultimately, without China and Russia, demand is near 1.5% and we are increasing production by over double that. Unless we resort to intervention and so on, which I worry about - Lord save us and bless us if we get back into that. We have to try to get into niche products. The Minister is very strong on this. Niche products are the way to go to try to diversify. Of course, our baby milk powder market is bought.

Eventually, Russia's return to the process will make a significant change. The EU will ultimately have free trade with China, at least for dairy or agricultural food products, assuming a multi-sector agreement is not possible. There certainly has to be an increase in the intervention price, because it is significantly below the cost of production at present. The problem the Minister is speaking about is that 21 cent is very good for the Baltic states, as it is way above their costs, whereas it is not for us. That is the problem, and the Minister has to try to convince them at Commission level and everything else. I understand that. We have to look at what is going on, such as the flagrant use of liquid milk as a loss leader by retail corporations, as we discussed, and the possibility of introducing a ban on below-cost selling of food and food products. We have to get all of thisinto shape.

I also want to mention the drystock sector. The criticality of the agrifood sector to our economic position cannot be overestimated, as it accounts for almost €11 billion in exports, providing employment to 300,000 people directly in the industry and indirectly in our largest and most important indigenous productive sector.

At farm level, the perennial issue of profitability arises. Very often it is sectoral, but this year it represents a significant challenge across all of the sectors - pig, beef, dairy, grain and sheep. All of the sectors and enterprises are hit this year. The drystock sector, which I am extremely familiar with as I come from the midlands, continues to suffer from declining or virtually no income. Without the basic payments there would be no income at all. The sustainability of the sector would be doubtful without them. The problem with the basic payment system, however, is that it is lopsided. The aim of the Common Agricultural Policy was to maintain the maximum number of families in rural Ireland and to ensure safe, proper and adequate food supply at cheap prices to consumers. The problem with the basic payment system is that it was never meant for large corporations or companies. There are farmers getting €150,000 or €200,000. It is obscene. There should be a cap on that, with the excess given back to other farmers. The idea was to compensate them for not being able to produce food at that reasonable cost. If it means anything, they are the very people who should be assisted so that they can continue in their farming occupations and pass it on to their family. That is one of the reasons rural Ireland is in decline. That is the reason there is no money to pay or to spend. That is the reason rural shops are closing. I predict that it will be like the Wild West and we will have no shops between towns. In Westmeath, there would be no shops along the corridor between two major towns such as Longford and Mullingar. Post offices will eventually close, churches will close, and things will go out of existence because the population will not be there. However, if rural Ireland is subsidised in the way it is meant to be and the way the original CAP proposed, then we have a hope. We can have all the Ministers for rural development and Ministers for agriculture and Ministers for this, that and the other, but unless we change the focus and the way resources are allocated, we are at nought - it is all poppycock and great lip-service. It gets everybody on camera for RTE for a day, but nothing will change on the other 364 days, which are the days that count.

The weakness of and the decline in the value of sterling means a narrowing of the differential for steers secured from that source. Exchange rate movements are unfavourable, and this further diminishes returns for beef farmers in the market. It has a significant impact upon Irish agricultural trade. Weight limits are also clearly of importance, and the 420 kg restriction is daft. Any suckler enterprise based on continental crosses cannot survive on such weight restrictions, whether steers or bulls, but the 420 kg restriction, at current prices per kilogram, means there is no profit at all. This is aligned to the 30-month cut-off and the restriction on the number of movements. They have everything; it is the perfect storm. That is why the beef forum has to shake things up. We also need a pig forum. The draft Mercosur EU offer in early April would represent a death knell for the beef industry. Permitting 78,000 tonnes of beef to be imported into Europe from the Mercosur countries under a tariff-rate quota - what would this really mean for our beef sector, which is worth more than €2.5 billion annually? Where did the Commissioner for Trade, Cecilia Malmström, get a mandate to offer a tariff-rate quota? What is being done at EU level to resist? That must be the focus now. Will the Government insist that the EU complete an analysis of the cumulative impact of tariff-rate quota concessions in the Mercosur and TTIP talks before any deal is concluded?

What is of concern is not just the huge impact upon rural economies and communities. We must factor in the significant decrease in beef consumption across the EU. In the last five years there has been a drop of more than 500,000 tonnes in beef consumption across the EU. That is a huge amount. It is abundantly clear from this that the EU market would be unable to absorb such a huge additional volume of imports, which would lead to further downward pressure on prices and incomes. All hell would break loose.

I disagree with my respected colleague about Aidan Cotter. I believe he is an excellent CEO of Bord Bia. He is worth every cent of the €150,000, and more. We should not begrudge those people who are doing a good job. Aidan Cotter has been out in Iran working with the dairy market. Everywhere he has gone he has secured markets. He has a tremendous team of corporate people with him.

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