Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Question 4: To ask the Minister for Agriculture and Food the steps she is taking at EU level to protect the income of dairy farmers; the action she will take at Government level to relieve the cost burden that farmers can no longer afford; and if she will make a statement on the matter. [19000/06]

Mary Coughlan (Donegal South West, Fianna Fail)
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Following a number of successful years for the Irish dairy industry on international and EU markets, 2006 is proving to be more challenging for the industry. The butter market, in particular, is under severe pressure on both the EU and international markets. Exports of dairy products, except cheese, are considerably lower than in 2005, with EU butter exports 35% less than the volumes exported during the previous GATT year.

The euro-dollar exchange rate has a significant impact on our competitiveness and the current weakness of the dollar is adding to the difficulties of EU traders. The internal butter market is also weak and butter prices in most member states are at or below intervention level. The intervention limit of 50,000 tonnes is likely to be reached within the next month after which a tendering system for intervention purchases will be introduced.

As this situation developed over recent months, I have urged the Commissioner on several occasions to use the market management tools in a more effective manner to ensure the overall stability of the milk sector. In particular, my key concern was to see the export refund regime used to maximum effect to dispose of product onto international markets outside the EU. I am pleased the Commission responded by increasing export refunds for butter and whole milk powder at the end of April and again at the last milk management committee when the tender refunds were accepted at a higher level for butter and butter oil. I have again asked the Commissioner to keep the focus for 2006 on the need to maintain the competitiveness of EU dairy exports, with particular reference to butter and to manage the introduction of the new tender arrangements for butter intervention in a manner that avoids causing further instability in the market.

I would of course emphasise that dairy farmers' incomes are not alone dependent on EU market supports although I fully appreciate the importance of internal aids and export subsidies for competitive trading conditions. Other elements impacting on farmers' incomes include direct payments, scale, efficiency and returns from the market. This year's milk price, taken together with the single payment entitlement of 3.6 cent per litre, is similar to recent years although clearly there is greater pressure on producer prices than heretofore.

Since the Luxembourg agreement of 2003 the dairy sector is operating in a new policy framework where market forces have an even greater influence on the price paid for milk. It is critical that we continue to manage the market so we maintain relative competitiveness. I will continue to focus on managing the transition to the next stage of intervention price reductions in July with the aim of maintaining and enhancing industry competitiveness and, ultimately, farm incomes.

At national level I have already announced my intention to move to a more open market system of transferring milk quotas between producers with the ultimate aim of increasing the scale and long-term efficiency of dairy production in Ireland. My Department also has a number of support schemes providing grant assistance to dairy farmers with the aim of facilitating dairy farmers to increase efficiencies and improve their facilities, thereby safeguarding their long-term farm income. These include the dairy hygiene scheme, whereby grant aid is available to assist dairy farmers in the upgrading of their dairying facilities. In addition, dairy farmers are eligible for grants under the new farm waste management scheme, while young dairy farmers are also eligible for a grant under the installation aid scheme. Collectively, these grant schemes are designed to assist farmers who wish to upgrade, modernise and increase the efficiencies of their operations.

I am confident as we complete the final phases of the 2003 Luxembourg agreement and make the necessary market adjustments intended by that agreement, instability in the dairy market will recede. In the meantime I will continue to impress upon the Commissioner the importance of maintaining a competitive market for EU dairy products.

Finian McGrath (Dublin North Central, Independent)
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What about small farmers?

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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I thank the Minister for an intensive and long answer. Unfortunately, it does not change the situation with regard to the income of dairy farmers. The Minister suggested that scale will solve the problem.

Mary Coughlan (Donegal South West, Fianna Fail)
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No, I did not.

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Can she explain why the biggest single dairy farmer in County Monaghan has opted to sell out? It is simply because there is no income. Does the Minister acknowledge there is absolute panic in this regard? Currently, for whatever reason, farm leaders are bringing that panic to bear on co-ops but co-ops are only passing on the result of the Minister's predecessors' negotiations at WTO and European level, namely, a collapse in milk prices. When the Commissioner was in the Chamber last week, it was clear she had no knowledge whatsoever of the seriousness of the situation. I ask the Minister to treble her efforts at EU level to make sure that instead of the pittance handed back to us at the last management committee meeting, the next meeting delivers real help to the industry so prices can be maintained.

Has the Minister considered increasing funding for research and development? I understand that only 4% of the overall national funding towards research and development goes to the food industry whereas the industry accounts for one fifth of net exports. Has she considered removing the disease and dairy inspection levies? The co-op to which I send my milk — I have a personal interest in this regard — takes most of its supply from Northern Ireland. Farmers in Northern Ireland do not have to pay a dairy inspection levy or a disease levy. These issues are within the control of the Minister. Will she consider giving the €500 to €800 cost of the levies back to farmers at a time when the country is awash with money?

Farmers are under extreme pressure, the like of which I have never seen. One need only consider the results of the Lakeland Dairies meeting in Cavan or any other dairy meeting throughout the country to understand the frustration. If it had not been for the change in the milk quota regime for this year, there is no doubt many more farmers would have opted out. We will see that happen next year.

Mary Coughlan (Donegal South West, Fianna Fail)
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The accusation that the changes I am promoting in the policy framework in any way had a detrimental effect on the price of milk is totally erroneous. Moreover, the Commissioner did not say that she had no knowledge of the implications of the 2003 Luxembourg agreement on dairy prices. That is factually incorrect.

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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She made it clear she was not aware of it.

Mary Coughlan (Donegal South West, Fianna Fail)
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To be exact, she stated the product mix in Ireland was causing us difficulties, which is true. This concerns the issue of butter, a fact the Deputy, as a dairy farmer, understands.

The price of milk is not an issue for me as Minister. It is an issue between the farmers, who are professionals, and the co-ops to which they send their milk. I am acutely aware of the issues that arise and the concerns expressed by the two groups, the dairy farmers and the co-ops, most particularly with regard to competitiveness. I will continue to support the necessity of the export refund mechanism in order to address some of those issues. However, in the medium to long term we will have to examine the product mix. This will not be done instantly but we will have to consider the issue. It is a big decision and one we will all have to work towards in the context of the future of the dairy sector.

With regard to the issue of scale, I did not say scale is the only way forward. It is one part of the issue, but there are other factors such as access to quota, efficiencies, issues with the co-op movement, access to new markets and new product development. The Deputy was correct to suggest the issue of research and development in the dairy sector will be vital to its future development. I have greatly supported the research and development movement in many aspects, including with regard to the university sector, the institutes of technology, Teagasc and working with the dairy sector. I agree with the Deputy it is very important for the future development of the sector.

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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I thank the Minister.

Mary Coughlan (Donegal South West, Fianna Fail)
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A number of initiatives have been made available through my Department and Enterprise Ireland. We will continue to work with the sector to enhance and increase the research and development capability. That will be an absolute priority for me.

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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I must repeat my questions because they are very serious. Will the Minister redouble her efforts in Brussels? I did not blame the Minister personally for what happened in Brussels under the regime of her predecessor and the Taoiseach. They led the negotiations and the results are there in black and white. The Irish Dairy Board can spell out day by day and week by week how the results happened. The Minister's comments are erroneous.

Will she make decisions at ministerial level that will increase the income of dairy farmers, not by much but by enough to act as a gesture of goodwill? If she has not already examined the disease and dairy inspection levies, will she please do so to make some gesture of goodwill towards a good industry, which was the best industry in the country but which is now under severe pressure?

Mary Coughlan (Donegal South West, Fianna Fail)
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It is vital that certain issues in the dairy sector are dealt with. The issue of cost and how it is to be removed from the sector is one on which I have worked continuously and will continue to work. We will achieve delivery on that. Other issues arise such as that of the world trade talks and their impact on the dairy sector, which is serious. I will work to the best of my ability to ensure we get the best outcome, that we achieve safeguard clauses and that we have as much protection for the sector as possible.

I do not accept the view that my predecessor or the Taoiseach in any way undermined the dairy sector in the 2003 Luxembourg agreement. I will explain why this is so. The then Minister for Agriculture and Food, Deputy Walsh, led the discussions on this issue in the 2003 agreement on the basis of the best way forward for farming, namely a decoupled reorientation of a policy framework that would allow us to develop. If not for the Taoiseach's negotiating skills, we would not have had the necessary support mechanisms and guarantees until 2013. He succeeded in that task despite the objections of many of his colleagues, for whom agriculture was less important than it is for this economy.