Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Question 111: To ask the Minister for Agriculture and Food the position regarding her plans to deal with milk quota; if she is committed to it in the long term; the advice she would offer to a young farmer regarding investing in milk quota and related housing and milking facilities; and if she will make a statement on the matter. [33029/06]

Mary Coughlan (Donegal South West, Fianna Fail)
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As the Deputy will be aware, the current milk quota arrangements were extended until the end of the 2014-15 milk quota year as part of the 2003 Luxembourg agreement on the reform of the Common Agricultural Policy. A review will take place in 2008 and any proposals submitted by the European Commission will be considered by the Council of Ministers at that time. Should the Commission come forward with further proposals in the milk sector, I will participate fully in the Council to ensure that the best interests of the Irish dairy sector are protected.

At national level, my focus is on the need to secure greater levels of efficiency at both producer and processor level in the face of considerable future challenges on international dairy markets. I recently announced the establishment of a new milk quota trading scheme to supersede the current milk quota restructuring scheme. The new system will continue to operate in each co-op area, thus maintaining the principle of regional preference or ring-fencing within current pools. It will have two elements, a priority pool and a market pool, the latter to run as an exchange.

The priority pool will be available to farmers whose leases had expired and were not renewed, successors and young farmers. The surplus available in the priority category pool will be allocated to producers with less than 350,000 litres. Some 30% of the total quota offered for sale will be allocated through the priority pool at a maximum price of 12 cent per litre, while the remaining 70% will be transacted through the exchange, delivering a market price. I have already announced 24 November as the closing date for applications by buyers and sellers to participate in the trading system and I will announce the date of the exchange when all valid transactions have been entered.

The new system, which was agreed following extensive consultation with the farm organisations and ICOS, will release larger quantities of quota to active and committed dairy farmers through the combined operation of a market exchange and a maximum price priority pool. The operation of the system will be reviewed after the first exchange and a second exchange will follow in spring of next year.

These arrangements will allow milk producers the opportunity to bid for the amount of quota required to meet the development needs of their farm enterprise at a price that will generate a commercial rate of return. Given the different levels of efficiency at farm level, such decisions are best made by individual farmers.

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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I thank the Minister for that long answer but it does not change the fact the milk quota situation is a total mess. One only has to think back to what happened last spring when the Minister announced the previous restructuring scheme on a Friday and the following day announced a new scheme whereby quota would be sold through marts, auctioneers and so on. Immediately, the Irish Farmers' Journal printed an article stating that milk quota would be €4 per gallon.

How does the Minister intend to organise ring-fencing? Is she suggesting milk should stay in counties like Cavan and Monaghan? How can this be achieved? How does the Minister reconcile the statement she made in Finland, namely, that quota is finished and is no longer an issue, with the reference in today's Irish Farmers' Journal to the quota rebels who want to bypass all schemes? This is closely linked to the issue of ring-fencing.

The Minister did not answer my key question. How can the House give an assurance to young farmers that it is worth their while to invest in and extend milk quota if we tell them there is no future in milk, the price of milk is collapsing and they will have to bid for it against all others in the open market? The Minister should clarify the position because it is very difficult for young farmers given that milk was quoted at €4 per gallon on a previous occasion but today's newspaper suggests it will be 50 cent a gallon. Where is the future for young farmers?

Mary Coughlan (Donegal South West, Fianna Fail)
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The future for young farmers will be on this side of the House because the negativity expressed by the Opposition in farming circles has been such that it would depress anybody.

Given the priority afforded to the milk industry in this country from a production and manufacturing perspective, I decided, against the background of the world trade talks and the fact Chile is now our competitor, that we needed a system whereby we could be competitive at an international level. On that basis, I decided we needed to change the quota scheme — contrary to opinion, the Minister is occasionally entitled to make a policy decision, as is the Government. I did not determine the price and will not do so. What is written in the newspapers is not necessarily a reflection of the truth.

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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We know that.

Mary Coughlan (Donegal South West, Fianna Fail)
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The Deputy can take it any way he wants but I did not suggest milk would be €4 or €5 a gallon. What I thought appropriate in the context of the exchange was that, first, the fundamentals of ring-fencing would not move, a policy with which the Deputy will agree, given the importance of the dairy sector in the Cavan-Monaghan area, as well as my area. Second, one of the frustrations expressed by young farmers was that they could not get access to quota. Third, they wanted to make sure they could afford to buy it, which is why I have a priority pool — 30% of the quota at 12 cent — for young farmers. Fourth, I introduced a substantial €100 million investment in the manufacturing sector, making an overall total investment of €500 million. This sector must be competitive, new and different to allow it to drive and move forward.

I did not say "yes" or "no", or agree or otherwise, while in Finland, although I am delighted the Deputy reads about what I say when I go abroad.

Denis Naughten (Longford-Roscommon, Fine Gael)
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We watch the Minister very closely.

Mary Coughlan (Donegal South West, Fianna Fail)
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I indicated that all of these decisions must be made against the background of what the Commissioner gave as her personal view when she came to Ireland three weeks ago, namely, that the future of quotas was perhaps untenable. Therefore, we, including farmers, must make decisions on the basis of that background — in other words, that we do not have, as the Deputy stated, quota rebels. This is why I have structures to allow that not to happen. That is unfair and we are not ready for that type of open-ended market system. However, we need access to quota and we will have to upscale and support farmers if they are to be competitive and survive.

My personal view is that as one of the most efficient milk dairy farming countries in the European Union, we have great opportunities. When one compares the price of quota in this country, at 12 cent, to the price of €2.50 in the Netherlands, it is clear other colleagues will have greater difficulties. The single farm payment is in place to compensate for income loss.

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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The situation with ring-fencing is clear. It is obvious a farmer in Cavan or Monaghan supplying Glanbia can sell milk to Waterford or anywhere else.

Mary Coughlan (Donegal South West, Fianna Fail)
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Through the co-op.

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Ring-fencing by no means safeguards the poor areas. Second, why did the Minister change the structures of the new support package so that there is a limit to the amount of money a group can spend on the new restructuring of dairies? For example, in the northern part of the country, there was a hope to move towards cheese units or otherwise. To introduce a change midway through the system complicates the situation dramatically.

Mary Coughlan (Donegal South West, Fianna Fail)
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First, €25 million is a sizeable investment. Sometimes people are misquoted in the Irish Farmers' Journal——

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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We can read.

Mary Coughlan (Donegal South West, Fianna Fail)
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——and there will be a retort by one of my co-op representatives that this person was misrepresented.

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Were they taken to heel?

Mary Coughlan (Donegal South West, Fianna Fail)
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No, this person was misrepresented. Second, a number of those who are pontificating never put a red cent into the industry in the past 20 years. Third, my scheme is specific to Annex 1 and a small part of Annex 2. We are driving the policy initiative in providing the funding and Enterprise Ireland is delivering the project. In the case of Annex 2 products, Enterprise Ireland still has considerable resources available to it to engage in joint ventures and support packages for producers of cheese, flavoured milks or yoghurts or for producers of other such products.

There is an issue concerning the case to which Deputy Crawford referred. The Minister of State and I met representatives of that company and the issues involved are being ironed out on behalf of the company.