Seán Sherlock (Cork East, Labour)
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Question 2: To ask the Minister for Agriculture, Fisheries and Food the steps she will take to combat rising inflation in food prices; if her attention has been drawn to the latest FAO food facts report, which expects that many countries will pay more for importing cereals from world markets than they did previously; and if she will implement measures to ensure growth in the cereals sector of the economy to meet growing demand into the future. [30263/07]

Trevor Sargent (Dublin North, Green Party)
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On Tuesday night I returned from the 34th international conference of the Food and Agriculture Organisation, FAO. I am aware of the issues raised in the FAO's food outlook November 2007. The FAO forecasts high international prices for all major foods and feedstuff this year. Of particular note are the conditions on world cereal markets. Supplies are much tighter than they have been for years, as unfavourable weather conditions in some of the main cereal producing countries, reflecting the latest UN climate change report, hampered production and the low levels of stocks worldwide have not been sufficient to meet demand.

There is increasing competition for cereals to meet demand from China and other parts of Asia, as well as demand for grains used for feedstuffs and the emerging liquid biofuels industry. Other factors making an impact on international cereal prices are increased input costs due to rising petroleum and freight rates, reflecting a pending peak in oil production.

Rising output prices are a double-edged sword. Depending on the combination of factors, higher output prices could give rise to higher farm incomes in this part of the world but some of the increase will be offset by rising input costs, especially feed costs, and unfavourable exchange rate movements.

Given current market conditions, some level of food price inflation is inevitable. While consumer food price inflation in Ireland has increased, particularly in the past month, it remains below the overall rate of inflation of 4.8%. This trend of rising food prices is common across EU member states, where food price inflation has increased in recent months. Retail prices are also affected by a variety of other factors, including the cost of wages, services and other materials.

In order to help alleviate some of the market difficulties, the Council of Ministers decided in September to set the obligatory set-aside rate at zero for autumn 2007 and spring 2008 sowings. This is expected to lead to an expansion of EU grain production by at least 10 million tonnes next year.

Additional information not given on the floor of the House.

Irish cereal farmers, following the decoupling of direct payments from production, are now in a position to respond to market signals. With the cushion of the single payment, they can focus on supplying markets, concentrating on minimising production costs and maximising their incomes.

My Department continues to operate a range of services aimed at improving the efficiency, quality and viability of cereal production. These services include seed certification, seed testing, recommended lists of varieties etc. In addition, Teagasc provides comprehensive research, training and advisory services for cereal producers. The value of all these support services is reflected in the fact that Irish cereal producers have consistently achieved some of the highest yields in the world. I am satisfied that the outlook for cereal growing in Ireland is positive and that cereal producers here are well positioned to respond to the challenges ahead.

Seán Sherlock (Cork East, Labour)
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I thank the Minister of State for his reply. I was motivated to table my question on the basis of the growing concern that food price inflation is increasing. Christmas is approaching and expenditure on food is quite extensive. There have been increases in the range of 16% to 17% in respect of staples such as milk and, in particular, flour. There is major potential for growth in the cereal sector to meet this demand. I accept there are global permutations that will affect how matters pan out for the industry here. Grain farmers want to see an increase in production to meet domestic demand. This is particularly the case if one considers the rise in bio-fuel production.

My question inquired about the practical solutions the Government will be putting in place to facilitate the increasing trend towards the cultivation of grains. I have not received an answer in that regard.

Trevor Sargent (Dublin North, Green Party)
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Time constraints only permitted me to provide part of the reply. However, the Deputy will have noted my reference to the zero rate for set-aside. It was difficult to justify how land could be set aside when there are shortfalls in grain production. In many ways it is bizarre that grain production rates fell between 2002 and 2006, while there was an increase in total value. I hope that next year we will be able to look back at what happened this year and see an increase in both value and acreage. The 2006 figure for output is 1.355%, while that for 2007 is 1.53%. There will be quite a significant rise. The latter is reflected in the value of the grain produced.

Market forces, which can be a problem at times, will, in this instance, provide the boost we need. The Department is encouraging — our efforts in this regard are bearing fruit — people who have not used the plough for many years to get back behind it and increase their tillage production rates.

Seán Sherlock (Cork East, Labour)
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Did the Minister of State refer to a figure of €10 million?

Trevor Sargent (Dublin North, Green Party)
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I referred to the EU figure of 10 million tonnes in respect of set-aside.

Seán Sherlock (Cork East, Labour)
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The Minister of State also referred to figures of 1.355% and 1.53% in respect of output. These represent minuscule rates of increase and the rate of inflation in respect of food will far outstrip them. I suggest that those rates should be increased considerably to meet demand.

Trevor Sargent (Dublin North, Green Party)
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My Department, my ministerial colleagues and I will be doing everything possible to encourage more people to increase their tillage and cereal production rates. There is also a need to think laterally in respect of this matter. A considerable amount of cereal produced is required for both human and animal consumption. The development of animal breeds that are able to thrive on a diet which is more grass-based, thereby reducing feed inputs, is another route we must take in order to insulate ourselves from the wider global reality of increasing grain prices. There is a need to increase grain production and also to deal with other issues.