Dáil debates

Tuesday, 24 March 2009

3:00 pm

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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Question 44: To ask the Minister for Agriculture, Fisheries and Food the progress made with the EU Commission regarding support for the dairy industry; and if he will make a statement on the matter. [12209/09]

Photo of Brendan SmithBrendan Smith (Minister, Department of Agriculture, Fisheries and Food; Cavan-Monaghan, Fianna Fail)
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We have an unprecedented situation in the dairy sector at present and the outlook for dairy markets in the short term is poor. Market prices have been adjusting following historically high prices in 2007 and early 2008 and there is the further complication of the credit crunch. These two factors have put an enormous burden on the sector and we have seen a slump in demand as a consequence. In Ireland we are entering a period of abundant supplies and the levels at which export refunds and intervention function will be critical to the speed at which the sector emerge from the current difficulties. I have urged a short sharp utilisation of the market management measures to get the market back to equilibrium as quickly as possible.

I have maintained close contact with Commissioner Mariann Fischer Boel regarding the need for appropriate action to support the market. The Commission responded initially with the early introduction of private storage aid for butter and with the reintroduction of export refunds in January. In addition, the Commissioner gave a commitment to continue intervention for butter and skimmed milk powder under the tendering arrangements once the fixed limits were reached. These were welcome developments and well judged at the time.

I met the Commissioner in Brussels on 11 March to discuss developments and to explore the options open to us. In particular, I had two main issues to press her on. The first was the need to buy butter into intervention at prices close to the fixed price level. The second was to stress the need to export larger quantities of butter and skimmed milk powder to international markets. I am pleased to report very positive progress on both these key points. At last week's management committee meeting it was agreed to purchase a total of 6,665 tonnes of butter into intervention at levels very close to the intervention price. This is a very important development.

In addition to this, increased quantities of butter and skimmed milk powder were granted export refunds at the meeting. The volumes supported with export refunds last week were almost equivalent to the combined totals of the three previous tenders. This is a very welcome and needed improvement and should help bring stability to the market.

At yesterday's meeting of the Council of Ministers there was a debate about the unprecedented situation at present in the dairy sector and the short term outlook for dairy markets. I informed my colleagues that in Ireland we are entering a period of abundant supplies and the levels at which refunds and intervention function will be critical to the speed at which we emerge from the current slump. While I was encouraged by recent developments in community support, I further urged a short, sharp utilisation of the market management measures to get the market back to equilibrium as quickly as possible. It is clear to me that the elements which will lead this recovery are competitive refunds that allow the sale of dairy products onto world markets in considerable quantities and the continuation of intervention under the tendering mechanism, provided that these arrangements remain relatively attractive.

The Commission was left in no doubt by myself and by a number of other member states of the importance of fully using all available supports to manage the market in the upcoming period.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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There is unanimity on all sides of the House regarding the crisis. Most people are interested in hearing about what progress in being made to deliver a solution, not just at the farm gate where, at prices of 20 cent a litre, many farmers will milk cows twice daily for no financial return. Another issue is the processing sector where, in the previous milk year, processors probably subvented the price of milk to the tune of €100 million but are not capable of doing so for a second successive year. The carnage may not stop at the farm gate. There is a real danger that there also may be casualties in the processing sector.

I welcome what the Minister said, up to a point. Did I understand him correctly when he said an additional 6,665 tonnes of butter could be bought into intervention as a result of last week's agreement? That is the equivalent of about less than half a day's production. We need to put that in context. The original 30,000 tonnes of butter available would be filled in less than two days. Therefore, 6,000 tonnes is but a drop in the ocean.

Apart from the bilateral meetings which the Minister is having with Commissioner Fischer Boel, what political arrangements is he organising? What alliances is he forging with other member states who have a similar issue?

One example is the issue of cheddar cheese and export refunds. Processors who are dependent on exports of cheddar cheese are finding that export refunds are useless because they are meeting a tariff on the other side which is greater than the refund available to them. We need to know what political alliances are being forged to deliver meaningful intervention for farmers in order that they get a fair price for their product and ensure that those employed in the processing sector are equally protected.

Photo of Brendan SmithBrendan Smith (Minister, Department of Agriculture, Fisheries and Food; Cavan-Monaghan, Fianna Fail)
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We all share the same views outlined by Deputy Creed. I understand he outlined a similar viewpoint at a previous question time. There are particular difficulties and we know the price being quoted now by the different co-ops and processors, and the difficulties that poses for farmers. I know the co-operatives and processors also face difficulties.

Regarding the quantity mentioned, to be accurate I wish to put it on the record that at last Thursday's management committee meeting 6,665 tonnes of butter were accepted at a level very close to the intervention price. This was an extremely positive response. The overall volume accepted amounted to some 70% of the total offered and the Irish component which was not accepted will be eligible for the next tender. It is worth putting on the record that in the case of skimmed milk powder and export refunds, 14,663 tonnes were equivalent to the combined volumes of the three previous tenders. Regarding butter, the total supported was 5,257 tonnes, compared to some 7,000 tonnes for the combined three previous tenders.

The general reaction of the operators was favourable to the decisions made at last Thursday's meeting. The next meeting will take place on Thursday week, where there will be further product moved along. As we all know, we need to get product out of the market to ensure we get the proper supply.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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What most farmers are concerned about is how the Minister's statement will translate into their monthly milk cheque. At a price of 20 cent a litre, it is a loss-making enterprise for farmers. Will what the Minister has achieved deliver 26 cent a litre, which is the target figure for profitable milk production? Anything less than that will not bring any comfort to the dairy sector which for many years has been the real engine of the agri-economy at the farm gate and in the processing sector. We need to know if the Minister is delivering something tangible or if he is delivering the status quo, which is prices below the cost of production and financial ruin facing farmers and processors.

Photo of Brendan SmithBrendan Smith (Minister, Department of Agriculture, Fisheries and Food; Cavan-Monaghan, Fianna Fail)
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It is not just now that we recognise the difficulties which will face this sector this year. We know historically about the welcome increase in prices in 2007 and the early part of 2008 and the subsequent major surge in supply onto the world market. The dollar, New Zealand currency and other factors all play a role in making it difficult for Europe to sell product. The prices, as all of us know, are set by the processor and not by the Department. I began intensively lobbying the Commissioner for Agriculture and Rural Development last November regarding the need to use the market management measures and the aid to private storage was brought forward on 1 January, two months ahead of the normal time.

I met the Commissioner in the latter months of 2008 to impress upon her the need to make the best and most effective use of the management measures which are in place.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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Question 45: To ask the Minister for Agriculture, Fisheries and Food the measures and guarantees he received from his recent meeting with Commissioner Fisher Boel on the dairy crisis; his strategy to secure support from his fellow agriculture Ministers in Europe for greater levels of support from the EU Commission to stabilise dairy markets and to speed up their recovery; and if he will make a statement on the matter. [12009/09]

Photo of Brendan SmithBrendan Smith (Minister, Department of Agriculture, Fisheries and Food; Cavan-Monaghan, Fianna Fail)
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I met Commissioner Fischer Boel in Brussels on 11 March to discuss the dairy situation and explore the options open to us to restore market confidence. In particular, I had two main issues to press her on. The first was the requirement to continue to buy butter into intervention at prices close to the fixed price level. The second was to stress the need to export larger quantities of butter and skimmed milk powder to international markets. I am satisfied that we have seen positive progress on both these key points.

At last week's management committee meeting it was agreed to purchase a total of 6,665 tonnes of butter into intervention at levels very close to the intervention price. This is a very important development. In addition to this, increased quantities of butter and skimmed milk powder were granted export refunds at the same meeting. The volumes supported with export refunds last week were almost equivalent to the combined totals of the three previous tenders. This is a welcome improvement and should help bring stability to the market.

I have of course had ongoing contact with the Commissioner long before my meeting on 11 March regarding the need for appropriate action to support the dairy market. The Commission responded initially with the early introduction of private storage aid for butter and with the reintroduction of export refunds in January. In addition, the Commissioner gave a commitment to continue intervention for butter and skimmed milk powder under the tendering arrangements once the fixed limits were reached. These were welcome developments and well judged at the time.

At yesterday's meeting of the Council of Ministers there was a debate about the unprecedented situation in the dairy sector at present and the short-term outlook for dairy markets. I informed my colleagues that we are entering a period of abundant supplies and the levels at which refunds and intervention function will be critical to the speed at which we emerge from the current slump. While I was encouraged by recent developments in community support, I again took the opportunity to urge the Commission and the Commissioner to utilise the market management measures to get the market back to equilibrium as quickly as possible.

It is clear that the elements that will lead this recovery are competitive refunds that allow the sale of dairy products onto world markets in considerable quantities and the continuation of intervention under the tendering mechanism, provided that these arrangements remain relatively attractive. The Commission was left in no doubt by a number of other member states and myself of the importance of fully using all available supports to manage the market in the coming period.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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Given that what the Minister has outlined represents a short-term response, will he indicate whether a long-term response has been discussed? I ask this question in the context of the announcement by Dairygold, one of the main processors in Munster, that it has had to reduce milk prices by 17.4 cent per litre in the last 12 months. The price is currently bottoming out at some 20 cent per litre. The intervention mechanisms to which the Minister referred, such as aid to private storage and export funds, will have a short-term effect in terms of improving price. Has there been any political discussion on the overall quota regime?

Photo of Brendan SmithBrendan Smith (Minister, Department of Agriculture, Fisheries and Food; Cavan-Monaghan, Fianna Fail)
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Some member states raised the possibility of revisiting the Health Check of the Common Agricultural Policy. I vehemently oppose such proposals. Last week I travelled to Germany to meet the German Minister. Germany has strongly advocated additional support for the dairy sector. However, it also favours revisiting the Health Check. As I said, we strongly oppose that proposal.

During the course of the Health Check negotiations, we sought and initiated a debate within the Health Check mechanism to ensure that we retained the market management measures that are currently in place. If those measures were not in place, the dairy sector would be in serious trouble. We are all aware of the serious difficulties that exist both at farm gate level and at processor level. Several member states have indicated that they would like to see the additional quota put on hold. One member state advocated that the butterfat adjustment should not be implemented. I disagree entirely with these proposals.

The Health Check has not led to the deterioration in the dairy market. The reality is that we are under quota. There was a welcome increase in prices in 2007 and the early part of 2008 at which time there was a reduced supply from New Zealand as a result of drought. Since then, however, there has been increased supply from New Zealand and the United States. In the case of the latter, the weakness of the dollar made for a favourable currency arrangement. The currency situation has since changed somewhat. To reiterate, we do not support a revisiting of the Health Check under any circumstances. We may stand to lose out in a major way from any such review.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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Why has the Minister entirely ruled out revisiting the Health Check? As he said, we are under quota. In the current global economic environment, the demand for dairy-based products is reducing significantly over time. Has there been any political analysis of how that will pan out? Given our emphasis on milk-based production, there will be serious implications for the agriculture sector if there is no improvement in global demand. There will be little choice but to revisit the Health Check because it will have serious implications for how we produce dairy-based products into the future. I do not see how such a review can be ruled out emphatically without some degree of debate and analysis of where we are going.

Photo of Brendan SmithBrendan Smith (Minister, Department of Agriculture, Fisheries and Food; Cavan-Monaghan, Fianna Fail)
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There is a provision in the Health Check for a review of its measures in 2010. Some member states have proposed that this review be brought forward to 2009. As I said, I do not support this proposal. We must be careful not to send out a message that Europe is chopping and changing policy. That would lead to instability. We must look to the situation of the processor or individual farmer who intends to invest and provide additional on-farm facilities. The political analysis that has been done in regard to the long-term demand for dairy products is favourable. The Food and Agriculture Organisation has provided detailed analysis of the potential of the dairy market to expand.

One simple statistic is that the world population is increasing by more than 6 million per month. Prior to the economic turmoil that has been with us for almost a year, there was growing affluence in the world. There has been a change in the dietary requirements of people in the huge population blocs of Asia, China and India. India and China have populations in excess of 1 billion, and new markets for dairy products have emerged in these countries. We have reached a crunch period. The upward trajectory in prices that we saw in 2007 was followed by a decline in global demand because of the credit crunch and the lack of disposable income in the international community.

The Health Check is the proper mechanism under which to address these issues. Ireland has the capacity to grow its dairy industry, and the medium to long-term outlook is positive. This is not to minimise the serious difficulties currently faced by the industry, as referred to by Deputies Creed and Sherlock.