Seán Sherlock (Cork East, Labour)
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Question 43: To ask the Minister for Agriculture, Fisheries and Food the supports which will be given to the dairy sector and dairy farmers in view of the reduction in milk prices; and if he will make a statement on the matter. [20405/09]

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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The EU Common Agricultural Policy provides a range of measures that can be used to assist the dairy market. In the health check negotiations last year there was pressure to remove or weaken these considerably. At the time I fought hard to keep the key market instruments in place and these are now being used to help support the market.

Dairy farmers' incomes are made up of the market price paid for milk and direct income support from the EU. Supply and demand have a major bearing on the price paid for milk. World market prices determine the returns received by dairy processors and this is reflected in the price paid to farmers. Export refunds and internal subsidies were suspended by the EU in 2007 as prices were at exceptionally high levels. As the market situation deteriorated towards the end of 2008, I called on the Commissioner to reintroduce support measures to help stabilise markets. The Commission initially responded last November by bringing forward the operation of the private storage scheme for butter.

In January, the Commissioner announced the reintroduction of refunds to support the export of dairy products outside the EU. This was an important step and signalled an intention by the Commission to put a floor under the market. In March, the intervention schemes for butter and skimmed milk powder were opened, thus allowing the purchase of product up to set limits at a fixed price. At that time I met with the Commissioner to discuss the market situation and stressed the importance of continuing to accept butter and skimmed milk powder into intervention at levels close to the intervention purchase price. I am pleased that the Commission has continued to buy butter and skimmed milk powder into intervention at prices close to the fixed price. I also called for the continued use of export refunds at viable levels to move significant quantities of product from the EU.

I raised this issue with my colleagues at the Council of Agriculture Ministers in April. I drew attention to the serious difficulties on the milk market where the severe slump in demand has led to a dramatic fall in milk prices. I urged the Commission to continue using the existing measures to support the market and to consider introducing additional methods where appropriate. Milk will feature on the agenda of the Agriculture Council next Monday and I will once again reiterate my views to the Commission and to the Council of Ministers.

The EU Commission's actions in utilising available support measures have helped to stabilise the market. However, as the milk price is greatly influenced by the forces of supply and demand, support schemes have a limited effect on milk prices. The short-term outlook for the dairy sector remains uncertain and I continue to monitor closely the Commission's management of the dairy market. In this regard I will again discuss the matter next week with my colleagues in the Agriculture and Fisheries Council.

Seán Sherlock (Cork East, Labour)
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I thank the Minister for his response. The Minister is not giving us much solace on the responses to the downward trajectory in global milk prices. Is there scope within the European Commission and will the Minister ask at next week's Agriculture and Fisheries Council for a dairy adjustment scheme to be implemented under EU legislation through the use of unused EU funding?

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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Apart from the €7 million that I allocated to sheep farmers, which will be distributed in December, we do not have access to the unused funds until 2010. One of the areas identified as a potential recipient is the dairy sector. However, that is not applicable until 2010. The European Union has not yet outlined to us the specific schemes on which we will be able to draw down unused funds.

The Deputy referred to the problem of demand and supply. Consumers worldwide do not have the level of income to purchase sufficient dairy products. Dairy prices rose to a very high level in 2007. Subsequently, there was increased production in third countries, including the United States. There were currency fluctuations that militated against us in the European Union. The dollar was strong at one stage and weak at another. New Zealand has also had the opportunity to change the value of its currency. All of those factors have had an impact.

Last year, I fought very tenaciously for the European Union to retain the market mechanism measures, particularly aid to private storage, intervention and export refunds. In the early days of negotiations of the health check of the Common Agricultural Policy there was little or no support for the retention of such measures. In the final day of the negotiation we got some support from other countries. Were those measures not in place now, the sector would be in even more difficulty than it finds itself in.

Seán Sherlock (Cork East, Labour)
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Will the aid to private storage continue indefinitely or does it have a definitive timeline? Quotas will be abolished in 2015. Notwithstanding that we cannot foretell what will happen in global markets, the Government must take responsibility for the question that is on every farmer's lips. Will farmers be able to produce milk after 2015, notwithstanding the current difficulties? It would appear the Government has no coherent policy regarding the potential loss of many farms and an outflow from farming because we do not know what will happen in 2015. There is no sense of direction from the Government in terms of planning for that eventuality. Farmers need to get such a sense.

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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The provision of additional quota does not in any way contribute to current difficulties because Europe will be more than 4% to 5% under quota this year. Quotas will be abolished in 2015. We have argued for increased quotas so that there will not be a hard landing in 2015. For the primary producers and processors the dairy sector is very sophisticated and has the potential to grow. The best estimates available to us from the Food and Agriculture Organization of the United Nations are that there will be increased demand for dairy products in future. We believe there is a bright future for the dairy industry even though very serious problems face our dairy farmers and processors today. If the health check measures were unravelled, we might not have the market management measures to support us. That would be an outright catastrophe. We fought, practically alone until the final day, to retain those measures.

A meeting of the management committee took place today and just before I came in I was advised that further product will go into intervention and to export refunds also.