Paul Connaughton Snr (Galway East, Fine Gael)
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I met a young farmer last week who showed me his milk returns for last month from his 40-cow herd. He was paid just over 19 cent a litre. This well educated and sensible young man literally had tears in his eyes, tears of frustration and anger. He proceeded to tell me how the cheque, the biggest he will receive this year, simply will not cover fertiliser and feed bills accrued during the months of April and May of this year which witnessed the worst weather conditions for 50 years. If the Minister of State is not aware of this situation then it is a case of shame on him. No one could produce milk at 19 cent per litre and one can imagine the problems farmers have in the wetland areas in which land has not been grazed for more than 12 months, simply because of waterlogging. We are witnessing the wind-down of the one of the most noble farming enterprises and if urgent action is not taken by the EU Commission and the Government, another sugar beet debacle will be on our hands.

There is no respect for primary producers of food in the country. In the case of milk, the farmer gets one third of the price of a bottle, the processor gets one third and the supermarket gets the final third. Who is walked upon in this case? Who puts in seven days a week, takes all the risks and who comes out the worst? I need not tell the Minister of State it is the farmer.

I put on record that the EU Commission must smarten up. More and greater volumes of milk product must be allowed into EU intervention and more funding to aid private storage schemes must be made available at rates that will keep dairy farmers afloat until world prices creep upwards. Matters within the control of Ireland must be re-examined also. The budget in October of last year will cripple farmers next October. Let us consider the savage cuts coming down the line. These include €1,000 off the top rate of the area base payment, which affects those in the wetland areas throughout Ireland, a reduction of 50% in the cow welfare scheme from €80 to €40, and a reduction of more than 2% in modulation in so far as the single farm payment is concerned. Let us consider the reduction in the REP 4 scheme from a maximum of €10,000 to €8,000. When these are added up an ordinary, average farmer in the country stands to lose €6,000 directly from his or her pocket next October or November and this bears no relationship to what such farmers earn.

During the last election there was a good deal of talk, rightly, of levies because they affected everyone. However, this levy works out at approximately 30% on the normal income that most average farmers will earn this year. Unless the Government takes action and reverses some of these cuts, which are entirely within its remit, there will be a catastrophe in the farming community of the country before the year is through. I realise many will say this is a case of the farmers crying foul again, but that is not the case this time. Every enterprise is under great attack.

The members of the Government should get up on their bicycles and go after the European Commission. I recognise the Minister for Agriculture, Fisheries and Food was in Luxembourg recently but it seems he has no clout and the process is going nowhere at present. If the Minister of State were a dairy farmer milking his cows seven days a week he would realise the severity of the situation. My background is farming and this is the first time in my memory that I have ever seen a situation in which for every marginal gallon of milk produced one is losing money. The price is below the cost of production.

Let us consider the case of a person highly geared, who cannot get grants from the Department, although such grants were guaranteed. If one puts all the pieces together it amounts to a very significant problem in the farming community. On behalf of every farmer in Ireland I call on the Minister of State to put his shoulder to the wheel and do something positive to try to get the whole industry on a better footing before it is too late.

Tony Killeen (Clare, Fianna Fail)
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On milk prices I point out that since last November when it became apparent that dairy commodity prices were in decline internationally from the record prices of only 12 months earlier, the Minister for Agriculture, Fisheries and Food, Deputy Brendan Smith, has been in close contact with the EU Commissioner for Agriculture and Rural Development, Ms Mariann Fischer Boel, and has been very active at the Agriculture and Fisheries Council to press for the activation of dairy market supports. These had been suspended since 2006 because of the historically high milk prices which prevailed in the intervening period. The Commission has taken a series of measures with a view to stabilising the market, commencing with the introduction of an aid scheme for the private storage of butter, some two months ahead of the normal date. This scheme remains in place and has already supported the storage of some 96,000 tonnes of butter.

In January export refunds were re-introduced for butter, cheese, skimmed milk powder and whole milk powder and this has enabled the export of considerable volumes of dairy products. In March, public intervention for butter and skimmed milk powder was opened. When the agreed intervention limit was reached the Minister, Deputy Brendan Smith, obtained the Commissioner's agreement for the continuation of these schemes under tendering arrangements at close to intervention prices. To date, some 81,000 tonnes of butter have been intervened with a further 202,000 tonnes of skimmed milk powder having been purchased into stock. In all, some 20,000 tonnes of butter and 27,000 tonnes of skimmed milk powder from Ireland have been stored under the schemes.

At the EU Council of Agriculture and Fisheries Ministers on Monday the Minister, Deputy Brendan Smith, again stressed the need to take further steps to assist in reversing the downturn and stimulating the market further. For example, intervention purchases of butter and skimmed milk powder are due to close at the end of August and the private storage scheme for butter shortly beforehand. The role that private storage plays in particular, but intervention too, is such that their continuation after the normal end dates will be crucial in preventing further market turbulence at a time when supplies would otherwise hit commercial markets. The Minister also called on the Commissioner to increase export refunds for butter and skimmed milk powder even further and to suspend the free at frontier price for cheeses enabling cheeses products to avail of export refunds. The dairy sector will remain at the top of our agenda in the coming months.

The Deputy referred to proposed reductions in farmer payments. However, he may not be aware that following representations from Ministers from several member states including the Minster, Deputy Brendan Smith, the EU Commissioner agreed to allow for an advance payment of 70% with effect from 16 October under the single payment scheme.

Paul Connaughton Snr (Galway East, Fine Gael)
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It is the same money.

Tony Killeen (Clare, Fianna Fail)
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This will be of particular assistance to farmers experiencing difficulties in the dairy market and others and will mean that almost €900 million will be paid in mid-October to Irish farmers, rather than early December. At the CAP health check negotiations, the Minister secured changes to the modulation arrangements whereby we will no longer be required to make deductions in respect of the first €5,000 of a farmers single payment.

Paul Connaughton Snr (Galway East, Fine Gael)
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That is nothing.

Tony Killeen (Clare, Fianna Fail)
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It is a sensible change in the rules. It will mean that farmers will no longer have to wait for six months for a refund of deductions amounting to €350 in most cases.

With regard to budgetary decisions in general, Deputies will be aware that these were made in the context of the deterioration in the overall economic and financial environment. Our approach has been to strike a careful balance between increased borrowing, higher taxation and reduced spending. Clearly, there will be consequences for every sector of society. The Government has agreed a five-year plan with the EU Commission to secure stability and growth. In agriculture, the objective has been to protect the most productive elements of the agriculture, food, fisheries and forestry sectors and to ensure they continue to make the maximum contribution to the economy. It is vital that the sector is well positioned to get through this very challenging period and to exploit the opportunities that will develop as the international and national economies recover.

Against this overall background, one could easily forget the Government has provided more than €1.9 billion in the Department's Vote in 2009. When combined with EU funding of €1.4 billion, this means total expenditure by the Department in support of the agri-food and fisheries sectors this year will exceed €3.3 billion.

The agriculture and food sector has the capacity to help lead the nation's economic recovery in the years ahead. This is regardless of the economic difficulties Ireland currently faces. There is no doubt the country is fully capable of producing and exporting high quality food and drink products. Despite the challenging market, currency fluctuations and turbulent export environment, food and beverage exports in 2008 were worth approximately €8.2 billion to our economy. The agri-food sector represents our most important indigenous industry and has the potential to boost export returns substantially in the future.

The EU medium-term outlook for agricultural commodities foresees a gradual recovery supported by growth in global food demand due to population increase and also a long-term decline in the growth of food-crop productivity. These factors can work to the advantage of Ireland. Agriculture and food production are always subject to change and challenges and while agriculture is often more resilient to economic crises than other sectors, there is no doubt that certain parts of the industry are facing significant challenges this year. We will continue to work to help the entire agri-food sector remain competitive such that it may capitalise on the inevitable global recovery.

Addressing the industry's capacity to compete successfully at home and overseas has assumed a new urgency and my belief is that a new development plan for the period to 2020 is required to maintain the impetus gained from the very successful Agri-Vision 2015 strategy. Preparatory work has already started on this plan which is focusing on the critical issue of competitiveness, the challenges from the global economic downturn, currency fluctuations, climate change and how best to maximise the opportunities arising from a growing international food and energy crop markets.