Michael Moynihan (Cork North West, Fianna Fail)
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Question 32: To ask the Minister for Agriculture; Fisheries and Food the steps he has taken, in conjunction with his European colleagues, to activate an EU wide milk quota system instead of a national quota. [12963/11]

Simon Coveney (Cork South Central, Fine Gael)
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This issue was debated in some detail last night and on which I agree with the Deputy. We need to find a way to allow the dairy industry to expand before 2015 when the European Union wide quota system ends. We have many young and not so young farmers in many counties who have the capacity to significantly increase milk output. They are doing so already at levels dangerously above their quota allocations in the expectation that they will get away with it this year because they got away with it last year. While we need to encourage expansion and growth, unfortunately under the rules of the milk check agreement, Ireland is only being given an additional 1% milk quota each year until 2015. That is nowhere near being sufficient to allow us to expand in the way we would like to over the next five years. So the Food Harvest 2020 target of a 50% increase in milk production by 2020 will, at the moment, require a massive expansion in the five years from 2015 to 2020 due to the restrictions before 2015. We are trying to find a political solution to that problem because many EU countries are under quota. We would like to see what the Deputy has called for, which is an EU-wide quota, so that when some countries are under quota others that wish to be over quota would be given the flexibility. That is not a runner politically at the moment, however, in the European Commission or in Germany and France. I am in the process of trying to put together a coalition of countries in order to find some kind of political resolution to this matter.

In the past year, both Denmark and the Netherlands have had significant super-levy fines applied to them for being over quota. We were less than 1% under quota and only just made it. There are four or five EU countries that want to expand their dairy industries and which need the flexibility to do so, but it will be a significant political challenge in order to be successful. All farmers that are planning milk production above the quota allocated to them should be careful before choosing to do so because we are in danger of being over quota this year.

Michael Moynihan (Cork North West, Fianna Fail)
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I thank the Minister for his response. Excess figures provided by various milk processors range from a low of 17% to a high of 25% year-on-year from April 2010 to April 2011. There is a major effort at every level cautioning people to avoid going over the quota. On 31 March this year, we were a little bit under quota because milk supplies were held back and managed at farm-gate level. The Minister referred to other EU countries that have had super-levy fines, and said he is building a coalition of other member states. Where is the pressure coming from within the EU and what countries, if any, are holding out against an agreement such as this?

Simon Coveney (Cork South Central, Fine Gael)
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That is a good question. I understand that France and Germany do not even want to entertain a discussion on this issue because the milk health check was agreed after a lot of difficult debate, particularly with France and Germany. Many people in both those countries would rather not see an end to the milk quota system. They see restricting milk output as a way of securing price consistency in future. Therefore the very idea that we would allow countries like Ireland, Denmark and the Netherlands to expand milk production dramatically in the short term is perceived as a risk to milk price stability between now and 2015. Whereas they have conceded that after 2015, when there is a long lead-in time to prepare for that, milk quotas will end, they are certainly in no mood to concede that there should be significant increases in milk production between now and then.

The counter argument is that milk production is falling in certain countries. In my view, overall milk production across the EU would not increase if Ireland, Denmark and the Netherlands were to increase production dramatically. That is because countries like Slovenia are 17% below quota. Our closest neighbour, Britain, is well below quota and it is not an issue there because production is nowhere near the quota. European thinking is needed here.

Many of the new markets for Irish dairy products are actually outside the EU. One of the reasons I will have to leave the Chamber early this evening is that I am meeting the Chinese Minister for agriculture. He is visiting Ireland this week to look at our production and traceability systems, as well as our quality food production. There are also exciting markets for infant formula, for example. Ireland sells 16% of the world's total infant formula exports and we want to fill the enormous and expanding market in China. The irony is that the expansion of the Irish dairy industry may not affect European markets at all. It is up to me to make persuasive arguments to open up a reasonable discussion on this issue. I am trying to do so and, to that end, there is an informal Council meeting in Hungary next week where we will start the process.

Michael Moynihan (Cork North West, Fianna Fail)
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If, as the Minister said, France and Germany are opposing quota increases and trying to maintain farm-gate prices, is it not better to have an orderly expansion of the European-wide dairy industry, rather than when the quotas go post-2015? Is there a political point to be made that it is bowing to the inevitable at European level?

Simon Coveney (Cork South Central, Fine Gael)
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That point needs to be made and I will do so. We need to make, and are making, reasonable arguments on interest rates relating to stability funds but unfortunately these things take time. Sometimes we are dealing with stubborn viewpoints in other European countries.