Séamus Kirk (Louth, Fianna Fail)
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Thank you, a Cheann Comhairle, for the opportunity to raise the matter here. I have raised it a number of times with the Minister because of its relevance to the industry at present.

Irish farmers will face a superlevy fine of approximately €20 million as the industry exceeded the milk quota by approximately 1% last year. Europe will be around 5% under quota this year. Under the current inflexible quota system, Irish milk production is stagnating while New Zealand, a major competitor, is ramping up production by between 8% and 10%. Denmark took over the European Council Presidency in January 2012. Denmark has exceeded the milk quota in the past two years. Five member states - Denmark, the Netherlands, Austria, Cyprus and Luxembourg - exceeded their dairy quotas in 2010-11, resulting in a superlevy of about €55.57 million, despite the fact the EU was 6% under quota. While places like Bulgaria only filled 50% of their quota and our neighbours in Britain under-filled their quota by 10% in the 2010-11 marketing year, Irish farmers are being placed under serious pressure to curtail production. In light of the fact that Ireland came only slightly under quota for the 2010-11 milk quota year and in view of increased production in the Irish dairy industry, we are calling for the introduction of a European wide quota system replacing the current national quota system. This would allow for an orderly expansion of the Irish dairy industry prior to the ending of milk quotas in 2015.

During Question Time on 6 October 2011, the Minister, Deputy Coveney, indicated there were prospects for some agreement on butterfat correction. He stated that Ireland would be able to increase its quota in 2011 by between 1.5% and 2% in addition to the 1% we receive under the soft landing policy. I want to know from the Minister of State if any progress has been made on this matter.

Adjusting the butterfat correction is one method to address the production problems. Another way to address the issue is allowing the industry to sell outside of the EU, thus avoiding distorting the market at home. These destination guarantees would appease opponents of changing the system due to their concerns about milk prices. This would empower the European dairy industry with an orderly expansion that could protect farm-gate prices by enabling market growth rather than through wastage of product, market stagnation and constrained productive capacities.

The Irish dairy industry is at a critical stage. It has the capacity to make a significant contribution to the regeneration of the Irish economy at this time. The opportunity exists to do it. We need to examine the quota system to allow for increased production and we need to do that urgently.

Shane McEntee (Meath East, Fine Gael)
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I thank the Deputy for raising this issue at the right time of the year, the beginning of the quota year. We know that if it were not for the price of fattened cows and the prices secured for the export of cows to England that young farmers in particular would have been badly affected. They were encouraged by dairies and others in the industry to enter the industry and then they were abandoned when got into a super levy situation. We all have to join forces to ensure something is done about it.

The decision to abolish milk quotas with effect from 1 April 2015 was made in the context of the CAP Health Check in 2008. Ireland strongly supported their abolition on the basis that quotas were widely regarded by both the Irish dairy sector and market analysts as a brake on the potential of the Irish dairy sector to respond positively to market opportunities. In addition to bringing an end to the quota regime, the health check also provided for a soft landing towards the post-quota situation, with an expansion in annual production allocations through five 1% annual quota increases and an adjustment in butterfat content calculations, the results of which mean an overall increase of about 9.3% in the 2014 national quota allocation compared to that of 2007.

Strong market prices over the past year and the prospect of a quota-free environment post-2015 have meant that remaining within quota has been a challenge for farmers who are preparing for the new regime. This combination of factors has resulted in high milk production levels in particular during the past month and Ireland is likely to incur a super levy fine for the first time since the 2007-08 milk quota year. The precise level of the oversupply has not yet been established but the Department expects to be in a position to publish an estimate shortly. The levy is 28.6 cent per litre over quota and hopefully it might be around half of the figure the Deputy mentioned. Ultimately, responsibility for the management of milk quota rests firmly with milk producers whose responsibility it is to ensure that the enterprise produces within quota. It is on the basis of this clear understanding that the milk quota regime has operated since its establishment in 1984.

Since entering office, my colleague, the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, has been working hard at EU level to seek additional flexibility in the milk quota regime to allow Irish farmers to respond to the increased demands without incurring super levy fines. To that end he discussed the matter extensively last year with other EU agriculture Ministers, both bilaterally and at the Council of Ministers, and with the Commissioner. Furthermore, officials from the Department have raised and continue to raise this issue at every available opportunity at appropriate EU level meetings, and at bilateral meetings with other member states.

Among the options discussed in regard to a soft landing are to have the front-loading of the remaining quota increases, a reduction in the super levy, a further reduction in butterfat correction levels, or a kind of EU flexi-milk arrangement which the Deputy mentioned, which would operate provided EU production overall was within quota.

Most attention has been focused on the butterfat correction, primarily on the basis of administrative and procedural simplicity, which has the potential to increase the quota available to Ireland by approximately 2%. A coalition of member states involving Ireland, Denmark, the Netherlands, Belgium and Cyprus formally put a specific proposal to the Special Committee on Agriculture for an adjustment to the butterfat correction mechanism. Unfortunately, the Commission has consistently resisted attempts to reconsider this issue, as it has resisted attempts to revisit the outcome of the 2008 CAP Health Check agreement in an overall sense. This is a view which is supported by many member states, who are firmly opposed to any further adjustment to the health check agreement.

It is also the case that only a minority of member states are likely to be adversely affected by the current quota restrictions. Therefore persuading a qualified majority to agree to an adjustment of the current regime, which was itself agreed after a protracted and difficult negotiation, represents a significant challenge. There are currently no signs of a breakthrough and it is critically important that milk producers have realistic expectations in this regard.

Consequently the Minister and his Department have consistently advised Irish dairy farmers to continue to operate on the assumption that no further changes will be made to the milk quota arrangements agreed in the context of the CAP Health Check. This is extremely important and I cannot emphasise strongly enough that farmers must continue to make this assumption in arranging their affairs in 2012.

During the health check process the Commission undertook to carry out market reviews before December 2010 and December 2012 to further consider the conditions for the smooth phasing out of milk quotas. The 2010 review concluded that there was no reason to revisit the health check decisions with regard to the gradual increase in quotas. This is not a view with which either the Minister or I concur, and it is intended to keep this issue high on the agenda, to ensure that the change in the milk market situation, both within the EU and globally in the intervening two years, and this year's events which will result in farmers from a number of member states suffering super levy fines, are fully taken into account by the Commission.

Exports of dairy products in 2011 were valued at €2.66 billion, an increase of 17% on the previous year. Ireland already has access to markets worldwide and exports dairy products to more than 80 countries. My ministerial colleague, Deputy Simon Coveney, has been extremely active in increasing the profile of Irish dairy products in international markets in order to ensure there are profitable outlets for the increased production after 2015. He is at present leading a trade delegation to China and dairy features significantly on the agenda.

While there has been some moderation in dairy prices globally in recent times, the medium and long-term prospects for the sector are strong, and I am confident that with the abolition of quotas, the Irish dairy sector can position itself to take advantage of the increases in global population and demand over the next ten years. I can assure the Deputy that the Department of Agriculture, Food and the Marine and its agencies will continue to play their part in providing an appropriate framework to support the development of this critically important industry, and that the Minister will continue to press at EU level for a further adjustment to the milk quota regime in order to ease the transition to the post quota-situation for Irish farmers.

It is important in the next six months that everybody concerned, including the Deputy who is totally committed to agriculture, continues to raise this matter on a daily basis. We have a responsibility to do this and to get other member states to support us because many dairy farmers, particularly young dairy farmers, need that help.

Séamus Kirk (Louth, Fianna Fail)
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There is immense opportunity for growth in the dairy industry and that has been confirmed by the statistics the Minister of State has given. Exports last year were worth €2.66 billion, an increase of 17% on the previous year. Food Harvest has envisaged a 50% increase, therefore, the potential for growth clearly exists. At a time when there is underproduction in other states, with our neighbouring state, Britain, underfilling its quota by 10% and Bulgaria only filling 50% of its national quota, clearly there is an opportunity to do what I seek. I cannot comprehend why we cannot convince the authorities at Community level of the merit of the arguments we can advance. The €20 million super levy fine and the lack of progress on the butterfat correction are a sad testament to the Government's failure in this area. There must be a redoubling of efforts. If it takes a strong diplomatic initiative to achieve these objectives, that is what we need. This coming 12 months is vitally important. If we can get a breakthrough on this, it will be of huge benefit to the economy of this country not to mention the agricultural industry.

Shane McEntee (Meath East, Fine Gael)
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We have an opportunity in 2012 to exert pressure. Nobody would like there to be a euro of a penalty in a super levy. I do not have the figures to hand but I hope it will not be as high as €20 billion. I agree with the Deputy that it should not happen but I can tell him that the Government is doing its best. We have an opportunity to raise this issue and I ask that the Deputy's MEPs and Members of all parties act on this. The butterfat correction is one way of doing this and the other way is to front-load the yearly increase. I can promise the Deputy that I, my colleagues and everyone in the Department will do everything in our power to help alleviate the position, particularly for young farmers whose livelihoods were nearly destroyed last year because of bad management.