Éamon Ó Cuív (Galway West, Fianna Fail)
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I thank the Minister of State, Deputy Ann Phelan, for coming to the House to debate this important issue. The decline in Common Agricultural Policy funding means that the issue of price has to take centre stage. I have been telling the Minister for three years that it is absolutely vital for him to realise that the price issue cannot be left simply to market forces. The reality is that there has been a significant decline in the price of milk, which is currently 22% lower than it was in July 2014. The decrease we have had here is slightly bigger than the average decrease of 18% across the EU. I will put that in monetary terms. According to the ICMSA, every cent that is cut from the farmgate milk price is costing the average farmer between €3,000 and €6,000 per annum. For the average dairy farmer, that means a loss of approximately €30,000, which is a huge amount of money. Given that the processing cost is 28 cent per litre, it is clear that we are approaching the point at which no profit will emerge from the production of a litre of milk. People with low gearing ratios who have been in farming for a long time can probably ride it out, but this is a significant challenge for people who have got into very heavy investments. I will elaborate on the major worry in this regard. We see the uncertainty in the world. Russia imposed a sudden ban because of things that could not have been foreseen three or four years ago. I will explain what the Minister has allowed to happen. The intervention price in the EU is 20 cent a litre. We need a safety net at 28 cent a litre. In other words, the intervention price should be 28 cent a litre. An intervention price of 20 cent is nonsensical because that is the world market price anyway. One can always sell one's product at that low level.

We have seen a massive decline in sheep prices. I know the Minister of State will probably read the same answer that she was given to read in the Seanad yesterday, when she spoke about technology adoption programmes and everything else. We could have a big debate about EU schemes, but tonight is not the night for it. Therefore, the Minister of State can skip that part of her reply. The issue here is price. In other words, farmers want to get their price in the market. I am particularly interested to know what the Minister, Deputy Coveney, intends to do on two issues. If he does not make sure there are constant live exports to provide for competition in the market, we will be in a bottleneck situation where the market is controlled by a very small number of processors. This is particularly concerning because we do not have a food ombudsman here like they have in Britain. I have two questions. First, can the Government ensure we get the full capacity for live exports? We need to have markets for live exports, and live exports need to be facilitated in every way. Second, can the Government confirm my understanding that if one sends a 25 kg lamb into the factories to be killed, one will be paid for just 21.5 kg?

Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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That is correct.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I do not believe the factories are throwing 3.5 kg of meat into their skips. My view is that if one's lamb is killed at 25 kg, one should be paid for 25 kg. Can the Minister not insist at all the beef and sheep forums he is so keen on that farmers are paid on the basis of the full weight of the animals they send in? This seems to be another way for the factories in a monopoly situation to depress the price artificially. I would be really grateful if the Minister of State could address the specific issues I have raised. I refer to the issue of the intervention price, the question of what is being done about live exports and the need for farmers to be paid on the basis of the full weight.

Ann Phelan (Carlow-Kilkenny, Labour)
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The Deputy is right when he says I spoke on this issue in the other House yesterday. It is important for me to reiterate what I said on that occasion. The Deputy will appreciate that I am responding on behalf of the Minister, Deputy Coveney, who is in Galway today for bilateral meetings with the EU Fisheries Commissioner, Karmenu Vella. The Deputy has spoken about market developments in the sheep and dairy sectors, which are two of the most important elements of our agri-food industry. I will deal with the sheep sector first.

Primary output from the sheep industry is worth approximately €230 million. This value has grown significantly in recent years. More than two thirds of our output is exported. In 2014, exports totalled almost 48,000 tonnes, with a value of €218 million. The sheep sector in Ireland is heavily dependent on the export market because domestic consumption is approximately 30% of overall production. France and the UK continue to be our core markets. The French market is usually represents twice the size of the UK market. This reflects the strong demand and reputation in France for Irish lamb and the consumer preference in the UK for the British product. I am aware that the sheep farmers are vulnerable to price fluctuations. While prices are subject to the normal dynamics of the marketplace, the Government has provided a range of financial and structural supports to the sector that can help to make it more resilient and position it to avail of development opportunities.

On the issue of sheep prices, my Department monitors average sheep prices and sheep slaughtering figures on a weekly basis because the two are clearly inter-linked. While the recent movement on prices has been disappointing, it is not out of line with the trend experienced in other countries and there have been some signs of recovery this week. I am satisfied that recent movements do not point to a structural difficulty within the overall sheepmeat sector, but instead reflect the fluctuations that can happen at this time of year. The latest available figures show that after a strong first quarter in 2015, when the average Irish price was approximately 11% more than in the same period in 2014, prices have fallen back. This change in price in recent weeks is probably due to a combination of various factors. Supplies are in full flow at present due to seasonal factors. At the same time, there are poor market conditions. This is believed to be driving down average prices as measured on a weekly basis.

While this recent dip in prices is disappointing, it remains the case that at the end of June the average year-to-date price was running at approximately 4% ahead of the price for the same period last year. This week prices have started to rise sharply again, and demand for sheep and lamb from factories is very strong.

In recognising the vulnerability of sheep farmers, the Minister has introduced a number of measures to help drive on-farm viability. These include the sheep technology adoption programme, STAP, which was introduced in 2013 and has played a major role encouraging technology adoption on farms, while also requiring participants to undertake a number of farm tasks. These farm tasks make use of the best technologies available to sheep farmers in Ireland while also encouraging improved breeding. STAP is currently in its third and final year. An average of approximately 4,000 farmers have participated in the scheme each year, and total funding of more than €6.5 million was spent in 2013 and 2014.

Various other schemes in the rural development programme, RDP, are also of direct relevance to the sheep sector. For example, the green low-carbon agri-environment scheme, GLAS, will benefit sheep farmers, and they will continue to be significant beneficiaries from the areas of natural constraint scheme. A series of capital investment schemes is being introduced under the TAMS II scheme. It must also be remembered that the sheep grassland scheme, under which more than €65 million was invested in Irish sheep farms during its lifetime, has now been included in the direct payment of each sheep farmer under revised CAP arrangements. The Food Wise 2025 report launched last week also includes included a number of recommendations relating to the sheep sector, and the Minister will put in place a robust implementation process to monitor progress on implementation.

Éamon Ó Cuív (Galway West, Fianna Fail)
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One can do anything with figures, and unfortunately the Minister of State's colleague is a genius with this. The Minister says the change in price in recent weeks is likely due to a combination of various factors and the fact that supplies are in full flow at present due to seasonal factors. However, if there are a large number of sheep coming to the market at a low price and the price is very high in the spring, when there are very few sheep available, the high price is not much good to the farmer because of the number of sheep coming out. If one looked at the average price paid for sheep, one would find that it has been a very bad year for lowland sheep to date. What is being done to stimulate live exports to maintain competition for the factories?

The Minister said the market was subject to the normal dynamics of the marketplace. Of course farmers will say that because of what they call the hourglass effect of farming - that is, many producers and many consumers but very few processors and multiples in the middle. There is no normal dynamic in the middle. The processor and the multiples have overweening power. It is interesting that the Minister's erstwhile colleague, Commissioner Phil Hogan, shares my concern about the price issue and about what can be done to curb the power of the small number of major multiples. All of the lamb goes to the Continental market; virtually nothing is exported outside the EU at present. I look forward to hearing the Minister's response on this.

I have a second question. Will the Minister of State accept that when the Minister amalgamated the sheep grassland scheme, particularly for hill sheep farmers, most of them were under €150 per hectare? By 2019, all of that money will be eroded because they will be at the €150 figure, but they would have been at that figure anyway. The way the Minister handled the grassland scheme is of no benefit to most hill farmers in the longer term. It was a disastrous decision. What is the Minister of State's view on that?

With regard to milk, there appears to be great confidence that the market will rise. However, it might not. I listened to a report about China yesterday. It said that China might have a classic stock market bubble of the same type that the US experienced in the 1920s. It is ordinary citizens who invested in the stocks and shares. If that is the case, purchasing power will go down. What contingency is in place if there is a collapse in milk prices? The best on offer at present is the intervention price of 20 cent, which is 8 cent below the production cost. What will the Minister do to get the intervention price up to 28 cent per litre?

Ann Phelan (Carlow-Kilkenny, Labour)
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The price situation in Ireland is broadly replicated in other EU member states, reflecting the global nature of the problem. Using cross-country comparable data from the European Milk Market Observatory, the most recently available complete data shows that the milk price in Ireland is, as the Deputy said, approximately 22% below the price in the same month in 2014 and slightly above the 19% decrease on average across the EU.

The MInister's focus now is on ensuring that the correct balance of policies and supports are in place so the Irish dairy sector can overcome the effects of volatility over the next period. The Minister will continue to push for the deployment and extension of EU market supports, such as aids to private storage and intervention, where appropriate. A number of other measures have been introduced by the Minister and the Government to assist Irish dairy farmers, including the introduction of a number of agri-taxation measures in last year's budget, such as extending the income averaging to five years, which will be of great assistance to dairy farmers wishing to manage volatility; the introduction of a scheme to facilitate the repayment of the

superlevy bill by farmers over three years, which the Minister expects will be heavily subscribed; engagement with Irish banks to ensure that access to credit for the dairy sector is available, competitive and responsive to market volatility.

A combination of these measures, allied to the investment and expertise of our dairy farmers and processors, means that the Irish dairy sector remains well placed to realise its potential in years to come and to meet the challenges of market volatility along the way. Both the dairy and sheep sectors are, and will continue to be, integral elements of our agrifood sector, and I and the Department are fully committed to their development.