Jackie Cahill (Tipperary, Fianna Fail)
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I congratulate the Minister on his appointment. We worked together when he was the Fine Gael shadow spokesperson on agriculture and I look forward to working with him in this Dáil term. The Minister has taken over responsibility for the agriculture sector when it is facing its worst crisis since the Economic War. Every sector of agriculture is under extreme economic pressure. The producers in the pigmeat and beef divisions are looking with trepidation at the possibility of a British exit from the European Union and the world trade deals that are being negotiated.

I want to concentrate on the immediate problems facing the dairy sector. Last weekend, farmers received their milk statements for April. Unfortunately, very few of them received a milk cheque. To take our two largest processors, Dairygold and Glanbia Industries Ireland, GII, they returned to farmers a net price of 20.9 cent per litre of milk, with 3.6% butterfat standard and 3.3% protein standard. I do not need to explain to the Minister that this price is significantly below the cost of production and is unsustainable in the future.

Looking at the market predictions from Ornua, there is no sign of improvement on the horizon. We are basing our premise on the survival of the fittest and that our dairy producers can withstand this storm. That theory will be put to the test this summer. With the level of grain prices currently, the production trends on mainland Europe will put that theory to the test. I have serious concerns that our producers will stand up as the lowest cost producers. It is a premise on which we have based many of our growth predictions, and I am concerned that will not come to pass.

The only practical way to increase milk prices in the short term is to increase the intervention price. There are many pros and cons in doing that. Some commentators say we will prolong the agony by having an increased intervention price, but is it better to try to prolong the agony and let the patient survive or terminate the agony and see many producers going into bankruptcy?

I suggest that at the next Council of Ministers meeting a dairy cow premium should be considered for the first 50 cows, and that it should be triggered when milk prices drop below 28 cent per litre. That is a practical suggestion to provide some much needed cashflow for European dairy farmers.

Co-operatives, private merchants, silage contractors and artificial insemination, AI, companies will have to carry debt from their customers into 2017.

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We must examine a mechanism whereby they can get interest-free loans from the Government to enable them to deal with the large merchant debt that will be carried over due to the 2016 milk price. With bank repayments and farmers' other commitments, we must ensure farmers can be allowed a holiday from repayments without financial penalty. Many of our 17,500 producers have invested very heavily in the past two to three years in anticipation of the abolition of quotas and we must ensure they can come through this price storm.

At my clinics in Tipperary last weekend, I met three farmers who are being put under pressure to sell parcels of land in order to reduce their financial commitments to banks. I have written to the Minister for Finance already and there is a mechanism in place whereby if a person is consolidating a farm holding, he or she may sell and purchase land free of capital gains tax. I suggest that the Minister might push at Cabinet the notion that farmers forced to sell parcels of land in an attempt to restructure bank debts would be allowed the same exemption from capital gains tax. It would only affect a minority of farmers but it would be of great help to them if they could go with a full sale price of land to the banks in order to restructure debts.

Our industry still has much potential. Our 17,500 milk producers can contribute greatly to the rural economy but we must put a structure in place to ensure that those farmers survive this current and major income crisis. If we are to meet the targets we have put forward in Food Harvest 2020 and Food Wise 2025, we must have practical suggestions such as those I have put to the Minister in order to ensure that we come out of this calamity. We must allow rural Ireland and its economy benefit from the milk expansion as we had hoped.

Michael Creed (Cork North West, Fine Gael)
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I congratulate Deputy Cahill on his election to the House. I worked with him in the past during his leadership of the Irish Creamery Milk Suppliers Association, ICMSA, and I have always found him to be very practical and straightforward. His contribution in this debate is very welcome and I respect his voice in the context of the crisis faced by the agricultural community. He raised some very practical and sensible suggestions that will feed into our consideration as we work to ensure that we bring the agricultural sector through this crisis so it can be in a position to capitalise when markets pick up.

I am pleased to address the House on the issue of dairy markets, although it would be inappropriate for me to comment on the price paid by any individual processor. Nonetheless, I am fully aware of the pressures faced by dairy farmers. I am committed to working with all the players in the sector and colleagues both in this House at a European Council of Ministers and Commission level to address these issues and ensure we can continue to have a sustainable dairy sector.

Food commodity markets, including dairy markets, have been characterised by significant levels of volatility for a number of years. This trend has continued throughout 2015 and into 2016. Factors contributing to this in recent times include the Russian ban on agricultural imports and the softening of Chinese demand. It is interesting to remember that China is about to become our second-largest market for dairy produce. From a standing start only a few short years ago, it is now the second most important destination for our dairy products. There has also been increased production among key global producers, including the European Union. The longer-term global demographic and demand perspectives remain positive but 2016 will be an extremely challenging year for the dairy sector in Ireland and elsewhere. Market volatility provides extremes at both high and low prices. The challenge for the dairy sector is to ensure that farmers are equipped to deal with downward price volatility when it occurs. There is no magic bullet on this issue. The reality is that a combination of measures, both public and private, will be required to protect farmers from the worst impact of this volatility.

Farm efficiency is one element of the solution. In Ireland, we are blessed with a cost-efficient grass-based production system and my Department will - through Teagasc, knowledge transfer groups and bodies such as the Irish Cattle Breeding Federation and Animal Health Ireland - continue to invest significant resources in providing farmers with advice and technology designed to improve farm efficiency and reduce production costs. The objective is to make farm businesses more resilient in times of downward price pressure and more profitable and competitive in good times. I have also called on the EU Commission to temporarily suspend anti-dumping tariffs on imports of fertilisers from third countries in order to reduce input costs for Irish farmers. We estimate that this would save approximately €14 per tonne of fertiliser, which would be significant for any holding.

The single farm payment provides some measure of income stability and EU market support measures also have a role to play. At EU level, Ireland has been to the forefront in calling for the deployment and extension of market support measures. This has resulted in the extension of measures such as aids to private storage and intervention for skimmed milk powder and butter. It has also resulted in additional direct payments of €27.4 million for Irish farmers, which were co-funded by the Exchequer and the European Union.

With respect to direct payments, I have asked the Commissioner to make the maximum possible provision for advance payment of the €1.2 billion in direct payments to Irish farmers. The latter would be a particularly useful measure to improve cash flow for farmers at this time. We should seek EU funding for further direct targeted aid for dairy farmers. I acknowledge that finding these funds within the European Union budget will be a real challenge but in light of the very difficult circumstances in which our farm families now find themselves, I am determined to exert the maximum possible pressure on this point. With regard to intervention, I recently asked the Commissioner, Mr. Phil Hogan, to increase the volume of skimmed milk powder that can be purchased into intervention at a fixed price. I understand he has now signalled his intention to increase the skimmed milk powder volume from 218,000 tonnes to 350,000 tonnes, which is a welcome development.

These measures are not enough on their own and the dairy sector must look at the development of new tools, including fixed price contracts, futures markets and more flexible financing arrangements for farmers. Many processors are using fixed price contracts and some are working on the development of the market price indices needed to support futures trading. Others have developed imaginative bonus payments and financing solutions. I would like to see more of this. As I have explained to Deputy Cahill, I will be meeting representatives from the pillar banks in the coming days in order to discuss the issue of the financial pressures faced by farmers.

As one of the proposers of the dairy forum, my goal is to ensure it continues to provide a vehicle for constructive engagement on relevant issues of concern for farmers and others in the sector. In this respect, the forum has come forward with some good initiatives for farmers already, including an initiative on improving cash-flow planning at farm level that will be rolled out shortly. I can assure the House that I will continue to engage constructively with all the stakeholders in the sector to ensure Irish dairy farmers are well positioned to deal with the current market difficulties and take full advantage of opportunities when the markets recover.