Paudie Coffey (Fine Gael)

I welcome the opportunity to formally second the Fine Gael motion which is timely in the light of the crisis facing the diary sector. I welcome the Minister to listen to the debate and hear the musings and thoughts of Senators on all sides of the House in reflecting on the reality on the ground. Like us, I am sure he has met many farmers who are suffering on a daily basis in the current economic climate. We are dealing specifically with the crisis in and the challenges facing the dairy sector.

I am disappointed that the Government parties decided to table an amendment to the motion which is a reasonable one. It calls on all stakeholders in the dairy sector to ensure a meeting of minds to work out mechanisms to try to assist the sector in these challenging times. We recognise the crisis facing the dairy industry and the threat posed to its future viability. This is accepted across the House.

Milk prices have fallen to a low of 20 cent a litre, significantly short of break-even point for suppliers. A young farmer with whom I spoke today told me he received just over 20 cent a litre, an all time low for him as a producer since 1983. It costs him 27 cent a litre to produce milk through the achievement of great efficiencies. One has to take account of such losses in the business plan of any business or small enterprise. Essentially, farming is a business which needs to pay its way. In this instance, the farmer concerned needs to be able tomake a living for himself and his family.

All the forecasts indicate that for the foreseeable future farmers will run their enterprises at a loss. That will introduce major cash flow problems and problems concerning the viability and financing of farm enterprises. That is the reality. Some farmers who had hired labour had to let them go because they could not afford to pay them. That is one the effects of the crisis. The farmer to whom I spoke has reduced resources with which to run an efficient farm enterprise and can no longer meet labour costs. He has to milk more than 200 cows on his own and has a young family. As Senator Bradford said, the gloom is closing in on such farmers. Many of the people concerned are extremely progressive and have invested in their farms which they inherited, have been in their families for many generations and have contributed enormously to the local rural economy. However, they are now in a position where they have little hope.

The people to whom I refer have been extremely critical of the banks. I ask the Minister and the Government to take up this matter with the banks, particularly in circumstances where conditions are being put in place in respect of guaranteeing and bailing out such institutions. Banks are trying to restrict the flow of cash to farmers and small businesses. On almost a daily basis there are reports about viable propositions which have been evaluated and approved by expert accountancy firms and others being put to the banks, but the latter continue to restrict the flow of cash to these enterprises. This is having a major effect on farmers.

Many of the farmers to whom I have spoken are of the view that if the current trend continues, their businesses could go to the wall within a year or two. As a result of the investment they have made in their farms, they have large mortgages which they must repay. If labour, energy and other related costs are as high as appears to be the case, the dairy sector - an indigenous industry of which we have always been proud and which is responsible for a quality product readily identifiable as being Irish - is in trouble.

I live in County Waterford which is also home to over 790 farmers. The dairy sector is huge and the average quota in the constituency is over 300,000 litres. If these farmers are to suffer, the heart will be torn out of the local economy and the pressure on their families and local shops and other rural enterprises will increase. A large proportion of these difficulties stem from the lack of credit available. Processors are not handing over milk cheques as quickly as they did in the past. In addition, the amount of money on offer from the processors has decreased. One farmer to whom I spoke informed me that his milk cheque for 2008 was €16,000, whereas that which he received for the current year only amounts to €12,000. The processor - Glanbia - takes over €4,000 out of it. In such circumstances, there is very little left for the farmer to run his business and provide for his family. The position is that basic.

There have been delays in the payment of farm investment grants. In addition, the 40-40-20 percentage basis on which such payments are made has given rise to difficulties. Some farmers have received the initial 40%. However, they badly require the next tranche of 40% in order to keep their businesses in operation.

Action is needed in the various areas to which I refer. The banks have a large part to play in this regard. The Government also has a major role to play in ensuring the banks restore the flow of cash to these farmers. If the latter does not happen, many of their enterprises will go to the wall.

Many processors and co-ops have come under fire with regard to the way in which they operate. However, I must point out that in comparison to those enjoyed by retailers, their margins are quite small. This is despite the fact that they carry out much of the work in the form of collecting, processing and pasteurising milk. There are many overheads and energy costs with which they must contend in this regard. They are then obliged to deliver the finished product to retailers, supermarkets, etc. It appears that processors only obtain 16 cent for each litre of milk produced and are expected to pay for all of the various activities to which I refer out of this. The retailers make approximately 53 cent a litre of milk. That is a huge margin compared to those of farmers - the primary producers - and processors.

The Fine Gael motion represents an attempt to try to bring all sides together, in a political sense, in order that we might develop mechanisms - whether nationally, through the European Union or farm organisations working in co-operation with producers, processors and retailers - designed to keep the sector alive. If the current level of unsustainability continues, not only farmers but also processors will go to the wall. Processors are sometimes obliged to make difficult decisions and scale back their operations. The latter is due to viability issues. In the United Kingdom one of the major processors went out of business last year. If the same was to happen here, there would be a major void in the economy. There is no point in producing milk if there is no one available to process it and sell it on to retailers.

At the recent protests in Luxembourg the chairman of the Irish Dairy Board, Mr. Michael Cronin, delivered a stark warning when he stated long-term damage would be done to the dairy sector unless the European Commission continued to support farmers and processors through the current income crisis. His comments represent a serious call for help. The Houses of the Oireachtas and the Government can play a part by lobbying the European Commission to support the farming industry during this critical period. The European Union plays an important role in supporting Ireland's economy and its agri-sector. However, it is imperative that the EU authorities, like politicians in this country, think outside the box in developing mechanisms to try to ensure viability is maintained in the dairy sector. In the current climate farmers cannot afford to be left isolated.

As stated, my main focus is on the banks and the restoration of cash flow. In order that we might navigate our way through the difficulties in which we find ourselves, it is important to ensure the banks will restore the flow of cash to farmers. If the Department makes the payments now due to farmers under the farm investment scheme, this would alleviate, to some degree, the problems encountered.

Other jurisdictions have put in place insurance schemes in respect of milk prices. Under these schemes, when milk prices are high, a levy is taken from farmers who do not receive the same high level of pay for the milk they produce. Subsequently, when there is a downturn - as with everything else, the price of milk goes through cycles - a subvention can be provided. Did the officials in the Minister's Department ever consider putting such a scheme in place? I accept that developing a scheme of this nature involves thinking outside the box, particularly in the context of ensuring viability by imposing a levy when times are good in order that a subvention might be provided when they are not.

I will be interested in hearing the Minister's views on this matter. As parliamentarians, we all have views to which attention must be paid. Many of us represent members of the farming community. It is important that the people concerned have a voice in the national Parliament and that we respond to the difficult plight in which they find themselves.