Eugene Regan (Fine Gael)

While I thank the Minister for that exposé on the dairy sector, it is disappointing he did not address the motion before the House. He spoke about many issues concerning the dairy sector. We all recognise its importance and the serious situation it is in. What part of the Fine Gael motion does the Minister disagree with? It calls on the Government to deliver a comprehensive framework in consultation with the industry to bring about the restructuring necessary to deliver long-term viability to the sector. I presume the Minister is not in a position to provide such a framework for the industry. The motion also calls for the introduction of export credit insurance measures in line with other EU member states and seeks co-operation from financial institutions. The Minister has indicated this is taking place, yet the motion is being opposed. It also calls for action to bring down input costs for producers. Has the Minister a problem with this proposal? Finally, it calls on the Government to negotiate more aggressive market support measures at EU level to deliver a price above the cost of production for Irish dairy farmers. I have to assume the Minister opposes these measures or is incapable of acting on the recommendations in the motion put forward by Senator Bradford and the Senators on this side of the House.

The Minister stated that the Government would continue to maintain close contact with the European Commission. That is not very profound and does not convince me we will get results. He claimed he raised this issue on a number of occasions at meetings of the Council of Ministers. There is also a condemnation of certain practices in the retail sector. The problem is that words are no good to the dairy sector. Action and real measures will lift the sector out of its current situation. We do not have a structural problem in the sector but a conjunctural problem that arises from the high price of dairy products in 2007 and the resultant increase in production. The resultant cyclical effect has caused a downturn in demand and a price which is now half the level of 40 cent per litre in 2007 and below the cost of production. The long-term sustainability of the industry is at stake. Since it is a cyclical or conjunctural problem, there is an onus on the Government and on the European Union to resolve it and assist the sector.

We recognise that the problem in the dairy industry is part of the broader economic trouble worldwide. The issues of credit, demand and food scares in China have all played into the collapse in demand. There is an onus on the EU and the Government to ensure the Common Agricultural Policy plays the role it is supposed to do, which is to even out the extreme volatility in prices. It is in the nature of agricultural markets to be cyclical, and counteracting this is the exact purpose of the CAP. The deregulation of the sector, in which the Government has acquiesced, is one of the roots of the existing problem. It is not providing the appropriate mechanisms to ease the extreme fluctuations in price. That is the position in which we find ourselves and is the cause of the problems dairy farmers and the general dairy sector face.

The chairman of the Irish Dairy Board, Mr. Michael Cronin, clearly pointed out the long-term damage that will be done to the sector if the necessary supports are not provided. Intervention for skimmed milk powder and butter, the private storage aid scheme and the reintroduction of export refunds has played a role in stabilising the market to some extent. However, it has not done what it was supposed to do - putting an effective floor on prices above the cost of production.

There is a danger if we do not have effective measures at EU level. Member states will provide aid to their own dairy sectors at the level of farming and dairy processing. The is a fear of the re-nationalisation of the CAP in the dairy sector. This was pointed out by the president of the ICMSA who expressed concern about this issue. A recurring theme when there are problems in the agricultural sector is that countries that can afford to subsidise their agricultural sectors will do so. We in Ireland, however, will be unable to do so and, ultimately, will lose competitive advantage. This is one reason the Government must be more effective in securing measures at EU level to assist the markets.

The Minister has mentioned that supermarkets in the retail sector are not playing their part. The reality is that prices to producers have dropped dramatically but prices at the retail level have not dropped dramatically. The margins are extreme. It is not a question of a code of practice; it is a question of applying the rules of competition and the abuse of market power. There is a disjunction between competition policy as traditionally applied and the fact that each of the supermarkets in this country has less than what is regarded as a dominant position. This creates a problem but, nevertheless, supermarkets at retail level have a disproportionate effect on the return to farmers and are taking a disproportionate margin compared with what is returned to the dairy farmer. The Council of Ministers has asked for a study on the functioning of the food chain.. This is an issue that must be addressed more effectively by the Government.

The IFA has set out its case very clearly, as have the Irish Dairy Board and the ICMSA. There is a consensus that we have a major problem in the dairy sector. To suggest that everything that can be done is being done is not good enough. We need effective action from the Government and we need results.