Simon Coveney (Cork South Central, Fine Gael)

I do not have a script because I hoped this would be a question and answer session which Senators could get as much out of as possible, in terms of getting the information they are looking for. I will try to keep my contribution as brief as I can. We will spend the first hour on agriculture and the next on fishing. One session can eat into the other if that is appropriate; I am in the hands of the House in that regard.

I would like to focus on two things from an agricultural point of view. First, we are going through a very good time in agriculture. The year 2011 was a bumper one. Prices, by and large, were strong, with one or two exceptions. Markets are strong. If one was to measure the success of the agrifood sector in 2011 in terms of exports, one would find 85% of everything we produce has to find a home and buyer outside Ireland. One would have seen 12% growth.

Almost €1 billion extra in food and beverage exports from Ireland was achieved last year, which is impressive. More than a quarter of the total increase in exports from Ireland last year were directly attributable to agrifood. On the dairy side, exports increased approximately 17% last year on top of an increase of 17% the previous year, a 34% increase in the value of their exports from Ireland in two years. The exports include cheeses, milk powder, infant formula, yoghurts, nutritional drinks, ingredients for dairy foods and so on.

Over the past ten years, particularly over the past three or four years, we have seen our top dairy companies move away from commodity-based products to become food companies. Such companies include Glanbia, Dairygold, the Kerry Group and the Carbery group. They are now leading names in areas like nutrition, flavours and the development of new exciting products. That is very much where we want to go in terms of the food industry. The basis of that is primary food production from our farms, which need to produce quality, safe, reliable, consistent and sustainable products. That is the driver of all of the current policy direction in terms of efficiency and output. My brief is also about broader rural issues, but in terms of the business of producing food that is what we are about.

The beef sector also grew last year, not in terms of value but volume. A lot of the increase in the value of the food sector and income for farmers has happened because commodity prices for grain, dairy products, beef, lamb and even pigs have increased significantly over the past number of years. We have an obligation to try to build on the good fortune that we have in terms of commodity prices, which are catching up following a decade of stagnation in agrifood prices during the boom years in Ireland. The irony is that during the golden so-called Celtic tiger period farmers did not do particularly well. Now we are in a recession, European and global demand and food prices have caught up with a lot of other price inflation over relatively a short two-year period and we have seen a dramatic increase in the income of farmers to the tune of between 20% and 30% on average.

Having said that, farming is still quite a low income industry. The average income for farmers is approximately €21,500 a year. One has to take into account that half of farmers or farm families also have alternative incomes. There are not too many millionaires in farming unless they have sold land. Producing food for a living is a sustainable way of life and has become a more exciting business for people to enter. That is why we saw a 27% increase last year in the number of young people studying food science and agricultural science in our universities and colleges, which is a good thing.

Young people are now investing in upskilling and educating themselves to take over farms and become involved in research and development on food and beverages. It is a good sign for the future. We need to deliver for those people to ensure they have a future that is about expansion, efficiency, improving margins, getting more from the marketplace and perhaps relying less on the support schemes that are there, even though those support schemes are hugely important, particularly for certain parts of the country.

This is a sector that is going well. We will have another strong year. It will not be like last year or the year before in terms of this massive increase but if we can maintain a position where prices are strong, although we may have a slight weakening in some areas, particularly in dairy, prices should still remain strong in relative terms. We can concentrate this year on consolidating the gains that have been made over the past two years and work hard to upskill farmers in terms of the margins they make and the efficiency they get into their business.

The second important issue, on which I hope Senators will ask questions, concerns the Common Agricultural Policy. We are at the start of a process of reforming CAP and there is a whole series of elements to that process. From an Irish point of view, some of the proposals that are currently on the table from the Commission are very positive while others are of great concern. Perhaps we can tease out some of those issues, if Senators wish.

As far as I am concerned, there is one really big issue of concern in the current Commission proposals and there are many other issues where I would like to amend and improve what is being proposed. For example, around greening proposals, we would like to see change as we consider that to have 30% of the overall payment being applied to a greening payment is too high. We believe some of the conditions sought need to be more tailored for individual countries rather than being the same for everybody. Applying the same environmental or greening requirements to Cyprus as to Sweden does not make much sense when one is talking about an entirely different type of agricultural structure, a different climate and so on. I would like to see more flexibility in that regard. However, these are issues I believe we will resolve.

There are also issues around the reference year of 2014, with which the farming organisations have concerns, as do many Senators and the farmers they represent. I believe we will find solutions to that over time during the negotiations.

The big issue, however, is the proposal currently on the table for a redistribution of the single farm payment within countries and the fact this is based on an entirely new model from an Irish perspective, which is that it would be a flat rate, area-based payment. This means that instead of relying on historical productivity as the basis for the single farm payment, one simply moves to this blunt model whereby the person gets a payment based on how much land is farmed. Regardless of output from that land, its productivity or the investment requirement linked to the farm, the person gets the same payment. In other words, a person who has 60 ha on the side of mountain, with very low stocking rates in sheep, gets the exact same payment for those 60 ha as a person who may be farming a highly intensive dairy farm in Wexford, who needs to spend a lot of money in terms of upgrading and so on.

This is not in the interests of productivity or of the agrifood journey we want to create, which is around growth and jobs and expansion. We are working with the Commission to try to find a solution. While I believe we will achieve that, it will take a lot of political effort and imagination to come up with appropriate models that are consistent with state aid rules, competition law within the European Union and also broader world trade talks limitations. There are no easy solutions and those who pretend there are such solutions are deluding themselves.

That said, the big benefit of Commissioner Ciolos's visit to Ireland is that he has gone back to Brussels understanding in real detail the Irish problem as regards CAP, in particular this move towards a flat rate, area-based system that treats everybody the same regardless of productivity, whether one is a full-time farmer or hobby farmer or whether one is an intensive dairy or beef farmer as opposed to one who is essentially a landowner who just about qualifies as an active farmer.

What I am interested in doing is working in partnership with the Commission because Ireland will play a crucial role in terms of getting this final deal done. Everybody accepts the CAP final deal will not be agreed by the end of 2012 yet we are all hoping to have a new deal in place and implemented from the start of 2014. This means the deal must be done in the first half of 2013 at the latest. Ireland has the Presidency of the European Union during that period so it is our job to get the job done. We cannot do it on our own, however, and we will need to do it in partnership with the Commission and the European Parliament. I am determined to try to achieve that.

We are making it absolutely clear to the Commission and to other member states that Ireland is serious about putting the resources and effort necessary into getting a compromise that all 27 member states can live with, but also, and most importantly from my point of view, getting a compromise that will take the Irish industry forward in a positive way. We will not sacrifice Irish farmers to get a deal on CAP but, at the same time, we would like to be the country that gets this deal done because we think it is in the interests of everybody, including Ireland, that it is done next year rather than pushing it back for two or three years. Who knows where the EU will be then? Who knows where the political priorities may be then in terms of the allocation of significant budgets to the agrifood sector? At present, there is a political appetite to protect CAP funds and to keep a very significant portion of overall EU funding in the CAP bracket to support food production and to support farmers. While that appetite is there, we need to get the deal done.

If Members have questions on any issue, I will try to answer them. I believe this House can play a very useful role in making a significant contribution towards the review of CAP and, indeed, the review of the Common Fisheries Policy, CFP. Both policies are being renegotiated at the same time and both will hopefully come to a conclusion during the Irish Presidency, which is a very significant responsibility in regard to those areas of fishing, farming and the agri-food sector generally, which is the real heartbeat of the Irish economy at present.