Seanad debates

Wednesday, 23 October 2013

Common Agricultural Policy: Statements

 

1:35 pm

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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I welcome the Minister to the House. In this debate, the contributions of group spokespersons are not to exceed eight minutes and those of all other Senators are not to exceed five minutes. The Minister will be called on to reply not later than 5.20 p.m.

Photo of Simon CoveneySimon Coveney (Minister, Department of Agriculture, the Marine and Food; Cork South Central, Fine Gael)
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I am happy to answer any questions Members have. It is hard not to be crestfallen when I walked into the Chamber and everyone else left. I take it that is not a reflection of the interest, or lack thereof, in agriculture or the Common Agricultural Policy, CAP. It is hard to follow the Taoiseach.

I wanted to put on record a statement of where the CAP is and then we can have a question and answer session for as long as Members want. I can get under the skin of some of the issues if Members want a deeper understanding. I am very pleased to have an opportunity to address Members on the state of play of reform of the CAP. I would first like to make some general comments on the outcome of the negotiations and refer briefly to some of the main features of the reform package before explaining where we currently stand as we move towards implementation in an Irish context. In overall terms, the agreement reached on 26 June is characterised by three broad themes. The first is a greater emphasis on sustainability through Pillar 1 greening measures and Pillar 2 environmental measures. The second is generational renewal through supports for young farmers under Pillar 1 and the option of supports for young farmers under Pillar 2. The third is a continuing move towards greater market orientation, with support measures and market intervention measures used only as a safety net. All three elements are in Ireland's interests as a country building markets for our products outside, and within, the European Union.

Moreover, the agreement includes a range of flexibilities that allow member states to pursue targeted policies suited to their individual circumstances and agricultural production systems. In addition to the method by which payments are redistributed within member states, these flexibilities include the options of a small-scale farmer scheme, a redistributive payment favouring small to medium-size holdings, coupled payments and additional supports for areas of natural constraint.

Parts of the CAP agreement hinged on the parallel negotiations taking place on the multi-annual financial framework, MFF, for the next EU budget from 2014-20. Although the Heads of State and Governments reached agreement on the MFF at the European Council on 7 and 8 February, final endorsement of the MFF elements of the CAP package was only obtained from the European Parliament at the end of September. Under the MFF agreement, the expenditure ceiling for Heading 2 of the CAP was set at €373 billion. While this represents a reduction of over €14 billion in comparison to the Commission’s proposal, Heading 2 has been protected to a far greater extent than other headings. For Ireland, the CAP will deliver in excess of €11 billion over the next seven years.

Turning to the main features of the reform package, the key issue for most member states, including Ireland, was of course the distribution of direct payments within member states, which we have discussed in this House on more than one occasion. We faced proposals from the Commission for a mandatory movement to a flat rate of payment per hectare. This could have had very negative effects on our capacity for sustainable growth and production. However, the institutions ultimately agreed that member states will have the option to apply a partial convergence model recommended by Ireland.

Again, I would have discussed this with many interested parties, including in this House, in terms of how the alternative convergence model would work. The scheme will be subject to a minimum payment per farmer of 60% of the national or regional average payment per hectare by 2019. Member states will also have the option to limit to 30% of the farmer's initial payment the amount redistributed through convergence. In other words, there are two tools. First, one can limit the amount that any one farmer could lose. Second, one can simply apply the convergence model adding a guaranteed minimum payment for everybody, as the Irish model suggested.

This outcome is a reasonable and balanced compromise that has satisfied the demands of members states as well as accommodating the concerns of the European Parliament. It also represents a very good outcome for Ireland. The partial convergence model, combined with the minimum payment would lead to a redistribution of about one third of the amount that would have resulted from the Commission's flat rate proposal. This will allow us to achieve the twin objectives of making the direct payment system fairer for those currently on low payments, while not undermining the efforts of those on higher payments to develop their farm enterprises. Of course we are free to redistribute more if we wish.

I was pleased with the outcome of the negotiations on greening of the CAP. As Senators will know, I have always supported the Commission's desire to imbue the direct payment system with a stronger environmental charter or character. For this reason I warmly welcome the balance struck between members states, the European Parliament and the Commission on the practical implementation of the three proposed greening criteria in Pillar I.

I also agreed with the decision to ensure that there can be no double funding of the environmental measures under Pillars I and 2. I am particularly pleased that the option to apply the greening payment as a percentage of each individual farmer, as proposed by Ireland, instead of a flat rate as this will limit the redistributive impact of the greening on the new direct payment system. In other words, there was a proposal that the greening payments would be paid to farmers on the basis of an average flat rate per hectare. Instead, we have the option of taking 30% of a farmer's payment and making it the greening payment. That creates the same incentive for all farmers to adopt the greening criteria whether one gets high or low payments per hectare.

Farmers will also be assisted in getting used to the new system by the fact that penalties for non-compliance with greening will not be implemented until the third year of the new direct payments regime. In other words, everyone has plenty of time to adapt.

I was particularly pleased with the agreement to introduce mandatory top-ups for young farmers, which was an Irish objective from the outset. In fact, it was an Irish idea from the outset. I have argued strongly that it is vitally important that we encourage generational renewal in Irish agriculture. Ireland has been one of the first member states to propose such a payment. Irish voices were very much part of the debate and included Macra na Feirme and other farming organisations.

There were other important aspects to the agreement that covers the broad range of instruments applicable to the agricultural sector. Let me give an example. A new framework to draw up rural development has now been agreed. In addition, programmes must contribute to the achievement of three headline objectives which in turn must be pursued through a set of priorities that includes the enhancement of farm competitiveness and the support of a climate resilient economy. A minimum of 30% of funding must be spent on environmental measures. However, flexibility is again the watchword with members states able to choose from a wide range of measures.

I shall mention the ongoing move towards a greater market orientation of the CAP which characterises this reform agreement. This is highlighted by the abolition of sugar quotas by 2017 and by confirmation that milk quotas will cease in April 2015. In addition, market support measures, in general, are to be used as a safety net only. For example, export refunds are to be deployed in exceptional circumstances only. Greater flexibility is also given to the Commission to intervene in exceptional circumstances. A special crisis reserve will be availed of where conditions go beyond normal market developments.

One of the lessons learned from the past, particularly in 2009 when there was a collapse in milk prices, is that we do have to give the Commission the powers to intervene quickly and decisively to put a floor on prices in order to protect primary producers, namely, farmers, from a price collapse.

After the June agreement the European Parliament held out for further negotiations on multiannual financial framework, MFF, related aspects of the CAP reform package. These were agreed with the Council and Commission at the end of September and endorsed by COMAGRI on 30 September. It remains for the European Parliament to adopt the package at its plenary session to be held on 18 to 21 November, before formal adoption by Council in December.

Similar arrangements are expected to apply to the adoption of the transitional regulation that contains measures that will allow the direct payments system and rural development measures to be implemented in 2014. In addition, it is expected that the European Parliament will also adopt the MFF at its plenary session in November.

In the meantime, we in Ireland have already turned our attention to the implementation phase. As I mentioned earlier, member states have been given considerable flexibility to implement the CAP reform agreement in a way that best suits their individual farming circumstances.

Last July I initiated a process of consultation with all relevant stakeholders and interested parties to ascertain their views on the most appropriate application of the direct payments regulation in Ireland. A total of 44 questions were put to potential respondents across a range of issues, all of which I am sure the House is familiar with. They include things like the allocation of entitlements, the structure of the basic payment scheme and the convergence of payments, the implementation of greening provisions, voluntary coupled support, and the young farmers’ and small farmers’ schemes. A total of 46 submissions were received by the deadline of Friday, 20 September. My officials and I are currently giving careful consideration to all of the responses. They are quite varied and reflect the different positions and circumstances of the various representative groups and individuals who submitted them. Modelling of the various scenarios that have arisen is also ongoing in the Department.

I hope to be in a position to make decisions across a range of alternatives over the next few weeks. It is imperative that the shape of the new direct payments regime is clear by the end of 2013. We have a very challenging schedule to meet if we are to ensure efficient processing of applications for payment in 2015. Even though the new budgetary period commences on 1 January 2014 we will have a transitional arrangement. It is a carryover of the existing CAP policy that will have a new budget next year. The new policies will kick in at the start of 2015 for the next six or seven years.

As regards the rural development regulation, I mentioned earlier that there is a broad range of measures from which member states may choose. These include knowledge transfer, innovation, young farmers, forestry, agri-environment and climate schemes and Leader-type operations.

Work on the development of the next rural development programme is already well under way. An initial consultation process was launched in 2012, and written submissions were received from over 80 stakeholders. These submissions have been analysed by the Department and have fed into the development of a strengths, weaknesses, opportunities and threats, SWOT, and needs analyses. Last July a second consultation was held where stakeholders attended a full day workshop. Based on the outcome of these processes the drafting of a new programme is being advanced by the Department. It is intended that further stakeholder consultation will form part of this. I expect to make decisions by the end of the year and to submit a draft programme to the Commission in early 2014, if not before then.

To summarise, it is expected that the legal texts reflecting the various agreements of recent months between the three European institutions will be formally adopted in December.

This will coincide with the finalisation of the Irish arrangements for the direct payments regime and the rural development programme, both of which need further lead-in times before becoming fully operational across the EU from the start of 2015. Those of us who were debating the issue 12 or 18 months ago would have been very worried at the potential outcome of the CAP as it was then proposed. Many changes were made, all of which were positive, in terms of support for young farmers making that mandatory rather than voluntary in terms of a sensible greening proposal for Pillar 1, a flexible greening model, that ensured all farmers will have the same incentive to meet a basic benchmark for environmental standards when they produce food and a reasonable balance in respect of market supports and market interventions, where necessary, but still moving Europe's farming and food production systems towards a more globalised market, which is what Ireland wants. The outcomes from the political deal at the end of June suit this country in terms of what we want to achieve in our Food Harvest 2020 plan. We are using the flexibilities within the agreement to design a system that is most suited for Ireland. We are seeking views from all interested bodies and stakeholders. As we have had a stakeholders consultation process nobody can say they have not been asked their view on this issue. At the end of the exhaustive process, which has taken three years, I hope we the outcome will be clear and finalised by the end of this year. We will then have 12 months to plan for its implementation for the start of the following year. That time will be needed in terms of mapping, software systems, inspection programmes, design of new schemes and an information process to ensure farmers understand the schemes and the impact on their incomes.

The other big issue on which members may wish to ask questions is the budget for the rural development programme. What has been agreed under the MFF from an Irish perspective is that Ireland will get €313 million approximately each year for the duration of the next CAP. Of course it is the co-funding element of the rural development programme from the Exchequer that will determine how much money we have to spend on rural development programmes. If we were to maximise the EU drawdown, in other words draw it all down, when one looks at the minimum amount of co-funding the Exchequer has to make to draw down that funding versus matching that funding the gap is €400 million to €600 million. I suspect we need to make a case for an amount somewhere in between. There are some schemes that have 85% EU co-funding and some schemes that will be 100% co-funded and other schemes will only be 53% co-funded from Europe. Obviously that will determine in overall terms how much is spent through the rural development programme in the coming years. There will have to be a collective Government decision to approve an overall rural development package which I will bring to Cabinet at some stage. I look forward to questions from Members on any of the details.

1:55 pm

Photo of Brian Ó DomhnaillBrian Ó Domhnaill (Fianna Fail)
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It is always good to have the Minister in the Chamber because, unlike other Ministers, he comes in with a genuine agenda and is always willing to interact with members and answer questions. He has had a busy period in respect of the review of the Common Agricultural Policy and the Common Fisheries Policy which we are not discussing today. It is important that we have the opportunity to discuss the Common Agricultural Policy. The Joint Committee on Agriculture, Food and the Marine, discussed the matter in some detail yesterday while we prepared our submission for the Department on some of the key issues which are of concern. We all appreciate there were constraints in respect of the import and the reluctance of some member states to fund the multiannual financial framework and then the knock-on effect to the agriculture budget. It is regrettable that there will be a 3.3% cut on the Pillar 1 element to Irish agriculture under the new CAP. When inflation is added, given that it was running at the rate of 7% during the last period of the CAP, the relative cut to farmers is in the region of 11%. Even the real cut of 3.3% will mean a cut of €330 to a farmer on a single farm payment of €10,000.

I am glad the Minister mentioned Pillar 2 because it is important. Sometimes it is like playing football in the dark when one is trying to negotiate the payments for Pillar 1 without knowing what is available under Pillar 2 or how that money will be drawn down and what the co-funding availability and commitment from the Government will be because that will depend on the moneys available to various scheme under Pillar 2 whether agri-environment, the Leader programme, disadvantaged areas or whatever. I appreciate the Minister's closing remarks in respect of a Government decision on the co-financing of Pillar 2 but I hope there will be a real commitment to regional and rural development and that the Government will subscribe to 50% level of funding for Pillar 2. I am sure that is an objective the Minister will try to achieve. While I appreciate that some of the scheme may receive EU co-funding of 85% or 100%, on balance a real commitment must be shown by Government to rural and regional development. That can only be done where a meaningful co-funding mechanism is provided under Pillar 2.

In regard to Pillar 1, the Minister mentioned the budget which is a cause of concern. Any reduction in farm incomes against the backdrop of increasing prices and costs will prove negative for the industry. I have a number of questions for the Minister. Obviously a mechanism is built in for a voluntary capping of €150,000 on single farm payments. In reality that will have little impact in Ireland given that the vast majority of payments are under the threshold of €150,000. That is an issue on which I and my party would have a particular view. The cap should have been much lower and those funds should be redistributed within the sector. While the cap is voluntary in nature what are the Minister's view on it? I am aware it has been agreed at €150,000.

On the convergence issue, when the whole process commenced the European Commission was considering a flat rate system and the Department had different views. I felt there had to be a rebalancing of payments particularly to farmers in the west who suffered down through the years and smaller farmers who suffered due to the distribution of CAP on historical grounds. Farmers who reared and sold on stock for further grazing and the factory end were penalised by larger payments going to the bigger farmers and they were not able to compete.

The movement is towards 60% of the average payment, where the average payment per hectare will be approximately €150 or €152. Therefore, by 2019, every farmer would be on 60% of the average. The question is whether the Minister then has the scope to consider introducing a ceiling on the hectarage payments and whether that ceiling should be at a certain level. What is the Minister's view on that? I am not sure that scope is available, but my reading of the documentation gives me to understand it is. Should that be considered? There are farmers on payments of well in excess of €1,000 per hectare, while others are on very low payments per hectare and that has been the crux of the debate, particularly over the past number of months.

The link between productivity and single farm payments in regard to the level of hectarage payments should also be examined. All of the figures, including the latest figures from the Department, indicate there is no correlation or link between farmers with stocking density and those in receipt of high single farm payments. A table from the Department on the figures relating to the most productive farmers was discussed at yesterday's meeting of the Joint Committee on Agriculture, Food and the Marine and my colleague, Deputy Ó Cuív, has studied it in some detail. The majority of Irish farmers are on payments below the average of €250, but there are approximately 40,000 farmers in the category between the average and €400 per hectare. One could argue that they have been underpaid, because their production levels are extremely high. Is the Minister thinking of introducing a cap at €400 or €500 or €600 per hectare? Has he a figure in mind at this stage? Perhaps we can tease that out further later.

We all welcome the young farmers scheme, which is excellent. There is scope within the CAP to introduce a scheme for small farmers, which will mean they can receive up to €1,250 per year. Is it the view of the Department that this will happen from within the national budget? There is no mechanism built into the new CAP proposals for retirement. However, is there any way we can incentivise farmers to leave agriculture? Given that only 6% of European farm managers are under the age of 35, is there anything we can do to encourage older farmers to retire?

2:05 pm

Photo of Michael ComiskeyMichael Comiskey (Fine Gael)
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I welcome the Minister, Deputy Coveney, and thank him for coming to the House. I appreciate this opportunity to put on the record my congratulations to the Minister and his Department on concluding successful negotiations on the Common Agricultural Policy. The new CAP was delivered on time and puts in place a policy that is fit for purpose for agriculture in the future and consistent with the Europe 2020 and the Food Harvest 2020 strategies for growth and recovery. I am satisfied that the priorities of sustainable intensification of production, environmental stewardship and promotion of vibrant rural communities, which Ireland brought to the negotiating table, have been preserved with the outcome.

The CAP budget will represent close to 39% of the overall European budget, which means agriculture will remain at the centre of European policy initiative. As we know, Ireland will receive €11 billion from that budget over the term of this agreement. Under the new arrangement, direct payments will now be distributed to Irish farmers in a fairer manner than previously. Acceptance of the approximation model ensures a better compromise between smaller and larger farmers. The agreement strikes a difficult balancing act, ensuring uniformity between member states while allowing for a high degree of flexibility for them in the application of individual measures. This is a pragmatic approach in a complex system which relies on the co-operation of lot of actors. As the consultation process in respect of Pillar 2 continues, I know the Minister seeks to underpin the approach to rural development with the same level of fairness in outcome as was demonstrated in respect of Pillar 1. As we are all aware, Pillar 2 funding contributes in a significant way to the socioeconomic development of rural areas. This must remain the priority up to 2020.

It is important that the significance of CAP is not just viewed from an EU perspective. There are international demands in terms of competitiveness and safe food production. The new agreement provides a framework within which these aims can be achieved. Previous common agricultural policies have been responsible for modernising Europe and ensuring food security. The most recent package advances these policies, bringing with it new measures to encourage generational renewal together with enhanced supports for young farmers. It provides certainty of policy for years to come.

The new measures for young farmers are welcome, particularly given the low levels of agricultural land sales occurring annually. Young farmers hoping to expand must be given opportunities to achieve growth and to access land. The role of young farmers and small holders is emphasised in a number of welcome measures in the agreement. I note that the European Council of Young Farmers praised this package as the first reform to include a mention, not to mind a measure, for young farmers. I know that under Pillar 2 there is the prospect of further measures being provided for younger farmers by means of funding for business start-ups and for small farmers to avail of such start-up aid.

I welcome the role of the European Parliament in the process for the first time since the enactment of the Lisbon treaty. In giving the European Parliament a role in creating policy rather than the previous rubber stamp function, a more robust agreement has emerged. Once again, I thank the Minister for coming to the House today to discuss the agreement which is soon to be in place. It has been a long time coming, with the launch of public consultation on the future of EU farm policy commencing as far back as April 2010 and concluding during the term of the Irish Presidency.

Photo of Rónán MullenRónán Mullen (Independent)
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Ba bhreá liom fáilte a chur roimh an Aire. I welcome the Minister and thank him for his good work in the negotiations. The good news for Ireland is that our portion of the budget or our national allocation will remain broadly the same under the reformed CAP. The key changes relate to how the money is distributed and it is on this issue that much of the debate here will focus.

The Commission has promised us a more efficient CAP by simplifying administrative mechanisms without losing efficiency. All farmers will welcome simplification of the processes involved and less red tape. However, the new CAP makes significant changes to the distribution of single farm payments, affecting thousands of Irish families over the next seven years. Like others, I broadly welcome the changes that are being made. I come from a small farm background and see the need to protect life on the land and rural communities, but there is also a need to protect sustainable productivity.

Under the new system, support will be calculated on a per hectare basis, rather than linked to past productivity. The new CAP will see a number of countries, including eastern countries such as Romania and the Baltic states receive an increase in their entitlements as countries are brought towards a minimum payment. Now, for the first time, the greater part of EU money will flow eastwards as opposed to going to the traditional recipients. However, it is welcome that most of our allocation has been protected.

Individual member states will have to change the way they distribute payments. The report states that through the process called internal new convergence, farmers will be entitled to a minimum level of payment. I note what the Minister said in his speech, although I was not present to hear him.

It is the case that approximately half of Irish farmers who are currently on higher payments will see a dip while a slightly larger number, 60,000 farmers who are currently below the average, will see their payments increase. We await further details on how member states will manage the various rural development schemes, the Pillar 2 aspects which, of course, also form part of the Common Agricultural Policy. I join the call made by the IFA that the Government should commit to 50:50 co-financing of Pillar 2 schemes so that there can be a comprehensive package of rural development measures put in place for vulnerable sectors and regions and to encourage investment in agriculture.

I note that member states or regions may grant additional payments for areas with natural constraints, as defined under rural development rules, of up to 5% of the national allocation. This is optional and it does not affect the options available under rural development, but I hope the Minister can confirm that the Government will commit the maximum possible to assist farmers in marginal areas.

I take this opportunity to raise the issue of the recent EU Commission deal with the Government of Canada on a common free trade agreement. On 18 October, the EU and Canada reached a political agreement on the key elements of a trade agreement called the Comprehensive Economic and Trade Agreement, CETA. We are told that this agreement will remove over 99% of tariffs between the two economies and create sizeable new market access opportunities in services and investment. It should be noted that until the agreement is approved by the Council of Ministers and the European Parliament, it will not come into effect.

The concern I would have is that perhaps the EU traded away some of its and, by extension, Ireland's agricultural interests in order to protect other interests of the EU. In 2012, Canada was the EU's 12th most important trading partner accounting for 1.8% of the EU's total external trade. In the same year, the EU was Canada's second most important trading partner, after the United States, with approximately 9.5% of Canada's total external trade. Unsurprisingly, Canada is more reliant on the EU than vice versa. Thus, it would have appeared to any observer that the EU would have held the senior position in the negotiations.

If we look at the deal that was done, the pact would eliminate tariffs on almost all goods and services, set larger quotas for EU dairy exports and make it easier for EU car makers to export vehicles to Canada and for European companies to invest in Canada's uranium sector. I can certainly see the benefit, for example, as quotas are removed in dairy, for export of dairy products from the EU and from Ireland but, for Canada, pork and beef farmers would appear to be the biggest winners. Such Canadian farmers, once they change production and processing to meet EU rules, have gained a bigger share of a significant market. As far as Canada is concerned, we can say that a powerful food producer is gaining powerful access to EU markets. The EU will eliminate duties on a range of Canadian agricultural products from wheat to maple syrup. Canada will be able to export 80,000 tonnes of pork and 50,000 tonnes free of duties to the EU.

Canadian cattle ranchers are gearing up to export an additional €426 million of beef annually into the EU from 2015. Significantly, there is no limit on the value of the cuts that are exported. Thus, it is reasonable to assume that Canadian exporters will target the higher end of the market with select cuts and steaks. This fear was articulated by the Meat Industry Ireland group which stated that allowed the Canadians to cherry-pick the EU beef and pigmeat market by targeting higher value segments. Those producers are rightly concerned that the European Commission seemed to use access to the EU meat market as a bargaining chip, thus sacrificing EU agriculture in trade negotiations for gains in other sectors of the economy. If Canadian beef processors target the lucrative EU steak cuts market, could this deal undermine European beef prices? I agree with the Irish Cattle and Sheep Farmers Association, ICSA, beef chairman, Mr. Edmond Phelan, that the likelihood in this deal was that there would be more pain than gain for Irish farmers. In contrast, the Canadian beef farmers are describing it as a really good outcome for Canada's 80,000 cattle farmers.

CETA is the first trade deal that the EU has done with a G8 country and it is widely regarded as a scene setter for trade talks under way between the EU and the US. That is what I want to ask the Minister about. Is there a danger - if there is, it must not happen - that the Commission might repeat the agriculture market access concessions to Canada in its forthcoming negotiations with the USA? I would welcome the Minister's response on that. We cannot know what negotiations are ongoing with the USA. Like all free trade negotiations conducted by the Commission, the EU-Canada negotiations were held in secret and, arguably, were driven by Canadian and European big business that want market access rather than the concerns of maintaining rural communities or our interests in the beef markets.

I agree with the IFA that the Government must be a strong voice in Europe to resist pressure to liberalise trade for sensitive products such as beef and pigmeat. The Wikileaks cables showed the enormous pressure that the US diplomatic service is exerting to compel one-sided deals in which large volumes of beef and pigmeat, and other agricultural products of dubious quality, are imported into the EU while they offer modest market access for EU exports. The Government must insist that any imports from Canada fully meet EU standards on production, food safety and the environment which, as one must bear in mind, put significant costs on Irish farmers.

Finally, I would ask what assurances the Minister can give the House as part of the implementation of this agreement that those farmers who are affected will be able to avail of supports at either EU or local level. In Canada, the economic development Minister stated that they had commitments from the federal Government to address the potential negative cost and economic impacts to the dairy sector, specifically, to cheese producers. Are there similar commitments and will there be similar protections for Irish farmers?

2:15 pm

Photo of Jimmy HarteJimmy Harte (Labour)
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I welcome the Minister to the Chamber.

Coming from a rural part of Donegal, east Donegal, which traditionally was a strong farming area, I was always aware of the importance of farming. When I set up my own insurance business, I always knew that when farmers were doing well, everyone was doing well. Farming is so important to the local economy. My experience was that farmers usually spent the money locally and agriculture was one of the wealth generating areas of the economy in an area like Donegal. Europe, if it had its way, probably would want Ireland to be one big garden and not have the bother of having farmers in Ireland. They would rather have them based in large European farms.

We are fortunate that the Minister, Deputy Coveney, was taking over the Presidency when the CAP was being negotiated. People do appreciate it but they must realise the work he put into it, the input he makes and his knowledge of farming, the agrifood sector and the range of agriculture. It was important that we had him there at the right time, for instance, on issues such as the top-ups for under 35s. Only 6% of farmers throughout Europe are under 35. People might see it as good that people have moved away from agriculture but in Ireland we can specialise. We have the terrain and the expertise and we have marketed our food well. By having Deputy Coveney at the negotiating table, it was important for the future of agriculture in Ireland. If Lithuania had held the Presidency at the time, it may have had a different attitude to CAP. The policy has been negotiated in a fair manner. Given €1.5 billion is coming into the country annually, it is so important for local economies that are so dependent on welfare, farming or public service jobs. The cities, such as Dublin, Cork and Galway, are different where there are financial services and other sectors. For rural areas and the country as a whole, agriculture has provided the stable income for many communities.

Over the past 30 years, farmers have become much more environmentally friendly. The Minister probably will be aware, even though he is much younger than I am, of how farms were kept years ago compared to now.

Nearly all Irish farmers have a very respectful knowledge of the environment and complied very well with regulations, even though some might have had to be nudged in that direction. It is a win-win. Current agricultural practice in this country has come a long way from that in the last century, when farms were perhaps not as well maintained. However, that was not the fault of the farmers concerned but was probably due to the fact that not enough of them were going to education colleges. The future depends on young farmers continuing in farming and, perhaps, making their own niche within certain areas of the market. Ireland has a massive opportunity to market itself. It has a worldwide image of having a clean food industry and I hope the CAP will encourage more farmers to bring their families into the industry and maintain it into the future.

I am not patronising the Minister, but we were fortunate that he was at the negotiating table at a very crucial time in the negotiations on the future of farming. I am sure previous Ministers, Governments and officials would say that when it comes to farming, all parties are as one. We are up against the European Union at times, but on this occasion it was positive and long may it last.

2:25 pm

Photo of Sean BarrettSean Barrett (Independent)
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I welcome the Minister and compliment him on his negotiations in achieving the figure of a minimum of 60% of the national or regional average per hectare. That is part of the social objective of keeping people in rural Ireland and the various industries that stem from it. Some €11 billion will come to this country.

Is it time to plan outside this figure of €11 billion? We hear about world shortages of food, the figure of 9 billion people, developments in New Zealand, the development of the Chinese market and the substantial progress we have made in satisfying markets, as the export figures show. However, at what point does the €11 billion become the target, rather than customers? Do Irish farmers spend too much time chasing subsidies and too little time facing customers? Is there a contrast in that regard? I would like to see the commercialisation of Irish agriculture proceed apace based on the New Zealand model. My fear is that the subsidies are capitalised in higher land prices which, in turn, become an obstacle to young people getting involved in agriculture. When the New Zealanders pulled out their subsidies, land prices fell. We have high land prices and relatively low output per acre; perhaps, therefore, the relentless pursuit of subsidies accounts for that problem.

I disagree with my friend and colleague, Senator Rónán Mullen, on the Canadian agreement. Free trade is the way to go. We might learn things from Canada, perhaps not so much in agriculture but certainly in respect of banking and the public finances, in respect of which it has done rather better than us in recent decades. Much of Canada is under snow for three or four months of the year, yet we still say we are not competitive with Canada, that it pulled a fast one on the Minister and his colleagues in doing the deal and that this is a very bad model for the forthcoming deal on free trade between the United States and the European Union, which I also support. Either we are really good at this and can represent companies such as the Kerry Group and the Greencore Group or we are not. Saying we are good but that we want more subsidies, particularly in straitened circumstances for most Exchequers, including in Europe, is almost a schizophrenic policy. As we are good, we should not be afraid of the Canadians, the Americans or anybody else. We have set ourselves the target of being a leading world food producer; therefore, let us proceed in that way.

There is a report from an all-party UK committee on European reform which states scrapping the CAP and other measures to protect European agriculture could add 1.1% to European GDP. Part of the euro-scepticism on the neighbouring island is that there are too many subsidies and too little food production taking place. It is an issue we must confront. Will it ever end? Will there be an agriculture industry in Europe which can supply a rapidly growing demand for food competitively with the Americans, the Canadian and the New Zealanders, or will we always be on the subsidy trail?

There is also a fair amount of scepticism in many rural areas about the non-farming part. Many think I would be critical of public sector approaches, but the criticisms I have of some of the rural development and Leader programmes are that there is mainly bureaucracy and very little output. We must face up to this in a period of difficulty in the public finances. It raises the general question of whether this is ultimately for the good of Irish agriculture. We hopped on the subsidy train when we joined the European Union, but when do we become fully commercial producers? Do the subsidies delay this happening? My colleague, Professor Alan Matthews, in Trinity College Dublin is concerned that the subsidy has become more important than the market based income. Farmers are good in market conditions, as one will see if one visits a cattle market, but have we made subsidies, instead of market based activities, the cause célèbre? Any action of the Minister - I appreciate his goals in this regard - should be to turn farmers more towards serving customers and meeting food needs, rather than repeatedly demonstrating outside Leinster House for more subsidies. They are either commercial or they are not. We can look after the non-commercial farmers with the €11 billion, but some of the others must face up to the fact that it is a world of free trade. If they are as good as they maintain they are, they have nothing to fear. I wish them well in that regard.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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I welcome the Minister to discuss this very important issue for the economy. The CAP negotiations have been ongoing for the past two years since the Minister, Deputy Simon Coveney, took office. When the Commissioner and the Commission released the first proposals, Ireland was facing doomsday in respect of flat rate payments. Under the Minister, especially during the Irish Presidency of the European Union, we emerged with a deal based on an Irish model. That this deal has been done proves the skill of the Minister and the esteem in which he is held by the other Ministers in Europe. It is an excellent deal for Ireland. The next month or six weeks will be very important with regard to the announcement to be made. The Minister said he had sent 44 questions to people about how CAP funding would be redistributed and received 46 submissions in return. That shows how important agriculture is in this country. When the CAP negotiations have been completed, the Minister might be moving on to greener pastures, but we hope it is not Angola, as is said about certain other areas, because he has done an excellent job in the agriculture sector.

The budget is part of CAP reform, too. When one sees what we have had to confront in austerity budgets for the past few years, one can see that the Minister has defended agriculture. The introduction of the genomic scheme this year for beef and calves is excellent. We must support rural Ireland. Senator Sean D. Barrett spoke about rural Ireland and the supports it needed, but his theme went wrong with his description of them as subsidies. I do not call them subsidies. It is a single farm payment and it is made to support rural Ireland. Ireland has a tradition of having family farms. We do not have an English or New Zealand model; it is not a factory farm. We have family farms which must be supported to keep people in rural areas.

What has benefited the economy most in the past two and a half years has been the growth in the agriculture industry. Agricultural exports have helped our GDP. One also sees it in the innovation of companies such as the Kerry Group, Glanbia and Dairygold. They are now market and world leaders with different products and we can be proud of them. They are gearing up for the challenges that will be faced in the next five to ten years in agriculture.

One of the major aspects of CAP reform, leaving aside equalisation, is that some people believed they were hard done by under the last agreement.

There were people involved in the sheep sector fattening heifers and people involved in the dairy industry who ended up with a small single farm payment. This new agreement will have to compensate them for what has happened as a matter of history. That is important. The ones who are producing are the ones who do not sit back and continue to produce. We have earned a reputation worldwide for the quality and traceability of our food, the sustainable way in which the agriculture sector is run and its safety. It is important for us to maintain this reputation.

Farmers should not be afraid of the greening issue under the CAP. Greening is part of the wider picture in the way food is produced. Let me offer an example. Last Monday, for the first time, I received a printout of emissions on my farm. There were four graphs showing what the national averages were and where my farm was in that context. This is something that was introduced as a reform under the Minister. The aim is to ensure that when we sell a pound or kilo of steak in Germany, we can say what the CO2 emissions were in producing that piece of beef. That is something for which the world is looking because it wants to see what is happening.

To reiterate, this measure is being introduced to support family farms and rural Ireland. The milk quota subsidy will disappear in 2015 and the sugar quota in 2017. I congratulate the Minister on the excellent negotiations that took place on sugar quotas and hope the sugar industry can again be successful in this country. We are going to see growth in milk production. Companies such as Glanbia and the Kerry Group have put their plans in place to deal with the issue of extra capacity. It is important and germane to these negotiations that young people enter agriculture. They are energetic and have new ideas as to how the sector can be run. They train in agricultural colleges. A few years ago being involved in agriculture was not sexy. Young people did not become involved; they went to college, trained or went into the building business. In the past three or four years, however, as the building industry declined, places in agricultural colleges have become very important. The Minister negotiated with the Minister for Education and Skills, Deputy Ruairí Quinn, to have more teachers employed in these colleges to train students properly. I reiterate that it is important to get young people to become in agriculture, as they are the ones with new ideas to drive us on in the 21st and 22nd centuries. There is a future for farming, a sector which has been well led by the Minister. I congratulate him on the CAP negotiations. I was not being disrespectful when I wished him the best in Angola, but I imagine he will be going somewhere.

2:35 pm

Photo of Trevor Ó ClochartaighTrevor Ó Clochartaigh (Sinn Fein)
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Céad fáilte roimh an Aire. My apologies for not being present at the beginning.

I wonder if there is any money available in the CAP negotiations to clone Deputies and Senators who need to be in two places at the one time. I had to leave a committee meeting to come here, but I have read the Minister's speech.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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There is only one of you, Trevor.

Photo of Trevor Ó ClochartaighTrevor Ó Clochartaigh (Sinn Fein)
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The same goes for the Senator. I appreciate and it is worthy noting that the Minister has had a particularly busy time. There was the fodder crisis, the horsemeat difficulties, the CAP negotiations and the Irish Presidency of the European Union. It is generally accepted that the Minister is very much on top of his brief and hard-working. This is something we recognise and it is important that we acknowledge it. Nevertheless, we are disappointed by the outcome of the negotiations on the new farm payment scheme. Sinn Féin argued for a cap on the high payments received by a small number of individuals and companies not directly involved in farming. We also proposed radical redistribution of payments to recipients to increase the viability of lower income farm households. The unfairness of the payment scheme is illustrated in the following figures. If one takes those who receive more than €100,000, 243 recipients received between them €32,840,000. For those in receipt of between €50,000 and €99,000, some 1,804 recipients received between them €118,368,000. If one compares these figures with those for recipients who receive less than €5,000, 52,193 recipients received between them €125,399,000. We believe there can be no defence of a scheme under which less than 2% of recipients at the top receive more than the bottom 40%. We, therefore, ask for a fairer redistribution for those who receive the lower amounts.

Much of the defence of the current single farm payment was based on the claim that it rewarded more productive farmers. However, statistics for stocking density prove there is little evidence to support this claim. Farmers with an average payment of €282 per hectare in 2010 had an average stocking density of 1.47. That compares with a stocking density of 1.92 for those with average payments of €1,180 per hectare. It is difficult to see how this can be justified. For the present we must accept conservative parameters agreed to by Ministers last June which allow for a degree of flexibility. We would argue for the greatest possible flexibility in the interests of those on lower payments.

Sinn Féin supports the use of 2% under the national ceiling for the young farmers scheme, which would amount to €24.3 million in 2015. We would retain a figure of 3% as a national reserve, which would amount to €17.5 million in 2015. We support the application of a redistributive payment, amounting to the maximum possible percentage under the national ceiling allowable. We agree with the definition of "active farmer" that would exclude from payment non-agricultural land such as airports, golf courses and so on. We also support the exclusion of agri-business the main activity of which is not actual farm production.

Sinn Féin called for an immediate cap of €100,000 on individual payments. Given that this has been ruled out, we now support the lowest possible cap under the agreed format. We support the allocation of payments to farmers who receive no single farm payment but who can produce evidence of being involved in active farm production in the reference year. Under the agreed framework, we support the maximum possible redistribution of payments. We believe the minimum payment ought to be the national average per hectare payment. We support the application of the lowest maximum per hectare payment allowed under the agreed framework. Sinn Féin does not support the reintroduction of coupled support schemes. We support the introduction of a small farmers scheme, with the inclusion of all farmers with annual payments of less than €1,250.

I welcome the reopening of the sugar production facilities which will be a very welcome element and offer an opening for farmers throughout the country. I note there are serious concerns in the farming community about the suckler cow herd and future production capacity. Perhaps the Minister might like to comment on this issue.

I have a particular interest in Leader funding supporting rural communities. There is a great deal of concern on the part of companies dealing with this funding about the alignment process. They believe the county councils are trying to get their mitts on the money and taking control of the way funding will be spent. There is a serious concern that there will be a lack of democratic involvement by local communities in the boards of these companies. I call on the Minister to speak to his colleague, the Minister for the Environment, Heritage and Local Government, Deputy Phil Hogan, on that issue. It is important that local decision-making be kept local.

I am also conscious that many coastal communities are dependent on income from a number of sources - fishing, farming and perhaps some other work. It is important that we try to maintain this. As the Minister also holds the brief for fishing, it is important that quotas and their redistribution nationally, from a fishing perspective, are fair across the island of Ireland and that we do not see certain geographic areas benefiting to the detriment of others. It is also important to state we are concerned about the cuts to rural services, including transport services, the closure of Garda stations, etc. These are dragging people from local communities that are already suffering heavily from emigration. Farming and fishing, particularly in rural areas such as Connemara, have been the stalwarts in keeping people in communities. It is all linked with the funding and support given under the likes of the Common Agricultural Policy. I realise the Minister has a very difficult remit in trying to balance all of the different vested interests, but coastal communities must be given special consideration, as must communities in mountainous areas such as those in north Connemara which have a particular difficulty when it comes to farming and fishing.

I will leave these thoughts with the Minister whom I thank once again.

Photo of Jim D'ArcyJim D'Arcy (Fine Gael)
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Ba mhaith liom, ar son muintir na hÉireann agus feirmeoirí na hÉireann go háirithe, buíochas agus comhghairdeachas a ghabháil leis an Aire as an obair mhór a rinne sé ar ár son i dtaobh an Comhbheartas Talmhaíochta. It was a great achievement to have been able to sort out the Common Agricultural Policy during our Presidency. It went a long way towards restoring our reputation in Europe.

I particularly welcome the initiative which has led to 2% of the total CAP budget being allocated in the form of premiums for young farmers. We need people involved in farming and we also need generational transfers. In addition, those in the sector must have the enthusiasm to develop their farms.

It is extremely important that the livestock sector should be supported. In that context, I welcome the measures introduced in the budget to assist suckler cow and sheep farmers. This sector of agriculture is worth €5.7 billion to the economy. It is important that the farmers who operate in it be given support in order that national herd numbers will not decline. The CAP allows for coupling of up to 8%. It may be intended to use coupling for that purpose but taking another 8% out of the budget for the purpose of making headage payments may be too much for other sectors to bear. I suggest that some Exchequer funds may be required in this regard. It might be better to restrict the figure for coupling to between 3% and 5%, with the balance being made up by the Exchequer. I would welcome the Minister's opinion on this.

In the aftermath of the foot and mouth disease crisis that occurred early in the last decade, farmers in the Cooley area of County Louth have been working very hard to build up their herds and to ensure the quality of their animals. The Cooley sheep show and sale is held every August and I invite the Minister to attend next year's event. He would be most welcome----

2:45 pm

Photo of Jim D'ArcyJim D'Arcy (Fine Gael)
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-----if he attended. His presence would provide a great boost to those farmers whose livelihoods were decimated early in the millennium and who are now getting their confidence back and developing both the breed and the brand.

There is a need for a national agri-environmental scheme - this is a matter to which the Minister referred - with a specific element relating to mountain regions. The latter would provide higher payments to the farmers who operate in such areas, most of which are designated as special areas of conservation, and who are obliged to engage in a particular type of farming as a result.

We must also look forward to the next version of the CAP in the context of food security and achieving better market prices for farmers without increasing the cost to consumers. The Minister will be obliged to deal with this major job of work in the coming years.

Photo of Paschal MooneyPaschal Mooney (Fianna Fail)
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I welcome the Minister and thank him for his presentation. I accept that I will be commenting on matters raised by previous speakers but it is important that emphasis should be placed on certain aspects of CAP reform.

On convergence, the key question for Fianna Fáil relates to where responsibility regarding paying for overall increases should fall. For example, farmers on over €400 per hectare are overpaid based on livestock criteria. I welcome the agreement negotiated by the Minister in respect of single farm payments. In the coming five to six years the 60% average should result in those who live in the county in which I and Senator Comiskey reside receiving increased payments. This does not just apply to those on the western seaboard. One of the suggestions made in the debate which took place prior to and during the CAP negotiations was that only those in severely disadvantaged areas would benefit and that so-called productive farmers would lose out. I have never been able to find a definition but I presume the term "productive farmer" relates to the big grassland farmers who operate in the Golden Vale. Kilkenny is supposedly a very rich farming area. However, there are some 1,473 farmers in that county who are on incomes of less than €10,000. In the Minister's county, Cork, the number of such farmers is over 7,000. The suggestion that the new average would only apply in certain parts of the country is incorrect. I am glad, however, that farmers in my county and similar counties will hopefully receive significant increases as a result of the new convergence arrangements. A question arises with regard to how the Minister intends to manage the system in the context of the flexibility built into it. What sort of levels will be imposed? Have matters reached that stage yet or are other issues still being addressed?

It is disappointing that the rural development budget under Pillar 2 was reduced even further to €85 billion during the final negotiations. The new figure represents a 14% reduction. What has happened in this regard highlights the need for the Government to match EU funding in respect of rural development schemes on a 50-50 basis. I am not sure whether the Minister has been vocal in respect of this matter but the IFA has certainly voiced its views. Perhaps he might outline his thinking on how the Government, in light of our current straitened circumstances, is going to match funding from the EU.

There are a couple of side issues which arise in the context of the overall CAP reform package. The first of these relates to the impact of the recently concluded trade agreement between the EU and Canada. The initial reaction is that this agreement will post a threat to the pork and beef sectors in Ireland. I had the honour to be a member of the delegation from the Joint Committee on Agriculture, Food and the Marine which visited Berlin for International Green Week earlier this year. When we were out in Berlin in the evenings, we were struck by the number of restaurants highlighting the fact that they had Argentinian beef on their menus. That was the first occasion on which I had ever seen this. The beef in question was being sold at premium prices on the basis that it was an attraction. There were billboards and blackboards outside of the restaurants to which I refer proclaiming the availability of Argentinian beef. In other words, it was being used as a catch-all in order to attract customers. I am concerned that this might be repeated in Ireland in the near future, when we will see similar blackboards outside restaurants here advertising the availability of Canadian beef at premium prices and proclaiming the latter to be better than Irish beef.

My final question relates to the ending of sugar quotas. There is general agreement that a mess was made of the termination of the sugar industry in this country. To put it another way, and acknowledging that hindsight is 20-20 vision, if matters had been handled better we might still have a sugar industry. However, we will never know for sure whether the latter would have proved to be the case. The Joint Committee on Agriculture, Food and the Marine debated this matter at its meeting yesterday. I was not at that meeting but Senator Ó Domhnaill informs me that one of the conclusions arrived at is that a cost-benefit analysis or something similar should be carried out in respect of the viability of resurrecting the sugar industry here and that we should not just leap back in with our eyes closed only to discover that it is not viable. I understand that this is one of a series of recommendations which will be submitted to the Minister in the not too distant future. Perhaps he might outline his views on this matter.

Photo of Simon CoveneySimon Coveney (Minister, Department of Agriculture, the Marine and Food; Cork South Central, Fine Gael)
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I will try to respond to as many as possible of the numerous questions posed. In particular, I will try to address the points raised by those who have remained in the Chamber.

In respect of what Senator Ó Domhnaill said, it is important that people get the context right. The idea that anybody would be disappointed that there will be a 3.3% cut in direct payments when six months ago a 30% cut was being discussed just does not stand up to scrutiny. Anyone who thought the CAP budget would remain untouched while the overall EU budget is being cut to quite a significant degree does not live in the real world. I agree with the Senator that farmers will see reductions in their direct payments. That is regrettable but I am of the view that we obtained an extraordinarily good deal in terms of the overall MFF and the priorities relating to agriculture. Ireland, through the Taoiseach's office, lobbied very hard in order to obtain the result that was eventually achieved. We supported other countries that were working with us in this regard, most notably France.

To limit the reduction in Pillar 1 direct payments to 3.3% was way beyond the expectations of most people. From the point of view of the farmers, who do not care about the politics of it and just see a reduction in the direct payment, it is a cut, but people need to understand that limiting the cut to that extent was a significant achievement and should be noted. Anyone in the sector, including farm organisations, can recognise that.

With regard to co-funding, it is important to understand that we have been living for the past number of years under the terms of a bailout agreement. We have set expenditure ceilings year-on-year as required in the agreement. At the end of this year, and not before time, we will be leaving the straitjacket approach to the management of our economy, but we will still have to have financial discipline in terms of how we spend money and where we spend it. Expenditure ceilings will still be applied to every Department by the Department of Public Expenditure and Reform. I will have to negotiate, on behalf of the sector, a rural development programme that draws down full EU money and creates as big a fund as we can afford to spend on the rural economy. I will do so, as opposed to designing a rural development scheme that targets the maximum co-funding at EU level. We are required to have up to 30%, in terms of expenditure, of our rural development schemes as environmental schemes. All environmental schemes have 85% co-funding. The idea that we can have 50:50 co-funding without a significant extra contribution from the Exchequer, which is not required to draw down EU funding, is a question of the willingness of the Government to add significantly to what it needs to spend to draw down EU funds. It is a lot to ask in these times but I will make the case forcefully at the Cabinet table because rural economies are performing extraordinarily well. This is particularly true of the agrifood and fisheries sector in the past number of years. The figures prove it.

People talk about the Irish agrifood industry not being able to perform because of subsidies. I totally reject that concept. In the past three years, we have seen growth of more than 30% in the value of food and drink exports out of the country. It is partly driven by more efficiency at farm level, which we must continue. We must use the funds. Direct payments to farmers are about income stability, and we have attached those payments in the past to productivity. This is not about income distribution; it is about supporting sustainable, efficient and safe food production. There is a deal between European taxpayers and European food producers that we pay them for producing sustainable, safe, high-quality food because they must do that under conditions more stringent than in other parts of the world. They must also do so on family farms that are much smaller than in other parts of the world and we want to keep that structure intact. In return for direct payments, farmers must comply with restrictions that do not exist in other parts of the world.

In dairy production, Ireland has a natural competitive advantage against any other country in the world, including New Zealand, in terms of our climate and our ability to grow grass. The industry has not been allowed to expand since 1983 because of quotas. Farmers are not getting money for nothing; they are getting money to comply with a production system that is politically designed in the European Union for all sorts of objectives including food safety, food quality and a certain amount of rural social engineering in terms of family farm ownership, the structure of rural communities and keeping farms on hillsides and mountainsides. This is the kind of farming that does not exist in much of the rest of the developed world in similar areas.

It is important to understand that it is not a simple question of farmers pursuing subsidies for the sake of it. We are trying to provide income stability for farmers in good times and bad but also to incentivise them to become more efficient at what they do. This is why we introduced the beef genomic scheme in the budget. We will spend some €40 million on the beef sector but we will receive a significant dividend from beef farmers, which will allow us to be the first country in the world to set up a national beef DNA database, matching it to the information we already have from our beef farmers in terms of performance indicators in the herd, such as ease of calving, performance, feed conversion efficiency, fertility and other measures. We will be the first country in the world to be able to tell a farmer, on the basis of a DNA sample from the calf, how the calf is likely to perform later in life.

The idea that farmers cannot become more efficient at how they produce food if they are getting subsidies does not match what is happening on farms in Ireland. Both can be done together. If we had a lazy approach from the Government, giving money to farmers without asking for anything in return, and if the CAP policy was sloppy and lazy, we would be paying people to remain on the land regardless of how they produce food. However, that is not how the deal works. Most farmers drawing down direct payments who are getting support from schemes in the rural development programmes understand that.

I want to deal with the EU-Canada trade agreement because I was involved in it. In response to some of the questions, Deputy Martin Ferris proposed that we advocate for a cap of €100,000. At the time, I agreed with him. We had to move heaven and earth to get agreement on €150,000, and it is not a cap. Countries such as Britain and Germany just want a 5% degressivity above payments of €150,000 for farmers. There are just slight reductions on payments above €150,000, but we have agreed that countries can apply a degressivity figure of 100% above €150,000. In other words, we can set a cap at €150,000 for any farmer. From my comments today and previously, Members may have picked up that I am quite sympathetic to it. I must look at the submissions from all organisations before we finalise an agreement.

We also have the capacity to examine capping payments per hectare. There is a major misunderstanding among many people who have examined the CAP debate but not the detail. People talk about higher earners versus low earners and big farmers versus small farmers. The only calculation that matters is the payment per hectare. Of course, a farmer with a lot of land will receive a higher payment than a part-time farmer with a small amount of land. To make the case that both farmers are in the same category, as if they are both full-time farmers with the same sized herds and land, with one receiving €3,000 and the other €140,000, is incorrect. The payments farmers currently enjoy have been brought about on the back of entitlements in the past that were linked to headage payments and integrated administration and control system, IACS, payments that depended on the number of animals on the land or the crops they were growing. They did not get payments out of thin air. In the past, farmers who could work the system most efficiently in terms of maximising throughput and getting payments linked to throughput were the farmers with the highest payments. There is a correlation between productivity on farms and the level of payment per hectare in general. The percentages are not as wide as the payments suggest. The highest-paid farmers, in terms of payment per hectare, are those with the highest stocking rates but there is not a ten-fold gap in stocking rates, as suggested by one farmer getting €80 per hectare and the other getting €800 per hectare. That is why convergence was necessary.

We are moving towards average payments and a guarantee of a minimum payment of approximately €146 to €150 per hectare. The more one earns per hectare the more one loses and the closer one is to the average payment, one will either gain or lose. The vast majority of farmers are somewhere between €200 per hectare and €500 per hectare. That group of farmers is not massively gaining or losing but they are all moving slightly towards the average payment over a gradual period of six or seven years. The agriculture sector does not want shocks to the system. The internal convergence model which has been agreed as an option and which Ireland intends to adopt, is a good result. I am unable to provide exact answers to some of the questions because we have not completed our consideration of them. If any Member wishes to contact me directly I am happy to speak to him or her afterwards.

I will speak briefly about the EU-Canada trade agreement. It is important to understand a number of factors. The reason this deal was not done eight months ago is because of countries like Ireland and maybe one or two others, but Ireland in particular. We are very sensitive on the issue of beef. There is really no other significant beef exporter in the European Union. We export nearly 90% of the beef we produce and the vast majority of that product goes to the UK and to the rest of the European Union. Any dramatic increase in tariff-free imports of beef into the EU will be a concern for our sector. Canada was looking for significantly more than 50,000 tonnes carcass weight which is about 37,000 tonnes of beef; it was looking for twice that amount under this deal. Canada was also looking for a fraction of the 15,000 tonnes of tariff-free dairy exports which we can now send into Canada. Anyone who understands the Canadian agri-food industry will know that it is an incredibly rigid, strong and protectionist dairy industry. It is almost impossible to get any dairy product into Canada. The agri-media in Canada are extremely concerned about the impact of this deal on the Canadian dairy industry. This deal is not one-way traffic. I think we have limited the damage of Canadian beef imports to the EU to the greatest extent possible. We have maximised the opportunities to the greatest extent possible for increased dairy access into Canada. However, some in the European Union would like to use beef as a form of Trojan horse to get these things across the line. We have made repeated strong representations, including by the Taoiseach, to the President of the EU Commission, on this issue, declaring that Ireland would not be steamrolled just because it was the only country in the European Union that was vulnerable to beef imports into the European Union. On the question of whether this agreement will set a precedent for the EU-US trade agreement, I hope not but I suggest it will certainly be part of the discussion because that is unavoidable. Likewise, this will be the case in any deal with Mercosur countries where beef is again the stumbling block and Ireland needs to be very firm.

We also need to be consistent with our own principles of trying to get Irish beef into other countries. I am going to Qatar next Saturday and on to the UAE and Saudi Arabia. We will be announcing partnerships between Irish food and drinks companies with partners in these countries to build up markets and to ensure consistent exports over the next ten to 15 years. It is hoped that before the end of this year we will get Irish beef into the very lucrative and exciting Japanese market which has a high consumer spend. As we try to break into new markets it is not reasonable to suggest that there will be no new supplier of beef into the European Union, that we can have some kind of protected market for Irish beef while we have uninhibited entry into new markets. We should not fear competition. The Canadian beef imports will be hormone-free which Canada does not have the capacity to produce in large volumes at the moment but over the next five or six years it may build its output to fulfil the potential of the agreement from Canada's point of view. However, our beef industry needs to become more competitive during that period. We produce a different type of product to the Canadian product. We produce grass-fed beef which attracts a premium price.

I was also in Germany recently. Irish beef exports to Germany this year will increase by approximately 20%. The reason for the collapse in the Irish beef export trade to Germany some years ago was because of the BSE crisis here and that gap was filled by Argentinian beef. German consumers became used to big Argentinian steaks. Many of the steak houses opened during that period were Argentinian steak houses. Irish beef is replacing it in many cases. There is more Irish beef on menus in high-end German restaurants, with a premium price of 10% on top of what is paid for German or Argentinian beef, than has been the case for many years. The Senator is correct that we are competing with countries such as Argentina and we will compete with Canada in the future but we need to carve out a premium niche for our own product across the world. That is the way to guarantee the best price for our farmers, rather than trying to have this false policy of keeping everybody else out, creating an artificial market and an artificial scarcity for product which, let us face it, was the strategy of the CAP in the past. Our food industry is expansionist. We are looking for new markets at home, within the European Union and outside it. Our approach needs to be consistent while at the same time ensuring that we do not operate at a disadvantage whereby we allow food into the European Union which is not produced to the same standards and does not have the same rules about the use of hormones and GMO as pertain here. I hope I have answered some of the questions. I am conscious that I have run out of time.

3:05 pm

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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I thank the Minister for his attendance and for his contribution.