Tuesday, 8 March 2022
Nithe i dtosach suíonna - Commencement Matters
I thank the Minister of State for taking this question. Trade policy and import substitution is an area in which he has a strong interest. Today, the Minister for Agriculture, Food and the Marine is meeting various farm organisations. One thing he will encourage is increasing grain production to help provide greater domestic food security. This is something that will be very welcome if it can be done and I am quite certain that our farmers and farm organisations can step up to the plate.
The average person in Ireland eats 54 kg of flour per year, that is quite a bit of bread and bread products, yet over 80% of the flour we use in Ireland is imported. The bulk of this comes from the UK. Something that the special committee on Brexit explored in detail is that much of the flour that we import from the UK is made with imported wheat, a lot of it coming from Canada. Under the EU rules of origin that flour is subject to tariffs and if the non-EU content is more than 15% it is subject to the full tariffs.This is already contributing to some of the cost pressures that are in place.
When it was before the Seanad Special Select Committee on the Withdrawal of the UK from the EU, Enterprise Ireland highlighted the need to look at import substitution for those that use flour in Ireland to change supply chains. This is a view that was shared by Food Drink Ireland. On top of that we see the pressure that Russia's disgraceful invasion of Ukraine will put on global food security. About one quarter of the world's wheat exports come from that region and even though we do not import much wheat from there directly, there will be a knock-on impact if wheat from that region is not contributing towards the world supply.
There are food security issues in parts of the Middle East, which I have spoken about in this House before and there will be knock-on implications on the supply coming in here. I was looking at the Chicago commodities futures market and wheat prices are 70% higher now than at the start of the year. Last week, wheat futures contracts had their largest price increase since 1959. We will see a major problem around wheat supply and as we are importing a lot of flour produced from imported wheat we should be certain that this will impact here.
If we produce all that additional grain how can we ensure that we will have commercial mills in Ireland again? There are a number of small mills here but supports should be put in place for the flour we use in our bread. A pair of brothers in County Wexford, Andrew and Raymond Kavanagh, have planning permission for a full commercial mill. They have yet to receive much support from Enterprise Ireland, in spite of some of the discussions around the Brexit adjustment reserve fund. If we look at import substitution we have to be in a position where we support those brothers or others who may wish to develop commercial mills around Ireland. We are inviting the farmers to grow more wheat so for the purposes of food security what guarantees can we put in place to ensure that we will have sufficient access to flour and ideally that we will have import substitution such that we can produce it here? I ask the Minister of State to meet those brothers or to arrange through his office for Enterprise Ireland to meet them. Food security, on a global and domestic level, is important and it is particularly important given the importance of flour to our diet. I look forward to the Minister of State’s answer.
I thank the Senator for raising this issue. We have had to have an important conversation on import substitution and food security. In recent years our supply chains were tested by Brexit, then Covid and now the terrible events and atrocities in Ukraine. There is an urgency around looking at food security issues, and import substitution is something that is close to my heart and which we have discussed in this House before. Covid and Brexit have taught us that we need to look at that again and seek out any opportunity we can to produce at home on our shores. That in turn creates jobs and gives us added security and opportunities. I would be happy to explore these options with the Senator.
The events of the last two weeks in Ukraine have brought about a different conversation and they have brought much more urgency to that issue. The Government is monitoring the impacts of this crisis closely. We have been working closely with our EU partners and fellow member states on the adoption of sanctions in response to Russia’s violation of Ukraine’s territorial integrity. Ireland is fully committed to the comprehensive implementation of the four EU sanctions packages adopted to date, which will have an impact on our economy and industries. We have to plot a course through that to assist businesses and domestic customers through those difficult times.
While the effects of the series of sanctions being implemented may not be directly significant for Ireland, the Irish economy remains exposed to the indirect spillover effects resulting from the sanctions and the general geopolitical instability. We can see the price increases in many sectors already. Sanctions will not be cost-free for Ireland or for other EU member states, as evidenced now by the sharp increase in flour prices and in the price of other commodities but we were left with little choice due to Russia’s behaviour. We all agree that this is important but we also have to find ways to manage this for our economy. Russia and Ukraine account for one third of global grain production, while the EU imports more than two fifths of its gas demand from Russia. It goes without saying that Russia’s systemic role in energy supply will have significant impacts on prices because some the costs of flour production are down to both the price of grain and the price of energy.The implications for inflation and production costs are also significant because of those energy costs. Unfortunately, pass-through price effects are expected in other sectors apart from flour production, such as fertilisers, fuel and transport costs. The knock-on effect will be quite serious. I am aware that representations have been made by the bakery sector on the implications of flour and gas costs on the price of bread and other products. My Department is working with our enterprise agencies and other Departments, including the establishment by the Taoiseach of a new group at Secretary General level, to update, advise and co-ordinate all aspects of our response to the conflict, to assess the full impacts of the sanctions and to develop mitigations and contingency plans to support enterprise and traders.
Unfortunately, there will be no easy solutions to addressing the indirect consequences of imposing these sanctions on Russia and Belarus. The question of implementing measures on a sectoral basis would require careful consideration and should be balanced by consideration of other potential mechanisms in addressing the impact on the most vulnerable consumers and sectors. On flour production and flour milling in general, we need to look into the feasibility of doing further processing in Ireland. It is something we should look at, exactly as the Senator said. Since Brexit, the rules of origin impact on flour have resulted in unintended consequences because we import most of our flour from the UK, and through Canada, although recently imports from Northern Ireland have surged, thus avoiding potential tariffs and cross-border delays. I agree with the Senator that it is probably opportune to look specifically at the issue of supporting companies and the feasibility of doing further processing and flour milling in Ireland to secure our supply of this vital ingredient.
I certainly have an interest in organising that meeting with Enterprise Ireland and will join it I can. If there are guys like Andrew Kavanagh and Raymond Kavanagh, who are seeking support to make this happen and already have planning permission, I would be very interested in seeing how we can progress that for them and for others. While the Government will intervene in different ways to deal with the current pressure right now, the Deputy is suggesting it deals with the long-term solution, which is something we should certainly be looking at. I am happy to work with the Senator on it. I will talk to our guys in Enterprise Ireland to see if we can organise a meeting to make that happen.
I thank the Minister of State for agreeing to that meeting. Most people in this country strongly support the sanctions we need to stand up to Russia. As the Minister of State said, it has consequences. One of the issues is the price of a loaf of bread. We all know the implications that will have, especially for those on low fixed incomes. It is important, therefore, that we give certainty of supply to any of our bakers in this country and we also look at import substitution. Brexit highlighted some of the problems but this conflict indicates there is an urgency to the matter. I greatly appreciate the offer of a meeting and I will work with the Minister of State to set that up, but apart from providing support to the Cabinet, the general issue of import substitution, especially for those products and commodities where we are vulnerable, needs to be a real priority on the Government's table.
I again thank the Senator for raising this issue. We are at one on the need to focus on import substitution in the short and long term to deal with crises such as the current one, but also from the perspective of job security and security for various parts of the market. We should look at this for different reasons. It is an area we probably need to focus more on, which I have been saying for a number of years. From this point of view, certainly when it comes to flour and milling, if there is an opportunity there we should develop it.
On the sanctions and what is happening with Russia, the ultimate and most ideal solution to the crisis is for Russia to withdraw its forces and uphold international humanitarian and human rights law. That is something we all agree with in this House. The use of such military aggression has no place in the modern world and is wholly unacceptable in the 21st century. Unfortunately, the longer this crisis continues the greater the adverse economic impacts will be, particularly on energy costs, which will carry through to consumers and businesses. The Senator referenced the price of a loaf of bread. That will impact on everybody but, specifically, it will hurt low-income families harder.
There is no doubt that low-margin industries, especially food producers and food processors, will be put under severe pressure in the coming weeks and possibly months. The Government may have to consider options that are targeted to provide relief in critical sectors. That work is ongoing at present. All these issues are being considered and co-ordinated at the highest levels of the Government and interdepartmentally. I re-emphasise, and I agreed with the Senator on this, that there is now an opportunity to have another look at the domestic capacity for flour production and flour milling. We will ask our enterprise agencies to examine this and to continue to assess business proposals for the setting up of commercial flour mills in Ireland, similar to those of the Kavanaghs and others.
I thank the Minister of State, Deputy Brophy, for coming to the House today for Commencement matters. It is appreciated. I call on Senator Hoey who has a Commencement matter on the International Dublin Gay Theatre Festival 2022.