Paul Gogarty (Dublin Mid West, Green Party)
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Question 96: To ask the Minister for Agriculture and Food the action she is taking to improve the lot of dairy farmers who are being paid less today for milk than a decade ago; and if she will make a statement on the matter. [14227/05]

Mary Coughlan (Donegal South West, Fianna Fail)
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The price paid for milk is a commercial matter between milk producers and purchasers. The manufactured milk prices are determined by a number of factors, including the international market for dairy products, the product mix and the efficiency of the processor as well as the overall operation of the EU price support mechanisms.

My role, as Minister for Agriculture and Food, is to ensure that the areas within my scope of influence such as the EU market management measures are implemented in a manner which enables the dairy sector remain competitive and thereby continue to develop and support farmers' incomes. It is reassuring to note that milk producer prices in Ireland have remained stable for several years.

As part of the reform of the mid-term review of the Common Agriculture Policy producers have been compensated to the tune of €60 million for reductions in intervention prices of butter and skim milk powder. Compensation for these support price reductions takes the form of a direct payment to farmers amounting to approximately 1.2 cent per litre at present rising to 2.4 cent per litre as a decoupled payment later this year. The first intervention price cuts for butter amounting to 7% and skim milk powder, SMP, amounting to 5% took place on 1 July 2004 without any adverse effect on producer prices.

While stability is being maintained in milk prices, undoubtedly the changing nature of EU support for dairying will require a more market-oriented approach by the dairy sector in the future. This focus will, in particular, require a lessening of dependence on intervention and a renewed emphasis on competitiveness and increased efficiencies at all levels of the industry.

On a more general note on production at farm level, producers will also have to look at increasing the scale of their operations, reducing costs where possible, and improving the quality of the milk they produce. While the mid-term reform of the CAP has ensured the extension of the quota regime until 2014-15, it is imperative now, more than ever, to assist those who wish to expand their operations within this new environment. My decision to decouple the dairy premium from 2005, which has been positively received within the dairy sector, should help those who wish to expand. Also, the milk quota restructuring scheme which I announced at the end of last year, and which set a stepped down quota price for two years should also help producers, who wish to expand, gain access to available quota at a reasonable price.

The future development of the dairy sector and, in particular, price stability to milk producers, remains a priority for me. It must be recognised, however, that we are operating in a more global economic environment where many external forces come into play. I will do my utmost to encourage the dairy sector to make the necessary changes, both at producer and processor level to strengthen and improve its position in the increasingly competitive international markets in which it operates.