Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Question 21: To ask the Minister for Agriculture and Food if she has had discussions with the Agriculture Commissioner or her personnel regarding the serious fall in prices and returns to dairy farmers; if she will provide assurances that increased supports will be provided to offset declines in EU export competitiveness; and if she will make a statement on the matter. [18555/06]

Mary Coughlan (Donegal South West, Fianna Fail)
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Following a number of successful years for the Irish dairy industry on international and EU markets, 2006 is proving to be more challenging for the industry. The butter market, in particular, is under severe pressure on both the EU and international markets. Exports of dairy products, except cheese, are considerably lower than in 2005, with EU butter exports currently 35% less than the volumes exported during the previous GATT year.

The euro/dollar exchange rate has a very significant impact on our competitiveness and the current weakness of the dollar is adding to the difficulties of EU traders. The internal butter market is also very weak and butter prices in most member States are at or below intervention level. The intervention limit of 50,000 tonnes is likely to be reached within the next month after which a tendering system for intervention purchases will be introduced.

As this situation developed over recent months I have urged the Commissioner on several occasions to use the market management tools in a more effective manner to ensure the overall stability of the milk sector. In particular my key concern was to see the export refund regime used to maximum effect in order to dispose of product onto international markets outside the EU. I was very pleased that the Commission responded by increasing export refunds for butter and Whole Milk Powder at the end of April and again at the last Milk Management Committee when the tender refunds were accepted at a higher level for butter and butter oil.

I have again asked the Commissioner to keep the focus for 2006 on the need to maintain the competitiveness of EU dairy exports, with particular reference to butter and to manage the introduction of the new tender arrangements for butter intervention in a manner that avoids causing further instability on the market.

I would of course emphasise that dairy farmers incomes are not alone dependent on EU market supports though I fully appreciate the importance of internal aids and export subsidies for competitive trading conditions. Other elements impacting on farmers' incomes include direct payments, scale and efficiency and returns from the market. This year's milk price, taken together with the single payment entitlement of 3.6 cent per litre is similar to recent years though clearly there is greater pressure now on producer prices than heretofore.

Since the Luxembourg Agreement of 2003 the dairy sector is operating in a new policy framework, where market forces have an even greater influence on the price paid for milk. It is critical that we continue to manage the market so that we maintain relative competitiveness and I will continue to focus on managing the transition to the next stage of intervention price reductions in July with the aim of maintaining and enhancing industry competitiveness and ultimately farm incomes.