Jimmy Deenihan (Kerry North, Fine Gael)
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Question 472: To ask the Minister for Agriculture and Food the measures she intends to take to prevent further milk price reductions in January 2007; and if she will make a statement on the matter. [32909/06]

Mary Coughlan (Donegal South West, Fianna Fail)
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The price paid to milk suppliers is a commercial decision between the supplier and purchaser over which I have no influence. Milk prices paid to producers have reduced over the past few months arising from the new policy framework where market forces are the key drivers of dairy product prices. Greater efficiency and economies of scale at both producer and processors levels are key to competitiveness in the market.

The Luxembourg Agreement in 2003 provided that the intervention price for milk products would reduce in the period 2004-2007 and these reductions would be compensated by the introduction of a direct payment amounting to 3.6 cent per litre equivalent to €180 million in 2006. This payment, taken together with the market value of milk has resulted in a return for dairy farmers similar to that of the previous few years.

At EU level, I have consistently challenged the pace and level of reduction in support level implemented by the Commission. In my view it is important that the EU consolidates its international market share while ensuring there is balance on the EU market. I have urged the Commission to maintain a competitive combination of aids and subsidies to achieve these objectives.

I am confident that the Irish dairy industry at both producer and processor level will make the necessary adjustments to adapt to new market conditions. In the meantime I will continue to encourage the Commission to carefully manage the market to ensure a smooth transition through the final phases of the 2003 Luxembourg Agreement.