Eamon Gilmore (Dún Laoghaire, Labour)
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Question 104: To ask the Minister for Agriculture, Fisheries and Food the reason the price supports he welcomed under the CAP health check have failed to support milk prices; the minimum milk price at which he expected these supports to sustain; and if he will make a statement on the matter. [4876/09]

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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The Common Agricultural Policy contains various market support measures for the dairy sector. The initial CAP Health Check proposals had planned to abolish or weaken most of these. During the negotiations I argued very strongly in favour of keeping critical market instruments in place and using them effectively. These support measures can now be used to respond to price volatility in the current market situation and will help support the dairy sector in Ireland.

Dairy product prices reached record high levels in 2007 and early 2008 and producer prices also peaked in that time. Most CAP market instruments were suspended as they were not necessary at that time. Since then international dairy product prices have fallen back considerably, although the average Irish producer price for 2008 was only marginally down on the 2007 price. Indications are that markets will remain weak in the first half of 2009 and I made clear to Commissioner Fischer Boel that a range of supports would help to restore confidence and put a floor under market prices.

The Commission initially responded by commencing the 2009 butter private storage scheme two months early. Subsequently, on January 15th the Commissioner announced further measures to assist the dairy sector. These included a commitment under the Intervention system to purchase more than the fixed quantities of butter (30,000 tonnes) and Skimmed Milk Powder (109,000 tonnes) if the market situation requires it. In addition, she announced the reintroduction of export refunds for butter, milk powders and cheese and these were reinstated at the milk management committee meeting on 22nd January. Irish operators can now avail of these refunds and my Department will continue to examine the position and urge the Commission to set the refunds at an appropriate level to support the dairy sector.

The activation of these measures will take some time to influence commercial markets and stimulate demand for dairy products. It should be noted that market measures alone will not be sufficient. Dairy farmers incomes are comprised of the market price paid for milk and direct income support from the EU. Market forces have a major influence on the price paid for milk. World market prices determine the returns received by dairy processors and these in turn are reflected in the price paid to farmers. In essence, farm gate prices normally reflect the returns from international markets of dairy product sales. Therefore, nobody can predict precisely what the minimum or maximum milk price will be as it is determined by market forces.

While we are facing short-term uncertainty, analysis shows that the long-term outlook is bright. Global growth in wealth and population will provide opportunities for quality producers like Ireland, and all areas of the dairy sector can expect to reap the rewards. In the meantime, I will continue to monitor developments in the dairy sector closely and intervene again with the Commissioner as the market situation evolves.