Joanna Tuffy (Dublin Mid West, Labour)
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Question 98: To ask the Minister for Agriculture, Fisheries and Food if, in view of the collapse in the dairy markets, the deregulation of the dairy sector should be reassessed; and if he will make a statement on the matter. [26080/09]

Séamus Kirk (Louth, Fianna Fail)
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Question 105: To ask the Minister for Agriculture, Fisheries and Food his views on whether the terms of the CAP health check should be revisited in the context of the pressure on dairy prices; and if he will make a statement on the matter. [25946/09]

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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I propose to take Questions Nos. 98 and 105 together.

From a dairy sector perspective the CAP Health Check agreement of last November had two key elements, supply control and market support. The agreement essentially provided the framework for the EU milk quota regime leading up to its abolition in 2015. There was a wide divergence of views among member states in the months leading up the final negotiations as to the best course of action in relation to milk quotas. Commissioner Fischer Boel had made it clear that she would not be proposing the continuation of the quota regime beyond 2015. The question was whether, and to what extent, milk quotas should be increased in order to prepare for their abolition.

Many of our colleagues argued in favour of annual quota increases of up to five per cent, while others were opposed to any increase. I adopted an ambitious approach that would facilitate the maximum possible fulfilment of the production potential in the Irish dairy herd. In that context I believe the decision to increase quotas by 1% each year from 2009 to 2014 was a good outcome. So also was the downward adjustment in the butterfat co-efficient that equates to a further potential 2% rise in quotas in 2009.

When the 2% quota increase in 2008 is taken into account, the result is a cumulative increase of 9.3% in Ireland's milk quota by 2014 compared to 2007. This will help our dairy farmers to maximise their production potential, and to maximise the natural advantage they possess in the form of a grass-based production system. This in turn will lead to efficiency gains and help to achieve a competitive edge in an increasingly volatile world market. If on the other hand EU production is constrained by quotas, it will prevent Ireland from benefiting from future upturns in dairy markets. In that scenario the only winners would be our global competitors.

It has been suggested that the EU quota increases to all Member States are the cause of the current low prices for milk. This is a flawed argument. In its report to the Council last Monday week the Commission said that milk production in the quota year 2008/09 has fallen by 0.6 per cent compared to the previous year and that overall production was 4.2 per cent below quota by 31 March 2009. To attempt to attribute the current market weakness to the additional quota allocated as part of the Health Check is patently wrong — it is a demand-led problem.

The other key dairy element in the Health Check was market support. In the negotiations I strongly defended the view that quota increases must be matched with effective dairy market management measures. The transition to a post-quota EU dairy market, along with current market fluctuations, makes this particularly important. I therefore called for the continuation of such measures and, above all, those schemes which are especially important for Ireland.

In the event we managed to maintain the butter and skimmed milk powder intervention schemes intact despite the powerful forces opposing the retention of these schemes. There was a determined effort made to introduce tendering for every tonne of butter and SMP intervened. This would have been particularly difficult for Ireland. The importance of these measures cannot be overstated as they play a crucial role in levelling out the market supply/demand dynamics. They have a vital role in Ireland given our seasonal pattern of production. This is true also for Private Storage Aid for butter where existing arrangements were maintained, although once again there was strong opposition intent on introducing tendering arrangements.

Fighting to maintain these market supports in the Health Check has been vindicated and they are now being used to deal with the current situation. I have continued to ensure that these supports are operated to the maximum extent possible in the current volatile environment.