Written answers

Thursday, 15 October 2009

Department of Agriculture and Food

Dairy Sector

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 262: To ask the Minister for Agriculture, Fisheries and Food the extent to which the costs to the dairy producer here compare with those in the UK, France and other EU countries; and if he will make a statement on the matter. [36607/09]

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 264: To ask the Minister for Agriculture, Fisheries and Food the extent to which milk prices to the dairy producer here compare with those in the UK, France and other EU countries; and if he will make a statement on the matter. [36609/09]

Photo of Brendan SmithBrendan Smith (Cavan-Monaghan, Fianna Fail)
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I propose to take Questions Nos. 262 and 264 together.

Analysis of Irish dairy farming shows a wide variation in performance efficiencies between high and low cost producers. There is a difference of approximately 56% in the cost base between those with the lowest production cost and those with the highest, amounting to 9c/litre. Production costs vary across the EU, but Ireland has an advantage compared to other Member States through our largely grass based systems of production.

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 to farmers 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. Ireland's peripheral geographic location and highly seasonal grass based production curve has resulted in a dairy production profile heavily based on storable product. Those commodity products, such as butter and milk powders, are low margin products and this is reflected in the milk price.

The following table below shows the milk prices per 100kg for the EU27 member states for August of 2009.

EU CountryMilk Price August 2009 €/100kgs
Cyprus50.58
Finland38.11
Greece36.60
Italy31.50
France29.95
Portugal27.94
Spain27.18
Netherlands27.02
United Kingdom26.07
EU 2725.77
Austria25.32
Sweden25.08
Denmark24.49
Bulgaria24.43
Slovenia24.08
Luxembourg23.98
Poland22.45
Czech Republic22.42
Germany22.18
Ireland22.04
Belgium21.59
Hungary20.50
Slovakia19.54
Estonia19.38
Romania18.41
Latvia15.95
Lithuania15.57

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 263: To ask the Minister for Agriculture, Fisheries and Food the steps he proposes to take to address the issues raised by dairy farmers; and if he will make a statement on the matter. [36608/09]

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 265: To ask the Minister for Agriculture, Fisheries and Food the steps he proposes to take nationally or in conjunction with his EU colleagues to address the issue of collapsing prices for the dairy producer; and if he will make a statement on the matter. [36610/09]

Photo of Brendan SmithBrendan Smith (Cavan-Monaghan, Fianna Fail)
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I propose to take Questions Nos. 263 and 265 together.

The Common Agricultural Policy contains support measures to help us manage the market. During the Health Check negotiations last year I fought hard to keep the important measures in place. Since the start of the current crisis I have pressed the Commission to use all appropriate market instruments. Most of these supports have now been activated since the beginning of the year and have helped to stabilise the situation.

Since the start of 2009 the Commission has reactivated a range of measure provided for in the CAP Health Check, beginning with the early operation of the private storage scheme for butter. Then, in January export refunds were reintroduced to support the export of dairy products outside the EU and these have been increased several times, most recently in June. In March, public intervention schemes for butter and skimmed milk powder were opened which allowed the purchase of product up to set limits at a fixed price. When the mandatory limits of 30,000 tonnes and 109,000 tonnes respectively were purchased at the intervention price the schemes were continued under tendering arrangements at close to the intervention prices. To date some 83,000 tonnes of butter and 282,000 tonnes of skimmed milk powder have been funded under these schemes. Also, 135,000t of butter has been aided under the private storage scheme, which was extended beyond the August closing date.

In early July the Council of Agriculture Ministers agreed to the use by the Commission of emergency provisions to allow it to extend the intervention periods for butter and skimmed milk powder for 2009 beyond the normal end-August closing dates to 28 February 2010, and to replicate this mechanism in August 2010 if necessary. The Commission has also removed the so-called "free at frontier" threshold price governing the export of cheese from the EU, which I had been pressing the Commissioner to review for some time in bilateral contacts and at meetings of the Council.

Over the past month there has been comprehensive discussion of the dairy sector at the Council of Ministers. Twenty ministers, including myself, have now signed a statement calling for an EU approach that would combine short term measures with a medium to long term strategy to deal with volatility in the milk sector. At a special Council meeting last week it was agreed to establish a High Level Group to examine the sort of measures that could be put in place. That group will report in June 2010, and I have decided to set up a consultative group to advise me on the medium and long term measures that will best position the Irish dairy sector for the future. I also welcomed the commitment given by Commissioner Fischer Boel at last week's special Council to manage the release of stocks from Intervention in a prudent manner. We are seeing some tentative signs of an improvement in dairy markets, though a solid recovery is still uncertain and it is crucial that the disposal of stocks from intervention is handled in a sensitive manner and in a way that does not undermine the market at this critical time.

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