Written answers

Thursday, 15 October 2009

Department of Agriculture and Food

Dairy Sector

Photo of Kathleen LynchKathleen Lynch (Cork North Central, Labour)
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Question 17: To ask the Minister for Agriculture, Fisheries and Food his views on whether dairy farming here, as currently structured, can compete on the world market; and his further views on the price which will be returned from the world market based on current expert forecasts. [36212/09]

Photo of Brendan SmithBrendan Smith (Cavan-Monaghan, Fianna Fail)
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As we all know, the international dairy industry is facing serious challenges at present. Markets for dairy products are extremely weak across the world, primarily due to a collapse in demand caused by the global economic downturn. Over the past couple of years we have witnessed extremes of volatility in dairy product prices on an unprecedented scale. During 2007 dairy prices reached record high levels during the international commodity price boom. In 2008 world dairy markets returned to far lower levels and has continued into this year. We have seen the effect of these international low level prices finding their way back through the milk chain to primary producers.

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. As the milk price is greatly influenced by supply and demand market support schemes can only have a limited effect on prices. For a dairy producing country like Ireland, where we export the vast majority of our product, this new framework is particularly relevant. Ultimately the market is the source of income and to maximise income the focus has to be on competitiveness, efficiency and innovation.

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 the available market instruments. Most of these supports have now been activated since the beginning of the year and have helped to stabilise the situation. Over the past month there has been comprehensive discussion of the dairy sector at the Council of Ministers. Twenty countries 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. 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.

It is important to remember that the medium term prospects for global dairy markets are good. Growth in wealth and population is forecast to stimulate strong levels of demand for dairy products and returns will improve to all parts of the sector. The Government is committed to ensuring that the Irish dairy sector reaches its full potential. One of the major challenges in the medium term will be to ensure that Irish farming and the agri-food sector is at the heart of an evolving high-value food market, which is focussed on quality and innovation. This is at the core of Government strategy which sets out a series of actions to develop a competitive, innovative and consumer focussed agri food sector.

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