Niall Collins (Limerick West, Fianna Fail)
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Question 74: To ask the Minister for Agriculture, Fisheries and Food his views on the terms of the Common Agricultural Policy health check, particularly in relation to quotas, if it should be revisited in the context of the pressure on dairy prices; and if he will make a statement on the matter. [43435/09]

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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At the outset I would like to point out that I and my Government colleagues have been fully engaged in dealing with the current dairy market difficulties while at the same time trying to ensure that the industry is well-placed to take advantage of the upturn in dairy markets when it arrives. A revisiting of last November's CAP Health Check agreement would do nothing to achieve either objective.

The Health Check agreement had two key elements, namely, supply control and market support. Taking the issue of supply control, or milk quotas, first, the agreement 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 preceding 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, which is why I did not add my voice to recent calls for a reversal or freezing of the agreed quota increases. Indeed I actively counselled against such a course of action.

It has been suggested by some groups that the quota increases are the cause of the current low prices for milk. This is a flawed argument. In its report to the Council in June, the Commission said that milk production in the quota year 2008/09 had fallen by 0.6 per cent compared to the previous year and that, overall, production was 4.2 per cent below quota by 31st March 2009. Statistics for the 2009/2010 quota year thus far indicate a similar trend. Indeed, here in Ireland production was just over ten per cent below quota at the end of October. Therefore to attempt to attribute the current market weakness to the additional quota allocated as part of the Health Check is patently wrong. The problem lies in the mismatch of supply and demand that arose as a result of the increase in supply that followed the high prices of late 2007 and early 2008, and a contraction of demand arising from the combined effects of the global financial crisis and recession.

This brings me to the other key dairy element in the Health Check, which was, of course, market support. In the negotiations I strongly defended the view that quota increases must be matched with effective dairy market management measures during the transition to a post-quota EU dairy market. I therefore called for the continuation of such measures and, above all, those schemes that are especially important for Ireland. In the event, I managed to have these schemes maintained in the face of powerful opposition and they have been used to the maximum possible extent by the Commission in recent months to help support the market.