Bernard Durkan (Kildare North, Fine Gael)
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Question 239: To ask the Minister for Agriculture, Fisheries and Food his plans for the future development and expansion of the beef, lamb, pigmeat, poultry, dairy and cereal sectors; the extent to which market forces have affected each sector negatively or positively on an annual basis over the past five years and to date in 2010; and if he will make a statement on the matter. [40855/10]

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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The market performance of the meat, dairy and cereal sectors is a function of supply and demand, and has been affected by the recent global economic downturn, exchange rates and other factors. Food Harvest 2020 provides a vision for Irish Agri-food and Fisheries for the next 10 years and includes specific recommendations for these valuable sectors.

Dairy Sector

The development of a strong and vibrant dairy sector is at the heart of the Food Harvest 2020 Plan, which contains an ambitious target of 50% production expansion laid down for the development of the dairy sector. Market forces have a major influence on the returns to the dairy sector which fluctuate in accordance with the international dairy markets. Over the past few years the international dairy industry has witnessed extremes of volatility in 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 primarily due to a collapse in demand caused by the global economic downturn. The slump continued into 2009 before gradually improving later in the year. I continually pressed the Commission to take all appropriate actions to deal with the dairy market situation and the implementation of a range of support measures helped to stabilise the market. The dairy market situation has improved considerably this year with increased commodity prices on world and EU markets, and a consequent rise in milk prices.

Beef Sector

With a current annual output value of some €1.9 billion, Irish beef and livestock production makes an extremely valuable contribution to the overall Irish economy. Progressive initiatives to position Irish beef in higher value EU markets have proved very successful over the past decade. As a result, 99% of Irish beef exports now goes to EU markets with annual exports valued at €1.4 billion in 2009. Additionally, live cattle exports were valued at €157 million in 2009. Given recent developments in the domestic and international economy, the immediate prospects for the Irish beef sector still remain challenging. In view of the importance of international trade, the impact of exchange rate developments and a consumer switch to lower value cuts will continue to exert a strong influence on market returns.

From a more strategic perspective, the 2020 report provides a sound framework for the development of the sector generally. The report sees the maintenance of Irish beef's premium position in EU markets and closing the price differential between Irish and other premium competitors in those markets as the main challenges facing the sector. Against this background, the report recommends the development and enhancement of a number of policy initiatives to underpin the market performance of Irish beef. In particular, it envisages a focus on genetic advances to drive productivity and product quality. A combination of better quality breeding and better carcase quality at a younger age together with genetic advances can potentially deliver greater profitability at farm level. An important spin-off from the significant growth expected in the dairy sector will be an increased supply of calves for rearing and finishing. Complementary Teagasc initiatives, such as the Better Farm Beef programme, offer the best route for producer viability and growth through the adoption of best practice at farm level.

Increased product differentiation, based on predominantly grass-based Irish beef, has the potential to build on the success of current marketing strategies and concepts such as Brand Ireland, when delivered. Collectively, these strategies can provide enhanced returns to the producer and close the current price differential for beef in high-value EU markets. The beef industry has, in the 2020 report, set itself a target of 20% growth in output value over the next decade. Achieving this target will depend on increased communication, collaboration and consolidation across the supply chain and I can assure the Deputy that my Department will continue to work with other industry stakeholders in pursuit of the vision for the beef sector set out in the report.

Pigmeat

The pig sector remains an important component of the Irish agricultural sector. With a farmgate value of some €300 million, and employment in the industry of approximately 7,000, the sector provides an important source of income to rural communities all over the country. Almost half of Irish production is exported with the UK accounting for 50% of exports with the remainder split between Continental Europe and third countries.

In common with other meats, returns to pig producers have fallen as a result of the economic recession. Prices fell in 2009 but recovered somewhat during the early and mid part of 2010. The normal seasonal decline is ongoing at present, but prices in Ireland remain approximately 5% ahead year on year. Pork remains the most-consumed meat worldwide and consumption is expected to increase steadily over the next decade. In order to best position the Irish industry to share in that growth, I am progressing a number of initiatives.

Teagasc prepared a development strategy for the Irish pig industry, which identifies the issues facing the sector and makes certain recommendations that need to be taken to position the sector for a successful future. The recommendations of this steering group have been largely incorporated into the 2020 report, which targets a 50% growth in the value of output by 2020.

On marketing and promotions, the domestic market remains the most important for Irish pigmeat, accounting for 50% of our production. Therefore, protecting and maintaining the market share of Quality Assured pigmeat in Irish retail is critical for the Irish industry. Bord Bia will continue to work with the industry and invest heavily in consumer promotions at retail and education programmes at foodservice level to promote Quality Assurance.

The ongoing marketing initiatives conducted by Bord Bia both at home and overseas are instrumental in supporting the pigmeat sector. Resources have been increased by Bord Bia, through the Marketing Fellowship Programme, in the market development of more customers for Irish pig meat within the EU. By targeting the end users and further manufacturers directly, we can shorten the supply chain and return greater value to exports. We currently export to over 20 non-EU markets and it is my policy and that of the Government to ensure that Irish producers have access to markets worldwide. My Department will continue to work with Bord Bia, and the Department of Foreign Affairs and the industry to identify and develop other potential markets.

Poultry

The farmgate value of Irish-produced poultry meat is thought to be approximately €150 million. Despite considerable competition from imports the domestic industry has proven to be quite resilient in recent years. The majority of Irish product is consumed in this country with exports focussing largely on by-products. The target over the medium term is to increase the share of the Irish poultry meat market being supplied by Irish producers. The 2020 report targets a 10% increase in the value of poultry output over the next decade.

Lamb

2010 has so far proved to be a very positive year for the sheep sector in Ireland with factory prices running approximately 16% ahead of 2009 levels for the year to date. This is due in no small part to the tightening supply situation, down 14% on 2009 levels, which has led to increased competition among processors for supplies. The sheepmeat sector faces ongoing challenges caused by the decline in the national flock which has led to declines in throughput at processing plants in recent years, leading to questions about the future of the Industry. However, the relevant stakeholders have taken action designed to safeguard the future of the sector as follows.

Bord Bia's promotional strategy for the Irish sheep sector addresses the issue of safeguarding the future of the sector in the following ways: By encouraging Irish consumers to buy more Quality Assured lamb; by collaborating with its French and English counterparts in a campaign to reverse the decline in consumption of lamb on the French market, which accounts for over 50% of our exports; by working with individual exporter to increase the amount of exports to higher value markets such as Germany and Scandinavia and thereby reduce Ireland's dependency on the French market. Bord Bia will spend up to €1 million this year on such promotional campaigns.

Food Harvest 2020 also includes specific recommendations for the sheep sector. It envisages that over the coming years, demand for sheepmeat on the European market will outstrip production levels, which could provide opportunities for exporting countries such as Ireland. This should provide the potential for better returns, provided the industry can continue the market and product diversification which has been evident in recent years. At producer level there is likely to be improved price prospects, provided an increased focus on production, efficiency and product quality is evident. Based on a renewed commercial focus by the sheep sector, building consumption on the domestic market and through the implementation of the recommendations of Food Harvest 2020, the industry has targeted a growth in output value of 20% by 2020.

The recommendations of the report focus on farm competitiveness and the processing sector. On the farm side, they emphasise the importance of the continuance of the application of on-farm labour efficiencies and new technologies, breed improvement and the production of a quality product. On the processing side, the focus is on efficiencies, innovation and improved product range. These recommendations build on the Malone report, which was published in 2006 and provided a clear framework for the sheep sector. Indeed the Malone report is still very pertinent and Food Harvest 2020 endorses its findings and recommendations and calls for their full implementation by the relevant stakeholders.

I have also provided a number of key supports to this sector in the past two years, most notably €7 million from the 2009 Single Farm Payment National Reserve under the Uplands Sheep Payment Scheme, €54 million for the three year grassland sheep scheme commencing this year and €8 million for the sheep fencing/mobile handling equipment scheme, also commencing this year. I am confident that all of these initiatives will provide a much-needed boost to the sheep sector.

Cereal Sector

The maintenance of an efficient and viable cereals sector in Ireland is clearly very important. Not only does it generate an income for our tillage farmers but it also a key source of feedingstuffs for our livestock sector. Annual cereals production in Ireland has fluctuated around 2 million tonnes in recent years and it is desirable to try and sustain this level of production in order to avoid over dependence on imported cereals.

Since Ireland is a deficit market for cereals, prices here are greatly affected by world prices and supplies. In 2007, increased demands for grain from the biofuels sector and the new emerging markets like China and India drove up world grain market prices. Grain prices in Ireland increased to record levels during 2007 and growers here reacted by increasing acreage sown. This resulted in a bumper harvest in 2008 with total grain production of 2.4m tonnes, the second highest on record. Bad weather at planting, coupled with poor returns for growers resulted in a lower harvest for 2009 of 1.9m tonnes. Despite the significant drop in production, grain prices were also down – on average 30% lower than the 2008 level. This illustrates the fact that the grain price in Ireland is a function of developments on EU and world markets rather than a function of domestic supply and demand developments.

Globally grain prices have increased significantly in 2010, due to lower than expected harvest figures and the grain export ban imposed by Russia. Grain prices in Ireland have increased by up to 50% on 2009 prices. This is a welcome development for tillage farmers after two difficult years. Good sowing conditions have renewed interest in planting of winter cereals.

My Department operates a range of services aimed at improving the efficiency of, quality and viability of cereal production. These services include seed certification, seed testing and recommended list of varieties. In addition, Teagasc provides research, training and advisory services for cereal producers. The value of all these support services is reflected in the fact that Irish cereals producers have consistently achieved some of the highest yields in the world.