Michael Moynihan (Cork North West, Fianna Fail)
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Question 144: To ask the Minister for Agriculture, Fisheries and Food if he and the European Commission have looked at the markets for milk and milk-based products post-2015, when the expansion in the dairy industry will take place; and the steps he and the European Commission have taken to ensure that there will be a proper price paid to primary producers. [7843/11]

Simon Coveney (Cork South Central, Fine Gael)
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There have been a number of reports on the impact of quota abolition on milk production in the EU. Most recently, the European Commission has analysed the market situation for milk and milk products post 2015, in a report published last December on the prospects for a 'soft landing', following the abolition of milk quotas. This report predicts that EU milk production over the period to 2020 will grow modestly, with production in 2020 expected to exceed that of 2009 by about 3%. It also suggests that cheese and fresh dairy product output is expected to grow in response to strengthening demand, with prospects for butter conditional on firm domestic demand. Milk powder prospects are somewhat uncertain, with a fall in EU production possible.

In 2009 the Commission established the High Level Group on Milk to examine a series of mid-term and long-term issues in the dairy sector arising from the expiry of milk quotas. It delivered its report in June 2010 and one of the recommendations was to look at measures to improve the bargaining power of dairy producers. This has resulted in a proposal for a legislative 'dairy package' making provision for contractual relations between producers and processors. It will also allow producer organisations to negotiate contract terms on behalf of dairy farmers with a view to strengthening their position in the supply chain. However, these elements are expected to have little impact in Ireland, where our processing structure is based on co-operatives.

The milk price paid to primary producers varies throughout the EU as market forces have a major influence on the price. World market prices determine the returns received by dairy processors and these in turn are reflected in the price paid to farmers. Over the medium to long term prospects for world dairy markets are positive, with growth in population and wealth predicted to stimulate strong levels of demand and improve returns to the dairy sector. Nevertheless, the CAP provides a range of support measures that can be used to manage the dairy market, and to provide a safety net in times of market decline such as 2009. There is now a broad acceptance at the Council of the need to retain such safety-net measures in the reformed CAP after 2013. In addition the Commission has undertaken to explore new instruments to help reduce income volatility.

On the domestic front we have also been preparing for the future. Last year my Department published Food Harvest 2020 and the report outlines the positive prospects for the dairy sector over the medium- to long-term, and sets an ambitious target of a 50 per cent increase in milk production by 2020. It sets out a number of recommendations designed to support the realisation of this potential growth, ranging from milk processing to on-farm competitiveness, technology transfer, and R&D and marketing. I fully support the aims of this strategy and will work with the industry to help achieve its targets.