Jonathan O'Brien (Cork North Central, Sinn Fein)
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Question 19: To ask the Minister for Agriculture, Food and the Marine his views on whether milk prices will drop in 2012; when quotas finish will dairy farmers be producing milk under cost once again; and if he will make a statement on the matter. [7071/12]

Simon Coveney (Cork South Central, Fine Gael)
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Market forces have a major influence on the price paid to farmers for milk, as world market prices for dairy products determine the returns received by dairy processors which are reflected in the price paid to farmers. While 2011 was a very successful year for the dairy industry, with an average milk price paid to farmers of 34 cent per litre, the milk price paid to dairy suppliers is ultimately a commercial matter between the dairy farmer and his/her processor.

However, dairy markets appear to be relatively stable at the start of 2012, and the short term outlook is quite positive. Due to the volatility of international markets there will always be fluctuations in dairy prices, but it is important to remember that the medium term prospects for dairy markets are good. Growth in global population and wealth is forecast to stimulate strong levels of demand for dairy products. These positive medium-term forecasts are what the Food Harvest 2020 report seeks to exploit in setting out the strategic vision for the agrifood and fishing sector. From a dairying perspective, the ending of milk quotas in 2015 represents an exceptional opportunity to increase our milk output, and Food Harvest 2020 has targeted a 50% increase in milk production in the next decade. This target is ambitious but I also believe it is realistic, because the dairy sector has the capability to expand at producer and at processor level, and to exploit the significant potential in expanding international markets .

In relation to on-farm production, it is important for producers to focus on profit rather than milk price, and therefore to focus on increasing efficiency and reducing cost. My Department provides €6 million per annum through the Dairy Efficiency Scheme to encourage the adoption of technology and best practice at farm level. This scheme will help to equip farmers with the knowledge and skills necessary to maximise their output, reduce their costs of production and increase margins.