Éamon Ó Cuív (Galway West, Fianna Fail)
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39. To ask the Minister for Agriculture, Food and the Marine the dairy volatility pricing models he has examined at either Department or European Union level; the steps being proposed to protect farmers from price volatility; and if he will make a statement on the matter. [26054/15]

Simon Coveney (Cork South Central, Fine Gael)
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As the Deputy is aware, the EU milk quota regime ended on March 31 last. Planning for the post quota period had been ongoing amongst all stakeholders for a number of years and I believe we have the right balance of measures in place to ensure that Irish dairy farmers can enter the new era with full confidence. Notwithstanding the overriding opportunity that a quota free environment will bring I remain acutely aware that addressing price volatility will be a key challenge for the dairy sector and in particular for farmers.

All stakeholders in the sector need to be cognisant of the reality that there will be occasions, as there have been in recent years, where various factors align to provide the sector with a positive market context. There will be other times, such as the current environment, when issues such as global supply imbalances impact on prices in EU and domestic markets. Those involved in the dairy sector, including banks, cooperatives, farmers and Government, need to work together to mitigate the impact of these peaks and troughs.

The market supports framework negotiated as part of the reformed CAP will continue to play a role, and as Minister I will be proactive in demanding their deployment on extension when circumstances require it. The new CAP regulations provide for more flexible exceptional measures in times of difficulty, but we must remain aware that resources in this respect will not be unlimited.

A key insulation against volatility is the ongoing move up the value chain that is in evidence in Irish dairy production. The almost €1 billion investment by Ireland’s processing industry in preparation for quota abolition will be key to realising this potential and is one of the reasons why we can be confident about the long term future of the sector here. Investment in innovation and product development in areas such as food for the aged and for infants, sports nutrition and food for health can help to produce a higher value product mix which is less susceptible to volatility. Furthermore, it remains clearly evident, from engagement with potential customers for Irish dairy products that the sustainability message for our production has a strong resonance, and through the Origin Green Programme and the Dairy Quality Assurance Scheme, we are building a brand image for Irish milk production based on our strong environmental credentials.

Another key issue in addressing the issue is in respect of efficiency gains at farm level, which can help to mitigate the downside impact of price volatility. The State has also provided financial support for knowledge transfer groups, breed improvement, through ICBF, and for research, advice and education, through Teagasc. With the Dairy Quality and Sustainability Scheme, and the Origin Green Initiative, Bord Bia is helping to drive a sustainability culture that is already serving the Irish dairy sector well on international markets. Actions to improve environmental sustainability also improve the bottom line for farmers.

In terms of relationships along the domestic supply chain, it is important that the scope for longer term fixed price supply contracts for a proportion of farmers’ production are examined and utilised where appropriate. This is a feature of the market that is developing slowly and which I would encourage. Longer term supply arrangements with the buyers of Irish raw materials and ingredients may also be of benefit in this respect. It is also important that bank facilities are calibrated to deal with the impact of volatility on farmer returns.

The Single Farm Payment also provides an income buffer in terms of volatility mitigation and taxation is also a key policy instrument in respect of dealing with the issue, where the increase from 3 to 5 years for the purposes of Income averaging represents a key measure which can only be positive for dairy farmers and for the sector in general. Dairy futures markets are also a slowly emerging feature in Europe.

The long-term fundamentals of the global dairy market are strong. I am confident that the Irish and EU dairy sector is well placed to gain from the opportunity presented by expanding global demand whilst simultaneously addressing these challenges of volatility.