Séamus Kirk (Louth, Fianna Fail)
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95. To ask the Minister for Agriculture, Food and the Marine his views on short-term borrowings in the dairy sector and the negative impact this has on the industry; and if he will make a statement on the matter. [27757/15]

Simon Coveney (Cork South Central, Fine Gael)
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As the Deputy is aware, the EU milk quota regime ended on March 31st 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 issues such as borrowings and financial constraints will be key challenges for the dairy sector and for farmers in particular in the context of various factors such as price volatility, investment and shorter term borrowings and super-levy repayments. My Department has been exploring new and more competitive sources of funding and will continue to do so in the context of evolving market requirements. For example, the Strategic Banking Corporation of Ireland, established by the Government as a strategic SME funding company, has recently launched a new ‘Agriculture Investment Loans’ product. This credit is available at favourable terms for investments by agricultural SMEs involved in primary agricultural production, the processing of agricultural products or the marketing of agricultural products.

In relation to accessing finance and credit terms generally, I retain ongoing contact with the main banks, most recently meeting directly with them earlier this year. I emphasised that this is a critical phase in Ireland’s dairy expansion and that the increased investment and output from production and processing will have significant downstream benefits across the economy generally, including for the banking sector.

In order to support the on-going development of the dairy sector and to mitigate the current difficulties caused by milk price volatility, I asked them to explore the full range of potential measures that could serve to alleviate the loan repayment burden facing farmers and offer maximum flexibility for dairy farmers in what will be a difficult year ahead. I believe that it is essential that short term cash flow difficulties are not allowed to undermine prudent investment plans or the longer term competitiveness of their operations. I will continue to communicate with the main banks on issues affecting the sector.

Another aspect to addressing this issue is the utilisation of provisions under the regulations governing the European Structural and Investment Funds (including the Rural Development Programme - RDP), where it is open to Member States to fund interventions via financial instruments. Essentially, financial instruments offer an alternative to the traditional grant based approach whereby schemes under the RDP may be funded via loans, guarantee funds or equity investments. The funding for any such financial instruments would have to draw on our existing RDP allocation of European Agricultural Fund for Rural Development funding as well as National Exchequer funding. It is also possible to incorporate funding from other sources such as the European Investment Bank.

The European Commission has indicated that it is aiming to double the usage of these financial instruments in the 2014-2020 programming period. Officials in my Department have been engaging with the European Commission, EIB and other stakeholders in order to identify areas where financial instruments could be implemented to best strategic effect. They are also exploring the practical steps which are required in order to implement financial instruments and put in place a clear plan based on real market failures and economic needs.

As well as the issues outlined above, it is worth mentioning at this stage that I have also been proactive in other areas in terms of ensuring the right balance of measures are in place to ensure that Irish dairy farmers can enter the new quota free era with confidence. On-going contact has been maintained with the Minister for Finance to ensure that existing and future taxation policy reflects the Government’s commitment to agriculture. Of interest to dairy farmers here will be the announcement in last October’s budget to provide for income averaging over five years when it comes to paying income tax bills. I have also ensured that priority has been given to measures for the dairy sector in the Rural Development Plan.

Finally and importantly, in terms of super-levy impacts I certainly recognise the difficulty that this causes for farmers here and for that reason I have taken the decision to make the 3 year interest free instalment arrangement available to all those affected. This is now open for applications by farmers. The first instalment must be collected by the milk purchaser in the normal way and paid to my Department before 1 October 2015 and the two subsequent payments must be paid by similar dates in 2016 and 2017.

I firmly believe that the dairy sector can look to the future with confidence. 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 as outlined above.