Helen McEntee (Meath East, Fine Gael)
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28. To ask the Minister for Agriculture, Food and the Marine if he will increase Irish milk production; his efforts to ensure banks afford credit flexibility to farmers while the Irish dairy sector consolidates its expansion, given the market turbulence in adjusting to the abolition of dairy quotas and given significant borrowings by dairy farmers; and if he will make a statement on the matter. [2202/16]

Simon Coveney (Cork South Central, Fine Gael)
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Production decisions are made by producers, taking prevailing market conditions as well as their efficiency of production and price of inputs into account. The abolition of dairy quotas in April 2015 allows farmers the freedom to make these production decisions on a commercial basis.

The price of milk and dairy commodities is determined by a range of factors, including supply and demand at international level. Food commodity markets including dairy markets have been characterised by significant levels of volatility for a number of years and this trend has continued throughout 2015 and into early 2016.

Factors contributing to global price volatility in 2015 include the Russian ban and the softening of Chinese demand on one side, coupled with increased production among key global producers including the EU on the supply side. The longer term demographic and demand perspectives remain positive and Irish dairy farmers are well placed to take full advantage of rising global demand.

I maintained ongoing contact with the Irish banks and have indicated the need to show flexibility in their dealings with farmers experiencing temporary cash flow difficulties in 2015 and into 2016. At the dairy forum in late September, I again reiterated these calls to the three main banks in attendance.

The Irish dairy sector is cost competitive and Teagasc figures indicate that Irish farmers have relatively low levels of indebtedness compared to counterparts in competitor countries. The banks assured me that they are sensitive to the temporary pressures on dairy farmers and will be flexible in their dealings with them. Banks have stressed the need for early engagement from those who see early financial pressure.

I am also in regular contact with the banks, co-ops and others about the development of lending products for farmers that are better adapted to the volatile global markets in which we operate.

The Government has also been proactive of course. Initiatives include provisions allowing dairy and other farmers to use income averaging over five years when it comes to paying income tax bills. This offers respite to the sector from a cash flow perspective. Furthermore, I have also ensured that priority has been given to measures for the dairy sector in the Rural Development Plan. The agreement at the Council of Agriculture Ministers late last year to increase the rate of single Farm Payment advance to 70% has been of assistance from a cash plan perspective as have the EU targeted aid payments for the sector, matched at national level, which on completion will have injected approaching €25 million in liquidity into the sector.

Also of relevance in this respect was my decision to make a 3 year interest free instalment arrangement available to all those affected by superlevy. This option has been availed of by approximately 3,700 producers and will be of assistance to farmers facing cash flow difficulties arising from super levy in the final year of the milk quota regime.