Written answers

Tuesday, 24 May 2016

Department of Agriculture, Food and the Marine

Superlevy Fine

Photo of Patrick O'DonovanPatrick O'Donovan (Limerick County, Fine Gael)
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517. To ask the Minister for Agriculture, Food and the Marine the level of engagement his Department has had with representatives of farming organisations and the European Union Commission in respect of superlevy repayments and to the ongoing financial issues facing dairy farmers; and if he will make a statement on the matter. [11170/16]

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I am fully aware of the pressures on dairy farmers right now and I am committed to working with all players in the sector here to address these issues and ensure that we continue to have a sustainable dairy sector going forward. Dealing with price volatility is a major challenge for the sector. The Single Farm Payment provides some measure of income stability, and EU market support measures will have a role to play. These measures are not enough on their own, however. The sector needs to look at measures to reduce costs on farms, and at the development of new tools, including fixed price contracts, futures markets and more flexible financing arrangements for farmers. I expect all of the stakeholders in the sector, including processors and banks, to play an active role in the development of such instruments.

As one of the proposers of the Dairy Forum my goal is to ensure that it continues to provide constructively in terms of relevant issues of concern to farmers and others in the sector. Recent meetings of the dairy forum and its subgroup have had as their aim proactive engagement in the sector with respect to cash flow issues for producers. In this respect, the Forum has come forward with some good initiatives for farmers already, including an initiative on improving cashflow planning at farm level, which will be rolled out shortly.

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 2016. Factors contributing to this global price volatility 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, but there is no doubt that 2016 will continue to be a challenging year.

As the Deputy may be aware, a facility to phase the final superlevy payment over three years was introduced by the EU Commission last year at Ireland’s request. Farmers availing of the facility must pay at least one third of the bill in each of the first two years (2015 and 2016) with the balance to be paid in 2017. The Department implemented the scheme nationally and 3,741 farmers (out of a total of 6,109 farmers who incurred the levy) deferred repayments of €35.6m in superlevy liability, (out of a total national levy liability of €71.2m).

The mechanism required the Exchequer to pay the superlevy liability to the EU in full in 2015, and to recover the levy from farmers over the three years from 2015 to 2017. A wide process of consultation in the design of the scheme was undertaken with farm organisations and co-ops and it was agreed that once the initial farmer instalment was paid in 2015, the optimum repayment model for the balancing payments would involve ten equal instalments from the months of May-September in 2016 and 2017.

These amounts will be deducted by co-ops from a farmer’s monthly milk cheques to coincide with the peak milk supply months of April to August. The co-ops will then forward the money each month to the Department. This approach was also agreed as part of the sanction given by the Minister for Public Expenditure Reform.

As part of the discussions in the run-up to the March Council of Agriculture Ministers, Ireland proposed a further deferral of the payment to 2017 and 2018, to ease the financial burden on liable farmers in 2016. However the European Commission advised that the legal basis for the Regulations under-pinning the scheme are no longer in existence and therefore further amendments were not possible. While Ireland suggested a possible alternative legal approach, it was clear that the proposal enjoyed very little support from other Member States and was therefore unlikely to succeed.

On that basis the focus turned to other measures in the package which can be of assistance to Irish dairy farmers to help them through current difficulties, including the doubling of intervention fixed price buying-in thresholds. I did however raise the matter with Commissioner Phil Hogan, in our recent bilateral meeting, as well as at last week’s Council of Ministers meeting and encouraged him to reflect again on whether a legal basis could be found to facilitate a further deferral in superlevy repayments for farmers.

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