Written answers

Tuesday, 24 May 2016

Department of Agriculture, Food and the Marine

Milk Prices

Photo of Robert TroyRobert Troy (Longford-Westmeath, Fianna Fail)
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526. To ask the Minister for Agriculture, Food and the Marine his plans to tackle the falling milk prices, as they have been continuously falling for 24 months and have now reached around 24c per litre which is below production cost; and if he will make a statement on the matter. [11313/16]

Photo of Robert TroyRobert Troy (Longford-Westmeath, Fianna Fail)
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527. To ask the Minister for Agriculture, Food and the Marine if he will consult with Minister for Finance and the wider Government with a view to establishing Exchequer funded interest-free short-term loans to be used for facilitating a repayment suspension for the super levy and to provide farmers with merchant credit debt, an opportunity to transform it into interest free short term debt, in light of exceptional poor farm incomes; and if he will make a statement on the matter. [11314/16]

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I propose to take Questions Nos. 526 and 527 together.

I am fully aware of the pressures on dairy farmers right now. I’m committed to working with all players in the sector here to address these issues and ensure that we have a sustainable dairy sector going forward. 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. 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.F actors 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 be a challenging year.

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.

I very much welcome the EU Presidency conclusions on a package of support measures to address challenges in the dairy and pigmeat sectors agreed in Brussels at Council in March. This follows on from an earlier package of measures agreed in September of last year and takes account of the ongoing difficulties in the sector. The package includes a number of proposals by Ireland to the Commission in advance of Council, in particular the doubling of the intervention ceiling for skimmed milk powder and butter.

In terms of input costs at farm level, Ireland has called on the Commission to consider temporarily suspending EU import tariffs on fertilisers. I understand that the Commission is examining this request at present. At national level, I will continue to support the work of Teagasc, the Irish Cattle Breeding Federation and Animal Health Ireland to increase on farm efficiency and reduce input costs. The EU Presidency conclusions also refer to the possibility of advance payments under CAP, as was done in 2015. In addition my Department recently paid €26.4m in direct aid to dairy farmers, co-funded by the exchequer and the EU, to assist with liquidity and cash-flow issues on dairy farms.

I also welcome the proposal for the European Investment Bank (EIB) and member states to work together with the Commission on the feasibility of an EU export credit tool. My Department will continue to engage with the Irish banking system to ensure there is a full appreciation of the temporary impact of downward price volatility on farm enterprises which are financially sound in the medium term.

The 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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