I move:
That a sum not exceeding £72,772,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1972, for the salaries and expenses of the Office of the Minister for Agriculture and Fisheries, including certain services administered by that Office, and for payment of certain subsidies and sundry grants-in-aid.
The 1971 Budget provided for increases in milk prices and pig prices, increased levels of support for beef exports and improved rates of grant under the hogget ewe scheme, the small farm incentive bonus scheme and for certain farm buildings and equipment. In addition, the Minister for Finance announced in October that he was providing further funds mainly for disease eradication schemes. I will be introducing a Supplementary Estimate at a later stage to take account of these and other items which are not included in the Estimate total of £72.8 million. That total is £3.3 million higher than the final provision for 1970-71. It includes almost £36 million for price support, £22 million for agricultural production and development aids, £4 million for livestock improvement and disease eradication and almost £7 million for agricultural education, research and advisory services.
Deputies will have already received notes on the main activities of my Department which will be of help to them in the debate on the Estimate.
In 1970 the volume of agricultural output was an all-time high being 2.6 per cent more than in the previous year. The rise in cattle output in 1970 made the greatest contribution to the overall output increase. Although more cattle were sold than in 1969 there was an increase of 176,000 on farms at the end of 1970 so that the number available for marketing and breeding this year is much greater. There was a small decline in the volume of milk output due to the diversion of milk from creameries to feeding on farms. The output of pigs exceeded the record level of 1969. Poultry output was also up but the output of sheep declined. Barley output rose by about 4 per cent and there were marginal increases in the output of wheat and oats. Sugar beet output also increased marginally but potato output continued to decline. Agricultural prices also rose in 1970 and the combined effect of the rise in prices and volume was a new record output figure of £343 million, or £24 million higher than in 1969. With increases in the usage and prices of fertilisers and feeding stuffs and in other expenses, operating costs rose substantially during the year but, in spite of this, total family farm income was £10 million or 6 per cent higher than in 1969. Allowing for the decline in the numbers engaged the income increase per person was, of course, more than 6 per cent.
Farmers, like everybody else, are affected by the inflationary trends in the economy and as Deputies are aware the Government intervened on two occasions in 1970 and again in the 1971 Budget with a series of measures designed to raise farm incomes. Total Exchequer provision in relation to agriculture is now running at a very high level—it is estimated that it will amount to about £105 million in the current financial year. For reasons which are well known and which I need not explain the level of farm incomes is highly dependent on Government policy and action. Farmers have very little scope for passing on increased costs to consumers and prices obtainable on export markets for several important agricultural commodities are often below cost of production, a situation which we hope EEC membership will remedy. On a wider plane, this expenditure is justified by the very important contribution made by agriculture to the national economy, its impact on the balance of payments—agricultural exports are likely to be well in excess of £200 million this year—and its basic position in relation to the large sector of industry which is servicing it and dependent on it.
I should now like to review briefly the main trends on a commodity basis beginning with cattle and beef. The cattle trade was buoyant during 1970 and has continued so during the current year. Our exports of store cattle to the UK so far this year show a marked increase on the figures for the same period in 1970. The upward trend in export slaughterings of bullocks and heifers which has been evident in recent years was again maintained, although in recent months the high prices obtaining in Britain led to a greater proportion of our heavy cattle being exported live. Up to the end of October this year it is estimated that we have exported 550,000 live cattle as compared with 473,000 in the same period in 1970. Slaughterings of cattle at export premises in the ten month period were 576,000 as compared with 530,000 in the same period in 1970.
Cattle prices throughout this year have been averaging about £1 per live cwt. over 1970 prices, which themselves were regarded as satisfactory. In the short term the prospects of firm cattle prices are reasonably good. In the longer term we can look forward to a higher level of prices on accession to the EEC. The latest census returns show cattle numbers at record levels.
Thanks to good market conditions in Britain, export subsidy costs on beef this year will be substantially less than in 1970-71.
Quota restrictions on beef imports into the US continued during 1971. Ireland's quota for the current year was 31,116 tons, an increase of 670 tons on the previous year. Our beef exports to the US consist almost entirely of frozen boneless beef for manufacturing purposes.
All in all, we have the very satisfactory situation in the cattle industry this year of an increased national herd, increased cattle and beef exports and a profitable level of prices.
Following the improved rates of grant introduced in 1970 there was a big increase in participation in the beef cattle incentive scheme in all counties and in the year to March, 1971, over £4.8 million was paid to about 51,000 herdowners. In 1971 there was a further significant increase in the number of participating herdowners and in the Estimate now before the House funds totalling £5.3 million, or an increase of £500,000 on the amount paid out in grants last year, are being provided. However, with over 61,000 herdowners now participating and the average herd size tending to increase, the £5.3 million will not be adequate and additional funds will have to be provided.
Over 1,000,000 cows or 61 per cent of the total were artificially inseminated in 1970, Hereford and Friesian being the breeds mainly in demand. There is no indication of any significant change in this pattern in 1971.
In pursuance of the policy of trying out new breeds under Irish conditions, 12 bulls and 122 heifers of the Fleckvieh, or Simmental, dual-purpose breed were imported from Austria last May. The bulls have been located at AI stations to enable a comprehensive progeny test to be carried out, while the heifers are with pedigree herdowners who are participating with my Department in an assessment programme to evaluate the breed under Irish conditions. Two further importations currently under way will bring the total imports of this breed to 450.
In view of the importance of Friesians in the national breeding pattern, an experimental import of 11 bulls and 11 heifers of the German Friesian breed was also arranged in 1971 to investigate the potential contribution which this breed can make to our native stocks. The bulls have gone to AI stations to be progeny tested for milk and beef characteristics while the heifers have been used to establish an experimental herd at Clonakilty Agricultural College where they will take part in comparison trials with a herd of Irish Friesians.
Turning to milk, the slight fall in intake at creameries last year has been reversed and it is estimated that intake this year will reach the record total of 530 million gallons, about 16 million gallons over the 1970 figure.
A world shortage in supplies has resulted in prices for our dairy produce, particularly in the UK, reaching very high levels. However, notwithstanding the increase in the volume of milk available here for processing, we were unable to take full advantage of the suspension, owing to the supply situation, of the British butter and cheese quota arrangements.
The £30 million in the printed Estimate for creamery milk support does not include provision for the increases in the milk price allowances or the adjustment of the multi-tiered system of payment announced in the Budget. It now appears likely that, because of the improved export market prices, the additional expenditure on production allowances will be counterbalanced by savings in the grant to An Bord Bainne. I might add that creamery milk producers, in addition to benefiting from the Budget increases, have also benefited directly from the favourable market situation through a reduction in the levy payable by them to the board.
This has not been an easy year for the sheep industry. Since April last sheep and lamb prices have been lower than in 1970 but in recent weeks factory prices for lamb have hardened and are now about the same as they were at this time last year. The reasons for the lower prices this year were poorer market conditions, especially on the French market where import levies were increased and where stronger competition was met from increased British exports. Increased earlier marketings of lamb arising from mild weather conditions in the spring also added to the problem.
There has been substantial help from the State for sheep production this year. The rate of subsidy on hogget ewes has been increased from £1.50 to £2 per head and total payments under the sheep subsidy schemes will be about £1.75 million, an increase of about £400,000 over 1970. The guaranteed price for lamb was increased, in line with the British increase, by 2.2p per lb. To assist the industry we extended the period during which the upward seasonal adjustment to our rates of subsidy applied and we abandoned the autumn deduction. As a result of these measures and of having to send increased supplies to Britain rather than the Continent, export subsidy payments on mutton and lamb since last April have amounted to about £400,000 as compared with about £30,000 in the same period in 1970 and payments for the full year 1971-72 are expected to amount to £850,000 as compared with £56,000 for 1970-71.
Even with heavier slaughterings throughout the year we have an increased sheep flock. A rise of 76,000 in June, 1970, has been followed by a further increase of 84,000 in June, 1971. I am hopeful that the rising trend will continue and accelerate. In the mountain areas, the number of sheep presented for subsidy this year is expected to show an increase of about 10 per cent. The hogget ewe subsidy introduced last year in the lowland areas appears to be having the desired effect in encouraging more hoggets to be retained for breeding and the number presented for subsidy is likely to be up by more than 10 per cent.
This year I took further steps to improve the efficiency and operation of the wool marketing arrangements. On 1st April the register of buyers of wool was set up with the result that only registered buyers could operate from that date. Over 250 buyers have been registered and all those have premises which meet the standards laid down in regulations. Also in April this year, on the basis of recomendations by An Chomhairle Olla, I made regulations providing for the purchase of wool on a graded basis and the display by buyers of purchase prices. Buyers are also required to furnish to producers statements of wool purchased. Our thanks are due to wool buyers and producers for the manner in which they co-operated with my Department and with an Chomhairle Olla in the introduction and implementation of these requirements. The courses in wool grading provided by An Chomhairle Olla for wool buyers and their staffs proved particularly useful.
As regards horses, the most important development was the setting up of Bord na gCapall under the Horse industry Act, 1970. The board have a wide range of functions, including the establishment and operation of a national equitation centre, giving advice on breeding, and promoting the sale and export of non-thoroughbred horses. I am looking forward to this body playing a most useful role in the development of the horse industry.
Pig production continues at the high levels of recent years. So far this year deliveries of pigs to bacon factories are well ahead of 1970 and the total for the year will exceed 2,000,000.
Pigmeat was in surplus supply on European markets this year and marketing conditions were difficult with subsidy costs high. There is now some slowing down in European production and the market is expected to improve over the coming months. In order to meet higher costs of production the guaranteed minimum prices for pigs were increased in May and again in September.
The rationalisation of our bacon curing industry has become a matter of urgency in the context of prospective EEC membership. It has been apparent for a long time that, in relation to total production, we had too many factories, a low average throughput and excessive overhead costs. Furthermore a number of our factories no longer meet the very high standards of plant and equipment required by importing countries. Fewer plants and higher all round standards are essential if we are to safeguard the interests of pig producers and the industry in the competitive conditions which will have to be faced on home and export markets in the years ahead.
A rationalisation scheme has now been put in hand. Individual processors are being invited to surrender their licences on a compensation basis. Factories which will continue in operation will be encouraged to modernise and extend their plants where this is considered necessary. The administration of the scheme, the cost of which will be financed by a levy on pigs slaughtered at the factories, has been assigned to the Pigs and Bacon Commission. The commission will be assisted in their task by a consultative group representing the Industrial Development Authority, the Fair Trade Commission, the Federated Union of Employers, the Confederation of Irish Industry, the Irish Congress of Trade Unions, the Department of Labour and my Department. The commission will keep in close touch with the IDA, AnCO and the Department of Labour in the course of the rationalisation programme so as to ensure that there will be a reasonable opportunity of arranging for alternative employment in the area of closures and also for special training courses for any new industries with which it might be possible to replace the factories being closed.
Turning to poultry, broiler consumption continues to increase. Production of broilers in 1970 amounted to 15 million birds and is expected to be about 17 million in 1971.
In the case of turkeys, increasing use of day-old poults from licensed turkey hatcheries has led to an improvement in the quality generally of turkeys marketed. Supplies of fresh turkeys for the Christmas trade are likely to be about 5 per cent greater than last year and, together with increased stocks in cold store, will be fully adequate to meet the demand.
As regards livestock diseases, while there is no appreciable change in the incidence of bovine tuberculosis its persistence in some areas, even at a slightly lower rate, is a cause of concern. Testing on an area basis is at present being done in counties Waterford and Kilkenny and it is proposed to extend such testing to the remaining southern counties next year. The purpose of the change from a county basis to an area basis is to ensure that all the cattle in each area are tested and all reactors removed over a very short period.
There are five counties in the brucellosis free area—Donegal, Cavan, Monaghan, Leitrim and Sligo. Herd testing must continue there to guard against any resurgence of the disease.
In the light of the introduction of brucellosis eradication on an area basis in Britain, and our prospective accession to the European Economic Community, the early clearance of brucellosis from the midland counties, from which most of our live cattle are exported, is very important. With this in mind, and also to safeguard the counties already cleared, full scale eradication measures were started in Counties Louth, Longford, Mayo, Roscommon, Westmeath, Meath and part of county Offaly in 1970. The level of the disease in County Mayo was low and clearance was rapid so that I hope to add that county to the brucellosis free area within the next few months. In County Meath, on the other hand, the disease incidence, as had been expected, was high, particularly in the dairy herds. The numbers of reactors and the high prices paid for them have made a heavy drain on the available funds and I am aware that some dairymen have met with difficulty, even hardship, because of the persistence of the disease in their herds. I have the eradication procedures under examination at present to see whether these difficulties can be abated. The scheme is proceeding very satisfactorily in the other counties mentioned and I am confident that, even in County Meath, the second round of testing will show a substantial reduction of the disease.
In the remaining counties the Voluntary Brucellosis Scheme and the Brucellosis (Certified) Herds Scheme are available to herdowners who wish to clear their herds in advance of general eradication. In these counties also two rounds of milk ring tests of all creamery herds were carried out this year to identify the clear herds. Discussions have taken place with mart organisations to promote special sales of animals from herds which were twice clear to the milk ring test.
The Heifer Vaccination Scheme operating in the 11 main dairying counties of the south and east is, I am glad to say, proving attractive to farmers and over 300,000 heifers have so far been vaccinated. Vaccination will not, of course, cure or eradicate the disease but it will give protection to many herds in the dairying area until the eradication programme reaches there.
The work of the expert group formed to study the problem of liver fluke has already produced some useful results. Bodies co-operating with my Department in this group are An Foras Talúntais, the veterinary faculties of the universities and the Irish Veterinary Association. Shell Research Ltd. is also making a valuable contribution. I wish to take this opportunity of thanking these bodies for their help.
When the provision for general disease control and eradication was being estimated it was expected that the cost of free treatment of warble infested animals this year would be much the same as in 1969-70. In the event it was decided to suspend free treatment and to allocate part of the provision towards meeting the cost of providing supervision of the national warble dressing programme this autumn. This programme has gone very well and, while final figures of the number of cattle dressed are not yet available, it is clear that well over 5,000,000 cattle have been dealt with. I am grateful to the farming organisations who co-operated fully in the scheme and to the vast majority of herdowners whose ready participation helped to make it a success. A special word of thanks is due to the artificial insemination bodies for their excellent work in organising and executing the dressing programme in their respective areas.
A serious and widespread epidemic of fowl pest occurred in Britain last year. The disease spread rapidly through most of England and Wales and some areas in Scotland. Special precautionary measures were taken to guard against the introduction of the infection into this country. Although the situation in Britain has been progressively improving for some months past continued vigilance is necessary in the interests of our valuable poultry industry.
Before leaving the subject of animal diseases I would like to stress the importance to the agricultural economy of our eradication and control measures. By raising the standard of health of our livestock these measures not only improve efficiency in production but also ensure a better return from sales on export markets of the resultant higher and better quality output.
As regards tillage the area under cereal crops in 1971 showed an increase over 1970 and is now close to 1,000,000 acres. Harvesting was completed quickly in favourable weather conditions with relatively few intake or storage problems.
The wheat acreage was 226,000 compared with 234,000 in 1970. Yields varied considerably but, on the overall, the average yield is likely to compare favourably with the levels of recent years.
Under the stimulus of a floor price increase of £2.50 per ton to the grower, the acreage under feeding barley increased by almost 12 per cent over 1970 to a new record of 452.000 acres in 1971. Malting barley at 139,000 acres was up by about 10 per cent. The average yields of both feeding and malting barley were higher than in 1970. The return to growers should be very satisfactory and the increased production of home-grown feeding grain will help our balance of payments position. Barley growing is one of the areas where producers will benefit on this country's entry to the EEC and the steadily increasing acreage of feeding barley is a healthy trend.
Despite an increase of £2.50 per ton in the guaranteed floor price for oats grown in the western counties in 1971 the overall acreage of oats continues to fall. The area sown in 1971 was 151,000 acres compared with 168,000 acres in 1970. In general the quality was reasonably good and the average yield was higher than last year. Owing to insufficiency of home supplies, some imports of high quality oats will again be required for oatmeal milling and for feeding to bloodstock. It is my policy, however, to ensure that such imports are kept to an absolute minimum and that they will not interfere with the market for home-grown oats.
The production and use of compound feeding stuffs is continuing to increase and reflects the growing preference of farmers for properly balanced livestock foods. The output figure for 1970 was slightly over 1,000,000 tons. I have been concerned to ensure that only good quality compound feeding stuffs are offered for sale and that proper standards are observed by manufacturers. Although it was necessary to take legal proceedings during the past year against a number of compounders whose products were found, on analysis, to be deficient in relation to their statement of guaranteed contents, I am glad to say that the position generally has considerably improved.
While the number of applications received in 1970-71 under the Land Project was less than in the previous year, there is still a high level of demand for the facilities of the project.
During the year the Farm Buildings Scheme was rationalised and improved to bring it more into line with modern agricultural requirements. A number of new grants were introduced and existing grants revised. In the case of the Water Supplies Scheme the maximum grant for the provision of piped water to farmyards and fields was increased.
These schemes for modernising farm buildings, improving land and water supplies have greatly increased the potential of Irish agriculture for efficient competitive production.
Ground limestone consumption for the year ended March, 1971, at 1.6 million tons was only slightly less than the record figure for the previous year. Consumption of nitrogen, phosphorus and potash continued to increase. The total amount being provided for lime and fertilisers in the current year is £7.1 million, an increase of £230,000 on the amount provided last year.
The total provision for horticulture in the Estimate is £518,000 of which £450,000 is for grants for glasshouses. The latter sum would be sufficient to provide for the erection of over 50 acres of modern fully equipped glass, but, in fact, a large number of grants this year have been for the installation of heating and ancillary equipment in houses already erected, rather than for completely new houses.
Applications for grants are still substantial, but the backlog of applications which awaited attention in previous years has largely been eliminated. Since the introduction of the scheme in 1967, over £1.6 million has been paid in grants, with an investment of about twice this sum by growers. Although the home market for tomatoes during the cold month of June was somewhat depressed, returns over the full 1971 season have been satisfactory. Up to the end of September, almost 3,500 tons of tomatoes valued at £728,000 had been exported compared with 3,100 tons valued at £600,000 in the corresponding period of 1970.
The Estimate provision includes £50,000 in respect of grants for the erection of mushroom units. These grants offer growers an incentive to enter an expanding sector of horticultural production. With approaching entry to the EEC, it is necessary that provision for statutory grading of horticultural produce should be made and preparation of the necessary enabling legislation is at present being undertaken.
I should now like to deal with our education, research and advisory services. By far the most important of our agricultural resources are the men and women who work on our farms and my Department is very much concerned with improving their management and technical efficiency. This involves a continuing process of education and advice and the provision and application of new information and techniques.
Full-time residential courses are provided at 11 agricultural colleges and in 1970-71 total attendance at these courses was approximately 600. This year Kildalton Agriculture and Horticultural College at Piltown, County Kilkenny, was opened as a new residential college with accommodation for over 100 students. In addition to full-time courses, residential short courses are provided at the Department's colleges at Athenry and Clonakilty. Winter agricultural classes and farm schools are conducted at numerous centres throughout the country. Full-time education in commercial horticulture, poultry-keeping, dairying and farm home management is also provided at several centres.
The farm apprenticeship scheme, which has grown from the original 24 participants in 1964 to 123 in 1970-71, also plays an important part in agricultural education and training. Educational facilities in agriculture, horticulture and dairy science at university level have been expanded and the number of students taking degree courses has steadily increased. Proposals for further development of the university faculties are being examined by the Government Departments concerned in consultation with the universities. It will be evident that very substantial progress has been made in providing the educational basis for a modern, sophisticated agricultural industry.
There has been rapid expansion also in the advisory services. The number of instructors has increased from 355 ten years ago to 608 at present. During the past year I have had a series of consultations with the various interested organisations on the proposals for the reorganisation of these advisory services. The discussions are not finally completed but I hope that the stage will soon be reached when decisions can be taken on an organisational structure for the services which will best suit our needs in the challenging times ahead.
One of the most important tasks of the advisory services is to keep in touch with research and technological advances at home and abroad. Research in this country, undertaken by An Foras Talúntais, the universities and my Department, has been considerably stepped up in recent years and has given some useful results. A substantial allocation of State funds is now involved.
On the subject of small farms, I am glad to say that the Small Farm (Incentive) Bonus Scheme continues to make steady progress and is very attractive for smaller farmers planning expansion. New applications are being received at the rate of about 2,500 per year and more than 2,000 new participants were launched on farm development plans during the past year, bringing the total of active participants to nearly 10,000. The scheme continues to have most impact in the western counties which account for two-thirds of the participants.
Under a pilot scheme introduced earlier this year certain types of group farming projects will be eligible to qualify for special grant assistance. The scheme is directed mainly towards encouraging groups which aim to increase their efficiency in the production and marketing of their produce. The grants offered are intended to be of a "priming" nature to help worthwhile groups in the early stages of development. The scheme is essentially experimental at this stage and it is proposed to review its scope and general operation in due course in the light of experience. A limited number of applications have already been received and these are being processed in consultation with the local advisory services.
A report entitled "Agriculture in the West of Ireland: A Review of the Low Income Problem in Farming" prepared by my Department's western regional officer is due to be published shortly. The report presents a general examination of the factors contributing to the low income problem in western farming as well as an appraisal of the pilot area development programme covering its first five years of operation and an assessment of the factors which contributed to or inhibited progress in the pilot area during that period. I look forward to constructive public discussion of this report and to receiving comments on it from interested persons and organisations.
On the subject of pollution, which is a matter of serious concern, my Department is represented on an inter-departmental working group set up by the Minister for Local Government to examine the problem. At the same time my Department has been pursuing its own investigations on problems arising or likely to arise in the agricultural sector, for example in relation to silage effluent, farmyard waste and effluent from creameries and meat and poultry processing factories. The results of these investigations have been transmitted to the inter-departmental working group for consideration in connection with its work on the overall problem which is one that calls for increasing attention if we are to succeed in overcoming this danger to our environment.
I should now like to say a brief word about the general agricultural position in 1971. This has been an excellent year for farming and it is already clear that both output and income will be substantially higher than in 1970. Our estimate is that the volume of output will be up by around 5 per cent and aggregate family farm income by about 10 per cent. The most encouraging feature is the strengthening of the cattle sector where numbers have now topped the 6,000,000 mark and, with the breeding herd in excess of 2,000,000 for the first time, future prospects are very promising. Milk production is above last year's level, pig production is expanding and the declining trend in sheep numbers has been reversed. The tillage acreage is up, with significant increases in the case of barley and sugar beet. The increase in output has already added £30 million to our agricultural export earnings this year.
We have now had four years of sustained expansion in farm output, income and prices In this period output has increased by over 15 per cent; agricultural prices have risen by 26 per cent and incomes by almost 40 per cent. This evidence of continuing progress and prosperity is a tribute to the skill and hard work of our farmers and reflects the soundness of the Government's policy in relation to agriculture. It also clearly demonstrates that the farming community is now well equipped to exploit the opportunities which membership of the EEC will provide.
I do not propose on this occasion to go into detail on the terms of accession to the Community for Irish agriculture. This will be spelled out in the Government White Paper which it is planned to publish early in the new year. Following publication, the House will have the opportunity to discuss the terms and the prospects in depth.
Broadly speaking, the terms of accession for Irish agriculture provide for the gradual harmonisation of our agricultural prices with the common price levels of the Community, the gradual removal of obstacles to trade within the enlarged Community and the adoption of a common trade policy vis-à-vis non-member countries. For our major products, price harmonisation means a gradual levelling up of our prices to the Common Market level; in the case of cattle and milk it means something in the region of a 50 per cent increase on 1970 prices.
One could not over-emphasise the significance to Irish farming of our move into Europe. Irish farmers will be participating in a common agricultural policy which has among its specific objectives the aims of ensuring market stability and the provision of a fair and reasonable standard of living for the agricultural population.
Membership of the EEC will place Irish agriculture on the threshold of a new era of challenge and opportunity. What it means is that our farmers will be getting the chance, hitherto denied them, of competing on fair and equal terms with their fellow farmers in the Community in a great and growing market. Fair and equal terms means that obstacles we have had to contend with up to now will be removed and it will be up to ourselves, through the efficient production, processing and marketing of top quality farm products, to compete successfully and reap the full advantages of membership.
Here I might mention that one of the points that keep coming up in discussions about our membership of the EEC is the position of the small farmer. It should be said straight away that the small farmer who works his land efficiently will be better off under EEC than he is to-day. He will get better prices for what he has to sell and it will be up to himself to get the most out of his land. Aids and incentives which can be operated under Common Market regulations will be oriented towards less favoured areas and smaller farmers, the basic purpose being to increase their efficiency and earning capacity. While it is not possible to say at this stage precisely what changes will have to be made in various schemes and services of my Department to align them to Common Market regulations, I feel I can say that the general principle on which my thinking is based is that the effort of the State will, in future, be more and more concentrated on the smaller but potentially viable farmers to help them make the most of their resources in order to take the fullest advantage of what the Common Market has to offer. For the bigger farmers operating on a fully commercial basis, their rewards will come increasingly from the market, and their dependence on Exchequer assistance should progressively decline.
At the same time, I must stress the urgency of adapting our processing and marketing organisations to take full advantage of the opportunities the Common Market will offer. This is particularly true in the case of milk processing. The rationalisation of the creamery industry has made some progress, but it is still far from complete and, in some areas at least, there seem to be lingering hopes that everything can go on as before and that talk about rationalisation is so much hot air. Under the Common Market system, there can be a big difference to the producer between the best price and the worst price, and that difference will depend largely on the efficiency of the processing unit and its ability to use its milk supply to the best advantage. This means utilising all parts of the milk, including in particular the skim milk. At present, some areas lack facilities for processing skim milk. This is a serious drawback to those areas and one which the owners of creameries there must tackle with drive and energy immediately.
From time to time, it has been stated that the position of the Dairy Disposal Company has been an inhibiting factor in the process of rationalisation. This is certainly not the case. I have stated repeatedly that the Dairy Disposal Company will be happy to co-operate in schemes of rationalisation or to sell units to co-operative groups as part of the rationalisation process. In the past few months, subject to settlement of details, agreement has been reached on terms for the transfer of three of the company's creamery groups to co-operative societies, and negotiations for the transfer of a further group are at present taking place. This is considerable progress and will make a positive contribution to creamery rationalisation in the areas concerned. In other areas—for example, Kerry— the Dairy Disposal Company is participating with co-operative and private interests in setting up diversification facilities. In County Clare the Dairy Disposal Company has been authorised to create new processing facilities. There is no intention of closing the door to co-operative development in County Clare, and I would suggest to the IAOS and to the farmers in that county that, if they want to put the milk industry in County Clare on a co-operative basis, they should develop a programme to buy out the Dairy Disposal Company for an agreed price over a number of years. This, however, is a matter entirely for themselves. Co-operation cannot be forced on them nor indeed on anybody else by any kind of Government order.
As regards marketing, the monopoly export position which An Bord Bainne now enjoys is not in conformity with EEC regulations. Under EEC the maximum co-operation in processing and marketing between the dairy cooperatives will be essential for success. Pigmeat exports which are at present centralised through the Pigs and Bacon Commission will face a similar situation. Ireland is not a big country and our entire exports of dairy products or pigmeat are not large by world standards. It will certainly not be in our interests to have these exports handled by individual exporters selling relatively small quantities with variations in quality and seasonal irregularity in supplies. In our circumstances, co-ordinated exporting by central agencies using modern techniques will be indispensable. I am glad that, in the case of dairy products, the farmers' organisations and others concerned are, in fact, actively considering the type of marketing arrangements which they should have in EEC conditions.
I should like to add a brief word about foreign participation in the dairying industry. Under Common Market regulations, this cannot be prevented by Government action, but it will take place only to the extent that milk producers and their co-operatives want it to take place. If the cooperatives, through lack of enterprise or skill, or through an inability to work together for the good of their members, leave a vacuum in the marketing process, somebody is bound to fill it. Shortage of capital is often referred to as the cause. I accept that sometimes it has been a problem, but I believe it is often the smallest problem and one which the steps now being taken to expand credit facilities will help to overcome.
This is one of the major questions which I have been discussing recently with farmers' organisations. Another is the restructuring of our creamery milk prices in anticipation of EEC membership. I shall deal with creamery milk first.
The Government have reviewed the creamery milk situation particularly with regard to the need to gear the milk price structure more closely to the conditions that will obtain under an enlarged EEC. The greatly improved export demand for dairy products and the increase in production and processing costs have also been carefully considered. The improvement in the export markets for dairy products in the past 12 months is expected to be maintained in 1972, and the further outlook for beef cattle also appears to be good. Farm and creamery costs, both wages and materials, have however also been increasing appreciably. In these circumstances and to strengthen further the position of the dairying and cattle sectors of our economy in anticipation of future export opportunities, the Government have decided to raise creamery milk prices. I am announcing this decision now rather than waiting until Budget time next spring so that farmers can plan their next year's farm programme with the knowledge of these significant changes.
The structure of the creamery milk pricing system will be remodelled on a basis that would be appropriate in an EEC context and at the same time the average return per gallon will be increased. This will be brought about by increasing from 1st December, 1971, the prices paid by An Bord Bainne for butter and other dairy products, including a system of support for skim milk powder; by introducing a subsidy on liquid skim returned to suppliers and by removing the liability on farmers to meet one-third of any increased losses incurred on exports of dairy products arising from these changes. The higher prices payable by Bord Bainne will incorporate the existing Exchequer milk price and quality allowances and this change will mean that the arrangement under which a tiered system of milk price allowances was paid to producers supplying over 10,000 gallons per annum to creameries will no longer operate. It is estimated that in 1972 the average price of creamery milk will be 2p per gallon higher than the average price in 1971.
The ex-creamery price of butter for sale on the home market will be increased by £52 a ton; this will represent an increase of approximately 2½p per lb. in the retail price. The home butter price, which for the first time in many years is now below the export price, has remained at the same level since 1966, despite a number of increases since then in milk prices and, indeed, in food prices generally, including margarine. Even allowing for this price increase, butter consumed on the home market will still carry an Exchequer subsidy of nearly 8p a lb. Home market prices of cheese and other milk products will also be increased correspondingly. The price of milk used in these products has not been increased since before 1962.
To give effect to these changes, the following detailed arrangements will apply on and from 1st December and will continue unchanged during the 1972 season.
(1) The price payable by An Bord Bainne to creameries for butter as from 1st December, 1971, will be increased from £469 per ton by £256 to £725 per ton. This increase will be equivalent to 5p per gallon of the present milk price and quality allowances. The payment of the present milk price and quality allowances by my Department direct to creameries will cease at the same time. New arrangements will be made with creameries to ensure that quality standards for milk are maintained.
(2) The price for skim milk powder will be supported at a level of £160 per ton equivalent to a price of about 5p per gallon of skim milk. As facilities for the production of skim milk powder are not available in some areas, a subsidy of 2½p per gallon will be paid on skim milk returned by creameries to their suppliers. This subsidy will be equivalent to 2p per gallon of the present milk price allowance on whole milk.
(3) The support prices of other dairy products will be increased to bring them into line with those of butter and skim milk powder.
(4) These changes will mean that Bord Bainne will be involved in substantial export losses and it will be necessary to ensure that this does not reduce the return to producers. It is proposed therefore to amend the Dairy Produce (Marketing) Act, 1961, to enable the whole of any increased export losses that arise as a result of these proposals to be met by the Exchequer.
(5) The retail price of creamery butter on the home market will be increased by approximately 2½p per lb. This will still leave an Exchequer subsidy of £176 per ton on creamery butter supplied to the home market, making the price for that market £549 per ton against the new Bord Bainne purchasing price of £725 per ton.
To encourage smaller producers, especially those in creamery milk production, to expand their enterprises on a more intensive basis, the Government have also decided to increase to £500, from the present level of £325, the total bonus grant that may be earned by new participants under the Small Farm (Incentive Bonus) Scheme. The increased rate will apply to farmers accepted into the scheme on and after 1st January, 1972. This scheme which is giving very useful results, will be revised and kept under review in the light of evolving EEC structural policy.
The Government have also reviewed the present capital position of agriculture and the agricultural processing industries, and the capital requirements which will have to be met in the light of prospective entry to the EEC. It is estimated that the level of total capital investment in farming is now running at around £60 million a year. Of this, over £40 million comes from investment by farmers, financed both from reinvestment out of farm incomes and from banks and other normal credit institutions, and the rest is provided by the Exchequer as part of the public capital programme. Farmers can be expected to increase their rate of investment still further in the coming years in view of the excellent prospects for agriculture. Extra investment will be needed to finance both a higher rate of farm output and the rationalisation and modernisation of production and processing facilities. It is expected that much of this extra investment will be financed from the substantially higher farm incomes arising from entry into EEC as well as from the usual commercial credit sources. There are, however, some areas of agricultural investment which might not be met in full by these sources. The Government have, therefore, decided to increase the availability of credit for agriculture through the Agricultural Credit Corporation in the following ways:
In the case of credit for farmers the amount which the corporation may lend in 1971-72 for the purpose of expanding efficient production will be increased. This year the amount in the public capital programme for lending by the corporation was £6.3 million, and, as recently announced by the Minister for Finance, this has been increased to £9 million. The Minister for Finance has now authorised the corporation to lend a further £4.5 million in the current year. The corporation expect that this level of lending will enable them to meet the full demand for productive credit by farmers this year.
Credit for processing industries will be available as required from the Agricultural Credit Corporation to help finance approved projects and to supplement capital raised from State grants, farmers' investment, and borrowing from other sources. Priority will be given to the milk processing and pigmeat processing industries, but this does not preclude consideration of applications from other processing industries. In the case of the milk processing sector, it is estimated that the extra borrowing required may be of the order of £4 million. Of this, the Dairy Disposal Company may require up to £1 million to cover the construction by the company of processing facilities in County Clare and the participation by them in processing plants in other areas. For the bacon industry, after making allowance for grants, and for capital to be provided from non-Exchequer sources, an additional sum of the order of £1 million may be required to help finance improvement of factories as part of the bacon industry rationalisation scheme.
These decisions will result in total lendings by the corporation being increased to an estimated £13.5 million in 1971-72 with further substantial increases likely in the following year. Moreover credit availability through the corporation will be kept under review in the light of the demands for credit and the resources available. The Central Bank are currently reviewing the overall credit situation and in that context will be discussing with the commercial banks the particular needs of agriculture. The extra facilities to be provided by the Agricultural Credit Corporation taken in conjunction with the public capital programme, farmers' own investment funds and normal commercial credit facilities, in particular from the commercial banks, are expected to meet in full the capital needs of Irish agriculture in the years immediately ahead.
These developments on milk and capital will give farmers added incentives and opportunities to plan ahead in the knowledge of the full support they will receive from my Department. Farming to-day is prospering and there is all round confidence in the country that this prosperity will increase further. We have followed policies that have generated this prosperity and we will continue to give farmers the support they need to develop the full potential of our agriculture.
In conclusion may I say that I look forward to a useful debate on this Estimate and I shall welcome any comments and suggestions Deputies may wish to make.
