First, I want to correct an impression Deputy Collins may have given to the House when he spoke about the need for some encouragement to increase the national herd. He seemed to indicate that there were no moneys in the budget directed towards this very worthy cause. Of course, that is not the case. The budget provides an extra £11.4 million specifically for increasing the national herd and does that by way of increasing the headage payments for beef cows in disadvantaged areas from £32 to £70 per head. That will involve 45,000 farmers, so one can see the significance of that. It is a very large sum of money. It is a very generous inducement to people to increase the number of cattle they rear. In that context, I might also mention that we are now financing an additional 1¼ million acres of disadvantaged areas embracing a further 12,500 farmers entitled to the headage increase to which I have just referred. It would be entirely inaccurate to say that we are not doing anything about increasing the national herd. We are doing a great deal under very difficult circumstances.
I want to refer in particular to the great difficulty which the European Community are at present experiencing in agriculture, the effects of which are felt everywhere in the Community. Because of the enormous surpluses, the Community's budgetary situation is anything but healthy. As a result, the Agricultural Commissioner, Mr. Andriessen, has proposed some pretty drastic and draconian measures which, if implemented, would affect farming in this country in a very alarming manner.
I can see the Commissioner's difficulties. They come from the production of enormous surpluses which amount approximately to the following: 15 million tonnes of grain in storage — it is almost impossible to visualise such a quantity — in excess of one million tonnes of butter; 690,000 tonnes of beef; together with considerable surpluses of wine, skim milk powder and a whole variety of other products. The value of surpluses in Europe today is five times greater than it was four years ago. That statistic alone is very sobering. The magnitude of the surpluses illustrates the magnitude of the problem.
We cannot run away from it and pretend there is no problem. We cannot pretend we can escape the results of the difficult decisions that will have to be made in the coming years, particularly if the Commission does not succeed in getting rid of those surpluses. Getting rid of them will be a very difficult matter because of the amount of money needed to do so. Those surpluses generally are sold off at approximately half price — about half what the Commission and the Community originally paid for them.
With that background, one can see the particular difficulty agriculture faces immediately and in the years ahead in the Community. When we take other factors into consideration the position is even more difficult. Some of the other considerations are as follows. A recent American farm Bill helps American farmers to sell their produce off in the world markets, and gives them a better support system. That makes it more difficult for the Community to sell off their surpluses. The Americans have allowed the increased production of milk to continue and so have the New Zealanders. This creates difficulties for us on world markets. The Americans, by their support system, are encouraging the production of more cereals. Again with the enormous surplus and intervention which I mentioned, it creates tremendous problems for us on the world market.
Probably the proposal which creates the major difficulty for us at the moment is that which would virtually end intervention for beef in the Community. The beef trade is the backbone of Irish agriculture and, if intervention were abolished or were even seriously curtailed it would have a very depressing effect on the price of cattle and hence on our beef trade generally. That is what the Commissioner proposed — virtually to abolish intervention. We in this country put about 17 per cent of all beef produced into intervention. Depending on the amount of production from year to year, that approximates to 80,000 to 90,000 tonnes of beef. For all practical purposes, the abolition of intervention would mean that we would be left with 80,000 to 90,000 tonnes of beef on hand.
Comparatively speaking, when one considers the size of the agricultural output here in comparision with that of the other countries in the Community, we produce and export more beef than any other country, so the implications of the Commissioner's proposals would affect us far more than any of the other countries.
The other element is an unfortunate one and we are partially, if not largely, to blame ourselves in that we put more of our beef into intervention proportionately than any other country. We have to face up to the fact that we should not be so dependent on intervention. We should be able to sell virtually everything we produce.
It would be unfair of me to make a blanket criticism of beef processors or traders here because some of them have done Herculean work in recent years. They are probably the most progressive and aggressive businessmen in our society. They can go to almost any country in the world and sell Irish beef. Unfortunately, not everybody has been up to that standard — hence our reliance on intervention. I do not want to be taken as being facetious, but one company several years ago advertised for a salesman with experience in selling beef into intervention. The stupidity of that may not dawn on people, but of course you do not sell beef into intervention — you put it into intervention. That is the way some Irish processors in the past looked upon intervention: it was the place to get rid of your beef, and they made no attempt to go out to sell it on the open market.
We have a tremendous band of processors and traders who can compete with anybody, whether in South America, East Europe, Australia or New Zealand. Unfortunately, we have not got enough to them. Things are improving and we should be in a position when we will not be dependent on intervention or storage at all.
We sell much of our beef to third countries, the Middle East and North Africa, for instance. But there is a tremendous market in Europe, much of it still untapped. In the past, 40 per cent of our beef went to Britain, 30 per cent to third countries, we consumed 20 per cent at home and 10 per cent went to mainland Europe, our EC partner nations. We can improve our market share in other EC countries with a more positive and aggressive marketing policy. There are now 320 million people in the EC, the single largest economic unit in the world. If we have people with marketing ability we should not have any problems about selling our produce because our beef and lamb are recognised as the best in the world. All we need are marketing skills and abilities. If we have stuff to sell we should be able to sell it because the market-place is beside our doorstep.
One factor that will cause some difficulty, but it may also give us some opportunities, is the recent decision by the Community to ban the use of hormones or growth promoters. That ban will be implemented from 1 January 1988. We have two years in which to put matters in order, a time in which growth promoters should not be used. Shortly, I will be bringing in regulations prohibiting the use of hormones or growth promoters completely, other than for therapeutic or animal health reasons. The weight of animals, of course, will be affected by the non-use of hormones or growth promoters but we will be able to go abroad into any markets and say that we have the purest and best quality beef in the world. We can use it to our advantage.
Our neighbours in Britain and Northern Ireland will have an exemption for a further year, up to January 1989. Though they will have an advantage in regard to weight, we will have a greater advantage by being able to say that our meat is hormone free and their's is not, something which our traders and processors will be able to take advantage of. Up to now, we have not been able to sell beef in Italy or Greece, because they contend that their consumers will not accept meat which has been treated with hormones — their standards are so much higher than ours. That bargaining will go out the window with the ban on hormones, so we will be opening up a market which was closed to us of approximately 70 million additional people. With the accession of Spain and Portugal we will have a further 60 million people.
Therefore, if we are good enough, if we can market properly, we should be able to overcome many of the difficulties which would be created if intervention for beef is removed. I have opposed the removal of intervention and I will continue to do so. If it is to take place we hope it will be many years hence. The effect of removing intervention from December 1987 would be drastic as far as our beef trade is concerned. That is one Commission proposal which we are opposing strongly.
A second proposal by the Commission is that the price paid for cereals in certain circumstances should be reduced considerably. The growing of cereals here at the best of times is a marginal farm activity from the point of view of profits, and when we have a year like 1985 it is not just marginal but is a serious loss for farmers. What the Commission are proposing immediately is that there will be a co-responsibility levy of 3 per cent to help to pay for the cost of getting rid of surpluses. Quality standards are to be introduced which would penalise poorer quality grain, grain which is not millable. Unfortunately because of our climate, the moisture content of grain here is quite high and in certain years, like 1985, it is exceptionally high. The penalty clause attached to quality standards would mean a further serious reduction for grain growers here. In general, the proposals would have serious repercussions for cereal growers.
The background to this proposal is interesting and, perhaps, somewhat logical. The French feel they can sell grain on world markets at a lower price than the Americans and the Canadians. People are stunned when they hear that, but it is a fact. The French are a major cereal growing nation, the quality of their grain is exceptionally good and their production methods exceptionally efficient. They are now at a stage where they feel they can out-sell the Americans and the Canadians on the world market and to do that they want to get the price down to at least American and Canadian levels. They are fully behind the Commission's proposals to introduce quality standards which will reduce the price of inferior grain. The Commission are delighted that somebody should suggest that the price of grain, or any commodity, should be reduced. The British usually advocate that but on this occasion the French are doing it. That is unusual because, like ourselves, they are generally looking for price increases for just about every agricultural commodity that can be produced.
Here we have a situation where it suits one of the major nations to have a price reduction so that they can out-sell their competitors on the world market. They are being supported not just by the Commission but by the British and a few other countries. Countries such as Germany and ourselves will oppose that and it will be a fairly long drawn out discussion. I expect the price proposal talks this year, which embrace these proposals, to go on until at least May, and possibly June, because of the magnitude and seriousness of the proposals being put forward. We have the curtailment of beef intervention, this quality penalty on grain, which would mean a considerable price reduction, and the proposal to have a milk cessation scheme which would effectively reduce the amount of milk produced in the Community by 3 per cent in each member state — that would be an actual cutback in production of 3 per cent. This has certain similarities with the super-levy but it is not as draconian. Nevertheless, it is a very serious and potentially damaging proposal, if implemented, for this country.
The Commission is also suggesting that each country should have its own national cessation scheme of 3 per cent. This means that there would be a redistribution of milk within a country and we are in favour of that idea. It would mean that people who had difficulties, whether through disease, or a young farmer coming into milk production, would have some hope of getting a quota, and a person who wanted to retire from milk production could get a reasonable amount of money for giving it up. That type of national redistribution of milk is something we are in favour of. The umbrella organisation for agricultural cooperatives, the ICOS, are endeavouring to formulate a scheme which will be acceptable to farmers, the Government and the EC alike. I wish them success in their efforts and we will be only too glad to support them in the work they are doing.
The EC cessation scheme is not acceptable to us because it would breach not just the spirit but the wording of the March 1984 super-levy agreement which specifically states that the amount of milk produced in Ireland cannot be reduced during the five year period of the super-levy regime. Other countries will contend that this is a new situation and everybody will have to take a 3 per cent cutback. This is one of the issues which will be hotly debated in the coming months.
Here we have in one year three proposals which, if any one of them is implemented, will affect agriculture to an enormous degree. The 1986 price package discussions assume an importance which we have never seen before. One could say they are of greater magnitude than the super-levy proposal two years ago, which caused all sorts of ripples in the dairy industry in Ireland and throughout Europe. These three major proposals are zoned to reduce prices and production in the Community. This means we have an exceptionally important price negotiations schedule over the next few months. In conjunction with those proposals the Commission proposes a price freeze for all agricultural commodities. We find that unacceptable because to keep in line with the spirit of Article 39 of the Treaty of Rome farm incomes must be protected. If we have a price freeze in conjunction with an inflation rate of something like 4 per cent to 5 per cent, farm incomes will not be protected, they will be reduced. We want to see increases which at least compensate for inflation and increased costs.
We are supported in that, initially, by the Germans but unfortunately I cannot tell the House that we have had support from any other member country. There seems to be a general acceptance by other countries, with the exception of Germany, that there will be a price freeze in the current year. Given the state of the Community's budget people are prepared to suffer a price freeze. That is unfortunate but it is the line which I saw promoted at this week's meeting of Agriculture Ministers in Brussels.
There is a great deal of inconsistency in the Community's attitude towards agricultural production and imports of agricultural products. I want to refer specifically to agricultural products which are produced within the Community. The Community is a trading bloc and in order to sell consumer goods it has to have reciprocal trading relations with virtually every country in the world. Some of these countries produce only commodities which are also produced in the Community. In order to generate trade with these countries the Community allows imports into the Twelve of commodities it produces, for instance beef, cereal and even milk products. These are generally referred to as concessionary imports.
These concessionary imports are causing us an immense amount of difficulty. It seems illogical that when we have surpluses of the magnitude to which I have referred we should import those same commodities into the Community. When you have 15 million tonnes of wheat and other cereals in storage, it seems illogical to import cereals or cereal substitutes into the Community but unfortunately that is the case. We have constantly objected to this and we have been supported by one or two countries but, unfortunately, we do not have a majority of countries supporting us in our demand that these concessionary imports should be stopped, or at least curtailed.
It is very aggravating to allow commodities into the Community when there is already a very large surplus of them. I will illustrate the point by saying that the Community are importing 175,000 head of live cattle despite the fact that we have 690,000 tonnes of beef in intervention. A fortnight ago at a special agricultural commitee meeting the Community voted to allow in 4,000 tonnes of beef from Austria. We did not have that importation before this year. They suddenly decided to allow this importation despite the fact that we have 690,000 tonnes in intervention and we will find immense difficulty in getting rid of it. One can see the contradiction and the difficulty created for all of us when they allow in commodities which are in over-supply. The reason they are allowing them in is to retain their trading relationship with those countries.
We import a massive amount of cereal substitutes, in particular corn gluten from the United States and tapioca and manioc from the Far East, despite the fact that we have 15 million tonnes of cereals in intervention. I cannot see the consistency in doing this. We will have to insist that there is a reduction in these imports. I hope we will get more support in the future from the other member states. We have support from the French where the cereal substitutes are concerned, and we have support from some countries where the beef imports are concerned but the support is not sufficiently strong and it is not a position where one can stop them on one's own. One must have a majority to do it. It would be better to use the word "curtail" rather than use the word "stop" because it is not a reasonable proposition that you can stop them completely. A lot of the imports come in under GATT arrangements which are internationally binding legally and you cannot stop them. The only way they can be stopped is by bilateral agreements between the Community and the countries involved.
These concessionary imports are causing us great problems and it is necessary that they be curtailed if the problems in the three major commodity areas of milk, beef and cereals are to be solved or the intensity of them reduced. Those overhanging surpluses are causing such problems that I feel the Community in general — I mean the overall Commission and the Governments of the 12 member states — should seriously consider providing funds specifically to get rid of those surpluses because agriculture in the Community will be in dire straits for years to come if those surpluses are allowed to remain. The value of those surpluses is five times as much as it was four years ago and it will cost the Community five times as much to get rid of them.
The sensible thing is for the Community to make a special effort to get rid of those surpluses and to operate the CAP in the future in such a way that surpluses do not arise. By prudent management of agricultural production within the Community together with a curtailment of concessionary imports, that can be done. It will cost a lot of money and will take a good deal of will power and political skill to do it. If it is not done, there is no simple or easy solution for any farmers within the Community. It is very important that it should be done because of the dependence of our economy on agriculture. When we have an unhealthy situation such as we have with those surpluses it must give all of us serious cause for concern. It is a problem which will remain with us for many years unless it is tackled with great resolve very soon. I believe the public in general understand the problem we have with those surpluses and that we will not get major price increases and we will not be allowed to expand production as much as we would like to until the Community get rid of those surpluses.
We must examine alternative methods of agricultural production. Some of us are already looking at this very seriously. Because of climatic and soil conditions we are limited to a relatively small range of agricultural activities. We are primarily involved in the production of beef, milk, sheep, pigs, cereals and sugar beet. We also produce some vegetables. The major commodities we produce are giving rise to problems in the Community. Over 70 per cent of our agricultural production is devoted to beef and milk production and 8 per cent of our agricultural production is devoted to cereals. Over 80 per cent of the agricultural production involves commodities which are in huge surplus and because of that there will be difficulties in those areas for years to come.
It is important that people consider other types of agricultural production. There is no place where the ingenuity of the Irish farmer is seen to greater effect than in the Ceann Comhairle's and Deputy Leonard's constituency. Those people have not got the best land in the country but they make very good use of it. We need activities like intensive pig, poultry and egg production. Mushroom growing has been a fantastic success in recent years. The value of our exports of that commodity is now running at £20 million a year. This has been largely due to the industry of farmers in the Border counties. Those industries seem to be concentrated more in the Border areas than in other parts of the country.
We must get our farmers to think in terms of alternative systems of production. There is an infinite number of them. We keep saying we cannot do it, that we have not got the right climate or the right soil. Our climate does not militate against the production of a wide variety of products. We will have to study those various alternative systems. I have asked the Community for help in this matter and I will continue to press for assistance during the current price negotiations for this type of alternative agricultural activity. I have set up a committee within my Department to examine the various types of alternative activities which they feel can be engaged in. I have enlisted the aid of semi-State bodies, such as ACOT and An Foras Talúntais, at the highest level, and will continue to do so. We need alternative systems. If there is pressure on major commodities we will have to take that pressure off by diversifying or spreading our energies around into other activities.
Deputy G. Collins spoke about an impending quota on beef production here. I would not like to give rise to scaremongering of that nature. There is no immediate threat or mention of quotas on beef production. I should like to make that quite clear to the House. While the Community produces approximately 110 per cent of its beef needs, the fact that we export so much enables us to expand that production. Our third country markets are considerable. There is no question of a quota system being implemented in the beef sector. The only commodity which we produce to any degree here which is not in surplus in the Community is sheep and sheepmeat. The Community is 75 per cent only sufficient in sheepmeat. Therefore, there is enormous scope for expansion in the sheep industry.
The sheep population of this country has increased by 20 per cent in the past five years. That is quite a considerable increase and the quality of the sheep is continuously improving as are sheep breeding methods and techniques. But we have a long way to go. I might give the House a simple illustration of the type of competition we face in the sheepmeat industry. The lambing rate in Britain per ewe is approximately 1.7 to 1.8 whereas the lambing rate here per ewe is 1.1 only, a very low figure in comparison when one considers that the conditions are somewhat similar. By improving our breeding techniques we should be able to attain something like 1.7 or 1.8. That is what we need to do to make these enterprises highly profitable. There is an enormous market for Irish sheepmeat, or Irish lamb, on the Continent, particularly in France. There is unlimited potential there. Our production is a fraction only of what it should be.
I might point out that our beef production methods are not the best either. The number of calf mortalities here annually runs at 200,000. Just think of the value to our economy of 200,000 calves were they brought to maturity. If one uses a conservative figures of £500 per annum, multiplying 200,000 by 500, one arrives at a figure of approximately £100 million per annum being lost to our economy, at least £100 million. Calf mortalities can be reduced enormously by improved techniques and farm management, as can the level of sheep production.
A matter that is causing quite a deal of concern in the farming community at present is disease eradication and the cutbacks that were effected in this area in the Book of Estimates. This is one subject about which I feel particularly sore or bad because we are on the brink of making a major breakthrough in disease eradication. One of the famous myths according to some people is that it goes on for ever. Some people want to perpetuate its existence for their own purposes. I do not believe that; it is a myth. Following a fairly lengthy dispute, at the end of 1984 and the beginning of 1985 I reached agreement with the Irish Veterinary Union on a new system of operation of disease eradication. That new system has worked wonderfully well because of the co-operation of vets, farmers and departmental officials. Anybody involved in farming will tell you that they can visibly see the results of the new scheme. The changes mean that the Minister of the day controls the scheme. He actually tells vets when and where to test whereas, previously, it was a hit and miss operation.
We have had 30 years in which, by present-day standards, approximately £1 billion was spent without any major advance being effected in eradicating disease. When we began the very intensive testing last April and May obviously we detected quite a large number of affected herds because it was the first full round that had been carried out over a number of years. With continued and sustained testing we can see already the benefits of such intensive methods. For example, in October last there were 7,100 restricted herds in this country. Those are very graphic statistics — 7,100 restricted herds. Within the last few weeks that number has been reduced to 5,700. If we can sustain the intensity of testing being carried out over the past ten months, the elimination of bovine TB will no longer be a pious platitude. It will be a reality.
I am particularly concerned that we will have the money necessary to sustain that intensive testing programme. I am very concerned and anxious that we sustain that rate of testing because then, within two years, I can foresee that bovine TB will be virtually eliminated in this country. It will never be eliminated completely but we will have it down to the levels pertaining generally in Western Europe. That is rather important. Some time ago I spoke about the need to promote Irish beef as being freshly produced on grass, being of the highest quality and free from hormones. It is very important also that we should be able to say it is free from all types of disease and contamination, all types. Therefore, it is very important from this country's point of view that bovine TB be eliminated as far as possible. Of course, it will recur in pockets here and there, as it does in Britain, western France and so on. It will never be totally eliminated but we must bring it down to an acceptable level.
I am glad to be able to tell the House that, for all practical purposes, brucellosis has been virtually eliminated. There are at present 490 herds only in the country affected by the disease. In coming months we expect to reduce that figure by 50 per cent, such is the degree of control we have over it at present.
I must do my party piece here and mention some other achievements we have brought about in recent months. I might refer to the farm improvement scheme which replaced the old farm modernisation scheme. The scheme has been welcomed generally. It has proved to be better than people had hoped. The rates of grant are at least as good as those obtaining under the old farm modernisation scheme. It has the added value that it applies to all farmers. One does not have to be in the category of development, transitional or commercial; it applies to everybody. Whether or not a farmer benefited under the old farm modernisation scheme, he can still benefit under the new one. The new scheme has three main thrusts. One is the housing of livestock, cattle and sheep, the second is land drainage and the third is the encouragement of silage making. We all know the necessity for the encouragement of silage making after a summer such as we had in 1985. The days of making hay for winter fodder should be numbered. We are providing generous grants for silage making in the new farm improvement scheme. We are also providing an installation aid scheme for young farmers. This will mean that a young farmer taking over from his parents will automatically get a grant of £5,600. He will also get a further grant of £5,600 if he carries out improvement works. In all he will get as much as £11,200, a very generous sum. In order to qualify for that grant he must have an ACOT certificate in farming but I do not think that is an unreasonable requirement.
There has been some criticism of the cuts in the budget for ACOT and An Foras Talúntais. That is unfortunate but every Department has had to suffer cuts. The Minister for Health, the Minister for Education, the Arts Council and even the Minister for Labour have had to cut back. ACOT and An Foras Talúntais should be able to cope even with the cuts which have been imposed. We are currently spending over £50 million on advice, research and education in farming. Of that, 75 per cent comes from the taxpayer. We must ask those people who provide a service to charge for it and make it pay to a certain degree. We do not expect them to be self-financing. ACOT are expecting an extra £2 million this year from the European Social Fund.
I referred to the necessity for more silage making in this country. I want now to refer to the success of the scheme which we brought in last August for first-time silage makers. We anticipated that there would be £8,000 applicants and that it would cost £1.5 million. In fact the scheme was so successful that there were 30,000 applicants and the cost was £6 million. Some people complain that we did not do enough for people who had difficulties with the weather last summer. We do not control the weather but we made a lot of money available when it was not too freely available in any Department. I am annoyed at the criticism from certain people in the farming organisations that the Department of Agriculture handed back £27 million to the Exchequer at the end of 1985. Every Department at some stage hands money back to the Exchequer. If country councils or local authorities do not spend their allocation on road works or housing it goes back to the Department of the Environment.
