Dáil Éireann debate -
Tuesday, 26 Apr 1988

Vol. 379 No. 9

Private Members' Business. - Beef Cow Numbers.

Mr. J. O'Keeffe

I move:

That Dáil Éireann recognises the crisis facing the beef industry, notes the Fine Gael proposals for a resolution of the problem and calls for the introduction and implementation of a comprehensive programme to achieve the necessary increase in beef cow numbers.

The major crisis in agriculture is that facing the beef industry which arises because of a shortage of supply. The crisis is one which has huge post-farm implications and, therefore, a solution is essential not just in the interests of farming but in the interest of the economy. The Minister for Agriculture and Food has finally admitted what has been known for months past, that his scheme for maintaining the national beef cow herd has no hope for implementation. Apart from the difficulties of securing acceptance of the scheme it could have been criticised as being a totally insufficient response to the problem. In any event, it has now been consigned to the dustbin and is no longer relevant to the debate. However, it must be said that the pathetic posturing of the Minister in Limerick yesterday attempting to blame the meat industry, and all and sundry, for his own failures did not add anything to the debate.

What is needed now is a comprehensive action plan which will apply over the next four years. The target should be to increase beef cow numbers to 750,000 by 1992, an increase of almost 300,000 on the June 1987 figures. I have on behalf of Fine Gael circulated proposals for a 20-point action plan to achieve that target. Implementation of that programme will result in at least 1,000 additional jobs being created in the meat industry, extra beef exports of £200 million per year and viability for 20,000 to 30,000 farm families. Correspondingly, failure to act will result in thousands of farmers and many meat plants being forced out of business and many jobs lost. Indeed, many meat plants are operating on a three-day-week, or less. In addition our exports will suffer as will our balance of payments. The utterly defeatist attitude of the Minister is not acceptable to us. This is an issue on which defeat cannot be accepted. The consequences are too serious not just for our farmers but for the country as a whole.

I am asking the House to recognise that the beef industry is facing a crisis. The introduction of the meat quota, and its reduction in the last two years, has major implications for our beef industry through reducing dairy cow numbers and, thereby, calf supplies for the beef herd. Over recent years cow numbers have fallen by almost 100,000. The effect of that is that the supply of calves going to the market has fallen sharply. An obvious consequence of that, which can be seen at marts around the country, is that calf prices are booming and squeezing the margins from beef production. Indeed, the increase in calf and store cattle prices puts into question whether many farmers can afford to remain in beef production.

I reckon that about 90,000 farmers are involved in cattle production and the future viability of many of their operations must be in question. Even more serious is the prospect of a further cut-back in dairy cow numbers. I have read a variety of papers on this and listened to speeches from various experts from AFT, ACOT and elsewhere and the general consensus is that there will be a reduction of another 200,000 dairy cows over the next four years. That, on top of our existing problems, will exacerbate the difficulties being faced by farmers. It confirms my view that there is a crisis in the beef industry.

If we look at another aspect of the same industry we will see that there has been massive investment in beef processing in recent years. Between 1983 and 1986 the IDA approved grants of £20 million towards capital investment of about £90 million in that sector. In 1987 we had the announcement of IDA support for the investment programme of our largest beef processing company, Goodman International, which projected investment of £140 million over the next five years. The IDA have projected an extra 1,000 jobs in beef processing but there is a condition. They say that the jobs are there if there is not a reduction in cattle numbers, and that is the reason why I am focusing on that aspect of the problem tonight.

The implications of a continuing drop in numbers in the national cow herd are obvious. On the other hand, because the pattern of falling numbers is not unique to this country a major opportunity is presented to us. If we examine the figures in the EC — the only figure I had access to related to the Ten; Spain and Portugal only joined recently — we find that there was a drop between 1984 and 1987 of 2.6 million, or 10 per cent of what might be called the international herd. In this year alone the EC self-sufficiency ratio for beef is expected to be 100 per cent as compared to 110 per cent in 1984. I accept that there are still intervention stocks but it is expected that they will be significantly reduced, if not eliminated, over the next couple of years. We now have an attractive prospect of market opportunity opening up for our meat exporters in the context of the EC market coming into balance and the prospect of under-supply in a few years' time.

We must then examine our circumstances: will we be in a position to exploit this potential? My basic contention, one accepted by most people with an interest in this area, is that we will not be in a position to exploit this potential despite our massive investment in processing facilities and so on unless our meat plants can get sufficient supplies. The position was summed up at one seminar by one respected individual in the trade when he referred to the prospect of a herd of meat-processing white elephants around the country. That is the danger if insufficient supplies are not available.

It is against that background of market opportunity, spare capacity on our farms and in our factories — I mentioned those on a three day week and so on — that a serious commitment must be given to increasing cow numbers rapidly. The Minister has been in office for well over a year. I understand from his public statements that he accepts the facts underlying the basis of my concern. On the other hand, he has failed utterly to introduce and implement a policy to cope with the problem. That failure has led to this debate here this evening. Apart from the Minister, I accept that there is need for an acceptance on the part of all with an interest in this area that this constitutes the major national priority within the agricultural sector and is one of the top national economic priorities of all sectors.

I carried out a fair amount of examination of this issue in recent months. Before circulating my proposals some weeks ago I had come to the conclusion that no single policy instrument would be sufficient to achieve the overall objective if we are talking about a targeted increase of 300,000 extra beef cows. The only way that target can be achieved will be by a combination of measures covering grants, tax incentives, financing arrangements and measures to improve on-farm efficiency and profit margins for those involved in the business. At the end of the day it will be so difficult to achieve that target that every possible method should be deployed to bring about the necessary increase in cattle numbers. That is the strength of my conviction about the depth of the crisis, the need for action and the possibility, the golden opportunity, that awaits us if we do take such action and can bring about the necessary increase from the point of view of supply.

If one examines the grant structure at present one will see it is clear that the grants provided for beef cows largely represent social payments. This is due mainly to the fact that this system of farming is predominant in disadvantaged areas and on poorer farms outside disadvantaged areas. Because of the over-riding need to increase cattle numbers, public policy toward beef cow numbers must take on a much clearer economic focus. Thus, the various restrictions attaching to the grants schemes, by and large, are no longer justified. In examining the position obtaining one must understand that there is another problem to be faced, that is the funding difficulty of those involved in beef cow enterprises, particularly in their early stages. I also accept that there is a low borrowing capacity on the part of many farmers.

I want to touch now on the principal proposals contained in my 20-point programme. I am putting them before the House for serious consideration, as forming the basis for an action plan to be implemented now. I have already presented them to my party. Were we in Government I would be pushing for their immediate implementation. My outlook is that the position is so serious I must put them to the House, seek the views of Members, asking that they be implemented immediately. If the Minister has alternative proposals to achieve the same result I will be quite prepared to debate them. The following are my proposals: (1), I am talking about a subsidy of £100 to be paid on pregnant heifers in the beef herd kept for the purpose of increasing the herd. Because of the difficulties encountered by those involved in the beef area some such arrangement is necessary, one which would involve a down payment rather than the prospect of some return in the distant future.

(2), I contend that the existing grant levels for beef cows, within disadvantaged areas, should be maintained. I believe strongly that the restrictions on receipt of grants in relation to off-farm income — affecting the cattle headage and beef cow schemes and the restrictions in regard to full time farmers, affecting the suckler cow premium schemes — should be removed.

(3), I propose that the existing restrictions concerning grants payable per farm and per forage acre — another restriction — should be modified, that the current limit of 30 livestock units for headage payments in the more severely handicapped areas should be increased to 45 livestock units. I am not proposing the introduction of that provision carte blanche. I suggest that it should be increased provided the increase relates to beef cows. I propose that the current limit of 28 beef cows should be increased to 42 under the provisions of the beef cow scheme in the less severely handicapped areas and, correspondingly, the maximum payments per forage acre adjusted to £45.72 in severely handicapped areas and £42.73 in less severely handicapped areas.

(4), I propose that there be a review of the EC beef policy later this year. The Minister is in a very strong position to seek an increase in the EC-funded suckler cow premium scheme, at present standing at £36.80. Fully argued I believe there would be a possibility of having that sum increased to at least £60 to be applicable outside disadvantaged areas.

(5), I propose, in relation to the calf subsidy at present standing at £77.60 and applicable to all calves born in the dairy and beef cow herds, that, subject to EC approval that subsidy should no longer apply to dairy herds but, instead, be increased by £15 per calf in beef herds.

(6), I propose that dairy farmers with a milk quota of less than 30,000 gallons should be eligible for beef cow grants; that is becoming more and more obvious. There is great potential there for expansion on small farms with limited quotas. I want to see that potential encouraged and the possibility of beef cow grants being made available to those with a quota of less than 30,000 gallons. I accept that any such scheme would have to be thought out carefully from the point of view of administration. I propose that we take the numbers of dairy cows and quotas in 1987, as a base so that cows kept in excess of that base would then qualify for the beef cow and suckler cow premiums.

(7), stock relief is an instrument which can be used to help in achieving the necessary numbers. Stock relief for additional beef cows should be increased from 110 per cent to 125 per cent. I can confirm that Fine Gael propose to table an amendment to the Finance Bill to achieve this effect.

(8), because stock relief cannot be used to create a loss, I am also proposing a further change that, for beef cows, unused stock relief should be carried forward for up to three years.

(9), in regard to stock relief, I also propose that the clawback period should be reduced from ten years at present to seven years.

(10), on the basis that it is in the long term interest of the financial institutions that as many farmers as possible remain viable, I propose that their contribution towards achieving this should be by way of the extension of the AAA rate of interest to farmers engaged in the expansion of beef cow numbers, thus reducing the existing interest rate by 2 per cent to 3 per cent.

(11), a further incentive would be the introduction of a new loans scheme which would provide for a three year interest moratorium while the beef cow enterprise is being established. I have had discussions with some of the financial institutions and I have reason to believe that they could be encouraged to introduce such a scheme.

(12), because of the need to tackle farm level constraints to development, a properly funded research and advisory service is necessary. More research is required on technical aspects of suckler systems, including nutrition levels and breeding policies. This needs to be translated into practice on farms, through the advisory service. Therefore, the drive to expand suckler cow numbers must receive an appropriate priority in the programme of the new agricultural policy. Of course there is now a further difficulty in the implementation of that proposal because of the unholy mess that has been made of the merger arrangement. However, that is a matter for another day. Despite the mess, the results from this decimation must be prepared to take as one of their priorities this whole question.

(13), in regard to housing, the figures show that up to 70 per cent of dry stock farms in the west have little or no housing for store cattle and a high proportion of the remainder have very poor facilities. It is essential that the revised western package is put in place straight away. Furthermore, existing regulations should be modified to allow low cost housing systems. Some of these have been developed in recent years by ACOT and AFT and low cost housing does not necessarily relate to poor quality. On that basis, the regulations should be modified to allow such low cost systems to qualify for grant aid.

(14), because calf mortality is still a serious problem — on about one-fifth of our farms the rate is running at 10 to 20 per cent — there must be an intensification of existing campaigns to reduce it. In particular, such a campaign obviously must be targeted at these problem farms.

(15), the IFA initiative in promoting producer groups and the application to the EC Commission that producer groups in the beef sector should be eligible for establishment aid and other support measures are worthy of the strongest support.

(16), while it does not make sense to build a beef industry based on imported raw material, some limited imports will help, in the short term, towards achieving the overall objective of increasing numbers. Obviously, such imports will have to come from herds of an approved health status and would be imported to farmers operating calf to beef systems.

Perhaps undue attention has been focused on that proposal but I do not anticipate that the numbers resulting from that approach will be enormous. However, the problem is so serious that it is one of many proposals which would help to achieve the overall objective.

(17), I want to see an effort made to overcome the constraints in the expansion of the use of once-bred heifers. The main constraints of the price discount in the carcase and the fact that the variable premium does not apply in the UK to the once-bred heifer carcase means that processors have a responsibility to explore all market opportunities for once-bred heifer meat. Even though I accept that some research has been done which has been reasonably positive, further market research in this field should be undertaken jointly by the processors, the research arm of the new agricultural authority and the CBF. The whole idea is to feed back to the producer the benefits of a better market outlet for this type of meat. We must find a way to encourage producers to breed the heifers before disposal.

(18), while I do not see short term benefits resulting from the excellent research into twinning which has been undertaken in our universities and research institutes, in the medium term such research will help in the overall solution. Accordingly, the importance of this research should be reflected in the allocation of the national science and technology budget and the processing industry should contribute to this national effort on a greater scale by linkages and funding with the universities and research institutes.

(19), processors have a major role to play, specifically those in receipt of substantial grant aid. They must undertake commitments in terms of increasing national added value and in respect of undertaking measures to increase the supply of cattle.

(20), conditions should be laid down and there should be an annual review of the progress made towards achieving targets and respecting the conditions agreed under the grant aid arrangements. There should also be a clawback in the event of failure to achieve targets.

That is an outline of my main policy proposals. There are also possibilities under the business expansion scheme and my policy document emphasised the need for rapid progress in the eradication of bovine TB which has been a continuing major cost to the livestock industry. It was the basis for the first policy document I produced last year in the area of agriculture and I am glad that the Minister is making a move in that regard at long last.

If my proposals are implemented, I anticipate that we can achieve the necessary target increase of 300,000 beef cows over the next four years at no additional cost to the Exchequer. I accept that, in some instances, the proposals require the approval of the EC Commission. Clearly, in the light of the acceptance — it was written into the Single European Act — of the need for cohesion and of the importance of the industry to our economy, we have an exceptionally strong case for securing such acceptance by the Commission.

In regard to the question of cost, a reallocation of the calf premium would cover the additional cost of doubling the subsidy for calves in the beef herd as well as the subsidy for pregnant heifers.

The increase in EC recoupment from 50 per cent to 70 per cent would enable the other measures to be implemented without any difficulty or any additional charge to the Exchequer. In considering this, it is also very important that we look at the overall benefits to be derived by the economy and the Exchequer. It is very clear that there are huge benefits to be achieved from having an additional 300,000 beef cows.

I mentioned earlier the importance to farmers involved in beef production of the achievement of such a target which would substantially improve and make a vital contribution to maintaining the viability of 20,000 to 30,000 farmers in this country. Then we can look at the effect on our balance of payments and exports. I also dealt with this in my policy document and I said that it would result in increased exports which would amount to £200 million. There is also the question of jobs. More jobs will be lost in the meat sector, people will be laid off or put on a three-day week and this trend will continue unless the supply is there. On the other hand, if we can achieve increases in supply of the order I have mentioned I have no doubt that we can achieve the additional 1,000 jobs in the meat processing sector projected by the IDA. The results would probably be even better because the target I have set is higher than that talked about in the IDA document, therefore, the 1,000 extra jobs would be an absolute minimum.

It has been estimated that the Exchequer inflow from additional spending associated with this sector, agriculture and food imports, represents about 25 per cent of the value of these exports. I have not heard that figure contradicted in any way. If we are talking about an increase in exports of the order of £200 million from this sector and if the figures in that study are correct, the direct return to the Exchequer would be of the order of £50 million a year.

As we stand it is clear that much valuable time has been lost. I am presenting my proposals to the Dáil as the basis for a comprehensive plan to be implemented immediately. As I mentioned, if the Minister has alternative proposals to offer let us also debate those. As I have said also, it is now time to recognise that the crisis is there and for us to insist on the introduction and implementation of a programme to resolve that crisis. It is clear that such a programme cannot just focus on one plain or one policy instrument; it has to be broad and comprehensive. Only in that way will we achieve the kind of increase in numbers that clearly is needed.

I am not sure at this stage whether, with the collapse of the Minister's own plans, he is prepared to take on board my proposals completely. For the purposes of the debate I will be glad to hear what he has to say. If he has alternative proposals I will be glad to discuss those in my reply to this debate, but clearly we need action now. I am asking that all parties in this House recognise that the crisis is there and be prepared to debate the proposals I have put forward or any additional proposals which may arise in the debate and that, arising out of this, we will have agreement in this House on the need for the introduction and implementation of a comprehensive programme to achieve the necessary increase in beef cow numbers.

Minister for Agriculture and Food (Mr. O'Kennedy)

I welcome the opportunity to have this debate in the House on the beef industry. I recognise that the document recently published by Deputy O'Keeffe, the Fine Gael spokesman on agriculture, was intended by him to be a discussion document and that he set out to make a constructive contribution to a debate on the future of the industry. That said, I am afraid — and this will not surprise him — I have to take issue with him on a number of items contained in the document.

It is fair to say, I suppose, that noone, not even a Fine Gael spokesman on agriculture, should be held responsible for the sins and failings of the past, but if there is a crisis, as he puts it, in the beef industry now, that crisis did not start this year. I want to give the figures in relation to the crisis so that we have an objective presentation of the reality. As it happens, that crisis ran right through the period of office of the Government of which Deputy O'Keeffe was an active supporter in the Dáil. I want to give the figures and trends that now emerge.

Since 1984 the total numbers of the cow herd generally have dropped from 1,949,000 to 1,864,000 up to this year. The beef herd is particularly affected by this. Take the last couple of years: there was a drop from 414,000 to 406,000 in the space of one year, 1986. During last year, which I am glad to come back to, there was a significant improvement back to 420,000, an improvement of 14,000 in the space of that year. I mention these figures, not for the purpose of trying to suggest that even the improvement that was evident last year is anything like adequate, but to demonstrate above all else that the crisis the Deputy refers to was much more acute — indeed, it was chronic — when the party he supports were in Government. The facts bear that out.

I would like to bring other facts to the attention of the House which from the point of view of the confidence of all concerned in this sector have to be presented. That is my function. Then, to the extent they are matters that need to be corrected, my function is, of course, to take corrective action.

The situation in the beef industry today is far from being as black as the Deputy or others would wish to have it seen. Let me give some of the rather reassuring facts in this as in every other sector in agriculture and point that out. Since 1 January this year, for instance, cow slaughterings are down by 17,000 cows. We were all concerned about the level of cow slaughterings and the Deputy should know — but did not refer to it — that right now as he presents this crisis picture we are seeing a major reversal with cow slaughterings down by 22 per cent. In the last six months the drop in the number of cow slaughterings has been some 50,000. Clearly a pattern is now emerging where farmers are already retaining extra cows in significant numbers for good reasons which I will point to in my contribution. What are those reasons? They are fairly evident. Cattle prices have remained buoyant and look like remaining so for the foreseeable future. Those are facts on which we do not need to — indeed, we cannot — take issue on in this House. Those facts speak for themselves to the extent that our prices have recently been higher than the Community average for one of our main categories of beef, category O, and the same trend is developing in regard to category R. What is the significance of that? For the first time since we joined the EC in the early seventies, apart from one brief isolated period in 1973, our average price for the main categories of beef is higher than the Community average. Of course, that is having a major effect on the whole attitude of the producer to the beef sector and to the retention of suckler cows because the prices for calves this year have been exceptionally good and obviously constitute an enormous incentive to farmers to retain extra breeding stock and produce calves.

You can look at that in one of two ways. Deputy O'Keeffe chooses to look at it in the other way, that the prices are so high they are a disincentive, you cannot purchase calves. That is one way of presenting it, but the other is the reality, that because the prices are so high and there is such unprecedented buoyancy in the beef sector——

Mr. Farrelly

There is scarcity.

Mr. O'Kennedy

The Deputy may call it scarcity if he likes. I have given the figures in relation to slaughterings. Deputy Farrelly can ignore those or he need not do so. I have given the trend and I will give more in relation to the increase in the herd in a moment. Farmers like anybody else are prudent managers and they react to the market, and the market condition is now encouraging them to react in a way they could not and did not when there really was a crisis.

The prices of calves this year have been exceptionally good and that in itself will constitute enormous incentive to farmers to retain extra breeding stock and to produce calves. We have to keep in mind that dairy cow numbers are being cut back in other member states of the EC — in many cases much more drastically than here. The situation here must be considered in the context of what is happening in the Community as a whole.

It is, of course, accepted that an increase in the beef cow herd is a priority objective. I accept that this is the intention in Deputy O'Keeffe's paper. It would not be fair or reasonable to lumber him with responsibility for the failure of the past four years. The Government and the Community are already expending a great deal of funds and effort on measures relevant to that aim. There is already a modest but welcome increase in the beef cow herd. In 1987 the fall in beef cow numbers was reversed for the first time in years and the beef cow herd was at its highest level since 1980.

If there was occasion for a debate on the crisis in the herd it might have been in 1986, 1985, 1984 or 1983 but just when we get a reverse in the trend Fine Gael decide we now have a crisis. They have a strange way of reacting and seem to be equipped as ever with the wrong utensils in any given climatic conditions. It is not something that extends merely to the Leader of the party. The lack of the appropriate utensils in any climatic conditions seems to be a feature of all the Fine Gael Party. The same utensils were available to them for four years and they were using the forks instead of the spoons.

(Interruptions.)

Mr. O'Kennedy

We will dish out the spoons now and there will be enough for everybody. The increase which was evident in 1987 and is still occurring is due in no small way to existing incentives but it is also due to farmers' sound business sense. I give them full credit for seeing the market opportunities and grasping them. Market demand for beef is clearly improving and is likely to improve a good deal more over the next few years. Irish farmers have seen this and are beginning to act accordingly. They are not helpless children who need to be told what to do and paid to do it at every hand's turn. That day is over. They are enterprise managers and there is no point in giving the impression that every time there is a problem or an opportunity the taxpayer, through the Government, dishes out money. That is not the way it will be. The market, subject to good Government management, will determine the conditions. Deputy O'Keeffe would not, of course, intend to suggest that farmers are children who need to be looked after but there are elements in his paper to which he referred at great length which seem to follow the traditional approach that every problem can be solved by throwing more money at it. I had thought all Members of this House had recognised that this is not possible or desirable.

(Interruptions.)

Mr. O'Kennedy

I remember when children like Deputy Farrelly first came into this House. He is making much more noise now than when he came in as a squawking child.

Mr. Farrelly

The Minister was in Europe at the time.

Mr. O'Kennedy

I remember the impression the Deputy made when I came back. In such a short period at school Deputy Farrelly has been put out more often than some long-serving students of 20 or 30 years here.

Mr. Farrelly

At least I did not leave or run away when there was a crisis. I was put out once.

Mr. O'Kennedy

That is more often than many of us who have been here for over 20 years. Deputies will be aware, and it is recognised in Deputy O'Keeffe's document, that the State is not alone in having an interest in expanding beef numbers and production. Farmers themselves have a contribution to make, while the agri-business and banking sectors also have a part to play. I support the suggestion made by Deputy O'Keeffe that the banks have a role to play since they derive much of their profit from the agricultural sector. I have publicly called on the banking sector to make a major contribution through interest rate reductions to increasing the level of the beef cow herd.

I regret very much that some of those with major vested interests in expansion have failed to contribute the funds expected from them to meet the cost of the scheme I proposed to maintain the national cow herd some time ago. It depended on the agreement of all concerned — the meat industry, the banks, the farmers. Another factor was that the Government could not put in a single red halfpenny because of European Community conditions. The Commission would not have it as a national aid. Those who agreed in principle actually refused to put up the funds to give the plan effect. At the end of the day they said we should go around and collect the money from the factories in the meat industry. If they were not even ready or capable of collecting the funds, I do not suppose I could be blamed for their disposition. The only regret I have is that this did not emerge more clearly at an earlier stage.

Mr. J. O'Keeffe

Before the fourth announcement.

Mr. O'Kennedy

I made an announcement on the basis of what had been pledged because I tend to take people at their word. That is all over and because of the difficulties encountered in settling appropriate arrangements for the funding I have decided now to abandon that scheme. I do not believe in hanging around waiting for agreement between the various parties. Even though that scheme is not now possible, I will continue to encourage the financial institutions, the meat factories and others involved to follow their own best interests in giving real support to the expansion of beef cow numbers. They must demonstrate their interest by their practical decision-making. I have already initiated an examination within my Department of other options. This morning at Government we discussed on a preliminary basis a variety of these options and I will be coming back to Government on matters within my authority and competence, having regard to constraints within the Community, with issues that do not depend on agreement from any other sector. The constraints I am faced with at both national and Community level are well known but I am hopeful that within those constraints I can find ways of operating existing schemes in a way that will increase their contribution to the expansion effort.

The document produced by Deputy O'Keeffe contains little new. It is mainly an assembly of ideas which have surfaced over the past year or so but there was no sign of them during the previous four years when they were badly needed.

Mr. J. O'Keeffe

I was dealing with a different portfolio.

Mr. O'Kennedy

Nobody told my predecessor from the Fine Gael benches about all the brilliant ideas which Deputy O'Keeffe believes started with himself. Each has its own merits and difficulties but I do not think the factors are changed much by stringing the various ideas together and baptising them as an "action plan".

At present, anyone with calves to sell is likely to get, and I stress this, a record price for them judging by recent market levels. Feed supplies are plentiful and cheap, unlike the pattern during the past four years. Cattle producers like everyone else are aware that the prospects for beef sales in EC member states look promising now and well into the nineties. A very important point, which I think every farmer in this country recognises as the most important change this year and last year over the previous four years, is that interest rates are coming down as the Government's drive to restore the financial health of our economy bears fruit and the rate of inflation is being held at a very low level. Some of the things Deputy O'Keeffe was suggesting would go very contrary to maintaining, much less improving, that welcome trend in the reduction of interest rates. He wants to throw more money around. Of course, if that happened I would not be surprised if teachers and nurses say they want more money——

Mr. Farrelly

They were promised it.

Mr. O'Kennedy

——and then the very thing which has brought about the very remarkable and welcome change in the economy here would be set at nought. This Government do not intend to do that.

Mr. J. O'Keeffe

The Minister was the first to look for a copy of my proposals which were clearly costed and involved no additional Exchequer expenditure.

Mr. O'Kennedy

Obviously they do and I will make some comment on them.

All in all, it is not surprising that the fall in our beef cow numbers was reversed last year for the first time and that the 1987 beef cow numbers were the highest since 1980. I want that process accelerated in the national interest and in the interests of the producers themselves.

Mr. J. O'Keeffe

What are you going to do about it?

Mr. O'Kennedy

That is why — and I want to refer to some practical things now — I encouraged ACOT to give top priority in their advisory work to expanding the beef cow herd. In this regard, I am pleased to say that I had the privilege of launching ACOT's 1988 suckling campaign on 1 March. The purpose of this year's campaign is to accelerate the momentum achieved during the 1987 campaign when the decline in suckler cow numbers in previous years was reversed. Speaking at the launch, the Director of ACOT said that the campaign was being launched against the background of a dramatic increase in calf prices in recent months which had increased the profitability of suckling relative to other cattle systems all over the country. He commented on the fact that for the first time ever, suckling was now competitive with other cattle systems in the non-disadvantaged areas and would become ever more competitive over the coming years. He added that in the disadvantaged areas where subsidies are higher, suckling is now unquestionably the most profitable system and is capable of yielding a profit of at least £50 per acre greater than other cattle systems. That is the reality and for that reason I should like to take this opportunity of congratulating ACOT on their efforts——

Mr. J. O'Keeffe

Cut another few million pounds off them.

Mr. O'Kennedy

The Deputy wants to give more bad news. We will come back to that as soon as the Deputy allows the matter to proceed at a normal pace through this House.

Mr. J. O'Keeffe

As soon as the Minister reintroduces the Bill and gives the House an opportunity to discuss it.

An Leas-Cheann Comhairle

Deputy O'Keeffe, I presume you had an uninterrupted audience yourself. Apart from the requirements of Standing Orders, the Minister should not be interrupted.

Mr. O'Kennedy

I know that with your experience in the House, a Leas-Cheann Comhairle, and I would like to think you are aware of my conduct in the House, you can base your presumption confidently because in fact that is what happened. Deputy O'Keeffe was uninterrupted for 40 minutes.

I want to give the House an appreciation of the positive approach taken and the encouraging results achieved to date. The objective of the campaign is twofold, namely to expand suckler cow numbers to counter the drop in the dairy herd and also to increase the use of continental sires in order to improve beef quality. In other words, the objective has both a quantitative and a qualitative emphasis. The principal target groups of farmers identified by ACOT were as follows: existing suckler cow owners; dairy farmers participating in the milk cessation scheme; and farmers setting up new suckler herds.

As a result of last year's experience, it has been possible to be more selective in identifying the target groups with potential for development and these now comprise 6,000 existing suckler herd owners, some 2,000 cessation scheme participants and up to 2,000 new suckler herd owners.

Obviously ACOT are using every means at their disposal to get the message across to cattle farmers that suckling is the best means to protect their future income. In addition to comprehensive farm visits to each of the 10,000 farmers identified as having strong potential to expand numbers which are now taking place, an intensive advisory programme involving a network of farmer meetings, courses, farm walks and demonstrations and the issue of special brochures has been undertaken in each ACOT District. Some 300 local meetings at separate locations throughout the country have been arranged and these should generate considerable farmer interest in suckling. Deputies will be aware of the intensive promotional programme by ACOT on press and radio at local and national level. This media coverage will continue at specific periods throughout the year and will be beamed at all farmers and impact on a much wider band of herd owners than the main target group of 10,000 farmers.

What is expected from this? The results the campaign is expected to achieve will be an additional 20,000 cows in existing suckler herds in 1988, which would be the biggest increase since 1984. The year 1987 saw the biggest increase since 1980 and I have no doubt that we will, with those additional cows, have the biggest increase since 1974. Also, another 20,000 or 80 per cent of the cows in participating herds in the cessation scheme have either been retained for suckling or sold to dairy farmers and have thus been saved from slaughter, as the figures I originally gave demonstrated, which is a significant achievement in itself.

These are most encouraging results in terms of numbers and I am glad to say that the expansion was not achieved at the expense of quality. There was in fact a substantial increase in the use of continental bulls and this augurs well for the future quality of Irish beef. More than half the suckler herd were bred to continentals and it is ACOT's aim to increase this to 70 per cent. I have no doubt that the efforts of ACOT, coupled with the incentives available to farmers by way of grants, will lead to further expansion of the suckler herd in the future, that the welcome reversal we saw last year, which has been even more evident in the first three months of this year, will be maintained and that we will not see the continuing decline we saw during the four years our predecessors were in Government.

On the question of grants, I should like to refer to a few points because there are some inaccuracies in the Fine Gael document. I acknowledge that Deputy O'Keeffe put a lot of thought and effort into that document, and perhaps if my predecessor put as much thought and effort into it when he had an opportunity of doing something about it, we might not have seen the crisis I inherited at this point. A farmer keeping beef cows in the disadvantaged areas receives more than the £110-£114 per cow and calf referred to in that document. Indeed, between the two headage and three premium schemes operating in the disadvantaged areas a farmer can receive as much as £148.80 on a cow-calf unit in the more severely handicapped areas and £129.60 on a cow-calf unit in the less severely handicapped areas where the calf is a male. These totals comprise £70 beef cow grant, £19.20 headage grant on the calf in the more severely handicapped areas, £36.80 suckler cow premium, £7.60 calf premium and £15.20 special beef premium on a male calf over nine months old. Understandably, I suggest that this wide range of grants should help to increase cow numbers in the disadvantaged areas in the future.

The Deputy might well ask: if that is the case, why have these grants not increased numbers in the past if I expect them to do so in the future? The reasons they have not done so are fairly obvious: the £70 payment rate was not introduced until 1986, the £36.80 suckler cow premium rate until 1987, and no special beef premium at all was paid up to 1987. Because of the long production cycle it takes time for every set of measures to take effect, and it is no different with these grants. However, with our budgetary problems well under control and interest rates falling, there is a new confidence in the economy and in farmers who now have incentives where previously there were disincentives and we can expect to see a sustained response to these incentives in the disadvantaged areas.

I have not time now to refer to the whole range of grants to which I intended to refer. I will just assure the House that there are some very reassuring trends in grants and incentives. I recognise the critical importance of this issue not just to the primary producer but also to the economy generally. Calf mortality must be reduced and we have programmes directed at that. A short while ago I launched a programme for embryo transfer, a joint venture programme between University College Dublin and Mastock. I have no doubt that the impact of this new element in technology will have a major effect on the nature and level of calf fertility. We have to ensure also that we control our disease levels. The beef TB scheme that Deputy O'Keeffe mentioned has been put in place and if it has the desired effects it, too, will reduce mortality.

All of these are contributory factors. I understand the points Deputy O'Keeffe made but no Government has the total responsibility. They have a responsibility to create a suitable climate but those who have an immediate vested interest have a responsibility. I will continue to promote every opportunity at national and Community level.

That said, let me make a final point which I cannot do in detail now. There are European Community constraints on national aid, and some of the points made by the Deputy in his document would not be acceptable to the Commission. For that reason it is not realistic to put them forward as proposals that can be implemented. In Opposition one can say certain things should be done but in Government one has the responsibility of actually implementing them.

Mr. McCoy

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:

"recognising the emerging crisis facing the beef industry, urges the Government to (i) increase the stock relief from 110 per cent to 150 per cent for additional beef cows retained, (ii) extend the Business Expansion Scheme to cover beef cow enterprises and (iii) to increase the off-farm income limit to qualify for headage payments in the disadvantaged areas."

The proposals in the Fine Gael document attempt to tackle a crisis which the Minister says is not there but they are very involved and, to a certain extent fragmented. The Minister says there is no crisis but, nevertheless, he has personally and through his Department made numerous efforts to bring in a scheme to avert a crisis which is there and was there when he came into office in 1987. It would be incorrect to pretend here tonight that the document produced by Fine Gael has been produced in response to that crisis.

The Minister is quite deft with figures and in answering most arguments with statistics. The increase in the beef cow population is very small in comparison with the decrease in the dairy cow population. Therefore, the overall decrease needs to be addressed. Last year the Minister's own Department admitted that there was a potential loss of £300 million facing the beef industry if something was not done to arrest the slide in the general breeding herd, both beef and dairy.

The Progressive Democrats, while recognising the problems, have tabled a number of amendments to this motion. The Government's failure to develop indigenous industries like beef processing contrasts sadly with all the special grants that are available to attract people to the Custom House Docks site in Dublin which will have a minimal employment content. On the other hand, we seem to have shut our eyes to the industry we say contributes so much to the economy. At a time when it most requires a stimulus from the Government, none is forthcoming. That stimulus should have begun in 1984, when it became apparent that quotas were here to stay and would only bite deeper as time went on. Nothing was done, but the Minister, late as it was, could have done something about it 12 months ago.

I accept that the Minister now intends to bring another scheme forward which will not depend on outside agencies and organisations for its implementation. This is the proper way to go about it and the way it should have been done from the beginning. That this was not done is an indication of the lack of understanding of the potential of the beef industry with its vast potential for downstream jobs through added value, vacuum packing and all the other possibilities that have opened up to us in the past few years.

It has been recognised by all sectors of the agricultural industry that a beef herd incentive scheme is vital to counteract the loss of cows in the dairy herd resulting from the EC cutbacks. In fact, the Minister for Agriculture and Food in reply to a question from Deputy Deasy on 24 February said that following recent discussions with interested parties the technical aspects of the scheme for maintaining the national beef cow herd, including the financing of it, had been largely settled. It is most disconcerting for the industry and particularly for the confidence of farmers in this sector to find that these undertakings, given in good faith, are now worthless. Even the scheme, as it was proposed, was a paltry one, offering £50 compensation over two years for the retention of beef animals. It shows a lack of understanding of the problem to suggest that one should take the risk of providing the capital for beef animals retained in a herd for a proposed £25 per year to be paid at the end of two years. It is laughable. If it were offered as a pay increase or incentive to anybody in the workplace in any other industry or sector of society it would be laughed out of court.

This proposal was doomed to failure. The scheme was not properly thought out; it was derisory in its effort to provide the necessary incentive. There is a smaller breeding herd now than there was in 1972. This is critical because it cannot be changed with the stroke of a pen or even by an overnight scheme. There is at least three years involved from the inception to the time when animals are ready for slaughter and that is a minimum time. It is obvious now that some meat factories are actually holding back on their development plans and proposals because they understand quite well that the raw materials supply is going to be critical.

Notwithstanding the level of Government support to the processing facilities for job creation, it is very hard to understand why no such support was given to the beef production industry. It is a sad reflection in the face of all the hype that the actual headage provision for tackling the disadvantaged area this year has been reduced in the budget allocation by £2.3 million. The disadvantaged area indeed could play a very significant role in the retention and building up of the beef herd if proper incentives were given.

It may interest the House to know that the average payment for headage grants per farmer in the disadvantaged and western package area was £600 per farmer last year. This suggests a very low level of activity and totally excludes any person who, by way of their own industry, may have an off-farm job or income paying more than £100 per week. In the period since 1984 the number of dairy cows has fallen by 115,000 and this number is set to fall by a further 200,000 by 1992 as farmers cull more cows in the face of EC restrictions. This is happening against the background of the dairy herd being the backbone of the beef herd.

With higher milk yields and an onslaught on TB, for which I congratulate the Minister, there is no doubt about it but the dairy herd is set to fall significantly as a result. That is why it is so vital to get a special beef scheme going but as I have said, a Leas-Cheann Comhairle, nothing has been heard of this scheme since 24 February in the Dáil. Indeed the Department of Agriculture and Food, the Minister's own Department last year, when introducing the beef scheme stated that there was a difficulty in relation to the losses which could be expected if such a scheme were not put into action and that £300 million would be lost to the beef industry if immediate steps were not taken to counteract the loss of calves due to the reduction of the dairy herd.

Up to now the real crisis facing the beef industry has been masked by the level of cattle imports from the North, the high level of slaughtering of cull cows and surplus cows and heifers from the dairy herd and the overall reduction in cattle numbers. However, this once-off situation cannot be maintained and without real incentives for farmers to retain more beef cattle, a major crisis will envelop the beef industry now. We have heard of many proposals to extend headage payments to non-disadvantaged areas; we have heard of schemes and proposals to extend the disadvantaged areas to the whole country, but at this point in time we still await the green light from Brussels even to make such a submission and realistically speaking there will be no extension of boundaries in the EC disadvantaged area for at least three years even if it happens then.

There is a proposal before the Commission to have modulated payment of headage grants in the less severely handicapped areas but this area is comparatively small in relation to the entire country and in relation to the beef producing areas. This is not a farmers' problem and it is not essentially an agricultural problem. There are far more off-farm jobs involved in the beef industry than there are in the rearing of beef and the provision of raw material for the processing factories and the difficulty which will arise in the country will greatly affect the capital investment which the Government are making in processing plants and will certainly affect the job prospects as announced in the Programme for National Recovery.

I am reliably informed that many beef processors at present have put plans for expansion into cold storage until they see what the Government's response will be to this national crisis. In Europe, the number of all classes of beef cattle, are down, the biggest drop being for beef cattle over two years of age. This indicates a tremendous opportunity for Ireland in the beef industry which it will now not be able to take full advantage of because of the lack of raw material. This is also reflected in the growing scarcity of calves and the high prices which they can make and as, a quick turnover is needed when the investment is high, and since the introduction of the ban in hormone implants in cattle, it is necessary to sell them at lighter weights.

All the information on cattle numbers adds up to a significant fall in output of prime beef in the EC for the next couple of years. Cow slaughterings have been heaviest on intensive dairy farms which make little use of grass and rely on cheap, bought in feed. This gives Ireland a distinct advantage because on many farms the stocking rate is not as high as in Europe and there is a far greater use made of grassland feeding. In this way there is a possibility of keeping surplus cows to dairy requirements for breeding and multiple suckling. This is certainly a logical development for most Irish dairy farmers where the land is more suitable for grassland since changing to other classes of stock to replace cows would require major investment.

There are many options open to the Minister besides trying to get going with totally inadequate schemes. There are many options open to the Minister which will be of little or no cost to the economy or to the Exchequer which could and should be better explored. There are many options open within the context of the EC. Among the options which we would suggest to the Minister are the possibility of increasing the value of the EC special beef premium from £14.70 for 50 cattle up to £42 for 100 cattle which would be part of the price negotiations in Brussels.

Further, under the provisions of the new western package it is proposed to increase the EC headage contributions by 70 per cent to 75 per cent. I contend that the Government should not seek to dilute their contribution but rather maximise the headage payments in order to increase the breeding stock. Also, it is open to the Minister to renegotiate the special beef retention scheme headage payment from £36 to £60 per animal at no extra cost to the Irish Exchequer and he should also seek the extension of this scheme to mixed herds of beef cows and dairy cows as it is becoming more apparent now that the expansion of the beef herd will depend very much on the retention of excess dairy cows on dairy farms for beef cow purposes.

We, the Progressive Democrats, wish to propose amendments which are of no particular cost to the Exchequer save the one in which we are asking the Government to adjust the off-farm income in the disadvantaged areas for qualification for headage payments. When one considers that the average headage payment in the disadvantaged areas last year was £600 approximately, one can see the extent of the average income of many of the small farmers in the west and to seek to penalise those who might have to seek off-farm income to support their families by precluding them from the disadvantaged areas headage payment is not alone unjust but highly counterproductive and it is no wonder that rural Ireland is losing its population when we have a total dole mentality to many of the production incentives which are in place.

We are also proposing an extension of the stock relief from 110 per cent to 150 per cent in the case of additional animals which would be retained in the beef cow herd system. As it is, these animals would have to be retained and their offspring for a number of years before any money could be made out of them. At the same time, under accountancy procedures they would be shown up as a paper profit and income tax would have to be paid on them as such. We are suggesting that if the stock relief was extended to 150 per cent for beef cows, then the claw-back would come for the Department of Finance when the animals were sold.

Finally, there are elements of the business expansion scheme which could be applied to the expansion of the beef cow herd and in particular I relate to situations whereby investments made in beef cow operations would enjoy the same type of tax benefits as are available to others in the commercial sector. It is clear that there are many options open to the Minister which would cost very little in terms of Exchequer contribution and which would reap tremendous rewards for this country in terms of a viable beef industry. Beef has certainly the most exciting possibility for this country and it would be a pity and a downright shame if we could not achieve that possibility by now having the raw material available.

I ask the Minister as a matter of extreme urgency to call together the interested parties again and also his colleagues around the Cabinet table and impress on them the urgency of immediate action and the cost-saving exercises in terms of Exchequer funding with the proper plan and the proper scheme.

Mr. Farrelly

I welcome the opportunity to support the motion put down by my colleague, Deputy Jim O'Keeffe. It is regrettable for a number of reasons that we are here tonight discussing this motion. The main reason is the collapse of a proposal to secure increased numbers for the beef industry which was announced on three occasions over the past six or eight months by the Minister for Agriculture and Food. Unfortunately, it is quite evident that the background work on the proposal was insufficient to ensure that the scheme, when introduced, would be operational. It was very easy for the Minister to state yesterday evening when he had abandoned the scheme that the meat industry and the factories involved had let him down. Had I been involved in negotiations with those people I would have said that, long before the proposals were agreed, the industry should have acknowledged that with the capacity we have in the State there needed to be a total package in the region of £15 million to £20 million made available from the beef industry, the processors and the farmers in addition to some help from the State. The State help could have been organised, and still can be organised through the good offices of Brussels, under our proposals for agricultural aid which we should be getting.

Having listened to the Minister tonight he appears to suggest that we, as a party, are totally to blame for the crisis which it is claimed exists in the beef industry. The Minister referred to the years 1984, 1985 and 1986. I could not allow the references to previous years to pass without stating how the circumstances arose in 1984-86. It is quite evident that there was a dramatic decline in beef numbers in the years 1980-86. The reason for this decline was that Irish farmers borrowed money over the previous ten years to develop and expand their enterprises when we joined Europe and they could not make the repayments on those borrowings to the financial institutions. The Minister went back a number of years but we have to go to the root of the problem and then pose the question. The farmers could not make their repayments due to policies introduced and pursued by the then Government, of which the Minister was a member. He left and went to Brussels when the problem became too difficult.

We cannot allow this debate to pass without making those comments when we recall, as I am sure the Minister of State will recall vividly, that interest rates were then 18 or 19 per cent and inflation was running at 20 or 21 per cent. Thousands and thousands of farmers right across the country had to sell their breeding stock because of their inability to repay their borrowings which had been taken out at a rate of interest of 11 or 12 per cent in the years the Minister forgot to mention. I am not at all surprised that the Minister has forgotten to mention those particular years because he would rather forget them.

Minister of State at the Department of Agriculture and Food (Mr. Kirk)

That theory is a bit far-fetched.

Mr. J. O'Keeffe

It is true, though.

Mr. Farrelly

It is important that the Minister should not forget them because the Taoiseach at the time had some problems in remembering things he wanted to forget. I would not like this opportunity to pass——

Mr. Kirk

It is a bit far-fetched.

Mr. J. O'Keeffe

The Minister of State was here in 1977.

Mr. Farrelly

——without those remarks being made. That is when the crisis really started.

An Leas-Cheann Comhairle

Could we skip through it as quickly as possible and come to the present?

Mr. Farrelly

I know the Leas-Cheann Comhairle would not have realised how serious the problem was. It is hard to listen to it, but we have to put on the record of the House why there is still a problem and where that problem arose. The Minister went to great lengths to tell us that it arose when we were in Government. That is the root of the problem, a Leas-Cheann Comhairle, and you have to get to the root of the problem if you want to cure it.

It is important to realise that calves were never as dear in this country as they are at present. We all accept that, but can the Minister come into this House and say honestly that the beef producers can afford to pay the prices calves are making and subsequently make a profit on their beef units? We all know they cannot because the animals are 30 per cent more expensive than they should be. Even the farmers selling them realise that. It is not fair to compliment people on the record prices they are getting for calves because the people who are getting those record prices are not very interested in the beef industry as they do not depend on it. However I think the two are very much related. The farming community, and we as a nation, are inclined to think of them as separate industries and that each looks after his own.

I honestly believe that the proposals put forward by our spokesman in the discussion document Securing a Future for the Beef Industry are worth considering. If we take into consideration that the majority, if not all, of the finance for the State subsidy could be recouped from Brussels I do not believe there is anything wrong with the suggestion that we as a party are making to the Government that we should be looking for extra badly needed finance to help our producers, many of whom can produce nothing other than stores for the beef industry. I do not believe that we should only have a policy for developing processing in the beef industry. It should be a two-pronged effort, I do not disagree with further investment in processing because I believe all animals should be processed and sold abroad as a prepacked product ready for the housewife. It is recognised by everybody — and in fairness it is recognised by the processors, regardless of what the Minister says — that there is a crisis in the industry and we need an extra incentive because of the costs involved in producing the animals for the beef units throughout the country.

The Minister mentioned very elaborate figures of the decrease in the number of cows slaughtered in the last 12 months. Perhaps he has not realised since taking up office that there was large curtailment on milk production because of the introduction of the super levy. Last year would not be a year on which to judge.

Debate adjourned.