Dáil Éireann debate -
Wednesday, 13 Dec 1995

Vol. 459 No. 7

Milk (Regulation of Supply) (Amendment) Bill, 1995: Second and Subsequent Stages.

Minister for Agriculture, Food and Forestry (Mr. Yates)

I move: "That the Bill be now read a Second Time."

The purpose of this Bill is to provide for a small but necessary technical amendment to the Milk (Regulation of Supply) Act, 1994, which provided for the abolition of the Cork and the Dublin District Milk Boards and their replacement by a new National Milk Agency to regulate the supply of milk for liquid consumption throughout the State. It also paved the way for the sale of the milk boards' ancillary businessess and made provision for the protection of staff interests in this context.

I would like to make it clear that this Act has worked very well since its implementation in late October 1994. In mid-November of that year, as part of a staff rationalisation programme preparatory to the sale of the ancillary businesses, some 50 staff were granted voluntary early retirement on terms analogous to those which applied in the public service generally in the 1987-88 period.

On 5 December an interim board was established to oversee the management of the ancillary businesses and to make arrangements for their sale. On 30 December last the milk boards were abolished and the National Milk Agency came into being. In late April and early May of this year the former milk boards' ancillary businesses were sold as going concerns and, on the sales, some 80 staff were transferred to the private sector as employees of the new owners.

The new National Milk Agency is composed of a part-time chairman and 12 ordinary members. In accordance with the terms of the Act, the membership includes representatives of milk producers, processors, distributors, retailers and consumers. The first members of the agency were appointed by the then Minister on the nomination of interest groups for each category of member. Of the 12, five were producers' representatives, four were representatives of the processors, while consumer, retainer and distributor interests nominated one appointee each.

Milk deliveries in general follow a highly seasonal pattern. The peak to trough ratio for manufacturing milk stands currently at approximately 6:1. The domestic drinking milk market represents in the region of 10 per cent of the total milk produced. It is an industry which clearly must be supplied all year round and so has evolved a different pricing structure to compensate producers for the higher costs entailed in winter milk production. The purpose of the agency is to regulate the market in such a way that the consumer is guaranteed fresh drinking milk throughout the year.

The mechanism by which the agency regulates the supply of milk for liquid consumption involves the registration of all producers of milk for the preparation of drinking milk, of all drinking milk pasteurisers and of the contracts made between them for the supply of milk. With limited exceptions, the Act makes it an offence to sell milk for liquid consumption unless it is prepared from a raw milk produced under a registered contract.

While the Act provides that the first producer representatives shall be appointed by the Minister on the nomination of producer interests, it goes on to state that "in the year of establishment of the Agency" the Minister must appoint a day for the election of producer representatives and prescribe the manner of election. All producers who are registered with the agency on the first day of the month before that in which the election takes place are eligible to vote in this election. The persons elected must be registered with the agency in order to hold their place as producer representatives. This provision is, of course, based on the assumption that, in its first few months of operations, the agency will establish a comprehensive register of producers. However, due to start-up difficulties outside the control of the agency, it has not proved possible to register the vast majority of producers in the time available.

Accordingly, it has not been possible to conduct a legitimate election of producer representatives within the time scale envisaged by the Act. The most sensible and practical way to regularise this was to amend the Act to provide that the existing representatives should continue to hold office until sufficient producers are registered to facilitate the holding of an election as provided for under the Act. Both farming organisations have requested the amendment in order to allow the impasse to be resolved.

The Act also provides that "in the year of establishment of the Agency" the Minister shall again appoint processor, distributor, retailer and consumer representatives on the nomination of the relevant interest groups. At this stage the processor representatives must be processors who are registered with the agency. However, because of the difficulties I mentioned, there were so few processors registered it was impossible to obtain a sufficient number of valid nominations to fill the number of places available for processors in the agency.

Obviously it is necessary to effect an amendment in relation to the appointment of processor representatives similar to that applicable to the election of producers. In the circumstances, it is considered highly desirable that the appointment of the other three members should be synchronised with that of the producers and processors, as was always envisaged by the Act.

It is not proposed to go beyond making the minimum necessary amendment to the Act to allow for deferred elections and appointments to the agency. The agency has been in existence for less than a year and it was set up after widespread and detailed consultation with the dairy sector. Consultation also took place with the EU Commission before its establishment. It would not, therefore, be prudent nor do I intend to propose any policy changes to the arrangements now in place. Accordingly, it is proposed to effect a slight technical amendment to the Act which will provide that the election of producer members and the appointment of all other members should take place not in "the year of establishment of the Agency" as provided for at present but as soon as may be practicable in 1996. The Bill has been framed to give effect to this amendment and I commend it to the House.

Mr. Cowen

My party supports this Bill and understands why it has to be introduced before the end of the calendar year. In October 1994 the then Minister, Deputy Joe Walsh, introduced the Milk (Regulation of Supply) Bill whose main function was to set up the National Milk Agency. The role of the agency was to ensure that a reliable supply of good quality reasonably priced milk was available to consumers throughout the year. Its other, but no less important, function was to ensure that liquid milk producers received adequate compensation given the seasonality of production and the need to ensure year-round milk supplies. The agency was to have a part-time chairman appointed by the Minister and representatives of milk producers, pasteurisers, distributors, retailers and consumers. The main legislation introduced by the Fianna Fáil-Labour Government last year was supported by the Fine Gael spokesperson on Agriculture, Food and Forestry, Deputy Doyle. The general policy issues underlying the legislation has been the subject of substantial cross party agreement, as has been mentioned.

Under the provisions of the Act, producers and processors are due to sign contracts. The agency put considerable work into the production of a model contract, acceptable to all parties, which was circulated to dairies in August of this year with negotiations starting immediately with producer groups. A substantial amount of time was needed to allow producers to negotiate with processors the detail of supply contracts, of which few producer groups had any prior experience. I recognise that the development of the agency is at a delicate stage. It is imperative to finalise all supply arrangements so that the agency plays its full role. However, there is no point in rushing matters now, when with an extra few months at their disposal, all parties could arrive at an amicable resolution of their own affairs.

The board of the National Milk Agency comprises five producer and four processor representatives as well as one representative each of distributors, consumers and retailers. The five producer representatives were nominated by the Minister for Agriculture, Food and Forestry earlier this year and were to be replaced by democratically elected representatives by the end of 1995. Because of the delays in negotiating supply contracts between producers and processors, the election date of 22 November 1995 set by the Minister for Agriculture, Food and Forestry, Deputy Yates, has proved impossible to keep. Hopefully, he will not find it difficult to have matters resolved before we reach the next date set for the elections.

The register of contracted producers who constitute the electorate was set up as recently as 1 October last. On 1 November 1995 only about 40 producers were registered out of an estimated 5,000 liquid milk producers — progress is slow. Clearly, an election for the producers' representative in 1995 would offer no democratic guarantees and could be challenged by disenfranchised producers. I am satisfied that postponement of the election to 1996 is a practical and reasonable response in the prevailing circumstances.

Up to 10 per cent of all milk produced is for the domestic liquid milk market. There are approximately 40 pasteurising dairies, 5,000 people employed and 4,500 farmers supplying these dairies at an annualised value of £300 million. It is not an insignificant economic activity. We take for granted the proper distribution and availability throughout the year of such a basic foodstuff as milk.

I was interested to learn from reading previous debates that our consumption of milk per capita is the highest in the European Union — I think the New Zealanders are the only people with higher milk consumption in the developed world. This shows that milk is widely used by people in all income brackets. A household survey conducted by the CSO showed that expenditure on milk accounts for 11 per cent or 12 per cent of the weekly household budget — which is not an insignificant amount of money and this shows how vital a product it is.

Because the Cork and Dublin district milk boards were deemed to be incompatible with European Union regulations the Government, in consultation with the Commission, came up with the proposal for the National Milk Agency. It is important to know how it is working at this stage. A levy of just under 1p per gallon was payable under the old arrangements and I would be interested to know the amount payable now. It was indicated at the enactment of the 1994 legislation that the levy would be considerably less due to the reduced cost structure of this new agency as many staff resigned voluntarily or were reemployed by purchasers of subsidiaries of the district milk boards.

As and from September 1994 up to 60 per cent grant aid is available for building works and dairy equipment for those who want to provide on farm dairy facilities. Obviously, this was introduced because of the higher hygiene standards required under various EU directives and milk directives in Ireland. Many producers who supplied the local town or village throughout the country have gone out of business. I would be interested to learn the number who have availed of the grant scheme to provide on farm dairy facilities — presumably for the purpose of being able to continue in business. Perhaps the Minister will respond to those points in his reply.

We accept the necessity for this Bill. It shows the difficulties that arise when the Department of Agriculture, Food and Forestry puts a time limit of 12 months on itself and I am sure it is the last time we will see elections to a board in the year of establishment of an agency on the basis that it is difficult to foresee the delays that might be involved. In fairness, the 1994 Act has been a success. I commend all those who worked on that legislation, but that is no criticism of this Bill.

Ms Keogh

The original Bill regulating the supply of milk introduced in October 1994 was welcomed by the Progressive Democrats Party. As we said then, the Dublin and Cork district milk boards did an excellent job in regulating the liquid milk industry. However, the way in which they operated was seen as unfair to dairy farmers outside their catchment area and they fell foul of EC competition rules. The EU decision gave rise to the need for a new body to take over the functions of the district boards and the National Milk Agency came into being.

A key function of the agency is to ensure that those involved in liquid milk production are adequately compensated for their efforts and that liquid milk continues to command a premium price over milk supplied for manufacturing. Those who know anything about dairy farming realise there is a world of difference between producing for the manufacturing industry and the production of milk on a year round basis for the liquid milk trade. The two forms of milk production are so different in terms of time, effort and investment involved that they can almost be considered as two separate industries. Substantial additional costs are incurred in producing liquid milk. It is right that this should be reflected in the premium price paid to farmers, as it ensures that they put in the necessary effort and investment to ensure a reliable year round supply of high quality drinking milk. The former district boards fulfilled a useful role in this regard as they operated a system of quality assurance at producer level which laid down demanding standards for all farmers supplying the liquid trade. The indications are that the National Milk Agency is ensuring continuity in this respect.

At the time of its establishment all appointments to the National Milk Agency were made by the Minister for Agriculture, Food and Forestry. This Bill seeks to amend the original Act in two ways. First, it provides for the holding of elections among producers to enable them to select their representatives on the agency and, second, for the various other interested parties in the milk industry — processors, distributors, retailers and consumers — to submit nominations to the Minister for appointment as members of the agency. Once implemented, we shall have a national milk agency which will be truly representative of all those with an interest in the liquid milk industry. On the matter of the election of producer representatives, I understand that a full register of producers is not yet available and it would be wrong to hold such an election until a full and accurate register is available. Accordingly, I look forward to direct elections in which producer representatives can take part some time in 1996.

Minister for Agriculture, Food and Forestry (Mr. Yates)

I thank Deputies Cowen and Keogh for their support of the Bill and their co-operation in taking it at such short notice. They raised a number of queries on the progress made by the agency since its establishment about which I should like to give the House some details.

The inaugural meeting of the agency was held on 23 February 1995 and it met on 13 occasions since. It has a small staff, located in the Teagasc head office on Sandymount Avenue, Dublin 4. In accordance with the Department's agreement with SIPTU, all staff were recruited from among those of the former milk boards, with the exception of the chief executive, who was recruited by the agency itself and took up duty on 10 July 1995.

In regard to Deputy Cowen's question about the levy, this came into force under Statutory Instrument 253 of 1995, which placed a levy of one-tenth of a penny per litre on all milk produced for liquid milk consumption from 1 October 1995. The levy is payable on the 28th day of the month following the end of the accounting period which, in this case, is 28 November 1995. To date some £387.69 only has been collected. The agency applied for and was given ministerial approval to borrow £100,000 to cover its running costs until levy receipts stabilise. The annual levy income for the first year should be about £500,000, to take account of establishment costs, reducing to £350,000 in subsequent years when the levy will be reduced to 0.07 pence per litre.

On the registration of contracts, the agency circulated a model contract in August last to facilitate processors to comply with the provisions of the Act. Some processors adopted that contract while others drafted their own. Some processors had operated a similar system under the Dublin District Milk Board and, accordingly, were familiar with the concept of registering contracts; others were not, so that a considerable degree of explanation and consultation was necessary and continues.

On the voluntary staff retirement package in mid-November, some 50 staff in Cork and Dublin were granted voluntary early retirement, those boards having previously become overstaffed, they were losing money. This facilitated the sale of ancillary business which the interim board oversaw. In late April last the ancillary business of the former Dublin District Milk Board was sold to Progressive Genetics Co-Operative Limited comprising milk producer representatives on the former board. In early May the former Cork board business was sold to Pendine Investments Limited, a company in which Progressive Genetics and the South Western Cattle Breeders' Co-Operative and Dairygold each hold a one-third stake. On the completion of these sales approximately 80 staff who had remained after the rationalisation programme of the previous November moved from public to private sector employment. So far these sales have gone very smoothly apart from a few outstanding issues.

I assure the House that the election will not be delayed any longer than necessary. I am confident it will be held as early as possible in 1996.

Question put and agreed to.

Acting Chairman (Mr. Boylan)

We now proceed to Committee Stage in accordance with the order of the Dáil of today.

Bill put through Committee, reported without amendment and passed.

Sitting suspended at 6.30 p.m. and resumed at 7 p.m.