Ceisteanna—Questions. Oral Answers. - Beef Export Refunds.

Brian Cowen

Question:

23 Mr. Cowen asked the Minister for Agriculture, Food and Forestry when export refunds will be restored to a realistic level to avert a deepening crisis. [1999/96]

Desmond J. O'Malley

Question:

24 Mr. O'Malley asked the Minister for Agriculture, Food and Forestry the measures, if any, he proposes to take to secure full restoration of EU beef export refunds, the reduction in which has caused a substantial drop in cattle prices; and if he will make a statement on the matter. [1967/96]

Chris Flood

Question:

47 Mr. Flood asked the Minister for Agriculture, Food and Forestry if he will withdraw his assertion that cuts in export refunds will not affect the price of beef. [1869/96]

Gerard Collins

Question:

67 Mr. Collins asked the Minister for Agriculture, Food and Forestry the price of beef per pound to farmers on 1 January 1996. [1864/96]

Gerard C. Connolly

Question:

76 Mr. Connolly asked the Minister for Agriculture, Food and Forestry the level of beef export refunds. [1867/96]

I propose to take Questions Nos. 23, 24, 47, 67 and 76 together.

To control the level of subsidised exports of beef and live cattle from the EU to third country markets to comply with the GATT export ceilings, in this the first year of the GATT agreement, the EU Commission cut export refunds on four different occasions between September and November last year. These cuts and other measures were made in an effort to achieve a more orderly flow of licence applications. These adjustments had little or no effect on the price of cattle in Ireland in that period — prices in early December were only marginally below those in late August.

Nevertheless I was — and am — deeply unhappy with the approach the EU Commission has adopted in managing the beef market and believe it has overreacted to the slightly elevated levels of applications for export licences by cutting export refunds. I considered that the level of refund which resulted from these cuts was too low relative to cattle prices in the EU and prices in third countries and would eventually cause difficulties for producers who were wintering cattle for sale in the first half of 1996. This is now beginning to happen.

I discussed this issue last week directly with Commissioner Fischler and at the Council of Ministers in Brussels where I impressed upon my colleagues and the Commission the need for an immediate increase in export refunds to ensure adequate returns for our beef producers. The matter was again raised at the Beef Management Committee meeting on Friday last, but the Commission refused to propose an increase in the refunds, citing the strong market prices in the EU overall, as one of the reasons for not doing so. I will continue to press through every avenue open to me for a restoration of refunds to adequate levels before the current licences expire at the end of next month.

Prices remained relatively steady between the early autumn and early winter despite the refund cuts. They have fallen by about 4 per cent since then. It is important to emphasise that beef exporters have been operating from licences which were prefixed at the higher refund rates, before mid-November. These higher rate prefixations are in adequate supply to cover normal exports until the end of February. No export licences have been taken out by beef traders here at the current relatively lower rates.

The average market price reported to the EU Commission for R3 grade steers slaughtered at beef export premises for the week beginning 1 January was 98.6p per lb, including VAT. Since then prices have remained relatively steady.

The payment of the deseasonalisation slaughter premium, which is worth up to £60 per steer slaughtered this spring and about £14 million in total, will be an important factor in maintaining returns to winter fatteners. This, in conjunction with premia payments which have increased by £250 million since the onset of the CAP reform agreement in 1992, should help to undepin the income of beef producers in general. Nonetheless, an increase in refunds — or equivalent action — is urgently needed and I will continue to press our case on this until it is achieved.

While we all share the Minister's unhappiness, he is the only one who can do anything about it. He has issued three press statements in recent months. On 13 November, he stated that he did not expect "the cuts in refunds to have an immediate impact on the export trade or cattle prices". On 17 November, when there was a further cut, he said that it would have no adverse consequences for cattle prices in the immediate future. On 1 December, he stated that he did not expect the new level of refunds to have any immediate effect on cattle prices. Does he agree that this is hogwash as cattle prices have collapsed since late November-early December when they stood at £1.03 per pound?

The questioning is rather long.

Will the Minister further agree that the cuts have had a serious impact on cattle prices and will continue to do so until such time as the Beef Management Committee agrees to increase export refunds to adequate levels, by as much as 25 per cent, which he has allowed to be decreased in the past three months?

Those statements were reiterated in an attempt to convince the beef processing industry, including the slaughtering plants, that I will not tolerate a situation where they opportunistically seek to deal with the matter by lowering prices. The existing prefixations will cover the slaughter of about 85,000 animals between now and the end of February. The same level of refund applied to cattle purchased and slaughtered in October, November and December. The meat factories, therefore, were not justified in cutting prices overnight, from 1 January, when the deseasonalisation premium fell due for payment, almost as if saying they would pocket the payment of £60 per head. When I meet the representatives of the IMPA and IBEC at 5.30 p.m. this evening I will tell them bluntly that I am not satisfied, on the technical information available to me, that the price cut can be justified.

When the prefixations work their way through the system here and throughout the rest of the European Union there is the prospect of a further price cut. Both the Beef Management Committee and the Commission will have to take this extremely seriously. I am circulating a further paper to Commissioner Fischler today——

Another one.

——the purpose of which, apart from the general response of the Commission when the prefixations work their way through the system, is to ensure the introduction of a special measure for Ireland. It was apparent at the meeting of the Beef Management Committee last Friday and at the Council of Ministers this day week that Ireland was on her own.

The price of bull, steer and cow beef has increased throughout the rest of the European Union. I am not satisfied with price trends here. It has been argued that this is due to the BSE scare in Britain, but prices have recovered there and in Northern Ireland. This leads me to believe that a price of around or in excess of £1 per pound can be afforded by the meat factories given the current level of prefixations. The other issue will still have to be confronted by the Commission.

Is the Minister aware that the spokesman for his Department is reported in theIrish Independent as having said yesterday that, politically or otherwise, there is no hope of export refunds being restored to the figure they were at the beginning of November? What are the prospects for the future, particularly in view of the information given by the Minister to the House today that factories and other exporters will operate on the basis of prefixed refunds until the end of February? I hope that will be the case. If there has been a drop in prices of 7p per pound to date while the prefixed refunds ramain in place, what will be the position when they expire at the end of February? On that basis, is it possible that the price of beef could drop by 15p or more per pound?

At the Beef Management Committee meeting last Friday the Commission stated clearly that it would not have an Irish solution to what it did not perceive as a European problem; in other words, beef producers across the Union are not experiencing a problem, there is only a problem here. The Commission will not, willy-nilly, increase export refunds now as it believes this would lead to the market overheating.

The Deputy is correct that when the current prefixations, in excess of 400,000 tonnes, work their way through the system between now and the end of March they will have to reopen for business. The GATT quota is 1.1 million tonnes. This works out at a weekly average of about 22,000 tonnes. The reason export refunds were cut was that the weekly average was about 60,000 tonnes. Since the cuts were carried out the level of prefixations have varied between 2,000 and 7,000 per week. It is quite clear that the European trade cannot service third country markets on the level of refunds. It is inevitable therefore that they will be increased but my fear is that it will be too little too late for Ireland. That is why I am seeking special measures for Ireland in the interim. However, it is true that if the Commission refused to alter the refunds indefinitely there would be another price cut.

The Minister told Deputy O'Malley that at the beef management committee meeting last Friday they were not open to an Irish solution to what he called an Irish problem. However, he allowed his spokesperson in last week'sFarming Independent to indicate that what he called a “reduced damage strategy” would be available to the Minister at that beef management committee meeting and he held out every prospect of being successful. The Minister will have to come clean with the public at some stage. Is he suggesting that the Commission was justified in reducing the export refund to the extent it did? If so, he is flying in the face of every statement he has made. If that is not the case, will the Minister let farmers, particularly winter fatteners, know when he will have a situation that will allow them to survive in the present environment, given the fact that over a third of the winter fattener kill will be gone through under the present regime?

The beef management committee meeting is not to be held until 16 February and, allowing for the lead in period, there will not be a new export refund regime until 26 February. In the meantime, what will the Minister do to change the situation?

There is no difficulty——

Nothing is the answer.

I have no difficulty in saying unequivocally that the beef management committee and the Commission have handled the beef regime and the export refunds very badly since the autumn of last year.

Right, but what will the Minister do about it?

What should he have done about it?

They have rewarded speculators, engendered panic and allowed a situation where traders gave out licences instead of the Commission. All of that was very badly handled. We put forward proposals about non-transferable licences, increasing the security and shortening the validity period. The question remains as to the best way for us to deal with this issue. The best way is to try to ensure that a special measure is brought forward for Ireland in the form of aids to private storage or an increase in live exports or in the form of dealing with special cuts such as boneless hind quarters for beef which Ireland takes out more than any other State.

That was thrown out last week.

Those are three options I am pursuing with the Commission.

Without success.

At this stage, I will take any of the options because of the gravity and the urgency of the situation. However, I do not want anybody to be under the illusion that meat factories which want to pay less for cattle and which are going to service Iranian and other contracts with existing prefixations will have my support to lower prices at this time.

Would the Minister agree that it would appear from his statements about the Commission and presumably about DG6 that relations between the Minister and the Department of Agriculture, Food and Forestry with the Commission and DG6 have hit an all-time low which does not augur well for problems the Minister has in other areas of his relationship with DG6 and the Commission? It is, perhaps, not terribly helpful of the Minister to describe them in these terms.

He will shift the blame anywhere.

I do not know whether to be glad or sorry that we are not, it appears, going to get an Irish solution to an Irish problem. Some of them in the past were not a success, although they might have been in the agriculture sector. Will the Minister clarify the question of prefixations? In his reply the Minister said they would expire at the end of February. However, in his subsequent reply to Deputy Cowen he said they would expire at the end of March. There is a major difference there. Would the Minister agree that when they do run out and if things continue as they are the drop in the price of beef is likely to be as much as 15 pence per pound or even more?

With regard to the latter point, because Europe took out heavy prefixations in November, their prefixations are likely to run out at the end of March. However, the Irish prefixations are likely to run out at the end of February. The level of price cut would be somewhat nearer to 90 pence in the worst case scenario; I do not envisage it moving beyond that.

The Deputy also asked about my relationship with DG6. It is true that the Government and I have three burning issues with DG6 and the Commissioner. The first is the issue of export refunds. The second is the deseasonalisation premium for which we no longer qualify. The threshold for the three month period is over 40 per cent and as the outturn for last year was 35.8 per cent we no longer qualify for that. It is worth £14 million per year to Ireland and I must get it back. Finally, there is the not inconsiderable sum of over £100 million in fines which is a matter for the Commission in its entirety. The Commission knows the way I operate — I believe in calling a spade a spade and in trying to ensure that the good relations we have had with the Commission can continue.

Is that what the survey said?

Ireland has a unique dependence on third country exports which means that we have a unique dependency on these export refunds. I am absolutely determined to bring that home to the Commission.

The time for Priority Questions is exhausted. However, I can take replies to Questions 25 and 26 in ordinary time.