Vol. 524 No. 6
94 Mr. Callely asked the Minister for Agriculture, Food and Rural Development the importance of dairy farming; the costs associated with production of dairy products; the recognised costs associated with the production of one litre of milk by a dairy farmer and the price he obtains from the creameries; the cost of production through the creamery to the sale price to shops; and if he will make a statement on the matter. [23252/00]
148 Mr. S. Ryan asked the Minister for Agriculture, Food and Rural Development his views on whether the current milk prices on offer by some retail outlets will have an adverse affect on the price per gallon available to farmers; and if he will make a statement on the matter. [23405/00]
I propose to take Questions Nos. 94 and 148 together.
Dairying plays a central role in the agricultural and wider economy in Ireland. The sector accounts for over one third of gross agricultural output and includes 30,000 dairy farmers and almost 8,000 people directly employed in processing.
The price paid to milk producers ultimately depends on a number of factors, including a combination of the efficiency of the processing, marketing and distribution operations, the type of products produced and market returns available from these products at any given time and the level of underlying support under the EU dairy regime. While the costs of milk production vary across the sector, studies indicate that the average cost of milk production in 1998 was 13.8 pence per litre. The annualised weighted average price paid by processors to farmers for liquid milk under National Milk Agency contracts was 25 pence per litre.
My Department has no function in setting the retail price of milk or milk products. Matters related to competition and to the functioning of the market at retail level are for the Competition Authority and the Office of the Director of Consumer Affairs. However, it is clear that if producers cannot recoup the cost of production supply patterns will be disrupted.
Is the Minister satisfied that milk is available to consumers at the lowest possible price, which at the same time protects those involved in dairy farming and production?
There is competition in this market. The worry is that milk at consumer level will be sold by retailers at below the cost of production. A serious problem would then arise because producers need a margin. This applies especially to liquid milk producers because they must supply all year, including in the winter period when the cost of production is much greater than it is for manufacturing milk. There must be a margin for all concerned in this cycle and there is a reasonable balance at present.
The Minister's colleague, the Tánaiste and Minister for Enterprise, Trade and Employment, announced yesterday that the ban on below cost selling would be retained.
Belatedly.
It is welcome, however belatedly. Does the Minister consider that this announcement will have an impact on recent developments and on the recent travails in the industry?
I confirm the matter the Deputy alluded to, but below cost selling is not precluded under the Groceries Order. There is no evidence that retailers are selling at below the invoice price received from co-operatives. The difficulty arises if processors come under increasing pressure to further reduce the price of milk. There must be a margin for the farmer and the processor.
The consumer wants the produce at the cheapest price. Deputy Callely is rightly concerned about the consumers in his constituency. As a rural Deputy I am concerned about the margin for the farming community. There needs to be a balance. In the first instance it is a matter for the Competition Authority and the Director of Consumer Affairs to ensure that there is a reasonable balance. A good quality product – milk – is available to people at a reasonable price.
I welcome these questions, especially the one in the name of Deputy Callely. I initially thought he was only interested in the providers of milk. I am a provider. I produce liquid milk on the home farm.
There must be a balance here. Is the Minister clear about the difficulties in the industry? Is he certain that milk is not being sold below cost? I do not believe farmers would have picketed in County Donegal in recent weeks if there was not a problem there.
Is the Minister aware that some of the companies selling milk at 80p or 82p per litre were selling water at £1 per litre? Does he agree that it does not make sense that milk, which must first be produced by a cow, then milked by a farmer, put through a processing plant and delivered by hand or shop to the consumer—
Please, Deputy. A number of Deputies are offering and we want to accommodate them.
This is a very important question, especially if the present trend continues. Is the Minister satisfied that people will remain in liquid milk production? If they do not the consumer will suffer.
There is pressure on liquid milk farmers, first, because it is an all year around activity. Producing milk in the winter is very costly. It is at least 20% more costly than manufacturing milk. The younger generation of producers will not continue in milk production 365 days a year. They will need a break like people in all other sectors of the economy. In addition, there is a squeeze on the margins. There is a sizeable margin for the retailers, less of a margin for the processors and less again for the farmer producers.
This balance must be maintained. We are at the limit of it at present. If farmers are squeezed any further in terms of their margins there could be a shortage in the supply of milk to urban areas, as there was in the 1920s and 1930s. That would have serious consequences and we cannot allow it to happen.
In light of the comments of the previous speaker, Deputy Sheehan will know that I probably have a better handle on dairy farming than most of my urban colleagues.
The Deputy looks like a milk round man.
I was up at the crack of dawn, and earlier, on many mornings bringing in 35 and 40 cows, and I milked them myself.
By hand.
The Deputy's late uncle was an extensive dairy farmer in my constituency.
Deputy Callely, without interruption.
He was a good friend and fan of Deputy Sheehan.
I thought I got the No. 1 there.
No, I do not think so. I think the Minister knows that.
Deputy Sheehan got the No. 1 and I got the pint of milk.
My question indicated the best possible price for consumers but I equally indicated the protection of those involved in dairy farming and production. Can the Minister give an indication of the base line in relation to the retail price of a litre of milk, which would give the lowest price while protecting those involved in the industry?
My information is that currently liquid milk is being used as a break even or loss leader in a price war by multiples, and that the floor has been established at 43p per litre or 86p per two litre container for own brand products sold in supermarkets. Branded products are retailing in multiples at between 119p and 122p per two litres. If anybody has any evidence of below cost selling or unfair trading in this matter, they should make their representations to the Office of the Director of Consumer Affairs or the Competition Authority.
I was hoping that the Minister would have included Question No. 145 in his reply, which refers to meat processing. I am particularly concerned about the performance of the Glanbia company because I believe that the shareholders in Waterford Foods, who agreed to that merger, were seriously misled during the course of the negotiations on that take-over. There may well be a criminal investigation into the matter.
A question please, Deputy Deasy, relative to the question before us.
As the Minister for Justice, Equality and Law Reform is in the House I ask that the fraud squad be asked to investigate the circumstances—
Deputy Deasy, you are wandering from the substance of the question.
I am dealing with a pertinent point involving the most significant milk pool in the country.
Is the Deputy's question relative to the two questions before the House?
Yes. I am asking the Minister to instigate an investigation, in conjunction with the Minister for Justice, Equality and Law Reform and the Tánaiste and Minister for Enterprise, Trade and Employment, because I am convinced there has been sharp practice and that certain individuals in the Waterford Foods company were hung out to dry.
That does not concern these two questions, Deputy. I call Deputy Crawford.
They were misled. There was criminal intent. I have no doubt about that. Would the Minister care to reply to that question? Can he explain the collapse of the share price on the stock exchange? Will the Minister comment?
First, is the Minister satisfied that all the milk that has been sold as own brand is produced under the same regulations as that milk which is produced by dairy farmers? Second, is he aware that some of us have to house our cows and pay high feed costs for up to seven months in the year? I am aware that does not happen in Cork but it does happen in Monaghan.
I confirm that we have a longer growing season in Cork. I confirm also that the standards of food safety and hygiene under which the milk is produced is up to both domestic regulatory standards and EU standards. Not all of it is produced in the Republic. Some milk is coming freely from the North, for example, but we have to accede to that under the Single European Act.
In relation to Deputy Deasy's question, that is the subject of Question No. 145, but I can say that the matter he has referred to is a serious one. It is the largest milk pool in the country and it is one that is being monitored very closely by both the Department and the State agencies to which he referred.
