Ceisteanna – Questions. Priority Questions. - Common Agricultural Policy.

Tom Hayes

Question:

4 Mr. Hayes asked the Minister for Agriculture and Food the policy changes he will implement to assist those sectors of the agricultural industry which have suffered support loss in the new CAP reform; and if he will make a statement on the matter. [19256/03]

In the mid-term review agreement reached last week there is a reduction in intervention support prices for milk and a reduction in the monthly increments in the case of cereals. Producer incomes will fall only if the market prices fall in line with the reductions in support prices. The effect on cereals producers is estimated to be negligible.

As far as the dairy sector is concerned it is useful to outline the specifics of the agreement in relation to this sector. First, the quota regime was extended to 2015, thus providing producers and processors alike with a stable environment within which to plan for the future. In the absence of agreement on MTR, the quota system was due to end automatically in 2008. The reduction in intervention price support amounted to about 4% over and above what had already been agreed under Agenda 2000 in 1999. That the additional reduction is compensated for at the rate of 80% means its actual impact is very limited. The extent to which milk prices will reflect the support price reduction is dependent on a number of factors, in particular the level of prices on the market, the type and range of products produced and the extent to which milk processors and the industry generally rely on intervention as an outlet. It should be recalled that the Commission's proposal would have resulted in a cut of 10% over and above Agenda 2000 with compensation only at the rate of 56%.

It is generally acknowledged by everybody that there will be much more pressure on dairy farmers. I agree with the Minister that every other sector is reasonably happy. The problem is in the dairy sector. Is there any specific action the Minister can take to help the smaller dairy producer? We all know they are the backbone of agriculture and of rural communities. The younger dairy farmers and those farmers with the lower amount of quotas need to be protected and helped.

In anticipation of the upcoming agreement and the WTO round of talks I met the dairy industry chief executives and pointed out to them that we could no longer rely on intervention to the extent that we had relied on it. We have 70,000 tonnes of butter in intervention and a similar amount of skim milk powder out of a total of 200,000 tonnes. The Commission is afraid of mountains of butter and powder again. It knows very well that it makes no sense whatsoever to proceed in that direction.

The Prospectus study was embarked on and I have since met the chief executives of the co-ops, PLCs and talked to them about sharing facilities. There was a meeting with Dairygold early this week and the chief executives said they had four plants in their co-op making the same product. The costs and the overheads involved means they cannot continue like that in the future. We have six main plants in Ireland and we have approximately the same amount of milk as Denmark, yet it has only one for the entire country.

When I made the case, as Deputy Hayes made it, to try to help the industry in the best way I could at the Council of Ministers by looking for 100,000 tonnes of butter per annum, it was aghast. I remember the Danish Minister asking me afterwards if I was serious. The Minister from the Netherlands told me there was not any future in shovelling butter into intervention. It would cause mayhem because it must come out of storage sooner or later. The taxpayers pay for it in storage and when it comes out, it depresses prices in the marketplace or, alternatively, it is dumped on third countries, which are the least developed in the world. They are trying to eke out a living and to develop their industry. There was an agreement on 70,000 tonnes depreciating to 30,000.

I met Dan Flinter of Enterprise Ireland, who will retire soon, and some other senior people there to show my support for the industry in new processes and products because that is the only way to go. The leaders of our dairy industry are being less than fair to farmer producers who have improved their position. Anyone going into a dairy farm now compared to 25 years ago will see fabulous milking parlours and good breeds of cattle. There is better protein and solids in milk than there was before, although we have some way to go yet. However, the amount of improvement and development on the farms is not reflected in the processing sector. There are plenty of opportunities in that area, particularly when one considers that there are 400 million consumers in Europe, which will increase to 509 million from 1 April next year. I am glad that Dairygold, which has appointed a young manager, is embarking on that route.

I launched a commemorative stamp recently for a Cork man, Henry Ford, who came from my parish in Ballinascarty – I did not see Deputy Boyle there. He made the old model T car. He had to develop the range of his products because if he had continued with the model T, Ford would be out of business now. He could not say he would store the model T for years and expect the taxpayer to pay for it. Society changes and modernises. Our dairy industry must do the same.

Dairygold does not have an equivalent to the model T. Into what areas does the Minister consider co-operatives could diversify? I agree they have many facilities which they do not need.

I made a statement in the Seanad yesterday and I listened to the various contributions. One interesting contribution was made by Senator Quinn, who owns a number of supermarkets. He said it grieved him to walk past the shelves of dairy products, particularly cheese, and to see that approximately 75% of them are imported from Denmark, the Netherlands and New Zealand. I gave the example of west Cork where there is a long tradition of distillation, some of which is legal and some of which is illegal. We convert the lactose from milk, which is a natural product, into alcohol and it is sold here and around the world as Boru vodka. It is called after Brian Boru. That is the type of process and product development I am talking about. Bailey's Cream Liqueur is another example. No one said a cream liqueur was required. However, the dairy industry had a problem because lactose from cheese making was going into the streams and rivers creating pollution, particularly at weekends. It had to do something about that, so it converted the lactose into alcohol, added the cream, got a stabiliser and made a cream liqueur. It is now a world brand leader. That is the type of imagination which is required. A range of products could be incorporated into bakery, general food and pharmaceutical industries. The dairy industry must apply its mind and ingenuity for the future.

Paddy McHugh

Question:

5 Mr. McHugh asked the Minister for Agriculture and Food his views on the CAP reform agreement; the potential benefit for farmers; the disadvantages inherent in the reforms for farmers; and if he will make a statement on the matter. [19182/03]

I seem to be repeating myself on some of these questions. We reached a great deal last week. This is a similar reply to others I gave recently. I do not know if Deputy McHugh is in the House.

Acting Chairman

He is here.

I see him now. I am sure the reply I have been given was compiled with great skill by senior officials in the Department. The outcome of the mid-term review was satisfactory. It will reshape agriculture into the future. It will also ensure that farming is supported, but not product. Farmers will get a single farm payment each year based on the years 2000, 2001 and 2002, which are the reference years. That payment will be a cushion. They will then embark on the farming of livestock or cereals for which there is a market. They will get their return solely from the marketplace. That is what the agreement is about.

I cannot blame the Minister for not realising I was in the House. We tried to get a position on the front benches, but Fine Gael disagreed with our attempt to get equal status with other Members for priority questions. That is the reason the Minister could not see me.

The Deputy can go back to Fianna Fáil.

There are many views on CAP reform. However, I want to know the Minister's view on the contention that full decoupling will lead to a drop in the volume and quality of cattle and sheep being produced which, in turn, will lead to job losses in the processing industry and a substantial loss in export earnings to the economy. I want to return to a question Deputy Upton asked, but I will be more specific. I invite the Minister to confirm that the Irish Cattle Traders and Stockowners Association will not be excluded from the consultation and negotiation process which will take place and that it will be a full member of the forum which will engage in the negotiations on the implementation of the CAP reform deal. I am sure the Minister is aware that it is the only farming organisation which believes that full decoupling is the way forward. I cannot see how negotiations can be held and a successful outcome achieved if this organisation, which holds that view, is not included. The Minister was quoted as saying he would consult the social partners. However, as Deputy Upton said, it is not a member of the partnership process. If the Minister engages solely with the social partners, it will be excluded. Can the Minister confirm that it will be a full member of the consultation process?

I will confirm with ICSA. I acknowledge that ICSA is closer to the general evaluation by individual farmers of how the CAP reform might work out.

ICSA published a statement which praised the Minister and he is now returning the praise.

It was first out of the traps. If one gets to the first bend, it is half the battle. I will consult with that organisation. I am anxious, though, to have a formula or model in place which will protect our production base. I do not want to see briars and buachallán buí growing all over the country. It is not so easy to switch farming on and off. I am considering the possibility of introducing a premium to be given at the end of the production cycle so that there will be a bonus for people who finish. If people in the beef industry, for example, become involved with very high quality beef such as Angus, Belgian Blue or Charolais for a specific market that niche is there for them. There is no point in trying to put meat on the low quality Holstein from the dairy herd. That will not work for the future. I undertake to enter consultation with the farming organisations as well as organisations such as ICOS and the smaller producers.

Will the Minister confirm that the decisions being made now on the system to be pursued in the decoupling area will suffice and that we will not go back next year or in two years to reconsider? Does this decision finish everything, so that we are stuck with it?

That is a good point. Whether the negotiations took place early in the morning or late at night, towards the concluding hours of the negotiations, there are always teething problems with the systems that result. The economists and everybody else say this thing or that will happen. Funnily enough, things do not work out that way. The way people respond to new situations is always different to what is predicted. There is a built-in review in two years to consider the structure of the industry – if people have abandoned sheep production totally, for example, this must be investigated. We will also need to find out how the marketplace is being affected by breaking the link with production. It will be clear in the final text that this is built in.