Written Answers. - Common Agricultural Policy.

Seán Ryan

Question:

7 Mr. S. Ryan asked the Minister for Agriculture and Food the steps he proposes to take to lessen the impact of the agreement reached on the CAP on the Irish dairy sector; if he will meet representatives of the dairy sector to discuss the agreement; and if he will make a statement on the matter. [19013/03]

The final agreement on the mid-term review of CAP was a very satisfactory conclusion as far as Ireland is concerned across the deal as a whole. It is useful to outline the specifics of the agreement in relation to milk.

First, the quota regime was extended to 2014-15, 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. The fact that the additional reduction is compensated for at the rate of 80% means that its actual impact is very limited. That compensation amounts to almost 5 cent per gallon of the 6 cent per gallon intervention price cut. The net effect of the price reduction and increased compensation is a reduction in the farm gate price of €14 million per year – 1% of farm gate value.

The extent to which milk prices would actually 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%. The completely unfounded criticism in this area are based on adding the price reduction agreed four years ago in Agenda 2000 to the price reduction of 4% agreed last week – 80% of which is compensated for.

In relation to the intervention ceiling for butter, the Commission proposal would have resulted in restricting this to 30,000 tonnes from next year. Despite considerable opposition and indeed without any support, I succeeded in having that limit increased to 70,000 tonnes next year and dropping gradually so that the limit of 30,000 tonnes will not be reached until the year 2008-09. The expansion of quota at EU level, which was part of the earlier proposal and which would have put further pressure on the market, is not being proceeded with for the present. On the issue of quota increases, Ireland has already availed of an increase of 2.86% in its quota under Agenda 2000, the benefit of which has been granted to Irish farmers over the past three years.
There is no doubt that the Irish dairy industry faces considerable challenges. The relatively modest changes introduced by the mid-term reform, beyond what was already agreed under Agenda 2000, do not change that situation in any significant way. It was in recognition of these challenges and in the context of the developments in the CAP and the WTO, that I initiated discussions with the industry last year which led to the commissioning of the Prospectus report. That report has identified weaknesses in the industry including a lack of appropriate scale for today's conditions and an over-dependence on commodity products and on intervention. The report recommends greater expenditure in research and development to allow the development of a greater range of consumer value added products.
The key message in the report is that the success and long time survival of the industry is critically dependent on its ability to transform itself and deliver on the key strategies set out. That message is well understood by the main players in the industry. Since the publication of the report, and in an effort to drive it forward, I have had a series of meetings in the past months with representatives of most of the main processing undertakings. I propose to continue these contacts with the industry in the future and to do whatever is possible to encourage the sector to take the appropriate steps.
It is, however, well recognised by those involved in the industry, and those outside it, that the ultimate decisions which are required to meet the present challenges and to reposition the industry for the future, will have to be made by the industry itself. I have no doubt that the industry will respond positively and effectively as it has done many times in the past.