JOINT COMMITTEE ON AGRICULTURE AND FOOD debate -
Thursday, 22 Mar 2007

Rural Development Fund: Discussion with National Milk Rights Group.

Chairman

I welcome Mr. Donie Shine, Ms Rena Phelan, Mr. Joe Sheehy, Mr. Noel Coughlan and Mr. Larry Hollywood, who are here on behalf of dairy farmers to make a presentation to the joint committee on rural development funds. Before I ask Mr. Shine to commence his presentation, I draw attention to the fact that while members of the committee have absolute privilege, the same privilege does not extend to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment, criticise or make charges against a person outside the Houses or an official by name in such a way as to make him or her identifiable.

I apologise for the delays caused to this meeting by divisions. As two more divisions may be called between now and 1.30 p.m., I ask the witnesses to prepare themselves accordingly.

Mr. Donie Shine

I thank the Chairman for allowing us the opportunity to make our submission on behalf of the dairy farmers of Ireland regarding urgently needed dairy and animal welfare supports. When Ireland joined the EU in 1972, there were 38,000 dairy farmers in the country, a number which has since dropped to 20,000. Not only have the numbers significantly decreased but both ends of the candle are being burned in that customers are looking for more in terms of product.

It is more expensive now for those farmers who remain on the land to produce the same quantity of milk they did 30 years ago because standards are rising and more account must be taken of animal welfare. Mr. Sheehy, a retired dairy specialist with Teagasc, and Mr. Coughlan, from Dairygold, will give their own opinions on what we should do in regard to the welfare scheme. Farm yields are increasing but the demands on farmers are also getting heavier and some are finding that animal welfare has become an important issue. Somatic cell count is now a problem for Irish co-operatives, as Mr. Coughlan will probably attest, and a financial burden on dairy farmers. The National Milk Rights Group hopes to establish an animal welfare scheme to keep dairy farmers on the land while protecting the welfare of their animals because farmers will need a strong cash flow to replace cows that have gone out of production. Over a five-year period, the scheme would cost approximately €300 million, or €4,000 per farmer.

Mr. Joe Sheehy

As Mr. Shine noted, I am a retired national dairy specialist. I worked for Teagasc in Moorepark, where one of my responsibilities involved formulating programmes that would provide money to help farmers. I am aware of the work of the National Milk Rights Group in securing extra quota for farmers who missed out in the quota allocation in 1983. It wanted a programme that was suitable for rural development funding, as well as modulation funds.

The submission has been made under the animal welfare heading because the biggest problem dairy farmers have at the moment is somatic mastitis, which is linked to somatic cell counts, or SCC, in milk. Somatic cell counts can result in great difficulties for animals and improvements in animal welfare will lead to improvements in SCC.

As Mr. Shine said, there is an income crisis for farmers but there is a very good future for dairying. Prices are rising already and prices of grain have gone through the roof, which I write about every week in the Irish Examiner. Ireland can produce decent quantities of milk from grass, whereas most of Europe is highly dependent on grain, which will double in price in the next two or three years because of the demand for bio-fuels.

We want to keep as many farmers as possible so the programme proposes that farmers receive approximately €4,000 per year, based on improvements they make. They must improve the somatic cell count of their milk, which is linked to mastitis, by 10% per year, and must breed 55% of their cows through artificial insemination, AI. At the moment approximately 30% of replacements come from AI, despite the fact that progeny from AI have been proved by the Department's milk recording section to be between €80 and €90 more profitable per cow per lactation. They must also undertake milk recording.

The programme we propose is very simple and can be assessed from the records available from milk purchasers, such as Dairygold. The purchaser can see if a farmer is making the necessary progress and, if he does not make it in one year, we allow it to be made over two years. I will not give details of the cost-benefit analysis now but will provide it in writing to members. Every dairy farmer will receive €4,000 per year for up to 40 cows, which will cost €60 million. However, it will cost farmers between €3,000 and €4,000 to make the necessary improvements. The benefit will arise from the breeding of 300,000 extra cows from AI, which will be worth €24 million to dairy farmers, and milk recording will add an extra €8 million.

The benefit for mastitis control will amount to approximately €25 million and improved health will result, so reducing veterinary costs. Farmers will be approximately €5,500 per annum better off, so will not get the benefit of the full €4,000 and must do certain things to benefit. In other words, we are not giving a man a fish but teaching him how to fish.

The most important figure we have worked out is that an extra 4,000 farmers will stay in business to avail of the new dispensation when plenty of quota will be available. If members have any questions I will be delighted to go into the details of my submission.

Mr. Noel Coughlan

When Dairygold became conscious of the submission by the National Milk Rights Group it studied it in detail. It has much merit in addressing a key efficiency issue in the dairy industry, namely the high level of somatic cell count in Irish milk, which has resulted in huge losses for farms in lower levels of production and higher culling rates, and for the processing sector in lower product yield, as well as in missed sales opportunities at national level.

The proposed scheme will bring about major improvements in efficiency at processing and farm level. Its real merits are in directly targeting the problem, being easily implemented and not involving huge administration costs in verifying the benefits. It will also improve the standard of animal welfare, it will bring about a badly needed improvement in dairy farmer income and may to some extent halt the decline in dairy farmer numbers. In our experience the rural economy benefits from the presence of a large proportion of dairy farmers because dairy farming generates far more economic activity at rural level than other farming enterprises. The more farmers we can keep in dairy production the better. For all those reasons Dairygold and the general processing side of the industry endorse the submission.

Mr. Shine

We are talking about an industry worth €5 billion. In that context, is it not worth €60,000 per year for the next five years?

Ms Rena Phelan

Coming from rural Ireland, I feel it is imperative something is done now. Many farmers go out of business every day because there is no recognition of their plight. Costs have risen, as all speakers have mentioned, meaning nothing is coming back to the dairy farmer from all the funds that have been made available.

In 2004 the National Milk Rights Group made a submission for modulated and Exchequer funds. We did not succeed, though now we have upgraded our submission. It is vital to have quality milk together with good animal welfare practices. Milk recording is also important because milk solids will be the future income of dairying, together with protein.

The Department has invested a lot of money in AI. What better way is there to promote it than through a scheme such as we have proposed, one which is accessible for farmers and is farmer-friendly? There is a mix of people in rural Ireland and, if we do not do something, we will add to the gridlock which is fast becoming intolerable. It is time some effort was put into retaining as many dairy farmers as possible.

We also need to keep an eye on the implications for tourism and our claim to have a green island and a traditional culture. Rural Ireland, with its farms and haybarns, is not a myth but will become one if we do not do something about it very quickly. The industry can be vibrant if some time, effort and money are put into it. The money proposed would be money well spent.

Mr. Larry Hollywood

This scheme is a must to reduce the numbers leaving the land, by helping those on it to remain. The number of cows sold every week is unbelievable. Where will it end?

Deputy Crawford

I welcome the group and apologise to Mr. Shine for not being able to meet him on a day we had arranged to meet previously. I believe he can see, being here today, how difficult this place can be from time to time. We are not our own bosses.

As one who owns a dairy farm but does not work on it, I can see the sector is in a frightening situation. Some of our best dairy farmers are going out of business because there is simply no profit there. In that context I welcome the delegation's proposal and congratulate it on getting this report from an eminent Teagasc adviser and Dairygold.

The new scenario regarding quota exchange is extremely frightening, especially considering the differential in the price offered in the deep south and the north and north west. There is a differential from 11 cent to 24 cent a litre. There is also talk of the quota being done away with in eight years and it is difficult to deal with that.

If those who remain in the industry are to be helped, we must find a way to do it. I congratulate the delegation on doing so. Has the delegation at this stage met the Minister, departmental officials or anybody at that level in order to gauge a reaction on the matter? It will clearly be relevant to the rural development funds or that type of structure. What was the reaction and commitment to the issue?

I was shocked to read some time ago that only 35% of cows are being served with artificial insemination at present. That is a major change and relates to the number of part-time farmers who wish to rely on the service of a bull rather than go to the trouble of artificial insemination or having to be on the farm. Have we considered how to rectify that? If we do not produce the most that we can per cow, there will be further implications involving the nitrates directive and other regulations, as we are tied into the level of stock we can have on farms for the nitrates directive, the REPS, etc. It is vital we get the maximum out of each cow, be it in dairy, beef or whatever.

I welcome the delegation's work and would like an idea of how far it has gone. As a party we could seriously consider the matter as a means of trying to maintain some semblance of a younger generation in dairy farming. Unlike 20 years ago, such farmers have options. Most of these people are now well educated and can go to a five-day week instead of a seven-day week. It is that bit more difficult to get young people committed to work in the sector, especially if the money is not there for them. That is another reason for them to leave.

Deputy Naughten

I welcome Mr. Shine and his delegation and thank them for the presentation, on which I compliment them. This is the second time the delegation has made such a presentation, as it gave one before relating to modulated funds. It is disappointing that the Department has not taken more heed of many valuable submissions from various organisations, although I believe the presentation from this delegation was the only one specifically referring to the dairy sector.

Much time and effort went into that issue and a decision was taken by the Minister on how she was to allocate the funding, which was her prerogative. Those submissions should have been reviewed in the context of what is going on in regard to the rural development funds which will become available. I compliment the delegation on again taking the initiative.

I also praise the delegation for leading the debate on the abolition of milk quotas. This is prescient as the Commissioner is pushing the issue strongly. Now is the time to open the debate and plan for the eventual abolition of the quota, if it comes about. The steps being taken here are critical with regard to the viability of the dairy industry and its farmers in particular.

Johne's disease is an issue which continually arises at meetings of this committee. Mr. Sheehy might be the best man to comment on that issue. Has that factor been tied into the scheme? Based on the €4,000 figure, what is the envisaged annual cost of this scheme, with what uptake? Will the witnesses elaborate?

To come back to Deputy Crawford's point, what response has been received from the Department on this matter? I propose that this submission be formally presented to the Minister by the committee and that we seek a formal response from her. We must go down this road. If we are to reach our targets on developing the industry, it is important that we introduce a scheme along these lines.

This might be addressed to Mr. Coughlan rather than the other members of the group. This scheme concerns efficiency on farms. There is a push towards more investment into the agricultural sector. This must happen and we could be here all day talking about research and development. What is critical is that there be some return to the farm gate price and the farmer with regard to initiatives taken.

The new processors' fund is available, which will improve efficiency, develop new product ranges etc., but unless there is raw material there will not be an industry. We know the difficulties that arise at processor level because of the powers of supermarkets, but it is critical that we consider the farm gate returns for the raw materials of our valuable food industry.

Deputy Hoctor

I apologise to the Chairman and the members of the National Milk Rights Group for my late return. I will have to read the submission. I have followed the debate and seen what is proposed under the scheme, and from previous meetings with the group I am aware of its genuine concerns and the realistic approach taken by it to ensure we continue to have a successful and effective dairy sector in future. I support the group and the committee in presenting the case to the Minister.

Mr. Shine

I will take the first question on whether we have met officials from the Department. We have met officials and in fairness there is a willingness to get something off the ground. They sent us back to the drawing board to do our costings and this joint committee is the first to hear them. The figure is approximately €300 million over the five years. This is what the Department must deliver.

Mr. Sheehy

We have done a cost-benefit analysis and the figure breaks down to an average of approximately €3,200 per farmer. We would hope a farmer would get €4,000. This would be for doing things in a way which is over and above normal good practice. Some farmers would engage in hardly anything more than good practice. At least 70% of milk is currently not reaching 200,000 SCC for the bonus, so we have a long way to go.

Deputy Naughten

It is going the wrong way. Is it not the case that it is going up rather than coming down?

Mr. Sheehy

That is the case. There were great programmes in Teagasc a number of years ago but somebody must have felt it was not a sexy subject for discussion. I am not saying all this occurred when I left Teagasc, but the current advisers are not trained on milking machines and mastitis.

With regard to the figures of €3,200 and €4,000 mentioned, a conservative scientific calculation shows that at the end of all this a farmer would receive approximately €5,500 extra per year due to the elements referred to earlier.

Johne's disease is an issue that is becoming well known and John Mee, a veterinary surgeon in Moorepark, is very involved in the subject. It is a terrible disease which they say is linked to Crohn's disease in humans and pasteurisation of milk must be very thorough to kill it. We feed calves with colostrum but if it is mixed and one cow in a herd has Johne's disease it will spread to all the others. It is the only disease that must be handled differently from all others.

We have included a cost of €300 per year, in addition to what farmers already pay for vets, relating to a veterinary programme that would have vets visit twice a year looking for these diseases and taking milk samples. We are including diseases such as Johne's disease and bovine viral diarrhoea, BVD, because they cause distress to animals and relate to animal welfare. I have referred to the diseases mentioned and the cost of the scheme to farmers, so I think I have answered the questions.

Deputy Naughten

I have one point of clarification. Is it the case that at the moment there is no scientific evidence supporting a link between Johne's disease and Crohn's disease?

Mr. Sheehy

The headlines in newspapers have stopped.

Deputy Naughten

I know that.

Mr. Sheehy

Pasteurisation barely kills Johne's disease and that fact will not stop the headlines. I agree that there is no definite proof of a correlation between the diseases but there seems to be a relationship.

Mr. Coughlan

The whole issue relates to providing a viable farm gate price to milk suppliers and, from our point of view, this proposal achieves that goal by decreasing the cost of culling, the cost of lost production at farm level and, from the processing point of view, increasing the product yield. A greater product yield will bring about greater efficiency in processing which, in turn, will lead to better milk prices at the farm gate. I take the point entirely that the whole issue relates to delivering a better farm gate price to sustain as many people as possible in milk production and keep the fabric of rural communities intact. This will maintain a balance of economic activity at a rural level.

Mr. Sheehy

The Chairman and co-ops that we visited have said this scheme is the only performance related scheme they have seen. Some people do not like this because most of the schemes simply see the farmer receive the money, which is not good for Mr. Noel Coughlan and Dairygold.

I work on a voluntary basis in this regard and have no vested interest. I have worked with dairy farmers all my life and I believe in this.

Mr. Shine

I thank Deputies Naughten, Crawford and Hoctor for listening to our presentation on the scheme. They feel, as we do, that there is value in this. We should go forward together in a cohesive fashion.

Chairman

Is it agreed that we send a submission to the Minister on the debate that has taken place here today? Agreed.

On behalf of the committee I thank Mr. Shine and his colleagues for coming and responding to members' queries. I apologise for the delays in proceedings due to votes, which are beyond our control.

The joint committee adjourned at 1.30 p.m. sine die.