Dairy Produce (Miscellaneous Provisions) (Amendment) Bill, 1984 [Certified Money Bill]: Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time".

Minister of State at the Department of Agriculture (Mr. Hegarty)

This Bill provides for the amendment and extension of the Dairy Produce (Miscellaneous Provisions) Act, 1973. Essentially, the Bill involves the continuance of the guarantee which, with the consent of the Minister for Finance, I may give in respect of loans obtained by An Bord Bainne Co-operative Ltd.

An Bord Bainne Co-operative Ltd. was established by the Irish dairy industry in 1972 and took over from the semi-State body, An Bord Bainne. The essential purpose of the board is the purchase and centralised marketing of dairy products produced by its members. Due to the seasonality of the production of milk and dairy products in Ireland and the fact that sales by the board are effected on a fairly even pattern throughout the year, it is obliged to borrow heavily to enable it to purchase its members' production during the peak production period. The board's assets — in spite of the fact that they have shown commendable growth in recent years — are not yet sufficient to enable it to borrow to the very substantial extent necessary and it was to assist the board in borrowing that the State guarantee was provided by the 1973 Act and enlarged and extended in 1976, 1977 and 1979.

The initial State guarantee in 1973 provided coverage for borrowings by the board up to a maximum at any one time of £20 million. This figure was increased to £40 million in 1976 and to £90 million in 1979. The purpose of the Bill before the House is to extend the application of the guarantee — which, in fact, expired at the end of last year — for a six-year period to 31 December 1989 and to broaden the guarantee's scope to cover a range of borrowings, thereby bringing it more into line with the actual pattern of Bord Bainne's credit needs. Previously, the guarantee covered only "loans", as strictly defined and it is felt that the amendment proposed now will increase the flexibility and usefulness of the guarantee to the board. Also, the additional six years will afford the board a reasonable opportunity to accelerate the build-up of its own resources and so become less reliant on State backing for a proportion of its borrowings. The maximum amount of the guarantee is to be retained at the level of £90 million.

The dairy industry is the backbone of much of our agricultural industry. Its continued expansion is of immense importance for the economic and social development of our country, but its continued prosperity is greatly dependent on maximising efficiency in processing and marketing. Centralised marketing of dairy products has a major role to play by enabling us to develop and exploit markets in a planned and economical way and by earning and maintaining an internationally respected position for Irish dairy products.

Since we joined the Community Irish milk deliveries have increased by about 72 per cent. The value of the milk intake of creameries and other processing plants has increased by almost 100 per cent in the same period. Marketing this extra production has, of course, been a major task and one which has been accomplished with success and, until recently, little reliance on intervention. That this is so, is an indication of the role played by Bord Bainne which has successfully sold an expanding range of Irish dairy products in an increasing number of international markets. By 1982 the total value of Irish dairy exports was £710 million per year, or about 12 per cent of the value of all our exports.

We are at present facing an extremely difficult situation both within the EEC itself and in the international market place. We face proposals from Brussels aimed at restricting Community milk production to the 1981 levels and at reducing the cost for the Community budget of support for the milk sector. These proposals will continue to be the subject of negotiation in the Council of Ministers in the coming weeks, as will the Commission's parallel farm price proposals for the 1984-85 season. For milk, while formally a freeze has been proposed, related technical changes would in fact result in a price reduction. The Government are not under any illusion that the task facing us will be an easy one but we are fully determined to secure agreement for arrangements which are fair and balanced and which take due account of our special situation in regard to milk.

Our primary objective is to ensure that our dairy industry can face the future with confidence. But it is obvious that now more than ever before, efficiency in production, processing and marketing will be of crucial importance to us. Indeed if we ever could afford the luxury of running our dairy industry at less than optimum efficiency we certainly cannot afford it from now on. The central importance of dairying to the agricultural industry in Ireland and to the national economy as a whole is understood now as never before. All who work in its must do their utmost to see that we maximise the contribution it can make to our overall prosperity. Bord Bainne's pivotal role in all this involves an increasing challenge in the future.

It is now clearly essential that we make an all-out effort to reduce our present heavy dependence upon intervention. Because of the limited size of our domestic market and increasingly difficult trading conditions in our major traditional market, the United Kingdom, this means that henceforth we must make more efforts than we have ever made before to sell competitively on other markets. Of course, this will call for diversification, for greater effort by the co-operative societies to develop new products and new processes and not to be over-reliant on traditional products, such as butter, cheddar, milk powder and so on. We will really have to take on the French and the others at their own game.

Not alone must we increase sales of existing products in present and new markets, we must also develop new products and identify new market opportunities. New product development is, however, a slow and expensive process requiring heavy investment over a long number of years. Yet if we are to market successfully our anticipated increasing milk output in the years ahead, product development and diversification are areas in which we cannot afford not to get involved. I am greatly heartened that Bord Bainne have definite proposals in this area.

In extending the State guarantee as now proposed, we shall be giving tangible support to the board and recognition that the board's ability to obtain the finance necessary for their operations, as easily and economically as possible, is clearly of vital importance. As I have already stated, the backing of a State guarantee is still necessary for the present if the board are to discharge their essential function in the best and most efficient way. Hence, my proposal to extend the guarantee for six years and to make it more responsive to the board's actual borrowing needs.

The existence of the State guarantee has up to the present enabled An Bord Bainne Co-operative Limited to obtain adequate borrowing facilities to meet their funding requirements. No claims have ever been made under the State guarantee and no question of expenditure by the Exchequer has arisen up to now. Neither is any such claim likely to arise in the future. The present Bill, therefore, affords the House a timely opportunity to demonstrate our confidence both in An Bord Bainne and in the future success of Irish dairying.

Here I should like to endorse that point and to make the observation that this Bill is in itself a formal vote of confidence by the Government in the Irish dairy industry. I have also to make the point that I would regard Bord Bainne as a household name in Ireland today. We must remember the people who had the courage and willingness to come together at that time, submerging their personal and localised co-operative interests, even foregoing some marketing opportunities in order to be able to face the market place with the sort of large quantities of a product then required in the market place. That took a lot of courage and foresight on the part of people at that time and I do not think we should forget that. Bord Bainne were one of our great success stories. Around the world today the name "Kerrygold" is synonomous with Irish dairy produce, a high quality dairy produce. That is why I am so happy to be introducing this Bill today for the House's approval.

I should like to commend politicians of all shades of opinion for their support of the Government on matters relating to the super-levy. Our recent debate in the Dáil was very heartening. As I said in the Dáil, if we seem to be wrangling amongst ourselves about the terms of reference for the super-levy then we are making a case against the country in Brussels. It should be remembered that the media reports are received in Brussels on the same evening. If we seem to be hesitant, if we are not of one strong voice then we are weakening our case. Our case is simple and straightforward. We accept that there is a problem of over-supply. We are worried about that. We are concerned about efficiency. The fiscal problems of the Community are also our problems, but at the same time we claim that we were not the country that caused these problems and that we will contribute to their solution to the same degree. As our contribution to their creation has been minimal so we contend that our contribution to their solution should be minimal.

I will leave it at that because it does not relate directly to what I am saying. Nevertheless it is important that that should be said and repeated because I have heard some Senators from the Fianna Fáil benches speak in public on the super-levy and I thank them and, indeed, members of the Labour Party and Independents for supporting the Government on this issue.

I commend the Bill to the House and I trust Senators will readily approve of its terms.

Mr. T. Hussey

I support this Bill. It is very necessary and it is only right that Bord Bainne should get the borrowing power necessary to enable them to carry out the work they have been doing over the years in promoting the sale of our dairy products on the world market. They have certainly done a very good job. They have advanced the cause of Ireland in many new markets. They have helped our farmers to get a better price for their milk, butter and cheese. I certainly hope they will continue in these difficult times to expand on those markets and to find new markets and new ways of diversifying and selling those products on the world market. We on this side of the House support the Minister in his appeal today for an extension of this guarantee facility which is normal practice.

There is only one matter I would like to question. When replying, perhaps the Minister would elaborate somewhat on it. In his introductory remarks the Minister said:

The purpose of the Bill before the House is to extend the application of the guarantee — which, in fact, expired at the end of last year — for a six-year period to 31 December 1989 and to broaden the guarantee's scope...

I am wondering what the Minister has in mind there? Is this a departure from the traditional facility given to An Bord Bainne? Perhaps the Minister will enlighten us when replying.

As far as I am concerned, it is very important that we have agencies like Bord Bainne to promote our dairy products. If you like, Bord Bainne have been one of the bright lights in the Irish export scene and have successfully pioneered the sale of Irish dairy products in many parts of the world. At present we have 1,000 million gallons of milk for processing each year. That figure clearly illustrates the need for diversification. There are no longer markets for the traditional products. We all know that the sales of butter are declining somewhat. People are being advised that butter is bad for them. Perhaps we could counteract that claim because there is no proof to substantiate it. I know that people trying to sell margarine and other products will tell one that butter is bad for one, that there is too much fat in it. Perhaps the Department or Bord Bainne could undertake some kind of research into that matter. We were told some years ago that potatoes were bad for us. Yet that was contradicted recently by an expert who told us that potatoes are definitely not bad for us. Therefore, perhaps the same is the case with butter.

Over 80 per cent of all milk going into creameries is converted into butter. Bord Bainne cannot find outlets for all that butter so eventually it ends up in intervention. That is a pity and should not be the situation.

Another commodity of which we have a surplus is skim milk powder. I understand there are about one million tonnes of it in intervention at present and the Community are finding it very difficult to get rid of it. Bord Bainne's initiative in promoting research and development is to be commended. Where we have a surplus product it is important to find out what the consumers want and then to deliver the goods. As far as I am aware, no effort has been made to promote the use of milk. Even the school milk programme has been a failure because co-operation was not sought from the school authorities or the Department of Education. In many cases the milk was allowed to go sour before being used. Surely it should be possible to find a flavour that would be acceptable to children and produce a product accordingly. We all know that if it was coke or orange that was being provided all of it would be consumed and there would be very little wastage. Many children do not like the taste of raw milk but if it were flavoured they would drink it. Surely it should be possible for our dairies to produce an acceptable product. In a small way this would show that we were making an effort to reduce our milk and butter surpluses.

It is unbelievable that we import in the region of £40 million worth of dairy products each year into a country that has everything going for it as far as climatic conditions, quality of soil and so on are concerned, for the production of those items. We know that individual dairies in this country have made great progress as far as diversification is concerned. They did their research and found very remunerative products — cream liqueurs is one of those products —— that have made an impact on the world market. Cheese has been another such product. There are many kinds of cheese and they are selling very well in the foreign markets but I think the liqueur is probably one of the items that has hit the headlines in many parts of the world. The processors who manufacture those products are to be praised and commended for the contribution they are making to our dairy industry.

It is things like this that we need to look for because we can see the problems that are created in Europe at present because of the over-supply of milk and butter. We know we are only contributing in a very small way to that butter mountain but nevertheless as we are part of the European Economic Community we must accept our share of responsibility. Even though our contributions to the butter and milk mountains have been minimal, nevertheless when the cutbacks come they are bound to affect us in the same way as the big countries who are actually creating the problem.

The Minister and his Department officials should be fighting those factory farms — if you like to call them that — that are producing huge quantities of milk and butter. The people who feed their cattle cheaply on tapioca, soya beans and so on are the people who are really responsible for the huge milk mountain that is creating the problem for us at present. The Minister and his officials should avail of every opportunity to highlight that fact. We are only a very small country. Dairying is a very important source of income for our farmers and I think nobody knows that better than the Minister of State, Deputy Hegarty, who comes from a dairying county. Indeed, years ago before we had any talk about the problem of the EEC, Cork was envied, particularly in the west of Ireland, because of the fine dairy herds they had and their high output of milk. I know the Minister certainly realises the problems that are facing this industry now.

It is particularly sad for us in the west because we had hoped that the dairy industry would continue to expand. In the small fragmented farms we have in the west the income from the creamery was very valuable. We were really only at the beginning. We did not have the same expertise, we did not have the same advantage that our counterparts in the midlands or southern parts of Ireland had, and it was only in the last few years that we were really beginning to develop the industry in the west. It is unfortunate that at a time when we thought we were going to make some progress there should be so much talk about the imposition of a super-levy that is going to cripple not just the individual farmers but the whole country. I hope the Government will fight this to the bitter end. Even if it is necessary to use the power of veto in the EEC, that should be done because of the importance of the dairy industry to our country.

The Minister of State said this afternoon that this was a time when we should not be hesitant and I certainly agree with him. However, at the beginning the Minister for Agriculture gave the impression to our farmers that he was a little hesitant and that he was frightened to go in and fight the case for the Irish farmers. It was unfortunate that he gave that impression. Perhaps it was because he was new at the negotiating table: he had many, many problems to surmount and he was dealing with experienced negotiators, but the Minister was assured at all times that he had not just the support of the other political parties but also the support of every farmer. Unfortunately, it only became obvious late in the day that this was of interest not only to the farmers but also to industry because when one looks at the number of jobs involved in the dairy industry one realises the significant contribution it makes to the national economy. For that reason it is important, not just for farmers and for agriculture, but also for industry and business, that this super-levy be opposed and that it be defeated. Certainly as far as we on this side of the House are concerned we will support any effort the Minister makes to get rid of it and that includes the veto which he has the power to use if he thinks it necessary.

I support this Bill. I hope Bord Bainne will continue to flourish, that they will continue to explore the markets that are available to this country and continue to sell our products. I appeal to our processors and our dairies to explore the possibility of diversification. Traditional products may not be selling as well as they did and for that reason it is important that our dairies spend some money on research into the possibilities of developing new products. If they do that they will be able to sell them. Bord Bainne are an excellent agency who established themselves on the world markets and will continue to support and help the dairy industry in this country.

Mr. Hourigan

In supporting the Bill, which I very gladly do, I would like to commence by asking people to reflect on the performance of Bord Bainne, not alone from the time they became a co-operative society in 1972 in accordance with legislation of the EEC and as required by the EEC at that time, but right from their very beginning. Bord Bainne have a track record and a performance that stands up extremely well in comparative terms or on any other terms. In fact, their performance has been quite unique as a marketing board at all stages and it is only in relatively recent times that they had to resort to the use of intervention as a means of disposal of surplus stocks. In other words, they have consistently and very determinedly and on a very planned basis gone into the market place and sold their products there at good prices. Right through the board's existence from the early sixties they deserve the fullest praise and support that can be given to them. It is true to say that things have changed and unfortunately the board have to resort to intervention for butter and skimmed powder. That is one of the harsh realities at present.

We are talking about the dairy industry which represents approximately 9 per cent of our gross national product. That is a very substantial percentage. Our support of this Bill — I am glad to see the Bill getting support from the other side of the House — is a firm indication that we believe Bord Bainne have done valuable work over the years. Our support for this Bill, which proposes that £90 million be underwritten for the next six years until 1990, shows that we believe and have confidence in the board and in those who operate and run the board's affairs.

There is no doubt that centralised marketing is a very essential ingredient for this country and this applies to agriculture and to other areas of production. We have had it in the dairying sector to great advantage. Perhaps we could benefit a great deal if we could centralise marketing in the area of beef and other areas as well; otherwise there will be a lot of fragmentation and duplication where efforts are not harnessed in the best possible way.

Reference was made to the problems created for Bord Bainne by the seasonal nature of the production of milk in this country. Unfortunately, a very high percentage of the milk in this country is produced from February until November or December and then we have a very slack period for a few months. In fact, approximately 25 per cent of cows do not commence lactation until after 1 April and if these cows commenced their lactation on 1 February we would have approximately 60 million gallons more. One might say that this is only adding to our surplus but I emphatically stress that while our present level of production is approximately 1,000 million gallons we could have a considerably higher figure than that in order to make the best use of our processing facilities which at the moment are totally and utterly underutilised. We have excess facilities in most of our major processing plants at present and we have a situation where we do not have enough milk for the other facilities available. We must strive for a situation that will enable us to have more milk and make certain that we can maximise on the facilities that are there and add to them as far as possible.

In 1972 the present organisation became a co-operative society, as I indicated earlier, in accordance with EEC legislation and I believe that since that time they have done an extremely good job. In 1973 — and reference was made by the Minister to this — there was a guarantee of £20 million to Bord Bainne and that, in fact, was increased in 1976 to £40 million. In 1979 that figure was adjusted to £90 million and today the proposal from the Minister is that we reaffirm this £90 million to the board or underwrite it for the next six years until 1990.

We should realise that we have had a very significant increase in milk production since becoming a member of the EEC. We have had in excess of a 70 per cent increase in milk deliveries and in some instances we had over a 100 per cent increase in the intake of milk at many of our manufacturing points. While being a very welcome development, it has led to major problems in the disposal of milk and milk products. For a number of years we have traditionally relied on butter and skim milk powder, products which are complementary to each other, for the utilisation of our milk. We now clearly see a situation where we have to diversify very significantly. There is no way that we can continue producing butter and skim powder at the current level. Emphasis must be put a great deal more on the non-fat and non-skim milk powder products.

It is not often realised that 87 per cent of milk is made up of water so it is a question of our making the best use of the 12 or 13 per cent of solids in the milk. We have to explore every avenue to make certain that we produce what the consumer wants. There is no point in our continuing to produce something and trying to sell it. One mistake we have made in our whole marketing scene up to now has been that we have produced goods of one sort or another, we have gone into the market place and we have expected the consumers to buy those goods. As I have stated previously, it is essential that we do an in-depth examination into what the consumer requires and that we go back from the consumer, through the marketing processing stages right down to the production line at farmer level, and make certain we produce what the consumer wants. In other words, we should produce for the market place rather than, as we have been doing up to now, marketing what we produce. This has been one of the big weaknesses in our whole system in relation to agriculture and in our attitude towards it, and for that reason an overall, in-depth examination of, and research and study into diversification and into consumer demands is required very urgently.

The point must be stressed that by 1982 the total value of our dairy products was £710 million which represented 12 per cent of our total exports. Putting that into perspective, we must clearly see and understand the absolute importance of the whole dairying industry. Apart from its own contribution to exports and employment, it is the basis of our cattle trade. In fact, about three-quarters of our beef herd originate from the dairy industry and when we link this with employment — I am talking of off-farm employment, excluding farmers — there are approximately 11,000 persons employed in the milk processing sector and about 7,000 employed in the beef processing sector. That brings home to us the extreme importance of the whole area of milk production and without it our economy would be in dire straits.

Even more important, milk production is the one area of agricultural development in which many of our people are bound to engage for economic and other reasons. By that I mean the return from dairying is the only way many smallholders can survive economically and can make a living for themselves. Much of the land that is used for dairy production, which will become a matter for consideration by Bord Bainne in their selling practices at a later stage, has no other use. There is no choice except the production of milk. This is very important and it cannot be overstated. Many of our farms are in the 40 or 50-acre bracket or less than that. There is no other line of agriculture that will yield a return comparable with what can be got from the dairying side.

While the super-levy is not directly part of what we are talking about here, I do not think that one could speak on a Bill of this sort without stressing the absolute seriousness of the proposed super-levy for this country and I stress "the proposed super-levy". I share the view that there is a very substantial surplus of milk and milk products in Europe and I also share the view that there is need for a super-levy but for a number of very justifiable and valid reasons that super-levy must not and cannot apply to the producers of milk in this country. This is a point that the Taoiseach and the Ministers for Foreign Affairs, Finance, Agriculture and others have been emphasising and re-emphasising in recent months. I do not think it could get too much support or too much emphasis. What the Minister stated is extremely relevant, that the support of all parties is essential if we are to achieve the result we need. That result can be nothing short of total derogation for this country. While we acknowledge, as I have said, that there is a major surplus problem we have contributed very little to that problem. In fact, at present we are producing only approximately 4½ per cent of the total milk production in Europe. There are three countries, and this needs to be stressed again and again, the United Kingdom, Germany and Holland and between them they produce more than 50 per cent of the milk in Europe. These three countries enjoy very cheap cereal substitutes. Of the 17 million tonnes of cereal substitutes imported into the Community, approximately 70 per cent is taken up by these three countries. One recognises that because of GATT agreements and arrangements and other factors it is difficult to break that situation but nevertheless one has to recognise that the production that has arisen because of these cheap cereal substitutes is causing a problem.

While it is very difficult to quantify precisely what arises from this cheap cereal substitute production content, it certainly has aggravated our surplus and without it the surplus would probably be non-existent or very little. Added to that we have the situation that we are an island off the mainland of Europe and we are very dependent on agriculture, the most dependent of the Ten with the exception, perhaps, of Greece and parts of southern Italy. This dependence revolves very much on the dairying industry. For that reason we have an irrefutable case for total and complete derogation from the super-levy. With the super-levy operating in Europe, and as was proposed at the Athens meeting, with a review of that situation after four years, I believe the problem would take care of itself.

With other political colleagues from all parties, I was recently in Brussels and Strasbourg. We had a number of meetings with people from the Commission and people in the European Parliament and we saw that we have a very difficult task ahead of us if we are to achieve our objective, which is total derogation from the super-levy. There is absolute acceptance in Europe at Commission level, and other levels too, that we have a special problem but it is question of converting that sort of acceptance of our special difficulties into policy formulation that would be steered in our direction. As one very high ranking person put it to us last week in Europe, there is an acceptance of the Irish case and now it is a matter of the degree of acceptance. We say, quite categorically and quite firmly, that we will settle for nothing short of total and complete derogation for this country.

While the super-levy is not directly related to what we are talking about, if we fail to get derogation the whole marketing of our dairy products and the effectiveness of the industry will be seriously distorted. One would like to believe that we will get this derogation but one also recognises that it is not going to be got too easily or too lightly. It will be a continuous, difficult battle on the part of everybody concerned, particularly the Taoiseach and the Ministers for Finance, Agriculture and Foreign Affairs. It will require the united efforts of all political parties and members of farming organisations. There is now, as never before, an acceptance among the non-farming public of the importance of agriculture, and dairying in particular, because of the publicity the whole matter has received. Linked to the super-levy question we have a serious position confronting the whole Common Agricultural Policy.

Though the super-levy is of extreme importance to us, there are other aspects also of extreme importance to us, for example the calf premium scheme, export refunds and many other matters. In my view it is essential that we concentrate on the most important issues, but we must keep all the other matters fully in mind. Closely aligned to that is the fact that the EEC Common Agricultural Fund is fast running out. Unless there is an increase in the level of VAT paid by members of the European Economic Community there will not be a continuance of the Community's ability to pay us money for a longer period.

We should give consideration to the establishment of a national development agricultural authority that would embrace all the facets involved in agricultural production, processing and marketing. Combined studies of all agencies involved should be used to evolve a policy that would lead to a position when we could diversify to the extent which I stressed as necessary earlier. Because employment is such a very critical factor we must leave no stone unturned to ensure that wherever there will be the possibility of securing employment in agriculture directly, or on the periphery of the industry, we must chase after it.

In the area of added value on agricultural products in general, there is a substantial potential for job creation. Another area which offers potential for employment is that of food imports. A substantial amount of the goods we import can be produced here. I have stressed on many occasions that we should produce products which the markets will buy from us.

Bord Bainne deserve our support. Agreeing to the Bill as presented in the Seanad is an indication of our absolute trust and confidence in the future handling by An Bord Bainne of the products they have been engaged in selling. I am confident that all Members of this House will support the Bill enthusiastically and wholeheartedly.

Mr. Ferris

I hope the Bill will be read by the agricultural community, in particular the dairy sector, as an almost formal vote of confidence in the sector. Such a vote of confidence is very necessary because of the trauma the dairy sector are undergoing at present due to the threat of the super-levy. It is imperative for us as a House of the Oireachtas to indicate our confidence in the sector by way of additional support for the marketing agency responsible for not alone the marketing of the products but new product development and diversification of existing products.

The Bill, unlike the previous guarantee which only covered loans, will give a certain amount of flexibility which may be very useful to An Bord Bainne. I hope they will use that flexibility for the betterment of the industry as a whole, particularly product development. Our party, which is a small party, but involved in Government, want to put on record the importance we place on the agricultural sector as part of our national economy. Regarding the dairy sector and what has arisen from the whole discussion on the proposed super-levy, I want to deal with a few specifics which will put my party's attitude to such proposals in proper perspective. The agricultural community as a whole can be reassured of our concern about this valuable area of production. I should like to quote from the Bulletin of the European Communities, Supplement 4/83 — the Adjustment of the Common Agricultural Policy, which deals specifically with milk on page 11, section 39:

The market imbalance, already grave when the guaranteed threshold was first introduced in 1982, has deteriorated further. World market prospects do not indicate the possibility of further significant increases in the Community's exports. The cost of subsidised disposal on the Community's own markets has reached very high levels. Community consumption of milk products shows significant signs of stagnation. The Community is therefore faced with the need for radical action to correct the situation.

That could be the nucleus. We can go back to 1981 to various proposals that emerged from various sub-committees of the Commission. Obviously the Community has financial and marketing problems. I want categorically to state that in spite of the fact that employment has been falling dramatically in the industry in the past 20 years, from 17 million in 1960 to 8 million in 1983, there are still considerable numbers of people, small farmers particularly, directly employed in the industry. The spin-off effects in the processing sector, particularly relevant to dairying, is quite significant. As a party we recognise the central importance of the dairying sector to the Irish economy and for that reason, we have stated categorically to the EEC Commission our attitude in regard to the proposed super-levy.

The dairy sector underpins our entire agricultural economy. There are still approximately 70,000 Irish farmers who derive their incomes mainly from dairying. There are a further 13,000 people directly employed in dairy processing. That is, therefore, a total of 83,000 people employed directly in dairy farming and in the by-products of dairying. It is equivalent to the total number of IDA-assisted jobs in new industries since they started their programme of industrial development. The total export value last year of our dairy products amounted to £725 million. In addition to those 70,000 farmers and 13,000 people directly employed, there are, of course, their families. There are approximately a quarter of a million people dependent on the dairy sector.

For us, the Labour Party, it is a very important segment of our community, and we must have regard for it and understand the plight they would be faced with if the super-levy, in any form were implemented. The industry has experienced consistent growth over the past ten years. This has served to strengthen existing dairy farmer units. It has provided additional employement in the processing and the farm input sectors. Of course, it provides an outlet for home produced cereals. It also provides the nucleus stocks for the beef herd. It contributes significantly to the rural construction industry. Taking all these together, one can imagine how important the dairy sector is to Ireland.

There is a clear national commitment to the continuing development of this sector in the next five years. This has been indicated on numerous occasions by this and previous Governments and by the present Minister for Agriculture and his Ministers of State in part of the negotiations that have gone on, and in the comments made in this country before the discussions began. There is no doubt about the clear commitment from all sides of the House to the dairy sector. It is essential that any agreement achieved at EEC level must protect the current and future development patterns of this industry. Therefore, it is vital that the present lack of progress in the negotiations which appears to have taken place within the Council of Ministers be resolved. We all seem now to be looking forward to the next heads of state meeting. We hope lack of progress will not jeopardise the already agreed agricultural prices of 1983. They are trying to put us into a Catch 22 situation by holding up payments which are legitimately and rightfully ours pending the forcing of our hand on the 1984 super-levy proposal.

It is essential that the Irish position during the negotiations would be based firmly on our national plans and targets for this sector and the potential for the sector to contribute to the growth of the other farming sectors and the food industry, as I have outlined. It is on this basis that the Labour Party are fully in support of the Minister for Agriculture in his current negotiations. It is imperative that any Minister of any Government would have the full support of all the political parties here while negotiations are going on. It is important that the rug is not pulled from under anybody's feet while the tricky negotiations are going on — I think everybody realises that those discussions are tricky.

As Senator Hourigan said, a derogation is vital for us. I contend that it is absolutely essential that there will be a derogation for us on these proposals. It must be achieved on a basis which will allow sufficient scope for dairy farmers with the most potential for development, for example, the small and medium sized family farm units, to expand and develop production to at least the average level within the EEC. I do not think it is too much to ask from our colleagues in Europe that we would be allowed time on a production derogation. A compelling case can be made for this on the basis that in spite of our increased production we are still relatively underdeveloped and undercapitalised in the dairying industry. The central importance of the dairy sector cannot be over-emphasised as part of these negotations. The fact that the average production levels in Ireland in dairying are so far below what have been achieved by other EEC countries, particularly in terms of milk yield per cow, must be stressed.

It is vital, therefore, that we have a derogation, that those dairy farmers with the most potential to expand and are in need of increased income will get primary consideration in any decisions that are reached. We require a dairying industry which will allow scope for development and will contribute to the maximum number of family farms being retained in the country. We, as a member state, certainly do not want an industry which might be maximised for the benefit of a small number of dairy or factory farmers who use cheap imported feeds to gain these high levels of milk production. The Labour Party do not hold a brief for any of those factory farmers, whether they are in Ireland or in Europe.

I am worried about the 85 per cent of Irish dairy farmers who have 30 or fewer cows, those people who will suffer as a result of policies that might be initiated when the factory farmers of Europe make use of imported cereals and have not shown any recognition whatsoever of Community preference or indeed of solidarity and are not apparently prepared to pay the price of political unity in Europe which is part of the Common Agricultural Policy. Part of our reason for joining Europe was to benefit from such a policy. We are not afraid to say it as a small party. Of course, the CAP will have to be looked at and must be reviewed. If it had been looked at and reviewed three, four or five years ago, the Commission would not be in the dilemma it is in now when it is fast running out of money. In the review of CAP our special position as a developing nation must be taken into consideration.

It might be worth stating, particularly approaching the European elections which are important for all of us, that the Labour Party have given special significance to agriculture. I would refer back to our special delegate conference in Limerick in 1982 when we decided to go into Government. We had a clear commitment to agriculture, first of all by controlling inflation, which we have helped in Government to contribute to. It was creating a major problem for Irish agriculture because of the cost-price squeeze that farmers found themselves in. That was tackled and I am glad to say that in the first period of this Government's life, in 12 months, they have halved the inflation rate. Farming will benefit, and last year it did so significantly from that kind of cost-price inflation control that has taken place.

I foresee this as quite a difficult year for farming. It will be particularly difficult because of the situation we find ourselves in now. This Bill is a vote of confidence in what we feel An Bord Bainne Limited can be doing and what An Bord Bainne are doing. They produced a newsletter in January 1984 in which they referred to a development fund for themselves and the concept of making a fresh start in the area of product diversification which has been under discussion for some time. That is fundamental to the success of any marketing agency the Government try to assist by way of legislation. They must tackle existing markets and go out with a dynamic policy of selling on them and look for new markets elsewhere. We are dealing with a commodity that does not stay fresh very long. They have a major task on their hands. It is frightening to see that the traditional market in the UK is now almost self-sufficient in milk and milk products. About 85 per cent is home produced in Britain and the balance is imported. That leaves very little chance for us to go into the traditional market of the UK.

It is also frightening to see in this document produced by An Bord Bainne that the total tonnage of butter in intervention in Europe is now reaching a crisis point. For the first time since 1979 — when it was almost 300,000 tonnes — it is now more than 700,000 tonnes. That means we are now at a crisis situation. That is why the Community are talking about super-levies. We have not contributed to this problem and it is only in recent times that the figure for intervention for butter has soared to such a staggering level as 700,000 tonnes.

Irish milk production has also gone up, according to this graph. I hope this graph does not leave Ireland and go to Europe because the European Community and the Commission could produce evidence like this against us and point to our little green island with its massive growth of milk supplies from 600,000 gallons in 1973 to 1,000 million gallons, which is an astronomical increase. 1981, which is the year the Community have chosen as the base year, was one of our lowest years because we had gone through the process of an accelerated programme for the eradication of brucellosis in our dairy herd. Our milk production that year was at one of its lowest levels. It is a pity that year was chosen — perhaps that was why they chose that year. Since then we have got back on the road to increasing our production, and these figures are spectacular for a small country, but we still produce only 4½ per cent of total EEC milk. So I contend that we are not creating the problem. I hope the dairy sector will accept that this Bill gives a certain amount of confidence to them, which they require. It gives the board the flexibility they need for new product development.

I would refer Members of the House to the document, Dairy News, 9 January 1984, which concisely sets down the programme the board have for tackling the problem of product development and getting into a dynamic sales area. I hope they accept this Bill in the spirit in which it is given to them. It gives them powers to raise additional funds over a period of six years or more and gives them the flexibility which was not there, in fact, in previous Acts. I commend the Bill to the House.

Mr. Smith

I think the Minister enjoys the unanimous support of the House in presenting this Bill which guarantees the borrowing of An Bord Bainne for the next six years. However, he comes in here at a time when agriculture in general is in a cloud of uncertainty and the proposals to reform the Common Agricultural Policy grimly hang over the country. It is a time, too, when all of us — those who are engaged in the agricultural industry and at this level — should be as united as possible in our efforts to wrestle in the further negotiations for the best possible deal in what are admittedly difficult circumstances.

We are only too well aware of the budgetary position with regard to the Common Agricultural Policy should the growth in milk production continue at recent levels. We are only too well aware of the massive damage that would be done to our own economy, so uniquely depending on agriculture, and that sector so dependent on dairying, if the proposals with regard to the super-levy were to be implemented. Pegged as they are at the 1981 levels of production, plus 1 per cent, these would have devastating effects on our whole economy.

We support the Minister and the Government in all the efforts that have been made and we hope are being made and will be made in the course of the next few weeks, through their officials and through their subsequent personal involvement in the final stages. If we were to fail in not getting some room for growth in this industry, at this underdeveloped stage of agriculture, we would have done irreparable damage to the agricultural industry and indeed to the community as a whole. We have in many ways a unique opportunity because, possibly for the first time, we have had a tremendous degree of co-operation between what would previously have been considered competing sectors in the economy. All are at one, both in the trade union movement and in the agribusiness generally, in accepting that we cannot and must not accept this super-levy, and we have to ensure that at least we will be allowed to grow to levels comparable with those of our partners in Europe. Most of us do not want to consider the implications of failure to do that because they would be so horrific for the economy as a whole.

That said, we have to recognise that this achievement will be difficult enough to bring about. We have said, and most of us agree, that a stop has to be put to the growth of milk production as a whole in Europe. Whether we are talking about the import of cereals or about factory farming, the simple fact of life is that we are unable to dispose of the surplus which is now developing. I am told that in a very short time we will run out of storage space in this country for our butter and skim milk powder surplus. The position is similar in other parts of Europe. These pictures indicate that the Community as a whole must come up with a solution which will stop the massive growth in milk production but at the same time will come up with an equitable solution, one which will not hurt the smaller countries and those countries that have been and are traditionally dependent on this source of income and where it is, in the main, produced from basic raw materials from within the Community.

We have not been importing cereal substitutes, we have not enjoyed higher MCAs, and we are much more dependent on the dairy sector in the economy as a whole than most of the countries that are. There are other proposals which will be equally difficult for the dairy sector. Consideration is being given to changing the ratio between skim and butter. This would give an advantage, in terms of reducing the subsidies on butter, and perhaps improve butter sales. Those, admittedly are quite difficult. Any solution to the butter problem should not necessarily aggravate the position regarding skim milk powder for which the markets have substantially dried up. Any proposals from the Commission which seem to be lopsided in that sense must be equally fought because they do not solve the problem.

Since this is probably the last opportunity that we will have to discuss matters of this kind prior to the finalisation of these negotiations, I would like to ask the Minister here whether the Government have considered a devaluation of the green rate. It seems that proposals already in hand effectively reduce the price of milk at farm gate level where we still have high interest rates and inputs are still rising resulting in a fairly substantial reduction in farm incomes. Many farmers who are at a middle-way stage in their development programme are in arrears with their repayments to the ACC and the commercial banks and any further erosion of their incomes obviously very seriously aggravates an already problematic situation. Have the Government any proposals in this regard, taking into account that the price rise this year appears to be practically negligible and could be brought about only by some consideration of the question of the changing of the green rate? We have fought fairly consistently for the elimination of the MCAs and it is high time that the member countries, particularly the Germans, were forced into the situation which would enable us to solve this problem, which obviously will not be eliminated overnight. It could be eliminated over a number of stages in a few years.

To digress for a few moments, I regard the super-levy as a central issue which calls for the greatest unity of purpose amongst parliamentarians supporting at all levels a terrier-like attitude in EEC negotiations. At the same time, I must record some disappointment that in the management of our agriculture we have made decisions over the past year which, to say the least of it, have not helped our position. We have made changes in intervention payments. We tried to fight off EEC proposals when we were proposing to do the same thing at home. The Minister of State representing, as he does, a very strong farming constituency, must be very concerned, as I am, about the restoration of the grants for the farm modernisation scheme when within two weeks after the restoration of this very important development aegis with so much downstream employment in it and which is so necessary for underdeveloped agriculture, we are told that proposals in the EEC eliminate a section of that development as they devolve around the dairy industry. As most people who are involved in this area know, a middle band of farmers have not been able to afford or avail of the grants up to now and are in desperate need of the provision of in-winter facilities and some reasonable kind of dairying and silage yards for their small cow herds. It seems incredible — maybe I am dense — that you could come up with a proposal to restore a scheme which had been fought through these Houses over the previous 12 months which we saw as so important and at the same time some section within the EEC were bringing forward proposals which would render that restoration impossible in so far as it affects the dairying industry.

I would like the Minister when replying to give me some assurance that we will be able to provide some aid to the groups of farmers who are now the least able to provide these facilities without grant aid. Most of the bigger, better off farmers in times when it was easier to borrow money carried out these developments with the help of grant aid. Can the Minister now justify depriving a farmer with very limited resources of grant aid which supported his neighbour who was four or five times stronger than he was when he was carrying out that job? There is another aspect to that. Pierces in Wexford, Keenans in Bagenalstown, Kellys in Portlaoise and many other industries are threatened with closure because for over 60 per cent of their output they depend on farm development. Sand, gravel, hardware facilities, timber, slates, galvanising, cement and everything else that goes into farm development we all readily accept are all home produced.

The scheme is designed by officials. You pay no money to any farmer until those officials are satisfied that this scheme is carried out and totally completed to the prescription of those officials, with whom I had the privilege to work for so brief a period. I do not want to lose confidence totally in that system or in those individuals. Transport of our meat can be stopped in France and the customs officials in Italy can take whatever action they like. The bold Mrs. Thatcher can manipulate the Milk Marketing Board. She can import New Zealand butter. She can look for a budgetary refund at the same time as she aggravates that problem quite deliberately because of her colonial history. Can we not in this country, small as it is, contemplate some ingenuity which would allow us to cater for this very fundamental problem as it affects our own agriculture today? I want to hear from the Minister in his reply some positive statement which will indicate that he too is concerned and will find a solution to this problem.

I want to conclude on the matter of diversification which is trotted out from Bord Bainne and will be trotted out here as the solution. A couple of years ago I was at the Green Week in Berlin and I was very proud to see Irish dairy or dairy-related products on sale there. One of those products, Bailey's Cream, has been a phenomenal success. However, difficulty is involved in diversification. Half our increase in milk production last year over the 1982 level — not our total level of production of 1,000 million gallons — was used by Baileys in the production of their well marketed product which is synonymous with the best that goes in Irish business, workmanship and so on. The scope for diversification is enormous. We depend too much on butter and skim milk powder. The percentage of our gross national product or total agricultural produce that we invest in research and new product development is infinitesimal and I cannot say how it can be increased. I recognise that the solution is not as simple as it is said to be. Out of the volume of milk that is produced the small amounts that can be trailed into these kinds of products, however good and important they are, barely touches the perimeter. Whether it be proprietary cheeses or whatever else, I recognise that we must head out in the direction of real diversification. I do not see a solution to that problem for many years to come but I urge Bord Bainne to continue on that road as far as possible.

An Leas-Chathaoirleach

Senator Smith, there is a division in the other House.

Mr. Smith

I was about to conclude, and normally I would not like to be interrupted when I am in full flight. I was trailing down and the seatbelts were on, so I will leave it at that. I will be looking forward to hearing the Minister's reply subsequently.

An Leas-Chathaoirleach

Does the Minister wish to leave?

Mr. Hegarty

Yes, I will be back in a short while.

Sitting suspended at 4.10 p.m. and resumed at 4.25 p.m.

Mr. McDonald

I am very glad to have the opportunity of speaking in support of this Bill. It is good to know that the Minister for Finance, the Minister for Agriculture and the Government have confidence in the dairying industry, in the dairying sector. I should like to take this opportunity of complimenting Bord Bainne Co-operative Limited for their continuing efforts which no doubt have contributed to the significant expansion of our dairying industry. As a farmer I am extremely lucky to be living almost adjacent to one of our top co-operatives, Avonmore. From close quarters it is easy to see the tremendous contribution that that well-managed and very extensive co-operative make, not only to the industry as a whole but through employment to a significant number of employees drawn from two if not three counties.

It is important that the Bord Bainne Co-operative Limited be in a position to continue their excellent work. It is reassuring that in this Bill the Minister for Agriculture is demonstrating his confidence not only in the Bord Bainne Co-operative Limited but in the dairying industry as a whole.

It is important that there be continued development. Sometimes when talking about development Government Ministers or people addressing themselves to the problems of agriculture are inclined to stress the need for greater efficiency. I suppose most farmers would accept that point. But when one looks at the position of the ordinary farmer — whether it be somebody trying to survice on 45 acres on a Land Commission holding or somebody on a 50 or 100 acre farm — when he is trying to balance his books to prove that he is not in the tax category it is not much good to him to hear the pleas that he should be more efficient and increase production in order to pay his way. Our farmers and agricultural industry will continue to have difficulties until some new mechanism is devised whereby the cost of farm inputs tie in in some way with the increases in farm production at the other end. Already this year we hear that there is going to be an increase in milk or agricultural prices that that increase will not exceed 3 per cent. For those farmers who are thinking of putting on early nitrogen, or manures of one kind or another, the cost of fertilisers compared with last year have gone up by 19 or 20 per cent. This is where farmers are literally being squeezed out of existence.

While I support the Government and admire the progress that they are making, I do not think that the seriousness of the plight of such a high proportion of our farmers has yet been realised by them. This year, at least in some midland counties, many farmers experienced difficulty in getting their annual working capital allocation from the commercial banks. This has meant that there are quite a number of silage pits in more than one county that have not been utilised this year mainly because the banks' advisers — who graduated from being farmers' advisers — say that there is no money to be had from fattening cattle this year. Therefore, they have refused to extend the finance that farmers sought successfully annually to stock their farmyards.

At least it is good to see that the Government have confidence in the continuation of the industry. My greatest disappointment is in regard to the policy pursued by the Agricultural Credit Corporation. The legislation setting up that corporation stated that they were to assist the development of agriculture. I do not know where the board members are drawn from, but certainly it can be contended they are not doing so. I know that there are difficulties encountered by them. I know there are farmers who have not been fair in regard to their repayments or whatever. Nevertheless, if the Government are saying now that they have confidence in the dairying sector as one very important sector and are proposing to guarantee any State loans that An Bord Bainne Co-operative Limited may wish to draw on, then I think there should be a follow-up.

The Central Bank last weekend issued a new policy statement. I have not read in the newspapers to date what that is going to mean to the ordinary debtor or customer of one of the commercial banks or the ACC. I do not know whether there is going to be an easing up of the credit restrictions. At the same time the message should be got across that, with the diminishing returns on capital invested in agriculture — whether it is in dairying, which is covered by this Bill, or any other of the agricultural husbandries — it is not possible to service loans at 15.75 or 16 per cent when the return on capital invested in farming last year was down to single figures, to 3 or 4 per cent, or whatever was the figure. The Agricultural Credit Corporation must assist in the development of agriculture and of the dairying industry.

Senator Smith in his contribution dealt with the difficulties that the EEC have imposed by overruling our Government's decision to reintroduce the farm modernisation scheme. I can appreciate the difficulties that the Government find themselves in. I would hope they would continue to look at that proposal to ascertain if there can be a breakthrough. The contention that the only way for farmers to expand is by greater efficiency is not valid while the people servicing agriculture and processing agricultural produce have an open cheque to increase their prices, securing their margins, at the expense of the ordinary farmer.

Many years ago the advisory services — which must be in the spotlight at all times — dealt with agriculture and the farmyard enterprises. Some years ago milk and butter-making formed part of the farmyard enterprise, being in the domain of the housewife rather than that of the farmer himself. That was before the dairying industry expanded universally to its present state.

With hindsight we made a mistake in eliminating the poultry-keeper and butter-maker from that type of service. I am not contending now that there is need for a professional adviser to assist with poultry-keeping and butter-making, for the simple reason that those two activities have been removed from the farmyard enterprise as we knew them. The latest change has meant that this service has been done away with completely. A direct effect was that last year this country imported over £14 million worth of fruit and vegetables. The Department of Agriculture must keep track of ACOT activities. While ACOT is an autonomous body, nevertheless the Minister has an obligation to keep an eye on their general guidelines and ensure that the service more or less caters for the kind of agricultural developments that will be of most benefit to our country as a whole.

I regret the passing of the farm home economic advisers. There was a grey area between the vocational education committees and the domestic economy service in which they should be operating and the demise of that service is to be deplored. I would hope that ACOT would have a second look at it even at this very late stage. Their move overnight some months ago, transforming every agricultural adviser into a specialist in one of the lines of farming husbandry, was not a great idea. I hope their move will be successful and that they are proven right. But I am still very sceptical because I see the adviser becoming further removed from the problems of agriculture and those of the small individual farmer.

It is important to remind people of the importance of the dairying industry. The latest figures for 1982 show that our exports totalled over £700 million or, approximately, 12 or 13 per cent of our total exports and that the processing industry employs some 11,000 or 12,000 people. These are very important sectors. We must remember that there are not very many other areas with those kinds of statistics. Therefore general policy must be of greatest importance to our economy as a whole.

An area that has not received the same support as other sectors of the dairying industry is that of liquid milk production. In replying perhaps the Minister would confirm that the liquid milk producer will not be subject to any super-levy that may be introduced. I have noticed of late that the co-operatives are inclined to cut in on the liquid milk market. They are entitled to do so. Nevertheless the liquid milk market has always been a very specialist area. The farmers who opt to supply liquid milk for human consumption are subjected to very rigorous and high standards of hygiene proficiency, with veterinary inspections several times per year. This is not the case with people who are producing for manufactured milk whether that be butter, skim milk powder or whatever.

If we are to continue to produce high standard and high quality milk for human consumption we should expect that those supplying the domestic market would be able to continue those traditional high standards. That is the reason the price of liquid milk always was that bit better for the producer than to those supplying the creameries or the manufacturing industry. Since those people employed in the production of liquid milk have never been involved in any way with the European Economic Community, the common agricultural policy or whatever, I do not see how anybody could suggest that they be subjected to a levy. That has not been spelled out. I hope that the Minister will take this opportunity of allaying my fears that these people who have produced milk under contract, during the most expensive period of the winter to keep the liquid milk trade supplied will be looked after.

I should like to make a very special plea to teachers, especially national school teachers and to the boards of management of schools to organise the distribution of the generously subsidised EEC school milk scheme, which is of direct benefit to children. It is unfortunate that it is not universally accepted. There are some children who will not drink milk. But if it were available and attractively presented it would be of significant benefit to a lot of children whose families might not otherwise be able to afford to provide it for them at the ordinary commercial rates.

I compliment the National Dairy Council on their initiatives in trying to improve the presentation of milk and their approach to modern sales techniques. The Minister and the Department should give some thought to providing refrigerated dispensers for national schools so that milk is dispensed to children at its optimum quality and palatability. Surely it would not be beyond the scope of ordinary national school management boards to provide a refrigerted dispenser. Perhaps some dairies would provide special school cartons which would make milk more attractive for small children for whom it is highly desirable and who should be afforded this very nourishing food. Driving around the country especially in summertime it is quite usual to see a school's supply of milk on the wall outside in the sun. That is a shame. I would hope that the national teachers — who over the years have shown that they cared for all of the children in their care — would make a special effort to provide such a service. I am aware it would cause some extra work but it would be well worth while. Perhaps the boards of management would ascertain how best that can be done.

It is difficult to speak on a Bill such as this without giving thought to the number one bugbear in the entire agriculture industry at present, that is the proposed super-levy on milk. I take this opportunity of complimenting the Taoiseach and the Minister for Agriculture on the excellent manner in which they have defended our national interests to date against last year's proposal for the introdcution of a super-levy.

Looking at the overall figures for the Community, it would seem that we have not yet reached the stage at which we have record stocks of either powdered milk or butter in the Community. I would be inclined to lay the blame fairly and squarely on the Heads of State for the present impase in the Community. It is not just the Common Agricultural Policy that is causing the problem at present. It is the nationalistic stances of the Heads of State who have not the guts to take the necessary decisions to increase the Community budget from the 1 per cent of VAT levied on the entire Community set some ten or 11 years ago.

Many new policies have been introduced and many others expanded in the Community. But the contention seems to be that they all must be implemented at the expense of the Common Agricultural Policy, which is probably the best developed policy of all the Community's policies. The unfairness of the original super-levy proposals vis-à-vis Ireland is quite plain. I would hope our Ministers will succeed in getting a full derogation from those harsh proposals. It is difficult to understand how the Commission should have agreed to the inclusion of Ireland even after the first draft. The proposed 70p levy per gallon, while it represents 100 per cent of the price paid to Irish farmers, constitutes less than 80 per cent of the price paid to our main competitors in the milk producing areas of Europe, those who have caused the problem; those people who over the years have benefited from the Common Agricultural Policy having obtained their present high standards of output and production as a result of the generous aid they received over the past 25 or 26 years since the establishment of the Common Agricultural Policy. Therefore it is very unfair that Ireland is cut away midstream as it were.

I hope our Ministers will resist any proposal which does not guarantee our producers the rights guaranteed to us under the Treaty of Rome through our Treaty of Accession. In tackling the Community's budgetary problems it is unfortunate that the Heads of State have failed to demonstrate the European spirit the founding fathers obviously had when drafting the Treaty of Rome and which holds out such hope for the improvement of the living and working conditions of our people.

Perhaps the Minister would explain the situation vis-á-vis the proposed super-levy should the worst come to the worst for those people engaged in liquid milk production. I would also ask the Minister what is the situation regarding the continued up-dating of the agricultural advisory services. It is very important that we have an advisory service which will highlight the best possible ways of improving our competitiveness under present conditions.

Mr. Lennon

Perhaps it is true to say that everything that can be said has already been said. But I want to add my voice on a few points which strike me forcibly as a farmer, as somebody who has been very much involved in the agriculture scene for a long time. I welcome the Bill, which extends the duration of the State guarantee for borowing by An Bord Bainne Co-operative Limited some years which is very welcome. I am sure I speak on behalf of many farmers outside the House today, when I say that naturally I dislike the move afoot by the EEC to squeeze or kill off many of our farmers. It would be true to say that many of them are in serious difficulties. Of course, their main worry is the proposed super-levy on milk. The Minister may not be in a position to state just exactly what our chances are regarding the super-levy. I would like to compliment the Minister and the Taoiseach on their efforts to ensure that we get the best deal possible. Many farmers are very worried about the outcome. They have had an uphill battle for a long time and it was only in the 1970s that farming improved. It goes without saying that the Minister and the Government will do their utmost to ensure that the best possible deal is got for this country, not only in the interests of the farming community but in the interest of Ireland as a whole.

The effects of the levy on the farming community would be considerable and many other people also are going to suffer if we do not get the deal we are hoping for from the EEC. It appears to many people at the moment that the big decisions now are made in Brussels. I am quite happy that the Government will take the necessary steps if the decisions in Brussels are not to their liking or are to the detriment of the farmers. I have the utmost confidence in the Government that they will ensure that the Irish farmer does not fall by the wayside.

Most people and the Government of the day believed that when we joined the Common Market it was for the common good of all the nations but we may have been forced to change our minds on that. The position now is that it is a case of every country getting what they can for themselves by hook or by crook no matter who is going to suffer as a result. If the decision does not go well in Brussels, then we will have to rely on the Government to take the necessary steps.

The effects are going to be felt by more people than the farming community and some people do not realise that. There will be a considerable effect on the unemployment situation. If the deal we get in Brussels is right, it is going to help. It may not necessarily create more employment but at least it will ensure that there is not more unemployment.

There are many people involved in the cattle industry who are very concerned about the outcome. If the super-levy goes ahead the effect on the whole cattle industry will be catastrophic. The beef industry depends to a large extent on the dairying industry to produce calves. One is totally dependent on the other. If a super-levy is introduced it will have effects across the board for everybody. We have been trying to increase our cattle numbers over the past few years as they had fallen in the seventies. It is our greatest industry. At this juncture I welcome the deals made with third countries in relation to the cattle trade. The cattle trade at the moment needed a little shot in the arm, and it got that. There were fears that because of the economic situation cattle prices might fall. The margin of profit is very low in the cattle industry compared to the dairying industry and I welcome any deals because this will bring back confidence in the cattle trade.

The grain growers in this country are dependent on the dairying and beef industries to use the grain. It is true that there were some warnings about the super-levy the past few years. We have read about the mountains of butter and skim milk and cheese. That was not the fault of the Irish farmer. He responded to the call to increase production when he was asked to do so and it cost money. Nobody would dispute that. It could not be said that the Irish farmer is responsible for the glut that exists at the moment. It is some of the other countries which are responsible in this case. For example, in Holland farmers can produce as much as 1,100 gallons for an average yield, and that country has the advantage of cheap cereals. It is not something that is enjoyed by the farmer in this country.

The farmer in this country was asked to increase production and this cost him a considerable amount of money. To get into dairying costs a large amount of money. In the Seventies when they were responding to the call, they were lucky that many of the leading agencies in this country, for example, the banks, the ACC and so on, had an open door in relation to the borrowing of money. It may be true that some of our farmers borrowed too much. Others did not borrow too much, but unfortunately they had to cope with the problems of inflation and the doubling of interest. It must be said that there are many farmers in serious financial difficulties. A survey was carried out by ACOT two years ago and it mentioned a large number of farmers who were in serious financial difficulties. I was a member of the board at the time and expressed the view that the figure given in the survey represented perhaps only about half the number of farmers who were in serious trouble. The survey was carried out among farmers who were working closely with the advisory service. However, there would be a great number of farmers who were not working with the advisory service and they would be very slow in coming forward to disclose their financial difficulties.

No matter what the decisions may be in Brussels, I am hopeful and confident that the Government of the day will ensure that the farmers get sufficient money, from whatever source, to continue in business. We cannot afford to allow farming to run down. It is our greatest industry, and we have to accept that. A small injection of money into agriculture can ensure that farmers can continue to produce and continue to live on their farms. We have no place for these people outside farming; we do not want them to leave their homes where they were born and reared and where they are now bringing up their families. We must ensure that a small injection of money is given to agriculture. It costs something in the region of £15,000 to produce a job in industry; a much smaller amount of money would ensure that farmers could continue on their farms and enjoy a decent living.

It has always been difficult for farmers to survive. In the seventies farmers enjoyed a reasonably good time. Some farmers made money then but any of them who made money spent it as fast as they made it, and not foolishly. Very few farmers spend money foolishly. They had to ensure that they did drainage work, build sheds and all things that were necessary, and by doing that everybody reaped the benfit. They spent the money and it created more employment and we can never lose sight of this fact. I know the farming community perhaps better than anybody else and I would say that in those years when farmers were making money they went out and spent it just as quickly. For that reason it would be foolish for anybody to think that the farmers were millionaires in those days.

Farmers responded to the call to produce more and we must admire them for doing that. We hear about butter and cheese mountains now, and all the rest, but it is not the farmers' fault. Perhaps we were not the best people in the world to look for other markets in those times. We relied too much on intervention, and while intervention was there it was looked upon as a dumping ground. The Irish farmer was not to blame for that. The people who were making the deals and working in the interests of the farmers, trying to ensure that they had a market for their produce, should have warned the farmers in relation to producing certain products or the over-production of certain items. The farmer cannot change his way of farming. Some counties such as Meath have land that is suitable for dairying or beef production while counties like Monaghan and Cavan are the home of the small farmers. Farmers cannot change, they have to live with the system. They cannot change to mixed farming or grain and perhaps it would be dangerous to do that. The great danger would be if people were forced to cut back on the numbers of cows, which would reduce the number of cattle. We cannot afford to let that situation arise. We must ensure, no matter what is the decision in Brussels, that this does not happen.

Senator McDonald spoke about encouraging people to drink more milk, for example, in schools and other places. The Senators is quite right in this: we must encourage people to drink milk. This was started here in Leinster House a few weeks ago by some members of the Government. On an occasion recently I bought a glass of milk and paid an enormous price for it. Something should be done about this matter. I have seen in my local newspapers a report of a small family grocer who was taken to court for overcharging a halfpenny on a particular item, yet a person could be charged up to 50p for one half pint of milk. There is something wrong with this, and it must be examined. We will not encourage people to drink more milk if they are charged at the rate of 50p for one half pint: they will drink the pint of porter instead.

I want to speak about the cattle industry and the problems that existed for the farmers when building up their herds over the past few years. The Government and the Minister are well aware of the problem of disease that some dairy farmers have run into through the year. Some farmers who have suffered because of outbreaks of brucellosis and TB in their herds are still in a bad financial state. This happened many farmers, and they are not out of the wood yet. This matter has to be examined by the Government.

In relation to the calf subsidy, there are fears that this subsidy may be withdrawn. That would be another serious blow to the dairy farming community whose income has fallen over the past 12 months. While the calf subsidy in the first instance was introduced to encourage people to rear more calves, the benefit was eroded because as soon as the subsidy of £22 for calves went on the price of calves was raised in the market by perhaps £30 to £35 per head. However, as long as some farmers enjoyed the benefits we will not complain about it. If the calf subsidy is withdrawn it will be a further blow to the dairy man.

We have to congratulate the Irish farmer for responding to the call to produce more. His life is not an easy one; it is a very difficult one. Many people would not change places with a dairy farmer for love or money, and certainly not for money, because there is none in it at the moment. The dairy farmer works 365 days a year and it is a fight for survival. Anyone who is prepared to work 365 days a year must surely be entitled to whatever reward there is at the end of the day. There are not many people who are prepared to do this but the people who are doing it must be encouraged and there must be some reward for them.

With regard to the credit restrictions at the moment, to which I referred earlier when I spoke about the survey that was carried out on the number of farmers who are in financial difficulties, it saddens me to read in the papers of the number of farmers who are under pressure from some lending institutions. I do not think that any farmer is happy to owe thousands of pounds. Every farmer, with a few exceptions, tries his utmost to repay the money he has borrowed. For any lending agency, be it the ACC or the banks, that puts pressure on these people from Monday morning to Saturday night to get them to pay the money that they freely gave them at a particular time, is not adopting a good policy. It is difficult enough to work at the best of times. Those pressures will not help any farmer to repay his money, but it will have the opposite effect. For that reason we must plead with the banks and others who are putting pressure on farmers to lay off. The farming community in Ireland are a decent race of people. They got that money at the time; in fact, some banks were competing with one another as to the amount of money they would lend them. I congratulate the banks for handing out the money, because for far too long their doors were closed, but when the farmers found themselves in difficulties they then put on this type of pressure which can do nothing but harm. For that reason we must and should appeal to all lending institutions to relax a little.

I am encouraged by the fight the Minister and the Government are making in relation to our case in Brussels. I have the utmost confidence in them that the result will be what we are looking for but if the result is not as good as we would like it, I ask the Minister today to carry the message back to the Government that more money will have to be spent from our own Exchequer to ensure that the farming community do not suffer from lack of cash.

Mr. Kelleher

I welcome the opportunity of contributing to this debate and I support the guarantee to An Bord Bainne for a further six years. As Senator Lennon has said, almost everything that could be said in this debate has probably been said today. I know that the Minister is anxious to reply to the debate so I will not detain him too long.

I should like to congratulate An Bord Bainne for the wonderful work they have done in the past 20 years since they were founded in the early sixties and since they were reconstituted as a co-op in 1972. By 1982 the total value of Irish dairy produce was £710 million. However, the board in recent years has been facing very stiff opposition both within the EEC and in third countries; by third countries I mean the countries outside the EEC and particularly the United States. There has also been a milk surplus problem in the United States and, as a result, we have had to face stiff marketing competition from them. One of the most lucrative markets we had in the past was the Mexican market, but we have recently lost this market to the United States because they undercut us in price.

Now we have 1,000 million gallons of milk to process each year. My belief is that we are too dependent on the traditional products such as butter, cheese and skimmed milk powder. We need more diversification into other areas. It is very difficult to understand why we as a dairying country import £40 million worth of dairy products each year and the Minister in his reply might make reference to that point.

I urge the co-ops to get more involved in product development. I believe there are a number of grant incentives from the IDA for this development. It has always puzzled me that while we have a surplus of food and milk products in the EEC there is starvation in other parts of the world. I find it difficult to understand why we cannot send more of our dairy produce such as skim milk powder or whole milk powder to Third World countries where there are people dying of starvation day after day and yet we in the EEC have a surplus which is costing us a fortune in cold storage and intervention.

As far as our own country is concerned, we have an excellent record of trying to sell our produce on the open market. I was involved in the dairy industry in a managerial capacity for ten years both in the creamery industry and with the Department of Agriculture. I remember in the mid-seventies when all other countries were selling their produce into intervention Ireland was one of the countries which was successfully selling their dairy produce on the world market, and the Mexican market is one of the areas to which I was referring. At one stage I remember a boatload of skim milk powder leaving Cork harbour with a capacity of 5,000 tonnes for the Mexican market at a time when there was controversy about the butter mountain and the skim milk powder mountain in Europe. It can be safely said that Bord Bainne did an excellent marketing job during the sixties and seventies.

I should like to make a brief reference to the threat to this country from the super-levy It has been accepted that it would cost our country at least £150 million if this levy were imposed. When we joined the EEC in 1972 our farming was not taken seriously. We were down in production in relation to our counterparts within the EEC. Our national yield per cow at the time was 480 gallons while the national yield in Europe was about 1,000 gallons. With a lot of hard work and valuable input from the advisory service and a lot of dedication our farming community has turned our farming scene into a business-type operation. Our national yield per cow has increased to about 700 gallons but we are way behind our European counterparts. There is no denying that there is a surplus in the EEC, but I want to point out — this has probably been said already — that our contribution accounts for only 4 per cent of this surplus. If you compare that figure with that of France you will find that their contribution to surplus is 24 per cent, Germany accounts for 23 per cent and the UK accounts for 15 per cent of the overall surplus in the EEC.

Having said that, I want to make a small comparison from our country's point of view on the importance of agriculture, and dairy produce particularly, to our economy. Dairy products alone account for 9.6 per cent of our gross national product compared with Germany whose dairy products account for only .79 per cent. I am pointing this out because you can have situations developing in the EEC which will not affect the other countries as much as ours. We are basically an agricultural country and Germany and other countries could be regarded as strong industrial states. So there is a huge difference between the two types of state. A small change of opinion in Europe would have vast implications from our point of view.

I spoke earlier about how An Bord Bainne did an excellent job in our marketing. During those years all the other countries were taking the easy way out, they were selling their dairy produce into intervention, something we avoided for many years. At that time there was also a surplus of grain in the EEC, yet you had countries like Holland importing cheap cereals, producing factory type milk. In other words they had it both ways: they had the cheapest possible inputs for milk production, they were a grain growing country yet they made no effort to sell their grain on the world market. They took the easy way out. They sold their grain into intervention. Thye did not use their grain for milk production because it was too costly. Thye would get a better price by selling it into intervention, yet they used their ports and harbours as facilities to import cheap cereals. I will make one other point. While they have a surplus in the EEC, I find it very hard to understand why we have New Zealand butter on the UK market.

An Cathaoirleach

I do not wish to interrupt the Senator, but it was agreed on the Order of Business that we adjourn from 5.30 p.m. to 6.30 p.m. for tea.

Mr. Kelleher

I will be finished in a few minutes.

Mr. O'Leary

The position is, at the conclusion of Senator Kelleher's speech I intend to suggest that if there were no other speakers offering, we would extend this portion of the sitting to allow the Minister to reply and to finish all Stages.

An Cathaoirleach

There is another speaker offering.

Mr. O'Leary

Then I think we should adjourn, as agreed, and resume at 6.30 p.m. If there is to be any variation in the Order of the House, as set out in the Order of Business, that can be done at 6.30 p.m. by agreement.

Mr. W. Ryan

I think we should decide that now. Is the Minister in a hurry with his Bill? We decided that we would give an hour an a half to the motion, from 6.30 p.m. to 8 o'clock. If we have to conclude this Bill we will not get 1½ hours on the other Bill. I would like to know whether the Minister wants his Bill today or not.

Mr. O'Leary

I understand the Minister wants the Bill today, if at all possible. We are anxious to facilitate the Minister in that regard. The reason I made the suggestion that we should adjourn until 6.30 p.m. was to allow the usual discussion to take place between 5.30 and 6.30. We should come back and make the decision, and if it is decided to do so to consider the possibility of varying the earlier Order of the House at that stage, following discussions between the Whips.

An Cathaoirleach

Does the Seanad agree to sit for another 15 minutes and see what the situation will be like then? I will not be here, unfortunately, as I have to go to a meeting at 5.30.

Mr. O'Leary

I am very happy with that.

Agreed.

Mr. Kelleher

While we have a surplus of dairy produce in the EEC I fail to understand why we allow, or why the EEC allows, the importation of New Zealand butter to the UK market. In 1974 they accounted for 25 per cent of the UK market; in 1983 this had risen to 34 per cent and I am aware of the discussions that took place recently between our Minister for Agriculture and the Prime Minister of New Zealand in relation to that matter. I do not understand why we should be making a bad situation worse by allowing this importation to take place.

Ireland is an agricultural country and as such it needs special attention from the EEC. Eighty-five per cent of all of our farms are milking fewer than 30 cows. If this super-levy was to be introduced it would put 14 to 15 per cent of our producers out of business. As a result it would contribute further to unemployment.

I will finish by commending the Taoiseach for the excellent work he has done in relation to the super-levy. I also commend the Minister for Agriculture, but particularly the Taoiseach, for his commitment and dedication and for his trips to the capitals of the EEC. We cannot afford to have this super-levy introduced. I wish our Minister for Agriculture well in his negotiations during the coming months.

Mr. Deenihan

Ba mhaith liom cúpla focal a rá ar an mBille seo. I would like to welcome this Bill and more especially the confidence it has given to An Bord Bainne to carry on their very vigorous and aggressive marketing campaign of Irish dairy products around the world. Now, more than ever, we need this type of aggressive marketing if we are to compete with our EEC partners, America and other developed countries. Notwithstanding the constraints of the intervention system, An Bord Bainne made considerable progress in recent years. They have developed a market that is very successful for a wide range of branded products. We must all appreciate the fact that Kerrygold is now a familiar name in the United Kingdom, in Europe and in many parts of the world. This is due mainly to the very aggressive, expert type of marketing carried out by the board.

A great deal remains to be done with the dairy industry. In this regard there are two matters which are of particular concern to all of us. The first one is the undeniable potential of our dairying industry to develop in the years ahead, and the second and more important one is the pressure to change the CAP policy because of the problem of surpluses. In 1983, 15 per cent of all the milk that was produced on Community farms was surplus. Because of this there will be pressure to change the CAP. This will have far reaching consequences not only for Irish farmers but for the board, because if the board are to expand and obtain more markets they need milk. If a super-levy is imposed — as previous speakers have pointed out — we will not have enough milk in order to be competitive.

I would like to refer briefly to my own area, which is Kerry, and especially to Kerry Co-Op, and to point out the major disadvantage that a super-levy would have, if imposed, on a co-op like Kerry Co-Op. From 1972 to 1978 Kerry Co-Op experienced an enormous growth of milk intake, and this was mostly from the Kerry region, which is not renowned for high quality land. In 1978 it reached 88 million gallons. A few factors stemmed this growth. Some factors were natural, the very poor weather conditions we had in the summers of 1979, 1980 and 1981, and the announcement in 1978 by the then Minister, Mr. Jim Gibbons, that Kerry was designated an area for disease eradication. This had a far-reaching effect on the amount of milk that was produced in Kerry from that period onwards, with the result that in a period of three years milk production by 1981 in Kerry had fallen to 72 million gallons from 88 million gallons, and this had a very stemming effect on future growth of Kerry Co-Op. Being such a good company, they offset this disadvantage by diversifying into other products.

Since then Kerry Co-Op have been picking up again, and last year they took in 82 million gallons. This is still short 6 million gallons on the 1978 peak. I would like to point out here that if a super-levy is imposed, taking the 1981 figure of 72 million gallons, it will have disastrous effects for the Kerry Co-Op and for the Kerry region that it has served so well. Besides, I think that marketing as a whole has assumed new importance, and if we are to remain competitive on the world trade market we have to market and produce goods properly.

That is why An Bord Bainne have been so successful with the marketing of its products, through Kerrygold. I would just like to point out as well that An Bord Bainne marketed butter and butter oil from Kerry Co-Op, to the tune of some £35 million last year, and for that the people of Kerry are very much indebted to them. I would like to conclude by saying that the future of this country is very much dependent on the future development of agriculture, and any measures that will be taken to stem the growth of agriculture will no doubt affect very much all our futures.

Minister of State at the Department of Agriculture (Mr. Hegarty)

I compliment the Senators on their wide ranging contributions. Some of them may not have been directly related to the Bill, but important nevertheless. I appreciate that Senators do not get too many opportunities to discuss some of these very serious problems. I was pleased that the Chair was lenient with Senators and allowed a fairly wide ranging discussion.

With regard to the points raised by Senator Hussey about the widening of the scope of the borrowing, it is to include promissory notes and bills of exchange. That came, incidently, at the request of An Bord Bainne. As well, of course, there are loans which are indeed very well defined. Senator Smith made the point about the green rate. The devaluation of that can only take place when the value of the Irish pound changes within the EMS. Devaluation of the Irish pound, as he knows very well, would have fairly far reaching consequences in the whole economy. It is a question wider than that of a green pound. As the Senator knows, a member state is not free to change its green rate: only the Council of Ministers can do this on a proposal from the Commission.

With regard to the CAP, the system will only permit a green rate change when the central rate of the currency is changed. With regard to the MCAs, I quite agree with the Senator that we support moves to have these dismantled, because positive MCAs in the case of Germany, the UK and other countries have had the effect of distorting the trade in agricultural goods and consequently on growth of our agricultural sales. I share his views also with regard to the Farm Modernisation Scheme in leaving out the dairy side. At the EEC Council yesterday there was a proposal to continue the Farm Modernisation Scheme excluding the dairy sector and our Minister voted against this because it was contrary to our views in an expanding dairy industry.

The super-levy was discussed and, as I said initially, we did not cause the problem, and though we are concerned about the surpluses, our contribution to that problem was minimal. Our gallonage is comparatively low when you compare it with any of our EEC partners, and we believe that our contribution to the solution should be minimal. I agree that while winter milk is pretty demanding, there is no particular case made for winter milk when it comes to talking about a levy.

We had many references to the National Dairy Council. Some very good points were made with regard to school milk, something we should ask the National Dairy Council to look at. There is the question of presenting milk in a manner that might make it more palatable. Obviously, if the milk is left sitting out on school walls it could not be good drinking after a short while. Maybe we should ask them to look at the possibility of refrigeration. That suggestion is an excellent one. Flavouring of milk should be possible, and even products such as yogurt — anything to make the thing more attractive. We are only taking up something like 1.6 million gallons against a possible 6 million gallons that are available to us. That is something I would be keen on investigating. The success story of another type of flavoured milk was referred to, Bailey's Cream. This has been one of our great success stories. When it comes to diversification, whoever thought up that one did us a good turn, because practically every co-op is in on it and doing extraordinarily well.

The same could be said of the various cheeses — we should and could be developing them. Imports were referred to there by Senator Kelleher. The figures would not be quite as bad as he said — the £40 million in fact involves some £20 million, part of which relates to butter coming in from the North and reexported through Southern ports. Even so, there is a £10 million import that we should not be happy with, and I certainly am not happy with it. Much of it involves rather sophisticated cheeses, and here I see a lot of room for the major co-ops farming out some of this type of operation to small operators. The type of cheese in question would be basically work for small groups of people who would have an interest in that and in a specialised type of cheese. We have had some good and bad experiences with the diversification of cheese, but basically the amount and the quantities sometimes are so small as to make it very difficult to operate in the context of a big co-op. In a hotel you pay for the comfort of the hotel, and that is all built into the price of the pint of milk, but I think it is something which should be looked at. I agree that if we could offer milk at 20p a pint there is absolutely no good reason why they should be charging more for it. We might appeal to them to go a bit easy on the price.

The important thing is that we support this measure from all sides and the comments, as I said already, fall into three categories: one, the general climate for investment, two, the need for diversification and three, the super-levy. I have always said that a prerequisite for success in any enterprise would be that the Government should bring inflation under control. We have the evidence at the moment that we are succeeding in this. Borrowing was referred to here this evening. I fully appreciate that farm borrowing is a very serious problem, but the point is that the greatest gift we could offer to farmers at the moment would be to bring our inflation down and our banks rates down, consequently, to an acceptable level.

On the proposals before the EEC Council of Ministers, they are the consequence of failure over many years to increase the Community's resources on the one hand and to confront and to overcome the problem facing the CAP on the other. Until this is done we will continue to face the unpleasantness of somewhat random measures aimed at making short-term budgetary savings. This is why a satisfactory outcome of the discussions on the super-levy and other issues is so very necessary.

I am happy that everybody in the House has spoken this evening in support of the Government's efforts, and without further ado I thank Senators for their support of the Bill.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without recommendation, received for final consideration and ordered to be returned to the Dáil.

Sitting suspended at 5.50 p.m. and resumed at 6.30 p.m.

Seanad Éireann debate - Wednesday, 29 Feb 1984