I welcome the Minister to the House and wish him the best in his portfolio.
Common Agricultural Policy: Statements.
I am pleased to have this opportunity to report formally to this House on the outcome of the Common Agricultural Policy reform negotiations. I regard the results of the negotiations as being very satisfactory from the Irish viewpoint. This is not just my view, it is generally accepted in the industry that this is so.
From the time of my appointment as Minister for Agriculture and Food I have accepted the objectives of the EC Commission in relation to Common Agricultural Policy reform. These aims were to bring markets into balance by means of production controls, price policy and extensification of production methods; to keep a sufficient number of farmers on the land; to give an enhanced role to farmers as producers of quality foods and as protectors of the environment; to achieve a more effective distribution of support; and to maintain the position of the Community as a major player in world agricultural trade.
I did, however, have considerable problems in relation to the Commission proposals to achieve those objectives. In the papers presented by the Presidency at earlier Councils, some of those concerns were eased. However, going into the decisive Council in May, I was still some considerable way from being able to endorse an agreement.
While I accepted the need for reform of the Common Agricultural Policy I set myself the overall goal of ensuring that it remained an effective support policy and I also set myself some specific aims for what I wished to achieve for Ireland in the negotiations. Obviously, my primary objective had to be to achieve a framework which would allow Irish farmers and our agriculture based industries to prosper in the future. I very much shared the Commission's aim of achieving a more equitable distribution of support. To me that meant putting more money into farmers' pockets rather than giving it to operators of storage and disposal systems. At the same time, however, I wanted to safeguard our more competitive farmers and to make our industries more market orientated.
Nevertheless, I had to accept that in any multinational negotiations the result is always a compromise between the conflicting aims of the participants. In the Common Agricultural Policy reform negotiations a number of the other participants had considerably different views to mine. However, while the result of such negotiations might be a compromise, the compromise which emerged can be weighted in different directions. It was my job as Minister to ensure that the result of the Common Agricultural Policy negotiations was weighted in a way which achieved my objectives.
Good results cannot, however, be achieved by wishful thinking, neither do they emerge over a few days, no matter how strenuous, at a Council in Brussels. In our case, months of preparation and discussion were involved. It was a hard slog. I took every opportunity, not just at Council meetings but also in bilateral contacts, to make my colleagues aware of our concerns and needs. My officials did likewise with their counterparts. In the week before the decisive Council, I visited Lisbon and impressed on the President of the Council, Minister Cunha, the importance of agriculture to the Irish economy and what we needed to achieve in the negotiations to safeguard our primary industry.
At the Council the discussions on Common Agricultural Policy reform were preceded by a series of bilateral meetings between Commissioner Mac-Sharry, Minister Cunha and individual Ministers from the member states. This gave me a further opportunity to present the Irish position in the strongest terms to the people drafting the compromise package of reform measures. That was on the Tuesday. In the very early hours of the following morning we received the compromise paper. I was gratified to see that most of my major concerns had been catered for in the document and that all the hard work had paid off. There were still, of course, some remaining issues to be addressed, particularly in regard to the limit on the suckler cow premium, the milk quota reduction for 1992-93, the retention of the reduced sheep flock limit of 350 in the non-disadvantaged areas and the question of cereal co-responsibility levies and the individual base area.
In the continuing negotiations, breakthroughs were achieved in all these areas. The herd limit was abolished for suckler cows, the milk and price quota cut was dropped, and flock limit was re-established at 500, the cereal co-responsibility levies were removed and the individual base area was granted. The latter is particularly significant this year in that a proposed price reduction of 6 per cent for cereal farmers is transformed into a 2 per cent price increase. This will increase the income of cereal farmers by £16 millions this year. My one regret was that we could not get agreement to the introduction of a dairy cow premium. From an early stage, even when a price reduction of 10 per cent was proposed for milk, the vast majority of member states were opposed to such a measure. Only Luxembourg and ourselves supported the scheme and unfortunately we did not form a strong enough power bloc to force this through, particularly when the milk price was only to be reduced by 2.5 per cent.
I mentioned earlier that I had set myself a number of objectives to be achieved in the negotiations. I am satisfied that I have fulfilled those aims. There is no doubt that a framework of support capable of being maintained for the future has been put in place. The existing mechanisms which consumed money voraciously without maintaining farmer incomes could not be sustained either financially or politically. Farmers, processors and traders can now plan on the basis of assured support arrangements and market conditions. Producers in all areas will continue to secure the bulk of their income from the market-place, although at somewhat lower prices. The reduction in prices will benefit consumers. I have already put in train a mechanism with my colleague, Minister O'Rourke, to ensure that the lower prices to farmers will be passed on and reflected in consumers' shopping baskets. In many instances, producers should gain from increased consumption of cheaper products.
I also wanted to bring about a more even distribution of resources and there is no doubt that in this we have been successful. As a result of the negotiations direct payments to Irish farmers will increase by £340 million per annum to a total of over £620 million each year. While the current mechanisms helped to underpin farm incomes, not enough of the Community funding found its way through to farmers. The new premia payments will ensure that it does.
It is worth while recounting the amounts involved. The basic male premium will increase from £35 to £158. In addition, a special slaughter premium of £52.75 will be payable on all male animals slaughtered between 1 January and 30 April. I am convinced that this will transform our beef industry. This aid was introduced specifically at my request to help redress our seasonal beef production pattern. On top of that, an additional premium of £26 per annum will be payable on each animal qualifying for the basic premium on holdings where the stocking rate is below 1.4 livestock units per hectare. The total beef premium payable can, therefore, be as high as £237 per animal. This will more than make up for a 15 per cent reduction in beef intervention prices. Of course, in the headage areas, the headage is payable as well as the premium.
The suckler cow premium has also been increased substantially and including the extensification factor will amount to £150 per cow. This is almost three times the current rate of £52 per animal. Over 700,000 animals per year will qualify for this premium. All told then, Irish farmers will receive a high level of premium in respect of about 1.75 million animals each year.
The results of the negotiations also achieved my twin objectives of safeguarding our more competitive farmers and making our agriculture-based industries more market oriented. Farmers will receive somewhat lower prices for their products which will make them more competitive in the marketplace while, at the same time, their incomes are safeguarded by virtue of the compensatory payments. Our agri-industries will also be able to compete more effectively because the cost of their raw materials and in the case of cereals that will have been reduced.
In the beef sector the counter seasonality premium payments should help to maintain a year round supply of cattle for factories. This is essential if our meat factories are to supply Community supermarkets on a continuous basis. All major reports over the past 20 years have identified our seasonal production of beef as the major impediment to greater penetration of Community markets. Obviously, our factories cannot be expected to change overnight and the phased reduction in intervention levels, together with the retention of safety net intervention, will give them the breathing space necessary to gear up their marketing arrangements to meet the challenges ahead. In this regard, it is worth noting that the intervention levels which will obtain in 1997 at the end of the phasing-in period are almost 50 per cent higher than those which were agreed by the Council of Ministers in 1989.
Because the negotiations have progressed over a period, people tend to look at the improvements secured in the decisive Common Agricultural Policy Reform Council rather than look at the changes in the original proposals. I have to say that in all sectors we secured significant improvements on the original proposals.
I have already outlined the main improvements in the beef sector. In the milk sector the original proposal involved a 1 per cent cut in quota in each of the years 1992-93, 1993-94 and 1994-95 together with a 10 per cent cut in milk price. There is now no quota cut being applied in the forthcoming year and any reduction in the following two years would be made only by the Council in the light of an assessment of the market situation before the beginning of each of these years.
In the sheep sector the Commission had proposed reducing the flock limit for the full ewe premium from 1,000 in disadvantaged areas and 500 in non-disadvantaged areas to 500 and 350 respectively. The 50 per cent premium paid in excess of those numbers was to be dropped completely. The limits have now been restored to existing levels and the 50 per cent premium will continue to apply.
In the cereals area the price reduction will not be as severe as first proposed and compensation terms for price cuts and set-aside have been considerably improved.
A measure of how well we have succeeded in the Common Agricultural Policy reform negotiations can be taken from a static analysis of the original Commission proposals carried out by the economic unit of the Department of Agriculture and Food which indicated that net losses to the Irish farming sector could amount to close to £100 million when they would be fully operational. The outcome now achieved would more than compensate producers as a whole for the reform measures and could, in fact, involve a substantial net gain compared to 1991.
The Commission has, by and large, achieved its objectives in the negotiations. I am satisfied that I have achieved my objectives. There will always be some who will be dissatisfied with the outcome of any negotiations. In fact, there will always be some who will be unhappy with the outcome of all negotiations. The majority view clearly is, however that the result of the Common Agricultural Policy reform negotiations is in the long term interests of the Irish agriculture and food sector and the economy as a whole.
It is now up to the Irish farming and Irish agriculture industry to respond to the new situation. I have already established an expert group to provide a framework where we can best respond to the new situation. That group has already had its inaugural meeting last week and will have a programme in place for me by the end of December. By the start of next year, we can ensure that our industry, from farms to marketing bodies, will be well aware of their responsibilities in the new, internationally competitive, agricultural environment.
I thank the Minister for his opening address to us this afternoon on the Common Agricultural Policy reform package. I would also like to thank him and his advisors personally for their obvious hard work and dedication in getting this package finalised. It cannot have been easy.
A collective sigh of relief that at last something was agreed may have masked possible difficulties down the road when we analyse in detail some of the small print. Reform was needed and there was no argument about that. We were not going to get our own way. We were not going to get 100 per cent of what we wanted. The Minister will agree that those of us who think seriously about agriculture being our primary industry for so long — and, indeed, for the foreseeable future — still have reason to have major concerns in many areas. We have yet to see the legal nature of the way things work in Brussels. It will take some time before we play out in reality the theory of what has been agreed.
The reform package before us will change the whole structure of agriculture. Today's farmers, like some of our hurling teams in the past, will all grow old together. They will be the last generation to have had the opportunity to develop our grass-based agricultural production. They are the generation that got the chance. Primary production areas are quota controlled — dairy, sheep, beef and tillage — in an effort to bring balance into the market and to decrease the storage costs of the massive surpluses. The cheque in the post must undermine agricultural development. Given the enormous collapse in farm incomes in recent years, there is some short term comfort from the concept that, regardless of what one does, one will get a cheque in the post just for having X number of animals, or compensation for X number of acres set aside. In the long term we have got to see that this "cheque in the post" type farming undermines the national effort and particularly the future of commercial growth in the agricultural sector. It removes the initiative to work. Instead of green certs, farmers will need Ph. Ds. to fill in the plethora of application forms and to cope, as Alan Gillis put it, with the new industry of small print.
What about the herdowners who were disqualified in 1991 for two years due to application difficulties, for example, with male beef premium, the suckler cow premium or the ewe premium? They will have no reference year in which to establish their quota. Are they ruled out forever from claiming in these areas? There is a serious problem to which I would draw the Minister's attention immediately. Will we change the rules for those who were disqualified last year or this year? If we do not, even though they may have been producing beef or had a ewe flock for years, they will technically have no reference year because they were paid no premia last year or this year. They will be ruled out on a technicality on the application form. I would like the Minister's response as to how he will deal with that group of farmers. There are quite a few who have got caught for different reasons on the application form.
What about the stock relief implications of the reform package? With the consequential decrease in the value of stock, will farmers using stock relief to compute tax liabilities now be caught in a major clawback operation? Again the rules need to be looked at and, I imagine, changed. There is a particular difficulty about the category I have just mentioned. We all supported the concept of stock relief to encourage farmers to increase numbers and production and to intensify when that was our philosophy. Are these farmers all to be caught in a tax clawback, and in liability for back taxes because their stock will naturally be reduced? I would like to know the Minister's views on this matter. Major problems will arise very quickly in this area.
The relief of agreeing the reform package now needs to be matched with hard facts, with the delivery on promises and some very serious analysis. The GATT international trade talks must acknowledge the areas of reform and ensure they are put into what we refer to as the "green box". They are not subject to further reductions. That is the Minister's intention and he has our support in ensuring that, whatever resolution is arrived at in relation to the GATT talks, farmers who have taken cuts now will not be subject to a further layer of restrictions because of GATT demands.
There will be major job losses in the PAYE sector because of this CAP reform package, upstream and downstream of the farm gate, as farmers reduce inputs on the one hand to increase margins and to intensify, and on the other to decrease production to comply with the quota controls. I would like the Minister to try to quantify for us the impact on the agri-business sector because there will be impact as a result of these figures of 50,000 jobs at risk and there will be thousands more which will not now materialise in an area where we had hoped to expand and where much effort had been expended in trying to get it to expand.
The factory farming of continental Europe is now favoured over grass based production. They have cheaper cereal feed. The Minister referred to a 29 per cent drop and the special maize silage supplement; that crept in unknown to most of us although the Minister and his advisers may have known it was coming. On the continent, maize silage is the main forage crop. They have the advantage of the cheaper cereals; many zero graze, in fact. There is a £75 per acre maize silage supplement. How will our farmers with grass produced silage compete with a £75 maize silage supplement on the continent? That has very serious implications which have hardly hit the headlines here at all, certainly not for the average grass root farmer. Perhaps the farm organisations are beginning to realise what is happening, but apart from the cheaper cereals which were hit by the competitiveness of our grass based agriculture a supplement for the maize silage they use on the continent is going to make life extremely difficult. There is no such thing as a level playing field or fair competition there. I would love to know the Minister's views on how he could accept that maize silage supplement which would militate against our farmers so seriously and against the UK farmers as well.
Apart from the maize silage supplement, they also have an extra VAT refund in Germany, Italy and France. These factors will conspire to make our milk, beef and sheep meat less competitive in the market-place and to increase calf exports from this country.
The mention of VAT refund brings to mind an area of concern of mine for some time: it is whether the Common Agricultural Policy is common at all. It pretends to be, and on that basis we must question the difference in national aids that are allowed to agriculture under the rules. The fact that Germany, the Netherlands and the other wealthier countries — if I may use that expression — are in a position to give national aids to their farmers way above what this country could be expected to give, will distort competition. There will be no level playing field. I would ask the Minister to refer the distortion in agricultural competition because of the differences in national aids in the different national Governments to the Competition Commissioner to see if we can resolve it.
It is easy for some countries to accept major cutbacks in agricultural enterprises, European compensatory mechanisms and subsidies in the knowledge that their own Governments will be able to top up their compensatory mechanisms to an extent that the farmers will no longer feel the pain. We cannot do that. National aids to agriculture in this country since 1987 have decreased by 50 per cent; in Germany aid has increased by 70 per cent. Where are we going if the individual countries can support their farmers and cushion any reform of the Common Agricultural Policy whereas we cannot? It is not leaving our farmers playing on the same field. There is a major competitive disadvantage.
I will look now at the specific proposals in the Common Agricultural Policy reform. We must welcome the winter beef premium. It is a first and very welcome. It should help iron out some of the awful seasonality we have in this market. I am sure the Minister is aware of how markets operate when left to their own resources here. I would have major fears that farmers would increase the price of stores going into the sheds by the equivalent of the premium they are expecting when the stores come out of the sheds. As a result, there will be no net gain to the serious winter beef producer. They will not be able to fill their sheds at a price which will allow them an economic margin having over-wintered them. Bringing them on to beef in the sheds during the winter for the last few years has not paid at all. I do not know what one can do in a free market to resolve that, but if that happens I fear it will negate entirely the profit from the winter beef premium.
There is even confusion among farmers who feel that the winter beef premium will be paid next spring instead of in spring 12 months. It is already causing problems in marts when it is pointed out that there will be no premium next year. The winter beef premium will not be paid until 1994. Distortion is beginning to creep in already under a misconception. What will it be like when they realise how the rules work? We need more talking and explaining in that area to ensure that farmers are not their own worst enemies when it comes to the introduction of what should be a very good addition to the support package that was agreed in Brussels.
The male beef premium has been increased also. It will now be paid twice in the animal's lifetime: it will be paid at ten months of age and at 22 months of age; it will amount to £158 per head. There will be a regional reference herd. This is causing some questioning at present. Perhaps the Minister could elaborate on how he thinks the regional reference herd will be established and how it will work. What is the definition of a region in this context? Where will the Minister draw the line? The concept of regions comes into the suckler cow and tillage areas as well.
As I understand it, Ireland is a single region, from the Brussels' point of view. I gather from reading how we are handling these different areas that Ireland now will be subdivided into more regions when it comes to administrating the different premium subsidies. We need fairly quick clarification how a region will be defined, and on what basis the country will be carved up into regions. The tillage farmers want to know and the beef farmers will want to know.
Confusion arose over a statement the Minister made in the Dáil. I understand that the reference year will be 1992. I am subject to correction on that. From what the Minister said an inference was drawn that he would average the years 1991 and 1992, and that that would establish the quota for an individual, or in a region if we are talking about male beef premium. Can we have an explanation whether the Minister has made a decision that 1992 will be the reference year in terms of the male beef premium and the suckler calf premium? There is some confusion there.
The suckler cow premium should be a tremendous help to all, and particularly those in disadvantaged areas. Mentioning disadvantaged areas, could I make a plea to the Minister to speed up the appeals process, notwithstanding the excellent work being done by the appeals secretary? It has got to the stage, with so many areas under appeal that effectively, we have a new review under the less favoured areas directive. The last review took about three years before we got a decision from Brussels; by that time it had gone around the country twice and to Brussels and back a few times. Is there any way, for the benefit of those farmers who are in the appeals system under the less favoured areas directive, by which we could speed up the process now?
Many of the implications of the reform package which we are now debating will depend on whether one is in or out of a disadvantaged area classification. Some who got in under the last review are up and running; they will qualify for the extra payments, extra grants and the bonus of being in a so called disadvantaged area. However we all know many areas which should have been included in the disadvantaged areas classification the last time and it will be at least another 18 months before such areas get in under the present scheme if the process takes as long as it has always taken in relation to these reviews. It is tedious and cumbersome. It will be put into the computer, decisions have to be made at home and the whole thing has to be sent to Brussels. Brussels will probably ask a few questions. It will go backwards and forwards. The last time they took six months from the time they got our submission until we got the final answer from them.
I plead with the Minister to speed up the appeals process so that farmers will know, once and for all, whether they are in or out of the disadvantaged areas classification under the less favoured areas directive. The suckler calf scheme in the disadvantaged areas will be a tremendous asset. There will be individual producer quotas in relation to suckler cows as distinct from the male beef premium. A national reserve is to be established by a 1 per cent reduction on numbers in non-disadvantaged areas and a 2 per cent reduction in disadvantaged areas. Maybe I am missing something as I cannot see why numbers are being reduced more in disadvantaged areas than in other areas. May I ask the Minister to explain the thinking behind asking so-called disadvantaged farmers to reduce their numbers further to create a national reserve and by a comparatively greater proportion than more advantaged farmers? Perhaps to be disadvantaged one must be capable of carrying less stock. I am not sure that that logic has applied to date in the classification procedure but it could be the thinking behind it.
The transfer rights in relation to the suckler cow premium are interesting also in that they do not attach to the land as in the milk quotas if I understand correctly and can be transferred within families or from producer to producer within a region. My question in relation to defining the region is relevant here because there is no co-op involved when we are talking about suckler cows. There is no distorting of deliveries in any area. Why the regional restriction on transfers of suckler cow production rights? What would be the implications if one lived on the border of a region? Some people who live just inside a regional border may want to sell to a neighbour on the other side of the regional border and this would be reasonable in the case of the suckler cow premium given that there is no distortion of other trade by movement of quota rights in this area. I would like the Minister's comments on that.
I do not know if we will have much demand for the extensification premium — although in certain areas we may; I think demand will not be as great here as for other supports. There are changes in the original proposals for stocking rates but I still expect major problems in this area. Do the original penalties remain unchanged? Will a farmer who exceeds the stocking rate by the year designated be ineligible for a premium of any kind whether special male beef premium or the suckler cow premium or will the farmer be paid up to the stocking rate numbers that the acreage officially permits? The initial discussions implied that one would lose all premia if one exceeded the stocking rates. Many farmers are concerned about the implications of stocking rates and about penalties for not complying with numbers. I do not expect any demand for the Common Agricultural Policy conversion premium in this country and the situation will remain this way.
In relation to sheep proposals, the low premium area has become a very important one. We have doubled the numbers in our national flock in a few years. The collapse of lamb prices this spring burned many a farmer's fingers badly. The abolition of the variable premium in the UK last year and New Zealand access to the French market for chilled lamb present marketing difficulties to the Irish farmer attempting to dispose of lamb to the French market. What are the Minister's thoughts in this area? Is there any way in which we could bring sense and rationality into it? Has the Minister plans to discuss with his opposite number Mr. Gummer in the UK and with the French authorities ways of bringing law and order into the French market which is vitally important to Irish lamb producers. I would like the Minister's views on that. With regard to the reference year, has the Minister opted for 1991 or is he averaging 1989, 1990 and 1991? I think it is 1991 but I have been contradicted on that and I would appreciate clarification.
The Minister is creating a reserve which I support but he is taking more from disadvantaged areas than from non-disadvantaged areas. The transfer rights of quotas are interesting and satisfactory and the best we could get for sheep production. Those producing sheep on conacre maintain their right; it is not the land but the individual to whom the production quota or the claim premia is attached. Is the transfer of quota rights in relation to ewes restricted within regions we have yet to define? If so, why? When another trade is not being distorted, as would occur in the dairy industry if movement was permitted beyond regions, why the need to restrict the transfer of quota rights? Perhaps there is an explanation but many questions have been asked about that.
Much has been said and written about the Common Agricultural Policy implications for tillage farmers. What agreement will there be about splitting our tillage crops between spring and winter cereals and how will that be handled in this package? Rotation or set aside will be almost compulsory in this country. What is the official line on that?
We read that the final legal text will be ready in September. Is that correct? When will the flag be raised on all the new proposals? Many of them will not come in until the next full agricultural production year in April of next year, but beyond that what dates are available? Is the Minister worried that we are still getting the same price for Friesian steers as for better quality continental steers? We have never been able to devise a system that rewards quality. Even with present grading schemes in meat factories, farmers are not rewarded for quality production. If our grass-based agriculture is to survive against the competition of zero grazed stock on the Continent, particularly with the competitive advantages of continental farmers, we must insist that quality Irish produce is recognised for what it is and that the farmers are rewarded accordingly.
What have we done wrong? Why after all the talk about rewarding quality over the years does a Friesian steer still make the same price as the best commercial continental steer? Something is wrong. We have not got our production and marketing act together. I would appreciate if the Minister will indicate what plans he has to resolve that problem because quality production will be a key to the success of Irish grass-based production in the years to come, combined with effective marketing. If we do not marry the two we are going nowhere and we all recognise that.
Given our track record on marketing procedures I am not confident that we will be able to make up the difference necessary to compensate for the loss of the intervention system quickly enough to ensure a future for Irish farming. We will need to increase significantly the amount we market directly. Maybe the Minister has something up his sleeve. The Culliton report had much to say in this area. The Minister may have plans to ensure that the marketing arm of our State support structures is sufficiently effective and efficient to resolve problems that will become apparent as we decrease our reliance on intervention over the next three or four years.
The Minister agreed recently that beef cattle steers were not making money now, nor did they last spring. An R3 steer at 800 pounds carcass weight commanded £1.5 a pound this spring, amounting to £840 gross before the addition of subsidies amounting to £35, bringing the total price for an 800 pound steer to about £875. According to the tables which detail decreased reliance on intervention over the next three years and rates of compensation to cushion the farmer against price reductions in 1995, a price of 70p a pound will give an equivalent of £560 for an 800 pound steer. When one adds on premia such as the winter premium, the male beef premium and perhaps the extensification premium amounting to a maximum of £235, the price in the spring of 1995 for an R3 steer will be £795 to the farmer, £80 less than in the spring of 1992.
The Minister said that the farmers lost money in the spring of 1992. What is in it for farmers when with winter beef premium and even extensification premium which will not apply to many, in three years time with normal increases in the input costs they will be £80 a beast less well off for cattle coming out of the sheds? I do not know if farmers, particularly beef farmers, have done their sums and realise that an R3 steer of 800 pounds deadweight will be worth £80 less then, even with all the extra supports.
Is there a future for the Irish beef industry? I would like the Minister's reaction. These are the plain facts when the small print is analysed and farmers get over the bamboozling they have had in the last few weeks. I know the Minister will ask what it would have been like without these supports and that is a reasonable point, but if farmers cannot make money this year how will we have a viable industry if that scenario unfolds in three years time? This is of major concern.
The Minister regretted the fact that the position on dairy cows was not agreed, which would have been of enormous help to many dairy farmers throughout the country and is sorely missed. It would have made a huge addition to the success of the package if that could have been achieved. The Minister did his best without the support of other nations, apart from Luxembourg, in that area.
I think 712 gallons per cow at the moment is the national average yield. There is much hidden print here where dairy farmers will get caught. If they do not milk record in years to come and if they produce more than 712 gallons per cow, which the better dairy farmers now do, they will need certification from the Department to be paid for over 712 gallons per cow. Can the Minister explain the reasons behind this aspect of the Common Agricultural Policy agreement? Is it to ensure that all farmers enter into a national milk recording programme? I would support that, although initially there will be difficulties for small farmers who are not yet suitably equipped. But is that the ultimate aim? Will penalties be imposed in the next few years on farmers who are not part of the milk recording system? Again, the Minister's views on these points would be welcome.
Whenever I talk on agricultural issues, I think of Brendan Behan's reference. When giving an opinion on Irish agriculture many years ago he said that in Holland agriculture was a science, in England a hobby, and in Ireland a bloody misfortune. He put if more colourfully than that but parliamentary rules do no allow me to repeat the words he used to describe the Irish misfortune. We have come a long way since then and are going back a long way.
We have not become briefer in the meantime.
I can go for another hour so do not tempt me.
Do not terrify me.
The House is now sitting. The Senator must be rushing to go somewhere else, but he is supposed to be in the House and he may wait. If it is such a chore, why does the Senator not give the agricultural sector brief to someone else?
(Interruptions.)
What we are debating here today is of prime importance to the future for agriculture in this country. As I said initially, it will be some time before we play out in practice much of the theory before us. Problems will emerge as farmers read and get advice on the implications of the reform package, as they apply it to their own situation and as they work through the changes. I urge all who are interested in agriculture to give serious consideration to this package and I urge Senators who find it amusing that some of us like to put time and thought into contributions on our primary industry not to be so facetious and cynical. I am prepared to give all the time necessary, and to allow other Senators give all the time necessary to this subject. I compliment the Leader of the House who has assured us that this debate will continue next week so that every Member of the Seanad who wants to contribute may do so.
I represent a county that has enormous farmer indebtedness. Their indebtedness to financial institutions is a noose around the necks of Wexford farmers at the moment. Wexford farmers got into the dairy end of agriculture later than those of other counies, as a result of which when the reference year for the establishment of milk quotas was announced in 1983 many Wexford farmers were still only developing their milk production. Could the Minister, please, indicate whether he is still fighting the cause in Brussels of those farmers who built milk parlours and invested in plant and equipment to build up a 30 to 50 cow herd on the advice of Teagasc and who got caught half-way through their overall development plan to build up their production? Many farmers invested heavily on the basis that they would get a return from 50 or 30 cows, but before they could acquire the full number of cows they were cut-off by the 1983 reference year. This category of development farmers who were prepared to intensify and to increase efficiency and production, as we asked them to do at the time, should get preferential treatment now because repayments on their loans is crippling their enterprise. Many of them have been caught in a non-viable situation because they could not develop their quotas as they had planned and as their investment would have justified. I ask the Minister to look at that category of farmer.
Given that farmers are the primary guardians of our environment which is often forgotten, and given all the talk about environmentally sensitive areas and environmentally sensitive farming, perhaps we could have an indication as to whether there will be a national scheme, apart from the present pilot schemes to fund farmers in environmentally sensitive areas. I am talking about ESAs rather than ASIs. The present pilot schemes are successful; I stand to be corrected on that. There are many areas in Wexford that would benefit from ESA financial support to ensure that the environment is protected and if as a consequence farmers there are not as efficient or as productive as they might be by using other less environmentally sensitive methods the Government must make up the difference.
The environment is a concern for all of us and we must hand over land to the next generation in as good, if not better, a condition as this generation of farmers inherited it. Progress on ESAs could indicate when we might step into a national scheme as distinct from the pilot areas designated at the moment.
This reform package highlights that we can no longer depend on guaranteed prices for stored products and highlights the importance of marketing for the future of our agriculture and food industry. Our track record to date on marketing, despite efforts of Bord Bainne, CBF and various other arms of State, has been lamentable, especially in the light of our intervention history during the last ten years.
In conclusion, I ask the Minister to ensure a future for grassland production in this country. Farmers and farming enterprises deserve our support at this most difficult time, when farmers do not know what the future holds, find it difficult to make choices, even more difficult to consider investing and wonder if they can encourage their sons or daughters to stay on the land.
At this difficult time for farmers there is one area where we can stand above the rest in Europe and demand support, and that is for grass based production because the whole philosophy of the Treaty of Rome that has brought us to where we are today in the European Community was based on concentrating production in areas of natural advantage. Our natural agricultural advantage is grass. Much in this reform package militates against grass based production. Cheaper cereals, maize silage subsidies and our distance from the marketplace will all make it more difficult for Irish farmers with grass based products to compete on a level playing field. We must reward quality and we must invest heavily in marketing.
Time will tell whether this is a good package. Some of the euphoric reaction to it was premature and ill judged. Some of the comments of the prophets of doom were premature and ill judged too. Only time will tell whether this very complicated and important reform package will protect Irish family farms and commercial farmers. Only time will tell whether this present generation will be the last generation of farmers who got a chance and whether there will be any future for our sons and daughters on the land.
May I have guidance first as to the time allocation?
Acting Chairman
There is no time limit.
The Senator is restricted to one hour and a half.
Acting Chairman
The debate will continue on another day, but we will conclude at 4 p.m. today.
I welcome the Minister of State, Deputy M. Ahern to the House. I think it is his first time here for a debate like this and I wish him every success in his Ministry of Science and Technology, an area from which farming and agriculture in general have benefited over the years and I am sure that as more science and technology is made available to us agriculture will benefit in the years ahead also.
I congratulate the Minister for Agriculture and Food and his negotiating team on the successful outcome of the negotiations on Common Agricultural Policy reform. The outcome is better than expected and due in no small part to the leadership given by the Minister, Deputy Walsh, and to his knowledge of the needs of Irish agriculture at this critical time. When the original proposals were aired shock waves went through Irish agriculture because the proposals were not at all favourable. If they had been accepted, those proposals would have succeeded in putting many family farms out of business.
The new agreement provides considerable benefits for both producers and consumers and presents farmers and the food industry with an opportunity to penetrate into and compete in an expanding market of some 340 million consumers. Senator Doyle highlighted many of the problems arising from this new deal, and many of the questions to be answered and there is no need for me to repeat them. There are always problems initiating new proposals but I am sure they can be sorted out in the near future.
We will have to develop new markets which we neglected to do in the past relying too heavily on intervention. We must capitalise on our image as producers of good wholesome food produced in a clean environment. We can compete with the best in Europe. A noticeable feature of this deal is that it has produced a framework for reducing prices to consumers without lowering incomes for farmers. This should help the Irish food industry. The Minister in the course of his contribution set out his priorities during those negotiations, and I agree with them. They were the need to ensure that policy was modified in such a way as to give a more concrete expression to the basic principles of the Common Agricultural Policy laid down in the Rome Treaty, to protect the role of agriculture as the most important sector of the Irish economy — we cannot stress this often enough — to safeguard the income of farmers, to promote policy options which would result in the maintenance of the maximum number of family farms in the land, to protect the vital commercial element of our agricultural industry, to prevent discrimination against grass based extensive methods of production, to secure adequate and lasting budgetary resources and to seek to ensure that any reform package agreed would be secure in the context of an agreement under GATT. The last priority is important when we consider the negotiations we will be faced with in the near future.
I hope that we will hold on to what we have been granted, that there will be no change in what the Minister has negotiated and that American negotiators will not tell us that the subsidies paid to our farmers will have to be reduced further. I hope that will not happen because the Minister has negotiated a good deal.
We have witnessed uncertainty in farming circles for the past two years or so and it is good to see an end to this. Now farmers can plan their enterprise knowing the future shape of support and premium arrangements. Farm incomes will be stabilised and the contribution of the agriculture and food industry to the well being of our national economy will continue and may even improve in the years ahead.
On the implementation of the Common Agricultural Policy reform package, producers will derive a greater percentage of their incomes from direct payments and they will see a more equitable distribution of the community's resources among producers than in the recent past. As a result of the negotiations, direct payments, headage and premia to Irish farmers will increase by £340 million to exceed £620 million per year. Farmers can now react positively by increasing their productivity and will also benefit from a much more market led approach which will be adopted by the processing sector. Among the sectors that will benefit under this new reform of the Common Agricultural Policy will be the beef sector.
The Minister has outlined the premia to be paid to producers of steers over the next number of years. While the intervention price for cattle will be reduced by 15 per cent in three stages beginning in 1992, the premium will compensate producers and at the same time tackle the long-standing seasonality problem.
As anybody who has been involved in Irish agriculture knows, seasonability has been a problem for beef producers for many years. We have all witnessed the stampede at marts and at factories in November, December and January, the months in which farmers are usually marketing their cattle. Farmers had to be out on the road, sometimes at 2 a.m. in order to take their place in the queue at the mart or at the factory. I hope these changes will put an end to that problem. Farmers may in future be paid up to £237 in premia on their cattle compared with the present £35. That is a great improvement and should help the farmers to produce good quality cattle. We have the best land and environment in the world for producing good quality beef, and I see no reason our farmers would not do so under this new scheme.
BAC, or angel dust as it is more commonly known, has been a problem in the past. We should continue to be very vigilant, because some cowboys are prepared to take chances and this will give the beef industry a bad name. I do not want to see that happen. BAC problems led to a reduction in the consumption of beef in the past and I do not want to see that happen again.
I wonder if there has been an improvement in the Middle East market? The Middle East was a great market for our cattle up to the time of the Iraq War. I wonder if there has been any improvement in those markets, and what is the situation now.
There is a vast improvement in the suckler cow premium and many people will take advantage of this scheme — an increase from £52 to £150, a remarkable increase. I hope this will not lead to a recurrence of the situation which arose some years ago when we had so many scrub bulls. I do not know what controls are in force in that area, but I hope farmers going into this scheme will be vigilant and will aim at producing a quality animal that is easily sold at the market or to the factory or wherever, and for which they will get the best price. I hope they will not go into the scheme for the sake of grabbing the few handy pounds and flooding the market with inferior cattle. That would be a total loss.
I am mentioning the main features of this package of reform measures which the Minister has negotiated. The terms negotiated for the milk quota system are very good compared to the original proposals. Our policy should be to aim to safeguard the basic principles of the existing quota system and ensure that the other major producing countries adhere to similar restraints. That is very important because we know we are not the biggest blackguards in this area. It is the factory farms which create many of the problems. Any quota surpluses should be given to smaller producers. It is important that the support mechanism at present in place be maintained particularly since we export 75 per cent of our dairy products. Export refunds ensure a viable return from our exports to Third World countries. The value of the export refunds currently represents about 64 per cent and 41 per cent of the return on butter and skim milk powder, respectively. Any reduction in the value of the export refunds would, therefore, have serious consequences for commodity prices and producer returns in the Community as a whole.
This situation in Eastern Europe is having an adverse effect on the dairy industry because cheaper dairy products are available on the markets there. There is a great urgency for our dairy industry to rationalise its processing capacity into more efficient units and to reduce dependency on commodity products.
The take up this year by Irish butter of over 50 per cent of total Community purchases into intervention highlights our dependence on the intervention mechanism and shows that we are completely out of step with our fellow Community members. Fundamental restructuring is required in the dairy industries in order to eliminate the cost penalties which result from excess capacity and to provide the optimum conditions for diversification of our product portfolio. This has often been talked about in the past, but very little has been done about it. The long term success of the dairy industry will depend on how the challenges can be overcome. I believe that our dairy industry can meet that challenge and compete successfully with our competitors in Europe.
I would like to have more information on some of the new items in this agreement. One of those is the retirement scheme, 75 per cent of which will be funded by the EC and will improve the rate of land transfer to younger farmers while adequately providing for the security of the farmers willing to participate. I understand this scheme will now operate between father and son or father and daughter, whereas the old scheme did not apply to transfers within the family circle. That is a major breakthrough. We should all be glad to see it because there has been a tendency in this country for farmers to hold on to their land and, in some cases, the transfer to their sons or daughters took place very late in life. This scheme will be a good move but I would like to have more information on it, to see how it works. I am sure the Minister will supply us with that information as soon as it becomes available to him.
At the outset, in all those schemes, there is always confusion when it comes to filling in application forms and so on. I hope the application forms will be simple so that everybody will be able to understand them, because, in recent years we have had the problem of farmers not being able to fill in application forms, making mistakes and then being disqualified from receiving grants. I do not want to see that happen on this occasion. Full use should be made of the Teagasc offices to ensure that farmers and farmers' representatives are briefed on the complexities of these application forms to make sure farmers understand them. That will be helpful to the Department in processing those applications. There will be less confusion and dissatisfaction and everybody will be much happier.
I congratulate the Minister, Deputy Walsh, and his team on a job well done. We will look forward to seeing the implementation of those new Common Agricultural Policy proposals which he has negotiated for us. I am sure that Irish agriculture and the food industry in general will benefit from all those proposals in the years ahead.
I suppose I have an obligation to be brief after the way I behaved earlier. Indeed, I sincerely hope I will measure up to that obligation.
In relation to the Minister's speech, the best was kept until the end. He seemed to be turning philosophical in the last few lines of his script when he talked of it being impossible to please some of the people any of the time. This is true. I sincerely hope that statement arises from reflection on political matters rather than from an exhaustion from them.
When he left aside his script and began to speak off the cuff, he also referred to very interesting matters. He spoke of the responses which the Department of Agriculture and Food now proposes to make to the new era and new realities we are facing. In many ways that is really the question: what can be done? If there is to be worthwhile change then we must reorientate our whole approach to agriculture and our commitment to quality and to markets but from what I heard earlier in this debate I do not see any great evidence that that will happen.
The debate so far seems to have been centred around the problems of farmers, the price of bullocks and the difficulties of cereal farmers. I do not want to diminish those things, they are of considerable significance. The number of farmers is getting smaller and smaller, agriculture continues to be a declining segment of the economy even if it is still a very important one and unless we can bring ourselves to think realistically in terms of developing the food industry, the situation will continue to worsen.
Quite simply, our record in relation to the food industry has been abysmal. The changes in the Common Agricultural Policy, particularly in relation to intervention, can be expected to create a beneficial stimulus in relation to the food industry, but we have a long way to go. Considerable expense and effort will be required in order to develop a competitive industry on an international scale. The Culliton report is not particularly optimistic.
There are matters that must be faced immediately. We must begin to encourage consolidation in the dairy industry. Senator Hussey spoke about that and I agree with what he said. It is absolutely essential that the main co-ops should be consolidated. There is room for perhaps three major co-operatives in this country and indeed the number which will be viable in the longer term may be rather less than that. That is the type of capacity and scale we are talking about if this country is to be able to develop a food industry which will be able to put products onto the European and world markets and to have those products clearly identifiable as Irish.
In relation to Irish food on the European market, the reality is that it is simply not there. It does not exist. There are no worthwhile, serious, Irish food products in Europe and anyone who doubts that for a second has only to go into supermarkets in Europe and look for some Irish branded products. You certainly will not find Denny's sausages or other Irish-made sausages there. We have failed abysmally to put those products on the market. I do not want to diminish the difficulties of doing that, but we just have not been rating. The only way we can do so is by consolidation, particularly in relation to the dairy industry.
The meat industry is an entirely different matter. As far as that is concerned we are at square one; perhaps we are not even at square one, but in a terrible minus sitution. As far as the meat industry in this country is concerned, things can only get better. We seem to have bottomed out and I cannot visualise how things could get worse.
We have had the abuse of angel dust. We have had the apparently never-ending saga of the Beef Tribunal and the awful things which are being revealed there, meat industry leaders chasing around hotels and offices in middle eastern capitals following Irish Ministers and trying to pin them down. That is not the behaviour of a serious meat industry. We sometimes lead ourselves into the illusion of thinking that this industry will be able to compete on international markets. Nothing could be further from the truth. This belongs to the Stone Age era. It is absolutely dreadful.
During the past two weeks we have had the cucumber poison incident. Cucumbers had to be taken from the supermarket shelves in this country. I do not want to pretend that accidents cannot happen but after a fortnight, we still do not seem to have fully tracked down the cause of the trouble. We still cannot establish, with certainty, the origin of these cucumbers. The most elementary forms of quality food assurance would have allowed us, in the first place, to track down the source of those poisonous cucumbers. If we were even half serious in our effort to preserve our image as a producer of quality foods, we would have cracked the analytical problems of sorting out the toxic materials in these substances. If the report which apparently was given by the Minister in the other House yesterday, which was to the effect that these cucumbers were contaminated by a chemical which is used in their production, is true then it is appalling that we have not been able to identify that problem in a fortnight.
These are the realities of the Irish food industry. The Americans refer to "cognitive restructuring" in relation to football teams that were not playing well. There is a very great need for some cognitive restructuring in relation to the whole Irish food industry.
Senator Doyle spoke about the necessity to reward people who produce quality products. I could not agree more. We have failed to do that. We have certainly failed to put quality as a premium. We continue to talk about it but, when you get down to brass tacks most people simply do not appear to be interested. They seem to believe there are short-cuts around everything and you can somehow talk your way out of every problem.
I agree with what Senator Hussey had to say about the difficulties of seasonality. At one time there was a 12:1 ratio between the peak output and the minimal output of milk in this country. That may be all right for farmers, but it creates dreadful problems for people who are trying to process that milk efficiently because it requires enormously unnecessary expense in a plant to cope with the peaks, whereas if production could be at an even level throughout the whole year it would be easier.
In the longer term, as far as the Common Agricultural Policy and farmers are concerned, it is quite simply a matter of damage limitation. It is a matter of prolonging the agony. Things will get worse. The present package will create very serious difficulties for cereal farmers and, while the effects on the dairy and beef farmers are not so significant, they are indicative of the shape of things to come. We are now getting into quotas. That, in turn, means that we will limit our output and unless we are prepared to change radically, which I can see little sign of, then that means we will have great problems.
As for the "cheque in the post," I am not particularly impressed about the viability of this in the longer term. I do not believe that such subsidisation will continue. There are very serious problems in Europe. On television any night you can see people involved in a terrible war in what used to be Yugoslavia. Those problems will inevitably work their way into the centre of Europe. They will work their way through the system and will create demands and pressure on the money that is available. In the longer term I cannot see that money being available for countries such as Ireland by means of cheques in the post. That whole system will be whittled away.
Senator Hussey mentioned Teagasc and I am glad he did, because Teagasc seems to be one of the forgotten aspects of the farming industry. It is being pulled apart. It has been at the receiving end of a winding down process. Morale was first of all sapped and then the resources were taken away. We are doing all this in the belief that we should develop quality products and the development of quality products must ultimately be centred around developments in technology and the capacity to master it.
How can we expect to do that while, at the same time, we are winding down the basic technological support for the agriculture and food industries. Let nobody tell me that Teagasc is not demoralised. The people I met in the headquarters in Sandymount Avenue, are waiting for the axe to fall, wondering if they will finish up in one of the western centres, be landed in Fermoy or, dare I say it, become part of the new Environmental Protection Agency headquarters which Senator Doyle has informed us should be located in Wexford, and I am sure she is pushing ahead to see that that becomes a reality.
There is nothing wrong with living in Fermoy.
The Minister of State is leaving now.
He is off to arrange to have a transfer to Fermoy. Is it in his constituency?
(Interruptions.)
We do not have much farmland in the constituency I am interested in. There is only one farmer I know of, and he has retired. I can speak with a considerable detachment, free from the restrictions of having to worry about the farming lobby.
The Minister did not make much reference to the benefits which the changes will bring for consumers. I am glad he did not, because that seems to be based on an acknowledgement of the reality that the benefits will be trivial, and will be so in the longer term. There is not much in this package of reforms for Irish consumers. Above all I would hope that what has happened would create a stimulus and a drive among people, particularly the farming elements and those in the food industry, to recognise that the way we are going really does not have a future. We must start thinking in terms of developing products and getting them on markets. That is expensive and difficult to do. Our history and the behaviour which is now being exposed in the Beef Tribunal should leave nobody in any doubt about the enormous hills and mountains we have to cross.
I welcome the Minister of State, Deputy Hyland, to the House this afternoon. He may be relieved that he has missed Senator Upton's treatise on cucumbers which I am sure he has been hearing from many quarters over the past couple of days.
You are all right as long as you do not eat them.
They are not a vegetable to which I have an attachment.
The Common Agricultural Policy reform package which we are discussing is profoundly important because it will create a change in direction in Irish agriculture and farming. It will be a change in direction of a magnitude we have not seen since our original decision to join the Community in 1972. This House must give it careful and detailed consideration because it represents a very fundamental change.
It provides us with a challenge and a great opportunity to advance on the agricultural front and try to capture those markets which we have all talked about in this House and elsewhere over many years. In almost every debate since I entered this House we have mentioned the potential, which I do not question, for our food industry to capture markets. It will now be up to us to deliver because intervention — the cushion for the food industry for the past 20 years — will recede into the background and the market will make the decisions. It is a very selective and demanding market place.
A very aggressive, national and positive response is needed to cope with the challenges being presented to us.
It is obvious, and has been for some time, that we could no longer tolerate a situation where increasing quantities of food added to mountains which were building in intervention stores throughout the Community. That was not sustainable and had to be changed. Irrespective of one's perspective on the nature of the reform, it was inconceivable that that situation could continue.
The effect of the reform package on the numbers leaving the land is open to question. I am not sure that the trend which has existed for many years, prior to our entry and subsequent to our entry into the European Community, will be discontinued. I am not optimistic that one of the objectives of the reform package, which is to keep people in rural areas, living on their farms, will be sustained. I have doubt about that. I am not sure that trend can be reversed. It gives me no pleasure to say that. I hope a stop can be put to that flight from the land which in recent years has been of the order of 11 people a day.
I join with other speakers who complimented the Minister and particularly, his staff on the package which has emerged from Brussels. It is radically different from that originally put forward by Commissioner MacSharry. That needs to be said because there appears to be some confusion about that: the package is totally different. Its objectives are the same as the original presented by the Commissioner, but its detail is very different. Instead of the big reductions in national incomes we heard about, most independent observers say we can expect a benefit of about £70 million from the package. That is to be welcomed.
If we look back to the consternation created outside Dromoland Castle when Commissioner MacSharry announced a 35 per cent reduction in prices across the board, we realize this package is far from that original proposal. This package represents a very significant political victory for Commissioner MacSharry. At the outset, many people would have said his chances of seeing this package through were minimal. Irrespective of whether one welcomes the package or decries it, the significance of his political victory within the Commission is great. From that point of view, his tenacity is to be admired. I hope that when we advance to GATT he will be able to restrain his colleague, Commissioner Andriessen as well as he has managed to have his objectives carried through.
The first objective of the reform package is to reduce surpluses. That objective is likely to be achieved because it puts restraints on the amount of land that can be devoted to a particular enterprise and the amount of produce that can be produced on farms. It could be contended that the food mountains are not significant, because if one looked at what might be required in terms of a strategic reserve of food within the Community, we have 60 days supply, or perhaps a little more. That is not much of a cushion to have behind us in the event of a natural catastrophe. It must also be said that the morality of having so much food in intervention stores, while large parts of the world are starving, is questionable. Maybe the Community has not given a great deal of thought to that idea. Perhaps what is happening in Rio de Janeiro will awaken world consciousness to some of these matters.
The other policy objective must be to protect farm incomes and to a significant degree that has been achieved. Whether the production of farm incomes is consistent with keeping people on the land is another question, but compared to the original proposals farm incomes have been protected.
There has been much talk about the national benefits that will follow from beef and suckler premia. I do not dispute that there will be advantages, but they will merely compensate for income lost through price reductions. From that point of view the position of a farmer's income is fairly neutral.
As a cereal producer I worked out the consequences for me as a farmer and discovered that my income will be reduced. If I were the national average farmer producing the national average yield in the typical field in a region, in 1995-96 my situation would be exactly the same as it is today. However, if I were producing yields well above the national average, the fact that the compensation is based on average yields means that I would lose out, whereas people at the bottom end of the scale would gain. I will deal later with how we can devise a system whereby, as far as possible, producers will be treated equally. It may not be possible to treat all producers equally; nevertheless, we must endeavour to do so.
The third objective of the Common Agricultural Policy reform is to make production more market-led and I believe that will be achieved. Intervention is increasingly becoming closed off as a market of first choice. Produce will be forced on to an open market where the consumer will make the choice. From that point of view this objective has been fulfilled.
The fourth objective of the policy is to ensure that the consumer will benefit and I agree with some of what Senator Upton said in that regard. It is questionable whether the consumer will benefit to any significant degree down the line. Cheaper food prices should benefit the consumer but history teaches us that as food prices decrease the price of labour, energy and all the other inputs associated with producing an added value product increases, so the net benefit is reduced.
On a basic food commodity such as bread I would expect the consumer to benefit. One of the difficulties in the past was that consumers abroad benefited from our export policy but the improvements in the package have alleviated some of my concerns about the original package.
There is a change in direction from supporting the product unit price to giving direct income support to farmers and that is welcome. We know that in supporting the unit price a great deal of the money which was intended to end up in farmers' pockets ended up in other people's pockets; the beef processors, the middle men and others reaped the benefits rather than the primary producer. I welcome the fact that direct payments to farmers will be improved instead of using money to fill intervention stores and give benefits to people who should not receive them from the system.
It is also important to distinguish between the effect of the package on the farming sector and its effect on the food industry. They are two separate elements and considerable time has been spent during the debate dealing with the effect of the package on the farming community. I would not contest those effects but there are different effects for the food industry. The package will make life in the food industry more difficult, competitive and market-led. We will have to face up to the realities of this competitive marketplace which will be ruled by consumer choice. That is the big issue which the Government and the country will have to address over the next few years as the effects of the package sink in.
One of the difficulties about giving premia to livestock farmers is that there is a tendency on the part of the farmer receiving the premium to go to the livestock market and discount the premium by putting it into the market. The national benefit will remain if extra money comes from outside, but the distribution of the national benefit then becomes highly questionable. Again, some of the people who are the primary target for the benefit may not be the beneficiaries. The benefits may go to cattle tanglers or other producers in the chain. That is a reality and we have to put up with it.
One of the main concerns in regard to the package is the competitiveness of our grass-based production. Much of the compensation to the livestock sector is predicated on reducing cereal prices by 29 per cent and transferring that benefit to those who are feeding grain to livestock. That puts us at a disadvantage because we feed far lower quantities of grain to livestock than our European competitors. At the beginning of the debate on Common Agricultural Policy reform, Pat O'Neill, the general Manager of Avonmore, made the point that if prices were to decline in the cereal sector of the order of 30 per cent the benefit to the French milk producer would be approximately twice that to Irish milk producers.
Senators will recall the era of barley beef when the livestock at that time was produced in the east of England in huge industrial type feed lots because that was where the cheap grain was. There must be some concerns on the part of Irish agriculture that that type of situation could develop again, that we could find ourselves in a position where intensive livestock production is based where the grain is produced, in the Paris Basin, the East Anglia and in other parts of continental Europe. However, there are offsetting factors in that regard which have not been mentioned and they are to do with our green image, the fact that we have a production which is environmentally friendly which is based on grass production and which, if it is marketed properly, should be able to enjoy a price premium. However, that is a bigger question and is one we are going to have to address over the next few years. The competitive position of grass-based production in other countries continues to be a worry particularly, as was mentioned earlier, the subsidisation of maize silage to French intensive livestock producers. However, there are offsetting factors.
The opportunities for us are well known. There is a market on our doorstep in the Europe of 350 million people. After January 1993 goods and services will be able to move freely within that market and that presents us with the opportunity side of the reform package equation. It is unquestionable that the opportunities are there. If we looked at Ireland as Ireland plc. and set ourselves the objective of penetrating a market of 350 million people, we would surely regard it as a minimum achievement to be able to get 1 per cent of that market. If we were to secure an additional 1 per cent of that consumer market, the benefits to this country would be incalculable.
We spoke earlier about the Maastricht Treaty and Denmark's position. Denmark is one of the more prosperous countries in the European Community and was founded on the basis of producing for a large European market. Denmark is a model in that respect. That is the direction to which we will have to look. I do not think it is the Government's responsibility to sell the produce of the farms of Ireland. We did that once with the wheat hoard when we sold produce to the Government and then it was up to the Government to dispose of it. That is not the case in this instance, but the Government must assist those who are prepared to go out and sell their produce on the competitive market and in the new competitive environment which is thrust upon us.
There will be a demand within that market for natural foods, foods we can represent as being of the highest quality. We have the capacity to do that, but the people who use products like angel dust must be told in no uncertain terms about the damage their greed is doing to their farming colleagues. They must know that in this competitive environment there are people who will use every opportunity to undermine the image of Irish produce — that is being done calculatedly in the British tabloid press and elsewhere — there are people who want their share of the market and are prepared to use any means at their disposal to undermine the competitiveness of Irish produce. The challenge is to be competitive, and how we can be competitive.
I want to speak on the second part of the Common Agricultural Policy reform agenda — the General Agreement on Tariffs and Trade. As we move on to that agenda we are in a position to argue consistently that what we have done in terms of Common Agricultural Policy reform makes it easier for us to reach an agreement within GATT. The most critical aspect of the GATT talks from an Irish point of view is to have the income support measures and the compensation put into the so called green box; that cannot be underestimated as an objective because under the GATT rules it has been accepted that income support will fit into GATT. In other words, when they are calculating these things called aggregate measures of support — which measure what one country gives to its industry compared to another — provided they do not distort the market, they can be left to one side. This will be a critical factor from an Irish and European point of view. If the compensation is to be permanent — and that has been a repeated call from the farming organisations; they have reservations about the permanency of the compensation — the only way to achieve that is to ensure that it is left to one side when GATT is calculating how we support our agriculture.
Senator Doyle referred to the question of national distortions and how countries even within a Community which is about to embark upon an open, free, even market, can use domestic support measures to give disproportionate advantages to its own agricultural industries; the VAT refund is a classic example of that, in Germany and Italy there are VAT refunds of the order of 11 and 12 per cent, many times more than farmers are paying in VAT. Our Government must at every opportunity highlight these national distortions that are preventing us from competing on a level playing field.
We will have to become less dependent on intervention, which in one respect, will be very useful to us. It has generated within us as an agricultural society a dependency mentality, that all we have to do is to produce and then put the produce into intervention. The fact that we will not have that outlet any longer will be a positive help in focusing our minds on what we will have to do to secure the necessary markets to sell our produce. I am not criticising people for using intervention in the past.
If the dairy industry, the co-operatives, the beef barons and the processors had intervention as their most profitable market, they used it. They are dictated by commercial considerations, just like anybody else. That led us to the point where reform was required. It is the responsibility of Government to assist the drive on overseas markets. I am sure the Minister is familiar with the recommendations in the Culliton report which I hope will be advanced so that food industry can develop.
Since the Minister came home with this reform package the Irish Creamery Milk Suppliers' Association have been consistently telling us how terrible it is for dairy farmers. I understand there are difficulties for farmers as a result of this package but we have to get over this dog in the manager attitude and this knee jerk reaction. I have not heard anybody at any stage offer an alternative to the reform package in its broad terms. There were arguments about detail and I would have subscribed to those arguments but nobody at any stage said that agricultural reform should not take place.
Deputy Bruton offered an alternative, while agreeing reform needed to take place, down in the Senator's constituency not long ago.
Senator Dardis, without interruption, please.
Thank you, a Chathaoirligh, I appreciate your protection. In general terms, there were differences of emphasis but everybody agreed something had to be done. Something has been done which is far less painful than what was originally proposed. Now we have this consistent attack on the reform package without proposing alternatives. The point that needs to be made is that it is now in place and we must live with it.
What will we do now to ensure that Irish farmers continue to live on the land of Ireland and sell their food on the overseas markets? Common Agricultural Policy reform and Maastricht have nothing to do with one another. Any farmer who is dissatisfied with the outcome of the Common Agricultural Policy reform package must not use that as an excuse on 18 June to vote "No" to the Maastricht Treaty. The Common Agricultural Policy was instituted long before the Maastricht Treaty. There is one reference to the Common Agricultural Policy in Article 3 (e) of the Treaty: "a common policy in the sphere of agriculture and fisheries;". Title XIV — Economic and Social Cohesion — Articles 130a and 130b of the Treaty speaks about reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions, including rural areas. That is the only reference to the Common Agricultural Policy in the Maastricht Treaty. As I said, anybody who is dissatisfied with the outcome of the Common Agricultural Policy reform package must not use that as an excuse to vote "No" on 18 June. They are two totally separate issues and they should not be confused but there is confusion in some farming circles about that matter. On that score we can argue that if the Community's objectives under the Treaty about cohesion are to be consistent, it must look to supporting agriculture within the Structural Funds through other means, through the LEADER Programme and through the type of initiative of which the Minister is aware in his own constituency. These are the vehicles which must be advanced in terms of bringing that cohesion under Maastricht to fruition.
Senator Doyle dealt in detail with the individual enterprises and there is no need to go into that in any detail but I want to talk about the cereals regime and how the average reference yield will be arrived at. There is a suggestion that there will be an average yield for winter cereals and for spring cereals. If the distortions about which I spoke earlier in respect of the high and low yielding farmers are to be eliminated so that each group does not gain at the expense of the other, then each crop must have a reference yield. In other words there is a reference yield for winter wheat, spring wheat, winter barley, spring barley, and so on. I strongly recommend that in working out the detail of the package over the coming months the Minister and his colleagues try as far as possible to eliminate those distortions by the measure I have advocated.
The matter of reference yield will be crucial in terms of the compensation which will be available to cereal growers. A multiplier will be used to work out the compensation; there is the reference yield and there are the standard payments which will vary yearly over the next three years. It is crucial that the reference yield will be of a significant size to give compensation to average producers and to cereal producers in general and this must be sorted out quickly. If I am going to make decisions as a cereal grower about what crops I grow next autumn I will have to make decisions in July or August of this year. Therefore, there is an urgency about working out the detail of those figures.
I welcome the fact that the quotas will be the property of the producers rather than the landowners. It is right that people who have invested in livestock and developed their farms should be allowed to operate efficiently.
What can we do to advance the industry in the context of the reform? Certain measures can be taken at domestic level to bring us to the point where we can exploit the markets about which we have spoken. The obvious one is tuberculosis in livestock which must be tackled. We can argue on another occasion when discussing payments for livestock on the TB scheme as to how that should be dealt with. Animal health and mastitis must be given priority. As Senator Upton stated, we cannot over emphasise the need for proper research and development to back up the industry, particularly as the marketplace will now dictate the choice. No commercial enterprise or large food company would go to the market with their produce without adequate research and development. There is a lack of commitment to research and development in the agriculture and farming sectors here. It has been eroded over the years and it is now on its knees. My plea to the Minister is to rectify that situation because it is the only base on which we can build for the future. We need the expertise which will allow us to develop our products and allow farmers to avail of the technology they will need in their fight for survival over the next few years.
In response to the Common Agricultural Policy reform package it is fundamental that we have adequate research and development. We have talked about our image and the fact that our food industry will benefit from our green environmentally friendly agricultural sector. I believe it can; there is a growing market in Europe and elsewhere for products at that nature. Those who indulge in illegal practices must be sorted out because such practices have nothing to do with advancing our market share.
If we were to go beyond that point we would then get to the stage of having some kind of quality assurance. A quality assurance scheme operates for our liv-stock trade, but I would go beyond the point where the factories are the arbiters of quality. An independent body should be set up to establish quality parameters which would put the stamp of approval on Irish beef, butter and so on, stating that we stand over this product which will sell on any market, that we are confident it is the right quality product for the market.
We should then consider codes of good practice for environmentally friendly products — not that most of our production is not environmentally friendly; it is — within which most commercial farmers can operate and the food industry survive and which establishes nationally the quality of our produce. I recommend to the Minister that a national development board for the food industry be established. There was a reference to this in the Culliton report and it should be seriously considered. I also recommend the establishment of a council for rural development. This is an area close to the Minister's heart. It is unquestionable that under the Structural Funds more money will be devoted to that area, therefore, there should be a formalised system to regulate that side of the business.
There should be a national development plan and the establishment of a national development board as advocated in the Culliton report, to give direction to the industry. There should be properly funded research and advisory backup at production and processing level and there must be adequate State investment in research and development if producers' incomes and competitiveness in the industry are to be maintained. The food industry have a responsibility to make their own contribution to establishing Ireland's reputation for reliable, high quality produce on international markets and their standard must be as high as those they demand from the suppliers to the industry.
I share the general disquiet about the duration and cost of inquiries into the food industry, but that does not mean they are not necessary. They are necessary; that money would be well spent if it were to contribute to establishing the authenticity of the quality of the produce we export. Some people in our society advocate a sort of conspiracy of silence on inquiries of this nature and the use of material like angel dust.
They believe we should not talk in public about illegal growth promoters or the use of illegal substances as it is damaging our industry. It is quite the reverse. To establish the quality of our produce, it is necessary to highlight these practices and to root them out. The codes of practice for production and processing could be used to reinforce the reputation of our food industry both domestically and on our export markets.
In respect of organic products, a certification system would add to the market strength of our green image. I realise organic growers follow a procedure for establishing the veracity of produce but that could be built on. One of the difficulties with organic farming — and I am sure the Minister is aware of this — is that in the three to four year period required to transfer from being a conventional farmer to an organic farmer, it is extremely difficult to maintain income because the volume of production drops but the price does not increase to compensate. A system should be devised to allow people to transfer from orthodox commercial production to organic production without incurring a financial penalty. Scandinavia operates such a system; therefore there is no reason it could not be done here and it would not be very costly.
In February 1991 the Progressive Democrats issued a discussion document on Common Agricultural Policy reform. We started talking about reform as far back as 1991 and my main concern at that time was that commercial farmers would be so disadvantaged they would give up and go back to low levels of production. I am happy to say that the fears I had in that respect have been greatly allayed by the final package from Brussels. In the case of cereal growers, one of the huge disadvantages they would have had was a 230 tonne ceiling on cereal production and obviously any reasonably commercial cereal grower would be at a major disadvantage. I very much welcome the fact that the ceiling has been removed and that the livestock headages have been adjusted upwards, so that at least the commercial producers, who will be the basis of the dairy and beef industry will be able to operate successfully.
When is it proposed to sit again?
It is proposed to sit at 10.30 tomorrow morning. The statements on the Common Agricultural Policy will resume at a later date to be agreed with the Whips.