Seanad Éireann debate -
Thursday, 30 Jun 1994

Vol. 140 No. 18

Milk (Regulation of Supply) Bill, 1994: Second Stage.

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

Minister for Agriculture, Food and Forestry (Mr. J. Walsh)

The purpose of this Bill is to provide for the dissolution of the Dublin and Cork District Milk Boards, for the sale of their ancillary business and for the establishment of a new National Milk Agency.

Before addressing the specific provisions of the Bill I would like, if I may, to say a few words about the background to this measure. The Dublin and Cork District Milk Boards were established in 1936 and 1937 respectively by Orders made under the Milk (Regulation of Supply and Price) Act, 1936. The boards' primary function was to ensure an adequate all year round supply of milk for liquid consumption in the country's two biggest urban areas. This was achieved through the boards' power to ensure that producers received a minimum price for their milk. Prior to 1936 the producer price of milk had occasionally fallen below the cost of production leading to shortages in supply during the winter months. The milk board regime provides for a "production district" from which dairy farmers supply milk and a "sales district" in which the pasteurisers and distributors must have a registered premises in which to prepare milk for the consumer. In Cork the sale and production districts are the same — an area within a radius of about seven kilometres of the city centre. In Dublin the sales area is Dublin city and county, together with the urban district of Bray, while the production district comprises most of Leinster.

Only milk supplied by a registered producer to a registered pasteuriser could lawfully be used in the preparation of milk for liquid consumption within a board's sales area. In times of scarcity milk could, of course, be brought in from outside the production district, but this was subject to licence. While the board system had legal effect only in the Cork and Dublin areas, it formed a model for the arrangements which applied in certain other areas. The system worked well over the years and despite the pronounced seasonality of milk production in Ireland, it ensured an adequate supply of milk for liquid consumption throughout the year. It is generally regarded as having been a major contributory factor in Ireland's high level of milk consumption. However, following the receipt of complaints, the European Commission formally notified the Department of Agriculture, Food and Forestry that the boards' regulatory activities were contrary to European Union law. I suppose that I had better express an interest here in that the main complainant was myself.

Mr. Farrelly

Is Minister Fitzgerald there?

Mr. J. Walsh

The restriction of access to the market for drinking milk in their respective areas to registered producers, processors and distributors located in the areas concerned, the subjection of the marketing of milk from outside those areas to a licensing system, and the maintenance of an arrangement establishing a minimum producer milk price were, in the Commission's view, not in accordance with the common organisation of the market in milk and milk based products in Article 30 of the Treaty of Rome. On the advice of the Attorney General it was decided not to challenge the Commission's opinion. Nevertheless, it is very important that the supply of milk for liquid consumption in Ireland should have some form of regulation because, due to the highly seasonal pattern of our production, a complete laissez-faire approach could result in shortages during the winter months. Accordingly, the Department entered into consultations with the European Commission about alternative arrangements which would be in the best interests of both producers and consumers and would be within European Union law. The central provisions of the Bill now before the House are the result of this process.

Both the central provisions of the Bill and the consequential provisions have been the subject of consultation with the various parties affected. There is a very high level of support for the measure on all sides in the industry and I am satisfied that the Agency, which will be financed entirely by the industry itself through a statutory levy on milk sales, will ensure the orderly development of the market for milk for liquid consumption.

The production, processing, marketing and distribution of milk for direct human consumption is important to the continuance of a strong and vibrant dairy industry. The drinking milk sector provides a stable outlet for about 10 per cent of our total milk production, good returns for producers and high employment levels in distribution. There are at present some 4,500 producers supplying 39 pasteurising establishments with milk to a retail value of some £300 million per annum. There are about 5,000 persons employed in its collection, preparation and distribution.

In addition to their statutory functions, the milk boards became involved in the provision of services to the dairy farmers in their respective areas to encourage them in the efficient production of good quality milk. These services included the artificial insemination of cattle, milk recording and mastitis control. As a result of this, the boards have acquired considerable assets and now employ some 125 staff. This ancillary business has declined somewhat over the last few years and this decline is reflected in the boards' financial position. In the four years from 1989 to 1992, inclusive, they lost a total of over £500,000 between them. It is not expected that the audited accounts for 1993 will show a reversal of that trend. The basic problem is that because of the decrease in demand for some of the services which they provide, the boards are now, by commercial standards, significantly overstaffed.

I should, I know, refer to the fact that this is the second time a Bill to abolish the Milk Boards and establish a National Milk Agency has been brought before this House. The previous Bill was introduced in November 1991 and completed its Second Stage in January 1992. I recall that occasion very well, when concern was expressed by various Members to ensure that both assets and staff were looked after in an orderly way. Accepting the concern raised here at that time, I undertook to do that. It has taken a considerable length of time to put things in place and obtain general agreement with the staff associations and unions. I am glad that that point has now been reached. But at that stage, negotiations with the boards' staff were still in progress. It was intended that before the Bill completed its passage through the House, such provisions relating to staff as might require statutory effect would be included in the Bill. However, the negotiations did not conclude until January of this year, when the staff voted to accept an agreement reached under the auspices of the Labour Relations Commission.

Broadly, the terms of this agreement are as follows: the five or six staff which will be required by the National Milk Agency will be recruited from among the milk boards' staff, provided that a sufficient number of suitably qualified candidates apply for these jobs. Some 50 staff will be offered voluntary retirement on terms analogous to those which applied in the Civil Service in the 1987-88 period while the remaining 70 or so employees will transfer with the sale of the ancillary business as a going concern. They will transfer with their existing terms and conditions of employment and these may be altered only in accordance with established industrial relations procedures. In the event of being made redundant through business failure or a further staff rationalisation programme on the part of the new employer, they will have the right to redeployment to the public sector. There will be no compulsory redundancy involved in the abolition of the boards. This has been voted on and agreed by the staff and their associations.

I now turn to the particular provisions of the Bill. Section 1 defines certain words and terms used throughout the Bill. Section 2 provides for the establishment, by ministerial order, of a National Milk Agency. The basic function of the agency is to ensure the availability to the consumer, at all times of the year and at a reasonable price, of supplies of good quality milk for liquid consumption. The agency will have a part-time chairman, appointed by the Minister, and will be composed of representatives of milk producers, processors, distributors, retailers and consumers.

Section 3 provides for the dissolution, again by ministerial order, of the two milk boards and the sale of their ancillary business. It also provides for the possibility of transferring the business to an interim board. The House will note that the Bill provides that the order, which abolishes the boards, will at the same time replace them with the new agency. My intention is that the ancillary business should be sold at just about the same time. However, as a precaution against any delay in concluding the sale, the Bill includes provision for an interim board comprising three ministerial nominees to take over direction of the ancillary business until such time as the sale is completed.

Any such transfer would be technically liable to stamp duty so it is necessary to provide in the Bill for an exemption in keeping with the realities of the situation, hence the reference in section 3 (8) of the Bill to the Finance Act, 1895. The sale of the business will be by competitive tender, in keeping with Department of Finance guidelines for the disposal of State assets.

Section 4 deals with the pension position of the boards' staff. Basically, it provides that once the boards are dissolved, the administration of their pension schemes will become the responsibility of my Department. It bestows power to amend these schemes. It thus provides, in accordance with the agreement reached with the staff, for enhanced redundancy and severance payments for temporary and seasonal staff who may be granted voluntary early retirement, to provide notional "added years" of service for permanent staff in the same circumstances thus enhancing their pensions and to provide for the possibility of spouses and children's benefit for former and present members of the schemes.

In this latter connection, it is necessary to amend the Milk (Regulation of Supply and Price) Act, 1961, and this is done by subsection (7). Since future pension liabilities will be borne by the Exchequer, thereby securing the pension rights of staff, subsection (8) provides for the taking over by the Exchequer of the existing pension funds.

Sections 5, 6 and 7 are at the core of the Bill. These sections provide that milk may not lawfully be sold for liquid consumption in the State unless it is produced on foot of a registered contract between a registered producer and a registered processor. There is provision for certain exemptions and prescribed penalties for contravention. There are also requirements that, in order to qualify for registration, a contract must provide that the raw milk supplied be at least up to the quality prescribed by law, be for a period of at least 12 consecutive months, include supply during the winter months and specify a price level adequate to satisfy the agency that ample compensation is being provided to the producer for maintaining production during the winter months.

The three substantive elements of the contract — milk of appropriate quality, all year round supply and adequate compensation for the producer — are all interlinked. Given the grass based, summer concentrated pattern of Irish milk production, the quality and continuity of supply during the winter months can best be assured by a regulatory system of the type I have described.

Section 8 provides for the payment of a levy to the agency in respect of every litre of milk acquired under a registered contract. The rate of levy will initially be fixed by ministerial order and may subsequently be adjusted by the agency with the consent of the Minister. The section also deals with matters ancillary to the obligation to pay the levy, such as the requirement to make proper returns of milk supplied so that the amount due may be calculated and the procedures to be followed, up to and including the cancellation of registration, if the levy is not paid. As I have mentioned, it is the intention that, by means of this levy, the agency should be completely self-financing.

Sections 9 and 10 make provision for records to be kept and returns to be made by registered parties to facilitate the agency in its work of regulating milk supplies. Section 11 distinguishes between information which may be published and that which must be kept confidential. Sections 12, 13 and 14 deal with matters such as the alteration of registration or its cancellation for reasons other than non-payment of the levy which, as I have stated, is already dealt with in section 8 and the admissibility of registers as evidence in the courts.

Sections 15 to 23 are classified as miscellaneous provisions. They make no new substantive provisions; their purpose is rather to provide powers and impose obligations to ensure that the preceding provisions in the Bill can be effectively and efficiently implemented and also to fulfil certain necessary legal technicalities.

The Schedule to the Bill sets out detailed rules applicable to the new National Milk Agency, many of which I have already covered in general terms.

I hope I have given a clear outline of the contents of the Bill and I commend it to the House.

Mr. Farrelly

I welcome the Minister to the House. He is looking rested since he got his curate successfully elected to Europe. I have no doubt that he will be paying greater attention to the problems of Irish farmers from here on.

I welcome this Bill. It is three years since a similar Bill was discussed. It was probably worth the time it took to deal with the matter of staffing. I hope the offer and the agreement that has been reached will be of some comfort to the staff, who have given excellent service to the milk boards, in the event of any of them being made redundant.

I note that producers and processors must be registered. This is right, I suggest that retailers should also be registered since they are part of the chain between the producer and the consumer. In order to achieve comprehensive coverage and protection for the consumer, it would have been a step in the right direction if it was necessary for retailers to register. I am puzzled to know what will happen in the event of a challenge to the agency to establish an appropriate price to ensure continued supply for the consumer and how the agency will decide on appropriate price.

Existing milk producers can have a variation of as much as 30p per gallon in their production costs. I foresee a challenge where somebody will try to prove that he or she could produce milk at less than the price obtained by the agency in order to get a chance to produce milk all year round. This would be more lucrative than seasonal milk production. I am sure thought has been given to this matter to ensure it does not happen. I am glad to note also that the Bill has received the general approval of all farming organisations and processors. I am not sure to what extent retailers expressed approval or disapproval of the Bill.

The Minister outlined the background to the Bill. Legislation to regulate the supply and price of liquid milk on the home market goes back as far as 1936. The Milk (Regulation of Supply) Act, 1936, ensures a year round supply of liquid milk, as the Minister stated. In recent years, due to EU legislation, it became apparent that existing milk boards would have to be abolished. This is the purpose of the Bill.

The main features of the new National Milk Agency will be: first, all dairies and liquid milk producers must be registered with the agency; I would like retailers registered also. Second, registration with the agency will require producers to meet specific technical standards and to have a written contract with a registered dairy, guaranteeing all year round supply. In addition, all such contracts must be registered with the agency. Third, the agency will be empowered to monitor the terms of the contracts to ensure that they do not contain provisions which would jeopardise the all year round supply of liquid milk. In particular, the agency will be empowered to refuse to register contractors which do not include a milk price sufficient to meet the costs of winter production. There will be some disputes about this issue in the years ahead. Fourth, the agency will be empowered to withdraw registration from producers or dairies which do not observe the terms of contracts.

The liquid milk market is worth about £300 million a year. Ireland has the highest level of milk consumption in the European Union and the second highest in Europe as a whole; consumption in Finland is significantly higher. Annual per capita consumption is 179 litres but if we make allowances for tourists it is probably nearer 150 litres. Total liquid milk sales in 1990 amounted to about 490 million litres. Sales reached their peak in 1984 and have declined consistently since then. While factors such as an aging population may have something to do with this, I feel there may other factors involved. It would be a pity if our level of consumption dropped to that of some European countries, such as Italy and Spain. This would be bad for the consumer, the processor, the retailer and, especially, the producer.

Whole milk natural or standardised fat level sales account for approximately 90 per cent of total Irish milk sales. This is out of line with sales in other countries. In the Netherlands, low fat or skimmed milk consumption now amounts to over two thirds of the liquid market. Taking the EU liquid market as a unit, the low fat milk consumption figure is now higher than the consumption figure for whole milk. Implications arise for the development of butter fat. We already have huge EU surpluses of butter fat and it now seems that consumers of liquid milk are showing a preference for low fat milk thereby sending more butter fat on to the market.

Based on the CSO household budget survey, the average milk bill is about 9 per cent of total expenditure on food. I was surprised it is so high but this is what the CSO figures show. For the average household of 3.5 persons, the estimated weekly cost of milk is about £6. This is double the amount paid for bread.

There has been some fun in the area of distribution in the past and I will be surprised if there is not more fun in the future. The real objective of the multiples, particularly Dunnes Stores, was to gain market share and we now witnessing the beginning of an inevitable and demanding campaign by the supermarkets to capture a much higher share. If the producers and the bottlers are disappointed with this development, they have only themselves to blame. This applies particularly to the processors. The processors gave a discount of at least 30 per cent to the multiples in order to gain market share. Having made what I would describe as exorbitant profits, Dunnes Stores, in their wisdom, decided to drop the price of liquid milk by 9p per litre. The immediate reaction of the processors was to deny liquid milk to Dunnes Stores. In effect, they were foolishly trying to force Dunnes Stores to continue to make exorbitant profits.

The consumer is surely entitled to milk at a reasonable price. Why should milk producers give a 30 per cent discount in addition to three months' credit and cold cabinets in supermarkets to the big retailers and not to poor people who get up at 5 a.m. to do door to door deliveries or to small shopkeepers. The producers' actions enabled multiples to continue to make exorbitant profits which, on the basis of my calculations, must have been of the order of £20 million a year. It is inevitable that milk retailers will expand in supermarkets and shops with fewer door to door deliveries.

Some people say this trend will reduce milk consumption but I am not sure if this is the case. I have conflicting figures from the National Prices Commission's report of 1979, the AFT report of 1984 and market research sources. Some of these figures indicate that the percentage of door to door deliveries is as low as 41 per cent but the trend here and in every other country is for an increasing quantity of liquid milk to be distributed to the retail trade. It is usually contended that a doorstep delivery network is essential to keep up consumption levels, particularly for high milk consumption countries such as Ireland, Britain and others. I have difficulty reconciling this argument with what I said earlier about Finland having the highest level of milk consumption in Europe. The Finns have not had a delivery service for a long time. Nevertheless, its consumption level is significantly higher than ours. In the US, where 95 per cent of sales are through retail outlets, milk consumption has increased in recent times. The overall decline in consumption per head in Denmark over the past seven years has been about the same as in Ireland, despite the switch to an exclusive retail system. I cannot, therefore, accept that reducing the proportion of milk deliveries to doors will result in a decline in milk consumption. There is a feeling that it will do so but there is no evidence to this effect.

The big retailers can get favourable credit terms and do not have to handle the milk; the processors deliver it to and fill the cold cabinets. The customer picks it up, takes it to the checkout and pays, but the retailer pays for it three months later. As I see it, the trend will be for more milk to go through retail outlets and less through door to door deliveries. However, some people, for one reason or another, will want to buy milk in small corner shops or have it delivered to their doors and we should ensure that they are catered for at all times.

The Minister may be uneasy about my conclusions on the price of milk. The margin between what the consumer pays and the producer gets is difficult to explain. It is difficult to calculate what the producer gets because of variations at different times of the year and different quantities. I estimate that the amount is an average of £1.05 per gallon. It is a simple process to pasteurise milk, to put it into containers and deliver it to shops. The consumer pays about £2.50 a gallon. I find it difficult to see how pasteurisation and retailing costs can command £1.50 a gallon. The farmer commands only £1 in real terms on average. The retail price of milk in Ireland was decontrolled, as the Minister said, following regulations in 1988 from the UK Government. The price per litre has gone up from 40p to 60p since 1985, an increase of 50 per cent. There have been major changes over the years. The cost of producing milk is extremely high. The multiples are making huge amounts of money and enjoy three month credit periods.

The Minister spoke about the appointment of people to carry out the work of the agency while it is being set up. I hope that when it is established they will not be treated like Mr. Jim Nicholson — I am sorry the Minister is not here to answer this — who was to be a member of the new racing board but was not appointed to it.

An Cathaoirleach

We are on a different Bill now, Senator.

Mr. Farrelly

This is the third Bill in the Minister's field in the space of a few days. We should ensure that the same type of thing does not happen when appointments are made to this board.

I welcome the changes which will be made. This process was begun in the Seanad three years ago and it is only coming to fruition now. I hope it works and that the Minister will come back here in 12 months or so to report on how the system is working.

Mr. R. Kiely

I welcome the opportunity to speak on the Bill. It is my second time to speak on this matter as I spoke on the last milk supply Bill which was before the House in January 1992. This legislation is most welcome and necessary. It provides for the establishment of a National Milk Agency to regulate the supply of milk for liquid consumption. The Minister stated that:

It is very important that the supply of milk for liquid consumption in Ireland should have some form of regulation because, due to the highly seasonal pattern of our production, a complete laissez faire approach could result in shortages during the winter months.

This legislation is very important. The real purpose of the Bill is to implement a Government decision to abolish the Dublin and Cork District Milk Boards, to sell their ancillary businesses and to establish the new National Milk Agency. The Dublin and Cork District Milk Boards were established in 1936 and 1937, respectively, under the Milk (Regulation and Supply) Act, 1936, in order to ensure an adequate supply of milk all year round in the country's two biggest urban centres of population.

Senator Farrelly mentioned door to door deliveries. In my area, which is very rural, there are extensive door to door deliveries. People are more conscious of hygiene now and they want quality milk delivered in the most hygienic conditions to their door. Forty or 50 years ago milk was delivered in churns. That is no longer the practice and there is now a demand for a more hygienic delivery of milk. When the Dublin and Cork district boards were established, people who did not produce milk were able to call to a neighbour and get milk in a jug. That was the system which prevailed then.

Prior to 1936, the producer price of milk occasionally fell below the cost of production causing shortages of milk in winter months. The milk board system was established to ensure that farmers were adequately paid to supply milk to urban areas. It is very important that the Irish liquid milk market is not left without some regulatory system because of the risk of a free for all system which would leave the market short of liquid milk in the winter months, as happened in some areas outside Cork and Dublin.

The Minister said this legislation is necessary to ensure that we have an adequate supply of liquid milk for human consumption available on demand. It is not easy to produce milk all year round. Before the 1936 regulations were brought into force, there were not the facilities to produce milk which exist now. We have modernised our system. Prior to that, people did not have milking machines and had to milk cows by hand which was hard work, especially in the winter months. Those producers had to be paid for producing milk 365 days of the year. That demanded effort and those who made the effort were adequately compensated and were paid a proper price which was determined by ministerial order.

The production, processing, marketing and distribution of milk for direct human consumption is vital for the continuance of a strong and healthy dairy industry. The drinking milk sector provides a stable outlet for about 10 per cent of our total milk production with high employment levels and good returns for producers. The Minister said:

There are, at present, some 4,500 producers supplying 39 pasteurising establishments with milk to a retail value of some £300 million per annum. There are about 500 persons employed in its collection, preparation and distribution.

It is important that we have a milk agency to regularise the production of milk for human consumption. The Minister also stated that:

There is a very high level of support for the measure on all sides in the industry and I am satisfied that the agency, which will be financed entirely by the industry itself through a statutory levy on milk sales, will ensure the orderly development of the market for milk for liquid consumption.

The functions of the agency include ensuring that milk is properly produced and that producers and processors are licensed. I do not think the operation of the agency will be expensive or that there will be a big levy. I do not know whether it will be the producer or the processor who will pay the levy but it will eventually come from the cow. It was once said that due to all the levies, if a cow had four teats the farmer would be lucky if he was left with one for himself by the time everything was paid for. The producer will have to be protected in this respect.

I am delighted that the problems which arose when this legislation was introduced in 1991 as regards the workers have been resolved to everyone's satisfaction. The Minister stated that:

At that point, negotiations with the board's staff were still in progress. It was intended that before the Bill completed its passage through the House, such provisions relating to staff as might require statutory effect would be included in the Bill. However, the negotiations did not conclude until January of this year when the staff voted to accept an agreement reached under the auspices of the Labour Relations Commission.

That is very welcome, It is great that this matter was resolved to the satisfaction of all involved.

It is the intention that the ancillary business should be sold at about the same time. The Minister stated that:

However, as a precaution against any delay in concluding the sale, the Bill includes provision for an interim board, comprised of three ministerial nominees, to take over direction of the ancillary business until such time as the sale is completed.

It should be emphasised that whoever the purchaser is, the ancillary business will continue as heretofore. It provided a great service for farmers. Milk recording, which is carried out by an ancillary business attached to the Dublin and Cork District Milk Boards, is vital for farmers.

I am also delighted to see that the Department is looking after the pension position of the boards' staff. It is very important to ensure that their pensions are protected.

I welcome the Bill which is long overdue. It is very important in a country such as Ireland, which is well known for its green grass and milk production, to have a regulatory system for liquid milk consumption; control over the producers, processors and retailers and to ensure that milk is available to the consumer.

Mr. Dardis

This is turning into something of a marathon.

Mr. Doyle

I agree with the Senator. I am waiting here for another Bill.

Mr. Dardis

We seem to have been spending a great deal of time discussing agriculture over the past two days. This Bill, which was originally put before us in 1991, is to be welcomed. I do not intend to oppose it — I would hate the Labour Members to have to make the decision which lobby they were going to troop through.

The Bill is not controversial. It is very important that we ensure that consumers have a regular supply of high quality liquid milk at a price they can afford. This legislation does not differ in any marked way from the 1991 Bill other than in the provisions relating to staff. I was one of those who raised serious questions about the staff at the time. They were in the public service and naturally valued the security that gave them and they were concerned about their future. It has taken two years to sort out those concerns, but that would not do in the case of TEAM Aer Lingus or Irish Steel. This matter has been sorted out satisfactorily and that is to be welcomed because it was the single biggest problem in the original Bill.

I note with interest that the definition of milk has changed since 1991; perhaps it is a sign of the changing technology. Milk now means "raw milk or heat treated milk" which are both defined. In 1991 milk meant "cow's milk in the form of whole milk, semi-skimmed milk, skimmed milk or any other form to which the Milk and Dairies Acts apply". I would have thought that the milk was pretty much the same now as it was in 1991 but perhaps technology has advanced to the point where it is not.

I am aware that the introduction of this measure was imposed on us by the European Union. It is worth recording that the EC Commission agreed in 1988 that a new National Milk Agency would be established to replace the Dublin and Cork Milk Boards. I said yesterday that the gestation of the Irish Horseracing Industry Bill had been leisurely, even by equine standards. In the case of this Bill the gestation has been so leisurely, that it almost did not happen at all.

The broader question is our compliance with obligations imposed on us by European directives in other areas of legislation. In this case the relevant Council directive is Directive 92/46/EEC which lays down the rules of production and the placing on the market of raw milk, heat treated and milk based products. While the Commission decision on the need to introduce an agency was made in 1988, the directive is more recent. However, even though this is a more recent directive, there is still a question about the length of time it is taking us to comply with EU directives in other areas.

I broadly welcome the legislation. Those who produce liquid milk, both the dairy farmers and the processors, have performed a valuable service on behalf of the State. It was and still is a very unsociable activity as it ties people to their farms at times of the year when the weather is very poor. Milk production must conform to very high standards and they have done that very well and faithfully over a long period. They are to be thanked for that.

The consumer is entitled to expect that the quality of the milk delivered to the door or bought in shops and supermarkets is of the highest standard. Liquid milk producers were among the first group of farmers to recognise the need for high quality and to consistently produce it. They have set a headline for producers of other agricultural commodities. The liquid milk producers have always recognised the primacy of the consumer. This message is only beginning to become readily apparent to producers of other commodities.

Seasonality is a serious problem in Irish agriculture, not just in milk production but also in the production of beef and other commodities. The producers of liquid milk who are frequently committed to producing during the winter months in unsociable conditions and at more expense to themselves, must be compensated for the extra expense and extra work involved. The payment of compensation is enshrined in the legislation and I want to impress this upon the Minister — that compensation must be fair and adequate otherwise the seasonality problem will become even more serious to the extent that we could envisage circumstances where supplies could be jeopardised.

I do not have any particular problem with the interim board but I hope it will not be like the temporary postman who remains a temporary postman for his entire life and never becomes a full-time employee. The composition of the agency is to be welcomed, particularly the fact that producers, processors, distributors, retailers and consumers of milk will be appointed. This broad spectrum of interest which includes the consumer is to be welcomed.

The Minister referred to the type of services which the milk boards provided and continue to provide. There has to be some concern about those services particularly in the context of the Single Market and freer movement of goods. There is a growing trend among the leading dairy farmers to import semen from private companies. I heard of this happening on several farms in the past year. This obviously impinges on the profitability of the milk boards and it is apparent from the Minister's remarks that they have been losing money. I do not know if they have been losing money providing bovine semen but that is a highly competitive business.

If mistakes are made in this area it can have serious consequences for the quality of the cows being milked, and possibly even the quality of the milk itself. It is extremely important that the boards be given the resources to ensure they are at the leading edge of cattle breeding in this country. They should be in a position to bring the latest technology to the country rather than leaving it to private concerns which may be less responsible and driven by baser motives than the milk boards have been in the past. I ask the Minister to monitor this area.

Door to door supply is traditional. The so-called milk wars had the potential to eliminate the door to door supply but it is a tradition which people want and there is a demand for it. I hope this activity will continue.

I do not envisage significant amendments on Committee Stage but we will study the Bill over the next few days and if there are any amendments, they will be of a limited form.

Mr. Calnan

I welcome the Minister of State, Deputy O'Shea and the Minister for Agriculture, Food and Forestry who introduced the Bill. The Minister is a fellow constituent and has experience in the dairy business. He was manager of a dairy in West Cork for some time and was involved in the marketing of the Clóna brand. I compliment him on his work when it was found that we were in contravention of some EU regulations. He highlighted the situation with the milk boards.

The milk boards served their purpose. They were established about 60 years ago when people who were not involved in farming — farming folk had a plentiful supply of good milk — took their "gallon can", although it was often only a sweet tin, and hiked out to the local farmer for their milk supply. Later the same sweet tins were often used to collect creamery milk for baking or feeding poultry. Although the boards served their purpose, we need a modern body such as the National Milk Agency to control and regulate the production, processing, marketing and distribution of milk. I am glad the agency will be self-financing.

Little has been said about the work of the milkman. We cannot miss this opportunity to compliment the milkmen who are out early each morning delivering milk in urban and rural areas. Small suppliers who supply small markets in a village or town provide a tremendous service.

While the National Milk Agency is responsible for the production, processing, marketing and distribution of milk, it also has an important role providing employment. About 4,500 people are involved in the production of milk and about 5,000 people are involved in its collection, preparation and distribution. Good quality milk is good for the health of the population, particularly children. Fresh milk that is properly produced and delivered is of the utmost importance. Although we often complain about the rain, our wet climate is responsible for the quality of our fresh milk. We should appreciate what God has given us.

I am glad the problem regarding staff has been resolved. The agreement reached under the auspices of the Labour Relations Commission was satisfactory to all concerned. I welcome the establishment of the National Milk Agency and I believe it will be successful in the maintenance of our milk industry. Senator Dardis referred to the direction we are taking. I know the direction being taken by our group in the Seanad. Mr. Cox marched through the dairying region of Munster and made his way to Europe without Senator Dardis and his party.

Mr. Kelleher

I must claim a double vested interest in this legislation. A member of my family is the present chairman of the Cork and Dublin District Milk Boards and I am a supplier of liquid milk.

I welcome this legislation. The milk boards were established in 1935 and 1937 respectively, to regulate the milk supply and they were very successful. They played a vital role in the regulation of the supply and quality of milk for consumers in urban areas. The boards have not only served the consumer well, they guaranteed farmers a certain price for milk above what would be paid during the summer months. That allowed the farmers to invest and expand thus guaranteeing a regular supply of high quality milk. This benefited the dairy industry throughout the country. The farmers in district milk board areas were pioneers in the use of modern technology.

The disbandment of the milk boards is a necessity. Their existence was in contravention of European legislation. The milk board areas are perceived to be lucrative markets and producers from outside those areas have a right to supply those markets. However, some words of caution are appropriate. If this new agency is to be a success — and I hope it will be — it must realise it is expensive to produce milk in the winter months. Farmers who have invested heavily in previous years have benefited from different price levels and if those price levels are deflated there will be disastrous consequences for the producer and the consumer. The high quality of milk could be undermined; the agency should regulate and control with that possibility in mind.

This Bill was initiated in the Seanad in 1991 but there were difficulties with industrial relations. I am glad these delicate matters were handled with care and consideration and that the Labour Relations Commission proposals overcame the problems. There will be no enforced redundancies and the staff will be deployed elsewhere.

The issue of cartels has been mentioned on a couple of occasions. It is an important issue, although it might be outside the remit of this Bill. The multiple stores appear to be toying with the idea of breaking the small retailer and door to door deliveries by milkmen. It is a lucrative market worth £300 million per year. However, if they succeed there will be disastrous consequences for the milkman, the small retail shop and the producer in the long term. Senator Farrelly quoted figures from Finland and said that the door to door milkman no longer provides such a service there. Perhaps that is because the milk would freeze if it was left outside the door for long. In this country, however, door to door deliveries encourage a higher consumption of milk. Having milk delivered to the door instead of having to travel to the shop for it is a useful service and it must be maintained. That sector should be allowed to compete for its share of the market.

One must query the motivation of the multiples in initiating milk wars. It is a lucrative market. However, the co-ops and producers who are shareholders in most co-ops have made a mistake. All parties should be on a level playing pitch. It is hard to understand how a multiple store can get three months' credit and a 30 per cent discount while the small retailer must pay for milk up front and without a discount. The retailers must be protected because they are the backbone of the industry and are the most efficient means of distributing the milk to the consumer. I spoke on this issue on other occasions. Monopolies and cartels must be tackled not only in the milk sector but in the bread sector and the food industry generally. This is a serious problem.

The board is self-financing. That is welcome because it will have a certain amount of independence and will be able to do its business with a guaranteed source of revenue. That is vital for an agency of this importance.

The milk boards have contributed a great deal; they were involved in progeny testing, artificial insemination, somatic cell count, milk recording, freeze branding and other projects. They were instrumental in encouraging the dairy sector to expand on our entry to the EU. They gave information and held seminars throughout the country to encourage people to upgrade the progeny of their cattle.

It was interesting to note that an American company was interested in some of the services provided. What will happen to the ancillary services after this Bill? Perhaps the Minister could clarify this at a later stage.

If we are to encourage a high consumption of milk, which already exists to a certain extent, it is vital that this agency should promote milk and control its quality and supply. The door to door milkman and the small retailer should be given every opportunity to compete on a level playing pitch. The importance of these aims cannot be exaggerated.

The Minister mentioned that the sale and production districts in Cork are within a three and a half mile radius of the city centre and that temporary licences had been granted in the past because the district could not supply Cork during the winter months. In Dublin the sale area is the city and county of Dublin and the urban area of Bray, while the production area comprises most of Leinster.

The proof of what the milk boards have contributed to the dairy sector is the efficient milk production patterns, which mainly occur in the milk board areas. They contain the top class breeding herds, the high yield herds and the most efficient producers. When the new agency is set up, I hope the Department acknowledges this and uses its resources to fill the vacuum the milk boards will leave when abolished.

Since the milk boards were found to be in contravention of European law, measures had to be taken. I welcome the Bill because overall it is a positive step which lets everyone have an input into the supply of what is perceived to be a lucrative market. I often wondered whether that was the case when I was milking cows at 6.30 on winter mornings. The issue has caused tension in my area and in Dublin but most farmers now realise it is a positive step for milk supply.

I look forward to the later Stages. There is little in the Bill to cause controversy since superannuation and other staff problems have been solved. I wish the Bill well.

Mr. O'Brien

Rationalisation and greater efficiency have long been recommended as the way forward for the Irish dairy sector at all levels in the industry and thankfully this challenge has been taken up by many in the last few years, with farmers and consumers benefiting. The establishment of the new National Milk Agency is an example of the Government's commitment to all involved — producers, processors, distributors, retailers and consumers.

The liquid milk sector has experienced great change over the years. With district milk boards having outlived their usefulness and the role for which they were created, this House should record its appreciation of all involved for their work developing the boards. The range of services provided to farmers was critical to this development. Improving the breeding programme and milk quality came, in many cases, through the expansion of services available from the Milk Marketing Board.

In complimenting the staffs of the Dublin and Cork Milk Boards, the Minister is protecting their welfare as best he can at this time. It is welcome that the majority of staff will continue to work in their specialised positions following the formation of the new board.

The structure of the new Authority is representative of all involved, bringing together everyone from the producer to the consumer. This leads to a better understanding of all involved and of the other positions. This must benefit everyone. The importance of this Authority to oversee the collection and distribution of liquid milk to our major urban centres is enormous. It must ensure a supply is available all year at a competitive price and that the producer is adequately rewarded for his work. Given the population growth in our urban centres, it is vital that the regulation of milk supply is strictly governed and the new National Milk Agency is the vehicle to ensure this.

I compliment the Minister, Deputy Walsh, for bringing the Bill to the House and I thank the Minister of State, Deputy O'Shea, for steering it through.

Minister of State at the Department of Agriculture, Food and Forestry (Mr. O'Shea)

I thank the Senators who have contributed to this debate. By and large there has been welcome for the Bill and its provisions. A number of issues were raised by Senators during the debate which I will now discuss.

Senator Kelleher asked who would purchase the milk board's business and what was the position of an American company which had expressed an interest in purchasing it. The business will be put up for sale by competitive tender and there is no way of knowing at this stage who the interested parties are or whose bid will be successful.

Senator Dardis spoke about the control of artificial insemination activities. Artificial insemination activities are governed by EU directives, specifically dealing with artificial insemination, and by national legislation, implementing those directives. Senator Dardis also mentioned the length of time it had taken to bring this Bill before the House. It should be stressed that the Bill was delayed since 1991 to take account of the staff whose livelihood would be affected by the change. Time has not passed in a leisurely manner. The negotiations were long and difficult at times, but it was worth it because the staff's interests have been met and the way has now been cleared for the sale of the businesses as going concerns.

Senator Dardis mentioned the definition of milk as per the previous legislation which was before this House and the legislation before us today. The change arises directly from the adoption of an EU directive in 1992 which contained a new definition of milk. It was considered desirable to use, as far as possible, the same definition of milk in all legislation.

Senator Farrelly spoke about the interim board, but we need to clarify this matter. The interim board is not a board in the way the National Milk Agency is a board. The National Milk Agency will be made up of a board representing those involved in the industry while the interim board, which is quite small, may never be used. It is a safeguard mechanism if there is a delay in winding up the boards or in selling the businesses as going concerns. This device is available to expedite the work involved.

Retailers should be registered, and this point was made by Senator Farrelly. Food hygiene at retail level is the responsibility of the Minister for Health, not the Minister for Agriculture, Food and Forestry. Retailers are not involved in the regulation of supply, with which this Bill deals.

Senator Farrelly asked how the National Milk Agency will decide on an appropriate price. This will be a matter for the agency. The price can vary from area to area and from producer to producer. The idea is that the price of each contract should be sufficient to compensate farmers for the cost of winter production. It would be too rigid if the Bill were to specify criteria for determining the appropriate price for milk.

Senator Farrelly referred to supermarkets, the price wars—which Senator Calnan and Senator Kelleher also mentioned — and the important role carried out by the milk delivery service and the small retailers throughout the country. There is considerable employment in this sector and we want to retain the employment levels there. The issues involved here do not come under this Bill but are more suitable for consumer affairs legislation and the Director of Consumer Affairs, who has been active in this area. Senator Farrelly also mentioned possible disputes. Provision is made in section 19 for resolving disputes between the National Milk Agency, producers and processors.

I am happy at the widespread welcome for this legislation. I compliment the staff in the Department for their ongoing efforts to resolve the matter and to find a solution so that the rights and conditions of future employment for the staff in the Dublin and Cork District Milk Boards would be satisfactorily dealt with. That is an achievement in itself. It took time, but the officials did not take a leisurely approach.

I commend the Bill to the House.

Question put and agreed to.

Acting Chairman (Mr. Finneran)

When is it proposed to take Committee Stage?

Mr. Mullooly

On Tuesday, 5 July 1994.

Committee Stage ordered for Tuesday, 5 July 1994.

Sitting suspended at 3.50 p.m. and resumed at 4 o'clock.