Seanad Éireann debate -
Wednesday, 11 Dec 1996

Vol. 149 No. 13

Milk (Regulation of Supply) (Amendment) Bill, 1996: Second Stage.

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

Minister for Agriculture, Food and Forestry (Mr. Yates)

I congratulate you, a Chathaoirligh, on your recent election and wish you a long and successful tenure in your high office.

This is a technical Bill and should not be controversial. It provides for a number of small but important amendments to the Milk Regulation of Supply) Act, 1994, which provided for the abolition of the Cork and the Dublin District Milk Boards and the establishment of the National Milk Agency to regulate the supply of milk for liquid consumption throughout the State. It also provided for the sale of the former boards' ancillary businesses and included certain provisions to protect the interests of the staff affected by the abolition of the former boards and the sale of the businesses.

I am pleased to say that, in all the most important respects, this Act has worked very well. The milk boards were abolished and their ancillary businesses sold as going concerns. The National Milk Agency was established and, I am glad to say, is operating very effectively. All the main objectives of the Act have been achieved.

The purpose of this Bill is to resolve a few small problems of a technical nature which have emerged over time and to make some small but important improvements in certain areas. The first amendment concerns the disposal of the businesses and assets of the former boards. In order to protect the interests of the staff and to maintain employment at the highest possible level consistent with economic viability, it was decided that the old milk boards' ancillary businesses should be sold as going concerns. The boards' businesses were overstaffed and making financial losses. A staff rationalisation programme was agreed with staff representatives which provided that a certain number would be offered voluntary early retirement and the remainder would transfer to the employ of the new owners on the sale of the businesses. I am pleased to say that the whole operation was completed without any compulsory redundancy.

As provided for in the Act, I established an interim board to oversee the management of the businesses in the period leading up to the sale and also to be responsible for the sale itself. The sale took place by tender. Progressive Genetic Cooperative Society, which was representative of the milk suppliers in the former Dublin board's region, were successful in acquiring the business of the former Dublin board while the former Cork board's business went to Pendine Investments Limited, a consortium comprising Progressive Genetics, Dairygold and the South Western Cattle Breeders Society. The interim board was advised that a better return could be achieved for the State by selling one of the assets, a premises in Cork city which had been the headquarters of the former Cork board, separately from the ancillary business. A small technical amendment to the Act is necessary to allow conclusion of the sale of this property purely for its asset value rather than as part of a going business concern.

The interim board consists of two civil servants from the Departments of Finance and Agriculture, Food and Forestry, respectively, and a chairman from the private sector. As Senators will have gathered from what I have already said, the work of this board is largely concluded. The board itself is of the view that the time for its dissolution is approaching and I accept this view. However, there are a few residual business matters still outstanding and it is not easy to establish a time scale for their completion.

The Act itself already makes provision for the abolition of the board but not for the conduct of any business it might leave unfinished. Rather than leaving the board in existence to deal with a trickle of outstanding business, I want to clear the way for its abolition by providing that any business it may leave unfinished, any assets unrealised or any liabilities undischarged, shall become the responsibility of my Department. I want to stress that I am very pleased with the way the interim board has carried out its work and this amendment is solely to ensure that there will be no lacunae after it is dissolved.

There are some amendments concerned with the election of producer representatives to the board of the National Milk Agency. Senators will remember that the Principal Act provides for the registration of milk producers who are party to a registered contract and the election of producer representatives to the board of the agency by those registered producers. However, when the contracts came to be registered it was noted that in some cases there was more than one person named as the producer and all parties to the contract were registered in the Register of Producers. This meant that, in some cases, there would be more than one person entitled to vote in respect of the same contract. This is obviously unfair. To remedy that, it is proposed to amend the Act to provide that, where more than one person is named as the producer in a contract, the person whose name appears first will be regarded as the principal producer and will be entitled to vote in an election of producer representatives. This is just a step which must be taken to ensure fairness in an election.

There is also the question of ensuring regional balance in the producer representation on the agency. At present, the industry is structured so that there is a number of large-scale pasteurisers, mostly in the eastern region, with a big number of suppliers. On the other hand, there is a considerably larger number of small-scale establishments in other regions with fewer suppliers. The agency has expressed the fear that. if the entire electorate is to form one constituency, the suppliers to the large-scale establishments will predominate in securing representation on the agency, to the virtual exclusion of suppliers to the small-scale firms. I accept this could be the case and, to prevent it, it is proposed to amend the Act to allow the electorate to be divided into constituencies.

Finally, there is the question of representation on the board of the agency. During the debate in the Dáil, the matter of representation by consumers on the agency was discussed. It was suggested that the existing number of such representatives be increased. I was pleased to agree that a provision be included in the Bill that the number of consumers should be not fewer than two which is twice the current representation. As the main role of the agency is to ensure the all year-round supply of drinking milk, it is appropriate that consumers, who are the main beneficiaries of such a system, would be adequately represented on the agency. I am of the view that two representatives would be of great benefit to the agency in carrying out its work.

The per capita consumption of drinking milk in Ireland is among the highest in the world. There are benefits from this both for the economy, given the important role of milk in Irish agriculture, and the health of our people, given the nutritional value of milk as a food product. We want to preserve this situation and that means ensuring an all year-round supply of fresh, high quality and reasonably priced milk for liquid consumption. It is in this context that I intend to increase consumer representation and am confident that this amendment will find favour with Senators. On Committee Stage, I will table a minor technical amendment which will tidy up, from a legal draftsman's view, the wording of the point relating to increased consumer representation.

These are the measures in the Bill before the House. They are relatively minor to the extent that they do not entail any changes of policy or any radical alteration in the means of achieving policy objectives. Nevertheless, they are important in ensuring the effective and efficient achievement of the goals already laid down.

I commend the Bill to the House.

Mr. Dardis

There is nothing controversial in this legislation and I have no difficulties with it. It has taken some time for it to pass through both Houses since the original Bill to abolish the boards was initiated. One of the problems at the time, of which the Minister was well aware, was the status of staff. I am pleased to see there were no compulsory redundancies and that the staff's concerns were addressed.

I have a query about the first-named person on the contract being the person to vote. I understand the reasons for it and do not oppose it. However, if a husband and wife were tenants in common or joint owners of a farm with a large contract and hence the people registered on the contract, it seems as if they lose out in that one person with a small contract would have the same single vote as these two people with a large contract. I am uneasy about this although I understand the reasons for it. Legally we do not know whether those people would be treated as joint owners, so we are stipulating that it has to be the first named person on the contract. I hope the elections will proceed quickly. The Bill is technical legislation which is not contentious. It completes the process of dissolving the Dublin and Cork District Milk Boards and replacing them with a National Milk Agency.

There have been failures in our stewardship of certain areas of agriculture, such as the recent controversies regarding antibiotics in pork. However, this can not be said about the milk sector. Through self-regulation, including strict penalties for the abuse of antibiotics, the dairy industry has achieved a high health status in the national herd.

We can be proud of the high quality milk we produce. One of the reasons for this is the pooled collection system. If there is one bad apple in the barrel that producer impacts negatively on his neighbours. The same impact is not as evident in beef production, even though a producer who abuses growth promoters can affect the overall industry.

We have a high quality milk product which has benefited from the rationalisation of the creameries. It is a forward looking industry which can make a significant contribution to the welfare of the nation. The liquid milk producers have made a significant impact on the country's economy and ensured a year round supply of high quality milk. This is a significant achievement and there is a long history of producing milk to high standards in which the consumer can have confidence. We hear a lot about the primacy of the consumer and this is as it should be. This is an industry where that primacy has been evident for many years.

The old division between liquid and creamery producers is breaking down. As a result we should be moving towards a single system of registration for milk producers. The arguments in favour of traceability in the beef industry should be applied to the milk industry. We need to be consistent and every milk producer should be registered. There is traceability in that the dairy takes a sample from each producer; however, a single State system of registration would be sensible if we are serious about traceability and consumer protection.

The quota system has served us well. However, the enlargement of the EU and the next world trade round will place that system under scrutiny and there will be a battle to maintain it in its present form. To what extent is it to the national benefit to maintain it in its present form? I can understand that if the quota system were abolished, there would be a major shake up in the industry. Smaller producers would need to be protected in those circumstances but we have producers who could compete successfully with producers anywhere and given the chance they would do so.

One of the great deficiencies of the quota system is that when the market signals an increase in production, Ireland plc, so to speak, is constrained in terms of being able to respond to that. Americans and New Zealanders are the people who benefit nationally and not us. There is no reason to believe that at the more efficient end of the dairy industry in Ireland we could not compete successfully with these people. To a certain degree it would be in the national interest to have a liberalisation of the quota regime. I accept there would be a fall out for smaller producers and a system would need to be devised to protect them. If we look at the question of enlargement and at what happened to milk production in eastern Europe, there would be serious consequences if a quota system were imposed on eastern Europe as milk production there declined by 25 per cent as a result of the destruction of the command economy model. How will we reconcile that with a continuation of a quota system in the more developed countries of an enlarged Union?

The Common Agricultural Policy will come under review in the next decade by virtue of enlargement, the next trade round and the cost to the European budget of support for agriculture in the enlarged Community. At a recent conference on regional development in the Royal Hospital, Kilmainham it was stated that 12 billion ecus per year is required to fund the CAP eastwards. That is a significant amount of money and the only way it can be funded is through an increase in the European budget. One wonders about the will of the paymasters in Germany and elsewhere to fund that type of increase, although it is the German will to have political development to the east to ensure its eastern flank is protected, so to speak, that is driving the train to European enlargement. Perhaps Germany would be prepared to pick up some of the extra costs. In global terms, while this is a significant amount of money, it is not a severe burden on the budgets of the wealthier states. Consumers in the east spend a large proportion of their income on food because they have low incomes in the first place. If a regime is imposed which increases food prices rapidly, there will be serious political fall out in those countries.

We have reached the point where we will have to debate what will be done in the event of enlargement and in anticipation of the next trade round. We are coming close to those deadlines. I encourage the Minister to have a meaningful national debate on these issues. In the agricultural sector, the IFA has carried out the greatest amount of analysis and has had the most public debate on the issue and the Agricultural Science Association's conference last year in Kilkenny addressed some of these issues.

There should be wider public and political debate. I look forward to developing these more fundamental issues at a later date when we consider enlargement and the world trade round.

Mr. D'Arcy

There has been much debate on this issue. I intend to dwell on the dairy industry in general. The Bill is designed to deal with technical problems that have arisen following the disposal of the Dublin and Cork district milk boards. I have no difficulties with the points made by the Minister, especially with regard to the consumer; we are all aware of the issue of consumer confidence regarding food.

As a member of these boards over many years I can confirm that there have always been problems regarding the elections. It is right to ensure that these are resolved in advance, rather than having to address them as they arise.

The dairy industry is one of the economy's strongest and most valuable assets. It provides for liquid milk and a huge volume of manufacturing milk. It also provide one million steers for the export market. Indeed, it is impossible to put a figure, with any degree of accuracy, on the value of the national herd to the economy.

Since the introduction of the quota system in 1984, producers have had to take a reduction of approximately 9 per cent, despite problems with transport to the market. This has resulted in great expense because of production requirements to stay within the quota system. During the debate in 1984, in which I participated, undertakings were given that following the raising of consumption of milk products, markets would be secured in other areas and the quotas would be extended. However, unfortunately, this has not happened and is not likely to happen. I fail to understand how other countries, some of them in the EU, have increased their production. For example, the Italian quota has increased by approximately 10 per cent and the Greek by 16 to 18 per cent. This does not make sense. At the same time, some American countries, Australia and New Zealand have also increased their volumes of production, both during and after the GATT agreement. Will the Minister provide figures on this, as we have great difficulty obtaining them?

There are three main areas of concern with regard to the EU dairy hygiene regulations: the somatic cell count, bacteria count and antibiotics. The most important one from the producers' viewpoint is the somatic cell count. Prior to the introduction of this regulation, the somatic cell count was approximately 1.2 million units. The regulation requires that all milk producers reduce the cell count to 400,000 units. I am glad to say that 95 per cent of farmers have now achieved that level in a very short period. However, it was not achieved without incurring serious expense. In most cases, herd culls have been approximately 35 per cent, although they have been as high as 50 per cent.

In some instances, the regulation has resulted in a reduction in the number of lactations in herds from nine to six. This has proved to be very expensive for producers because farmers had to dispose of cows in their herds. It was impossible to put a figure on the expense involved because this was done over a very short period of four to five years. A simple explanation is that we must replace older cows with younger stock to maintain those standards. The time when farmers could retain cows for up to nine or ten lactations is over; they are now down to about six lactations if they are to maintain a standard of 400,000 units as far as the sematic cell count is concerned.

I am glad we can say in this Chamber that there are no antibiotics in either manufacturing or liquid milk, which is very satisfactory as far as milk producers, processors and, more importantly, consumers are concerned. This has also been achieved at great expense to producers.

I will now turn to the bacteria count. Practically 98 per cent of producers, both liquid and manufacturing, have reached the premier grade as far as milk is concerned. This is very satisfactory but it has not been brought about by just dreams and imagination. It has been brought about by the modernisation of milking parlours, cubicle houses, slatted units and the surroundings in which cows are kept — whether in housing, padded grazing or laneways leading to those premises. Farmers have gone to enormous expense over the last six to seven years to achieve these standards, and in certain cases they continue to do so.

There is a great deal of rumbling at the moment by the processors, in particular, that attempts are being made to bring down the price of milk. I warned them that farmers, by and large, have responded to demands laid down by EU regulations and they are not prepared to accept any substantial reduction in the price of milk. The return to the producer has taken a substantial reduction in the last five to six years. Six or seven years ago the consumer contributed about 47 per cent of the total cost; unfortunately this has now been reduced to 38 per cent, and I can stand over those figures. This unacceptable situation cannot be allowed to further deteriorate. I warned the processors that farmers are not prepared to tolerate substantial reductions in the price of the raw material, which is milk.

We saw what happened in the beef industry when costs went from £1.05 per pound to 80p per pound but the consumer benefited only marginally. The price of beef has increased to 90p — and in some cases up to 95p — per pound but there has still been no change in the price to the consumer. In that instance the processors have been very unfair to the producers and we are not going to allow the same thing to happen in the milk industry.

We are now working on a quota system which is regulated by the EU and we are not allowed to produce a gallon of milk over that quota. There are also rumblings from the Department in relation to the super levy. As a milk producer, I tell him not to worry about the producers because they have their own way of regulating that situation, which they have done over the years. I accept that some super levy was due last year — it is about 33,000 million gallons over quota at the moment — which will cost a substantial amount of money. However, while I accept there will be some over-supply, producers can reduce the volume of milk in January, February and March.

I have made these points to ensure the Minister, the Minister of State and Commissioner Fischler are clearly in the picture as far as milk producers are concerned. It is a very valuable industry and we cannot allow those on the processing side to damage the incomes of those on the production side, in view of the very serious expense they have undertaken over the past six or seven years. We can stand up in any forum and say we have the highest quality milk in Europe. Therefore, we cannot at this stage accept any reduction in the price to the producer.

I have great pleasure in supporting the Bill. I am a milk producer and I have no problems with it. The Minister has my full support for the few small amendments to the Act.

Mr. R. Kiely

The Bill provides for a number of small amendments to the Act, which we support. The Minister stated that the 1994 Act "provided for the abolition of the Cork and Dublin District Milk Boards and the establishment of the National Milk Agency to regulate the supply of milk for liquid consumption throughout the State". The most important aspect of the original Act was to regulate the supply and distribution of liquid milk.

The Minister also stated: "I am pleased to say that, in all the most important aspects, this Act has worked very well". I am sure it has but I am also sure that sections of it might not be too pleasing. Senator D'Arcy referred to how hard it is to supply milk and the high quality of our milk. Our milk is of first class quality due to the response of our dairy farmers to EU regulations.

Section 6(2) of the 1994 Act states the contract shall be one which:

.....

(b) provides for supply all the year round by the producer of raw milk with a specified minimum percentage of the producer's production being supplied during a prescribed period ("the winter months") or for supply during the winter months only;

(c) in the opinion of the Agency, provides adequate compensation to the producer for raw milk supplied under contract throughout the year, taking into account, in particular, in relation to the winter months, the economic cost of production of raw milk of suitable quality for heat treatment for liquid consumption all the year round;

(d) in respect of every year of its existence after the first year, is supplemented by an agreement by the parties submitted to the Agency not later than the end of June in that year which, in the opinion of the Agency, provides sufficient guarantee that adequate compensation will be made to the producer for raw milk supplied under the contract during the following winter months taking into account, in particular, in relation to the winter months, the economic cost of production of raw milk of suitable quality for heat treatment for liquid consumption all the year round.

I wish to deal with adequate compensation. Is there a uniform system of adequate compensation for suppliers of liquid milk? Do co-operatives and liquid milk processors have the same system of adequate compensation in all areas? Producers, particularly of manufacturing milk, cannot supply as much milk in the summer as other producers because they have to calve their cows in November and October to ensure adequate supply for consumers in the winter period and they should receive some compensation in the summer months. I speak for the vast majority of liquid milk producers — which is what the Bill is about — who do not believe the compensation is adequate. The Minister and the National Milk Agency should ensure there is adequate compensation.

The first purpose of the Bill is to sell the building in Cork as an asset rather than a going concern, a move with which we all agree. The second purpose is to amend the provision relating to the election of producers. This is the third amending Bill to the original 1994 legislation. Almost a year ago, on 20 December 1995, I said in the House:

I am not sure if a Bill similar to this asking for the elections to be delayed until 1997 might not come this time next year.

My prophecy has been proved correct. I envisaged that the elections would not be held in 1996. However, I doubt there will be another amending Bill and I am confident that they will be held in 1997. It was suggested that there were complications regarding the register of producers but I am sure they will be ironed out.

I welcome the amendment the Minister accepted in the other House from the Fianna Fáil spokesperson, Deputy Cowen, that the number of consumer representatives should be increased from one to two. I compliment the Deputy on tabling the amendment and the Minister for accepting it. We depend on consumers and their concerns must be respected. They must receive top quality milk and they are getting it because of the standard of milk produced in Ireland. It is correct that consumers should be adequately represented in the milk agency.

Although this is a technical Bill, the debate provides an opportunity for an overview of the dairy industry. In that respect, it is timely given the mounting difficulties in the industry. The number of milk producers is likely to decline from approximately 41,000 in 1994 to 30,000 by the year 2000. The policy of strict control of milk output in the superlevy regime, while maintaining the incomes of those lucky enough to have a decent milk quota, will ultimately lead to a declining and stagnating industry. Since the quota regime was introduced in 1994, the national milk quota has been reduced by 9 per cent, despite a recognition of the special position of Ireland, its dependence on dairying and that is a peripheral European island.

It was promised priority access to future quota allocations when the quota regime was introduced. However, as Senator D'Arcy said, in the meantime the Italian quota has increased by 11 per cent while the Greek quota has increased by 20 per cent. The Minister should address this serious anomaly and use his clout as the President of the European Council of Agriculture Ministers to ensure it is corrected.

Regarding the superlevy and the major problem of temporary leasing, dairy farmers' superlevy fines are heading for a record £33 million this year. This will also cause problems for those who entered contracts with agencies for the supply of liquid milk. Section 6(1) of the 1994 Act states:

The Agency shall, on the application of either party, register a contract for the supply of raw milk for heat treatment for liquid consumption made between a producer and a processor provided the requirements of this section are complied with.

I am aware that producers have entered contracts to supply a certain amount of milk, perhaps 100 gallons a day, during the winter months. If they do not have other quotas, they will find this impossible because they will be fined to such an extent that it will not be worth their while to produce the milk under contract. They will also lose their contracts for future years. This is a serious matter and should be addressed in the light of the superlevy problems and because it might leave consumers without sufficient liquid milk during the winter months.

More quotas are needed and the failure of the Minister to pursue this issue is a disgrace given the plight of small dairy farmers. In addition, a new generation of young dynamic farmers could avail of the opportunity to produce milk if extra quotas were available. Many small diary and young farmers who are anxious to embark on dairy farming enterprises are on the breadline. Their names will not appear in the newspapers or in the Price Waterhouse report as having received £5 million from Ben Dunne.

Senator Dardis mentioned the wrongs in the other industry. There is a marked contrast between the dairy and the beef and pigmeat industries. We should ask ourselves why there is so little fraud or improper practices in the dairy industry when they are so widespread in other parts of agriculture. There are no antibiotics in milk because the system ensures that farmers found guilty of using them are fined so heavily that they make sure not to use them again. This gives confidence to consumers that the milk produced in Ireland is of the highest quality.

I am delighted that the justice system is dealing with those found guilty of providing or using growth promoters for profit. Another problem is the use of antibiotics in the meat industry and the Minister was very slow in getting to grips with it. The major difference is that the dairy processing industry is dominated by co-operatives. There is accountability in this industry but, by and large, there is none in the beef and much of the pigmeat industries.

The Bill is welcome and the amendments are necessary. The Minister said he would introduce an amendment on Committee Stage to increase the number of consumer representatives from one to two. What will be the composition of the milk agency? How many producer and processing representatives will be included? Will the existing number increase? The Minister said that because of the fear that too many producer representatives will be elected from one part of the country he has decided to have constituency elections. What constituencies does the Minister envisage and will this be acceptable to producers? How will the constituencies be established? I welcome this technical Bill and have no problem accepting it.

Mr. Townsend

I am glad to contribute to the debate. There is nothing controversial in the Bill which has the support of my party. It is largely technical legislation that could be said to be a tidying up exercise.

The Bill does not deal with the quota system which regulates the milk supply and which is coming up for review in the year 2000. At present 25 per cent of milk is produced by dormant milk producers. A dormant milk producer does not keep, feed or milk cows, but they get up to £300 per week under this system; we must look at it. Some active milk producers must pay up to 50p per gallon to dormant milk producers for the privilege of producing milk. Included in this group are many young farmers who have put in place coolers and have done everything possible as regards dairy hygiene.

There is no doubt that the quota system will be changed. We should ensure any changes to the system are to the advantage of producers, the industry and consumers. There is much evidence to suggest the consumer is paying too much for milk. Some of the most progressive producers would like the quota system to be abolished but if that happened, it would be disastrous for others who have invested heavily in the industry because they were under the impression the quota system would last for a long time. No matter what changes take place, there will be winners and losers.

We can produce milk at a lower cost than most other countries because of our climate. We have a great advantage because our milk production system is based on grass. Cows can eat grass when in fields and silage when housed. Milk consumption has increased in Europe, America, Canada, Australia and the free world while beef consumption has decreased. Under the present quota system we will not be able to take advantage of the increase in milk consumption because we will not be allowed to produce more. Radical changes are needed in the quota system but we will have to be careful if it is retained.

The dairy industry and farmers' co-operatives have shown the way in terms of how an industry should be handled. They raised standards, cut out malpractices and did not ask the taxpayer or a State body to do it. They should be congratulated for acting in the national interest. It would be good if I could say that those responsible for the beef industry acted in the same way as the farmers' co-operatives and those in charge of the dairy industry but unfortunately I cannot. We should put on record our thanks to those in charge of the dairy industry for the wonderful job they have done.

On a number of occasions on the Order of Business I have asked for a debate on the milk quota system. We have had debates on issues which were not as important to the national interest. We should have a debate that is confined to the milk quota system at the earliest opportunity, I am sure Senator Rory Kiely would agree with that. I have no problem with the Bill which has my support.

Mr. Daly

Like other speakers I do not have particular difficulties with the Bill which will tidy up some of the anomalies in the National Milk Agency legislation. I wish to raise the issue of the milk quota regime and the seriousness of the situation for farmers in my constituency. Since 1984 when the milk quota system was introduced 1,000 farmers in County Clare have gone out of milk production. There are now 2,500 milk producers in County Clare and it is estimated that a further 1,000 farmers are at risk of going out of milk production over the next couple of years under the existing arrangements.

The most vulnerable section of the farming community, the small milk producer in the west, has been devastated. Farmers' incomes, particularly in west County Clare which derived largely from milk production, have been devastated. The situation is chronic. Many of these farmers were heavily penalised because of the over-supply of what would be considered small amounts of milk in the overall context of milk supply in the Community and, indeed, in Ireland. In 1993 when a detailed survey on retaining the maximum number milk suppliers in County Clare was undertaken by Leader and the rural resource development company, 43 per cent of farmers were supplying less than 9,000 gallons; 38 per cent were supplying between 9,000 and 20,000 gallons, while the remainder, 14 or 15 per cent, supplied in excess of 20,000 gallons.

The devastation caused by the number of farmers who have gone out of business has been matched by the devastation in incomes for those who supply 43 per cent of milk in County Clare, that is, less than 9,000 gallons. However, it will not stop here because, as I said, 1,000 farmers will be put out of business over the next couple of years under the existing arrangements. What is causing most alarm is that the farming community is aware that EU regulations govern up to the year 2000 and that, with enlargement and further developments in milk production among our competitors in Europe, we will be placed at a further disadvantage.

If we continue with the present policies, farmers whose income derives mainly from milk will be put out of business. This does not not take into account the fact that a sizeable number of small farmers in livestock production wish to get involved in milk production. A substantial investment is required to meet the European quality standards and regulations to which we want farmers to adhere.

The survey conducted in Clare showed that about 75 per cent of farmers need to make investments, ranging from very small to very large, in order to meet EU quality regulations. This imposes a further burden on people who are already seriously curtailed in the amount of income they can generate from the limited quotas available. That has not been helped by the stop, start policy with regard to grant schemes. At present it appears that substantial moneys will not be claimed because no clear indication was given earlier in the year that grants would be available if farmers made such investments.

The statutory instrument laid before the House in October last year gave effect to EU directives in this area. However, we did not have an opportunity to debate the directives even though they are detailed and comprehensive. In view of the speed at which the situation is changing, there is a necessity to put the management of the national milk quota on a statutory basis through new legislation. Although S.I. 266 covers part of the existing position, there is an ongoing problem in this area that will get more acute and difficult for the people who are most vulnerable, the small farmers in western areas. Therefore, it is necessary to put milk quota management on a statutory basis in the same way as the National Milk Agency was put on a statutory basis.

New, progressive legislation is required which will take account of the special problems of small dairy producers who are dependent to a large extent on the income they derive from milk production to maintain their family farms. Unless this happens there will be devastation in this area in forthcoming years. A small number of producers will have a monopoly of the milk quota to the detriment of the vast majority of small dairy producers and their families. No Minister for Agriculture, Food and Forestry could accept such a situation.

If the milk quota system in Europe is replaced or abolished between now and the year 2000 and milk prices drop drastically as a consequence, the outlook for small dairy producers will be bleak. The incomes which are so important for their survival in western areas will be devastated and they will be totally dependent on handouts from the Department of Social Welfare. This is unacceptable and cannot be tolerated. I appeal to the Minister to take into account the special difficulties of small dairy farmers and to acknowledge the huge bills many of them have had to pay and which were deducted from their cheques by their co-operatives. In many cases, the benefits accrued to larger producers, to the detriment of small producers, within the cooperative area. This has put many small producers at severe financial risk as many of them have leased quotas and are now unable to pay for them.

The House should be given an opportunity to debate S.I. 266. This is also an opportune time to establish a milk quota management agency which would manage the current milk quota and examine future prospects so we plan for them. Such an agency should provide annual reports to show exactly what is happening in this area. Under the current arrangement there is a committee and an appeals board but we do not receive an annual report from them, as happens in the case of statutory agencies. We are, therefore, in the dark about what is happening.

There does not appear to be a mechanism whereby people who are faced with severe losses can be compensated and in which latitude can be provided for farmers who must produce milk in order to survive. Such farmers do not have any other means of increasing their incomes. On behalf of my constituency, Clare, whose farmers are probably worst affected by the milk quota regime, I appeal to the Minister to seek a means of implementing some of the recommendations in the strategy for retaining milk suppliers in County Clare and avoid another 1,000 farmers in County Clare leaving milk production. Urgent action must be taken to deal with this crisis.

Mr. McGowan

I welcome the opportunity to comment on this Bill. I am concerned about the issue of milk production vis-a-vis the consumer. Previous legislation provided for the abolition of the Cork and Dublin milk boards and this legislation relates to that area. It does not have a national concern. The Minister never referred to the issue of imports and exports or to codes of control. This is a narrowly focused Bill. It is a temporary measure and its objective is to replace the two milk boards. It does not tackle the main problems.

An opportunity has been missed to deal with an important industry. It is related to the BSE issue in terms of public concern. I live close to the Border and I am concerned about the import and export of milk. People in County Donegal are reluctant to buy milk in the North for fear that it might come from an infected herd. However, up to ten tankers of milk come into Donegal each day from Northern Ireland as many producers there have milk quotas for co-operatives in the South. This issue is not dealt with in the Bill. The Minister of State should convey to the Department that there is concern not just about milk production in Dublin and Cork but about it as a whole, in terms of price, quality control and sales.

The consumer is not sure about the price of milk. It can vary from 65p to 116p for two litres. If the Department was concerned about the future of milk producers that matter would have merited attention but the price of milk was not mentioned.

The new board must feature representation not from co-operatives or the Minister's nominees but from producers. They should be aware of the quality and every other aspect of milk when it is brought to the consumer; a producer should not simply wait to have a set of regulations sent to him. This Bill is a missed opportunity in that regard. It is not too much to ask that every producer in the country, not just those with huge quotas, should elect representatives to the board. If that is done it will be easier to control the milk industry.

I also ask the Minister to clarify the position on the import and export of milk, as there appears be no regulations. I know of at least five tankers of milk travelling from the North to the Republic every day but this Bill has no control over them. We should go straight to the creameries to establish control over milk being imported. This milk comes to the South to be processed and is re-exported to the North to be retailed at 65 pence for two litres. No one in this State can buy milk at that price. When introducing the Bill, the Minister did not take the opportunity to state his concern about this urgent matter and since the legislation has a narrow focus it does not deal with it either. The Bill should specify the percentage of milk to be used for purposes such as producing spread, margarine mix or oil.

I have no difficulty with the Bill but it only deals with a small aspect of the problem. It covers the Dublin and Cork milk boards but does not seize the opportunity to deal with the production, control and retail price of milk. To put it bluntly, it is negligent not to deal with a problem on which the public is crying out for control measures and clear statements. Why has the Minister introduced such a narrow Bill? He and the Department must know that this measure is not enough. If there is a change of Government — which I hope there will be soon — I will press for a further Bill to deal effectively with the quality, price, importation and exportation of milk. All that must be covered but apparently it will not be done by the present Administration; I hope it will happen in the future.

Minister of State at the Department of Social Welfare (Mr. Durkan)

On behalf of the Minister for Agriculture, Food and Forestry I thank all Senators who contributed to this debate. Their contributions reflected a deep and intimate knowledge of milk production, over-production, supply and demand. While I was not here for the full debate I followed it on the monitor to get a flavour of the regulations. When I was party spokesman on the food industry some years ago, discussions along these lines were taking place. The 1994 Act brought in the structures to enable this legislation to be introduced. I will deal with some points raised by Senators, which should go some way towards addressing their concerns as experts in this area.

The Minister's contribution dealt with some of the points raised by Senator Dardis, particularly as regards naming people on the contract and voting entitlements. In respect of either a small or large contract, the first named person shall have one vote. This amendment was put forward on the basis of legal advice. If all persons named on the contract were allowed to vote, some people might include their entire family, even near neighbours or relatives, in order to increase their voting power, which would distort the legislation. One also had to consider communities such as religious orders where up to 30 people could have voting entitlements on one contract, which would also create obvious difficulties. One vote per contract is the fairest and most practical solution.

Senator Dardis also mentioned the single system of registration for milk producers. There is already a system of registration for all producers under Regulation 92/46, Statutory Instrument No. 9 of 1996, for health protection reasons. The registration under this Act is a supply regulation rather than a health protection measure but if necessary it could be built upon. In any event, the milk sector has good self-regulation and given the nature of the system, there is also excellent traceability, which has grown not only out of necessity but from the desire of both producers and consumers. Reference has also had to be made to the increased importance of meeting the desires and concerns of consumers in relation to anything pertaining to the food industry.

The future of milk quotas was also raised. The commission will put forward proposals next year. The Minister has set up a review group to identify the best options. A range of issues arise including enlargement, trends under the next trade round, competitiveness and what is in the best interests of the industry. The best interests of the industry are served by many factors, such as allaying consumer concerns, ensuring the industry operates within the guidelines and regulations and that it is efficient. It is important that we fully analyse the situation and it is intended to have a full debate with wide consultation. This is important to ensure that the concerns of those involved, directly and indirectly, be addressed at that stage rather than later.

Senator D'Arcy referred to milk quotas. They have always been a very controversial issue. We have all heard, seen and read what happens when one person has an insufficient milk quota and others have an over-supply and we realise the difficulties this has created. The quota system may not be ideal, but it is the best at this stage. From personal dealings with producers in my constituency, I have found that if a difficulty arises in one year, there is a tendency for the producer and the processor to address that in subsequent years.

By and large the system has worked reasonably well. Producers have taken extreme care, especially in 1995, and the prices have been very good during 1995 and 1996 which is an indication that the system has not worked all that badly. These prices would not have been achieved without the quota system and it is important to remember that.

The EU has a surplus of milk which must be disposed of through internal subsidised mechanisms. Greece and Italy received extra quotas. These were technical adjustments to their existing quotas which related to a deficit situation. There were statistical problems in allocating their quotas from the start. These extra quotas were given after full analysis and debate, not readily or without consultation. Italy paid a very high price for not implementing this system originally, and now Ireland has increased its production at world market prices of 40p to 50p per gallon.

Countries within the European Union have to operate within certain guidelines and are doing their utmost to do so, on occasion in quite trying circumstances. While there may be down sides to the circumstances arising from the operation of the quotas, they are immeasurably better than what would arise if that system was not in place.

Senator Kiely referred to the elections in 1997 and whether they would take place. I can assure him that the agency has every confidence that it will be able to conduct the elections in 1997, notwithstanding the reference he made to the previous expectations which did not materialise.

He also referred to the composition of the National Milk Agency: five farmer representatives, four processors in the pasteurising dairy area, one distributor, one retailer and one consumer — soon to be increased to two. I emphasise the importance of taking on board the concerns of the consumer. This increase from one to two is on the basis of an amendment to the Bill.

Senator Kiely also referred to the constituencies for producer representatives. The exact division has not yet been decided upon, but it will probably be on the basis of two constituencies, with the country being divided roughly north and west or south and east. The number of constituencies will be at the discretion of the Minister and may be altered to reflect changes in the distribution of the electorate. This is to ensure an equitable system.

Senator Daly also referred to milk quotas. Under the national milk quota schemes, priority has been given to small scale milk production. No member state has done as much as has been done here. The Minister has brought in regulations ring-fencing milk quotas in disadvantaged areas, including County Clare. This initiative was welcomed by the producers in this region. The management of milk quotas is governed by EU legislation which is specific and which we must implement. It is not possible to unilaterally make changes which do not come within the guidelines laid down by the European Union.

Senator McGowan referred to milk imports. EU trade in milk and dairy products is governed by EU Directive 92/46 from the starting point of public health protection, a point that should be emphasised. It is not covered in this Bill but in Statutory Instrument No. 9 of 1996. There is no way the EU would allow us to put artificial controls on imports; that refers to free trade, marketing, availability of supply, meeting demand, etc. Any suggestion of change in the EU structures would have to be discussed within the EU and fully analysed and agreed to by all member states.

Senator McGowan also mentioned the price of milk. The price control of milk was abolished several years ago. All such controls are contrary to EU competition policy. If there is any allegation of unfair trading, it is a matter for the Director of Consumer Affairs. I emphasise again that the important constituent bodies in relation to any food or food product are the producers and their needs and requirements which have to be met as far as possible to ensure they are in a position to trade. The processors' interests have to be met to some extent but the consumers' interests are understandably achieving greater importance as time goes by. The consumer has taken on a major role in the commercial equation and is much more fundamental than was previously the case. Processors and producers must recognise that everybody, including the producers themselves, are consumers. Everybody is a consumer of one kind or another and everything must be geared towards that in future. If this is done it will be of considerable benefit to all concerned, especially to the national economy.

On behalf of the Minister, I thank Senators who made a contribution to the debate. Contributions were worthwhile and knowledgeable and the points and concerns will be borne in mind by the Minister. I hope the answers I have given will go some way towards assuaging their fears.

Question put and agreed to.

Agreed to take remaining Stages today.