I apologise for the absence of the Minister for Agriculture and Food who is engaged in important talks. In the Dáil on 30 September I made a comprehensive statement in reply to many of the points in the Opposition motion but I am pleased to respond to this type of debate. The current situation in agriculture merits serious discussion but it does not merit a campaign of political points scoring or the putting about of misinformation of the type circulated over the past few weeks. I am glad to have the opportunity of dealing with the issues raised in this House and to set the record straight.
I reject suggestions that there has been any mismanagement on the part of the Government as regards the current difficulties in agriculture. The contrary is true. The Government fully appreciates the difficulties being experienced by some sectors of Irish agriculture. In the main, these have arisen due to developments on the Russian market and the difficult weather in 1998. With the support of the Government, I have been very active in my efforts to alleviate the pressure on the sectors involved.
I recently announced a series of measures to assist farmers with their cashflow this autumn. These measures include speeding up direct payments to farmers which are worth £1 billion annually and account for half of all farming income; an increased advance in suckler cow and special beef premium payments from 60 per cent to 80 per cent which will release an additional £45 million to farmers in November and December; more rapid payment of REPS where such payments are falling due; payment of an outstanding top-up of £6 million to certain beef producers in early October; a special scheme to alleviate winter fodder difficulties on certain farms and arrangements for Teagasc to hold special free advisory clinics on fodder in the areas affected; promoting live exports through the approval of additional facilities for live exports to EU markets; ensuring everything possible was being done to get Libya to honour the agreement reached between the two Governments in July; increased beef export refunds — the increase is equivalent to 5p per pound of beef, which follows previous export refund increases for beef, pigmeat and SMP; negotiating the reopening of the Iranian market for our beef exports; the introduction of EU funded private storage schemes for pigmeat and sheepmeat.
Each of these measures was identified as an important issue in discussions with farm organisations and they represent an impressive list of actions. Since some of these items have been specifically mentioned in the debate, I will be dealing with them in greater detail a little later.
I accept that there is significant hardship on many individual farms in the areas most adversely affected by weather conditions. In August, when the situation was becoming acute, at the invitation of Deputies, Senators and the farming organisations, I visited the affected areas. West Limerick was the first area I visited.
The Government made £10 million available to deal with fodder difficulties being experienced by some farmers. The details of the new scheme will be finalised very quickly and the approval of the Commission will be sought with a view to making payments as quickly as possible. In addition, I am seeking the approval of the European Commission to continue sheep headage top-up equivalent to £2.75 million. The intention is that this money would be made available through a top-up in the mountain ewes and suckler cows in the worst affected areas. A major consideration is the need to devise an arrangement that would get assistance quickly to farmers, and in that context, and together with the wide range of measures, the Government's response was appropriate and rapid. The fodder scheme in the selected areas is close to being finalised and the intention is to make payments without delay.
In comments from the Opposition on the fodder package, an attempt has been made to create the impression that this is the only payment being made to farmers. The fact is that direct payments to farmers will amount to nearly £1 billion in 1998 and they account for a very large share of income. Specific payment targets for these schemes are laid down in the Charter of Rights for Farmers. I have made clear my intention to make these payments as early as possible this year. Excluding BSE payments, £140 million has already been paid to farmers under the 1998 headage and premium schemes. The corresponding figure paid at this time last year was £89 million.
Payment of sheep headage commenced on 21 September. This was ahead of the commencement date in 1997 and, to date, over £12 million has been paid. Payment of cattle headage commenced on 26 September 1998, three weeks ahead of the commencement date in 1997. Over £47 million has been paid to date. Effectively, over £67 million has already been paid under the 1998 disadvantaged areas headage schemes. This compares with just over £22 million which had been paid this time last year. Payments under these schemes will continue over the coming weeks with a view to ensuring that all eligible applicants are paid by 31 October.
While referring to the headage schemes payable in disadvantaged areas, it might be appropriate to point out that in the period 1994-8, the total expenditure on these schemes, including the amount provided in the Vote for this year, will amount to just over £605 million. While these schemes are 65 per cent funded by the EU, the reality is that the total Exchequer contribution in the period 1994-8 will be just over £305 million, representing 50 per cent of the total amount spent.
In so far as the suckler cow premium and special beef premium schemes are concerned, I recently secured the agreement of the European Commission to an increase from 60 per cent to 80 per cent in the rate of advance payment which may be made under these schemes. I sought this change in order to alleviate the problems facing cattle producers arising from the low cattle prices and the fodder shortage. Payment of the advances at this higher rate will enable my Department to pay an additional £45 million in premiums to farmers this year. This will substantially improve their cash flow. I have also made arrangements for payment of additional BSE compensation to those producers who had more animals in 1996 than 1995 — the year originally chosen as the base year for the 1996 BSE compensation package. This measure will be worth over £6 million to the producers and payments commence today.
I would like to refer to one other matter which has been mentioned and which is linked to the amount of these payments. This led to changes in the retention period of suckler cows. This year £455 million has been paid in headage and premium schemes. That is a huge amount of money.
The retention period for the suckler cow premium scheme is set out in the Council regulations. Producers who lodged their suckler cow applications in early May will have completed the retention period in early November. Varying the retention period, even on a once-off basis for 1998, would require the agreement of the Council of Agriculture Ministers. In the unlikely event that such a scheme would be forthcoming, it would involve a lengthy process involving the Commission making such approaches to the Council. Therefore, any such agreement would not be in time to benefit a reasonable number of producers this year. I am confident that the package of measures I have announced to deal with the fodder difficulties, together with payment targets I have outlined, will more efficiently address this problem.
Senator Connor made reference to the existence of a cosy arrangement between the meat processors and the Minister. I categorically refute that; the suggestion that there is any kind of collusion is outrageous. The Minister had a relatively difficult meeting with the meat processors today during which he put his cards on the table on this issue.
The decline in beef prices which is adversely affecting the beef market stems almost entirely from the loss of the Russian market due to the economic turmoil in that country. In 1997, Irish beef exports to Russia amounted to 70,000 tonnes and were expected to reach similar levels in 1998. The effects of the loss of the market have been compounded by the fact that this was also an important market for other European exporters, although it must be understood that we are more exposed than other member states.
The renationalisation of the beef market in the European Union, following the BSE scares in 1996, has given rise to this and has in fact created a situation where we are very much on our own within the EU in regard to this problem. Irish beef exports to European markets have, it must be said, recovered significantly from the 1996 situation, particularly to France, Italy and the Netherlands. Nevertheless, there is a very substantial gap between cattle prices in Ireland and prices on these markets and I have been pressing the trade to exploit whatever opportunities exist in these markets. An Bord Bia is also assisting in this effort.
The current difficulties in the beef sector are extremely disappointing because, in the absence of the Russian crisis, there were very good prospects for cattle prices to remain at the higher levels which prevailed earlier in the year. From the very onset of the Russian crisis in August, I signalled to the Commission the potential crisis we were facing and sought a range of measures to be put in place with immediate effect to counteract these developments. The measures I identified as being necessary included a substantial increase in export refunds, the introduction of an EU sponsored export credit guarantee system, a widening of the intervention system and an increase in the advance of the cattle premiums from 60 to 80 per cent. I am pleased that the Commission has so far responded positively with regard to export refunds and payments of the advances in the premiums.
It was alleged that successive Fianna Fáil Administrations made many poor decisions on animal breeding over the years; animal breeding policies during the 1980s were specifically referred to. A Fine Gael Administration under Garret Fitzgerald pursued animal breeding policies in the 1980s in which the procedures for the licensing of bulls were changed. Fianna Fáil has always been to the forefront in developing good animal breeding policies.
A major breakthrough has been made with the European Commission on behalf of Irish beef farmers. Following a request from the Minister, a major package of measures on intervention has been agreed. The 04 grades will be eligible for intervention, the weight limit will be adjusted and the processors' margin will be increased. The net result of these measures will be that almost 50 per cent of Irish steers will be eligible for intervention. These new intervention arrangements will remove surplus beef from the market, thereby stabilising it and underpinning the increase to beef producers at this time. It will be up to manufacturers to implement these measures and pass on the benefits. The management committee has yet to agree to the changes announced by the Minister on Friday but this should pose little difficulty.
The Commission increased the refunds on live cattle by 7.7 per cent on male carcases, 8 per cent on boneless hindquarter beef and 27. 5 per cent on male boneless forequarter beef. The changes in refunds on boneless beef amounted to an average increase of 12 per cent and is worth 5p per pound carcase weight. This increase will improve the competitiveness of our cattle and beef exports on third country markets and should enable our processors to pay higher prices to producers for cattle. I have insisted these refund increases should be passed back in full to producers by the factories; in fact, I have requested the meat processors to not only pass back refund increases but to fully use the support available. It is clear this has not been done this week given the low use of intervention.
I have also secured EU agreement to pay a higher advance of the premiums this year. The increase in the advance from 60 to 80 per cent will be worth an additional £45 million this autumn and will provide a major injection of cash at this difficult time. This cash will be of particular benefit to livestock producers who will be experiencing fodder shortages this winter.
I have also made a request to the Commission for an export guarantee system to be introduced specifically to deal with the Russian situation. This would provide EU exporters with the necessary confidence to resume trading with Russia pending the restoration of normality on the Russian market. The crisis occurred towards the end of August when the rouble came under pressure. For the first six months of 1998, we exported 38,000 tonnes of beef to the Russian market, 2,000 tonnes more than in 1997. An Bord Bia, the State food development and promotion agency, forecast that we would export more than 70,000 tonnes of beef this year. That may not now become a reality because of the situation in Russia. The market there is effectively closed due to the economic crisis in that country.
In recent days I have had further and lengthy discussions with Commissioner Fischler on the reopening of intervention, in particular in a way which would provide timely and meaningful support. I have received a commitment from the Commissioner that this would be done and a meeting took place earlier today between the Secretary General of my Department and the Director General of the Agriculture Directorate of the Commission to advance the matter. Specifically, we are requesting that the Commission put more effective and flexible intervention support arrangements in place to help stabilise the situation, including the inclusion of the 04 grade in the eligible categories for intervention, an increase in the maximum weight limit to 360 kg, and an increase in the processing margin from 10 ecus per 100 kg to 14 ecus per 100 kg has been sought. This would increase the quantity of steers eligible for intervention from a current level of about 20 per cent to approximately 48 per cent, thereby rendering this market support measure more effective.
While there is major reluctance by the Commission to reopen intervention again in light of the current stock levels of some 570,000 tonnes which are overhanging the market, I believe that in the current situation, all market support measures must be brought into play. The temporary re-opening of intervention purchasing is therefore essential at this time and I am making every effort to bring this about. I made a preliminary announcement of what will happen on Friday and I welcome the efforts of the Department, the Minister and the Secretary General, who travelled to Brussels in an attempt to bring about this decision to alleviate the current crisis. I hope it will satisfy the requirements of the farming community because no stone is being left unturned on their behalf. The Government fully realises the importance of the beef farmers and the measures I have outlined will help to alleviate the problem which exists.
As far as the long-term is concerned, I have recently received a copy of the McKinsey report on the most appropriate future strategy for the beef industry. The objective of the report was to prepare a development plan for the industry in the context of the challenges which already face it and which will intensify as we move into the next century. The report has concluded that the industry could substantially improve its profitability by the adoption of a series of initiatives, particularly at producer and processor level. In particular, the report has identified over-capacity in the slaughtering sector, the need for greater discipline in marketing and the introduction of a quality based pricing system as the major issues to be tackled. While some of these issues are already being tackled, it is essential that the main recommendations of the report be examined thoroughly. In view of this, I have invited Enterprise Ireland and McKinsey to meet me next week to present their analysis for the future of the sector.
As a result of the BSE crisis, the Iranian market has been closed to Irish exports since 1996. The Minister visited Iran last week for extensive negotiations with senior members of the Iranian Government on the re-opening of this market for Irish beef. The Minister spent three days in intensive discussions with the Iranian representatives, who were impressed with the systematic and comprehensive BSE controls operating in Ireland and with the advanced traceability system now in place. The Minister was able to give assurances regarding the safety of Irish beef and this, together with the declining incidences of BSE, resulted in agreement to re-open the market to our products. The extensive county ban will be replaced by a more limited exclusion of herds in the immediate area of any confirmed BSE cases. This is an enormous improvement on the position up to now and marks a very positive step towards alleviating some of the market difficulties facing the beef sector. The Iranians agreed to send a technical delegation to Ireland within the next week or so to finalise details of a protocol for the resumption of trade which the Minister is confident will take place immediately afterwards.
This year has been a mixed year for lamb sales. Following a request which I made to the European Commission for assistance, a scheme of aids for private storage was introduced which helped to alleviate this difficult market situation. There then followed a period of several months during the summer when lamb prices were at record levels and reached as much as 12 per cent above last year's level. Since mid-August however, this situation has changed and we again face a depressed market here, in the UK and in France.
There is a particular problem with the prices of mountain lamb and with the sale of cull ewes, which are considerably back on last year. This current market situation is due to weak demand in the Mediterranean market for light lambs and to the impact of the economic crisis in Russia. The collapse in the demand for sheepskins and a knock-on effect of lower beef prices resulting from the difficult market in Russia have had a negative impact on the demand and the price for lambs here and in the UK.
I am currently in the process of examining the possibility of introducing a cull ewe slaughter scheme under which farmers will be compensated for the removal of between 100,000 and 200,000 cull ewes from the overgrazed commonages. Subject to the approval of the Minister for Finance I hope it will be possible to provide funds of £3 million for the scheme and that the scheme will be up and running in the next few weeks, because culling will have to be completed by early December. This initiative is designed primarily to ease the situation for those producers who will be faced with some level of destocking under the environmental programmes in 1999. However, it will also assist producers who have not been able to find a market for cull ewes this autumn, and at the same time make a contribution to easing the fodder shortage problem facing many sheep producers.
Discussions have taken place between my Department and the farming and processors' organisations to examine the practicalities of the scheme. Further discussions are due to take place tomorrow. My intention is that all farmers with land in degraded commonages will receive a slaughter premium to immediately remove at least a quarter of their ewes. As producers with land in overgrazed commonages will in any event have some of their quota rights withdrawn for 1999, this scheme by providing additional compensation will help them progress towards the required level of stocking and at the same time provide an outlet for animals which have devalued significantly in the past months.
I am very conscious that hill sheep producers are largely dependent on sheep and of the consequent impact of the current situation on their incomes. I am also aware that a large proportion of these incomes derive from direct market supports. I therefore asked the EU Commission to facilitate the early payment of the second instalment of the ewe premium. The Commission has agreed to this request and the second instalment of the premium, amounting to £5.33 was fixed at a sheepmeat management committee on 2 October 1998.
In an effort to address the market problem in a targeted way, I have taken steps to encourage the live export of sheep. The Holstein Express was cleared to carry live lambs some time ago and a second vessel, which sails to France, is currently undergoing inspection. I am hopeful that live trade of light mountain lamb to southern Europe will give a boost to the sector and I am doing all within my power to encourage and facilitate it.
I have requested An Bord Bia to undertake a promotion campaign this autumn to encourage the consumption of lamb and especially to raise the profile of mountain lamb which becomes available at this time of the year. An Bord Bia has also focused a promotional effort on the Spanish retail trade and in September I travelled to Spain to meet with retailers to promote Irish lamb sales on this premium market. I was very encouraged by the attitude I encountered to Irish lamb and am happy that a very good job is being done on behalf of the Irish sector.
On the question of headage payments to hill sheep farmers, I have already referred to the top up of £2.75 million for which I am seeking Commission approval. Any proposal to further increase the rate of headage grants would need to be backed by convincing structural reasons. The Commission does not regard once-off difficulties associated with market conditions, weather conditions, etc., as constituting sound structural reasons for increasing rates. One must also take into consideration the amount of money remaining in the envelope for headage payments and the Commission's view that too high a percentage of the overall envelope has already been allocated to headage payments.
In the pig sector, an over-supply of pigmeat in the EU as a whole is the chief cause of the low prices being experienced by producers at present. Consumption in the EU has not shown any marked increase and the Asian and Russian markets, traditionally major outlets for EU exports of pigmeat, have been poor this year. In fact, the Russian market is now effectively closed. Increased production, static consumption and difficult export markets have combined to make the EU 108 per cent self-sufficient in pigmeat at present.
On the home front, the fire last June at a pig processing plant in Northern Ireland has added to the problems of certain producers who had been supplying it from the South. Around 5,000 pigs per week went to the plant. I have been continuously keeping the pigmeat market under review and in early summer I looked for increased export refunds and got agreement from the EU Commission. In May last the Commission increased the rate of refund on pigmeat exports and followed this with a further increase in August. In view of the continued weakness on the export market, and in particular that of Russia, I have been pressing for a further increase in refunds.
Some weeks ago I also requested the Commission to introduce an aids to private storage scheme to support the market. The Commission has agreed to this and a very attractive scheme is in operation. The scheme will provide EU funding for the storage of 70,000 tonnes of pigmeat destined for third countries for a period up to six months. On this point, I would like to urge pig processors to make use of this support scheme. Apart from giving the wrong signal to the Commission, it makes little sense to introduce an attractive support measure which is fully EU funded and make little or no use of it here.
There is further good news as this evening the Commission agreed to a further and very substantial increase in pigmeat refunds of 33.3 per cent which should be of further benefit to Irish producers. This refund increase is in response to a request made by Ireland and a number of other pigmeat exporting member states. I am hoping we will see a major improvement in pigmeat processing and that major advantage will be taken of the scheme.
The fire at a pigmeat plant in Northern Ireland caused some additional problems for the market in the South. A backlog of pigs awaiting slaughter built up. To deal with this my Department, the IFA and the Irish Association of Pigmeat Processors put arrangements in place for Saturday slaughterings. I very sincerely thank the slaughterers for the efforts they have made following the intervention of myself, my staff and the Department. There were a number of meetings with the farming organisations and the processors agreed to come to the rescue at that time. The backlog has now been greatly reduced. The problem of overhang of pigs on the market should be further lessened with the recent purchase of a major pigmeat plant in Northern Ireland by the owners of the plant which was destroyed by the fire last June.
To assist pig producers I have also put a proposal to the EU Commission for an adjustment in the veterinary inspection fee to reflect the price payable to the producer at a particular time within the pig cycle. I am pressing the Commission for an early response — to date there has not been a response.
An Bord Bia has recently launched a pigmeat promotion campaign on the domestic market. This should in due course lead to increased consumption.
I now wish to turn to the subject of live exports. Live exports from Ireland to both EU and third countries are vital to maintaining competition in the cattle trade and in sustaining farm incomes. The seasonality of the livestock trade in Ireland makes market access for live exports particularly critical during the back end of the year when large numbers of weanlings come off farms. I have consistently recognised the importance of promoting live exports and have taken action in a number of areas to ensure market access for our cattle, to both EU and third country markets.
As regards trade with Libya, both the Opposition and the farming organisations are well aware that last July, following discussions over five days in Dublin, agreement was reached with a delegation from the Libyan Government which provided, inter alia, for the reopening of the Libyan market to Irish cattle and beef before the end of September. This agreement was formally cleared by the Libyan authorities before the end of September. Reaching this agreement marked the culmination of frequent contacts with the Libyan authorities since early 1997. I identify with the IFA which was so involved in this issue and which clearly understands the current situation. The IFA was fronting the issue as much as I have ever seen it do. In this it received much assistance from myself and others and I say well done. However, the market has not opened but we are making major progress in this area. The Irish Ambassador in Rome and his assistant are currently in Tripoli. They will probably return this evening or tomorrow and I am hoping they will have ironed out the difficulty. We have done what we can as the regulatory authority and it is for traders and those involved in the business to take up the issue. We are trying to iron out the difficulties. The Libyan authorities have also indicated that they wish to have the agreement implemented as early as possible. The problem is purely commercial rather than regulatory or diplomatic in character.
The availability of shipping services to transport cattle and other livestock to export markets is, of course, a critical factor. However, we must be clear about the facts. Commercial operators of roll-on/roll-off ferries, both Pandoro and Irish Ferries, are again carrying livestock to the Continent and this is being augmented by the carriage of large numbers of animals on dedicated vessels. So far this year we have exported over 98,000 cattle to the Continent. This is more than four times the number of cattle exported last year and twice the number exported in all of 1996. Cattle exports to continental EU countries so far this year are already almost on a par with what we exported in 1995, which was the high point in recent years. These are facts and figures which those who have sought to create an impression of crisis around live exports consistently ignore. Between 4,000 and 6,000 cattle per week have been exported to the Continent in recent weeks and I believe exports will continue at a high level.
People in the industry told me that there are sufficient walk-on, walk-off ferries but there is a shortage of roll-on, roll-off ferries. We realise that small animals travel better on roll-on, roll-off ferries, particularly to countries such as Portugal, Spain and Italy. Pandoro and Irish Ferries operate roll-on, roll-off services. We are looking at additional ferries and hope that commercial operators will work in that direction.
Over the past four weeks we exported more cattle than in 1997 to continental EU. These figures speak for themselves, particularly when contrasted with the comments of those who have not acquainted themselves with the facts. The Government has fully lived up to its obligations on this issue. I have ensured that a detailed, ongoing monitoring of the trade is maintained and exporters are facilitated in every appropriate way in shipping animals to Europe and elsewhere. In that regard, I am particularly anxious to provide that the long-term interests of the trade are served by ensuring that relevant welfare, animal health and certification requirements are observed by all concerned. My Department will, therefore, continue to give such matters careful attention and I again urge all other interested parties to do likewise.
The Opposition motion called for the extension of family income supplement to farmers and the self-employed generally. This scheme, which was introduced in 1984, was designed to provide an incentive to employees with families to take up or remain in low paid employment. There are cost difficulties in extending the FIS and there is no point in pretending otherwise. There have been substantial changes in the interim, including, for instance, the change to net assessment of FIS which is to be introduced this month.
I have discussed the role that the "Smallholders Assistance" can play in alleviating the difficulties faced by farmers with my colleague, the Minister for Social, Community and Family Affairs. Currently, more than 7,000 farmers are in receipt of £33 million annually under the scheme, which is available to all farmers on low incomes. The Minister assured me that his Department will be intensifying its information initiatives at local level to increase awareness of the scheme and to emphasise its applicability to farmers. During the debate on the Social Welfare Bill, 1996, the then Minister for Social Welfare in the coalition Government told a constituency colleague of mine that FIS was not workable. I remind Opposition Members to check the record.