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Dáil Éireann díospóireacht -
Thursday, 6 May 1982

Vol. 334 No. 3

Adjournment Debate. - EEC Farm Prices.

I have given permission to Deputy Alan Dukes to raise on the Adjournment the delay in fixing EEC farm prices.

I have asked for permission to raise this matter on the Adjournment this evening because there is a great deal of concern throughout the country since we still do not have agreement on what the EEC guaranteed price levels will be for the current marketing year. We are now at 6 May and, in the normal course of events, we should have agreement on the various guaranteed prices, other measures connected with the prices, new levels of aids for various schemes under EEC regulations and directives by 1 April, the normal beginning of the marketing year for the main products with which we are concerned, beef and milk. We are now at the point where milk production is in full swing. People are now selling cattle which have been wintered, which they would normally sell at this time of the year in the expectation of getting some benefit from the increase in prices at the beginning of the marketing year. All of the sowing has taken place. Wheat and barley are planted, both winter and spring cereals, and the people who have planted those crops still have no very clear idea what level of price they will get when they come to market those next autumn.

This situation has arisen before but it has never come home to us with such great force what the penalties of delay are, as is the case this year. We have today a very dramatic situation in relation to farm incomes. We have had three successive years of extreme difficulty on the farm income front. Last year we had a stabilisation of farm incomes in real terms. This year we hoped for some increase in farm incomes. The longer the new price levels are delayed the greater the danger that this year will simply repeat the pattern of the three previous years and that we will not see any further progress in income levels for our farm families and, indeed, we may not see any further progress in terms of the level of production for many of our main products. This, in turn, will lead to a lack of raw materials for our farm processing industries and next year a further reduction in the level of demand for many of the products and services farmers use in the course of production.

The delay, which has now gone on for almost six weeks past the normal date, is of very serious concern throughout the country. I heard it said this afternoon that the delay so far has cost Irish farmers in the region of £15 million. It is difficult to put a precise figure on it, but certainly the income foregone as a result of this delay is of that order. That is a very substantial sum of money when we are talking of a total number of farm families of less than 100,000 people who are really involved in farming for their livelihood. A figure of £15 million would be very welcome throughout the rural towns as an addition to the level of demand they can expect for this year. There are particular sections of the farming population who will be very badly hit by this. I repeat that our milk sector and our beef sector will be particularly badly hit. The delay cannot be recovered this year because a substantial proportion of the production which should normally benefit from these changes in prices and the increase in guaranteed prices has already been marketed.

The information we have so far on the point which the negotiations have reached is not very cheering. I would like the Minister to confirm my understanding of the point which the negotiations have reached. As far as I am aware, the shape of the package at the moment is that there is provisional agreement on an increase of about 10½ per cent in overall terms for farm prices. This would be a 10½ per cent increase for milk with a reduction of 0.5 per cent in the co-responsibility levels for larger producers and with a provision for a refund to smaller producers amounting to some 120 million units of account for the Community as a whole to be distributed among the member states in proportion to that part of their milk production produced by people coming under the 60,000 kilos per producer. This is more or less an agreement which was worked out earlier this year and which, I understand, in the case of the smaller producers amounts to more or less a reduction of about ½ per cent in the co-responsibility level.

It appears that for beef the figure in the package is around 11 per cent and this would be split in two parts. There would be an 8½ per cent increase in the intervention price from the date on which the new price levels apply and the remaining 2½ per cent would be added on to this in December next. That procedure has been followed before and is one which all farming opinion in the country unanimously condemn because it amounts to a provision that a very substantial proportion of our beef production—not as substantial as it might be if we evened out the pattern of our beef production—is marketed at a time when we do not have the full price increase agreed at Community level in operation. I understand that the increase in the package for sugar beet at the moment is 9½ per cent and for cereals the increase is 8½ per cent.

For a number of reasons the effect of those figures will come to an increase of something less than 10½ per cent in the overall level of prices being received by farmers here. The increases do not apply right across the board to all our products. There is a proportion of our agricultural output which is not covered by price guarantees. There is also a proportion—I am thinking particularly of the pigmeal sector—where the price guarantee does not apply directly; it is an indirect price guarantee in that case. The overall effect of these measures, even if they were to be implemented, would be less than 10½ per cent in terms of the changes in prices that would come about as a result. It would also be less than 10½ per cent because the full increase in intervention prices or in guaranteed prices did not find its way into the market prices for the product. This can happen and does not depend only on the present ratio between market prices and guaranteed prices for those products. We have seen in the past that, where in the beef sector in some years we had increases in actual market prices, that turned out to be less than the increase in the intervention prices because of the market situation. Of course, happily enough, there have been years when the increase in market prices, as was the case last year, worked out at more than the increase in the intervention prices, because of market circumstances. The effect of these measures will be to increase the guaranteed level of prices by a margin of less than 10½ per cent in the current year.

It is very clear, if we look at the economic situation in farming, that an increase of even 10½ per cent in prices received by farmers will not bring a new era of prosperity into farming. An increase of 10½ per cent in farm prices, when we take the situation we are likely to meet with this year, and take account of what has been happening for the past three years, is not going to mean that we have a boom in farm profits or in farm income, though, of course 10½ per cent, or whatever the figure turns out to be, is a great deal better than no change. It is not a figure, the value of which we should exaggerate and neither is it one that will resolve the very serious farm incomes problem.

For a number of sectors the kinds of increases being spoken about will fall far short of what is needed to encourage farmers even to maintain their present levels of production. I refer particularly to the cereal sector where the proposed increases in the present package is 8½ per cent but in both the wheat and barley sectors farmers have been under very serious pressure for the past couple of years. This is a sector in which production costs are rising rapidly particularly in the more intensive production systems. In addition, fertiliser costs have been increasing rapidly and this sector in addition is one in which, by reason of climatic conditions, in the last couple of years we have not been able to derive the benefits that would normally be expected from the introduction of new varieties and from the very substantial switchover to winter cereals that has taken place in recent years. The latter has been as a result of the appreciation on the part of farmers of the need to increase productivity.

An 8½ per cent increase for cereals in these circumstances will not encourage cereal producers to expand their production as we would have hoped they might nor will it create conditions for any further drive towards increasing productivity in that sector. The same can be said of sugar beet where the proposed increase of 9½ per cent is less than the proposed average of 10½ per cent.

I need say very little about the situation in relation to margins for milk producers. A 10½ per cent increase for most creamery milk producers will, if passed on in full, amount to something less than 6p per gallon by way of increase. Given the movement of costs in that line of production in the last few years that sort of increase will not provide the means on our farms to carry on with the drive to increase productivity, the sort of drive that we witnessed in the milk sector up to a couple of years ago, until that activity began to be endangered by the erosion of margins.

We are facing what seems to be an overall increase of about 10½ per cent or perhaps a little less in the guaranteed price levels. To say the least, such level of increase disappoints me. I am putting it mildly by using that expression but much stronger language is being used throughout the country today in that respect and has been used for the past three years in discussions about farm prices. Having started off with a proposal of about 9½ per cent, I would have hoped that the margin that would have been added on to that at this stage of the negotiations would have been somewhat more than an extra 1 per cent. Even in the years of rigorous price policy that we have witnessed in the last few years at EEC level it has normally been possible to add at least 2 per cent, if not a little more, to the Commission's original proposals during the course of negotiations even without taking account of monetary changes.

There are other aspects of the package that I am very glad to see included. I understand that it contains provision for cash subsidies of 32 European currency units per head, that is, about £22 per head, for our calves. That was one of the three measures that I proposed as a special measure in addition to the prices but it was one that the Minister for Finance was inclined to pour cold water on a few months ago. He claimed he had tried it a few months before but that it did not work and that there was not much point in trying it again this year. I am very glad that the Minister has taken up where I left off and has carried this matter to a successful conclusion because this will prove to be a very valuable addition to whatever is agreed at the end of the day. I hope it will be possible to put that measure into effect this year so that we will see the benefit of it in terms of this year's crop of calves and that the £32 million or £33 million which it should produce will find its way this year into the beef sector and provide some extra stimulus for expansion and production in that area.

I understand also that there is provision in the package for the continuation of the calved heifer scheme for a period of two years rather than for the one year on which I had got agreement towards the end of last year. That is a matter also of some little disappointment for me but of major disappointment to farmers. The proposal I put to the Commission at the end of last year was that we should continue the scheme for a period of four years and that in addition Community finance should be made available to allow us to build up our beef herd. It seems now that we are to continue with the scheme for two years but that there is no Community financing involved.

When in Government we provided £5 million for that scheme for this year. We had been proposing to keep the scheme in operation for four years regardless of whether we succeeded finally in securing Community finance for it. Therefore, it would be my hope that the Minister would commit himself to keeping the scheme in operation for a four-year period.

It is a different scheme.

I am sure the Minister will agree that there is no point in having a one or two year scheme of that kind. We need a longer-term target for planning expansion in our beef herd. I hope that when agreement is reached finally the Minister will insist on keeping the scheme in operation for a period sufficiently long to allow it to have the kind of effect that we want it to have so that we may get the expansion in our beef production that we desire and in addition increase the possibility of further expansion in our dairy production.

There is an element that is missing from the package and that relates to a proposal that I had put forward to have expanded the areas of the country that are covered by the disadvantaged areas directive and to have reclassified parts of the existing disadvantaged areas into severely handicapped areas so that the full benefits of the EEC schemes could be applied to those areas. I am very sad to find that that proposal appears to have sunk without trace. Perhaps that is a phrase I should not use at this time.

Should the Minister need any extra encouragement when bargaining in Brussels I would remind him of what the Tanáiste, Deputy MacSharry, said on 24 November last during the course of discussion on a motion he had put forward. On the question of how much importance he attached to an extension of the disadvantaged areas scheme he ventured the opinion that the whole country would be designated as a disadvantaged area. While I agreed with the sentiments expressed at the time I took that idea with a grain of salt but it seems now that we need a sack of salt because there is nothing there at all. I am disappointed to find that that is the case.

We have arrived at this point and the package is still in the air awaiting, apparently, a resolution of the UK problem in relation to its budget contributions. I understand that this matter will be taken up by the Foreign Ministers at the end of the week. I should like to make the point that a package that comes out at 10½ per cent at this stage for all the reasons I imagine have been advanced over the last few weeks represents a very substantial concession to the kind of pressure that the UK has been endeavouring to put on the common agricultural policy for some time. I would like to be sure that this is going to be the end of concessions to that kind of pressure and that the agreement, if agreement is reached at the end of this week, on the overall budget problem, will not be one that will jeopardise the future of the common agricultural policy. Otherwise we might find ourselves here in future years not just talking about a delay in fixing farm prices but about a delay in agreeing to maintaining the system as it is. That is something we cannot look forward to with any equanimity.

I should like to share the sentiments expressed by Deputy Dukes at the conclusion of his contribution in regard to the common agricultural policy. It remains the major operational policy of the Community. It is a Community policy that is organised by and functioning under the Community. It is implemented by the Commission on behalf of the Community. The important aspect is to make that policy more effective and not to detract from it. One aspect I propose to explore in the months ahead with regard to price fixing in future years is the starting of discussions and negotiations within the Community at an earlier stage so as to avoid the spill-over of decision-making into the milk production year as happened in the case of Ireland and other North European countries where milk is an important concern. I mention that idea because it is wrong that we now have a situation, as we had in previous years, where decision-making is not operative from 1 April but tends to move on to May or June. To that extent I agree with the need for reform in that area.

I should now like to deal with the basic situation that exists. We meet on Monday and Tuesday next following the meeting of Foreign Ministers on Saturday and Sunday. The package being worked out is very attractive as far as Irish farmers are concerned. I do not wish to go down any tendentious paths but it is an attractive package and we want to see it implemented as quickly as possible. Its value in a full year to Ireland is £235 million. Of that amount £100 million will accrue to the dairy sector. Deputy Dukes spoke about the 10.5 per cent price increase and that, as he knows, is not the full picture at all. The calf premium which we have secured will mean a transfer from the Community to Ireland of £37 million. It represents a direct cash supplement to the farmer of £22 per calf that is reared to six months. That is of far greater value than any price increase because it is paid directly into the farmers' pocket. As far as milk farmers are concerned it represents 3 per cent on top of the 10.5 per cent. If one adds in the reduction in the levy and the fund now being made available for the small milk producer, one is talking about an additional £6.5 million. If that figure is added to the total overall package one is talking about a real income increase for the milk farmer of 14.5 per cent. There is also a similar type increase as far as beef farmers are concerned because the calf subsidy applies to those farmers also. On top of that— I have not taken this into account in my sums in assessing the 14.5 per cent—we have now got approval by the Council of Ministers for an in-calf heifer grant for every additional breeding heifer over and above this year's level.

I should like to explain how this operates. Deputy Dukes, as Minister for Agriculture, secured an interest subsidy arrangement which will start from 1 July this year. We opposed that and I fought it strongly within the Commission. We have now got that converted for next year, and the following year, into a straight £70 grant. Instead of a £70 interest rate subsidy from 1 July as will operate this year, next year from the same date it will be converted into a straightforward grant to every farmer who breeds extra in-calf heifers over and above his present level. That represents a three-year cycle guarantee to the breeding farmer. The package combines the calf subsidy which is an income supplement of £22 for each calf reared up to six months with the incentive grant for every breeder. That is desirable and sensible.

At present I am having discussions with the lending institutions, the ACC and the banks, with a view to devising a combined grant and loan system to be presented in an attractive worthwhile package to our farmers to lift herd numbers. In my view that represents the kernel of the present Irish agricultural problem. If we can raise herd numbers, although the benefit would not be seen for two or three years, we will be achieving a tremendous advance not just from the point of view of Irish agriculture on that front but from the point of view of the economy as a whole by reason of the export earnings that would be involved. Such a dramatic increase in herd numbers would enable us to sustain other economic activity on the employment, industrial, investment and infrastructural fronts.

Deputy Dukes also referred to other details. The sheepmeat package is very interesting. It amounts to 13½ per cent. There are three alignment points on top of the basic 10.5 per cent bringing it to 13.5 per cent and that represents a substantial advantage also. The package is acceptable — I have discussed it with Irish farmers and farming organisations — provided we can implement it as soon as possible. That is the crunch. The difficulty is that there is a major reservation by the British by reason of their demands for a budget refund and they will be pushing that demand on Saturday and Sunday. They want to get a specific figure written in to meet their requirements with regard to budget refunds in the years ahead. Hopefully, that problem will be resolved and if it is I see little difficulty in solving our Community agricultural package problem on Monday and Tuesday. We have gone 90 per cent of the way towards solving the matter. The overall package is attractive from our point of view and if the Foreign Ministers resolve their problems at the week-end and I am hopeful that we will see a clearance of our problem and the implementation of the package immediately to start a marketing year next week that would be beneficial to the Irish farmer in the year following.

The Dáil adjourned at 5.30 p.m. until 2.30 p.m. on Tuesday, 11 May 1982.

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