I move:
That a sum not exceeding £268,854,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1984, for the salaries and expenses of the Office of the Minister for Agriculture, including certain services administered by that Office, and of the Irish Land Commission, and for payment of certain subsidies and sundry grants-in-aid.
Deputies will note from the motion that the provisions for my Department are now included in a single vote and not under two Votes — Agriculture and Lands — as was the case in previous years. This change gives formal recognition to the integration of staff and activities since 1977 and means that common Departmental items such as pay, travel expenses, postal services, etc., are brought together under the A group of subheads while Land Commission services and schemes appear under the L group.
Notes on the main activities of my Department, including the Land Commission, have already been circulated and will, I trust, be of assistance to Deputies in their consideration of the Estimate.
Before dealing with the detailed aspects of the Estimate I should like to make a few general observations on the current situation in agriculture and on its role in the economy.
Developments in the agricultural sector have mirrored to a large extent the path of the national economy in recent years. The year 1979 heralded a reverse in the fortunes of the agricultural sector following the growth in output and incomes of previous years. Gross agricultural output in volume terms fell by nearly 4 per cent between 1978 and 1981. This adverse movement in output was compounded by an equally adverse movement in the relationship between the cost of the farmer's inputs and the prices he received for his output. As a result, farm incomes over the period 1978-1981 fell by 8 per cent in nominal terms and by 43 per cent in real terms.
The year 1982 was one of recovery in farming following three relatively poor years. Gross agricultural output was up by over 3 per cent in volume terms and net agricultural output by over 5 per cent.
This improved development continued in 1983, with gross agricultural output increasing by some 3 per cent in volume terms to stand at some £2,400 million. This represents its highest ever level. The outturn was facilitated by output increases in the cattle, milk, sheep and pig sectors. Total farm incomes increased by some 13 per cent in nominal terms and by about 2 per cent in real terms. Per capita real farm incomes rose by nearly 5 per cent. This growth in real farm incomes has been greatly assisted by the downward trend in the rate of inflation, which is now at its lowest level since 1978.
Overall, the performance of the agricultural sector in 1983 in terms of output, incomes and exports growth was a welcome one following the depression of recent years in farming and is one which we as a Government will be doing our utmost to encourage and build upon this year and in the years ahead.
The 1984-85 farm price package concluded on 30-31 March will have an important bearing on the development of Irish agriculture in these years. The agreement was reached following what has been fairly described as the toughest set of agricultural negotiations since we joined the Community. They were the toughest negotiations in any sphere, agricultural or otherwise, since we joined the Community. We had tough negotiations on fisheries policies in October 1976 at The Hague but most people would agree that the agricultural discussions on the super-levy, which lasted from July 1983 until 31 March 1984, were the toughest since we joined the Community. When one considers the opposition ranged against Ireland in these marathon talks, the outcome we achieved was a very satisfactory one. Much of the comment made since the end of March has been concerned with that part of the arrangement we negotiated on the super-levy. I shall go into this in some detail later when dealing with the milk sector.
The producer price changes in the package were significantly affected by a green currency adjustment. As a result there was a net increase of about 2.5 per cent in the support levy for milk; for beef the net increase is 3 per cent to 4 per cent; for sheepmeat the increase is 5 per cent including the final step in the realignment of Community prices, while an increase of 2.3 per cent is provided for pigmeat, cereals and sugar. There has been a major agreement on MCAs. In future no new fixed positive MCAs will be created following changes in monetary parities. Existing positive MCAs are being reduced and it is the Commission's intention to have them completely removed within a matter of two years. The new negative MCAs created as a consequence of this change are being eliminated at the beginning of the 1984-85 marketing year for each product. The elimination of positive MCAs is of considerable assistance to this country and probably has not received sufficient attention because of the overriding attention given to the super-levy. It will place farmers, farm enterprises and industry in a much better competitive position. Positive MCAs have been a distinct impediment in agricultural trading. The resultant change in the representative rate for the IR£ provided an increase for Irish support prices of some 3.4 per cent. This greatly helped to offset the effect of the original restrictive proposals on prices, which would have involved price reductions for most of the products of interest to Ireland. When one considers the critical financial situation of the EEC, to get any price increase was a considerable achievement. The EEC's agricultural budget is in deficit to the extent of two billion ECUs, about IR£1,300 million. To get concessions in such a dire financial situation is a major achievement.
Another major feature of these negotiations has been the changes in the United Kingdom variable premium scheme for beef — known as the slaughter premium. For a number of years the method of operating the scheme had given United Kingdom beef exporters a considerable advantage over Irish traders on export markets and large numbers of our cattle were being attracted over the Border for slaughter in Northern Ireland. The price package provides for a reduction in the rate of premium and for the introduction of a clawback of the premium on exports of beef from Britain and Northern Ireland. This change will provide new scope for the expansion of the Irish beef industry. I will deal with the matter further when I come to the beef sector.
This has put a number of our beef processing plants in serious difficulty, particularly in the last 18 months to two years, although the premium has been in existence for 11 years since the British joined the EEC. It was introduced to subsidise the price of beef to the British consumer. We never objected when it was being used for that purpose, but in recent years as the British began to be self-sufficient in beef, they began to develop an export market in beef. This meant that a country which was a net importer of beef suddenly became an exporter of processed beef. The variable premium constituted a major subsidy to the export of British beef. What was happening was that they were capturing a considerable number of markets on the Continent which previously had been Irish, and this put many of our exporters in serious difficulty. We have been strenuously opposing the renewal of this premium for the past 15 months and I am glad to say our efforts have been successful. It is significant that representatives of our meat trade say that the removal of the more annoying and damaging aspects of the variable premium have been the most significant developments in the beef industry since our entry into the EEC.
The price package is worth some £65 million to the Irish farm sector in a full year. This figure represents only part of the benefit to Irish agriculture as a result of the negotiations. If one takes account of what the impact on Ireland of the super-levy under the original Commission proposal would have been, there is in effect a further benefit of some £180 million. Given the restrictive budgetary situation in the Community at present, the outcome of this year's price package was most favourable not only for our farmers but for the economy as a whole. If we take the price package as being worth £65 million, the deal on the milk super-levy in the current year being worth £180 million and add the benefit of the changes in the operation of the United Kingdom variable premium and the reduction in positive MCAs, we can see that overall the 31 March agreement is worth a vast amount of money. It is difficult to quantify the last two, but overall the price package would be worth something in the region of £300 million to this country in 1984.
Turning now to the Estimate itself, the gross sum is over £395 million, which is £42 million or 12 per cent above the amount expended in 1983.
Despite this clearcut statistic it is surprising to hear Opposition spokesmen and others saying that there has been a cutback. There has, in fact, been an increase of £42 million, or 12 per cent in 1984 over 1983. The net estimate is up by £13 million or 5 per cent, reflecting the fact that receipts are estimated to rise by £29 million. The sectors which principally contribute to the increase in gross expenditure are salaries and wages, the rescue package and market intervention. The increased receipts arise mainly from EEC contributions in respect of market intervention, veterinary inspection fees and the disease levy, but these are offset by a reduction in EEC receipts under the farm modernisation scheme.
It is important to stress that the gross total of £395 million in the Estimate represents only part of the total expenditure on agriculture. Account must also be taken of the EEC funds disbursed by my Department in respect of agricultural support measures. In 1983 these amounted to some £470 million. In addition, a sum of £310 million was raised to meet the capital cost of intervention purchases of beef, butter, skimmed milk powder and cereals. Thus, on top of the £395 million in the Estimate, a further £780 million was spent on EEC measures. One could say that in the Estimate we are talking about a figure, not of £395 million but something like £1,175 million. That is the true figure which is involved.
I should now like to deal with some of the main agricultural products. The year 1983 was a reasonably satisfactory one for the cattle and beef industry. The volume of cattle output increased by 2 per cent and exports of livestock and meat were worth £180 million and accounted for 45 per cent of agricultural exports. Slaughterings at export plants at 981,000 head were 4 per cent higher than in 1982. Slaughterings this year are showing a welcome upward trend and it is expected that the total for the year will exceed a million head for the first time since 1980.
More than any other single element in the agricultural sector of our economy, beef is an export-oriented industry. It is important in this regard that the industry should consider its output as a consumer product and that from the point of view of job creation and expansion of export outlets, every effort should be made to produce quality and value-added products. Marketing is also vitally important and in this connection CBF's promotional activities on our main markets have been paying dividends. A sum of £785,000 is provided under subhead H.1 to assist CBF to continue those activities.
The expansion of the national herd is essential if the beef industry is to make its proper contribution to farm income and the national economy. There is a wide range of measures which encourage farmers to increase their herds. Thus, there are the cattle headage and beef cow schemes in the disadvantaged areas, the EEC suckler cow scheme, the calved heifer scheme and the calf premium. Taken together an additional calved heifer with calf can represent as much as an extra £157 to a farmer in the disadvantaged areas and an extra £106 to a farmer elsewhere. These are very worthwhile incentives indeed.
When speaking about CBF and their valuable work, I must compliment them on the markets which they are helping to secure in third countries. They have been doing wonderful work in countries in Northern Africa and the Middle East, Egypt — which is a huge new market in recent years — Libya, Algeria, Saudi-Arabia, Iraq and more recently Iran, where, with the help of CBF and some of our major meat processors we secured a contract worth some £80 million for processed beef. The CBF are to be complimented on the efforts which they are making to open up these new markets which are invaluable to our cattle industry.
Currently there are some indications of shortfalls in supplies from traditional beef exporters to the world market. We should do everything possible to derive the maximum benefit from this situation. As I have mentioned, slaughterings at beef export premises are in fact showing buoyancy at present.
Some countries, particularly Saudi-Arabia and Australia have not the same volume of supplies as they normally would have and we have been able to benefit from the shortage of supplies in the world market. That has been a great help to us in getting these additional markets abroad. Of course, we shall always have the controversy as to whether we should export cattle live or in processed form. The answer is that one must pay attention to the market demand. If people want to buy live cattle and we have them, we have an obligation to sell live cattle. However, it would be preferable if the meat were processed before leaving the country. That is a natural evolution. There is a continuous increase in the proportion of beef processed before export. I gave the figure here last year showing that since we joined the EEC there has been a radical change in that regard. When we joined we were exporting about two-thirds of our beef on the hoof, in other words live. We were exporting one-third in a processed form. Last year's statistics showed that the situation has been reversed, with two-thirds of the beef being exported in processed form and one-third live. The trend towards processed rather than live beef is continuing and is to be welcomed and encouraged. It means more jobs here.
I must stress that the live trade has always given the beef industry that competitive aspect which is so vital. When that competitive aspect was not available back in 1974, there were disastrous repercussions within our beef trade. It is vital that there be a strong element of competition to keep prices up.
The EEC price agreement this year included two measures of great importance for the beef sector. Firstly, as I have already indicated, a clawback of the variable premium has been introduced for all exports of beef from the UK. This removes a serious anomaly which had enabled British and Northern exporters to outbid our factories for cattle and undercut them in selling beef abroad. With this distorting element out of the way, we should now see the resumption of fair competition and, I trust, a return of our exporters to some markets they have been squeezed out of in recent years. We retain entitlement to the variable premium on our own exports of cattle and beef to Britain. If the premium, while it operates, were not applicable to our exports to Britain, it just would not be possible for us to sell on the market there. The payment of the premium on our supplies merely equalises conditions of competition on the UK market. This does not give us preferential treatment on the British or other markets. It merely equalises our ability to compete. I notice that some British commentators and people in the beef trade said that it would give us an advantage, but it does not. It merely equalises what has been for us an unfair situation. Similarly, the clawback of premium on exports of beef from the UK merely puts our exporters once again on an equal footing with UK exporters. We shall be in a position to get back some of our markets. These were primarily on the Continent, in Germany and France. They were taken by British exporters of beef who had this unfair competitive edge because of the premium which was introduced as a subsidy for the British consumer but which had been translated into an export subsidy for British beef exporters.
The other major development has been the introduction of the carcase classification grid for intervention purchasing throughout the Community. The object is to buy-in identical qualities of cattle in all ten member states, and to pay identical prices for them. Prices for some qualities in some continental member states were appreciably higher than here, and while the harmonisation is not happening all at once, we have made a start. More or less the same qualities are now being bought-in in all member states and prices are being harmonised in three stages, with final alignment due in April 1986. The effect of the alignment in our case this year was to offset a 1 per cent fall in the intervention price; and so allowing for the green rate adjustment, our intervention prices have actually risen by about 3.5 per cent on average since the beginning of April. The markedly higher intervention prices for better grades should provide the incentive for farmers to produce a better quality of beef cattle than at present. People will now get paid proportionately for good quality beef which has not necessarily been the case in the past. There was not much of an incentive for people to produce high quality beef because of the lack of a system such as a classification premium.
Also in the beef sector, we have retained the EEC suckler cow premium with the special Community financing arrangement for Ireland being continued. In addition, the agreement includes the continuation of the calf premium but at a reduced rate of about £10 per calf. This is very welcome considering that the original proposal was for the abolition of the calf premium completely. Some Opposition Member announced in the House that it had been abolished. It is not abolished. It is retained at £10 per calf.
Some references have been made recently to the cost of operating the inspection service at meat factories and the fees charged to the factories for the service. In fact, the overall cost of the service is estimated at £7.3 million while the fees charged are expected to realise £5.8 million. The Department do not make any profit on the inspection fees being collected. They actually have to subsidise the veterinary services being provided.
It should not be overlooked that my Department are obliged under national law and EEC rules to provide this service. Indeed, since Ireland is a major exporter of beef it is necessary to be particularly careful about our inspection arrangements. With increased consumer awareness greater demands are in fact being placed on our resources in this area. The inspection service extends further than the factory floor. For example, we are now obliged to a greater extent than heretofore to provide laboratory services to check samples for freedom from a wide variety of residues. The service provided is monitored on an on-going basis and every effort is made to see that economies are effected consistent with the need to provide an efficient and comprehensive service.
People who complain about the cost of these services should remember that the people to whom we are exporting are watching comments which are being made about the quality of beef in this country. If they are not happy that we are taking every possible measure to see that the quality is of the highest standard then our beef export trade will be jeopardised. The veterinary inspection fees are a very small proportion of the cost of beef and cattle in this country at the moment. It is a very small price to pay and it is essential that we satisfy our customers that there is no dangerous residue in the meat that is exported.
My Department are continuing the various measures for improving the genetic merit of our livestock and expenditure on these appears under subhead C.1. Imports of high quality bulls and semen of proven bulls are being continued and the programmes of progeny testing bulls in AI and of performance testing beef breed bulls are being expanded. In addition, under the EEC Programme of Special Measures for Ireland, £300,000 is being provided as part of subhead M.9 to expand performance and progeny testing facilities. Inseminations by the AI service were 1,305,000 in 1983 and maintained their upward trend with beef breeds accounting for 53 per cent of the total as compared with 47 per cent for dairy breeds. The EEC programme also provided an AI subsidy but this ceased at 30 April when the programme expired. I am anxious to see the re-introduction of a subsidy because of its beneficial effects in encouraging the use of AI and I am hopeful that I still can make some progress on this. I am actually entertaining plans at the moment of adopting strategies which may well result in the resumption of this very valuable subsidy.
Following the discontinuation of bull licensing in 1983, I had the matter examined by the Cattle Advisory Committee. In the light of their recommendations, some alternative arrangements are currently being considered. I am providing £305,000 under subhead C.1. to fund the reorganisation of the revised milk recording service. Full responsibility for the service will shortly devolve to the Irish Dairy Records Co-operative, which is representative of creamery co-ops, milk boards and AI bodies. While I expect that over 100,000 cows will be milk recorded this year, we are still a long way behind our European partners in this important activity. However, I am confident that the new co-op will generate a rapid expansion in the level of milk recording in the next few years.
Creamery milk production in 1983 at close to 1,015 million gallons showed an increase of some 9 per cent compared with the previous year. The upward trend has been maintained this year but at a more modest rate. Assuming that the industry organises itself effectively to take advantage of the concession won in the super-levy negotiations, expansion should continue throughout this year. The volume increase in 1983, combined with the relatively modest price rise, resulted in a significant improvement in returns from dairying.
It is true, that, in spite of the action aimed at achieving market balance which was agreed upon recently in the Council of Ministers, the Community milk market is still faced with great difficulties. Owing to the continuing economic recession and strong pressure from competitors, Community exports of the main dairy products, with the exception of cheese, show a disturbing decline and intervention stocks are currently at unprecedented high levels. People will have to bear that in mind. We cannot be living in a fool's paradise. Intervention stocks are still building up enormously.
Hand in hand with the new quota system in the dairy sector, we can expect a restrictive price policy for some time. More than ever before, dairy farmers will need to exercise greater control over costs and achieve a more efficient use of inputs so that the maximum benefit is obtained from investment and the continued profitability of dairying is ensured. With prudent management and in spite of the super-levy, it will still be attractive for many farmers to continue to expand milk production. We still have genuine potential for development in the dairy industry in Ireland and it is in the interests of both farmers and the economy as a whole to exploit it; otherwise, we will be failing to make use of the valuable concessions obtained in the super-levy negotiations. Producers should not think they are tied to an increase of 4.6 per cent. In many cases people will be able to increase their milk production in 1984 by as much as 15 or 20 per cent, because there will always be people going out of milk production. Some may do so because of disease in their animals, others may decide to let their land. This will mean that some farmers will be able to jump forward and develop at a faster rate than ever, but it is something they must do in conjunction with their local co-operative from whom they must get very careful advice. There will be enormous opportunities for people to expand, even with the 4.6 increase. Development farmers should be able to expand well in excess of that.
It is worth emphasising the extent to which concessions have been made to us on the super-levy issue. The Commission originally proposed a super-levy based on 1981 deliveries plus 1 per cent. This would have resulted in a cutback in Irish deliveries of over 13 per cent and would have prevented all possibility of improvement in the future. It would have been an unmitigated disaster for the Irish dairy industry, Irish agriculture and the whole economy if it had been adopted. The Government used every diplomatic and politicial approach open to them to oppose the proposal and to make the facts of the Irish milk situation and the unique importance of milk to the Irish economy known to our partners.
The significance of the contribution made by the Taoiseach to these negotiations is not stressed often enough. His knowledge of the workings of the super-levy proposal and of the price package in general, designed to bring about financial rectitude within the EEC, absolutely baffled other heads of government and ministers. There was widespread recognition that his grasp of the situation was brilliant and that it was of major assistance. Ireland's negotiating team at those talks was exceptional. The senior officials from the Department of Agriculture, in particular, excelled. The standard of our team was at least on a par with any other group of officials at the talks and probably superior. That was a major contributory factor to the satisfactory outcome of the discussions. The officials of the Department of Agriculture and the Department of Foreign Affairs, as well as the Irish ambassador in Brussels and his staff, all played a very significant part. They contributed in an excellent manner at the initial talks in Athens and the later talks in Brussels. It was their good advice and diligence which led to the breakthrough at the end of the day. Many of our counterparts still cannot believe that we got such a concession.
For a while it looked as if there would be an agreement among the other member states on a super-levy with a basis considerably less rigid than the 1981 base proposed. In that context our problem would not have been as difficult to solve. The original Greek proposal made in Athens last December was generous, but the Commission found it too generous and could not afford to pay for it. They made sure that the eventual proposals were a lot less generous.
We were particularly fortunate in that the Presidency of the EEC happened to be in the hands of two countries who were most helpful. The Greeks could not have done more for us and at no stage during the French Presidency did France show anything but the greatest sympathy for Ireland's case. They were absolutely wonderful and backed us to the hilt to the end, even when the bulk of the other countries were showing tremendous resistance to any special exemption for Ireland. The French always stood by us, as did the Greeks.
As the budget and market situation worsened it became clear early this year that most member states were prepared to settle for a super-levy based on 1981 production plus 1 per cent. The longer the super-levy debate went on, the more difficult it became for us to get a good deal because of the chronic financial crisis within the Community. I hate to think what would have happened if we had not reached a satisfactory conclusion on 31 March. The cutbacks which had already been made by the Commission would have seemed like child's play compared with what they would have had to do subsequently. It is only common sense to recognise that support for intervention and export refunds would have been very seriously affected and would have had enormously damaging repercussions for agriculture here. People in the dairy and meat industries recognise that fact, although it may not be generally known. There would have been a shattering effect because of the critical state of the finances of the Community. The agriculture budget for 1984, even with the agreement for cutbacks, is in deficit to the tune of 2 billion ECUs, IR£1,300 million. Without the agreement of 31 March those figures would be increased considerably because there would be no curtailment on the output of milk and the situation would deteriorate very quickly, affecting this country more than any other country proportionately because of our dependence on milk and beef exports. We did not let that fact deter us from getting the best possible deal. The most extraordinary outcome of the talks is that while we were under immense pressure we still got the maximum possible deal in percentage terms.
For a number of member states the deal meant accepting a production cutback of up to 8 per cent and this made the negotiation of a derogation for Ireland very difficult indeed. Because of reserves and other implications of the super-levy in individual countries, some farmers are taking cutbacks of up to 12 per cent. In Britain it is 9 per cent. This is a colossal cutback. It is no wonder we have heard rumours in recent weeks that Northern Ireland farmers are offering milk to Southern co-operatives for 40p a gallon. The alternative is to pour it down the drain. Of course there would be no question of our accepting any such milk from Northern Ireland or anywhere else. It is our duty to fill the quota ourselves but this shows the panic in countries which have had to take cutbacks of up to 12 per cent. Because of the outcome of the discussions, relations between me and some of the other agriculture Ministers are not as good as they might be. This is only natural because they have had to take a terrible beating from their own farmers. Nevertheless most of them have accepted it and I do not believe there will be any lasting ill will towards Ireland. They are being hammered for taking a reduction while we are getting an increase.
It is important that we maintain good relations because everything in Brussels is done by consensus. You do not go around kicking down doors or hammering tables with your fists or your shoes, like Khruschev did 25 years ago. You must negotiate like a reasonable human being. It does not suit us to be making bad friends; we can be tough, uncompromising and rigid in our stand, but that is expected and people admire you for doing it.
In the end a series of compromises was put forward to meet our position. The one to which we finally agreed gave us a basic entitlement of 1983 deliveries plus over 4.6 per cent with a guarantee that this quantity could not be reduced. Furthermore we are to have priority in the division of any quantities which become available in future years. That is an important commitment.
In accepting this we were conscious of how far we had advanced from the original Commission proposal. We were also acutely aware of the impossibility of getting further concessions from our partners, most of whom were themselves having to settle for substantial cutbacks in production. To the extent that any delay would have caused a further deterioration in the budgetary position, a later settlement would inevitably have been a worse settlement. In those circumstances we accepted the final compromise which gave us the right to expand this year at a rate similar to our average over the past decade and which held out the prospect of further increases being possible in the future. If the national increase here in 1984 was only 2 per cent on 1983 it does not mean that we will have lost 2.6 per cent. We still retain that 4.6 per cent. That is our base year, not 1981, as is the case with the other countries. We do not believe there will be enormous quantities of milk available in 1985 because it will take the super-levy some time to take effect — how long is very difficult to gauge.
Certainly, the position of the industry here is far different from that of the industries elsewhere in the Community. The reductions in the case of three of the largest milk producing member states are between 7 per cent and 8 per cent compared to 1983. The fact that in those circumstances our partners were prepared to concede so much to us is a testimony to the strength of our case and the persistence with which we pursued it. It is a testimony also to the political courage of the Ministers concerned in the other member states who recognised the tremendous problem which the super-levy proposal presented for us.
Anybody who reads the British or European papers will notice that. The reaction has been quite violent. It was always in our interest that the escalating imbalance between the dairy production in the Community and the disposal possibilities available should be brought under control. However, it was essential this should be done without causing real damage to our own industry. We have succeeded in achieving this, and that is a major success.
This was itemised in The Farmers Journal this week. They gave details of the trends of milk production in other countries. It is too early yet to see the effects of the super-levy. It will be a couple of years before we can be definite about future prospects. Taking March and April, there were tiny increases in some European countries, about 2 per cent. There were decreases in places like Holland and the UK. In March in the UK it was 2.8 per cent and in Holland, which was the most intensive milk producer in the Community, the decrease was 4 per cent in the month of April. From those figures it appears that the super-levy is beginning to bite. In West Germany, another intensive milk producer, there has been an increase of 0.1 per cent.
In contrast, the Irish figures are rather interesting. The figures for the first quarter showed an increase of 9.2 per cent and in March alone it was 6.8 per cent. While others were almost static or dropping, Ireland has jumped forward, which shows we are living up to what we said we could do.
Milk production in the first quarter in the US has gone down by 1.4 per cent. That is a welcome trend because many of the problems in Europe in recent years were caused by the US flooding Europe with milk products at low prices. We have been involved in cut-throat competition on the open world market with the US and, to a lesser extent with New Zealand. However, the US have made valiant efforts to cut back on their milk production. They did it in a way which we would abhor, the alternative to the super-levy, the cutting of prices directly. It is a different method from getting people to drop production. Milk production in the US is decreasing. I had hoped it would have decreased by more because one way to get rid of the huge stocks of intervention butter is to reduce competition from countries like the US. We know how Bord Bainne lost a huge market in Mexico last year because the US undercut us: they sold a vast quantity of skimmed milk powder to Mexico at dirt cheap prices and we were not able to compete. The sooner European countries generally, with the exception of Ireland, cut back production according with the super-levy proposals, and the Americans do it by cutting prices, the better. We can then hope for a further leap forward in milk production here. That is our ambition.
The successful outcome of the super-levy negotiations affords our producers real possibilities for continued expansion of milk output. It is essential that we produce up to the full level of our guaranteed quantity. Failure to do this would represent inefficiency in the use of our production and processing capacity and it would also weaken our case for an increased quota in future years. There are indications that producers now realise the flexibility which Ireland's special super-levy arrangement allows them and that they will respond in a disciplined and intelligent manner to the circumstances which now prevail.
Deputies will be aware Ireland has opted for what is know as formula B for the purpose of the super-levy. This means that the quotas will be on a creamery or dairy basis so that a surplus in some creameries can be offset against decreases in others. I am glad to say that there is a good possibility that a national purchasing agency will be set up which will include most if not all creameries and dairies. It does not matter too much if three or four drop out. The purpose of a national purchasing agency is to achieve flexibility and mobility in the use of milk. In other words, if one co-operative does not achieve the target of 4.6 per cent and if another co-operative is in excess of that figure, milk can be transferred from one to the other through the national purchasing agency. It is a most desirable objective and I am glad to say the farming bodies in the umbrella organisation of the co-operatives are fully in agreement with our suggestions in this regard.
With regard to the allocations to creameries and dairies, I have had a joint recommendation from the IFA and the ICMSA that a special allocation of milk should be made to small producers. The allocation will apply to such producers all over the country but because of the greater proportion of small producers in the west the recommendation will have the effect of switching milk from the south and the south-east to western areas. There is some disagreement within the co-operative organisations about the recommendation. I had a meeting yesterday afternoon with the IFA and the ICMSA about the matter and I hope to make an announcement during the coming week. It is a very vexed question. The farming bodies have made a recommendation that would have allowed a considerable shift of milk from the southern part of the country to western and northern parts but, on the other hand, the big co-operatives in the south feel they would suffer financially by the introduction of such a scheme. We have to have a certain balance in the system and that is not easy. I know the Ceann Comhairle is anxious about the matter and is fearful that Killeshandra, Bailie-boro', Monaghan town and Lough Egish might not do so well. I am sure he thinks that people in the north-east and the north-west should get extra consideration. I sympathise but I have my own problems also.
