I move:
That a sum not exceeding £154,323,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1989, for the salaries and expenses of the Office of the Minister for Agriculture and Food, including certain services administered by that Office, and of the Irish Land Commission, and for payment of certain subsidies and sundry grants-in-aid.
The record achievement of the agriculture and food sector over the past two years is the best testimony of the success of overall Government policy. The sector has a unique and pivotal role in the economy and its performance has contributed enormously to the overall economic renewal in the country. The benefit of this success is not confined to the farming community; it has impacted in a dynamic and visible manner on the community generally.
The major building programme in the food sector, the farm development programmes in rural Ireland, the increased spending power in our towns and cities, the increased employment in our meat, dairy and horticultural enterprises, the huge boost to the haulage and transport services, the expansion of the range of quality Irish food products in our retail outlets, all testify to the positive spin-off across the economy of the renewed vigour in this primary production sector in our economy.
This Estimate is as relevant to each of these sectors as it is to the farming sector and it is the Government's firm intention to expand even further the opportunities that will arise in the European internal market. While the prolonged spell of dry weather is less than ideal for our agricultural pattern of production, the indications are already clear that this year will see a further major improvement in farm incomes, in agri-food exports and in employment in this key sector.
The decision of the Taoiseach over two years ago to adopt a new integrated policy for the agriculture and food sectors under my Department has been a key factor in this success. The direct responsibility of the IDA and SFADCo to my Department in the food sector has ensured that our production practices are geared directly to the marketplace and has enabled us in conjunction with CBF, Córas Tráchtála and Bord Bainne to capture very profitable and expanding markets throughout the world. I would like to pay a special tribute to these organisations and to the Department of Industry and Commerce for their co-operation and understanding with my own Department in this very successful transition.
I will now make some more general remarks before dealing in some detail with the main areas of agricultural production and with some of the precise elements in the Estimate. The Estimate is for a gross amount of over £310 million. This represents only a minor part of my Department's spending as some £950 million funded by the European Community is being paid by my Department to farmers and agri-business in 1989 and a further £120 million funded from borrowings will be spent on the purchase of products into intervention. Overall, therefore, between domestic and EC funds my Department are involved in disbursing almost £1,400 million.
The 1989 budget Estimates were framed in an overall economic environment which has provided significant benefits to Irish farmers. Inflation in 1988 at 2.1 per cent was at its lowest level for almost 30 years. Irish interest rates had fallen by 6 per cent over a two-year period and had withstood a significant increase in UK interest rates during 1988. The latest Teagasc report indicates an increase of 27 per cent in farm incomes in 1988 over 1987. This increase, on top of the previous year's very positive 31 per cent increase, consolidates the strength of family farm income levels and confirms that there has been a full recovery from the deep depression of 1985 and 1986.
The year 1988 also saw a significant growth in our exports of food, beverages and live animals which topped the £3 billion mark for the first time.
Deputies will be aware that the European Community has been adopting a restrictive approach to agricultural expenditure over the past five years or so. In particular, support prices have been frozen or reduced and other measures of varying types have been introduced both to control production and to stabilise budgetary costs. The Commission's proposals for prices and related measures for 1989-90 represented a continuation of this restrictive approach. However, overall, the financial impact of the pricedecisions was a favourable one for this country. Adjustments in the agrimonetary and milk sectors will be worth some £50 million to the farm sector in a full year, with a balance of payments gain of about £42 million.
The year 1988 proved to be exceptional for the dairy sector. The benefits of the improvement in the market were reflected, in particular, by the increase in milk prices paid to producers during 1988 as well as the record profit levels achieved by Irish dairy processors. The dairy sector provided some of the highlights of our export performance in 1988, a year in which world prices for the major dairy commodities rose dramatically and helped to create a favourable climate for investment. I have been heartened by the eagerness of the milk industry to undertake investment and to diversify away from the basic commodity products. Within the past two years alone butter production has fallen by 19 per cent while cheese production has increased by about 30 per cent. The advent of the Single European Market in 1992, of course, makes this process even more urgent and significant. Government action ensuring the availability of IDA and FEOGA grants for such investment has greatly helped the sector in undertaking this fundamental restructuring of output.
The advent of the Single Market also puts into focus the need for structural rationalisation of the dairy sector so that it can compete successfully with larger processing units in the rest of the Community. In the final analysis, only the industry itself can carry through the kind of reorganisation needed in a rational and sensible way, and the necessary planning at both producer and processor level has to be undertaken now.
On the actual operation of the milk quota system, my main concern is the particular difficulties faced by small-scale producers. I have constantly been seeking to introduce some flexibility into the system in order to make greater provision for such special category producers. The introduction of the milk quota restructuring scheme which I negotiated in 1987, as well as the scheme for the temporary leasing of quotas, have for the first time enabled quotas to be made available to these producers without the additional expense of purchasing or leasing land.
The main development in the quota system at Community level during the course of the year has, of course, been the resolution of the problem arising from the European Court decision in favour of the Mulder producers. The final date for the receipt of applications was 29 June and the quotas are to be provisionally allocated to eligible producers by 29 August. The House will be aware of my statement to the effect that I welcomed the fact that the Commission had responded to my request, and that of the French, at the price negotiations to introduce special proposals for a national reserve for small producers and young entrants into agriculture. I hope effect will be given to those proposals very soon.
The year 1988 was the time when the fall in cattle numbers throughout the EC, following the introduction of the milk super-levy in 1984, was finally reflected in market prices for cattle and beef. Factory prices throughout most of the year were about 10 per cent higher than in 1987. I am glad to report that, exceptionally in Ireland, the decline in the national cattle herd came to an end. The decline in slaughterings at meat export plants of about 120,000 head was due entirely to the strong movement towards stock rebuilding which manifested itself during the year. This movement was confirmed by the substantial increases in beef cows and heifers-in-calf recorded at the December 1988 livestock enumeration, which more than offset the decline in dairy cow numbers. As a result, the total breeding herd increased by practically 100,000 head. This was the first increase in the total breeding herd since 1984. It was also a striking expression of confidence by our producers in the future of the beef industry.
Certainly the climate is right for further expansion. All the favourable factors to which farmers responded in 1988 are still in evidence and have been supplemented since 3 April by an increase in the suckler cow premium from £38 to £51. There has also been an improvement in the relative profitability of once-calved heifer systems following the abolition of the UK variable premium which applied only to steers and maiden heifers. As a further encouragement to expansion my Department are this year offering grants of £20 per cow to selected farmers who use modern calf twinning technology.
There were significant developments during the last year in the EC beef regime. The EC Commission submitted proposals which would have involved very severe changes in beef market support. The negotiations on these proposals were crucial from the Irish viewpoint. In the event I was very pleased with the considerable improvements which we managed to negotiate before the matter was concluded last January. A very significant achievement was an assurance from the EC Commission that in its operation of the various support mechanisms it would have regard to the great importance of the beef industry in Ireland.
During late January and February it emerged that our winter feeders were encountering problems with cattle prices. I pressed the EC Commission to take urgent action and, as a consequence of my representations, intervention for carcases was introduced for a two-week period in March 1989.
I also obtained the agreement of the EC Commission to my proposal that a study be made of the whole question of the impact of seasonality on the industry. I am very pleased that the Commission will now regard seasonality as a priority issue. This is all the more significant in the context of the Commission's other assurance in recognising the great importance of beef in the Irish economy. I have also been giving attention to domestic aspects of the meat industry. The Abattoirs Act provides for a major reorganisation of the control and inspection arrangements for meat destined for the home market. The main provisions of the Act will come into operation on 1 September next.
Sheep production continues to be one of the most attractive farm activities. Last year alone the national flock rose by 16 per cent and some 5,000 new entrants came into sheep farming. There is a bright future for the sector provided we can supply lamb of the right quality at the right times. Since I launched the sheepmeat code of practice nearly two years ago considerable progress has been realised. However, there can be no letup in the move to better quality. The European Commission has clearly signalled its unwillingness to continue with open-ended support for the sheepmeat regime. Producers themselves will be expected to take more resonsibility for guaranteeing their return by marketing a better quality product. In this sector as in many others the message I want to convey is one of achievement to date and confidence for the future.
I would now like to refer to developments in the pigmeat industry and, in particular, to the Government's major five year modernisation plan, which I announced in 1987. The plan calls for the establishment of up to eight central slaughtering and processing plants of the highest standard and effectiveness, supplemented by a number of downstream specialised processing facilities. The development programme is well under way. A number of plants are already onstream and others are in the process of construction or at an advanced planning stage. In the past two years, my Department have approved investment projects in pig slaughtering and processing facilities involving a total capital input of about £80 million.
The plan also envisages an increase in pig output to three million pigs per year by 1992. The significant improvement in the pig prices in recent months should be a major stimulus to this expansion. Also, a number of pigmeat plants have already introduced incentive packages for producers aimed at encouraging the necessary expansion. I am confident that as these new developments bring about higher profitability, more farmers will be attracted back into pig production. Further contributions to the strengthening of our pigment sector will be made by the CBF marketing strategy and quality scheme which I launched recently and by the Community pig grading scheme which I introduced in this country last January.
The poultry meat sector continued to expand in 1988 with a further increase in the processing of oven-ready birds and an expansion in the added-value products sector, and significant export growth. While Irish egg consumption declined during 1988, in line with the international trend, the market share held by domesticproducers continued at a significant level. Home producers now account for 85 per cent of the supplies to the Irish market as compared with 55 per cent some years earlier. The impact of salmonella enteritidis in late 1988 resulted in a significant decline in home consumption of both poultry meat and eggs. However, consumption has now improved again in response to the implementation by the industry of the voluntary code of practice which I announced last December and the operation of the Department's monitoring programme.
As regards cereals, Irish production in this sector increased only marginally in 1988. As community production, at 162.5 million tonnes, exceeded the maximum guaranteed quality by less than 3 per cent, a partial refund of levies amounting to £2.09 per tonne of the additional coresponsibility levy was made to Irish cereal producers. Prices to producers should hold good for the 1989 harvest. The Commission has also agreed to tackle the problem of imports of cereal substitutes in the current GATT negotiations. Many Irish producers have turned to malting barley for which there is a ready and remunerative market for quality product. Milling wheat is another area to which cereal producers should look to improve their returns. Given reasonably favourable weather, better cereals management practices can also make a significant contribution to growers' incomes.
Turning now to some of the principal provisions in the Estimates, the allocation for the disease eradication schemes provided under Subhead C2 this year is almost £35.6 million. Funding for the TB and brucellosis schemes is guaranteed by the Government for the four years of the ERAD programme, a unique commitment and one which I consider vital to the success of the schemes. The board of ERAD recently announced increased compensation for reactor animals payable with effect from 1 February 1989. The total cost of these increases is estimated at £4 million in 1989. This expenditure will be met from savings of approximately £3 million by ERAD during 1988, with the balance being funded jointly by the Exchequer and by an increase in bovine disease levies. The ministerial orders giving effect to the increased levies are now being put in place.
For the record I want to indicate that these orders are being brought before the House on the basis of total agreement by the farm organisations and the board of ERAD. I want to indicate my appreciation to the spokesmen and leaders of the Opposition parties who have agreed to take this matter by way of Dáil motion without debate tommorrow. I would understand, of course, if they made comments, suggestions or even criticisms during the course of this debate.
The board have developed a comprehensive eradication strategy. To achieve the target set for ERAD of halving the existing bovine TB levels over four years, a more intensive and sharply focused programme has been implemented. This involves a full round of testing of the whole national herd, together with a component strategically focused on the 15,000 herds which pose the greatest disease risk. Particular attention will be given to areas with concentration of these high risk herds. I am satisfied that the establishment of ERAD has proved to be a successful initiative bringing together not just farmers but all interested parties to provide a clear and coherent approach to the disease eradication schemes.
A wide variety of schemes operate under the FEOGA Guidance Section but I will confine my remarks to the main areas where Community support is particularly important to Ireland.
Under Subhead L.3 the sum of £57.2 million is provided for payment of livestock grants in the disadvantaged areas in 1989. Of this sum, £45.2 million relates to cattle payments and £12 million to sheep payments. This allocation will enable payments under the sheep headage, cattle headage and beef cow schemes to be maintained at their 1988 levels. The payment of headage grants on beef cows in diary herds which I introduced for the first time in 1988 into the two cattle schemes I have just mentioned is being continued this year. Continuation of these grants is an important incentive for further expansion of the national cow herd.
Payments on mares registered with the Connemara Pony Breeders' Society and in the Irish Horse Register are being extended this year from the more severely handicapped areas to the less severely handicapped areas for the first time. The payments are also being increased substantially from £32 to £70 and from £28 to £66 and the operational rules will be changed to facilitate maximum uptake by mare owners. For the first time also this year, headage payments will be made on goats, at the same rates as on sheep. This should help to encourage alternative farm enterprises and to establish a solid breeding base for the Irish goat herd. Looking to the future, I would hope that I can negotiate an increase in our recoupment rate with the EC and that it will be possible then to increase the rates of headage payments and extend and reclassify some disadvantaged areas.
The availability of additional EC funds is, of course, the key issue here. It is too early at this stage to say exactly how much land can be included either for extension or reclassification, as the survey, on which the case made to the EC will be based, is not yet completed. Where the survey results justify the extension or reclassification of any particular area I shall put the case to the EC Commission and pursue it with vigour and determination, though I would warn Deputies that the negotiations with the Commission and indeed the Council can be expected to be difficult.
The agri-food industry in Ireland is of course one of the most important sectors of the national economy. The value of gross agricultural output, at £5.5 billion, is about one-third of our total manufacturing output. Employment in food processing represents nearly 25 per cent of all those employed in manufacturing industry. The industry has great potential for further development and expansion and with the advent of the Single European Market in 1992 there will be challenging opportunities for Irish exporters in an open market of 320 million customers. The Government are therefore devoting special attention under the Programme for National Recovery to the expansion of the food and drink industry.
The five year strategy for the food and drink industry published in December 1987 is well under way and accelerated development programmes involving investment of £0.6 billion have been agreed across the various sectors of the food industry. This investment will lead to the establishment of internationally competitive food companies in Ireland and will leave the industry well placed to take advantage of opportunities in the Single Market.
In view of the time constraint I will have to leave the remainder of my prepared script. However, I should like to make special reference to An Board Glas who have had a major success record. I should like to make that point in the presence of my colleague, Deputy Kirk, who was responsible for horticulture in the 25th Dáil. In the course of further developments in this area no doubt he and other colleagues will deal with that matter.
It is clear that Government policy places particular emphasis on farm efficency, product quality, environmental protection, rural development and improved support for disadvantaged areas. In doing so it highlights the principal areas where further progress needs to be made in the Government's endeavours for the agricultural sector. I am glad to be able to point out that each and every one of these problems is already being tackled. Obviously, they will not be cleared up from one day to the next, demanding, as they do, persistent and patient work as well as, in many cases, constructive co-operation from the EC Commission and Council, but once they are successfully solved, as solved they will be, we will have laid the basis for a world-class performance by Irish agriculture and food processing. We will have offered the opportunity to our farmers and processors to move ahead into a new dimension of efficiency and prosperity, to build an agriculture and rural society second to none and to face the future with pride and confidence.
As is customary on these occasions I have endeavoured to sketch out for the House the current state of our agriculture and food sector with special reference to recent developments. I must stress that the time constraint on us is a very serious one in view of the huge range of activities I could not possibly describe within 20 minutes.
I am determined to avail of every possible opportunity to build up the ability of our agriculture and food sectors to play a dynamic role in our economy and to achieve no less than a dominant position in the Single European Market of the future. Those are aims which this House, and the nation as a whole, can support. I am very confident that we can realise them.
