We put down this motion because of the deepening crisis in the cattle industry. It should not be necessary to emphasise the importance of the cattle sector. Cattle make up to 90 per cent of our farm stock and are crucial to the incomes of thousands of farmers. Those in the dry stock sector have had to deal with tighter margins than any other sector of the agricultural industry. While this crisis was predictable, very little was done about it. This is an outstanding example of what can happen when the difficulties in agriculture are neither understood nor accepted by our European partners. We fought hard in Europe for the introduction of a direct payments system and common agricultural policy reforms and success was achieved by the Minister's predecessors in the face of severe criticism.
We are not asking the Minister to seek something extra. We are asking him to guard the systems that have been put in place as a result of the negotiating successes of his predecessors. One of the greatest criticisms that can be levelled at the Minister is his abject failure to maintain the status quo which would have provided some prospect of viability for the thousands of farmers who depend on the dry stock sector. Those achievements did not benefit only cattle farmers. A survey of national farms carried out in 1994 shows that premia payments are crucial to the viability of farm families in all sectors.
We tabled this motion against the background of a crisis in the beef industry. We depend to a far greater extent than our European Union partners on markets outside the EU to dispose of our cattle. This unique position is neither understood nor accepted by our EU partners and has not been acknowledged since this debacle began last October. Since last autumn export refunds have been cut by 35 per cent. In recent weeks proposals emerged at Commission level to effectively remove the deseasonalisation premium from Irish beef producers and to reduce the 22 month premium. Throughout this period, because of the strength of the punt against sterling, pressure on the sector has cost factory jobs and added to the downward pressure on farm gate prices.
Fianna Fáil holds this Minister responsible. He has reneged on his political responsibilities to our single largest industry. He disastrously miscalculated the effect on the sector of the series of reductions of export refunds since last October. On 2 February he compounded his earlier misjudgments by accepting an entirely unsatisfactory and — on his own admission — inadequate resolution of the issue. He added insult to injury by saying the package of 2 February, "would give a psychological boost to the beef and live cattle trade at a very sensitive time". Cattle prices have remained at record loss making levels. A nightmare scenario has been visited on winter finishers in particular — so much for the Minister's psychological boost.
To date the Minister has not delivered on the promise he made last June to implement a special package to enable the processing sector survive the pressure of the sterling crisis. Vital investment planned under the operational programme, which was launched at least five times during the Minister's time in office, has not gone ahead. Investment of up to £660 million was envisaged to maintain the competitiveness of the Irish food sector. Will the Minister confirm that the basic assumptions and targets laid down under that programme were based on an exchange rate of 97p or 98p against £1 sterling? From talking to major players in the food industry I am aware that not only have proposed investments been deferred, but they have been postponed until such time as the exchange rate disadvantage with our major market is resolved. The £660 million investment package will be pie in the sky for as long as the exchange rate between the punt and sterling remains at its present level. Those who examine the risk-reward ratio will not invest. Factories are on short time, opportunities and jobs have been lost and existing jobs are at risk.
Since last Autumn export refunds have been slashed by an unprecedented 35 per cent. As nine out of ten of our cattle population must be exported and 60 per cent to countries outside the EU, the impact of that 35 per cent slash has been enormous. Cattle farmers have been devastated. Cattle bought last September at 106p and 107p per pound are being sold at 98p per pound and more than 13,000 people who specialise in beef finishing have been affected.
How can the industry survive and prosper if farmers receive only 98p per pound having bought cattle at that price and fed them over the winter? No business could service that sort of pressure. Taking into account the months of winter feeding, this represents a loss of more than £70 per head for steers, not to mention the loss on cattle. Teagasc figures show that a price of 105p or 106p per pound is required if farmers are to break even. To make a profit of £30 per head farmers need a price of 109p per pound for cattle.
A loss of £70 per head on 460,000 steer spread over the springtime amounts to more than £32 million, and this is assuming that the situation does not get any worse. However, there is every indication that it will get worse. Taking refund available, the price of cattle last autumn, the refund now available and the present price of cattle, the price at the beginning of March will be between 92p-94p per pound. The situation is about to deteriorate, yet no policy decision has been taken and no influence has been exerted where the decisions are taken to alleviate the situation. In the hope that the situation will improve farmers have naturally held back their stock. There is now a glut of cattle and these will soon have to be sent to the market. Given the lower export refunds in operation and the lack of competition from the live trade, there is a real fear that prices will fall further. So much for the Minister's psychological boost.
The Minister has a clear political responsibility for this enveloping calamity. He is out of touch with what is happening in Brussels and out of tune with how things are done here. It is clear that his eye has been off the ball. He was repeatedly warned of the effects of the succession of reductions in export refunds of the price of cattle but he repeatedly ignored these warnings. As recently as last December the Minister said he did not expect "the new level of refunds to have any immediate effect on cattle prices". Anyone who doubts the scale of the Minister's miscalculation should look at what is known as statement No. 257 of 1995 from his Department. One thing we are not short of is press statements from the Minister's office. The Minister's assertion was the latest in a line of assurances to farmers that cattle prices would not be affected. Those assurances have now been shown to be totally false. Damningly, those same assurances were as false then as they are now. The fault of farmers, if fault it is, is that they took the Minister at his word and they are now paying collectively with their livelihoods. The Minister is directly responsible for minimum losses of £32 million this spring.
The problem relating to export refunds is a political one. The decisions to reduce the refunds since last autumn have been taken by the EU Beef Management Committee. This committee, which is a bureaucratic part of the Commission, has successfully undermined the political decisions of the Council of Ministers. In April 1994 the Council decided on a price guide regime of 106p per pound. Ascribing their decision to problems with GATT, the management committee has repeatedly undermined that decision while the politicians who are supposed to be masters of the situation have claimed they can do nothing about it. There is no greater apologist than the Minister who has stood idly by. If as he says — and sadly we have no reason to doubt him — he has no support at Council level then the most serious questions must be asked about the political competence of this Administration. The Minister further undermined his position and that of farmers by deciding to engage in a slagging match with the Commissioner. One does not score points in Brussels by playing to the peanut gallery at home.
The beef sector faces further threats to its future. For example, the future of the vital deseasonalisation premium is now in doubt. This hard won success by the Minister's predecessor is worth £60 per head on slaughter between 1 September and 30 November. Qualification depends upon 40 per cent or more of annual slaughter taking place between these dates during the year before last. This premium has been vital in redressing traditional imbalances in production and dealing with the seasonality problem. Last year Ireland feel below the 40 per cent threshold. When I tabled questions on this issue I was given many assurances. The Minister put forward a proposal to reduce the threshold to 35 per cent. His lack of success can be evaluated by measuring the difference between the 35 per cent threshold sought and the proposal on offer. The unsatisfactory offer of a 38 per cent threshold will, in turn, be made less acceptable by the proposed financing of same by a 40 per cent cut in the premium. People look in amazement at these negotiations and wonder how well the Irish case has been put, not to mention how it has been accepted.
Additional financing for this proposal will come from a cut in the 22 month premium. The 1994 farm survey shows that 84,000 farmers collected a 22 month premium on 816,000 cattle while 12,000 farmers collected a deseasonalisation premium on 220,000 cattle. Farmers are going from the frying pan into the fire. Significantly, these are the first concrete proposals brought forward to mitigate the MacSharry reforms. The Minister has failed, not just to get something more but to hold on to what was negotiated by his predecessor. Following on the heels of a major tactical defeat on the issue of export refunds, beef producers are now being walked into a strategic débâcle by the Minister on the issue of the deseasonalisation premium.
Prices have been further depressed by a lack of real competition from the live trade. Farm gate prices have always been boosted by the competition between factories and the live trade. The cut in export refunds has hit the live trade particularly hard. We export 70 per cent of our cattle to third countries while our main markets are in the Middle East. To date this year total live exports are down a whopping 30 per cent on the same period last year. Certain markets, particularly Egypt, have been decimated and the market share so unnecessarily thrown away will be very difficult to regain. Inexplicably, the market to Turkey has not been opened up. There was media speculation today that significant progress has been made — the spin doctors have been at work again. For the sake of those depending on the trade I sincerely hope that this is not another false dawn. I challenge the Minister to say when the trade to Turkey will be opened up as any delays will impact on the long suffering beef farmers.
The live trade has been further hampered by the application of new regulations on animal welfare introduced by the Minister. Fianna Fáil has always supported balanced regulations on animal welfare but there is something seriously wrong when boats are tied up for months on end as a result of bureaucratic decisions. When one considers that six boats which previously worked the trade out of Ireland have been disbarred under the new regulations and are now working the trade out of other EU countries then questions must be asked about the Minister's agenda. These facts were confirmed to the Minister as recently as last evening by representatives of the trade and thus far he has not attempted a rebuttal. Where exactly has he drawn the balance between animal, farmer and factory welfare?
The problems in the processing sector were well under way before the Minister allowed the débâcle of the export refund reductions to arise. He recognised this last summer when he promised to introduce a special package of measures to help the food industry by tackling the disparity with sterling. The Minister is good at making promises but that industry and the thousands of jobs dependent on it are still awaiting the Minister's package. Leading people in the industry lobbied the Minister for Finance and this Minister prior to the budget to see if they were prepared to give recognition to this labour-intensive industry whose main market is the UK — 75 per cent of the consumer food sector exports into that market. The Budget Statement contained six meaningless lines on our biggest industry which showed, as The Irish Times cartoonist aptly illustrated, that when Labour and Democratic Left drew up the budget, the Taoiseach and the Minister for Agriculture, Food and Forestry were out making the tea.
Because of the Minister's inertia there is a major question mark over the achievement of targets set out in the food sub-programme. The assumptions for those investments are based on a valuation of 97 to 98 English pence to one Irish pound; the current position is £1.04 Sterling to £1 Irish. In essence, many of the areas targeted for growth in sectors such as prepared consumer foods, the cheese industry, vacuum packed beef and processed meats were strongly targeted for a push in UK sales. People in those sectors have asked how they can increase sales when our currency policy puts them at an 8 per cent disadvantage over and above other problems in initially penetrating the market. That is having a significant impact on producer price at the farm gate. The targets were drawn up when the punt was 94 pence against sterling. The Minister recognised the problem — he is good at doing that and at saying what he was going to do, but he is also good at doing nothing about it. If that sounds familiar from the Minister, Deputy Yates, that is because it is.
In the critical area of imposed costs, such as employer's PRSI at 12.5 per cent versus 7.2 per cent in the UK, this Government has ignored the food sector generally and the beef processing industry in particular. Specifically, the increase of the PRSI threshold from £12,000 to £13,000 failed to capture any significant number of food industry employees. In many cases, any benefit in the measure was wiped out by the increase in the ceiling. This time of opportunity for expansion is being lost by a Government which cannot grasp the big picture.
The crisis in the beef sector is a manmade disaster. Political ineptitude on a colossol scale is resulting in losses which are already being counted in tens of millions of pounds. It is increasingly likely, according to predictions by everyone in the industry, that worse is still to come. The beef sector is the single largest component of the Irish economy but it is being chronically mismanaged at the political level.
If the Minister had recognised reality when everyone else did much could have been avoided but unfortunately his agenda did not extend beyond good news. Soon it will not even include that, because reality is biting quicker and harder than anticipated. No sooner had the Minister announced the end of the "cheques in the post" era than the Commission announced proposals which effectively signal the dismantling of the MacSharry reforms. Fianna Fáil rejects the Minister's policy of unilateral disarmament on common agricultural policy, because it bodes disaster. If lost ground is to be recovered — and there is a great deal lost already — the Minister must construct a credible agenda at EU level. We have already paid too high a price for the benefit of hindsight.
On export refunds, as there are 700,000 tonnes at present with 24 weeks left it is clear March will be a big month, depending how the next beef management committee meeting goes. The Minister should not be chronological or clinical in examining the problem — he now has the privilege, as a member of the Irish Government, to do something about it. Farmers are not prepared to listen to more tales of woe. They expect those who were quick to take responsibility to come up with the goods.
It should be argued that the Irish case is unique with no parallel among EU partners and must be addressed in the interest of maintaining the single most important component of our biggest industry. There are too many farm families who cannot rely on rhetoric. They cannot go to bank managers and refer to a statement which claims a psychological boost. We seek a proper price for a good product. The Minister should not allow the further dismantling of hard won gains; he should maintain the successes achieved by his predecessors until someone else gets the job.
