Milk (Regulation of Supply) (No. 2) Bill, 1991: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time".

Mr. B. Ryan

The immediate history of this Bill deserves to be put on the record. For reasons that may be well known to most people in this House, the Minister was not in a position to put some of the history of this legislation on the record, although his role in it was most commendable.

Under the old Cork Milk Board there were only two registered suppliers of milk. The issue arose because of their tendering to supply liquid milk to the Southern Health Board and, in particular, to Our Lady's Hospital. By miraculous coincidence year after year the two suppliers happened to tender exactly the same price. It was one of these wonderful coincidences the world is full of. I could not, for one second, suggest collusion. How could you? People do not do these things in the world of competitive, trusting enterprise we have in this country, but there was something very funny going on. It was funny first that they managed to arrive at the same price, and it was even funnier that those who were given the job of looking after funds in the Southern Health Board never seemed to notice that they were tendering the same price. An upstart of a milk provider from outside the area tendered at a dramatically different price — the Minister had an involvement then, I do not think he has now. It ended up with one hospital saving, I was led to believe, something like £30,000 on the price of liquid milk for one year. I do not want to get hung up on the price but thousands of pounds were saved. Instead of having a general celebration of the fact that market economics, for once, worked and that we had competition, we had urgent and immediate recourse to Europe with many people attempting to defend the indefensible which was that, effectively, a cartel had operated in a considerable part of Cork city and county and managed to keep prices at extraordinarily high levels relative to what the market could sustain.

The legislation we have before us is the outcome of the dissolution of the Dublin and Cork District Milk Boards which was brought about because they were deemed to be invalid under Community law. I am assured that there is great need for this legislation because of the extreme seasonality in milk production in this country which could result, as it did in the past, in milk shortages in the less economical seasons, that is winter.

Reading the reply the then Minister for Agriculture gave to a question in the Dáil on 5 December 1991 — columns 443-444 of the Official Report — it is admittedly difficult to imagine shortages of anything in the dairy area when one considers that in 1990, 56 per cent of total butter production in the State was sold into intervention amounting to £204 million and 48 per cent of the total skimmed milk powder produced in the State was sold into intervention. While the percentages for 1991 are not yet available, the figures suggest 185 tonnes of butter and 94,000 tonnes of skimmed milk were sold into intervention in 1991.

The question a person from an urban environment like myself would ask is: where is an industry which has that scale of dependence on a dying mechanism going? Are we, to a certain extent, legislating for something that will be so transformed within the next five years as to make this legislation meaningless? What will be the nature of the dairy industry or the dairying section of agriculture in two or five years? Will there be a liquid milk industry? Will it be economical in the light of what are called reforms of the Common Agricultural Policy for anybody to produce milk in this country?

We can only compensate people if we are talking about marginal economics. In other words, the objective of the legislation which is encapsulated in section 5 on the registration of contracts is to provide a guaranteed supply of milk, and that involves quality and a price in the contract that will be sufficient to ensure that in the periods of the year when it might be marginally uneconomical to produce milk, producers will continue to do so. If the production of milk on a large scale becomes inherently uneconomical for most of the year, then the scale of compensation will be enormous.

Having been educated here over the years by my colleagues about the woes of the agriculture industry, I am amazed at the number of people who assumed the Common Agricultural Policy would last for ever. We are on the periphery of Europe. It appears to me at least that the large scale importation of milk would have diseconomies associated with it in terms of the need to preserve quality and value ratio.

I wonder if we will need something more dramatic than a fairly light handed regulatory mechanism which does no more in terms of what is written in this Bill than a rational human being would expect, in other words, ensure quality and continuity and guarantee that a price would be offered which would ensure that continuity would be maintained. That is fine when large numbers of people want to produce milk and feel that, overall, the dairying sector of agriculture is profitable. However, if policies formulated in Brussels are unsuited to many of the qualities that make Irish agriculture unique in terms of our climatic advantage and the fact that we can produce many things more competitively than anybody else if we are left with a level playing field, I wonder what will happen? The possibility of this country being unable to produce its own milk is not as remarkable as it might seem, given that we do not seem to be able to produce so many other agricultural commodities like potatoes or vegetables to meet our own market demands.

I compliment the Minister for the legislation but also for the hand he had in creating the situation where this legislation was needed. Subject to the caveats I have offered, it will meet the objectives required and hopefully in Dublin and Cork will introduce a fair amount of very healthy competition between competing suppliers of liquid milk which might even result in some benefits to the consumer, the unfortunate suffering creature who does not get the consideration that he or she deserves in most of the debates about agriculture.

Agriculture is unique in all of the industries that I am aware of in which the obsession is eternally with the producer and his or her rights. Every other industry that I am aware of has to think of the market and the consumer and then produce a product. We have the reverse here where we have an obsession in agriculture with the right to produce and apparently a compulsion then to ensure that somebody buys the product. It would be very healthy for agriculture if we were to turn that around and create a dairy sector in the agriculture industry which actually saw itself as being primarily motivated by the needs of the consumer.

Mr. R. Kiely

The Dublin and Cork District Milk Boards were established in 1936 and 1937 respectively under the Milk Act, 1936 in order to ensure an adequate supply of liquid milk all the year round in the country's two big urban centres of population. We know liquid milk is necessary for areas of urban population and probably now that has changed and it is necessary in areas of rural population also. When the Dublin and Cork District Milk Boards were established people who did not produce milk were able to call to a neighbour and get a jug of milk. That was the system that prevailed at the time. Prior to 1936 producer milk prices had fallen below the cost of production, causing a shortage of milk during the winter months. That was why the milk board system was established to ensure that farmers would be paid adequately to supply milk to the urban areas.

Under the milk board legislation liquid milk for consumption in the Dublin and Cork sales areas had to be supplied under contract between producer and purchaser and could only be obtained from producers who were registered with the district milk board and producing milk within the production district. However, in the event of scarcity of milk, the boards had power to license registered processors and distributors to bring milk into a sale area from outside the production area. While the board system formerly applied only to the Cork and Dublin areas it constituted a model for the arrangements which applied in other areas. The system worked well over the years and despite the exaggerated seasonality pattern which obtained in Ireland ensured an adequate supply of good quality milk for the liquid market throughout the year. It was generally regarded as having been a major contributory factor to Ireland's high level of milk consumption. I understand that our level of liquid milk consumption is about 9 per cent of food consumption. Liquid milk is vital in the diet. Stephen Roche who brought honour to Ireland claims that milk was a great help to him and Jack Charlton, who brought honour to Ireland in another sporting area, praised Irish cheese.

It is very important that the liquid milk market in Ireland should not be left without some regulatory system because of the risk of a free-for-all system which could leave the market short of liquid milk in the winter months as was previously the case in some areas outside Cork and Dublin. The Minister said this legislation was necessary to ensure that we would have an adequate supply of liquid milk, that is milk for human consumption, available on demand. From a producer's point of view it is not easy to produce milk all the year round. Before the 1936 and 1937 regulations were brought into force you did not have the facilities to produce milk that exist now. People had to milk cows by hand as they did not have milking machines and it was hard work. Those producers had to be paid for producing milk 365 days of the year. It demanded effort and people who made the effort were compensated adequately and were paid a proper price.

The production, processing, marketing and distribution of milk for direct human consumption is vital for the continuance of a strong and healthy dairying sector in Ireland. The liquid milk industry provides a stable outlet for about 10 per cent of total milk production with high employment levels and good returns for producers. At present there are 4,300 milk suppliers supplying 42 liquid milk plants with milk with a retail value of some £260 million per year. There are about 5,000 workers employed in collection, processing and packaging.

Over the years the milk industry has developed and even in remote rural areas there is delivery to householders. They are now getting milk delivered every day. It is important that we have good quality milk and that can be ensured by means of a proper register which is the task of the news agency. I hope it provides better quality milk and that the industry will develop and prosper over the years.

To have better quality milk we must have better housing and better milking facilities. If we are to comply with EC regulations which not alone apply to the production of liquid milk but also the manufacture of milk, we will have to bring our milking equipment to certain standards and this is an extra financial burden on milk producers. I appeal to the Minister to ensure that adequate grants will be given to dairy farmers to allow them to bring their milking systems in line with EC regulations.

Milk recording is very important, quality standards have to be maintained, there is a total bacteria count and a cell count. Many dairy farmers and liquid milk producers are not in a position at present to know the cell count because they are not furnished with it, they have to pay a fee for it. If they could get an individual count for each cow, they could cull the inferior cows and ensure that the cows they retained produced milk of a high quality. Milk recording is very important. A farmer who gets his results every month from his milk recording station, with his kgs per cow, butter fat content, protein content, and the cell count, could identify those cows that are producing low quality milk.

Unlike most of Europe, liquid milk continues to be an essential part of the Irish diet. While per capita consumption has declined from a peak of 211 litres, in 1984 to its present level of 176 litres per annum, Ireland still remains one of the largest milk drinking countries in the world, ranking third to Finland and Iceland. In this regard I understand that in those two countries there are no door to door deliveries. Since door to door deliveries are important for old people, it is essential that the processor has an adequate margin of profit to ensure this service.

Not too long ago the opinion was that the processors made excessive profits and we had a milk price war. Dunnes Stores cut the price of milk. That favoured people who could buy their milk from those stores at a reduced rate but in rural areas where there are old age pensioners and others who would not be in a position to go to those stores, it is important that they have a daily door to door delivery of quality milk.

There is also the question of disease regulations and what would happen to milk from herds infected with tuberculosis, brucellosis and other diseases. Under the existing regulations any herd infected with tuberculosis is depopulated immediately and milk from such herds will not be accepted. There is also a danger when two countries share a border that milk can be imported from the other country. There should be a regulation to ensure that milk would not be imported to the detriment of our producers.

Under this Bill the Dublin and Cork District Milk Boards will be abolished and replaced by this new milk agency. There is concern about the employees in those boards. These agencies provided ancillary services, such as A.I. testing, etc. I was disappointed to read an article in the Irish Farmers Journal of 30 November 1991, headed: “AI Boss Calls for National Data Base”. I quote:

Today's farmers are brain-washed by highly skilled sales people, flashing glossy magazines which portray dairy bulls which are most impressive at a cost of £20 to £100 a straw with no guarantee of a calf or a repeat service.

Further on Mr. Twomey — I should not have mentioned his name — said that in the terms of cattle breeding the UK and Ireland were ten years behind our EC counterparts. I quote:

In hindsight one could question the wisdom of purchasing our test bulls from the UK, as 90 per cent of their milk goes to the liquid trade.

That is contradictory. He continued:

In recent years the Milk Board has concentrated on Holland, Germany, Austria, France and Denmark for young bulls to be tested for entry into Irish AI.

In one sentence he is condemning the glossy magazines and the test bulls and in the next sentence he is praising them. His comments did nothing to ensure that top quality, dairy cattle would produce top quality milk for liquid consumption in Ireland.

I have every sympathy with the workers in the Cork and Dublin District Milk boards and I am sure the Minister will look after them, although he said there might be redundancies. I appeal to him to ensure that these people are looked after and instead of being made redundant they should be employed in the new milk agency.

I welcome the Bill. It is essential to have a Bill to regularise milk supply because if we did not have such legislation we might run short and have to import milk. The producers must be paid a price that will give them a profit to ensure a decent standard of living. I am sure the Minister knows from experience that producing milk 365 days of the year is hard work. These producers are not adequately paid.

Mr. McDonald

I am glad of the opportunity to make a few observations on this important Bill. On 11 December when we last had an opportunity to consider this legislation, the Minister told us that negotiations between the staff, the unions and the Department were ongoing. I would like to ask the Minister what progress has been made in those negotiations. I was disappointed to learn from the debate in this House that of the 115 employees in the two boards the Department had introduced a proposal which was aimed at encouraging over 50 of them to take redundancy. It is now a feature of most rationalisation measures and even legislation coming through the Oireachtas that in order to have progress of change one must also have loss of jobs and redundancies. It seems to be a malaise in this country.

We do not seem to be able to get to a stage where high technology and a high labour input are compatible. Very important services were pioneered and developed by the milk boards and others — milk recording services, progeny testing and mastitis control. I would like the Minister to assure the House and the agricultural industry that as part of whatever package is ongoing at the moment the more profitable portions of the activities of these two boards will not be hived off either to a management takeover or to the private sector. This would be to the detriment of services that over the years may not have been profitable but nevertheless contributed to the quality, evolvement and development of the industry as a whole. This is important.

I hope the Govenment will ensure that we will have in the agricultural industry a continuation of the kind of back-up services initiated by the Department of Agriculture. The agricultural advisory and research services, pre-Teagasc, had a wide range of services but it seems now the farmers of Ireland will have to compete and survive in the new marketing situation without the same input from those services — that is if we accept that the research services are to be cut back and that some of the stations are being disposed of. Meanwhile, the industry here will have to compete with agricultural industries elsewhere that are well supported and have a favourable financial structure. I hope the Minister will be able to indicate what arrangements are being made for the continuation of these very important services. Progeny testing has not been carried on at a sufficient level and our efforts at disease control, even though they have been costly, have not been effective.

Recently I attended a function in the shadow of Avonmore which is one of our leading co-operatives. The milk on the table was from Glasgow Creameries. I cannot accept that it is cheaper to import milk products than it is to wheel them across the road from one of the most modern co-operatives in Europe. I take it that the import of milk products will be subject to licensing by the Minister's Department from a quality and disease control point of view. I am quite aware of the fact that from January of next year we will have absolute free movement and I am sure the Minister and his Department have all the necessary safeguards in place.

Having said that, I still believe that the difference in price in the litre of milk from the farmgate to the housewife's table, with a 150 per cent or 160 per cent markup, is exorbitant and extraordinary. We are told that we have the most efficient co-ops in Europe, that "big is beautiful" and that all these costings were going to come down once we got these huge multinational plcs in place. Has the Minister power to look at the pricing structure? It is desirable from many points of view that milk consumption should stay high. Even among our most eminent medical scientists it appears now that nobody can say milk foods are bad. There seems to be a different view now and people are being told again that milk is a good wholesome food. It is a food that is readily available here and is one whose use should be encouraged again. Some people ask why there is a decline in the consumption of milk. I believe that if the plcs or the co-ops were to allocate half the advertising resources now used to promote spreads and oil-based products in an effort to maintain the level of distribution of milk products the figures would be quite different.

I accept that the basic purpose of this new agency would appear to be to ensure availability to the consumer at acceptable prices of high quality milk and guaranteeing the quality of products in all seasons. This is very important. I wish the project every success and I hope they will be so funded as to be able to get off to a good start and proceed at full speed. Since the milk boards were set up in the mid-thirties it is true that the people supplying the liquid milk in both Dublin and Cork commanded a premium price. In the past it was more marked than at the present time. What people fail to note is that the farmers who were in the liquid milk area or who were lucky enough or had sufficient influence to get the liquid milk contracts had the advantage over their neighbours who did not have those contracts. Their farmyards and their dairies were subject to regulations and they were subject to quite frequent inspections to ensure that the quality and the hygiene of the whole milk production operation was to a very high standard. To my certain knowledge that has been the practice during the years. The old system has served the country well.

I am one who very passionately believes that the future of the agriculture industry, whether this year or in 1993, has to be based on quality control and on quality products well presented in the marketplace when the consumer wants them. In the meat sector which is very closely tied to the dairy sector, we must stop depending on intervention and begin instead to sell high quality produce at the premium prices that quality will command. At the same time the Department of Agriculture and Food must be in a position to guarantee that our herds are disease free. I do not think it will be possible to do that without adequate research and recording facilities to enable the process to be monitored.

There is a tremendous onus on the Minister for Agriculture and Food and on his Department to ensure the continuation of the service. It is not sufficient to say that the European Commission or the European Community have introduced new regulations. There is one set of regulations and while they may be read in six or eight different languages and different nuances emphasised each time, the first priority of our Department and of Irish officials is to ensure the quality and continuation of Irish facilities and services. Irish civil servants should not be fearful of making small dents or bends in European regulations. Another option for the Minister is to make all his civil servants multilingual so that they could read through all of the different regulations and pick out the version that suits this country best. This matter needs serious consideration because any paragraph translated into eight languages is going to produce different meanings before the job is finished.

I would like to see the Department of Agriculture and Food take a more pro patria view of regulations; otherwise we will not have much of an agricultural industry in the next few years. It is difficult to get into any of the commercial banks in the midlands at present because farmers are all lining up for their seasonal greetings. It is a bad economic sign to see so many people being called in for consultations and is a dire warning of something the Minister should be prepared to tackle from day one. He has an opportunity in this legislation to ensure that those farmers who are brave enough to invest in Irish agriculture at present will have the back-up services they need to prosper and survive in agriculture and to pass on their holdings to another generation.

The main problem now is that the younger generation are not interested in the meagre return on capital coming from Irish farming under the present stewardship. I hope the Minister will take a long hard view at that because he and his Department are in a frontline position. There is no point in hiding behind European Community regulations; Irish people have to live. It is up to the Minister, who has the opportunity to play a significant role here, to have the regulations tempered in order to give Irish people the best possible advantage and opportunity. The Minister and his officials know that this country is well placed to be a front-runner in the provision of high quality agricultural products across the board. All we want is the guidance, support and the regulations that will allow us to do that.

Minister of State at the Department of Agriculture and Food (Mr. Walsh)

I wish to thank most sincerely the Senators who have contributed to the debate on this Bill. It is an important measure. Having regard to the day that is in it, it is not the most earth-shattering activity in this building and I am particularly grateful to the Senators who contributed to the debate.

I am heartened to find so many Senators supporting this proposed legislation, which will have wide-ranging and long term effects on an important segment of our dairy industry. I am no less grateful to those who offered qualified support coupled with constructive criticism. I can assure them that I have listened carefully to all they have had to say and will take account of their views. In bringing this Second Stage to a conclusion, I would like, if I may, to comment on the issues which have been raised in the course of the debate.

The one issue on which I think nearly all Senators expressed concern is the future of the staff currently employed in the milk boards' ancillary businesses. As I indicated in my opening address, this issue is of crucial concern to me also. The fact is that technological innovations have led to a decline in demand for some of the services provided by these businesses so that the boards are now, by any standards, considerably overstaffed. This, in turn, has led to a deterioration in their financial position. It must be understood, therefore, that even if the boards were not being abolished, the question of rationalising the staffing position would still have to be addressed at this juncture. As I have already indicated, the minimum number of voluntary redundancies necessary to return these businesses to economic viability will be effected so that the long term employment prospects of the remaining staff will be secure. My Department are engaged in discussions with the trade union which represents the interests of the vast majority of the employees concerned, and it is my expectation that these negotations will be concluded in a mutually satisfactory manner before the proposed new agency is established. I assure Senator McDonald in particular that anything that can be done to ensure no employment is lost in the changes will be done.

I should also say that the rumour mentioned by Senator Dardis and referred to again by Senator Upton that five staff at Enfield were to be made summarily redundant as from 1 January is and was totally without foundations, as time has proved. I would appeal to all concerned not to heed any such scare stories. They breed alarm and suspicion and are not at all conducive to creating the atmosphere of trust and confidence needed to bring about a speedy solution to the problem with which we are faced.

I can also assure Senator Doyle that there is no hidden agenda in taking the Second Stage of the Bill in the Seanad prior to its passage through the Dáil. In fact I do not have any hidden agendas. As I explained the last day, I am a person who believes in the Seanad. I was a former Member, and intend to remain a former Member, but I also and equally look on the Seanad as an ideal forum in which to introduce legislation to get the comments and contributions of Senators and to open up discussion throughout the country. When legislation goes through the Dáil it is in better shape following Senators' contribution and public debate.

I should emphasise that even were this Bill to be passed into law, its provisions would not take effect, that is to say, the milk boards would not be dissolved or the new agency established until such time as the Minister should make an order to that effect. Therefore, the passage of this Bill would not in itself preempt matters in so far as the interests of the staff are concerned. Neither is there any basis for the Senator's suspicion that the board's ancillary businesses were deliberately run down in anticipation of the board's dissolution. The fact is that in recent years technological advances have meant that many farmers have been able to obtain the equipment necessary to carry out artificial insemination operations on their cattle, and that is the civil servants' way of saying, do-it-yourself. Unfortunately a lot of such spoil-sport activity is taking place now in rural Ireland and has created its own problem at Enfield. This, on the one hand, has reduced their costs and decreased their reliance on agencies such as the milk boards to provide this important service and, on the other hand, has led to a reduction in the employment potential of that service sector.

Senators Doyle and Raferty raised the question of how the agency could decide on what constituted an appropriate price for the producer to have the contract registered. Senator Doyle went on to speculate whether the proposed new procedure would be acceptable to the EC Commission having regard to their well known prohibition on all forms of price fixing. In reply I can say that the Bill was drafted in consultation with the Commission. They are completely au fait with its provisions and on the basis that it had the support of all sides of industry, signify their complete approval of its contents.

The central task of the agency would be to ensure that contracts for the supply of liquid milk will adequately compensate farmers for the costs of all year round production. In carrying out this task the agency will have regard to all interests and to ensure this producers, processors, distributors, consumers and retailers are represented on the agency.

Senator Raftery also made a suggestion that retailers should be registered with the agency. I would remind the Senator that under the Milk and Dairies Acts retailers are already required to be registered with the local authorities and to comply with certain regulations in relation to hygiene. While the proposed legislation will ensure that an adequate supply of high quality milk is available to the consumer all year round it is primarily a milk supply regulatory measure rather than a public health measure.

Senators Raftery and Doyle expressed concern about the retail price of milk having regard to the price the farmer receives for the raw product. Again I can only say that the retail price is an issue which does not come within the ambit of this Bill. Any excessive mark-ups which may be due to restriction on competition are a matter for the Director of Consumer Affairs and Fair Trade. I understand he has been rather active in this area in recent months.

Senator Hourigan suggested that the agency be allowed to engage in activities other than now provided for in the Bill in order to promote the industry and improve the quality of production. I can only reiterate that the agency will have a role under the Bill in ensuring the quality of milk supply; the other activities he referred to are already well looked after by the commercial concerns in the industry and by the National Dairy Council.

Several Senators referred to a large US based firm which is engaged in the provision of livestock breeding services world wide and which at one stage expressed an interest in the boards' ancillary businesses. I understand that this company was involved in discussions with an Irish co-operative that was also interested in purchasing the boards' businesses. However, the sale of these businesses could not proceed at that stage as the staff issues were not resolved, and I understand the American firm have since proceeded with alternative arrangements elsewhere in Europe which is a pity. It would certainly have provided a great opportunity for Ireland as a base for international breeding. Regrettably the negotiations did not prove conclusive and that particular international breeding operation has gone elsewhere. At present there are no negotiations in progress for the sale of either the boards assets or of their businesses as going concerns.

Senator Dardis and Senator McDonald asked how milk imported from Northern Ireland and elsewhere in Europe might be affected by the Bill. This Bill deals only with milk for liquid consumption that is produced within the State; the importation of drinking milk from other areas in Europe is subject to separate legislation and that legislation is not affected by this Bill.

Senator Dardis also asked for an estimate of the amount of levy which would be payable by the processor under the provisions of section 7. The levy which is at present payable to the milk boards is 0.862 pence per gallon and since the agency will have responsibility for supplies of milk for liquid consumption not only in the Dublin and Cork areas but throughout the country, it is hoped that the resultant economies of scale will facilitate a redution in the levy. It is envisaged that the agency will be self-financing.

I express my thanks and appreciation to the Senators. Today Senators Brendan Ryan, Kiely and McDonald contributed and I appreciate their contributions to this legislation.

Question put.

The Seanad divided: Tá, 34; Níl, 7.