Seanad Éireann díospóireacht -
Wednesday, 20 Dec 1995

Vol. 145 No. 17

Milk (Regulation of Supply) (Amendment) Bill, 1995: Second Stage.

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

Minister of State at the Department of Agriculture, Food and Forestry (Mr. Deenihan)

The Milk (Regulation of Supply) Act, 1994, which it is now proposed to amend, was, as Senators may recall, initiated in this House. It provided for the abolition of the Cork and the Dublin District Milk Boards and the setting up of a National Milk Agency to regulate the supply of liquid milk for consumption throughout the State. It also provided for the sale of the milk boards' ancillary businesses and included measures to protect the interests of the staff in this context.

This Act has worked very well since it became law and several important objectives have been achieved under its provisions. For instance, in mid-November 1994, about 50 of the milk boards' staff were allowed to take voluntary early retirement on generous terms. This was part of a staff rationalisation programme designed to make the board's ancillary businesses more attractive to potential purchasers.

Mr. R. Kiely

Could we have a copy of the speech of the Minister of State?

Acting Chairman (Mr. Belton)

It is not a matter for the Chair.

Mr. Deenihan

I will endeavour to supply those copies. I am sorry for disturbing Senator Kiely in this festive season.

Acting Chairman

The point has been made and the Minister has replied.

Mr. Deenihan

An interim board was established to oversee the management of the ancillary businesses and to make arrangements for their sale. On 30 December last the milk boards were abolished and the National Milk Agency came into being. In late April and early May this year the former milk boards' ancillary businesses were sold as going concerns and, on the sales, some 80 staff who had not applied for early retirement transferred to the employment of the new owners.

The National Milk Agency is comprised of a part-time chairman and 12 ordinary members. These are representative of milk producers, processors, distributors, retailers and consumers. The first members of the agency were appointed on the nomination of interest groups for each category of member. Of the 12, five were producers' representatives, four were representatives of the processors, while consumer, retailer and distributor interests each nominated one member.

The purpose of the agency is to regulate the market in such a way that the consumer is guaranteed fresh drinking milk throughout the year. The drinking milk industry must be supplied all year round and has evolved a pricing structure to compensate producers for the higher costs entailed in winter milk production. The mechanism by which the agency regulates the supply of milk for liquid consumption involves the registration of what are termed liquid milk producers, all drinking milk pasteurisers and of the contracts made between them for the supply of milk.

While the Act provides that the first producer representatives shall be appointed by the Minister on the nomination of producer interests, it goes on to state that "in the year of establishment of the Agency" the Minister must appoint a day for the election of producer representatives and prescribe the manner of election. All producers registered with the agency on the first day of the month before that in which the election takes places are eligible to vote in this election. The persons elected must be registered with the agency to hold their place as producer representatives.

This provision is based on the assumption that, by the time an election is called, the agency will have established a comprehensive register of producers. However, because of start-up difficulties outside the control of the agency which were not foreseen when it was established, it has not proved possible to register the vast majority of producers in the year of establishment of the agency. Accordingly, it was not possible to conduct a legitimate election of producer representatives within the timescale envisaged by the Act.

To overcome this problem it is proposed to amend the Act to provide that all the existing representatives, both of producers and, for reasons I will explain shortly, the representatives of the other interests, should continue to hold office until sufficient producers are registered to facilitate holding an election. Both farming organisations have requested the amendment to allow the impasse to be resolved. The amendment, as set out in this Bill, is a small but necessary measure which received the support of both sides of the House when it was passed by Dáil Éireann on 13 December last.

The Act also provides that "in the year of establishment of the Agency" the Minister shall again appoint processor, distributor, retailer and consumer representatives on the nomination of the relevant interest groups. At this stage the processor representatives must be processors who are registered with the agency. However, because of the difficulties I mentioned earlier about there being so few processors registered at the relevant time, it was not possible to obtain a sufficient number of valid nominations to fill the number of places available for processors in the agency.

Therefore, it is necessary to amend the provision of the Act relating to the appointment of processor representatives on the same lines as applies to the election of producers. In the circumstances, commonsense dictates that the appointment of the other three members should be synchronised with that of producers and processors, as envisaged by the Act.

Accordingly, it is proposed to effect this slight technical amendment to the Act which will provide that the election of producer members and the appointment of all other members should take place not in "the year of establishment of the Agency" as provided for at present, but as soon as is practicable in 1996. It is to effect this amendment that the present Bill has been drawn up. It is purely intended to overcome a practical problem and has no policy implication.

Before concluding, there is one slight correction to the text which I must ask the Cathaoirleach to authorise under the Standing Orders of this House. In section 1 of the Bill, which defines the Principal Act as being the Milk (Regulation of Supply) Act, 1994, the words — The Principal Act — should be in inverted commas. I would be most grateful if this correction could be effected.

Acting Chairman

I am directing the Clerk to make the appropriate correction in accordance with Standing Order 103.

Mr. R. Kiely

I compliment the Minister of State who introduced this Bill. He said that "The purpose of the agency is to regulate the market in such a way that the consumer is guaranteed fresh drinking milk throughout the year." and that is essential. However, the real purpose of this Bill, which is technical in nature, is to postpone until 1996 the election of members to the agency. It was originally in the Bill that they would be elected in the year of establishment. But, because of start-up difficulties outside the control of the agency, it has not proved possible to register the vast majority of producers in the year of its establishment. While I appreciate this is the case, I was surprised the Minister did not outline the start-up difficulties. Many people are aware of them and the House should also be told.

I am not sure if a Bill similar to this asking for the elections to be delayed until 1997 might not come this time next year. I know there are many problems involved. The register of contracted producers who constitute the electorate was set up as recently as last October. On 1 November, out of an estimated 5,000 liquid milk producers, only 40 producers were registered. Progress has been slow. I do not know — maybe the Minister does — how many milk producers are currently registered.

There are approximately 40 pasteurising dairies in the country employing 5,000 people and 4,500 farmers supply them at an annual value. I know processors must also have an election. How many processors are registered at present? Is the Minister's Kerry Co-op registered? I saw him photographed with Michael Hanrahan lately. How many milk producers in Kerry have been registered as milk producers? These questions are interesting because it is important to ensure that this agency works properly and that we will have co-operation on all sides.

The cause of the trouble was section 6 (c) of the original Bill which refers to the registration of contracts, and states:

...in the opinion of the agency provides adequate compensation to the producer of raw milk supplied under the contract throughout the year taking into account, in particular in relation to the winter months, the economic cost of the production of raw milk of suitable quality for heat treatment or liquid consumption all year round.

This is very important. People supplying raw milk for liquid milk consumption must be adequately compensated. The Minister and Senator Dardis know there was a protest recently by dairy farmers who did not feel they were being adequately compensated by the co-ops. We will have to get to grips with this very soon. We must ensure that in the near future a mechanism can be set up to register producers and to ensure that elections can be held. If they are not registered as liquid milk producers they cannot vote. Only 40 out of 5,000 producers were registered as of 1 November 1995, even though the original Bill was passed by the Oireachtas in 1994. What is causing the delay? The situation is serious.

This Bill is essentially of benefit to producers and consumers who have to be assured of an adequate daily supply of fresh milk all year round. The producer will have to be adequately compensated to ensure that supply. The only way that can be done is through this National Milk Agency with the co-operation of all concerned in the provision of natural fresh milk to the consumer.

In the Minister's reply I would like to hear what progress is being made to register producers and processors and to ensure that these elections will be held in 1996. I understand that registration of producers and processors must be completed by 1 April but I doubt if that will happen unless the difficulties to which the Minister referred, but did not specify, are addressed in the meantime.

Mr. D'Arcy

Senator Kiely asked why there have been start-up problems. Those of us in the trade know well why the problems arose. We have had a dispute between processors on the one side and producers on the other and we wonder why there are world wars. They had 12 months to iron out their problems and failed to do so. I hope that the remaining problems between producers and processors will be ironed out and that we will be ready for an election. I am a producer but I am also involved in processing. We all wonder why there are wars but it takes people a long time to iron out even simple problems because they become intransigent. Retailers had it their way for a long time but they must now share the responsibility with others in the same industry.

This Bill was debated in the other House for two days. An EU regulation moved the Cork District Milk Board and the Dublin District Milk Board from the processing side of the milk industry and set up an independent board to deal with this issue. I am not satisfied that some of the things we hoped would happen have transpired. After the previous legislation was passed the Cork District Milk Board and the Dublin District Milk Board were purchased by Progressive Genetics for approximately £4.2 million. I was glad that a foreign investor did not buy what belonged to the farming community. Farmers built up these milk boards over 35 years, although they were obliged to buy back their own property from the Government.

There should be a programme of research and development in respect of breeding both on the dairy and the beef side of the industry. Research and development is very important, irrespective of what line one is in. I am worried by the amount of Holstein blood being introduced to the milk herd. The more Holstein blood, the poorer the quality of beef.

Mr. R. Kiely

They produce better quality milk.

Mr. D'Arcy

I accept that. However, we can have just as good a breed if we mix the British Friesian with the Holstein rather than allowing the Holstein to take over. No research is available to anyone, including the Department, to indicate what is happening. Approximately 85 per cent of our beef is exported. EU requirements will not be in keeping with the Holstein breed. Holsteins cannot supply the beef required by the export market — I say that with authority. I appeal to the Department and Progressive Genetics to come together to establish a proper programme of research and development to ensure that we do not have too high a level of Holstein blood in the national herd.

I refer to the question of discounting milk in supermarkets. A board has now been given the responsibly to carry out certain functions in relation to this issue. Dunnes Stores has made several attempts to damage the liquid market and liquid producers. It has developed its own brand of milk that is produced in Northern Ireland which is not under the jurisdiction of the Department of Agriculture, Food and Forestry as far as producers are concerned, or under the jurisdiction of any board. It processes it in Donegal to cover the company under legislation and it distributes it to its supermarkets across the country.

The company is trying to set up a monopoly side by side with discounting. Two litres of milk is selling for about £1.12 in its stores while elsewhere the cost is £1.28. I would not mind that if producers from the Republic were allowed space in these supermarkets. Space should be allowed in those supermarkets for milk produced and processed in our own country. The company wants Irish farmers to attend their supermarkets, it wants the people employed in the milk industry to buy in its own supermarkets but it will not allow them to sell their produce in the supermarkets. That is Dunnes' Stores and I object to that.

The company has made at least two attempts, one very abortive attempt three years ago, to set up a monopoly. We did not allow it but, unfortunately, it got around that legislation by supplying milk from Northern Ireland and processing it in Donegal. That very sad situation must be highlighted. The Minister is setting up this new board. That is, and should be, their function. I do not mind any processor or producer selling in any supermarket provided others are given the same opportunities particularly those whose products are imported. I describe that milk as imported and I am correct in stating that.

The question of price has been a slightly vexed one for some time. The Minister is here today because the processors did not get their way. Senator Kiely has already alluded to the price. Up to 1 November, manufacturing milk was fetching a higher price than liquid milk. Dublin city in particular can be grateful to a large number of liquid milk producers who supplied this city in bad days and good with a very high quality milk, and they have continued to do so. They found themselves in a situation at the end of this year where the price of liquid milk fell below the price of manufacturing milk. It is considerably cheaper to produce manufacturing milk because it can be produced in the summertime. As regards liquid milk, the farmer is under contract to the processors and must supply 40 per cent of his or her quota during the five winter months. That is a restriction and cows must be calved in the fall of the year.

The Minister is in this House today because the processors have been most unfair. They have failed to put their house in order. All that has happened in the last two months is that the price of manufacturing milk and liquid milk has been put on a par. How long will the liquid milk producers continue to supply high quality milk when they find they can produce their quota as manufacturing milk in the summer without any feeding of their cows? That must be looked into.

I fully support what the Minister is doing and I hope Senator Kiely's fears will not come to pass and that the board's functions will be carried out as laid down by law.

Mr. Dardis

This is relatively uncontentious legislation and I do not intend to detain the Minister or the House. I support what the Minister is attempting to do and I understand the reasons for it. Extra time is required to allow a truly democratic process to take place so that the milk producers can be properly represented on the board of the agency. However, I wonder — this is something to which Senator Kiely referred — about the status of legislation we put through the House and how it should apply. There is a certain degree of retrospection about what is before us today. This matter dates back to 1988. There is no need to catalogue the reasons for the original legislation which was concerned with European regulations. It would be charitable to state that the original Bill enjoyed a leisurely passage through the House.

I remember the House discussed the matter in 1991. Very serious concerns were raised then by the staff of the milk boards, including those at the testing station in Enfield. Much discussion took place in relation to the maintenance of pension rights, the transfer of staff and the maintenance of their status. It took a considerable period to resolve those matters. The House did not deal with the next session of the Bill until October 1994. It seems that liquid milk becomes a matter of concern to Seanad Éireann, on an annual basis, in the weeks preceding Christmas. I hope this Bill will bring the matter to a conclusion and that we will not have a further instalment before next Christmas. I say this on the basis that we will all be here then.

Mr. D'Arcy

Hear, hear.

Mr. Deenihan

The Senator might find himself in the Lower House by that time.

Mr. Dardis

The Minister is very kind. I hope that, if I am in the Lower House, I will be in his company.

Mr. R. Kiely

Is the Minister forecasting a general election for early 1996?

Mr. Dardis

I accept that time is needed to allow producers to negotiate contracts. Such matters are not easily resolved. Section 7 of the Bill states that the agency shall maintain a register of contracts, a register of producers — in which shall be entered particulars of every producer who is a party to a registered contract — and a register of processors. There is a distinction between the register of contracts and that of producers, who will elect the farmer representatives to the agency. What progress has been made in respect of the register of contracts? When it is stated that only 40 people from a total of 5,000 are registered, is that in respect of the register of contracts or producers? I am sure the Minister will deal with that matter when replying to the debate.

The issue of adequate compensation and price was raised earlier. I do not have to explain that it is an expensive and difficult process to produce liquid winter milk. It costs much more and people should be adequately rewarded or they will switch to manufacturing milk. If the agency was established by law, why did the IFA feel obliged to conduct a campaign to have the price increased? When achieved, that price increase was not put in place unilaterally. Various co-ops passed the award on to farmers in November or December and others backdated it. I do not understand that process, in the context of this legislation, and it should be explained.

The boards did an excellent job and, other than by compulsion of European law, there was no need for change. However, we must accept that this was required and we were obliged to comply. I do not object to what the Minister is attempting under this Bill. I support it. However, I would like to see the elections conducted promptly.

In terms of all agricultural legislation to establish boards or agencies, we receive legitimate requests for farmer representation. I recall that this happened when the Bord Bia Bill was before the House. If such requests are to be taken seriously, measures are required to ensure the registration of the electorate. There must be a followup process. Otherwise one begins to question the commitment to the establishment of the agencies and to securing representation on them.

From what I understand from the IFA, only about 40 producers were registered out of an estimated 5,000 milk producers on 1 November. I accept what they say, an election in 1995 would be ludicrous on that basis. Why has it taken so long to get to this point?

When we make provisions here, we make them as we did earlier today with the Harbours Bill, 1995. We give them consideration and take them seriously. When legislation is seriously considered there is an onus to follow up and make sure its provisions are implemented.

The boards did a good job and we accept the reasons they had to be changed. Liquid milk production is a particular type of production and I agree with Senator D'Arcy who said people must be adequately compensated.

I also agree with Senator D'Arcy's views on Holstein blood. It would be regrettable from the overall industry point of view, not only the dairy sector but also the beef, if Holstein blood was to become dominant within the whole dairy herd. When CAP reform is taken into account, the impetus to individual cow production and this high individual productivity is not quite as severe as it was five or ten years ago. The same type of pressure is not in operation and it is necessary that there is balance within the breeding system to ensure Holstein blood does not become dominant within the herd.

Minister of State at the Department of Agriculture, Food and Forestry (Mr. Deenihan)

I thank the Senators for their contributions which were longer here than in the Dáil.

Senator Rory Kiely raised the issue of start up difficulties. Unfortunately, there was an unavoidable delay in acquainting producers and processors with the new procedures. As he knows, outside the Cork and Dublin districts the procedures were new to a large number of suppliers so it took some time to create an awareness among producers and processors. Thankfully, we have now resolved those difficulties.

There was a dispute between producers and processors over price, producers would not sign contracts so they could not be registered. As Senator D'Arcy said, this matter has now been more or less resolved and I hope we can make progress. In addition, there was consultation about a standard contract and this issue is also now largely resolved.

There are 879 producers registered and more are expected to be registered shortly. I am delighted to tell the House that all the processors in County Kerry are registered.

Senator D'Arcy, who is a producer and processor, raised the issue of discounting the price of milk which is not a matter for the Department of Agriculture, Food and Forestry as I told him previously. It is more a matter for the Director of Consumer Affairs and market forces. We cannot prohibit imports of drinking milk from Northern Ireland or, for that matter, from any other part of the EU. The last thing Ireland wants is arbitrary controls on inter-Union trade which would be totally against our interests.

The 1994 Act exempts from its provisions milk imported lawfully into the State. This has led to fears being expressed in some quarters that the legislation leaves the way open for cheap imported milk from Northern Ireland. This view is without foundation as there is nothing to suggest that the agency's operations are significantly altering the situation which pertained in the industry before the legislation became law. In any event, there is no possibility that the European Commission would allow us to insert any provision which would inhibit trade in the Internal Market, such as licensing systems for imports which some have suggested.

With regard to milk prices, it has been and might be argued that in requiring the agency to take account of the supply price as one of the factors in deciding whether a contract should be registered, the 1994 Act effectively provides for the re-establishment of a minimum producer price. We do not accept this view nor do we accept that the agency should become involved in fixing minimum prices. The price paid for milk is a commercial matter between producers and pasteurisers. Under the agency regime this continues to be the case. The only role the agency has in relation to price is to determine whether it is adequate to ensure supply throughout the year. Producer organisations favour involving the agency and the Minister in the process of fixing prices and that is something the Department of Agriculture, Food and Forestry cannot countenance.

Senator Dardis asked about registers. Three separate registers are maintained by the agency: a register of contracts between all producers and processors, a register of producers and a register of processors. Once the agency has registered a contract, it proceeds to register the producer and the processor involved in that contract unless, of course, they are already registered by virtue of a previous contract. Generally, each producer will be a party to only one contract while a processor will be a party to hundreds or even thousands. However, each party will be registered only once.

I seek the Seanad's support for this Bill. It received unanimous support in the Dáil and I hope it will receive a similar response in this House.

Question put and agreed to.

Agreed to take remaining Stages today.