In addressing the difficulties faced at present in the pig and sheep production, processing and marketing sectors, the sectors need to be put in their proper perspective of national and international developments and the operation of the Single Market within the European Union. As is common in the agriculture industry, both sectors are more than self-sufficient and surplus production has to be disposed of outside the country.
The pigmeat market worldwide has been in difficulties over the past year or so due mainly to over-production. In the EU over-production occurred as a result of classical swine fever which necessitated the slaughter of large numbers of pigs and their withdrawal from the market. The subsequent rise in prices led producers who were not affected by the disease to increase their production, as Senator Gibbons said. Weakness in the beef market also led to increased pigmeat prices. When disease was eliminated and the beef market improved, pigmeat production continued to increase and prices dropped. Other factors contributing to the difficulties were the market weaknesses in Japan and Russia, which traditionally imported large quantities of pigmeat.
Recognising the market difficulties facing Irish pig producers, the Minister for Agriculture, Food and Rural Development took a number of important steps at EU level to improve matters. Together with his colleagues in the Council of Agriculture Ministers, he sought and obtained generous increases in export refunds from the EU Commission on a number of occasions in 1998 and 1999. These increases ranged from 33% to 80%. The EU Commission also introduced an aids to private storage scheme for pigmeat. This scheme, which concluded in September this year, removed over 420,000 tonnes of pigmeat from the EU market. A food aid programme for Russia, which included 100,000 tonnes of pigmeat, was also put in place by the Commission and to date about 60,000 tonnes of pigmeat have been exported from the EU under the programme.
The measures had some effect, as evidenced by the fact that prices obtained by Irish pigmeat producers have increased by nearly 18% since the beginning of the year. Despite this, there is clearly scope for further improvement in prices to producers. In this regard last Monday at the Council of Agriculture Ministers meeting in Brussels the Minister again raised the matter of market support with the Commission. He urged the Commission to take immediate action in raising export refunds, in particular restoring the high refund rate for Russia. He also pressed the Commission to speed up the delivery of the remaining 40,000 tonnes of pigmeat to Russia under the food aid programme, which would have the effect of removing surplus product from the EU market.
The Minister also met with the Irish Grain and Feed Association and representatives of the main banks to discuss the current situation in the pigmeat sector. He sought and received their continuing support to pig producers during this difficult period, and both groups reaffirmed their commitment to the maintenance of the existing producer base. They will do everything possible to help producers during the current difficult market situation.
This afternoon the Minister, Deputy Walsh, met with senior management of the pigmeat producers to discuss the ongoing weakness in the market and the serious effect this will have on producers' incomes. The Minister impressed upon processors the need to ensure producers continue to have outlets for the pigs they produce. The Minister also had recent meetings with Enterprise Ireland and An Bord Bia and he asked both organisations to see what action they can take to assist the pigmeat sector. Enterprise Ireland was asked for an immediate assessment of slaughtering capacity and to examine aspects of the industry which may require attention and possible investment. The Minister specifically asked that aspects of regional capacity be addressed in view of the developments in Northern Ireland.
An Bord Bia recently launched a promotion campaign costing £300,000 aimed at promoting quality assured bacon. The aim of the promotion is to encourage the increased consumption of home produced product by emphasising the excellent eating quality of quality assured bacon and the fact that it is fully traceable as it is sourced only from approved farms. The campaign includes television, radio and print advertising and will no doubt help producers due to the increased demand for pigmeat which it will generate.
The Minister recognises that there is a particular difficulty for pig producers in the Border region arising from the fire which destroyed a pigmeat processing plant in Northern Ireland last year. In the recent past the Minister has had detailed discussions with these pig producers and he is actively looking at the position to see if he can do something to help their situation. However, there are serious EU legal constraints which must be respected and within which the Minister is obliged to operate. He has already raised this matter with the Commission and further discussions will take place.
I want to stress that the long-term outlook for pig prices is favourable. The EU Commission has forecast that the average EU market price will rise by over 4% between now and the end of the year. In addition, the increased demand during the Christmas season should also aid pig prices.
It is well known that pigmeat production is a cyclical business. As has already been said, the current cycle is particularly deep and drawn out. The Minister has done and continues to do everything possible within the common market organisation of the sector to support the producer base and to enable them weather their current difficulties. Notwithstanding these actions, we should not lose sight of the fact that there is an onus on the industry to ensure that the produce is right, that it is produced and marketed in a way which provides a reasonable and adequate return to suppliers, who after all are fundamental to the long-term future of the industry.
Turning to the sheep sector, the Minister is aware of the difficulties facing sheep producers at present. The low prices currently being paid by processors stem largely from increased supplies of UK lamb which have depressed returns from the French market. We export 70% of our sheepmeat and three quarters of this is marketed in France. Consequently, any difficulties on the French market have an immediate impact on the Irish sheepmeat trade. Another factor is that French lamb is perceived by consumers to be superior to imported product and as a result they are willing to pay premium prices for domestically produced lamb. Unfortunately, we are also at the mercy of the trade activities in the neighbouring UK market which has a lamb output that is six times greater than that of Ireland. Apart from this, the sheepmeat market is also affected by the weakness in the pigmeat market in that it is in direct competition with relatively cheap pigmeat. The ongoing difficulties in Russia continue to impact on the prices of lamb skins which are currently worth only a fraction of their value 18 months ago. This is also reflected in the price paid by the processing industry for lambs.
The current difficulties in the sheepmeat market highlight one of the deficiencies which has been identified in the ewe premium system, that is the failure of this system to take account of the fact that prices are much higher in some member states than others. In view of the fact that prices in Ireland and the UK are well behind 1998 levels, there was a strong expectation that the 1999 ewe premium would be fixed at a higher level than last year. However, the Commission estimates that the 1999 ewe premium will be at more or less the same level as in 1998. This is due to two factors: prices in continental Europe are relatively strong, largely because of the renationalisation of the EU market, and the appreciation of sterling has led to a situation where the fall in UK prices is not fully reflected in the average EU price.
The Minister understands and shares the sense of grievance felt by Irish producers about the matter. He also understands their view that it is extremely difficult to justify the retention of the stabiliser in a situation where ewe numbers across Europe have fallen significantly since 1992, when the stabiliser was fixed at its present level.
One of the other deficiencies in the ewe premium system is the non-payment of the extensification premium on ewes in spite of the fact that they are included in the calculation of stocking density for the premium. There is also concern that the cattle extensification provisions in Agenda 2000 will result in a sharp fall in sheep numbers. My Department was aware of this concern during the negotiations on Agenda 2000 and the Minister believes that the major improvements in the Commission's original proposals, which he negotiated as part of the final agreement, should minimise the risk posed by the beef extensification premium to sheep production. The increase in the maximum stocking densities from 1.4 lu/ha to 2.0 lu/ha for 2000 and 2001 and to 1.8 lu/ha from 2002 onwards will ensure that the vast majority of farmers who currently qualify for the extensification premium will not have to destock sheep numbers in order to retain eligibility for the premium. Indeed this is a view shared by the Teagasc sheep expert who, I note from yesterday's Farming Independent, believes that it will be easier for sheep farmers to collect extensification in the next couple of years.
As regards the inequalities of the ewe premium regime, the Minister has made strong representations to Commissioner Fischler over the years and most recently at the meeting of the Agriculture Council earlier this week. He outlined the serious income situation facing sheep producers at present and the failure of the ewe premium system to properly compensate Irish producers because of the lack of convergence of prices across the EU. He called on the Commissioner to take urgent action to address these issues, including by way of the temporary suspension of the stabiliser or through the payment of a supplementary premium in member states where prices are significantly below the EU average. Apart from the UK, he received no support from other member states. The Commissioner indicated that he intends to review the current regime next year. He intends to continue to press the Commission on this issue.
Earlier in the autumn the Minister took a number of initiatives to help address the difficulties in the sector. He made strong representations to Commissioner Fischler for a scheme of aid for private storage in order to alleviate the difficulties in the market. The Commission introduced such a scheme last month in order to take up to 130,000 lambs off the market in Ireland and the UK. He is satisfied that this scheme has helped to relieve the situation in the sector and that this, together with a lift in French demand in the past two weeks, has resulted in a firmer trade with factory quotes improved by between 2p and 4p per pound in the past week or two. Prices are now 10% above last year's levels. This firmer market should be sustained by the strengthening demand in the run-up to Christmas.
The effective marketing of lamb is of major importance to both producers and processors. In view of this, the Minister requested An Bord Bia to follow up the potential for developing new markets in southern Europe. An Bord Bia has also conducted an autumn promotional campaign on the domestic market to encourage demand by informing consumers about the positive qualities of Irish lamb. The theme of this campaign was that lamb is a healthy convenient food.
The Minister believes that it is worthwhile to remember that, in spite of all its defects, the ewe premium system provides income support to Irish producers amounting to £10 million per annum, with a further £22 million coming from the headage payments under the Structural Funds. This is a substantial amount of money and, while he is committed to securing improvements in the system, we have to acknowledge that the Commission and other members states view the regime as relatively expensive. Our demands for an improvement in the system have to be seen in that context. Nevertheless, the Minister wants to emphasise that he is conscious of the difficulties facing sheep producers at present and he intends to continue to press the Commission for urgent solutions.
The Minister believes that it is important for sheep producers to make the maximum use of all the EU schemes available to them to improve their income position. Recent studies by Teagasc have shown that the income of sheep producers who participated in the rural environment protection scheme has improved their income position quite significantly relative to those who remained outside the scheme. Less than 50% of specialist sheep producers are involved in REPS. Clearly, there is considerable scope for those sheep producers not yet involved in REPS to enhance their incomes by participating in this worthwhile scheme. As Members will be aware, money and funds are now available to allow this scheme continue for the next seven years.
As the House is aware, the Minister set up the sheepmeat forum some time ago to evaluate the future of the sheepmeat sector and to assess how the industry can best address the constraints and future challenges facing it. The forum, which is chaired by my Department and includes members from all interests connected to the sheep sector, identified a wide range of issues on all areas of the sector. The forum agreed a comprehensive series of recommendations which, if implemented, would enable the industry to prepare for the challenges ahead. The Minister is anxious to ensure maximum progress on implementation of these recommendations. For that reason he has decided to set up a monitoring committee to drive the process forward. The committee will be representative of all interests in the industry and will work closely with my Department.
Everything possible has been done to assist the pigmeat and sheepmeat sectors. My Department is to be complimented on the overall satisfactory performance of its responsibilities down through the years. The challenges facing agriculture, food and rural development and my Department have been identified and are being addressed. Most recently this is being done in the publication of the National Development Plan 2000-06, which contains a specific chapter on rural development, as I assured Senator Tom Hayes it would when I addressed a county council meeting in south Tipperary. The Senator will be pleased with the amount of money allocated to that area and the recognition it receives. The plan completes the framework for the development both of the agricultural sector into the first decade of the new millennium and of the Department into its second century.