Thursday, 6 December 2018

Ceisteanna (3)

Jackie Cahill


3. Deputy Jackie Cahill asked the Minister for Agriculture, Food and the Marine the status of the latest developments regarding SMP intervention at EU level; if he will provide data for sales; the plans the European Commission has for SMP intervention tendering in 2019; and the position of the Government in that regard. [51345/18]

Amharc ar fhreagra

Oral answers (6 contributions) (Ceist ar Agriculture)

I ask the Minister the status of the latest developments regarding skimmed milk powder intervention at EU level, if he will provide data for sales, the plans the European Commission has for skimmed milk powder intervention tendering in 2019 and the position of the Government in that regard.

As the Deputy is aware, in recent years the European Union has accumulated large amounts of public intervention stocks of skimmed milk powder which are overhanging the dairy market and having negative effects on wider dairy markets and market sentiment. In the 2015-17 period a total of 405,478 tonnes of skimmed milk powder were bought into public intervention. The sale of intervention skimmed milk powder stocks is undertaken through public tenders managed by the European Commission and voted on by member states through the Common Market Organisation, CMO, management committee for animal products.

After the most recent tender on 20 November, there are approximately 165,000 tonnes remaining in public intervention stocks, representing a significant reduction of approximately one half of total public intervention stocks since the start of 2018. The increase in the price of accepted bids in recent tenders is a welcome development and bodes well for future upcoming tenders. This underlines the effectiveness of the approach taken thus far. In July the Commission proposed to extend the arrangement to reduce the threshold for the buying in of skimmed milk powder at a fixed price from 109,000 tonnes to zero for the 2019 period. This was accepted by the Council on 15 October. It should be emphasised that the revised purchase model applies in 2019 only. As I have noted, as the new regulation does not prohibit the buying in of intervention stocks, buying in can continu, but on the basis of a tendering route.

It might be effective, but, unfortunately, it is farmers who have paid for it. I am very concerned that the Government has given another blank cheque to the European Commission to remove the floor price for skimmed milk powder in 2019. Only last April the Minister told me, " Department also engaged with the Commission on recent measures to limit further piling up of SMP in 2018 without due justification, including ensuring that the Commission's proposal to reduce the fixed price ceiling to zero be specified as for 2018 only, to avoid setting a precedent for the longer term." There has been a complete U-turn. Unfortunately, we are facing into 2019 with milk processors telling us that milk markets will be under pressure. It is unacceptable that the guarantees given to us last year have not been honoured, given that the Minister agreed to have no floor price for skimmed milk powder and said it was for one year only and would not happen again. We now see that we will be in a similar position in 2019 and this will affect the confidence of farmers. At the end of the day, this had an impact on milk prices in 2018 and, unfortunately, it will probably have a greater impact in 2019. It is not good enough that guarantees the Minister gave us last April have been reneged on.

I take the view that a substantial overhang of skimmed milk powder at the start of 2018, in excess of 370,000 tonnes, was a significant dampener of dairy markets. I do not think there is one industry representative to whom I have spoken who is critical of the manner in which the European Commission off-loaded the skimmed milk powder intervention stock, which has worked to the extent that it has practically been halved. That gives confidence to the dairy market. I accept the Deputy's point that the industry is talking about 2019 being challenging. However, it would be far more challenging if global dairy markets were to be as they are and we were to have not only the 370,000 tonnes of skimmed milk powder intervention stocks we had this time last year but, in fact - if the Deputy had gotten his way - additiional intervention stocks added in the last 12 months. To its credit, what the Commission has managed to do is reduce the overhang. This has improved market sentiment, which has to be beneficial to dairy farmers.

The Minister talks about what the position would be if I had gotten my way. The floor price of skimmed milk powder was agreed to to protect dairy farmers' incomes. If I had my way, the floor price would be kept in place and I make no apology for saying this. It was agreed in the last round of CAP proposals that there would be a floor price in the purchase of 109,000 tonnes of skimmed milk powder in each calendar year. The Minister gave us a commitment that it was being taken away for one year only. As he said, stocks have reduced greatly, but he has now given another commitment for 2019. How can farmers have any faith that what was agreed to will be kept in place? The taking away of the floor price of skimmed milk powder in 2018 had a dampening effect on skimmed milk powder prices. That is fact. The intervention product was sold significantly below the fixed price and the price processors received for skimmed milk powder all through 2018 was below the floor price. That was the direct result of the European Commission taking away the floor price. As the Minister admitted, we are facing into what will be a more difficult marketing year in 2019 and the Commission has already taken away one of the prime supports farmers need to stabilise markets. I am extremely disappointed that he has allowed this to happen for a second year. As he said, stocks have been greatly reduced. Whatever justification there was for doing it in 2018, it is not there for 2019.

Undoubtedly, if the Deputy sings the same tune repeatedly, on some occasions he will hit the right note. It is unfortunate that he does not recognise that what has been done in 2018 has worked. We have managed to dispose of stock without impacting adversely on the market. As what was introduced for a 12-month period worked, we have decided to extend it for a further 12-month period. It was originally introduced for a 12-month period, but it is being extended for a further period of 12 months. Intervention instruments are still available but not on the automatic basis on which they applied prior to 2018.