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Smith: Extra Milk Quota Good for Farmers, Good for Processors and Good for the Economy

The Minister for Agriculture, Fisheries and Food, Brendan Smith TD, speaking at the Annual General Meeting of the ICMSA in Limerick today, said that the outcome of the CAP Health Check in securing a net increase of over 9% in additional quota, combined with the retention of essential market support measures, was an exceptional achievement. The Minister expressed his optimism for the future of milk production in Ireland as a result of the deal concluded by him in Brussels last week, while also acknowledging the volatility of international dairy markets at present. Referring specifically to the milk sector, the Minister said that "the deal on milk was a phenomenal success for Ireland and will allow dairy farmers unprecedented access to milk quotas. This deal is good for farmers, good for processors and good for the Irish economy", he said.

The agreement the Minister negotiated with his EU colleagues will enable Ireland to increase milk production by some 9.3% when the deal is fully implemented in 2013, compared to 2007. This year milk quotas increased by 2% and, due to a butterfat adjustment and additional quota, production in 2009 will expand by a further 3%. Thereafter, quotas will be increased by 1% in 2010, 2011, 2012 and 2013. This is the first progressive annual quota increase that has ever been concluded at EU level and is unprecedented in its scope for extra production.

The extra quota will increase milk production in Ireland by 500 million litres during the period and, at a conservative estimate, will generate some €100 million in additional revenues for dairy farmers. Furthermore, it will pave the way for a 'soft landing' before the abolition of quotas in 2015. "This is great news for progressive dairy farmers who, for too long, have been starved of the potential to expand their dairy enterprises", according to Minister Smith.

Quota expansion was one part of the Minister's strategy in these negotiations. The other equally important dimension was to ensure that market management mechanisms would remain in place through the transition period leading to quota abolition, in order to cope with volatility. "We are experiencing short term market volatility at present as the markets adjust following historically high prices achieved for all dairy commodities last year and in the early part of 2008". Continuing, the Minister said: "I was conscious that the short-term outlook is uncertain and I was determined to keep intervention for butter and skimmed milk powder and private storage aid for butter fully intact".

These crucial schemes for Irish operators were under particular threat when the negotiations commenced. The purchase of butter and SMP at the intervention price was intended to function as a pure safety net, allowing product to be purchased only through tendering. The net effect of this would have meant that the intervention price would have been virtual rather than real and in effect the purchase price would have fallen below intervention level."The deal I secured means that the status quo has been maintained and both schemes will operate as previously, with 30,000 tonnes of butter and 109,000 tonnes of SMP eligible for intervention at the full price".

Industry representatives had very strongly emphasised to the Minister in the lead up to the Health Check that the retention of private storage aid for butter was critical. This scheme is particularly important because it allows processors to retain ownership of the product during periods of storage. It was intended that APS would become a voluntary scheme, leaving sole discretion to the Commission on the introduction of a scheme. Had this happened it would have left Ireland at a distinct disadvantage given our seasonal pattern of production. "I was particularly pleased that the Commission accepted my strong arguments for the retention of APS as an obligatory scheme".

In essence, the main market management mechanisms important to Ireland have been retained completely unchanged. This means that farmers can produce the extra quota in the knowledge that market supports will continue to play an important role in stabilising the market during the next period of milk production expansion.

Concluding, Minister Smith said that critics of the deal concluded last week would now realise that the outcome of the negotiations in relation to the milk sector has been a complete success and the industry will now be able to get on and build on the enormous success of the dairy sector in Ireland. "The Government's strategy for the dairy sector, comprising the €100 million Dairy Investment Fund and the Milk Quota Trading Scheme, together with this agreement at EU level, will provide the foundation for a great leap forward for the Irish dairy industry in future years".

Date Released: 24 November 2008