Seanad Éireann - Volume 146 - 01 February, 1996
Minister for Agriculture, Food and Forestry (Mr. Yates) Ivan Yates
Minister for Agriculture, Food and Forestry (Mr. Yates): I am delighted to have the opportunity to discuss details of the most important sector of the economy. I welcome the opportunity to listen to contributions today and next week and my Department, the Minister of State, Deputy Deenihan, and I will take note of the points raised. I propose to review the past 13 months, outline the priorities of the Department, review the commodity sectors in agriculture and how the Department's schemes operate. I will also talk about the future of agriculture in terms of enlargement, the TB eradication scheme and the budget provisions.
The year 1995 was a record one for agriculture in that incomes reached over £2 billion for the first time and it represented the fifth consecutive year where there was a real increase in incomes. To get a nominal increase of over 6 per cent at a time when inflation was 2.5 per cent speaks for itself. When looking at this £2 billion, it is important to note the Department's significant role in the net income to agriculture. It is reckoned that 37p in every £1 of farm  income comes in the form of a cheque in the post — direct income aids to premia and headage. If we take into account that an additional £750 million is paid by way of direct market supports, export subsidies, refund arrangements and other price supports, we will see that the total value of the CAP to Irish agriculture is £1.5 billion.
As regards direct payments, there was a problem in the latter half of 1995 with people who did not send in area aid forms. This meant that they were denied their entitlement to suckler cow or ewe premiums, to headage or to special beef premium. In 5,000 cases, applications were late or were not sent. I am delighted that further to my representations to Brussels some £20 million can now be paid to farmers on the basis that their 1994 submissions will suffice. I appeal to farmers to make sure they send in their area aid applications on time each year.
As regards the medium term prospect, we are now moving to an end of the income growth in agriculture through an increase in direct income aids, premium increases, green pound devaluations and headage changes. It is clear that the 1992 CAP reforms have worked their way through the system and that future income growth will come through improved productivity and efficiency and greater attention to cost control and quality at farm gate level.
There are long-term pressures in relation to EU enlargement. Eastern and central European countries have a capacity to produce food at a lower cost. The purpose of the Uruguay Round of GATT will be to intensify competitive pressures. Therefore, our future direction must be to ensure that those efficiency gains take place. In that regard, I will shortly launch the Teagasc advisory service for 1996 and I will pay particular attention to improving competitiveness.
One of my priorities on becoming Minister was to ensure that the Department of Agriculture, Food and Forestry was seen to be exemplary in terms of  providing a modern service in relation to payments to farmers. Because there is such a dependence on the cheque in the post for net farm income, it is important that it is paid on time in a consumer friendly way. The Taoiseach launched the Charter of Rights on 20 April last after detailed consultations with the farm organisations and management in my Department. Immediate benefits are already available. All the financial targets in terms of payments have been met in 1995 — some have surpassed the targets. In almost all cases we exceeded 95 per cent payments for individual types of premiums, including the suckler cow and ewe premium, in 1995. The charter sets out detailed timetables for payments.
We want to move towards what was available at the National Ploughing Championships in that a person should be able to go into a local office, feed their herd number into a computer and be told about problems and their entitlements.
Another priority was to ensure that office opening hours would be the same as any other public service office. It was not acceptable that offices were only open from 10 a.m. to 12.30 p.m. From 1 September last offices have been open until 5.30 p.m., like other Departments, although we did have industrial relations hiccups. The telephone service I promised — whereby if one rings the local office and wants to be connected to Castlebar, Cavan, Portlaoise or Dublin, one can do so at the price of a local call — is on schedule to happen by the end of the year. We have reached agreement with the Office of Public Works on the upgrading of the offices. The worst district offices in Tipperary, Roscommon, Enniscorthy and Davitt House, Castlebar will be moving ahead in terms of new or improved offices.
The Government will publish the strategic management initiative at the end of February and each Department must do its own follow-up reorganisation which I will announce shortly. This is an attempt by the senior Civil  Service to address reorganisation through executive units. The Department is diverse and employs about 6,500 people between State agencies and within the Department. Securing a better delivery of services will involve more streamlining and that is our intention in that regard.
Moving to commodities, with the exception of sheep, 1995 was an excellent year. The best performance was in tillage where, because of good weather, better circumstances and good market conditions, output increased by 46 per cent. This follows a couple of slack years in which profit was mediocre at best. When I was appointed Minister, the first crisis I had to deal with was in the pig sector. Prices had dropped to about £96 per 100 kilos. Now prices are up to £117 and today's market reports state that Irish pig prices are 5 per cent ahead of the EU average. I am delighted about that.
The most difficult area was sheep. From April to August 1995 prices slumped dramatically due to an overhang of hoggets on the market and a number of other factors. However, on a month by month comparison between 1995 and 1994, the drop was as high as 22 per cent. For the first and latter parts of the year — up to March and after September — prices were higher than they had been in the last four years. However, a particular segment of producers lost out and a number of protests and a lobbying campaign took place. Members of this House made strong representations to me about the difficulties being experienced, not least in my own county.
I am pleased, therefore, that, at the December Council meeting, we secured an exclusive package for Ireland which meant that the rural world premium would be extended to all sheep farmers. This is worth about £6 per head and will meet the problems of low level producers who were particularly badly affected by the price decrease. We increased the headage by £1 and £2 on hoggets and mountain ewes and, because of the market drop, we secured  a £3 increase in the mainline premium. It all added up to £26 million. The package was difficult to get because in other countries prices had fallen further and they were receiving nothing. In France the Minister for Agriculture was from a lowland constituency and he was anxious to get the rural world premium. The fact that we secured it was a successful outcome.
Over the last 15 years our sheep production has been standing still. Our national average for lamb output is 1.1 lambs per ewe; our quality has not improved and our breeding has remained broadly static. We must address these issues. I visited the Rungis market in Paris and commissioned an An Bord Bia study. It clearly showed that we do not have the consistency of quality which others have. The picture is more precise if we compare our performance with that of the British. In 1990 we exported about 51,000 tonnes of sheepmeat to France, our most important market. France provided sales to Britain of about 55,000 tonnes. In 1994 our exports remained broadly the same while those of the British had shot up to 86,000 tonnes, an increase of 62 per cent. Britain had increased its market share while we stood still.
The An Bord Bia report, which we published in early January, showed that we must adhere to quality. We must look in the long term towards paying for lambs in meat factories on the basis of quality confirmation and low fat as against weight. The lamb classification scheme, which is not a statutory scheme and will not involve a huge bureaucracy or levy, is now being put in place. We will target a number of initiatives with An Bord Bia to move towards more ready cuts, more labelling, racks of lamb and legs of lamb as opposed to just dumping the carcase on the Rungis market at a low price. We are also looking at the German and Spanish markets for opportunities. Teagasc will be asked to try to improve on-farm efficiency and breeding practices.
The beef sector is, at present, my most serious area of difficulty. It is the  most important sector in Irish agriculture and is worth £1.5 billion. The majority of farmers, about 100,000, are involved in beef production. Incomes improved last year due to the level of increase in premia. In 1990 the level of premia income to the beef sector was £120 million. That has now increased to £370 million. Cattle prices in 1995 were 10 per cent higher than those in 1992, when premia income was £250 million less. The Commission is strongly of the view that the purpose of premia is to compensate for lower prices. It believes that prices for cattle in Europe in the short and medium term must abate.
The other point to bear in mind is the fact that consumption of red meat and beef is dropping by about 1 per cent per annum; it has dropped by 10 per cent over the last ten years. Following the recent BSE scare in the UK consumption dropped by 20 per cent in six weeks. It will recover but not to its previous level. Germany in 1993 experienced a 20 per cent drop. That is the background to the problems in this sector.
The beef management committee cut refunds by a total of 36 per cent between September and November. We totally oppose this. Ireland is very dependent on third country exports and without these subsidies we cannot service those markets. We have bitterly opposed the Commission's handling of this matter. We believe it has engendered panic in heavy levels of prefixation. It rewarded speculators and we now have the farcical situation that if one wishes to get a licence today one must approach another trader who prefixed at an earlier date instead of approaching the Commission for it. We put forward proposals last October to deal with the problems of speculation, non-transferable licences, shorter validity periods and so forth. Some of these issues were dealt with but not fully. Instead the Commission simply slashed the refunds by 25 per cent across the board in mid-November. That brought it to a standstill.
 The Commission increased the refunds in mid-December by about 14 per cent and the level of prefixation since then has varied per week from about 2,500 tonnes to 7,000 tonnes. The important point is that the overall GATT quota limit for export subsidies by volume is 1.19 million tonnes. Our best estimate is that Europe will require exports of about 900,000 tonnes so there is no GATT pressure. There is no budgetary pressure. The problem is that the level of prefixations was so heavy they were afraid that they would run out of them by the end of the GATT year. The 1.19 million tonnes works out at about 22,000 tonnes per week. It was running at 60,000 and 70,000 tonnes per week so the Commission had to stop it. However, we believed that would work its way through the system. There are heavy penalties for people who do not take out licences beyond the expiry period. There will be another meeting of the beef management committee this Friday. We believe there probably will be an increase in the refunds although it probably will not be enough. The price drop we have experienced has not been reflected in the rest of Europe although the French have had a problem with cows. However, essentially, it is a difficult battle.
I am also fighting a battle about the EU fines which is a political battle with the Commission President and DG6 who decide this issue. The other issue is the deseasonalisation premium, which is the £60 per head we receive in the spring. The qualifying criterion is that we must slaughter 40 per cent of our animals from 1 September to 1 December. We have slipped to 35.8 per cent which means we are no longer eligible. I have to get the threshold lowered to 35 per cent. The problem is that the longer is one's shopping list, the more compromised one is in terms of not being able to secure all things immediately.
I am committed to continuity in live cattle shipments. Last year and this year I signed special regulations relating to  the condition of transport of animals so we could seem to have a long-term credible basis for this trade. The Australian rules would apply to long haul traffic and the EU rules would also be implemented.
We must face the reality that there is a surplus of beef production over consumption of the order of 400,000 tonnes per annum. There is also a potential drop in consumption. Ireland has the lowest price for beef and we will, therefore, trigger the point at which the surplus has to be dealt with, hence our dependence on Third World country exports. Live exports have a role to play and are essential to buoyancy in cattle prices. Meat factories have shown that if they can operate in isolation without competition they will have a profit opportunity which they would not otherwise have.
Dairying is our second most important area. There has been buoyancy in milk prices and record milk prices throughout 1995. The world price of milk is about half the European price of milk and that concerns me in the longterm. I have studied the longterm review of the quota which is assured to the year 2000 and beyond. We must look to long-term to ascertain what is in our best interests. The quota system has served us well but, because of the buoyancy of prices, the leasing and purchasing of quotas overheated.
Milk dried up in the restructuring and temporary leasing schemes operated through co-ops. I introduced ring fencing in disadvantaged areas to ensure that people would not be discriminated against. There is a pool of milk in disadvantaged areas that is vital to the retention of the maximum number of family farms on a viable basis. The legislation is now in place and will safeguard that pool of 320 million gallons of milk. In relation to overheating, I introduced a 10 per cent clawback which imposes a penalty on those private leases. We will clamp down on any bogus leases which do not conform to the regulations.
The milk restructuring scheme increased the price to 75p per gallon.  Through the hardship schemes and the appeals tribunal we gave additional quotas to 2,000 producers. We paid the fourth and final instalment of compensation to those producers who had a reduction in quota in 1991. I already referred to the comprehensive review of the long-term position of the quota system. I am setting up an advisory group to try to get an industry consensus on that.
We have a perilous situation in relation to super levy. At the end of the December we were 1.92 per cent over quota which translates into a levy bill of £25 million. There are about seven or eight weeks to go to the end of production year and I appeal to dairy farmers to try to stay within the quota. They have individual responsibility for the management of the quota and there is no way around this. Last year people said that we should shuffle some of next year's milk into this year's milk. If we had done that we would be in an even worse situation now relative to 1995.
As I said earlier it was a good year for tillage; 1992 to 1994 were disastrous because our output dropped by 25 per cent. We cut 0.5 million tonnes in grain and became more dependent on imports and more of a deficit nation in the trading of grain. We consume about 3.4 million tonnes of animal feed compounds and import about 2 million tonnes of feed. We need to produce our national base area and national quota — we are short by about 45,000 hectares — and minimise the level of imports. This would give opportunities for more access to feed here from native grain as well as more income opportunities.
We need to reduce setaside. We reduced setaside on a voluntary level from 30 per cent to 15 per cent and have a single rate of setaside at 10 per cent between rotational and non-rotational. That will yield an increase in output. I am determined to get a relaxation of the eligible land rule. Article 9 of the CAP on arable aid seeks to ensure that member states who are under quota would not have to adhere fully to their eligible land rule. If and when we become over  quota I would be sympathetic to introducing individual base areas but that is a couple of years away at least.
During the year we secured agreement in relation to the implementation of GATT and CAP reform for the sugar beet sector. There are 5,000 growers with an output of £60 million. I am glad to say production was up 20,000 tonnes, or 10 per cent, on last year to 220,000 tonnes. The six year deal was very satisfactory and there was no price cut. There was a fear that the subsidy for storage of seed quota from one year to the next would be caught but we protected it. There is now a viable basis for people to continue in sugar beet.
The Council of Ministers is currently debating the reform of the fruit and vegetable sector. We account for only one-third of 1 per cent of total fruit and vegetable production in Europe so it is not a major issue for us. However, I will try to ensure that it supports our existing growers and producer groups. We have introduced FIP for horticulture and the guidelines and forms will be available in local Teagasc offices within the next fortnight. My Minister of State, Deputy Deenihan, who has overall responsibility for Bord Glas and the horticulture sector, has established a forum to try to ensure that we can develop a further blueprint for the sector.
I referred earlier to the sustained price improvement in pigmeat. Sow numbers dropped on the Continent through disease and this, coupled with other factors, facilitated a more orderly market development. It is my intention to reinstate the Bord Bia pig levy shortly and to focus on pork and bacon promotion. The reduction of about 20p per slaughter fee on the pig was an exceptional measure because of the weakness of price. Those circumstances have now changed and Bord Bia would benefit from that money.
In the poultry sector we launched a £33 million investment scheme of Structural Funds for the processing sector and the budget also contained a measure to reduce non-auto LPG. I appreciate they have particular problems  and I await the poultry meat forum's report. When I became Minister there was a lot of in-fighting between processors, producers and so on. It was an important step to achieve consensus.
Moving away from commodities and on to farm investment, Members will know I had a nightmare situation in relation to CFP where only £3.8 million was allocated in the structural division of funds this year. Following a detailed review of the scheme, we have £20 million in the fund this year. We reallocated money from the inflator, future years and forestry roads and I am pleased to say that all 18,600 applicants will be approved. We are ahead of schedule and I hope that all those who want to be approved will have been approved by Easter and can proceed with the works. We abolished the £30 on farm inspection fee.
REPS has become a huge success story in terms of uptake. This is a very good scheme which comes out of the Feoga Guarantee Fund. It is not part of Structural Funds and is financed on a three to one basis between Brussels and Dublin. When I became Minister there were only 350 applications in REPS. People said it was a bureaucratic nightmare and not worth considering. We now have over 8,500 in the scheme, 1,500 in the process and we envisage another 12,500. We have a facility at European level to go to 40,000. Given that the average payment is about £3,500 and it does not involve a huge modification in farm practice, this is a way to increase farm incomes. I have also relaxed the rule that one had to carry out CFP work within one year of having a REPS plan approved. The requirement is now three years and this will deal with the other problems that were there.
There is also a problem with overgrazing in the mountainous areas of the west. The committee in Brussels agreed to a special package, £31 per ewe taken off the mountain, payable for five years in addition to the REPS payment. If a  person with a quota of 1,000 ewes reduced them by half, they would be £7,500 better of in net terms, even when one takes account of the reduced output.
The disadvantaged areas is another matter which I inherited and have been anxious to bring to fruition. The full one million acres of farmland were reclassified more severely disadvantaged which means an extra £4 million in a full year and an average of £1,000 per farmer. There are two remaining issues on the disadvantaged areas. The first is the extension of areas into the less severely disadvantaged. We have had major difficulties with the EU Commission on this issue. There have been legal and technical difficulties regarding stocking rates. Unfortunately, the interpretation we had of the rule was not the correct one and we have had to modify the proposal. I expect to secure agreement from the EU Commission within a matter of days and it is my intention that those areas that will be included for the first time and the disadvantaged areas will have the benefits in 1996. I am making the administrative arrangements for this and will try to publish the list as soon as possible. It will have to go before the EU Council of Ministers and the European Parliament, so the red tape process will take a considerable amount of time.
With regard to rural development, in 1995 the LEADER II Programme was launched with a total investment of £190 million. We obtained extra money from the EU Commission in the latter half of last year for this.
Other significant initiatives include the £35 million agri-tourism programme, involving grant aid of £10 million and a £4 million grant aid package for the sport horse sector. These initiatives, together with the county enterprise boards, the partnership companies and special assistance for horticulture and other alternative enterprises, will provide a framework for exciting development and job creation in rural areas over the coming years. However, there is a problem with poor quality and high  volume in the sport horse sector and we are now aiming at quality rather than quantity.
One of my priorities for 1996 is in the area of forestry. Approximately 7 per cent of the land of Ireland is planted; the EU average is 24 per cent. We have the most favourable climate for forestry production in the EU, together with 1 billion hectares of land that can produce a higher income from forestry than from agriculture. The premium and forestry grants, both from the EU, are in place and are tax free. We must get the marshy land planted. In addition, we must have a long-term strategy for marketing and growing timber and for ensuring that it is a successful, integrated industry.
I will be bringing to Cabinet in March, and publishing, a 20 year strategy for the forestry sector — the first of its kind. However, we are already seeing some of the downstream jobs in the Masonite plant and the OSB factory in Waterford, which will open shortly. These will create 2,000 to 3,000 jobs in wood pulp processing, tertiary processing with the wood industry and sawmilling in addition to direct industry jobs.
The A to Z of forestry will be dealt with in this strategy, including planning permission and environmental impact assessments. I am aware of the unpopularity of forestry among residents in some areas. We want to have an orderly development of forestry, not arbitrary, indiscriminate planting, and we will try to facilitate this.
There is another problem in that Coillte is virtually a monopoly raw material supplier to sawmills. There has been a huge debate among sawmill owners that there has been an unfair log allocation and pricing system. I hope to be in a position to announce, as part of the strategy, a new deal between the Irish Timber Council and Coillte with regard to the sawmilling sector in order to provide a transparent, independent and fair basis — a market led basis — for selling timber.
 I had a special focus on the food industry in 1995 due to the launch of the National Food Development Strategy. It involves public sector investment of £283 million over five years and, including the private sector, a total of £640 million. We hope to increase output by the turn of the century from £9 billion to £12 billion and to create an extra 5,000 jobs. It is a three pronged strategy between Bord Bia on the marketing side, Forbairt on the company development and research side in terms of research grants, and Teagasc to build up a State bank of food research to help small companies and to keep us linked in at an international level. I established a new national committee involving these organisations, chaired by the Secretary of my Department, Mr. Michael Dowling.
In the latter half of last year I topped up the money to Bord Bia to provide an extra £15 million, £7.5 million this year and next year, in terms of assistance. I am aware of the currency difficulties. While this is not a currency scheme, it may provide some assistance to those who sell it on the UK and European markets.
We must look at the long-term issue of rationalisation in the food industry, in addition to aspects such as involvement to scale and food processing, to which I will turn my attention this year. Notwithstanding this, I wish to highlight the event called Horizons which will take place between 11 and 13 June. This will be the largest ever shop window for Irish food. It will be a superb international exhibition, a £3 million event and the first of its kind. It will take place at the RDS and linked to it will be an international food conference and seminar. Top international speakers will be involved and the event will bring in 250 to 300 buyers. Our top 100 companies will be involved and it will be a superb opportunity to show the totality of Irish food — for example, its green image in terms of our extensive grassland base of production.
With regard to the budget, in a full year the VAT refund is worth £9 million  to unregistered farmers. The PRSI benefits will assist the competitiveness of the food industry. They are reckoned to be worth approximately £3 million in cost reductions. For all agri businesses which are not paying the 10 per cent profits tax, the reduction from 38 per cent to 20 per cent on the first £50,000 of income will be of benefit, especially to smaller companies.
I am conscious of the fact that, under the quota system, etc., young farmers and new entrants are having difficulty with quota and lamb prices. I am anxious to promulgate and support land leasing, especially long-term leasing. At present, tenants of commercial property have all the rights after three and five years. This is not the case with land. An elderly person who wants to retain the land in the family may not be able to farm it to its maximum output. Leasing is the long-term option. Even though there is shared milking in New Zealand, they have devised a number of career structures for people who do not own land. We must do this here and tax exemptions will provide a real incentive to farmers who own land and who, for reasons of ill health etc., cannot work it.
There is a further adjustment to the CAT, extending the 75 per cent relief. There was a specific problem with the farm retirement scheme in that when some people retired they transferred stock which created a tax liability. We are exempting this, which should deal with the problem. In addition there was a specific problem regarding social welfare under REPS. For small farmers on unemployment assistance from 1 October, the first £2,000 will be exempted from the means test.
I made changes to the installation aid during the year. I abolished the upper ceiling of man work units and introduced more flexibility for people at the smaller end, including part-time farms. I am anxious to keep this under active review. There was a catch in the scheme regarding the under 35 year rule in that one had to be under 35 years of age at the end of the production year, a year  after the transfer. This has now been changed to the date of the transfer because there were people who were 34 years of age caught out.
Enlargement of the EU is a serious long-term issue. We will seek a transition period so that applicant countries can join our club and absorb our rules. There will be veterinary, market and other difficulties. The problem is that output costs in these countries are approximately 10 per cent of our costs, they have approximately one-quarter of our spending power — the EU average — and they cannot, therefore, conform with the CAP as it is. It would blow the budget. Commissioner Fischler produced an assessment for the Madrid summit which showed that a radical reform, moving towards world prices, would break farmers. Ireland could not afford this in terms of direct income payments. In order to absorb Poland and the other countries, which are not homogeneous, into the community we could not afford to keep going as we are. The conclusion is that we must continue with the process of CAP reform but have a transitional period so that we can preserve it.
The most serious threat to Ireland is the renationalisation of the CAP. There is no doubt that the French or German Governments could afford to compensate their farmers. Spain, Portugal and Ireland, with a higher dependence on agriculture and a higher proportion of their workforces in agriculture, cannot afford this. We must ensure that the political commonality of support for agriculture is retained throughout the CAP rather than through national measures.
The TB and brucellosis programmes and eradication schemes were the most controversial and conflict ridden areas in 1995. I inherited a scheme that was agreed in principle with the social partners regarding rotation and a three year deal with Brussels. The vets refused to work it, despite the fact that we had offered them more money than the total amount of EU money involved, and it would have involved no reduction in levies. Essentially that could not work  and we had to go back to the drawing board. What we have come up with is the most radical restructuring scheme ever — those are not my words, I think everyone is agreed on that. It is a three year scheme which involves the participation of everyone through a TB forum to fine tune the system and make it work. It devolves responsibility for TB onto farmers, which means the annual test will be paid for by farmers and organised through the DVO, using the farmer's choice of vet. The farmer will pay for the test and the levies will be reduced by £18 million, from £28 million to £10 million; the reduction is from £7.30 to £2.50 per animal slaughtered or exported, and from 1.3 pence to 0.5 pence per gallon of milk. We reckon the net saving to farmers, between what they will now have to pay for the test and what they previously paid in levies, is about £4 million. I am paying for the new animal tags, which in 1996 will cost £3 million, and the abolition of pre-movement testing, which cost farmers about £4 million, will also be a saving. I have also arranged that the reduced levies which will be paid from now on will only go into a compensation fund, so they will not go towards administration costs.
I have now secured the agreement of all four farming organisations — the IFA, the ICMSA, Macra na Feirme and ICOS. It is impossible to get full agreement on TB, as it is a most contentious area. There are so many individual cases of hardship it is a most emotive area. However, to get that level of agreement is a great achievement. Today and yesterday there are detailed and extensive discussions in relation to the IVU. I appeal to vets for their co-operation. My Department has entered those talks in good faith and I hope they participate shortly. The IVU will have an executive meeting this week. I hope that issue can move on and that we can all move together on a three year programme.
The final eradication of TB will depend on a technological breakthrough — a blood test which is foolproof for diagnosis, or a vaccine. I think  such a blood test is not far away and will happen within three years. That will provide a basis for final eradication.
I thank Senators for their kind attention. As I said at the outset, I consider this as much a listening as a speaking exercise. I hope I have stimulated a basis for thought and provoked an opportunity for people to comment on their fears and aspirations for the sector. I am absolutely committed to development in this area. It is by far Ireland's most important indigenous industry; 86 per cent of its output is produced from Irish raw materials. Because the entire community is dependent upon agriculture it is in all our interests that we all work together to ensure our future growth and prosperity.
Mr. R. Kiely Mr. R. Kiely
Mr. R. Kiely: I welcome the Minister and concur with him that this is an important industry which needs the support of all of us to ensure its viability. The future of our industry depends much on the reform of CAP. The last reform was by an Irish Commissioner for Agriculture, who did a good job. We are now facing another reform. The material circulated by the Minister referred to EU enlargement and stated he believed that:
further enlargement, while certainly presenting us with challenges, can bring greater prosperity to existing member states by increasing trade and investment opportunities provided the overall conditions are right. [. . .] There is also a crucial need to maintain common financing of the CAP.
The importance of this debate has been highlighted recently by the decision of Commissioner Fischler to bring forward his proposal for reform. Policy makers in Europe are actively thinking ahead to the next round of world trade talks, the enlargement of the EU to the east and the implications of a single currency for agricultural policy. We recently saw that there may be a difference of opinion between the Tánaiste and this Minister on CAP reform. This may mean there  is some disarray on the range of issues defining our relations with the EU but I hope it does not. Despite being repeatedly promised since the spring, the publication of the Government White Paper has now been long fingered — I am sure the Minister will give some idea when it will be available. It is evident there is no agreement in Government on issues which are fundamental to the totality of our relations with the EU.
The CAP is a vital component of our entire economic structure. It was worth a total of £1.3 billion to us in 1994. Of that, £669 million was paid in direct payments to farmers. CAP reform goes to the heart of the national interest. The future economic viability of the majority of our rural community is on the line.
Commissioner Fischler's proposals must be given more than curt dismissal. He outlined three main options for reform. The first was to maintain the status quo. For the want of any constructive policy suggestion, this is apparently the Minister's preferred option but it is not that of the Commissioner. Mr. Fischler's premise is that in the light of changing circumstance, the status quo is unsustainable.
The second option outlined was for radical reform. Such moves if adopted would likely include either no support for prices or supports close to world price levels, with further decoupling of compensatory payments and their reduction over time. For example, reducing milk and sugar prices to world levels would necessitate a huge transfer of resources if compensation were to be achieved. The Commissioner has indicated that for a range of political and economic reasons, radical reform is not his preferred option in the short term.
The third option is to deepen and widen the 1992 reforms. According to the Commissioner, this approach implies a reduced reliance on price supports compensated where necessary by direct payments, whatever their concrete form may be. The linkage between income support and environmental maintenance, already a feature of  REPS, would be strengthened. It seems this last option is the one preferred by the Commissioner.
The lack of coherence in the broader area of foreign policy will, if not tackled, have a serious impact on our ability to successfully articulate a cogent response on CAP reform. The internal structures of the EU are also up for reform. At the moment, agriculture spending is ring-fenced until 1999 and the potential consequences for Irish agriculture are extremely serious. Fianna Fáil demands that the Government articulates its definitive position on these crucial structural issues. We must avoid a scenario whereby, because of a lack of planning by this Minister, the Government of the day in 1999 will be running around like ducks in a thunderstorm trying to make amends for this Minister and this Government's inactivity.
The determination of Fianna Fáil to pursue CAP reform is based on the following considerations. In its own right, it is one of the single most important economic issues that Ireland will have to deal with in the next decade. A shambles of historic proportions is looming under this Government's management. Enlargement is firmly on the EU agenda and the Government must meet the challenge, not run away from it. The Minister has said enlargement is not a danger. If, as everyone else in Europe believes, enlargement goes ahead, what are the Government's views on the conditions for transition? Should it take five, ten or 15 years? What sort of transfers would take place during this period? These are basic questions, the resolution of which will have a serious effect on our agriculture sector. The Government must articulate its position. Our future must be decided by ourselves, not by Brussels.
As things stand, about 60 per cent of Irish farms are small or moderately small in terms of economic size. Of these enterprises, non-intensive and non-dairy livestock predominate. In the past 20 years the number of farms with dairy cows has halved and there has been a dramatic shift towards dry stock  systems. This has happened in spite of the fact that dairying is five times more profitable than any other sector. Specialisation has gone hand in hand with a reduction in numbers.
Some 84 per cent of dairy cows are on 16 per cent of farms. There were 97,000 dairy producers in 1972 but that has been reduced to 41,000. It is officially predicted that if current trends continue, up to 12,000 dairy farmers will be out of milk production in the next five years. The small dairy producer is on track for elimination. As matters stand, 50 per cent of producers are trying to survive on only 22 per cent of the quota. Of half of all producers trying to survive on less than 40,000 gallons, it is likely that half of them will be out of business in five years. Half of the 41,000 farmers also have a quota of less than 30,000 gallons, which is the benchmark required for viability in the future. Small and medium sized dairy farmers own less than one quarter of the national milk quota.
Another disturbing trend is that the prohibitive price of the quota is keeping new blood out of the industry. Prior to the introduction of the quota, one new person became involved in milk production for every two people leaving it. The trend is towards bigger and fewer units away from disadvantaged areas. A 10 per cent clawback will have no effect on the continuing haemorrhage of quota from disadvantaged areas. Not only is the national quota slipping into fewer hands, but an opportunity to get more quota and to do something for people on the margins of the industry is being allowed to pass.
When the milk quota regime was introduced, the special position of Ireland and its dependence on dairying was recorded. It was promised then that in the event of future quota becoming available Ireland would have a priority claim. Not only is our claim not being pressed, but the Irish quota has been reduced by 9 per cent. In contrast, Italy has secured an 11 per cent increase in quota, while Greece got a 20 per cent increase. Everything should be done at  EU level to ensure that not only is the quota not reduced, but that we get extra quota. I ask the Minister to give a commitment to secure delivery of that promise of extra quota to Ireland.
Unless small farms get an opportunity to invest they will not survive in the medium term. The scrapping of the control of farm pollution scheme was a huge mistake in terms of achieving the long term viability of smaller holdings. Similarly, the nondelivery of the dairy hygiene scheme is placing thousands of smaller dairy units at the brink. If this Minister grasped the opportunity, on-farm investment schemes could be a powerful instrument of policy to secure the future viability of smaller holdings. In the absence of a willingness to intervene, our small farmers are more exposed to the forces of CAP reform. Farm pollution schemes are expensive for farmers. It takes a long time to process the grants which are available and this causes hardship for many farmers who must borrow money in the meantime. It is important, especially if we must meet EU regulations, that every effort is made to assist farmers in relation to the farm pollution scheme and other farm investment schemes.
The most immediate threat to our farmers is the fact that the loss of many cows in the dairy sector is adding pressure to the dry stock sector. Cattle farms represent approximately one half of the farms in the country, but during the past decade cattle farmers earned less than one fifth of farm income. Cattle farmers depend on the “cheque in the post” syndrome for 40 per cent of their income. The figure is 80 per cent for sheep farmers. CAP reform is a matter of life and death to many, if not the majority of farmers. Investment is the key to continued viability for two thirds of our farming families. Failure to invest in their holdings will mean the flight from the land will not only continue but accelerate.
As regards existing policy, the Minister has got rid of two on-farm investment schemes which were available under Fianna Fáil led Administrations.  The farm improvement scheme is gone and the control of farm pollution scheme has been scrapped since June last year. Of the 19,500 who applied for the scheme only 2,300 have been paid a grant for the necessary works. Grants under the dairy hygiene scheme, which was negotiated by the former Minister for Agriculture, Food and Forestry, Deputy Joe Walsh, to ensure that dairy farmers could meet EU standards, have only been paid to 225 out of 5,000 applicants. Lack of delivery of farm investment schemes is undermining the future viability of small and medium farms. The Minister should ensure that farmers receive grants for on-farm investments because it is important to meet EU standards and to ensure high quality produce.
The Minister referred to animal health policy and the restructured TB and brucellosis programmes. I hope that the new arrangements will provide the basis for an effective working relationship between farmers, vets and the Department. The farmer vet relationship is important. The Minister should have met the vets during the dispute and discussed the problems relating to the application of the restructured TB and brucellosis programmes. The criteria by which success or failure will be judged are effectiveness and cost. Reduction of the incidence of TB must be the net result of the Minister's changes. Responsibility for the initiation of changes in veterinary practice lie with the Minister. The cost of failure will be heavy.
Two meetings were organised recently in County Limerick by Macra na Feirme and both unanimously rejected the Minister's plan. Will it increase or decrease the incidence of TB in the long term? The 12 months pre-movement test for farmers could lead to an increase in TB. There has been an increase in the number of cases of TB in my area. A farmer recently lost a quarter of his herd. A dying badger was found on the farm and when officials  from the Department tested it, it was riddled with TB. Bovine disease is a serious problem which must be tackled.
BSE is causing problems for our beef industry. I would say that there are no instances of BSE in Ireland and compensation should be paid on a par with other disease infected farms which must lose herds due to brucellosis or bovine TB. While the compensation was further increased a year ago, it is not adequate.
As regards levies, I would not mind paying them if I thought it would keep the disease outside my farm gate, and I have said that here before. I had the misfortune of losing my pedigree herd and the compensation did not adequately cover the replacement. Pedigree breeding is most important, especially to our dairy industry, and the compensation for pedigree stock is completely inadequate.
The Minister said he was in most difficulty with the winter fattening cattle price, which is a most vital issue. I have had experience of that myself. Had I sold bullocks last November, I would have nearly received a better price than what I would get today, and many farmers would be in the same position because the attraction of the slaughtering premium encouraged them not to sell.
If the fatteners take the losses which they have taken this year, the Minister will have no difficulty achieving a 40 per cent kill in the autumn. Cattle prices have fallen by 6p per pound since last autumn, the equivalent of £50 per head on a 700 kilogram bullock. No section of the community would take such a reduction on their income, and winter fatteners cattle prices should be rising at this time of year to compensate for this. This time last year farmers were making 106p per pound. Now prices are down to 98p per pound and the winter fattening cattle farmer must face that reduction.
The decrease in export refunds has contributed enormously. Is the Minister attending the meeting in Brussels tomorrow?
Mr. Yates Mr. Yates
 Mr. Yates: No. Technical civil servants from my Department will be in attendance.
Mr. R. Kiely Mr. R. Kiely
Mr. R. Kiely: I appeal to the Minister to be more aggressive in any negotiations in Brussels in order to get the best deal for Irish farmers, especially the cattle farmers. The fatteners are losing money through having to feed cattle. Before I came to Dublin yesterday, one of these feed suppliers informed me that the cost of feed has risen and this adds more cost to the production of these steers and results in a greater loss of profits.
I hope export refunds on carcass beef will be fully restored to the levels that applied last September. The Minister spoke of having them restored to the pre-November level, and I suppose that is the same thing, but it is important that they be restored to that level. The Minister should have taken immediate action at the highest political and Commission levels in Brussels to ensure the refunds were restored at the EU Beef Management Conference meeting which was held last week. In addition, the balance between carcass beef and live cattle refunds must be restored taking account of the £60 per head winter slaughter premium. The 40 per cent September-October-November qualifying trigger for that premium should be reduced to 35 per cent in order to guarantee that Ireland qualifies for the £60 per head in 1997.
Farmers must be compensated. Irrespective of where the Minister gets the money, he must increase the grant on a par with the winter slaughtering premium to ensure farmers are not at a loss and their incomes are maintained. No other section of the community would take the loss of income which winter cattle fatteners are taking at present.
The Minister said there was an increase in incomes. There may be an increase in some sections but not all sections of the agricultural community benefited, so the Minister must provide a general policy which will ensure equality.
Mr. D'Arcy Mr. D'Arcy
 Mr. D'Arcy: I welcome the Minister for Agriculture, Food and Forestry on his second visit to House. He was not obliged to come and that is significant. He had a lengthy message to impart and I prefer to respond to it other than by way of a prepared speech since the last time I did so, when the Minister of State at the Department of Agriculture, Food and Forestry, Deputy Deenihan, was here, I was nearly in conflict with what he had said. The Minister is here on a fact-finding mission, to listen to the debate and to gather information on agriculture in general, and that is how we should respond. However, if one looks back on the debates, one finds that some of the issues raised at the time are completely irrelevant today.
The influence of GATT and CAP on the whole agriculture scene in Europe is somewhat serious. If one looks back on the debate during these negotiations, one will find it was almost impossible to have any degree of accuracy in the different areas. The present Minister and the Minister of State are doing an exceptionally good job as problems arise in relation to both GATT and CAP. It must be an awful problem for any Minister to find that the situation has changed, and situations change not only year by year but month by month and problems arise monthly.
As each problem arose this year, in particular, is was evident that the Minister was ready with accurate information to go to Brussels to try to resolve it. The sheep issue is a typical example of a job well done. Each problem must put awful pressure on both the Department and the Minister. As each problem arises, the Minister must dig up his roots, collect his officials and set out for Brussels not once but perhaps twice or three times in order to resolve it. The amount of time and expertise required to achieve this is unbelievable and that is how I see it.
On costings, the aim of GATT and CAP was, first, to control the volume of production and, second, to regulate pricing. That is not easy to achieve in view of the circumstances prevailing in  Europe. By and large, inflation across Europe is not high. However, if one looks at the overall increases in costs over the three year period, one will find that between 1993 and 1996 the cost of fertilisers increased by approximately 25 per cent. This is influenced to a great degree by the price of oil, but the fact of the matter is that such increases must be borne by the agricultural community. The price of “10-10-20”, a manure familiar to everybody, in 1993 was £150 per tonne; in 1996, it costs £84 per tonne. The cost of nitrogen, which of course is the most used product and is produced in this country, in 1993 was £108 per tonne and its expected price for 1996 is £133 per tonne. These are just two important agricultural ingredients. The same applies to wages, oil, machinery and everything involved in agriculture. This was not taken into consideration and no inflationary clause was built into either the GATT or CAP agreements. The Minister could consider it in making the Irish case. We are an island nation and all our costs are considerably dearer than the rest of Europe, perhaps by 4 or 5 per cent.
I congratulate the Minister for his efforts on behalf of the sheep farmers who were in a difficult position. The securing of the world premium of almost £6 per head was unexpected but the Minister achieved it and the sheep farmers are grateful. The problem in the sheep sector has been the importation of New Zealand lamb, particularly to the UK. As a result the UK exports its high quality lambs to the French market which is our largest sheep market. The British are almost dumping in that market; they are buying in the cheap New Zealand lamb under the GATT agreement. This system of the importation of lamb can prove difficult, in particular during the months of April, May, June and July when our own markets are loaded with lambs which become available as a result of a lot of winter feeding. The importation of the New Zealand lamb should be regulated month by month. They should not have the authority  to flood the markets to the detriment of the European producers, us in particular.
This has been done through the years and I appeal to the Minister to find a way to regulate the supply of lamb, particularly to the British market. Prices are forced down as low as 85p per pound in the months of June and July. A number of farmers have left sheep production. The problems which arise should not force people out of production. The compensation is now in place, but the importation of New Zealand lamb is the problem. The supply should be regulated on a month by month basis.
Quality lamb has been referred to. We should try to explore the German market for lamb to try to widen our base so as not to be so dependent on the French market. The Germans retailers can be selfish in their own way. I dealt with the Meyer supermarkets in Berlin in 1981 and the Minister is dealing with them now. They are difficult to deal with in that they will sell German produce if they can before they will sell Irish produce. I agree the quality must be improved; we cannot have too high a level of fat as it is unacceptable in Europe.
Beef production has had its own ups and downs throughout the years. I made a speech about three years ago on beef production in which I stated:
It should be remembered at the outset that the world price for beef is 40p per pound in Argentina and in Australia 50p per pound carcass weight. EC beef output is about 8 million tonnes of beef per annum. As consumption stands at about 6.8 million tonnes this leaves a surplus of 1.2 million tonnes [that was for 1994] . . . The proposed GATT limit of beef exports for 1994 will be less than one million tonnes. This means a reduction in exports of over 200,000 tonnes compared to the 1992 level.
 The Minister indicated that the amount of the beef surplus on the markets is about 900,000 tonnes.
Mr. Yates Mr. Yates
Mr. Yates: Four hundred thousand tonnes.
Mr. D'Arcy Mr. D'Arcy
Mr. D'Arcy: It has come down. That should be consumed in the EU. The export refunds were decreased this year by 36 per cent and that was a disaster, particularly if we were within our limits. Had the EU reduced the export refunds in May, June and July that may have been all right, but it waited until September when the expensive feeding time arrived and it was far more expensive for the farmers. I do not understand how the beef management committee could allow that to happen.
There is great and expensive investment in the beef industry in this country, whether in housing or in stock. Unlike the sheep industry, the amount of borrowings for beef production is very high. Fortunately, as a result of good Government policy, interest rates are at a reasonable level. Money can be borrowed at 8 or 9 per cent per annum. I hope Friday's meeting will be successful for the Minister. If he can obtain a 15 per cent restoration of the export refunds he will bring confidence back to the industry. A lack of confidence in the industry can cost 3p or 4p per pound.
I understand the Minister has been in contact with the factories with regard to their performance in respect of this problem. They are paying the farmers at least 3p per pound less than the market can carry, which is very unfair. For the past couple of years the processing factories have attempted to bring the price under £1 per pound, at which level they make big profits. There is a reduction in the level of consumption, but as far as the volumes are concerned we are within the margins and I cannot understand why the position is so difficult.
 Live cattle shipments have the Minister's full support and, I am sure, the support of Fianna Fáil. The shipments are a competitor in the market and if they are taken out of it we will have a far greater crisis than today. There are about 400,000 head exported at present and this is where the export refunds play a big part. I hope the Minister can restore at least 15 per cent to allow people to continue in production and create a situation whereby the factories will have to pay a reasonable price.
Dairying has had an exceptionally good year. The Minister need not worry about the superlevy because dairy farmers have their own way of eliminating it. Leave it with them. As the Minister has said, dairying is operated by the farmers — they supply the milk. There are still about two months to go. We were in a similar situation last year in respect of the superlevy and the amount of superlevy paid was very small. There is a fear that there may be a levy of about £25 million if the present situation continues. However, as a milk farmer, I can assure the Minister that the milk farmers will regulate that themselves.
I am glad to see the 10 per cent clawback on short term leasing, because people were paying ridiculous prices of up to 50p per gallon on short term leases. It was fire brigade action for the sake of supplying 5,000 or 6,000 gallons of milk. It also favoured to some degree smaller suppliers who were unable to pay 50p a gallon and it is now being sold at 30p or 35p per gallon, which is a more realistic price. The Minister need not worry about the superlevy, although there may be a small liability of £3 million or £4 million at the end of the year.
Tillage farmers have had an exceptional year. However, the variation in the volume of production from year to year can be as high as 20 per cent. 1994 was a bad, wet year and the average yield per acre was around 16 per cent less than that in 1995. The whole question of setaside should be looked at. In  view of the fact that there is such a shortfall and we are losing markets such as Egypt, should setaside be set aside itself? I know that the argument in Europe is that volume levels must be kept down and that intervention was very expensive. Nevertheless, Ireland — rather than Europe as a whole — has certain requirements and we are now importing large quantities of cereals.
There is great potential in the area of horticulture. Will An Bord Bia investigate the UK market, in particular, for fresh vegetables? With the development of the catamaran and very fast shipping lanes, the journey from Rosslare to Wales only takes two hours. There is then a four or five hour lorry journey to the markets, but nevertheless there is great potential in that market. Britain imports a large amount of vegetables from France, particularly during the six months from October to March. I call on the vegetable growers to invest some of their profits in that market. There is no restriction on the growth and sale of vegetables in the EU. I hope that the Minister can realise his expectations in relation to raising food industry exports from £9 million to £12 million, as that is the area with the greatest potential.
The Minister stated in regard to premium payments that he had solved the situation whereby 5,000 farmers did not have their forms in on time. However, for the past four or five years there has been a problem with simple, technical errors on forms. The EU is very strict in this regard and a farmer can lose all of his premium for that year and perhaps for two years. I do not support in any way deliberately fraudulent filling out of forms, but am rather referring to small technical errors. One constituent of mine made a mistake of one ewe on his application and he lost £1,800. That is a ridiculous situation and I have contacted the senior officials in the Department.
 The discretion should be left with the Department. I accept that these matters must be sorted out in Europe as otherwise the Department is in trouble if the audit is incorrect. Nevertheless, the Department and the Minister and Minister of State are adequately equipped to deal with this issue on a reasonable basis. How well is the Office of the Ombudsman working in this regard? The penalty should fit the crime. As the Minister said, the premium represents up to 50 per cent of total payments to a farmer and could represent 60 or 70 per cent of his net income.
Mr. O'Toole Mr. O'Toole
Mr. O'Toole: I wish to make some general points on the beef industry, in particular. I firmly believe that the agriculture sector are not holding up their end as partners in the Programme for Competitiveness and Work. What is happening in agriculture goes against Government policy and the attempts of every part of the community to create jobs. The beef industry is in danger of dying on its feet — which will happen at the expense of European and Irish taxpayers — and jobs are being lost.
The export of live cattle is having a negative impact and is undermining job creation and the policy of the Department and the Minister. It is also having a negative impact on our balance of payments position and endangering the numbers in the national herd. The industry cannot maintain the current pace. I do not have the precise figures to hand, but the live export of cattle last year was over 300,000 — in other words, we export 10,000 animals daily.
The discussion taking place in agriculture, including what I heard here this morning, is a cosy cartel of people looking out from inside the industry. Jobs are being lost and the industry is being undermined. The Minister's stated policy, which I support, is that there should be a market led beef industry. That is now impossible as many processors,  such as Kerry Group, have moved out of red meat processing.
The nonsensical argument put forward by the agricultural sector that it needs export subsidy in order to create internal competition does not stand up to examination. Somebody has to tell the farmers that they are being misled by their so-called advisers who tell them that that is in their interest. It is the Minister's duty to do so. There is a serious difficulty if someone running a beef processing industry in Tralee has to bid for cattle against someone who wants to sell them on the hoof to Cairo. The export subsidy on those live animals is costing jobs in Ireland. It is also having a negative internal impact as there are now fewer big players in the Irish beef processing industry. We are returning to the situation of a few years ago on which the roof fell in.
I am a layperson in this area but do farmers recognise what is being done to them? Do they realise that they are pawns in a game and that they are being misled into believing that the export subsidy is in their interests? Five to seven years ago they were similarly misled into believing that the intervention policy was in their long-term interests. It is now clear that this was a mistake and that the subsidy for exporting beef on the hoof is also against their best interests.
The decision taken last year by the European Union to include Turkey in the area for which export subsidy is payable has made matters worse. Increasing numbers of cattle are being exported from Ireland as a result. How can we build up a national herd or develop a policy? What is the case for continuing with the export subsidy when there is evidence that factories have moved away from beef processing? People who have a serious interest in investing in the industry will not do so because they cannot be sure of a regular supply. It is apparent, therefore, that jobs are being lost while payment of the export subsidy  is continued. The original raison d'être of the export subsidy was to get us out of the intervention bind. As this has happened, there is no longer a case for the subsidy and we now need a self-sustaining industry. Every animal that leaves Ireland on the hoof takes with it a premium. Effectively, this is an investment by the European Union to creating jobs in Turkey and other countries where I am sure they are badly needed. However, it is quite the reverse of what was intended during the negotiations to establish the Programme for Competitiveness and Work to which the Minister is totally committed. It is undermining the concept of a market-led industry.
During the past year the Minister announced a series of programmes to which £640 million was committed. Anybody considering this initiative would have to say “Well done, Minister.”. It is a progressive direction for the development of an industry in which we can be confident and in which jobs are being created. Having considered the statistics and the present state of the industry, it is important to state that the export last year of over 300,000 cattle on the hoof from this country cost a minimum of 3,000 permanent jobs. If those jobs are being exported and lost to the country as a result of a European policy to subsidise the export of cattle, which — I may be wrong in this regard — had its roots in attempting to get us out of the intervention bind, we need to reassess our position because our industry is the loser. On many occasions the Minister stated that the food industry depends on processing and adding value to our raw material. Ireland has the best raw material in Europe. We now face a situation where, rather than adding value to that raw material, we are exporting it.
I agree with the points made in relation to vegetables. That is the one area where increased exports should be encouraged. I also recognise that the  fish industry must export certain goods fresh and unprocessed. However, there is less reason to do this in the case of the beef industry. I ask the Minister to carefully consider the direction the industry is taking and how the current policy can be maintained. I also request the Minister to discuss that policy with his colleagues in the European Union. His proposal for the creation of a market-led beef industry, supplying high quality commercial outlets on a year-round basis, is the correct one. The seasonalisation programme is a very progressive move in this direction. However, this is threatened by present developments as to whether the trigger will be affected in any way.
The fact that the meat industry accounts for 30 per cent of the Irish food and drink sector is critical to the success of the Minister's programmes. He is investing £640 million of European and Irish taxpayers' money and is entitled to obtain the best results in this regard. In doing this, our farmers must be protected because they are being misled into believing that short-term subsidies are in their long-term interests. They are not. Farmers interests are best served by a stable industry in Ireland, which has been the case for a number of years.
Five to six years ago Tara Meats established a factory at Kilbeggan during the height of the intervention scheme. The company managed to produce a quality product with quality add-on and survived without availing of intervention. It was one of the first companies of its type to achieve the Quality Mark. That is the way forward. Companies such as Tara Meats, and parts of Kerry Meat, cannot compete with the money being paid to people to export cattle that are needed to build our industry. Meat is needed for our industry but we are getting rid of it. Not only are we exporting that meat, and losing jobs as a result, but we are paying  people to do so. This undermines what the Minister is attempting to achieve. It cannot work in the present circumstances.
During the recent weeks I considered the statistics which relate to this area. In 1992, one in 20 male cattle were exported on the hoof. The figures for 1995 reveal that more than one in three are being exported. This cannot continue. If a child in sixth class in primary school were given the figures and produced a graph relating to numbers of cattle in the national herd, it would show that this policy cannot continue. In not continuing, it will have an impact on jobs in that sector and in the beef industry. The problem is becoming more acute and the Minister has a responsibility to call the shots in this regard.
I hope that the message can be put across that high exports of live cattle to non-EU countries are causing problems. I have not had the opportunity to check the reliability of the figures for such exports. However, it appears that the State is providing a subsidy on live cattle and also on killed meat — carcass or boneless — for export. That will have to continue because a circle has been formed. If one sector becomes uncompetitive with the other and is given a subsidy, one must be given to the second sector to achieve a balance. There is no excuse for providing a larger subsidy — I do not accept the present provision of subsidies, but there are times when this must be done to create stability in the industry — for cattle on the hoof which is 13 per cent higher than that given for the export of killed cattle in boneless or carcass form. This is simply ridiculous and provides an encouragement for the non-development of the industry. I ask the Minister to ensure that the trend is reversed. This will save the industry from itself and its worst excesses. There is a danger that we will lose out in the long-term on this issue.
 During the past two days I have raised a number of issues in the House. The current debate on agriculture involves discussion about a large number of jobs. Last night I raised an issue on the Adjournment of the House relating to a small number of jobs in my locality. I am doing this deliberately and will continue to do so. People should understand that something must be done when policy in one area undermines public policy in another. This should not be interpreted as my having a go at farmers. I am aware that farmers do not correspond to the general perception that they drive 1995 or 1996 Mercedes Benz cars or have plenty of money. The vast majority of farmers are struggling but unfortunately they do not possess a voice on these issues. They are being made to look foolish.
I recently visited a town where quite a number of sheep were grazing on common land in the nearby hills. I discovered that some of the local businessmen had bought hundreds of sheep, paid somebody to keep them alive and collected an annual subsidy of approximately £30 per ewe. Who is that helping? It is not helping the industry. We have an aging sheep herd, and many animals are too old to be of any use to any part of the industry. Sheep all over the country are being kept alive so that the Minister will pay £30 or £35 per head at the end of each year. There is something basically wrong with that, although there was nothing wrong with the original idea that sheep farming needed to be supported.
Many of the problems have arisen due to a lack of added value in the sheep industry. The last time I checked, I could not find one outlet in Ireland for properly processing sheep's wool because most of it is being exported. It is a difficult area and I understand the ups and downs of the wool trade better than most. Those involved in buying and selling wool are dependent on the ups and downs of the market on the day.  If we had a factory outlet for processing wool it would lend stability, but as things are we are losing stability.
I tend to support the vets in their long running argument with the Minister over TB testing, but it is not my intention to have a personal go at the Minister. I have been at farm gates, as I am sure the Minister has, and have seen a vet distance himself from a farmer before telling him about the discovery of a reactor in the herd. The Minister and I know that that goes on all the time, but one of two things now has to happen.
Over the years, Governments have spent £1 billion on TB eradication schemes, but for once we should ask the vets how the job should be done. We have listened to everyone else and have had consultants coming out of our ears. We have had European, national and departmental policies dealing with it, yet we have failed. The one thing we have not done, however, is to ask the vets how they, as professionals, think the job should be done, and get them to implement it. That is one way out of the problem.
The only other way is for all movements of cattle to be made in conjunction with TB testing however difficult that may be. I have a lot of sympathy with Senator D'Arcy's point about form filling. I have seen farmers tied up in knots having to fill in 100 lines on a form, but that is nothing to the number of forms — up to 15 different ones — that a vet must fill in if he or she comes across a reactor in a herd. It is time to ask the professionals to put forward their proposals. The Minister should respond to them and see if such proposals can be implemented.
Finally, I want to refer to horse racing. The numbers of people attending race meetings is dropping all the time, and it is a matter of constant discussion within the industry. A critical part of this problem is the entry fee to race meetings, and one would not have much  change from £20 just to get through the main gate. That is a huge amount of money for the vast majority of people who cannot afford it. If I were running a race course I would not charge people anything to get in. I would do it like the tourist industry in Dingle which acts as a unit, attracting the punters to the main street, and may the best service win after that. We should adopt a proper approach towards getting more people into race courses.
Earlier, we discussed aspects of sports which are part of our national heritage. Racing is certainly a part of that but it is dying on its feet. It is becoming the province of a small number of very wealthy people who can afford to go racing regularly. The ordinary people who enjoy going to watch horse racing, and who have a bit of a flutter although they are not serious gamblers, are the people who made racing. These are the people who went along to applaud Danoli last week when the horse came third. That would not happen anywhere else in the world but it is a tribute to Irish people who travel to see superb sporting performances.
We are, however, stopping people from enjoying such sport. If a couple go to the races they will be £40 down after paying the entrance fee, having a few bets and a few drinks, yet it may be only 5 p.m. That is a very expensive day out for people. The Minister should look at the entry costs because there are ways in which more people can be attracted into race meetings.
I compliment the Minister on the initiatives he has taken. With the single exception of the vets, I am supportive of the issues he has moved on over the past couple of years. Beef processing has caused extraordinary concern both to myself and to people in the trade union movement generally. I do not want my words to be interpreted as having a go at farmers because I am having a go at policy. If it is the Minister's policy then  I am having a go at him. I would ask him to turn that back and create 3,000 jobs per year. This is a growing industry and I would ask the Minister to take my words on board.
Mr. Townsend Mr. Townsend
Mr. Townsend: My contribution will try to look to the future of agriculture by taking into account some of the things that have happened in the past. We can learn from past mistakes and successes. I will try and deal with some of the less flashy aspects of agriculture because they are also in the national interest.
I agree with Senator O'Toole's sentiments about exporting live cattle but in the past, when there were no live exports, the factories robbed the producers who got nothing for their product.
Mr. O'Brien Mr. O'Brien
Mr. O'Brien: That is correct.
Mr. D'Arcy Mr. D'Arcy
Mr. D'Arcy: They were robbing them.
Mr. Townsend Mr. Townsend
Mr. Townsend: In response to the Common Agricultural Policy, agricultural output in the EU increased substantially since 1987. This led to large surpluses which were difficult to dispose of in a competitive and stagnant world market. The increase in agricultural output was largely achieved through technological innovation which resulted in the adoption of intensive farming systems based on high external inputs. While these systems have had many positive effects they have also had many negative consequences, particularly with regard to market balance and budgetary costs, quality of food, environment and landscape, animal welfare, energy consumption and rural prosperity. There is now a clear recognition that these negative aspects of intensive agriculture are no longer acceptable and need to be addressed through appropriate agricultural policies clearly focused on research and development.
 Considerable progress has been made on extensification, which is reflected in EU policy and research in most member states. CAP reform, including the accompanying measures, aims at establishing farming practices and controlled production methods which reflect increasing public concern for conservation, landscape protection and wider environmental problems.
Production of quality food in an extensive and environmentally friendly way is also a central objective. It coincides greatly with our inherent reputation as a green country, a reputation to which we are justifiably entitled and which we can use to future advantage.
Research and development and extensification in agricultural production has been carried out in a number of EU countries. I am glad to see that Teagasc has an active programme in this area at a number of its research centres at present. Considerable experience has already been obtained with extensification or low external input farming systems. This shows that, even with existing technology, such systems can be successful in protecting the environment while reducing output and maintaining farmer income.
The system approach is necessary to meet in a balanced manner the multi objectives of CAP, which include not only improving food quality and giving greater protection to the environment, but also providing viable farm incomes, maintaining competitiveness and promoting rural development. Essentially, extensification in crop production aims at a substantial reduction in the use of costly and potentially polluting agri chemicals. It also relates to land use, landscape and rural development.
Mineral fertilisation is an essential function in current crop production in terms of nutrient supply, weed disease and pest control. Consequently, the strategic concepts should aim at developing replacements for the agri  chemical functions of these materials with environmentally safe, non polluting, possibly renewable and cost effective substitutes. Replacement of chemical external inputs can be partial or total. While total replacement may be regarded as a long-term idea, the integration of chemical and non chemical techniques offer greater flexibility and may be easier to apply on farms, at least in the medium term.
Nutrition is the second main area which involves high chemical input in crop production. Chemical fertilisers are the main source of nutrients in current agriculture and have undoubtedly contributed greatly to increasing crop yield. However, the negative environmental impact of excess nutrients, particularly nitrates — this is a particular problem in my area of the Barrow valley — and phosphates from fertiliser and other sources, is now well recognised. A high percentage of nitrogen in fertilisers can be lost to the air, water and soil through volatilisation and leeching or run off. Phosphates are also a source of water pollution and a major cause of pollution in rivers and lakes.
While chemical fertilisers are an important source of polluting nutrients, mineralised soil, organic matter, animal manures and crop residues are frequently of greater significance in respect of nitrates. It is essential that ways are found to reduce pollution from chemical fertilisers and other nutrient sources while still providing adequate crop nutrition. In this regard, there is a need to develop appropriate strategies, not only for individual farms but also catchments, to secure maximum positive environmental impact.
Apart from improving the quality of food and the environment, extensification can have positive effects on landscape, biodiversity and land management. Soil erosion in marginal uplands, particularly in higher rainfall areas, requires immediate attention. In this regard the practice of aid payments  to producers, based on animal headage or numbers per hectare, should be urgently reviewed. The use and management of setaside land requires considerable study in its own right in the context of total agriculture production in the EU.
There is a view that the required reduction in grain output should be achieved through the adoption of less intensive production systems rather than land set aside. The central questions include: should setaside remain uncropped or should it be used to grow non food crops? If cropped, which crops should be grown? Where crops are not grown, how should setaside be managed to have the most favourable impact on the environment?
Growing crops on setaside land for non food purposes is permitted within CAP. However, for a variety of reasons, economic in the main, there is little practical interest in this approach at present although this may change in the future. I urge the Government to take a proactive approach in encouraging the development of a native liquid bio fuels industry, using crops grown on set-aside land to produce bio diesel and bio ethanol.
Regarding animal production systems, the storage and disposal of animal manures, particular slurry, without risk of pollution is still a major problem in most European countries, including Ireland, especially where animal numbers are high relative to land area. Land spreading of animal manure, such as slurry, is the preferred option of disposal as it improves structure and fertility. The nutrients in animal manures can replace fertilisers with significant economic advantage. However, land spreading has the potential to pollute air, soil and water unless specific procedures are adopted. The degree of pollution is dependent on a number of factors, including method of spreading, soil texture and absorptive capacity,  land topography, rainfall and temperature.
While it is generally agreed that land spreading of farm waste is the optimum method of utilisation and disposal, it may not be possible in areas of high intensity livestock production. Transport of waste over long distances for spreading in other land areas is generally uneconomic. There is, therefore, a need to further investigate the processing of animal slurry, which is expensive at present, especially for materials with low dry matter content.
I am most concerned about the suspension of the control of farmyard pollution schemes due to lack of funds. This is largely due to the unexpected number of farmers applying to upgrade their pollution control procedures. The scheme is most attractive, which explains the large take up. However, that is not the Minister's fault. I urge the Government to make every effort to secure additional funds from Europe so the scheme can be reintroduced. It is essential to the welcome rural environment protection scheme, which will be taken up by small farmers. This scheme is specially designed to encourage farmers away from intensive agriculture and encourage them to diversify to alternative land uses. I referred to this aspect earlier.
In the budget, I am delighted the Minister decided to disregard the first £2,000 of income regarding REPS. This will be most relevant to people on social welfare. Small farmers who receive a small amount of social welfare will be fine now and it is a most worthwhile move. I also welcome the Minister's new farm improvement programme for horticulture; I know a certain amount about this area. The Minister stated that a horticultural forum has been established by Minister of State, Deputy Deenihan. It is representative of all sectors of the industry, including wholesalers, retailers and consumers, and has the task of developing a blueprint for  horticulture for the future. Horticulture fits well into many activities and I hope the forum will be different from others established in the past which featured a predominance of members with vested interests in other areas. They saw to it that horticulture did not develop.
Acting Chairman Acting Chairman
Acting Chairman: Senator O'Brien has two minutes.
Mr. O'Brien Mr. O'Brien
Mr. O'Brien: Two minutes will give me an opportunity to welcome the Minister to the House.
Acting Chairman Acting Chairman
Acting Chairman: The Senator will have 18 minutes next week.
Mr. O'Brien Mr. O'Brien
Mr. O'Brien: We are grateful to the Minister for coming to the House. We requested this debate in December and were promised it would take place early in the new year.
I will not go into details at this point as I have only two minutes. However, I was perturbed that Senator O'Toole made such a case against export refunds. It is most unfair and I am sure the Minister agrees. There is a crisis in the beef industry. Live exports and the beef industry are being crippled by a reduction of approximately 37 per cent in export refunds since last September. I asked the Minister and am delighted to know that there is a beef management committee meeting tomorrow and, if I heard the Minister correctly earlier, he said that he would be present at that meeting.
Mr. Yates Mr. Yates
Mr. Yates: I will not be there. It is a technical meeting.
Mr. O'Brien Mr. O'Brien
Mr. O'Brien: It is a technical meeting. I hope the Minister will use his good offices and that he and the Taoiseach will have export refunds reinstated immediately and to a level that is acceptable to both the beef industry and the live exports. The Minister should be looking for at least 35 per cent. He  probably will not achieve that, but rumour has it today that single figures have been mentioned. Single figures will not be acceptable at all and I ask the Minister to push very hard for at least 25 per cent. If he could achieve that for the industry he would have done a good day's work and I ask him to fight very hard for an increase in export refunds.
Seanad Éireann 146 Agriculture: Statements.