Agriculture: Dairy Sector 24th September 2013

REPLY

The Minister for Agriculture, Food

I propose to take Question 479 & 475together.

Market analysis predicts that medium term prospects for global dairy markets are good, with growth in world population and wealth expected to stimulate strong levels of demand for dairy products. More than 85% of Irish dairy production is exported and Ireland has access for dairy products to over eighty countries worldwide. Nevertheless I am working with industry to raise the profile of the Irish dairy sector, and the Irish agri-food sector generally, in emerging markets in the Far East, North Africa and elsewhere. I have been very active in developing relationships in new and expanding markets in order to build the kind of confidence in Irish production and control systems that provide a platform for long-term trading relationships in the future. On this note I am leading a trade mission to the Gulf States in the near future.

The ending of the milk quota regime does represent an exceptional opportunity to increase milk output, both in Ireland and in other Member States where milk production forms a significant part of their agricultural output. A Report published by the EU Commission last December on how markets are evolving, as the ending of milk quotas approaches, found that medium and long term prospects for the dairy sector are favourable. This conclusion is based on population growth projections and interest for Westernisation of diets in emerging economies. The Report did caution, however, that this outlook did not rule out short term market fluctuations.

Ireland strongly supported the decision to abolish milk quotas with effect from 1^st April 2015 on the basis that quotas were widely regarded by both the Irish dairy sector and market analysts as a brake on the potential of the sector to respond positively to market opportunities. I expect the abolition of quotas to facilitate an expansion in the sector and through the Food Harvest 2020 Report the industry has set itself an ambitious target for a 50% increase in milk production by 2020. For my part I have been working on a number of fronts to prepare the industry for the move to a quota free environment and equip it to respond to the market opportunities arising.

A key element of this market strategy is to optimise the already positive green image of Ireland in order to create a point of differentiation for Irish dairy products on international markets. In this context, stakeholders are at present engaged, through Bord Bia, in technical discussions to finalise a dairy sustainability and quality scheme. At processing level, Bord Bia’s Origin Green Programme is providing a vehicle for industry to commit itself to sustainability targets by reducing energy inputs, minimising overall carbon footprint and mitigating the impact on the environment. This pro-active approach to environmental sustainability has a strong resonance with procurement strategists in the many multi-national food companies who are interested in using Ireland as a source of high quality food ingredients and processed products.

Of course the industry itself has a responsibility to focus its efforts on market and product development. Supported by Government, the Irish dairy sector has succeeded in positioning itself as a major international player, and we have seen industry announcements in relation to the development of supply arrangements between Irish companies and multi-national players in third countries, and the development of value added products which can maximise the value of our dairy output.

At farm level my Department, in conjunction with Teagasc, has been working with, and will continue to work towards helping the industry prepare for this move to a quota free environment. A range of supports have been provided to develop the skills and knowledge necessary to reduce costs and improve efficiency at farm level. Such supports include the Dairy Efficiency Programme, which has facilitated a significant increase in Discussion Group participation, and the Dairy Equipment Scheme, which provides grant aid for milking machines, cooling equipment and other related ancillary equipment.

Taking all this into account, I am confident that the collaborative efforts of Government, the processing industry and the producers will ensure a thriving and sustainable dairy sector that can use the opportunity afforded by the abolition of quotas to fully leverage the natural advantage of Ireland’s grass-based production system.