Adjournment Matters. - Milk Quota System.

Wednesday, 1 February 1995

Seanad Éireann Debate
Vol. 141 No. 15

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Mr. Naughten:  Thank you for allowing me raise this matter this evening. I intend to share my time with Senator Finneran. I join with the Chathaoirleach in welcoming the Minister here this evening and thank him for coming.

I put down this Adjournment matter because of the need for the Minister for Agriculture, Food and Forestry to outline the action taken by his Department to limit the loss of milk production at primary level from sensitive zones to other areas of the country, particularly in view of the present situation at Shannonside Co-op. Ballaghadereen. Shannonside Co-op is owned by three co-operatives in the West, North Connaught Farmers Co-op, Kiltoghert Co-op and Mid-west Farmers Co-op. These three co-operatives cover the five Connaught [1777] counties. Collectively they own Shannonside Co-op in Ballaghadereen. Recently one of those co-operatives, Mid-West, took the decision to send 15 million gallons of skim milk from Shannonside in Ballaghadereen to the Nenagh and Tipperary Co-op.

This, as I see it, will cause two major difficulties for the West. First, it will cause a loss of jobs and second, it will undermine the viability and future of Shannonside Co-op. Shannonside currently employs 91 people of whom 34 have been laid off. We saw what happened in Tuam, for example, where sugar processing no longer continues. We were told when the Tuam sugar factory was closed down that a meat plant would be provided there which would create a substantial number of jobs. That never happened.

We have seen Ballyforan close down and we now see the peat being transferred from there to Shannonbridge or Lanesboro, again with loss of jobs in the Roscommon area. In north Roscommon we have seen the closure of the Arigna mines and the power station with huge loss of jobs. We cannot continue this drain with the risk of 34 jobs immediately and a possible 50 or more jobs later. I do not see Shannonside survive if it loses the skimmed milk from Mid-West. The operation in Shannonside will not be viable.

Shannonside is a co-operative which has suffered from mismanagement. Senator Finneran and I were at a meeting recently where the issue was raised. One member from the Ballaghadereen area pointed out that while 34 production workers — 50 per cent of the production workers — were let go they still had seven managers, seven secretarial staff and seven supervisors. I suggest that the management structure is crazy.

I know it is not possible for the Minister to interfere directly in this dispute since it is a dispute between three co-operatives; I do not blame north Connaught [1778] farmers — I say this as a farmer — for transferring their milk supply from Shannonside to Nenagh and Tipperary. They are getting approximately £50 per cow more for their milk by sending it to Nenagh and Tipperary than they were getting by sending it to Shannonside. A sum of £50 per cow to somebody with 20 cows is £1,000 profit and no farmer can afford to lose that.

The sizeable article on Shannonside co-operative in The Irish Independent of yesterday clearly highlights the major problems. I would like to see the Minister and his Department become the honest brokers in this dispute between those three co-operatives. It is not as simple as getting straight agreement between the co-operatives themselves. The future must lie in those co-operatives, if possible, coming together and getting another major player into milk manufacturing in the West. As the financial structure of Shannonside would appear to be so weak that it would be impossible for the three existing co-operatives on their own to get the financial structure correct, it is vitally important to try to get the three co-operatives around the table with another player.

The ICOS has a major role to play in bringing those co-operatives together, as has the IDA in an investment programme to keep Shannonside as a modern milk processing plant and to meet all the new requirements that are laid down for plants of that type. Without those elements being brought together I cannot see any future for Shannonside Co-operative and I regret having to say that. It is of vital importance to ensure that jobs are protected in the West. I have to put on record regretfully that I do not see a future for Shannonside if Mid-West is not part of the pool of milk available to Shannonside. At this point with the management structure, the cost structure and the price being paid for the milk, I do not see how the suppliers [1779] of Mid-West can continue to supply skimmed milk to Shannonside.

There is a major problem Mid-West also because it will lose its suppliers to other creameries, whether in Westmeath or east Galway, if they do not increase the price of their milk. If they cannot get a better price for their skimmed milk they cannot increase the price of their milk. This is why I ask the Department of Agriculture, Food and Forestry use its good offices to bring the parties together and to try to get some of the other major companies involved in the manufacturing of milk in Ballaghadereen, and to bring ICOS and the IDA in on the venture also. I understand substantial finance is needed to bring Shannonside up to the standard of a modern manufacturing plant.

I thank the Minister for being here and I would be grateful if his Department could act as an honest broker in this case.

Mr. Finneran: Information on Michael Finneran  Zoom on Michael Finneran  I thank Senator Naughten for sharing his time and I welcome the Minister of State, Deputy Deenihan, and congratulate him on his appointment. I support fully the sentiments expressed by Senator Naughten with regard to the unfortunate development that has taken place at the Shannonside Co-operative in Ballaghadereen.

Shannonside was started in 1970-71 and is a vital cog in the wheel of opportunity for employment and development in the West, in particular on the boundary between Roscommon and Mayo. The knock-on effect of the threatened withdrawal of Mid-West from the Shannonside Co-operative will bring the operation in Ballaghadereen to a standstill — it will close it down — and will cause that which we do not wish to happen — a further rural decline. We recently talked about Developing the West Together and the bishops' initiative and it will all seem hollow if we cannot [1780] stave off this disaster for the Ballaghadereen area.

It is not possible for the Minister to tell any co-operative where to sell its milk. I appreciate that the Mid-West farmers have a genuine crib and are not satisfied with what they are getting for their milk from Shannonside Co-operative. I have discussed the matter with them; they feel they have lost millions of pounds in recent years by supplying to Shannonside Co-operative. Nevertheless, it is important that we try to resolve this crisis on the basis that Shannon Co-operative stays and that it continues to get milk from the three co-operatives involved. Otherwise it will not be viable.

If it is possible for the Minister, through his good offices, to intervene and act as an honest broker, there may be other opportunities by which he could give support through Government or European aid. No stone should be left unturned to try to stave off this disaster now staring the people of Ballaghadereen in the face. Further jobs will be lost — all the jobs in that factory — there will be displacement of families as people have to move elsewhere to get jobs and as a consequence there will be a decline of another part of the rural west.

The Minister and his colleagues in Government should do anything they can to aid these people. The first step would be for him to act as the honest broker; to see if he can bring the people together and work out a strategy to bring Shannonside Co-operative back to viability. Decisions will have to be taken with regard to reorganisation and rationalisation there and that could be done through the good offices of the Minister and his Government.

Minister of State at the Department of Agriculture, Food and Forestry (Mr. Deenihan): Information on Jimmy Deenihan  Zoom on Jimmy Deenihan  I thank Senator Naughten for bringing this matter to my attention [1781] this evening and I thank Senator Finneran for his contribution.

While they have outlined the problems in the Ballaghadereen area my reply will refer to the whole subject of milk quotas and milk quota support for small producers. I will not refer directly to the Senators contributions until the end of mine.

The operation of the milk quota system in Ireland has always given special treatment to small scale producers and because many of these are situated in the west, north and north-east, consequently these sensitive areas have benefited to the greatest extent from this policy.

If we go back to the very beginning of the quota system in 1984, even the initial distribution of the quota represented a more advantageous allocation in favour of small scale producers. Each purchaser was allocated a basic quota reflecting the amount of its purchases from producers in the 1983 reference year plus a flat rate allocation of 497 gallons for each producer with a delivery in 1983 of less than 14,000 gallons, and an allocation of 3.55 per cent of 1983 deliveries for each supplier over 14,000 gallons.

This meant that those purchasers with the highest proportion of small scale producers received the highest percentage increase above their 1983 deliveries. As these purchasers are situated principally in the west and north-east of the country, these areas received 6 to 8 per cent above their level of 1983 deliveries.

Other special community reserves since then have also favoured small scale producers, and consequently the sensitive areas. In particular an 11 million gallons reserve allocated in 1989 went principally to small producers. The allocation to small scale producers situated exclusively in the west and north-east under this reserve was topped up by the allocation of a further 1.7 million gallons in 1991. A further 6 million gallons reserve was negotiated in the 1993 farm price review most of which went to [1782] small producers. In conjunction with this 1993 allocation, and in special recognition of the importance of dairying for the social and economic development of sensitive areas, a further scheme was put in place whereby 1.9 million ECU was used to operate a buy up and reallocation scheme in the west, north and north-east only. Small scale producers supplying purchasers in these areas received a further 1.1 million gallons.

Apart from these special reserve allocations, the various national arrangements which have been put in place for the redistribution of any quota which becomes available have been based on a policy of prioritisation. The first priority category for these arrangements are producers with quota of less than 30,000 gallons. As I already said, the larger number of small scale producers are in the west, north and north-east and these areas, therefore, benefit most from these arrangements. In the context of the temporary leasing scheme, small scale producers have total priority access to any quota which becomes available in any year through other producers not filling their quota.

The restructuring schemes which provide for purchase of additional quota on a permanent basis have also given priority access to this category. As a further encouragement to small producers, particularly those in sensitive areas, to expand their enterprise, two new elements were introduced into this scheme in 1994. A special subsidy of 50p per gallon towards the cost of restructured quotas was made available. The principle of ring-fencing of quota with the more severely and the less severely handicapped areas was also implemented in the context of the restructuring scheme. The purpose was to maintain, in so far as possible in the same region, any quota surrendered by outgoing producers in that region thereby improving the viability of their holdings. Both these measures have contributed to the success of the restructuring scheme in the disadvantage areas.

[1783] As in previous years, in the event of a national super levy situation, any unused quota will be redirected in the first instance to small scale producers under the present flexi-milk arrangements.

A further important factor in maintaining milk production in the sensitive areas is to ensure that producers are in a position to comply with the new hygiene requirements for dairy farms. To this end a special grant scheme has been put in place which also has special arrangements for small scale milk producers, giving them grant-in-aid of 60 per cent of the cost of their improvement measures.

In the particular context of Shannonside raised by the Senators, the sale of milk between processors is a commercial matter in which my Department has no role. Taken together, all the measures I have mentioned, however, represent a commitment to smaller producers and to maintaining milk production in the sensitive areas. If milk production is encouraged at primary level in these areas, the long term future [1784] of milk processing can only be enhanced.

In reply to the request made by both Senators about getting the Department involved, it is something I will certainly discuss with them. If there is a mechanism whereby Department officials could be involved in bringing the three co-operatives together and if it would help, I can see no reason it could not be done. As Senator Finneran pointed out, the Department does not normally become involved in commercial matters within co-operatives. In this instance, I agree with Senator Naughten that a milk quota is important to many parts of rural Ireland. If that part of rural Ireland loses its quota, the base of its economy will be lost also. It is something which I will discuss with both Senators and if an official from the Department can bring the three sides together to work out a better management system and so on, then I am sure it will be for the betterment of the community. I will certainly look at that immediately.

The Seanad adjourned at 8.05 p.m. until the Joint Session at 10.30 a.m. on Thursday, 2 February 1995.

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