Minister Creed, elected representatives, President Nalet, EDA members, ladies and gentlemen,
Thank you for inviting me here today, and congratulations to the organising committee, in particular Alexander Anton and Conor Mulvihill, for putting together such a great line-up.
The question steering your discussions at this conference is the following: what is needed to ensure a more green future for the EU dairy sector?
Of course there is no single answer to this question. But I do believe that many of the answers are within reach. I propose to provide some insight from the EU perspective that may be helpful, and I am sure that your discussion will be a focused and productive one in Rose’s capable hands.
Ladies and gentlemen, the only real starting point when it comes to sustainability and climate action is the Paris Climate Agreement and Sustainable Development Goals.
The European Union and its MS are not only signatories to these critically important global agreements, we are the best hope for making sure they are delivered.
Background: EU Environment & Climate Statistics
We have committed to ambitious 2030 climate and energy targets, where all sectors, including agriculture, have to contribute. There are no exceptions – everyone has to put their shoulder to the wheel. Our specific targets are:
- to reduce GHG emissions by 40% by 2030, based on 1990 levels;
- to have 32% of renewable energy in our energy mix;
- and to improve energy efficiency by 32,5%.
The Commission also plans to adopt by the end of this month a long-term EU strategy to achieve zero-emissions by 2050.
These are the targets, spelled out in black and white, and we have to be honest and clear-sighted enough to recognise that our agri-food sector needs to increase its contribution.
Let me give you some examples to illustrate the scale of the challenge. Agriculture accounts for 10% of emissions across the EU, but here in Ireland the figure is 33%. Most of the agricultural emissions in Europe result from methane and nitrous oxide from the use of synthetic fertiliser, manure use and management.
The Irish government published its first Climate Mitigation Objective plan in July 2017, with the stated aim of achieving carbon neutrality. However, this year, the Irish Climate Advisory Council indicated that there is a very low adoption rate of mitigating technologies, which will be a factor in Ireland failing to meet its 2020 targets.
In the Netherlands, the dairy industry has been dealing with an ongoing phosphate problem which has resulted in the reduction of the Dutch dairy herd by around 122,000 cows over 9 months. Dutch milk supply has fallen by around 1.5%.
In Denmark, dairy and pigmeat account for almost 90% of carbon emissions from agriculture, whereas the share of production value and share of employment for these products compared to the total agriculture sector is roughly one-third.
The EU Environment Agency found that out of 130, 000 water bodies in the European Union, 60% did not achieve “good” water quality status under environmental legislation.
These examples demonstrate the very clear scale of the problem. How then can the agri-food sector, and specifically the dairy sector, rise to the challenge and speed up its adaptation?
Future CAP Proposal: Here To Help
I would suggest that a very good place to start is the European Commission’s legislative proposal for the CAP post-2020.
We have designed a workable platform that can be a game-changer in relation to the agri-food sector’s contribution to the climate and environment agenda.
This reflects the wishes of our citizens, as well as the fact that the urgency of the climate and environment challenge has never been greater. The severe drought experienced by many farmers, including dairy farmers, this summer, emphasised the point.
The European Commission took swift and decisive action to offer various supports and derogations to Member States. This helped to alleviate immediate concerns, but it also highlighted the fact that we need to address the bigger problem: Farming and food production needs to get smarter, cleaner, and greener – and fast. Farmers need to adopt new technologies as part of building climate resilience.
Our proposal aims to increase the environmental performance of the CAP in relation to three clear objectives:
contributing to climate change mitigation and adaptation, as well as sustainable energy;
fostering sustainable development and efficient management of natural resources such as water, soil and air;
and contributing to the protection of biodiversity, enhanced ecosystem services and preservation of our habitats and landscapes;
The new delivery model has the potential to be a game-changer, because it fundamentally redesigns not only the tools to achieve better climate and environment outcomes, but also, crucially, the designation of responsibility.
Our goal is to increase flexibility and enhance effectiveness by ensuring that problems are addressed at a level where they are best understood. We know – and all the evidence supports the contention that – a one-size-fits-all approach does not work across the continent of Europe.
So instead of complying with a standard list of requirements from Brussels, dairy farmers and other key stakeholders will have the opportunity to be involved in the process of identifying local climate and environment challenges and outlining the best way to take action.
A new system of enhanced “conditionality” will link all farmers’ income support to the application of environment- and climate-friendly farming practices.
This will ensure compliance with key EU environmental legislation such as the Water Framework Directive and the sustainable use of pesticides. Each farm will need to engage in detailed nutrient management planning.
I would suggest that this can only be a help, considering that in Ireland up to 6500 farm inspections will take place every year from 2018 to 2021 under the new River Basin Management Plan.
Of course, technology and innovation can offer many solutions. Improved use of precision agriculture can help the average dairy farm on the both the input and output side, leading to commercial and environmental gains.
Mitigation in the agriculture, forestry and other land use sectors can be achieved by reducing GHG emissions per unit of output, and by conserving or enhancing carbon stocks in vegetation and soils.
The EU Joint Research Centre estimates that 45% of soils in Europe have a very low organic matter content of between 0 and 2%. Reversing this process to build up soil carbon stocks has the potential to sequester a lot of carbon.
Practices like the use of winter cover, catch crops, crop rotation, adding legumes, reduced or nil tillage can contribute to soil carbon stocks.
Soil organic carbon storage could contribute to meeting the joint goal of reducing the impact of agriculture on GHG emissions and climate change (as called for by SDG 13) and achieving zero hunger (as called for by SDG 2).
The future CAP will encourage increased investment in knowledge and innovation, and enable farmers and rural communities to benefit from it. €10 billion under Horizon Europe funding is dedicated to the support of specific research and innovation in food, agriculture, rural development and the bioeconomy.
These proposals put a framework around a green future for the European dairy sector. I urge you to familiarise yourselves with the details and support our proposals strongly.
It is very much in the interest of the dairy industry to do so. The market seeks sustainability and the EU must respond to market signals.
Trade & Exports
Of course sustainability is not just about the environment. Farmers also need a sustainable livelihood. Society cannot expect farmers to do more for the climate if they cannot earn a fair income to support their families. That is why farmers must be rewarded for their enhanced ambition.
And this really is a win-win. Because improved sustainability will not only generate an environmental and climate dividend, it will help our dairy farmers to maintain their competitive edge internationally.
The importance of the dairy sector is clear: the EU has a trade surplus of almost €20 billion, and you make up 50% of this.
It is vitally important that new export outlets are found. And the good news is that we are making real headway internationally.
Two good recent examples are the EU-Japan Economic Partnership Agreement and the agreement in principle with Mexico.
The EU-Japan agreement is the most successful deal ever achieved in EU agri-trade, providing huge opportunities for agricultural exporters.
Dairy products, especially cheeses, have had a strong growth on the Japanese market in recent years with a lot of interest in EU quality products.
Under the new agreement, cheeses are liberalised after 15 years for key quality hard cheeses such as Fontina, gouda, and cheddar; and significant duty free TRQ is achieved for fresh cheeses and soft quality cheeses.
The Mexico agreement in principle also provides significant market access improvements for cheese and dairy products:
The agreement will provide for TRQs of 20,000 t in 5 years for mature cheeses, and 5,000 t in 5 years for fresh cheeses, as well as 50,000 t phased in over 5 years for skimmed milk powder.
Dairy preparation will benefit from two TRQs of 13,000 t in total. The tariff for infant formula will be reduced to 50% of the MFN rate in 5 years. Finally, on butter a TRQ of 2,500 t will be phased in over 7 years. All TRQs are duty free.
Lactose and blue veined cheeses have been liberalized.
And it should be noted that these concessions come on top of current WTO TRQs.
It is vitally important that we continue to grow, and we are working hard to develop promising market opportunities. These include China, Indonesia and Malaysia – all dairy deficit markets with a growing population, and growing consumption of western products.
Indonesia is a very good example: this huge country of 264 million people has the lowest dairy consumption in Asia, and is only 25% self-sufficient in dairy products.
Arla and Friesland-Campina both have operations on the ground, and there is clear potential to grow.
I visited Indonesia as part of my ongoing diplomatic offensive two years ago. The only way we can unlock the full potential of these markets is through continuing business missions, smart use of promotional instruments, and of course by maintaining a strong and well-funded CAP to give farmers certainty on the home front.
At the same time, we are fully aware that trade openings can be problematic for some sectors. Beef and rice, sheepmeat, sugar and poultry will face stronger competition as the EU market opens up further.
And some negotiations can be sensitive for the dairy sector. We will therefore continue to duly recognise and reflect the sensitivity of those products in trade negotiations, making sure that we obtain an outcome which provides sufficient safeguards.
We will work hard to find the right balance for agriculture across all agreements, finding an equilibrium between offensive and defensive interests, which includes SPS issues and the protection of geographical indications.
A further positive market development is that we are continuing to clear intervention stocks. Some 380 000 tonnes of skimmed milk powder (SMP) was held in public storage by the end of September. Deducting the quantities sold in the last tenders, the actual stock level would be in the range of 200 000 tonnes.
Around 200 000 tonnes have now been sold via the tendering procedure, mainly during 2018. We will continue to manage the disposal of stocks in a prudent manner.
Let me also say a few words on Brexit. The rubber is finally hitting the runway this week and reality is starting to bite.
Brexit is a sensitive subject for the dairy sector across Europe, but particularly of course here in Ireland.
Arla commissioned a study on the impact of Brexit, and the report’s conclusions do not make for easy reading.
10,500 lorries pass through the port of Dover every day. In a no-deal scenario, it is estimated that even a seven-minute additional waiting period for each inspection would add 10 hours of delays and additional costs of at least £111 per container.
Meanwhile, the channel tunnel carries 27% of French products by value into the UK, and 42% of French imports back from the UK.
The simple reality is that free and frictionless trade will require the UK to retain a high degree of convergence with EU rules. A full 70% of UK agri-food imports came from the EU in 2017.
The UK has the second largest dairy trade deficit in the world, and 98% of UK dairy imports are of EU origin.
I hope that these very stark statistics help to clarify minds in London. The risk of a no-deal Brexit is still substantial, and there is no point pretending otherwise.
I have been a strong and consistent advocate for Ireland to be fully prepared for all possible outcomes, particularly the worst case scenario. No country has as much exposure to Brexit as Ireland, and our agri-food sector is particularly at risk.
I believe we can take heart from the Communication published by the European Commission this week in relation to preparedness for a no-deal outcome. Many of the most pressing concerns for Ireland are specifically addressed.
The Commission notably pledges to find solutions addressing the specific challenges of Irish businesses.
For agriculture, the document specifies that “EU law provides a variety of instruments to cope with the most immediate effects of” a no-deal scenario.
In relation to sanitary and phytosanitary requirements, there are options in place to cope with a no-deal, including the capacity to swiftly list the UK into EU law as an authorised third country.
Now all eyes turn to London.
Ladies and gentlemen, let me conclude by returning to the original question. What is needed to ensure a more green future for the EU dairy sector?
The European dairy sector has a good story to tell, and good prospects for the future. But we have to be honest about the potential pitfalls that lie ahead.
Our good news story is based on our strong reputation for high quality dairy products, produced to the highest standards of safety and sustainability. The appealing image of dairy cows eating grass in wide open fields is a very successful selling point for Irish products, for example.
However, if that reputation for quality and sustainability is compromised in any way, there is a clear and present danger of a negative market impact.
Building a more sustainable foundation in relation to inputs is not a choice: it is a must.
We need to get the balance right under the Nitrates Directive and the Water Framework Directive. Failure to act now will lead to negative consequences in the near future – potentially very negative consequences.
The UN Special Climate Report last month outlined the severity of the situation. Even greater climate action is needed, and the dairy sector needs to up its game.
The European Commission has a strong template for action, giving you the tools to become greener at home while supporting your sales and promotion abroad.
I would encourage you to support our plans, and in so doing take an important step towards making this key sector of our agri-economy greener, cleaner, and more resilient, going forward. Thank you.