Dr William McCrea MP MLA
Chairperson, Committee for
Agriculture and Rural
Development
Parliament Buildings
Stormont
Belfast
BT4 3XX

Rt. Hon Hilary Benn MP
Secretary of State for Environment, Food and
Rural Affairs
DEFRA
Noble House
17 Smith Square
London
SW1P 3JR

29 December 2008

Dear Hilary

Sincere regards.

Thank you for your letter of 25 November 2008 and for your gracious reception when Peter, David and I met you.

In your letter you clearly expressed an understanding of the hardship being experienced at this time by the entire supply chain in Northern Ireland but, in light of the continuing crisis in the sector, I feel I must press you again on the issue of UK support for the reintroduction of Export Refunds.

As you are probably aware, commodity dairy markets continue to fall and are at record historic lows in real money terms. This was reflected in United Dairy Farmers’ December milk auction, which returned an average price for 30 million litres of 16.63ppl. This compares with 17.30ppl in November, 18.03ppl in October and 25.1ppl in September. Compared with the average price at the December 2007 auction, this month’s actual price represents a fall of 44%.

I cannot over-emphasise to you the hardship these disastrous prices are having, and will continue to have, in the coming months in rural communities and the wider economy in Northern Ireland. Those close to commodity markets tell me there are no signs of markets beginning to bottom out and the prospect is that as we start to see normal seasonal upturn in milk production in the EU, market returns will continue to fall. We urgently need the EU Commission to use Export Refunds to try and bring some stability to commodity dairy markets.

In your letter you outlined reasons not to intervene; however, I would put it to you that even though there may be doubts as to the efficacy of Export Refunds, the situation is now so serious that the EU Commission must act quickly to try and help our dairy industry. The alternative is to wait to see the effects of Intervention and PSA for butter. In my view, that would be a high risk strategy, because the likelihood is that intervention will fill very quickly and will have limited effect on falling markets. Given that the volume of EU milk that would attract Export Refunds is small (less than 5%), the lower risk approach is to introduce these Refunds immediately. We need to remember that any market management measure will require time to take effect, and now is the time to introduce Export Refunds as we approach the seasonal upturn in milk production.

Dairy industry returns for processors and farmers are falling across the EU, nowhere more so that in Northern Ireland. We know that our milk auction is a barometer of where markets are and an early warning of what can be expected throughout the EU. The further fall in the December auction price is yet another indication of how serious the situation is. Now is not the time to debate the theoretical efficacy of Export Refunds. The Northern Ireland dairy industry in on its knees and needs help. The EU Commission has it within its power to provide that help. I would ask, therefore, that you use your good office to encourage the Commission to reintroduce Export Refunds.

Yours sincerely

Dr William McCrea MP MLA
Chairperson to the Committee for Agriculture and
Rural Development