Speech by Commissioner Phil Hogan at Oireachtas
Joint Committee on Agriculture
Leinster House, Dublin
23rd June 2015
- Check Against Delivery –

Chairman Doyle, Members of the Joint Committee on Agriculture,

I wish to thank Chairman Doyle for the invitation to speak to the
committee. It is my honour to be here today to engage with you
on matters affecting Irish and European Agriculture.

Since I have taken up office in November 2014, I have prioritised
engagement with national parliaments, and in particular
parliamentary committees on agriculture. To date, I have met
with agri committees in 10 different national parliaments.
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
As a former elected representative, I am keenly aware of the
importance of reaching out to parliamentarians and listening to
their perspectives and feedback on the state of play on the
ground.

Whereas European agriculture is as diverse as the European
climate, from the olive groves of southern Europe to the reindeer
farms in the far north, the issues raised by public representatives
are often quite similar.

Such as how to simplify the CAP? How to ensure a good living
for producers so that they can continue to produce their
product? How to gain new opportunities for our high quality
produce on global markets? These are issues which I am
prioritising so it is essential to receive feedback from those who
are closest to the citizen – their elected public representatives.

I am here today also to update you on a number of the issues of
interest to you and your constituents and I will be glad to answer
some of your questions immediately afterwards.
(Beef Genomics Scheme)

I will start by giving an overview of the Beef Data and Genomics
Scheme. The Beef Data and Genomics scheme is an agrienvironment-climate measure under the Ireland RDP.

A key requirement for any agri-environment-climate measure is
that farmers must undertake commitments for a period of five to
seven years.
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
The terms and conditions of the Beef Data and Genomics scheme
could be revised, but only by way of a modification of the RDP.

However, any changes in the terms and conditions would only
apply to those farmers who join the scheme after the programme
modification has been notified to the Commission.
(Milk market situation and outlook)

Of course 2015 has been an historic year for the milk sector, with
the ending of the Milk Quotas on the 31st March last. This
followed on from a bumper 2014 which saw prices reach new
highs.

Following this period of record high prices, the milk sector is
undergoing a correction as a consequence of global oversupply
and weaker demand from important markets such as China and
Russia.

The Commission has remained attentive to these developments,
especially since the introduction of the Russian import ban last
summer.

The measures deployed by the Commission in recent times have
included opening Private Storage Schemes for butter and
Skimmed Milk Powder in September 2014. These will remain
open until September this year.

We have also guaranteed the non-interrupted availability of the
safety net (extending intervention period in 2014, and
anticipating it in 2015).
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
We have granted targeted support to farmers most hit by the
Russian ban in the Baltics and Finland.

We have more than tripled the budget dedicated to promotion
programmes, in order to expand EU penetration in third
countries.

We have alleviated the burden of the surplus levy in the 2014-15
quota year by allowing deferred payment in 3-years at zero
percent interest.

Also, we have enhanced market monitoring in the post-quota era
with monthly meetings of the Milk Market Observatory Economic
Board.

As confirmed by the MMO Economic Board in its last meeting,
market sentiment is uncertain, with no clear signs of recovery in
the short term.

There are two main market fundamentals still potentially of
concern:

In terms of supply, worldwide milk production has not
substantially dropped, with better than expected output in
Oceania.

In terms of demand, a lifting of the Russian import ban seems
more and more unlikely, and Chinese imports are still some 40%
down from last year.
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
However, the good news is that the peak of milk production in
the EU has passed, the euro exchange rate remains favourable,
EU export performance in the first quarter of 2015 has been
remarkable and EU stocks seem to be at an appropriate level for
this time of the year – for instance, no offers to public
intervention have been reported so far.

But prudence is needed in these times, and operators in the milk
sector have to act responsibly, reacting to market signals. Let's
endeavour to produce what the market can absorb.

As price pressure is expected to persist in the short term, the
Commission forecasts a rather moderate milk supply trend, with
1% overall EU increase in 2015 (which, in the case of Ireland,
could be close to 5%).

The US Department of Agriculture has also scaled down 2015
projections in the US to +1.3%. Sources point to increases by
0.6% in New Zealand and 2.9% in Australia.

All in all, there is about 3.7 million tons of additional milk to be
absorbed mostly by importing countries.

In the long run, global demand for dairy products remains
promising. The EU in general, and Ireland in particular, is in a
privileged position to benefit from the new opportunities
coming from world markets.

In addition, on the supply side, feed prices are projected at lower
levels than those observed since 2010.
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
But the sector will be unavoidably confronted with periods of
short term volatility, as we are experiencing now.

Thankfully, we have a comprehensive toolkit under the CAP to
support the dairy sector in this new era.

In parallel, the sector itself needs to explore and develop
private-initiative tools for risk hedging, such as integrated
supply chain contracts, forward contracts, fixed margin
contracts and price differentiation according to volumes.
(Origin labelling)

Another issue which is subject to debate at EU level at the
present time is the issue of Origin Labelling.

Origin labelling is both technically complex and politically
sensitive. Under President Juncker's "Better Regulation" drive,
the Commission is keen to propose new mandatory legislation
only where such legislation actually serves a purpose.

The consumer interest in origin information on milk and meat
categories under the remit of this Commission report can be
adequately addressed by voluntary labelling, which avoids
imposing unnecessary burden and compliance costs.

Mandatory origin labelling would entail a higher regulatory
burden and additional operational costs that would not be
justified.
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
In the framework of the Commission priorities and the benefit of
the single market, voluntary labelling for dairy products appears
to be the most suitable option.

Currently consumers may, if they so wish, opt for milk and dairy
products where origin information is voluntarily provided for by
food business operators.

Introducing mandatory origin labelling would unevenly impact
operators. The burden would be particularly heavy on those
located in border regions and in areas non-self-sufficient in milk;
manufacturers of highly processed products; and processors
receiving milk from different origins with multiple manufacturing
stages.

Mandatory origin labelling would also impose more control
burden on public authorities and push food business operators to
change their sourcing practices.
(Beef Markets)

With regard to the beef sector, Irish reference prices are now
well above the EU average prices. The good performance of extra
EU exports, the improvement of demand in the continent and the
tight supply in the UK are the main reasons for the improvement
in Irish prices.
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
Ireland is, for the moment, the only EU Member State allowed to
export beef to the US. That is good news and given the US
internal market situation, where prices are near historic highs
due to drought in the main beef producing regions, there is a
good window of opportunity for Irish beef.

Opening the Chinese market for EU beef is a priority for the
Commission. Efforts are being made at all levels and we are
making progress. China lifted the BSE ban for Ireland last
February. This is a first important step in the Chinese procedure
to allow market access. We will continue with the efforts to
secure this big new market for Irish and EU exports.

China just opened its market to Brazilian beef. Brazil is certainly a
big competitor, but China's beef demand is enormous. There is a
place for everybody. On the other hand, the need for Brazil to
access additional markets is already having an effect: EU imports
from Brazil have experienced a significant reduction of 8
percentage points in the first quarter of 2015.

The prospects for the near future are positive. Our projections
show that 2015 should see a general moderate recovery in EU
prices and they should stabilize in 2016.
(Fertiliser prices)

I know that farmers are increasingly exposed to the impact that
increasing inputs costs such as fuels, other energy costs and
fertilizers have on income. I am fully aware that EU fertilizer costs
have not followed the decrease in energy prices.
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
However, the main input for the production of fertilizers in the
EU is natural gas, not oil, for which prices have not decreased to
the same extent as oil. The gas market is segmented at global
level, as opposed to the oil market which follows global price
trends, and the differences have been exacerbated by the shale–
gas "revolution" in the United States.

For instance, In EU the gas prices depend mainly on our import
demand from Russia (on the basis of 6-9 months contracts) and
Norway (normally on spot prices). Since gas prices have only
started to decrease in April - in particular, in Germany but not
across the EU - they have not resulted in a significant decrease in
fertilizers prices in the short term.

With regard to nitrogen fertilizers, the EU market is not selfsufficient and imports about 20% of its needs. Ireland buys
fertilizers on the EU internal market on the one hand - mostly
from Belgium, Netherlands, the UK and Germany - and on the
other hand from Russia, Egypt, Iran and Turkey. Most of the
imported nitrates fertilizers come from Russia (68%), and Turkey
(17%).

The decrease in Russian gas prices in April is not yet reflected in
fertilizer prices. In the UK, where fertilizers prices follow the UK
(NBP) gas prices, we note a slight decrease in granular urea price
(from 394 to 388 eur/t), but since January both urea and nitrates
are showing an increasing trend.
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
I wrote to my colleague, EU Competition Commissioner
Margrethe Vestager, to look into possible anti-competitive
practices in the fertiliser and energy sector. Our two services are
working together to follow up, closely monitoring agricultural,
fertilizers and energy prices in order to detect any possible
market disruption.
(Climate Change)

2015 is a crucial year in the area of Climate Change, with the Paris
Climate Conference, or COP21, set to be a landmark event.

The EU has committed to reduce its overall greenhouse gas
emissions by at least 40% by 2030, in order to avoid an increase
in temperature above 2°C above the preindustrial level.

This is a very ambitious target and to achieve it, all sectors have
to contribute. Emissions from land, mainly agricultural and
forestry land, will also have to be reduced starting from 2020.

The Commission is currently working on the question of how to
deal with Agriculture and Land Use, Land Use Change and
Forestry in the future climate policy framework up to 2030.

A stakeholder consultation ran up until June 18th last. A policy
proposal will be presented in 2016, based on a solid impact
assessment of the different options and COP21 outcomes.
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
The multiple objectives of agriculture and land use and its
reduced mitigation potential and higher costs as compared to
other sectors need to be acknowledged. We need to strike a
balance between the EU's food security and climate change
objectives.

Encouraging the sustainable intensification of food production is
one effective way to achieve this balance.

For some Member States, including Ireland, the mitigation
potential provided by afforestation is important. The Commission
has to work out how to include that in the climate change
framework.

The Irish Rural Development Programme includes measures,
some of which are rather innovative, such as the aforementioned
Beef Data and Genomics Scheme, which are needed in future to
improve the mitigation and adaptation potential of the sector
and at the same time its productivity. These measures have to be
assessed and refined as appropriate, to be prepared for the 2030
challenge.
(TTIP)

Of course, International trade negotiations in general and the
trade deal with the US in particular, known as TTIP, are of key
importance for EU agriculture. The US already represents a key
outlet for EU agricultural products: it is the destination of 13% of
total EU exports.
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
This negotiation offers great opportunities and also challenges.
In any scenario, the Commission is determined to defend and
promote the EU's interests, crucial for European agriculture.

I for one am personally and directly involved - I have visited
Washington, D.C. in February and May 2015 to engage with the
U.S. Administration (USTR, USDA), U.S. Congress and U.S. farm
sector stakeholders.

My key message to the US side has been clear and consistent:
the EU is strongly committed to concluding a deal, with
appropriate balance and respect for our sensitive sectors.

TTIP will offer new market opportunities for EU agricultural
products through reduction of both U.S. tariffs and non-tariff
barriers (including sanitary and phyto-sanitary ones) in areas such
as dairy (cheese, butter, etc.), food preparations (e.g. infant
formula), prepared meats (e.g. hams), sugar confectionery,
chocolates, fruit and vegetables, beverages, juices.

The reduction of non-tariff barriers is expected to bring the most
benefits in TTIP according to the impact assessment: most
barriers relate to sanitary and phyto-sanitary measures.
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
For example, there is currently an obligation to respect U.S.
"Grade A requirements" for fresh dairy product - the measures
are very stringent, hindering EU exports. The EU is seeking
equivalence for EU production methods. The U.S. lifted the BSEban for export of Irish beef. The EU is still waiting approval for
other member states as well as for EU sheep and goat meat. The
U.S. is currently approving individual member states, a process
which is lengthy and unfair. The EU should be recognised as a
single entity.

To allow EU producers to compete fairly in the US market, and
provide quality products, TTIP negotiations must also bring
enhanced protection for a selected number of EU Geographical
Indications. This is matched on the US side, where consumers are
taking a greater interest in origin products.

TTIP is a challenge due to the differences between EU and U.S.
production structures, environmental standards and approaches
to food safety. EU sensitivities (e.g. meats) have to be respected.

These elements will be taken into account to define the level of
market access that can be granted in each sensitive sector.
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
TTIP overall result must be balanced and reasonable. This means
appropriate quotas for sensitive products, such as meat. It
means a balance has to be struck between key interests with
gains on both sides and sensitive sectors protected.

An acceptance of our respective legitimate choices with regard
to environmental or health standards, including on GMOs, antimicrobial treatments or hormones needs to be a part of the
deal.

With regard to the process, working in parallel to address
different areas of negotiations is essential: for example talks on
tariffs, where agricultural products are a key U.S. interest, should
move at the same pace as the EU's key interests, for instance on
procurement, services, regulatory convergence, rules, including
Geographical Indications (GIs). The EU has already made an
ambitious 1st tariff offer but has still received nothing on our key
areas of interest.

This is in the context of U.S. difficulties in embarking on
meaningful concessions (procurement, GIs) before finalisation of
TPA and TPP.
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
The bottom line is that substance should dictate speed and each
step to a final deal must be considered carefully.

In conclusion, TTIP's overall result must achieve a reasonable
balance between key interests, and sensitivities need to be
respected, with acceptable quotas for sensitive products (such as
meats).

TTIP will not affect our respective food safety standards (such as
on hormones, GMOs, or ractopamine).

The Commission continues to pay great attention to transparency
in trade negotiations (notably in TTIP) to respond to increasing
public attention and concerns.

With regard to the timing for conclusion: 2015 is an important
year for TTIP, as it falls before the 2016 U.S. Presidential election
year. We are ready to make as much progress as possible in
2015 but a conclusion by the end of the year appears unlikely.

The sequencing on the U.S. side appears to be: 1) adoption of
TPA (trade promotion authority), due before end-June; 2)
finalisation of TPP (Trans-Pacific Partnership), possibly later in
2015; then TTIP.
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(Conclusion)

Chairman, Deputies,

It has been my pleasure to update you on the latest state of play
at EU level on agricultural matters. As you can see, despite short
term volatility on agricultural markets, there is much to hope for
in a world where the population will reach over 9 billion by 2050.

Demand for the high quality agri produce which is the hallmark of
Ireland and Europe will only increase in a world where the middle
class is growing by 150 million people every year. And Ireland is
positioning itself well to meet this demand.

Nevertheless, we must remain vigilant to short term market and
political challenges and it is my commitment to work with you
throughout my mandate, in the interest of EU citizens, rural
dwellers, producers, consumers and the agri-food sector as a
whole.

Go raibh maith agaibh go léir.
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