Without doubt, 2003 was "D-Year" in Irish agriculture due to dramatic changes agreed in the mid-term review of the Common Agricultural Policy.

For the Republic, "D" is for decoupling - breaking the link between agricultural production and supports paid to farmers. Farmers will continue to be paid the €1.6 billion annually in production-related payments for another 10 years but, from January 1st, 2005, the payments will not be linked to the farmers output - they will get the money whether they farm or not.

This will have enormous consequences not only for producers but for processors and consumers. The new market-led agriculture will be leaner and cleaner but not necessarily cheaper for consumers. Reports compiled by Teagasc, the agriculture and food development authority, predict that decoupling will mean an initial drop in production here. It could also mean a drop in prices paid to producers but, over the next few years, markets will come back into balance and production and prices will recover.

However, there is a lot of uncertainty as the sector tries to come to grips with the new realities. Beef and sheep producers are content with the outcome but dairy farmers are not happy.

Figures from the Department of Agriculture and Food show that the dairy industry is back to its reliance on EU intervention. At the end of 2003, there were 68,000 tonnes of Irish butter and 54,000 tonnes of skimmed milk powder (SMP) in EU Intervention stores, representing 30 per cent of butter and 26 per cent of SMP stocks within the EU.

While international markets have been recovering and demand for dairy produce is growing, the weakness of the dollar and the strength of sterling has arrested recovery here.

A Government-sponsored rationalisation based on the prospectus report Strategic Development Plan for the Irish Dairy Processing Sector, has been painfully slow.

The report, published in March, warned that the Irish processing industry was falling behind its international rivals and must implement a €300 million rationalisation and reconfiguration strategy. It said the industry should rationalise the number of processing plants for butter, powder and casein production from 11 to four.

Progress to find a consolidated player has been painfully slow, despite the urging of the Minister for Agriculture, Mr Walsh.

Dairygold managing director Mr Jerry Henchy looks set to rationalise his operations but there is strong opposition from farmer suppliers to becoming involved with Kerry or Glanbia in joint-processing ventures.

The industry, with a turnover of €2.5 billion and more than 9,000 workers in the processing sector, relies on the State's 27,000 dairy farmers and their opposition to change is considerable.But with the number of dairy farms set to drop to 18,000 by 2012, this opposition may weaken over the next few years.