Waterford TD John Deasy says further urgent measures are needed to help relieve the income pressure on dairy farms.

Following the abolition of quotas just over a year ago, February CSO figures showed a 37% increase in production by the sector compared to 12 months previously.

“However, milk prices have fallen by 20% since February 2015 due to a combination of global factors, and Irish farmers, many of whom have invested significantly, are struggling to cover the cost of production,” Deasy says.

The average February milk price was 24.68c/litre — down from 30.77c/l (also incl. VAT) in March 2015. And short-term indicators look to be static.

With the imminent phased payment of superlevy fines for 2015 set to further impact farmers’ cashflow, Deputy Deasy contacted the Department of Agriculture to see if there was any scope to postpone these instalments for another 12 months in the hope that market conditions can improve.

Secretary General Aidan O’Driscoll informed him that Irish officials “pushed strongly” for a possible deferral to 2017-18 during discussions in the run-up to the March Council of Agriculture Ministers.

However, Brussels had “rejected” this prospect on legal and regulatory grounds.
“While we suggested alternative arrangements it was clear that the proposal enjoyed very little support from other Member States and therefore was not likely to succeed,” the Sec-Gen added.

That means the “optimum repayment model” agreed with farming groups and at government level — 10 equal instalments from May to September in 2016 and 2017 — will proceed as planned.

Nationally some 3,672 farmers (of the 6,109 who incurred the levy) availed of this penalty repayment option; amounting to €35.6m out of a total national levy liability of €71.2m.

The exchequer has already forwarded the money to the EU. It will be repaid by farmers on an interest-free basis by way of deductions from monthly milk cheques covering the peak months of April to August. Co-ops will in turn send these monies on to the Department.

Last week the IFA called on co-ops to desist from any more milk price cuts given the challenges faced at farm level. The industry is heavily represented on the new national dairy forum — a partnership which Fine Gael TDs Deasy and Michael Creed proposed in order to address post-quota uncertainties.
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The need for meaningful, confidence-building measures to support a sustainable milk price is sure to be on the agenda when the incoming agriculture minister chairs the forum’s next session.

Waterford TD John Deasy says the first gathering of the national dairy forum “was really an introductory meeting about the structures involved and the role government sees itself playing with industry groups into the future.
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“It actually turned out to be a very constructive debate as to what measures might be taken to deal with the volatility we’ve been seeing in dairy markets for the last six months. I think the forum will prove an essential mechanism for the Irish dairy industry to put pressure on the government to take necessary steps when an intervention is needed,” he added.

FOCUS ON MARKET DEVELOPMENTS AND PRICE VOLATILITY
 
Department of Agriculture, Food and the Marine | Minister Simon Coveney T.D. today (29/9/2015) hosted the first dairy forum for stakeholders in the sector. The forum has been established by the Minister to focus on strategic issues for the development of Ireland’s dairy sector. Today’s attendees were drawn from the farming, processing and banking sectors, with representatives from Bord Bia, Enterprise Ireland, the Environmental Protection Agency, Teagasc, Animal Health Ireland, and the Irish Cattle Breeding Federation (ICBF) also attending. 
 
Commenting on the background to the forum the Minister said “as we know, 2015 is an historic year for the Irish dairy sector as EU dairy quotas have been abolished. I’ve consistently said this decision provides a great opportunity for the Irish dairy sector but equally sets us some challenges which will have to be managed along the way. This forum is about bringing key stakeholders together to assess their preparedness for this growth opportunity and to focus on strategic issues facing the sector over the next few years”.
 
The first meeting of the forum focussed on market evolution and price volatility. The package of dairy measures agreed at the EU Council of Agriculture Ministers on September 15th, was also discussed. 
 
On market issues, the forum received a presentation from Ornua on recent developments for key dairy commodities and the likely outlook in the short to medium term. Commenting on the presentation and discussion afterwards, the Minister said “there’s no question but that 2015 has been a challenging year for exporters of dairy products as a number of factors, including increased output in dairy producing countries and slowing demand in China and Russia. However there have recently been tentative signs that markets may be starting to stabilise as global production eases off slightly while demand starts to slowly increase again.”

Participants also discussed potential measures to mitigate the impact of volatility, following a presentation by Dr. Michael Keane of UCC, on potential market and policy tools. Referring to this discussion, Minister Coveney said “recent price volatility has been a reflection of turbulent global markets. This means Irish farmers are receiving a reduced farmgate price for their milk this year and I am fully aware of the difficulties which this has caused. 

While some price volatility is inevitable it is important that Irish farmers and processors have the tools to help overcome its worst extremes. The potential tools available go beyond EU market support measures. They include futures markets, longer term fixed price contracts between farmers and processors,  more stable supply and price arrangements between processors and purchasers of raw materials and finished products, and more flexible banking arrangements for farmers, calibrated to allow for periods of temporary market downturn.  Today’s forum provided the opportunity for relevant stakeholders to engage in a collaborative way on these challenges and to consider how they might respond”.
 
Concluding, Minister Coveney emphasised that the medium to long term outlook for dairy remained extremely positive “The main message is that notwithstanding current market developments, global demand is expected to strengthen substantially in the medium to long term and it is essential that the Irish dairy sector is positioned to take full advantage of this opportunity. Today was a useful opportunity to for the industry to engage collectively on how it might go about that.  For my part, I will chairing the first meeting of the High Level Implementation Committee of the Food Wise 2025 strategy tomorrow,  and I am determined that the agencies represented there will play their part in ensuring that the State plays its part in providing the  policy and operational framework  needed to  realise the tremendous  growth opportunity for the dairy sector”.