Business Farming

Sunday 25 September 2016

Guarded welcome for EU milk moves

Commissioner backs French proposal to pay farmers 10c per litre to cut production

Published 15/03/2016 | 02:30

EU Agriculture Commissioner Phil Hogan
EU Agriculture Commissioner Phil Hogan

Farm leaders have given a guarded welcome to EU moves to curb milk production in response to the mounting dairy crisis.

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A French proposal to limit production by paying its dairy farmers 10c/l out of its own State coffers has been sanctioned by EU Agriculture Commissioner, Phil Hogan.

The French estimate that the cost of incentivising its farmers to decrease production by 3pc will be €32m.

However, Agriculture Minister Simon Coveney ruled out the possibility of state coffers being tapped to help Irish farmers through the current price trough.

"We won't be putting money into that, and I don't think that the farm organisations would want that either," he said.

Less than a year after the abolition of milk quotas, other moves to ease the slump in milk prices include doubling the current limits on intervention butter and skimmed milk powder and permitting member states to give dairy farmers payments of up to €15,000.

The IFA is hopeful that this State aid option may open the way for more taxation measures that would allow income averaging over five years and the deferral of taxable income during good years.

"Today was a positive first step, but there's a lot more to do, and there's no magic solution," said the IFA's dairy chairman Sean O'Leary.

The crux of yesterday's EU Farm Council meeting was the French proposal as Irish representatives warned that voluntary measures to cut milk production could become compulsory if the price situation continues to worsen.

Commissioner Hogan said the severe market imbalance is weighing heavily on the dairy sector.

"It is the common view of the Council that the return to quotas or any other instrument of mandatory supply control is not on the agenda."

However, Mr Hogan said a number of member states, led by France, had requested access to allow producer organisations and co-ops make voluntary agreements on "supply management". The Commissioner said he was prepared to agree to measures to allow voluntary agreements on a "temporary basis".

The ICMSA said that raising the intervention price to at least 28c/l would be far more effective at relieving the crisis building on dairy farms.

ICMSA president John Comer added that the association had no objection in principle to a subsidy being paid to individuals not to produce milk on a state-by-state basis.

But he stressed that it was paramount that any such scheme was voluntary. Farmers who had scaled up and planned on the basis of the ending of quotas should not in any way be compelled to cut back production.

Retailers

Mr Comer said that until the EU was willing to compel food retailers to pay farmers and producers a living margin there was a clear onus on the EU to ensure that farmers made some kind of living and did not have to sell below the cost of production.

The French are proposing to suppress milk supplies during a five month period from May, resulting in a 320 million litre reduction in its output, equivalent to 29,000t of skimmed milk powder (SMP).

This would go some way to reducing the 63,000t of SMP that has already been sold into intervention this year at the equivalent of 21c/l. French output contributed 14pc of that total.

Milk production across the EU rose by 2.5pc, while Irish production was up 13pc last year.

Combined with re-emerging demand in China, dairy analysts believe that the moves bode well for helping a recovery in milk price.

Kerry yesterday confirmed that it is holding its February milk price at 25c/l including VAT.

Meanwhile, Commissioner Hogan has announced that he is planning to reopen Aid for Private Storage for pigmeat and increase the current €30m budget for the promotion of pork and bacon.

Other measures announced yesterday include: further collaboration between "high level representatives" from each country and the newly established Agri Markets Task Force, along with the establishment of a Meat Market Observatory along the same lines as the body compiling information for the dairy sector.

Mr Coveney had pushed strongly for the temporary removal of import tariffs that could reduce the cost of fertiliser by 14pc.

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