Sides divided on way to pay for dairy expansion
Sharp differences on how to fund the required expansion in milk processing capacity emerged at last week's ICOS conference.
ICOS dairy policy executive TJ Flanagan pointed out that the industry was undercapitalised and an agreed mechanism was required to cover investment costs.
Mr Flanagan proposed that new entrants to the sector and existing co-op members who planned to expand beyond agreed supply limits should pay for any additional investment in 'stainless steel'.
The ICOS executive suggested that contracts/agreements between milk suppliers and processors which would allow farmers deliver a given volume of milk each year based on their 'peak day' supply.
He claimed that basing the contract volume on peak day supply could allow existing suppliers to grow milk production on the shoulders of the supply curve. Access to spare processing capacity within each co-op would be allocated on a priority basis to:
- Existing supplier shareholders who would be given three years to reach supply targets;
- Existing co-op members who are not milk suppliers;
- Existing suppliers who are not co-op members;
- New entrants.
To fund investment in additional processing capacity, anyone who wished to supply milk beyond their contract arrangements would have to pay 30c/l.
This charge could be paid on a 3c/l basis over 10 years or as an up-front payment -- an additional 250,000 litres would cost €75,000.
However, responding to this proposal, IFA president John Bryan said any expansion of dairy production as set out in the Food Harvest 2020 report must not impose disproportionate costs on producers.