Sunday 11 December 2016

Coalition risks farmer backlash at election as milk prices slump

Darragh McCullough and John Downing

Published 21/07/2015 | 02:30

Milk prices look set to remain dangerously low for the next six months
Milk prices look set to remain dangerously low for the next six months

The Government is bracing itself for a potential farmer backlash before the upcoming general election as milk prices look set to remain dangerously low for the next six months.

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As world milk prices reached a 10-year low, analysts warned there appears to be little sign of improvement in the next six months. That would make the milk price problems a big election issue - with the Government obliged to turn to former cabinet colleague EU Farm Commissioner, Phil Hogan, for a remedy.

However, the milk price slump has failed to dampen interest in Glanbia shares, which hit an all-time high yesterday of €19.42, valuing the Kilkenny-based company at €5.7bn.

Many of Ireland's 18,000 dairy farmers have invested heavily to hugely expand production following the abolition of the 31-year-old EU milk quota regime last April.

The new deregulated regime was always expected to see prices drop, and production increase up to 50pc in the coming five years with the national herd expanding by 30,000 cows.

The IFA and ICMSA yesterday warned that their members faced income cuts.

Pat McCormack of the ICMSA said the average milk supplier was down €4,000 in this year's June milk cheque compared to June 2014.

"We're talking about a drop of getting on for €8,000 in eight weeks," warned Mr McCormack, point out that these months are a crucial production period.

Seán O'Leary of the IFA said milk prices were down around 11 cent per litre, or 28pc, since last April. He warned this was a 78pc cut in farmers' profit margins.

Teagasc head of dairy research, Seán French, said for now there were few options beyond waiting for a change in market sentiment.

"We still don't know when prices are going to pick up again, so you could be looking at a similar price for all of next year," he admitted.

The issue will increase pressure on Agriculture Minister Simon Coveney, who has already conceded that EU intervention buying is required.

Last week, Commissioner Hogan softened his reluctant stance on EU intervention buying. But tensions persist about the volumes which can be bought and - crucially - the price at which it is purchased.

Officials at the Agriculture Department in Dublin said the minister had successfully fought for improvement in intervention conditions at last week's EU farm ministers' meeting. They said Mr Coveney was also meeting with banks on flexibile borrowing terms for farmers.

Meanwhile, Glanbia profits have been boosted significantly since it developed products aimed at the high-margin sports nutrition sector.

The value of the company has effectively trebled since proposals to dilute farmer ownership were first mooted three years ago. However, farmers have also been big winners, owning an estimated 40pc in the company through their co-op and privately held shares.

The success of the former farmer-owned creamery mirrors that of Kerry Group, which has pumped billions into the Kerry region since its flotation over 30 years ago.

Irish Independent

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