Farm Ireland

Monday 23 October 2017

Co-ops put brakes on milk cheque handout

Processors withhold payments amid fears of superlevy penalties

Darragh McCullough

Darragh McCullough

Superlevy fears have forced some dairy processors to start withholding milk cheques from farmers that are already over quota.

The increase in milk supplies, compared with last year when Ireland had a narrow escape from a superlevy bill, continues across all regions, with some processors reporting milk supplies up by as much as 15pc compared with the same period last year.

As a result, Glanbia has issued letters warning farmers that fines of 20c/l will be imposed from the end of next month on any over-quota supplier that has supplied more than 350,000 litres since the start of the quota year.

The country's largest processor has never taken precautionary measures of this kind so early in the quota year, and is seen as an indication of how serious the superlevy situation is becoming.

This time last year, the country was 3pc under quota. However, almost every dairy processor is heading over quota at the moment, with Dairygold 9pc and Glanbia 7.6pc over for the first three months of this year.

Glanbia suppliers were also informed earlier this month that the board will review the situation on a monthly basis and take "appropriate" action to protect the co-op from a superlevy fine crisis.

Lakeland Co-op has gone one step further by not accepting supplies from dual suppliers that have already filled their quotas with the northern-based co-op. In addition, the processor started deducting a levy from recent entrants that are over quota.

Cork-based co-ops have decided to start making superlevy deductions as soon as suppliers reach 110pc of their allocated quota. Dairygold and Lisavaird are the exceptions to this, in that they will deduct the superlevy on account as soon as their suppliers breach their total quota.

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Milk supplies continued to pour in across the country, with both Connacht Gold and Lisavaird reporting June milk supplies up by 15-16pc.

The big two players in milk volumes are also running at significantly higher supply levels this year. Glanbia's milk supplies are 9pc up on April-June last year, while Dairygold estimates that it is 9pc over quota for the year to date.

In addition, butterfats appear to be slightly higher in many regions. If this continues throughout the year, it will exacerbate the superlevy situation.

This view is backed up by the latest figures from the CSO, which indicate that butterfat levels were 0.12pc higher in May compared to previous years.

"This will further exacerbate an already dire quota situation that is developing on farms right around the country," said the ICMSA's Pat McCormack. "This superlevy has the potential to do long-term damage to the dairy sector by making those farmers that the industry is relying on for expansion the most vulnerable to a cash flow crisis."

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