Milk production controls 'inevitable' to counter price volatility
The "honeymoon is well and truly over" for dairy farmers, who are now facing a very challenging period, IFA National Dairy Committee chairman Tom Phelan has warned.
Mr Phelan told a recent meeting in Limerick that a voluntary milk production control mechanism may become "inevitable" to counter price volatility in the sector.
Price reductions of the scale forecast this year threaten to slash milk sales from a typical 100-cow herd by up to €1,000 a week compared to 2017.
The IFA Dairy Committee has agreed to support a voluntary system of production management across the EU, but Mr Phelan stressed that the association would not support mandatory milk output cuts.
Any initiative would include some form of production management tool to restore market balance following the surge in EU milk production in the post-quota era, and the growth in production globally, the IFA representative explained.
"We do need a more sustainable model of producing milk going forward," Mr Phelan said.
However, he argued that such a scheme should not impact on Irish producers, because of their advantage of efficient grass production and low carbon footprint.
Looking to the immediate outlook for milk prices, Mr Phelan said there were mixed signals coming from the markets.
"I am slightly more optimistic than I was a few months ago, because production in New Zealand is down," he said.
However, he pointed to the continuing overhang of 370,000 tonnes of skim milk powder (SMP) in intervention as a major concern.
"I'm very concerned that it (SMP intervention stock) is going to create a crisis in the market," Mr Phelan admitted.
"It is the first time that the commission is losing money on intervention, because they always made money on it, and we are trying to get them to agree sell it [the SMP] for feed."
Mr Phelan said that intervention worked in a milk quota situation where supply was controlled, but that there was a need for other supply management tools.
The EU 28 was the largest global producer of milk in 2017 at 151.7 million metric tonnes of product, which was 55pc higher that production in the US, the second highest producer.
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