Is a superlevy Saturday beckoning?

Declan O'Brien

Declan O'Brien

The country is once again on the cusp of a superlevy fine, and this week's cracking grazing conditions have put a serious hole in any lingering hopes of the sector sneaking in under the wire.

While making definitive predictions on the milk quota situation is invariably a dangerous game -- we got it wrong last year -- the general consensus is that Ireland will be over the mark this time around.

However, although processors have taken a proactive approach in keeping a lid on milk production since last summer, farmer reaction has varied significantly.

While some dairy farmers have made genuine efforts to curb supplies -- such as once-a-day milking and selling off stock -- others have adopted a far more laid back approach.

This is particularly the case with younger dairy farmers, who are preparing for a major expansion in their operations from 2015.

These farmers make the point that even with a superlevy fine of more than 28c/l, the current high milk price means that the cost of producing the milk and paying the fine in very efficient set-ups can be covered.


However, what happens if milk prices fall?

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Dairy processors predict that returns to farmers could drop back close to 30c/l through the summer. Markets for dairy commodities remain weak, while production in the main exporting regions has increased this year.

In such a scenario, the viability of producing over-quota milk and paying a superlevy fine on these volumes would surely be turned on its head.

It must also be recognised that adopting a cavalier attitude to the whole milk quota regime has proven very divisive among dairy farmers.

Many of those who dried cows off early or switched to once-a-day milking will tell you privately that they hope the country goes over quota so that those who have pushed out the boat are forced to pay. There is very little sympathy for those who blew their quota out of the water.

It has been estimated that the country would finish 35m litres over quota based on supplies up to January. This would equate to a superlevy bill of €10m.

Such a fine would be a considerable drain on cash-flow at farm level, particularly if input costs increase further and milk returns take a dip.

The prices from the latest milk quota exchange confirm that access to quota remains a serious concern across the main milk-producing regions in the south and east of the country.

Paying superlevy fines of 28c/l or buying quota for 40-50c/l is not what dairy farmers were supposed to be doing this year.

Indo Farming

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