Farm Ireland

Tuesday 12 December 2017

Quota superlevy fine of €10m looming large

Latest exchange prices of up to 50c/l make 'no commercial sense'

Caitriona Murphy

Caitriona Murphy

Up to 50c/l has been paid for quota in the latest round of the milk quota exchange as the country heads towards its first superlevy fine in five years.

Prices in the exchange ranged from 8c/l to 50c/l, showing only a slight easing from the last round in December when quota hit a high of 56c/l.

The new figures were released against a backdrop of growing anxiety that Ireland is on the brink of a massive superlevy fine for the current quota year.

The country's quota position deteriorated considerably last month, moving from 0.3pc under quota on January 31 to 0.07pc under quota on February 29.

Since then, milk supplies to the co-ops were reported to be very strong, driven by a combination of mild weather, good grass growth and an increase in cow numbers.

Industry experts believe this last flush of milk could be the catalyst for the first superlevy fine since the 2007/2008 quota year.

Last month, ICOS expert George Kearns predicted that Ireland would finish 35m litres over quota based on supplies to the end of January, which would equate to a superlevy bill of €10m. If the over-quota co-ops pulled back supplies by 10pc, that would reduce the over-quota position to 18m litres, or a fine of €5.15m.

However, with February and March milk supplies in all co-ops running considerably up on last year, it looks like a superlevy bill in the order of €10m is looming.

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Early March supplies to Dairygold were extremely strong, although they eased in the second half of the month.

The latest estimate from the southern co-op puts it at 3-3.5pc over quota by the end of this week. This would equate to 30m litres over quota.

A spokesperson for Glanbia said it was in a serious over-quota position, with Glanbia 52.4m litres (4pc) over quota and Premier 1.5m litres (1pc) over by last Saturday. Last week, its suppliers sent in 1.1m litres more than the same week last year.

Kerry milk supplies are running 7pc ahead of last year and the quota position was described by a spokesman as "very tight". Town of Monaghan is expected to finish on quota.

Connacht Gold is expected to finish the year at 3pc (around 76m litres) under quota. Wexford Creameries plans to delay milk collection on over-quota farms for up to three days in an effort to reduce its over-quota position. It is currently 1.2m litres over but expects to pull back to 750,000 litres (0.7pc) over quota by March 31.

Centenary is expected to finish the year 2pc (2.1-2.2m litres) over quota, with March supplies running at 6-10pc higher than the same month last year.

Strong March milk deliveries are also expected to push Tipperary over, with the co-op estimated to finish 0.5-1pc over, which would equate to 900,000-1.3m litres.

Barryroe will finish the year around 3pc over quota, while Lisavaird is expected to finish around 1.5pc (1m litres) over quota.

Lakelands said the quota position at the co-op would be down to the wire but it would finish close to being on quota.

Arrabawn expects to finish the year 0.25-0.5pc under quota, equating to 700,000-1.3m litres, while Bandon Co-op estimates that it will finish the quota year 4pc (3.7m litres) over quota.

Referring to the latest quota exchange, ICMSA dairy chairman Pat McCormack said the prices paid in some co-ops made "absolutely no commercial sense".

"Some co-ops have a case to answer here through their failure to set out -- in a comprehensive and credible fashion -- their complete plans post quota-abolition in 2015," he said.

Mr McCormack added that speculation about co-op policy post-2015 had contributed to the high price of quota, at a time when quota price should be falling.

He said warnings to milk suppliers regarding seasonality penalties and possible capital contributions schemes post-April 2015 had contributed unnecessarily to substantial inflation in quota price.

"There is a bubble and ultimately it will be dairy farmers who will pay for it," he warned.

IFA dairy specialist Catherine Lascurettes described the high prices paid as "over the top".

"The prices are economically hard to justify," she insisted. "No farm should be paying higher than the cost of a superlevy fine at 28.6c/l."

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