Farm Ireland

Thursday 22 February 2018

Superlevy fines may sink milk producers

Hundreds face financial ruin as country closes in on quota limit

Declan O'Brien

Declan O'Brien

Hundreds of milk suppliers could be hit with massive superlevy fines as milk supply edges dangerously close to the national quota threshold.

All the major processors have reported a surge in milk deliveries this month and industry sources now fear that an early spring or tighter calving pattern through February and March could push the country over quota.

Although the size of the national fine would be small, farm leaders have warned that hundreds of milk producers could face financial ruin given the extent to which they have over-supplied.

Michael O'Neill, of Glanbia, admitted that between 400 and 500 of the company's suppliers had already delivered their full quota. He said more than 200 farmers had gone "seriously" over quota. It is understood that 30pc of Dairygold's suppliers were running over quota on a year-to-date basis.

Mr O'Neill said supplies to Glanbia had "ballooned" during the last three months, while a spokesman for Dairygold said deliveries for the first three weeks of the year were up 25pc.

"We have 500 manufacturing [milk] suppliers who always stopped supplying for two months but who didn't stop at all this year," Mr O'Neill said.

"And those that did dry off cows are racing back into production again."

Both Dairygold and Glanbia are well over quota and management at both dairies have written to suppliers this week cautioning that a milk superlevy is now a distinct possibility.

Also Read

If Ireland is over quota, then the superlevy fine will be paid by those farmers who are over quota and who supply milk processors that are also over quota. The fine is set at 28.5c/l for over-quota deliveries.

"The view in our supply base was that there would be no problem with quota this year or next but that's no longer the case," Mr O'Neill said.

Reports within the industry suggest that the over-supply levels on some farms ranged from 100,000l to more than 400,000l. An over-supply of 100,000l could result in a superlevy fine of up to €28,500, while farms with an over-supply of 400,000l could be hit with a fine of up to €114,000.

TJ Flanagan, of ICOS, said he had heard "the horror stories". He warned that many farmers were exposed on quota and that a superlevy fine could "sink" them.

Speaking at a Co Limerick meeting last week, ICMSA president Jackie Cahill warned that a "serious brake" would have to be put on milk production if a superlevy fine was now to be avoided.

Although the country was still 2.35pc under quota at the end of December, Mr Cahill pointed out that this figure had been 3.1pc at the end of November.

Teagasc's Dr Laurence Shalloo said the supply situation was still too close to call. He added that milk production had closed in on the quota at a rate of 0.65pc/month since September but by 0.84pc/month since October.

If the lower rate of 'closure' was maintained to the end of March then Ireland would just slip in under quota, he predicted. However, if supply growth held at the higher rate, he said Ireland would exceed its quota.

Indo Farming