Farm Ireland

Friday 27 April 2018

Supply controls vital for dairying

Declan O'Brien

Declan O'Brien

SUPPLY controls or market management mechanisms will be required for the dairy sector if producers and consumers are to be protected, Connacht Gold chief executive Aaron Forde has claimed.

Mr Forde told a 'Forum on Farming' meeting in Claremorris, Co Mayo, last week that the level of price volatility seen over the past two years had the potential to destroy the production base and markets for dairy produce if it was not controlled.

Characterising low milk prices as "producer destructive" and high dairy product prices as "demand destructive", he said a method of dampening these market swings was needed.

"What form this takes, I don't know. Maybe supply contracts are an option," Mr Forde commented.

He warned that producers would not stay in business if milk prices failed to provide a fair return to farmers for their investment and labour.

"We have to reach a point where the prices cover the cost of production and leave a margin or our production capacity will be destroyed," Mr Forde told the forum.

He said milk producers in New Zealand, the US and across the EU had all been operating at, or below, the cost of production last year.

ICMSA president Jackie Cahill warned of "Armageddon" in the dairy sector if policy makers failed to learn from the lessons of last year.

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He said the issue of supply contracts was on the agenda for a crucial EU dairy management committee meeting due to take place at the end of March.

Mr Cahill pointed out that the EU had spent €600m supporting milk prices last year and that without this intervention returns to farmers would have dropped to 16c/l.

"If we're going to have price supports, we'll have to have supply management because Europe will not continue to support an expanding milk pool," Mr Cahill maintained.

"We want a system with proper price supports and if this involves volume controls, then so be it," he added.

On dairy sector consolidation, Mr Forde said investment would be needed to fund such a process as the industry is under-capitalised, having spent €200m supporting milk prices over the past two years.

"The difficulty we are grappling with is how do we get to an improved structure and how do we fund this?"

More than 750 people turned up for the forum, which was organised by Connacht Gold.

As well as Mr Forde and Mr Cahill, the panel of speakers included John Horgan of Kepak, Jim Power of Friends First, IFA president John Bryan, local farmer Cathal Garvey, the Irish Dairy Board's former interim chief executive Sean Brady and Teagasc director Professor Gerry Boyle.

Irish Independent