Farm Ireland

Wednesday 21 February 2018

The race is on for EU dairy compensation

Hundreds expected to apply for milk reduction payments

EU Commissioner Phil Hogan. Photo: Reuters/Francois
EU Commissioner Phil Hogan. Photo: Reuters/Francois

Declan O'Brien and Darragh McCullough

Co-ops face a wave of applications from farmers opting for the EU's new voluntary milk supply reduction scheme.

Top dairy advisors say that farmers in marginal areas would be 'foolish' to ignore the 14.42c/l payment if they are facing the alternative of feeding silage and meal to produce milk at the current critically low prices.

"A farmer milking 100 cows could pocket €9,200 in EU compensation by drying off cows at the end of September," said Teagasc's John Donworth.

However, he added that it would only be attractive to farmers who did not have grazing available or milk sold forward into the fixed price schemes that are paying considerably more than the current average of 22-23c/l.

With 40pc of the country's milk pool produced on marginal soils, it is likely that hundreds of farmers will be keen to access the scheme.

EU Agriculture Commissioner Phil Hogan said that the scheme would run on a first-come-first-served basis. This will force farmers banking on the payment to get into the scheme as early as possible.

The moves are likely to put dairy processors charged with administering the scheme under huge pressure given the tight three week window for applications being mooted by Commission officials.

This is despite claims that there would be no "appetite" among Irish dairy farmers for the initiative.

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"If there is demand the co-ops will do their best to facilitate it," said ICOS food policy executive, Eamonn Farrell.

He explained that there would only be €150m available across the whole of the EU's dairy sector.

Ireland accounts for just 4pc of the EU's total milk pool, so if a lot of Irish farmers want to be certain of maximising their payment, they should apply sooner rather than later, according to the ICOS executive.

The EU hopes to reduce output by 1.1bn litres through the incentive, which is part of a larger €500m package aimed at helping EU farmers through the current commodity price slump.

However, John Donworth stressed that it would not be attractive to all producers.

"If lads have fixed 20pc of their supply and have good solids then they are still winning at the current milk price. But it won't pay farmers to milk cows once they are off grass," Mr Donworth said.

He estimates that a compensation payment of €9,216 would be available to a farmer with a 100-cow herd supplying 640 litres per cow up to the latter half of November. The Teagasc specialist said it would be up to each farmer to work out whether this represented a better return than continuing to milk on their cows for the period.

Member states will have the option of choosing one of four three-month time periods running from October this year to March, 2017.

However, final details of the overall package, and the application process, will only be signed off at the next EU management committee meeting on August 25, while the closing date for applications for the October to December period is September 19.

Commenting on the package, ICMSA president, John Comer, said it had could be an early boost to milk price if the details were finalised quickly and farmers knew well in advance.

Interested farmers will have to inform their processor, before their application is forwarded to the Department along with data specifying the supplier's proposed supply cut and the farmer's supply records for the same period in the previous year.

Payments under the supply reduction element of the package will be made in the first quarter of 2017.

On the remaining €350m available under the package, it is understood that the option of using Ireland's €11.1m allocation to facilitate some type of liquidity loans to farmers is being considered by the Department.

"The Commission are believed to hold the view that this might be possible, but the scheme would also need to have some sort of supply adjustment element," informed sources said.

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