Does the dairy industry need EU supports?
With less than four months go to until milk quotas are abolished, calls are being made for the introduction of support measures. Here, I outline why I believe such support measures should be introduced.
Elsewhere Margaret Donnelly outlines why she thinks support measures should not be introduced.
Back in 2009 and 2012 the EU Commission acted to support the milk industry only after the full impact of a total collapse in world dairy markets had been visited on producers the length and breadth of Europe. This must not be allowed to happen a third time.
Let’s be very clear about this: the boffins in Brussels have had many months’ notice of the pressure on dairy markets that will impact on EU farmgate returns during the first six months of 2015.
But of even more significance this time around is the fact that the crisis now unfolding within Europe’s dairy sector was – to a significant extent – caused by the breakdown in political relationships between Russia and the EU. President Putin’s decision to introduce a ban on EU food imports was the last straw in terms of creating a perfect storm for Europe’s dairy farmers.
The good news is that the European Commission has all the support tools it needs to make a real difference on behalf of dairy farmers. These include intervention, aids to private storage and export refunds. The challenge is one of scaling up their scope significantly – and immediately. The current dairy intervention price is in the region of 20.6c/L.
If producer returns are allowed to drop this far, there will be a wholesale clear out of dairy farmers from the industry. In reality, the intervention price should be set at a level that, at least, gives dairy farmers in Northern Ireland some chance of coming through the next six to nine months with their businesses intact.
Phil Hogan is the new man at the head of EU agriculture in Brussels. Given his Irish background, he knows full well how important it is to maintain the fabric of the milk sector in this part of the world. He has already said that he will not be afraid to make decisions: local dairy farmers will not have long to wait in order to gauge if he is a man of his word.
Long term, the spectre of volatility looms large as a challenge which the EU dairy sector must address in a post quota world. Last Friday saw ICMSA President John Comer calling for the introduction of a Strategic Volumetric Supply mechanism to be put in place as a means of dealing with this threat. While the ICMSA representative has not yet had the opportunity to flesh out exactly what he means, his idea has all the hallmarks of re-introducing quotas by the back door.
Personally, I don’t think this will wash: the reality is that land availability will become the self-determining restraint mechanism when it comes to capping milk output in Ireland and throughout other areas of the world.
Meanwhile, I do firmly believe that measures must be taken by the Irish Government – and right now – to stop Ireland being ‘conveniently’ blamed for the recent downturn in milk prices. Dairy conferences held recently in the UK have echoed to the view that Ireland’s planned milk expansion will crash EU milk prices over the next five years. And, as we all know, nothing could be further from the truth.