EU dairy package could require Irish farmers to reduce milk production

Another dairy aid package is currently being considered by the European Commission and will be presented to EU Agriculture Ministers in July.

However, pressure is mounting from a significant number of Member States that any further aid package from the Commission must be coupled with milk production cuts.

It is understood that the new package which will be on the table at the next Council meeting in July will include further measures to support efforts to reduce milk production across Europe.

The IFA is calling on Minister for Agriculture Michael Creed to resist any conditionality in aids, especially relating to the requirement to reduce production, and to put forward Ireland’s concerns relating to Brexit to ensure Irish dairy farmers can avail of fair and equitable levels of support.

IFA National Dairy Committee Chairman Sean O’Leary says the EU dairy support package to be presented by the EU Commission must reflect the fact that the dairy income crisis is affecting all EU dairy farmers, and that the consequences of Brexit may uniquely impact the Irish dairy sector.

IFA will be meeting on Thursday with the Hogan Cabinet with like-minded Dutch, Danish, Swedish, German, UK and NI farm organisation representatives to resist any such discrimination, and press for additional funding so that this package does not rely on the Crisis Reserve.

While all Member States are hoping the package can be financed from existing EU funds it is understood that a number of Member States indicated that they are willing to use the Crisis Reserve should it be necessary.

Such a move would be politically sensitive in my EU countries as it would involve a reduction in the EU payments of all farmers.

‘Farmers have invested in a quota-free dairy sector’

O’Leary said Food Harvest 2020 flagged the Irish dairy sector’s expansion plans as early as five years before the end of quotas.

“Farmers and co-ops have made investments in the legal certainty of the end of quotas in 2015. That a combination of global supply and demand factors led to a prolonged downturn which coincided with the end of quotas is unfortunate.

“However, it was not the fault of those EU farmers – such as the Irish – whose extra milk production has not relied substantially on market supports, but has been sold commercially on the global market place,” he said.

According to the IFA Dairy Chairman, EU output growth is already slowing, even falling back in some countries (France, the UK, Poland). Meanwhile, he says EU cow slaughters for the first quarter of 2016 are up 5.8%, April slaughters up 12.6%, with increased culls in France, the UK, the Netherlands and Germany.

“So, is it wise, as some advocates argue, to link any EU funded aid to production decreases and will it really speed up milk price recovery? Global factors govern the milk price paid to most, if not all, EU dairy farmers.

“Unilateral production reductions in the EU will not address output growth in the US, nor will it address the strain on demand from the extended Russian ban, the slower buying growth from China and lower oil revenues,” he said.

Mr O’Leary warned against using the Crisis Reserve, as some have advocated, to provide for this aid package. The Crisis Reserve is funded from a deduction from every farmer’s basic payment. Direct Payments made up 32% of dairy incomes in 2015 according to the Teagasc National Farm Survey.

“All EU dairy farmers need support through this prolonged slump, as their incomes and cash flows have come under massive strain. A recovery is afoot, but it will take time to translate into viable milk prices – EU farmers did not cause the slump, and all, including Irish dairy farmers, need fair and equitable supports funded from non-CAP EU funds,” he concluded.