Opinion

Opinion: If dairy processors want milk in November they’ll have to pay for it

Dairy farmers have until September 15 to decide if they’d like to partake in the EU’s new scheme to lower European milk production by 1.5 billion litres.

Farmers across the country are currently making up their own minds as to whether the scheme suits their business.  While for many the scheme will be of no relevance, for others getting paid not to produce milk might be an attractive proposition.

Whether or not farmers decide to take up the option, one thing that is for sure is that the scheme has added a new dynamic to the dairy industry.

While milk processors might not like it, ‘the ball’ to an extent is back in the farmer’s court now. The scheme might only be relevant in the short term but farmers have options now.

Indeed, just the schemes availability alone puts an immediate pressure on processors to pay farmers a milk price which is attractive enough to keep them producing milk through the autumn and that keeps them out of the ‘reduction’ scheme.

As one farmer said ‘if the processors want milk in November they’ll have to pay for it’.

While it’s likely most Irish farmers will do the sums, look at dairy market sentiment moving back into positive territory and decide not to partake, across Europe farmers with much higher production costs might take a very different view.

Indeed in many Member States, the 14c/L on offer to reduce production has been further subsidised by national governments with some paying farmers as much as 23c/L to cut back production.

Coupled with buyers returning to dairy markets, should the scheme achieve its target of reducing production by 1.5 billion litres, European milk prices are undoubtedly set to move in the right direction over the coming months albeit from low levels.

In the end, the scheme might be viewed as a blessing in disguise for Irish farmers by putting pressure on Irish processors to increase milk prices in the short-term and also reducing milk production across the continent.

In this way, many Irish farmers could reap all the benefits of the schemes existence without partaking in it at all.

This in itself highlights the ultimate drawback of the ‘voluntary’ nature of the scheme.

A scheme where some farmers are seen to benefit without taking any of the downside is doomed to fail and may leave a bad taste in the mouths of farmers who committed to production cuts but cannot take advantage of rising prices.