Supporting milk prices too much could damage dairy co-op finances this spring

With dairy market prices continuing to remain depressed incoming ICOS CEO, TJ Flanagan has warned for its impact on the finances of the countries’ dairy co-ops.

Flanagan has said that while we must all remain hopeful of an upturn, on the basis of current milk prices and projections, the typical dairy farmer could take a €30,000 hit on income.

He noted that will result in a cash flow crisis on many farms, particularly for new entrants and those who expanded production significantly.

Last season, dairy farmers benefited from co-op support for milk prices which exceeded €100 million for the year, Flanagan explained.

“Co-op boards were happy to provide that support; it’s what the co-op model is all about.

“But we have to be careful not to damage the co-op’s finances, which would undermine the position of farmers in the long term,” he warned.

He highlighted that the fact that Banks are reporting only a marginally higher overdraft utilisation compared to the same period last year demonstrates the degree to which farmers are utilising co-op credit to fund their feed, fertiliser and other input purchases.

“Huge work has been done by co-ops in developing fixed price schemes, which farmers are very glad to have availed of, but more needs to be done to help farmers to get through this year’s difficulties,” he stressed.

Government

The fact that we don’t currently have a Government could be significant, Flanagan cautioned.

“We may lack the structures to capitalise on the European Council’s decision to allow emergency State Aid to be granted to farmers, to a value equivalent to €15,000 in one year. The aid could take the form of access to temporary finance schemes (loans or guarantees) to bridge the liquidity gap.

“Whilst the Minister received a negative response to his request for a deferral of super levy instalments due for this summer, we must persist with the request, since every €1,000 of spending that can be saved this year could make a vital difference,” he said.

Taxation

Many farmers, particularly those on income averaging, will face significant tax bills this year, Flanagan said reflective of strong income levels in recent years.

“Unfortunately, much of the strong cash-flow from those years was spent on expansion, with cash-flow implications this year, and highlighted the move by the French government to defer €500m in farm tax and social insurance bills for this year.

“If the authorities here were in a position to do likewise, that would make a significant contribution to helping farmers’ cash-flow problems,” he said.