Voluntary supply reduction scheme can boost milk prices quickly – ICMSA

The €150m Voluntary Supply Reduction Scheme announced as part of the latest EU dairy aid package has the potential if structured correctly to provide an early boost to milk price, ICMSA President, John Comer has said.

But, he said that it is important that the scheme is finalised quickly and that farmers know where they stand well in advance of the October 1 start date.

Comer said that the ICMSA had lobbied for the introduction of this scheme despite a lot of opposition from dairy processors and others in Ireland.

“We firmly believe that the scheme will deliver stronger milk prices for farmers and in addition will provide all dairy farmers in Ireland and across the EU with an option to reduce supplies while milk price is below the cost of production while not preventing those who wish to expand to continue to do so,” he said.

As it stands, ICMSA understands that the following are the details of the scheme:

  • Where a farmer opts to reduce his/her production in the October-December 2016 period below his/her production in the October-December 2015 period, he/she will receive a payment for the amount of milk not produced. For example, if a farmer produced 50,000 litres in the October-December 2015 period and opts to produce only 30,000 in the October-December 2016 period, he/she will receive a payment on the 20,000 litres not produced.
  • The payment rate is expected to be approximately 14 cents per litre.
  • The payment will be paid in late January/early February 2017.
  • Farmers are likely to have to apply to either to the Department of Agriculture, Food & Marine or their milk processor.
  • The closing date for applications will be either 12th September or 19th September.
  • If the €150m is not used in the first scheme, there will be further scheme based on the rolling three month average.

Comer said that farmers across the EU have been producing milk below the cost of production for over a year and he complimented Commissioner Hogan for now introducing a scheme that has the potential to increase milk prices much earlier than expected and get farmers back into a profitable situation.

The scheme will also focus minds at milk processor level because farmers now have an option to supply or to reduce production.

“If milk processors across the EU need milk in the fourth quarter this year, they are now going to have to recognise that milk production in the fourth quarter will be back 1.1m tonnes and that should mean stronger returns from the marketplace and stronger returns for the farmers.”

The ICMSA President said that the European Commissioner for Agriculture, Phil Hogan stated that this is a scheme to boost farmers’ incomes and ICMSA believes that the scheme certainly has the potential to deliver stronger milk prices to farmers provided the funding is adequate.