Farmers have two weeks to apply to €150million EU dairy aid scheme

The Milk Production Reduction Aid is part of a €500million aid package, agreed at the Agri-Fish Council in July, designed to encourage farmers to reduce milk production to counter the over-supply situation and help restore prices. The EU is seeking to achieve a total reduction in milk deliveries of just over one million tonnes, compared with the same period last year.

Farmers will be compensated if they reduce their production in any one of four separate three-month periods between October 2016 and March 2017. The scheme is expected to start on 11 September 2016 when the legislation comes into operation. Applications for aid from Northern Ireland dairy farmers may be submitted to the Rural Payments Agency (RPA) who will administer the scheme on behalf of all UK regions. Applications for the first reduction period, running from October to December 2016, must be submitted to the RPA by 21 September 2016.

The Minister said: “The dairy sector in Northern Ireland has been experiencing a prolonged period of severely depressed prices and our local farmers have been particularly affected. I am pleased that our dairy farmers can now apply for EU aid to support a reduction in their milk deliveries to processors should they choose to do so.

“I would encourage dairy farmers to consider the detail of the scheme rules carefully and to ensure that they have the necessary supporting documentation readily to hand, should they decide to submit an application.”

Further information and details on how to apply are available at: https://www.gov.uk/guidance/milk-production-reduction-scheme-how-to-apply

The remaining €350million of the July 2016 financial package is for EU Exceptional Adjustment Aid which has been allocated to Member States to spend on measures that foster the economic sustainability of farms and that contribute to market stabilisation. The UK aid envelope is around €30million.

Minister McIlveen added: “I am committed to supporting farmers in Northern Ireland at this difficult time and to helping build a strong, sustainable and resilient agri-food industry for the future. I have made the case for Northern Ireland to receive a significant share of the UK envelope of EU Exceptional Adjustment Aid. I am currently considering the options for how best to use our allocation and will make a further announcement about this aid at the earliest opportunity.”

The EU Milk Production Reduction Scheme – Points to consider on-farm

The EU-wide Milk Production Reduction Scheme has a budget of 150 million euro and will be allocated over four tranches or, until the one million tonne target is achieved. There is no set allocation for any Member State or region.

It is important to consider the implications for your farm business before you apply. Each farm situation will be different.

So what do you need to think about?

- The payment will be around 12ppl. The maximum reduction you can claim payment on is the amount that RPA confirms to you. Within this, you will be paid for the actual milk delivery reduction, provided you achieve at least 80% of the reduction you applied for and the scheme is not over subscribed.

- You will not be paid for any additional reduction over and above your confirmed reduction.

- If your actual reduction is less than your confirmed volume of litres, then payment will be scaled back. If the reduction is 20% or less then no payment is made.

- You must have delivered milk to a processor in July 2016 and payment will be limited to 50% of the production level you achieved in the same period in the previous calendar year (known as the reference period). The minimum level of reduction for which payment will be made is 1457 litres or 1500kg of milk.

- What is your current cost of production? CAFRE Benchmarking highlights the significant range that exists on farms. The higher your costs of production the more attractive the scheme may be.

- Ideally you need to know the proposed milk price to be paid by your milk purchaser over the three month time period covered by your application. In previous years, winter bonus schemes were available to farmers in Northern Ireland.

- Has a reduction in milk supplies been planned through milking fewer cows, culling older/problem/less productive cows, combined with reduced meal feeding? Avoid making knee-jerk decisions based on getting 12ppl for 3 months.

- If cow numbers are reduced during this year, are there enough replacement heifers in the system for future years?

- What is the quantity and quality of silage available on the farm? A number of farms, particularly in the west, have poor quality silage and this will have a knock on effect on milk production.

- For economic milk production this winter on your farm, you need to consider the current Milk Price : Meal Price Ratio, taking into account forage quality.

- The herd calving pattern. If you have a late winter/spring calving herd, a reduction in milk supplies may be more straight forward to achieve, as yields are naturally decreasing and simply drying cows off earlier will allow you to cut production with a high degree of certainty. But remember, late lactation milk is normally higher in milk constituents and attracts bonus payments and this should be considered.

- An autumn/early winter calving herd will have more fresh calved cows in early lactation. Any significant change in feeding levels to reduce milk production will negatively impact on the cow’s energy balance resulting in potentially long-term effects on cow condition, milk quality, fertility and total lactation yield. Silage quality will dictate whether this is an option to be considered on these farms.

- What impact will reduced production and a payment of 12ppl have on the farm cashflow? What other costs apart from the meal bill can be cut on the farm? It is likely any production reduction will have minimal impact on fixed or overhead costs as the Scheme potentially only covers three months during October – March. You need to take account of when you will receive payment under the Scheme and factor this in.

- The calf rearing system, can you switch from milk powder to whole milk to achieve the supply reduction?

The points identified are some of the areas dairy farmers need to think about and weigh up before submitting a scheme application. Be realistic as to what level of production reduction can be successfully achieved without negatively impacting cow health and welfare or the longer term plans for the farm. In general the scheme might be most applicable where a reduction in milk supplies due to lower cow numbers and/or poorer quality silage is already known. Changing your system to increase payment under the scheme requires detailed analysis and carries a risk given the way the funding is to be paid. Also, if the scheme is over subscribed, the volume of milk you will receive payment for may be considerably lower than expected or, for later tranches, you may not receive any payment at all.

Further information, and details on how to apply, are available at: www.gov.uk/guidance/milk-production-reduction-scheme-how-to-apply