Speculation is growing that EU farm commissioner Phil Hogan will announce a dairy aid package on Monday next (July 18th) that will be tantamount to a pan-European voluntary milk control scheme.
“This is the type of measure that we have been calling for,” said Charlie Weir, from Fair Price Farming NI.
“The scheme would work on the basis of producers being paid a reasonable price for the milk they do not produce for an agreed period of time.
“On the basis of a 5% reduction in output, secured across 60% of Europe’s dairy farms, a fund of €500m would allow farmers to be paid the equivalent of 25c/L for the milk volumes they decided not to produce over a six-month period.”
“Obviously, a measure of this type will tighten supplies of milk across EU over the coming months. But it will also help to boost market sentiment. And this factor will kick-in as soon as the scheme is announced in Brussels.”
Mr Weir believes that the €500m funding package could be made up by the €150m underspend from the previous dairy aid package, announced before Christmas last year, and additional EU monies.
Fair Price Farming NI and Holstein UK have, since the 2015 RUAS Winter Fair, worked together in a bid to achieve a better milk price for all farmers, lobbying in Stormont, Westminster and Brussels.
“With the abolition of milk quota in 2015 and the subsequent surge in production from some EU member states, oversupply was only going to drive milk price in one direction,” said Holstein UK’s John Martin.
“Together we outlined a proposal which in February was presented to Commissioner Hogan and we look forward in anticipation of an announcement on Monday 18th July in which we trust the commissioner will embrace our logic and compensate farmers for producing less milk which is the only way to achieve a sustainable milk price for Dairy Farmers.”
Mr Martin added: “According to our calculations 2.5% oversupply in Europe has cost NI Dairy farmers 12-15ppl. To readdress the balance only 60% of Europe’s milk needs to reduce by 5% below 2015 levels which would readdress the supply demand imbalance.
“Our objective has been to ensure there is compensation available to ensure dairy farmers’ cash flows are maintained during the transition period. The compensation is only a means to an end. An announcement on Monday that Europe will embrace such a policy will drive market sentiment and we can see further milk price increases as supply reduces.
“We believe that to handout a fraction of a penny per litre will only achieve what the last hand out in October achieved, very little. Look no further than mainland UK for evidence of reduced supply as the spot milk price was recently reported at 25-30ppl.
“Cumulative supplies in Europe however continue on an upward trend and with significant intervention stocks, action is needed now. We have advocated compensation of at least €25c/L for up to 5% of a reduction on
2015 monthly supplies as an incentive which at today’s rate would equate to 21ppl. This reduction would be easily achieved on most farms through small management tweaks and most importantly, when milk price does rise, farms will be well placed to take advantage.”
Mr Weir pointed to a recent survey of dairy farmers in Northern Ireland, which confirmed that 80% were committed to reduce supplies voluntarily when compensated.
“We do not believe that we are placing our export markets at risk by pushing for a voluntary milk control scheme,” he stressed.
“Indeed, when we met processors to discuss implementation of the scheme, most had concerns about the long term availability of milk if a significant upturn in prices was not evident very soon.
“Processors and banks that we have met both agreed that supply would be in greater peril if a slight recovery was realised flat lining at 22-23ppl when a move would then be made against some of the more vulnerable farms. These farms in many cases are some of the most efficient with a younger generation who were encouraged by the various food strategy reports to grow and invest in the dairy sector.”
Mr Weir concluded: “The best new market for NI in 2016 for some processors was the Intervention Stores. Is this a market we should be protecting? On the contrary we believe that in a prolonged downturn such as this, Intervention has been of limited benefit.
“A market-led production profile going forward is one way we can address future volatility. Dairy Farmers must grasp any opportunity to take control of their own destiny. We trust on Monday Commissioner Hogan follows through on what may prove to be a new dawn for Dairy Farmers.”