Hogan package – what is the longer term impact?

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Within the last seven days, more details have emerged in relation to the European Commission Package of Measures (initially announced by the Agriculture Commissioner’s office on 7 September) and in particular how the UK allocation of the €420m (£365m) of direct aid would be drawn down.

The UK got £26.2m out of a total aid package of £365m agreed at a farm ministers’ meeting in Brussels earlier this month.

Northern Ireland received a boosted allocation of £5.1 million, in recognition that NI dairy farmers have been suffering from some of the lowest prices across Europe, which is a point that the UFU has been making repeatedly during our lobby efforts since July 2014.

You only have to look at the average farmgate milk prices for July 2015. The GB average was 24.25ppl, the EU average price was 21.64 and the average price paid to Northern Ireland dairy farmers was 18.87ppl. This differential has been apparent for the last 15 months.

The UK allocation is split as follows: England - £15.5m; Northern Ireland - £5.1m; Wales - £3.2m; Scotland - £2.3m.

We are still calculating how much each dairy farm will receive in NI and the UFU are still waiting for a decision on the how the money will be distributed within Northern Ireland.

Despite the allocation above, the UFU are increasingly frustrated at the Commission’s continued refusal to look at reviewing Intervention levels. Instead the Commission have decided to look to restoring Market Balance by proposing a “new and improved private storage scheme” to ease the market surplus in dairy protein products such as Skimmed Milk Powder and cheese, granting higher aid levels (per tonne/per day) and longer storage periods to operators

Phil Hogan when once again turning down our request for a review of Intervention said any changes would not be implemented in time to make any difference. It is the UFU view that he is missing the point entirely; our policy has always been that the Commission needs to act now to ensure that we are not in this position again in three years time and what is frustrating for the UFU is that we warned of a pending crisis in the dairy sector over 15 months ago.

It is worth looking at the “Hogan Package” in greater detail as to see what it may contain in terms of addressing longer term issues. The package focuses specifically on three key elements i) addressing liquidity problems; ii) stabilising markets and iii) food supply chain reform.

The Commission are to establish a new dedicated High Level Group to focus on a number of specific issues; credit for farmers and financial and risk hedging instruments such as futures markets for agricultural products (as demanded by COPA). All things the UFU have called for, but it is the latter point which is of particular interest (ie food supply chain reform).

The speech by the Commission also mentioned “possible improvements for producers in the supply chain”. The Commission confirmed that Commissioner Hogan “will be raising a number of questions on the relationship between farmers and retailers “for the better functioning of the food chain”.

The UFU will continue to press the Commission on food supply chain reform. Since the announcement, at the IDF World Dairy Summit in Lithuania last week, Joost Corte, Deputy DG of the European Commission’s agriculture department confirmed that the EC were already working on measures to combat low retail milk prices across Europe and this in itself is a step in the right direction.

Closer to home, on 17 September, it was announced that in Westminster, the EFRA Committee will look at the reasons behind the recent crash in farmgate milk prices across the UK.

As well as submitting written evidence in relation to the NI dairy sector, the UFU will be meeting EFRA Minister George Eustice MP in London on 14 October to highlight the lack of support farmers have received to-date.

The UFU have always taken a proactive approach to dairy policy formulation rather than reactive and going forward we will work towards drawing together a blue print on milk price volatility and looking to what we can address locally to ensure that we are not in this position once again after prices recover and invariably fall again in two-three years.