August 26, 2011

 

EU milk quota prices to remain soaring until 2015

 

 

Milk quota prices in the EU will continue to rise between now and the end of the country's quota regime in April 2015, warns ICMSA dairy committee chairman Pat McCormack.

 

The dairy group expert is urging Agriculture Minister Simon Coveney and the co-ops to follow the lead of Kerry Co-op, the only group so far to offer post-quota price clarity to dairy farmers.

 

Kerry is to offer farmers contracts guaranteeing it will process 20% more milk than the co-op's present quota from 2015 onwards.

 

This move was well received at Kerry's meetings on the transfer of shares to Kerry Group, and at its recent interim results meeting.

 

The ICMSA wants similar clarity from other co-ops to dampen the soaring prices now being paid for quota. Analysts predict quota will soon regularly exceed 40c per litre. One recent 79-acre land sale in Co Meath with a 363,000-litre quota sold for almost 53cpl.

 

Pat McCormack said, "There is a pressing need for the minister and the co-ops to send out clearer signals regarding milk quotas and possible processing rights to dampen the current quota market which has heated up beyond realistic levels.

 

"The lack of any real clarity from milk purchasers, with the exception of Kerry, is causing speculation that the current price for quota is not just to cover any superlevy liability over the next four quota years - including the current year - but that quota purchased now will also have valuable processing rights. Dairy farmers in individual co-ops need clarity on this matter without much more delay."

 

Dairy farmers are in broad agreement some new form of production management system will be necessary post-2015, given the huge milk output expansion likely to follow the end of the volume restrictions imposed by the EU's quota regime.

 

However, the lack of clarity comes partly from uncertainty over what format that production management system will take. Likely possibilities include a contract between the farmer and the co-op, a licence or guaranteed processing rights.

 

The problem for individual dairy farmers is that their local co-ops could yet choose any of these options, or indeed some entirely different production management arrangement.

 

Without a clarity from the co-ops, perhaps coupled with some umbrella guidance from the Department, the ICMSA feels quota values will continue to soar as farmers presume that quota will be linked to future processing rights.

 

Pat McCormack also said the demands for extra quota is coming from various categories of farmers, including those who have long established plans for gradually building their quota over time and individuals who have made rapid increases in milk output in more recent times.

 

Against this background, the management of Ireland's quota this year and policy and management for the remaining three quota years will be very important to ensure fair play for all farmers, said the ICMSA dairy committee chairman.

 

"The vast majority of farmers would see no need for massive changes in quota redistribution and allocation rules," said McCormack. "Clearly the minister and his department have an obligation to take account of all legitimate claims to quota, but in so doing this they should not make radical changes in order to accommodate one group at the expense of individual farmers who have been involved for some time in a gradual expansion of their herds and have an expectation that the quota rules will not be radically altered. Fair play for the majority of milk suppliers must be the principle underlying the milk quota rules up to April 2015."