Soaring levels of milk production push Ireland towards EU super levy

SOARING levels of milk production seem to be pushing Ireland almost inevitably towards being hit with EU super levy fines, according to most dairy industry experts.

Minister for Agriculture, Fisheries and Food Brendan Smith yesterday cautioned milk producers about the “very real possibility of a milk super levy being incurred at the end of the 2010/2011 milk quota year in March”.

This follows similar recent warnings from Teagasc expert Laurence Shalloo, Glanbia chief executive John Moloney and AIB head of agri strategy Michael Dowling.

To avoid exceeding quota and facing fines of 28c per litre, the experts advise dairy farmers that removing concentrates could reduce yield by 8%, to use once-a-day milking and rear or buy calves to soak up excess milk. Buying extra quota is also an option.

Mr Smith said: “Farmers need to actively manage the avoidance of incurring a super levy all the way to 2015. The alternative prospect is that farmers who fail to take account of continued quota restriction could be left with super levy bills in each of the remaining years prior to quota abolition.”

There has been a sharp acceleration in milk production up to the end of 2010, with butterfat-adjusted deliveries running at 2.35% under quota at the end of December, having been 5.15% under quota at the end of September.

Mr Smith said that early indications were that the acceleration in supply had continued into the early weeks of 2011, thus increasing the likelihood of a super levy.

Mr Smith said: “In these more volatile and challenging times, the priority for a producer must be to produce as much milk as possible, at the lowest possible cost. This is, of course, particularly important to those producers looking to expand and develop their enterprises.

“However, it is equally important that an appropriate balance is struck and that producers observe quota limits and not run the risk of incurring a potentially ruinous super levy.”

At Teagasc’s Positive Farmers conference in Limerick, Laurence Shalloo cautioned dairy businesses that they risked bankruptcy if they failed to keep within quota.

The co-ops are all conscious of their quota limits. Glanbia is currently 4.3% over quota, Dairygold around 3.3% over quota, but Kerry is 5% under quota.

Ireland finished 9.8% under quota for 2009/10, and has been allocated an extra 1% each year from now to 2014.

Nonetheless, the quota era doesn’t end until 2015, and farmers are clearly in danger of going over quota every year from now until then.