ICMSA fears ‘bubble’ developing as exchange prices for quotas inflate

INFLATED prices for the exchange of milk quota are fast developing into “a bubble”, according to ICMSA dairy chairman Pat McCormack.

The dairy sector expert said explosion in the cost of quota should be of concern across the sector. In the case of Kerry, that increase is almost fourfold from 8c to 30c; and in Connacht Gold, a traditionally low-cost quota area, it has almost doubled from 5c to 9c per litre.

Mr McCormack said: “There are too many unknowns, many of which could be addressed and clarified in a straightforward way. In fairness to the Department of Agriculture, they have set out a system of providing information regarding the supply situation based on the average of the last three years. This system is unfortunately not followed by all co-ops.”

That situation also applies in Arrabawn, while in the Lakeland area it has trebled. Regardless of the means of assessment, these price rises make no commercial sense, stated the ICMSA dairy chairman.

He said that there is a bubble in the making here and that it will be dairy farmers who will pay for it. At a time when quota prices should be falling, the opposite is the case.

“The Milk Quota Trading Scheme is not the real market. The real market is selling Irish dairy products on the domestic and foreign markets at a profitable margin. The Milk Quota Trading Scheme is merely re-distributing money from active dairy farmers to people who are exiting the sector on the eve of the quotas being abolished. More rational consideration of these points based on sound data and proper analysis is required and overdue.”