Kerry Group expects milk output to come in 3m litres under quota

Dairy regions planning to take a super-levy gamble based on an assumption that Kerry would keep its milk output low this year will have to revise their plans, according to ICMSA dairy chairman Pat McCormack.

Kerry Group has advised its 3,500 suppliers they can safely increase their supply from now to the Mar 31 quota deadline, having estimated that it will be around 3m litres under quota at the end of February.

Kerry Group corporate affairs director Frank Hayes said: “We have informed our suppliers that we expect to come in under quota on Mar 31. We have informed our suppliers of our present situation, which was brought about by good management by our co-ops.

“This time last year, we were 24m litres under quota. We are not telling our suppliers to drive on, but we are telling them that our quota situation has been well managed. Nationally, the picture is looking more difficult.”

Kerry’s more relaxed approach to the next four weeks of output, coupled with up to 50,000 heifers returning to milk production from calving at the start of March, all point towards a national quota excess.

The national picture stands at around 0.3% under, about one percentage point worse than this time last year, when smaller regions reduced output and helped the national pool avoid censure at less than 0.43% under quota.

At the end of January, Glanbia and Dairygold were over quota. Connacht is under quota. Lakeland is on quota, but a recent membership survey showed 33% of suppliers anticipate exceeding quota by 5%-10% in the run-up to 2015.

On balance, Pat McCormack says it will be virtually impossible for Ireland to avoid a super-levy fine this year. With some farmers facing fines of up to €40,000, he wants the Department of Agriculture to release figures earlier in March to give farmers an up-to-date snapshot of the super-levy risk.

He said: “Kerry has given its members the green light to increase their supply. Kerry has its house in order, and it will come in under or close to quota. Kerry was one of the few regions that was likely to have come in significantly under quota.

“From early March, the 50,000 dairy cows that have calved will go back into full milking. There will be a massive milk supply in March. We could see some farmers facing fines of up to €30,000 or €40,000.”

For comparison purposes, Mr McCormack noted that in Jan 2011, Ireland was 1.41% under quota and effectively ended on quota for the year; a similar supply pattern for February and March this year will lead to a super levy fine for farmers.

He said it should also be borne in mind that 0.3% under quota is less than 1,000 litres per supplier, so the present margin is very tight.

Mr McCormack added: “It is vitally important that each individual supplier examines his/her own position and consults with their co-op on an ongoing basis regarding the co-op’s position.

“In the context of a super-levy fine of 28.65c per litre, incurring such a penalty could have a disastrous impact on a farmer. Those under 350,000 litres will have some chance in the flexi pool, but those over 350,000 litres are very vulnerable.

“I did a local radio interview on March 29 last year and got it wrong. I said Ireland would be over quota, but we came in just under. After March 1, farmers will be feeding the milk to calves and trying to hold as much back as they can, but it will really take a miracle this time.”

Mr McCormack also reminded farmers the EU will not balance out quota across the union. Five member states — Denmark, the Netherlands, Austria, Cyprus and Luxembourg — were hit with super-levy fines of €55.6m for exceeding last year’s quota, despite the fact that overall EU production was 6% below the total EU quotas. Some 14 member states recorded deliveries at least 10% below their quota. Ireland scraped through.

Agriculture minister Simon has warned dairy farmers that the current level of milk received (with appropriate butter-fat adjustment) is 0.3% under quota. The corresponding figure for this time last year was 1.41% under quota.

Mr Coveney said: “The threat of incurring a super levy penalty is still great given that in the final two months of last year [Feb and Mar 2011] Ireland produced over 1% above quota. If a similar pattern in followed for the remaining two months of this year a super levy is inevitable.”