Banks urged to see past superlevyfine and invest in dairy expansion

Banks need to see beyond Irish dairy’s €16m superlevy fine and the sector’s weather-induced profit hits, and invest in the expansion plans of Irish dairy farmers, says one leading milk sector analyst.

IFA dairy chairman Kevin Kiersey said the EU’s confirmation of the €16m superlevy fine for Irish dairy farmers’ 60,000 tonnes to the end of March simply highlights the plight facing the sector this year.

He said this “massive cost” follows a series of hefty bills this year, including extra animal feed due to foul weather. He said the banks can play a key role in alleviating the sector’s present pressures.

“I believe banks must appreciate these farmers’ situation, and understand that, while the quota regime is in place for the next few years, superlevy will, for some farmers, be one of the costs of expansion.

“They must be receptive to farmers’ financial needs, and we have approached them on this issue,” said Mr Kiersey.

The superlevy is charged at €27.83 per 100kg and is levied on producers, money which most of the co-ops have been extracting from over-quota suppliers’ milk cheques all year long. The Irish co-ops had predicted this level of fine at the start of the year, and have made the appropriate reductions from the relevant farmers’ milk cheques.

Five other EU member states are also over-quota, namely Austria, the Netherlands, Germany, Cyprus and Luxembourg exceeded their national quotas by a total of 283,000 tons, despite the 1% quota increase in the year 2011/2012 decided in the framework of the 2008 CAP Health Check.

The Netherlands also exceeded its direct sales quota, while the other member states exceeded only their quota for deliveries. In total, these member states have triggered penalties of about €79m.

However, overall total EU deliveries remained -4.7% below the global quota volume. In all, 10 member states recorded deliveries at least 10% below their quota, with neighbouring UK notably 9.8% under quota.

The Irish dairy sector has long been among those member states suggesting that superlevy fines should only come into effect if the member states collectively exceed the EU’s overall quota total. The dairy quota system was introduced in the 1980s to address problems of surplus production.

Mr Kiersey said this year he has met several senior EU civil servants in charge of the “soft landing” review to be published in December to gain recognition for the Irish situation. He has also broached “soft landing” with the EU Commissioner at every one of his meetings with IFA.