Stephen Cadogan: Phil Hogan’s new dairy aid package unlikely to satisfy all

On July 18, European commissioner for agriculture and rural development Phil Hogan will present a new EU dairy support package to the council of agriculture ministers.

He has little hope of satisfying everyone around the table.

Today, he will hear from Irish farmers, represented by IFA, and what IFA calls “like-minded” Dutch, Danish, Swedish, German, UK and Northern Ireland farm organisation representatives.

IFA says they are resisting discrimination against any country’s farmers — and any moves to raid the crisis fund which farmers pay into.

IFA opposes any move by Mr Hogan to link EU-funded aid to cuts in milk production on farms.

Meanwhile, another team of EU farmers says that paying farmers to produce less, at a rate of 30c per litre, from EU funds, is the only way to help those suffering through a long slump in global dairy markets.

This has long been the call from the European Milk Board, which represents about 100,000 dairy farmers in 16 European countries.

One of their member organisations is Ireland’s ICMSA.

ICMSA President John Comer says the onus is on Agriculture Minister Michael Creed and his council of agriculture ministers colleagues to convince Mr Hogan that EU milk over-supply must be addressed at source, with a voluntary scheme subsidising farmers to cut 2016 production relative to 2015 — but which would not prevent those farmers who wished to expand from doing so.

Mr Creed hasn’t committed one way or the other, but said any action agreed by the council of ministers must not place farmers at a disadvantage when the market shows signs of recovery, and must avoid compromising farmers’ long-term prospects.

With so many conflicting demands, there’s a danger that the EU’s incoherent dairy policy (as it is described by Irish CAP reform expert, Alan Matthews) could become even more incoherent.

By way of example, Mr Matthews says France is one of the main countries calling for milk supply management, yet it persists in providing a coupled aid payment for half of its dairy cow population, which stimulates the very production which is causing the crisis. 

It is also one of the countries which has not yet made use of the last EU-funded assistance package for its dairy farmers.

Mr Matthews is also critical of the “woeful inaction on the part of the dairy industry as a whole to prepare for milk price volatility”— although he acknowledges Glanbia’s efforts in Ireland, introducing the MilkFlex loan scheme, a milk price-related lending instrument.

The CAP expert says the dairy industry could also have worked harder on tax-incentive savings policies, risk-sharing milk contracts, and insurance products such as a margin protection programme.

But supply management belongs in the past, says Matthews. Nevertheless, it may reappear on July 18.

It is feasible farmers across the EU will be offered money for every litre less of milk they produce, year-on-year.

IFA fears the consequences of that for farmers and co-ops who made investments on the strength of milk quotas ending in 2015, which could be endangered by a return to milk supply management now.

If farmers sign up for an EU financial incentive to produce less milk, milk factories could become under-utilised, and less competitive.

That would enable competing industries in New Zealand or the US to gain ground on the Irish industry.

However, Irish dairy farmers are unlikely to complain, because they may soon be able to demand that their co-ops pay more for their milk. Or else, they will sign up for the EU incentive.

It would be an unfortunate turn of events for our dairy industry, which has not relied substantially on market supports like intervention, instead selling most of its produce commercially on the global market.

However, such are the perils of the EU’s incoherent dairy policy.


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