First moves in quota poker
The announcement of an open-market milk quota transfer system in April, 2007 had led the ICMSA and Lakeland Dairies to predict cheque book domination of dairy farming.
But their bluff was called at the Conference by Department of Agriculture and Food Assistant Secretary General Jim Beecher.
He said the Department expects milk producers to act responsibly when buying milk quotas, and to bear in mind that quota are due for review in 2008, and due to be scrapped by 2014 or 2015. Not too many should be bidding high for something which might only last one year - unless the cattle farmers who are paying about 66% over recommended rates for store cattle decide to turn to dairying.
Even if milk quotas last to 2015, bidders should be put off by the litany of challenges facing milk producers which was presented at the Dairy Conference.
Only Jim Beecher demonstrated any optimism about dairy product markets. ICOS sources warned that world prices have declined in recent months.
Certainly, no one would bid much for a litre of milk quota if the dire warnings at the Conference of WTO damage to our dairy industry are accurate.
Even Department official Mr Beecher said Peter Mandelson’s offer of market access for non-EU dairy products “has reached the limits of generosity”, and EU negotiators must rein themselves in, and maintain the competitiveness of EU dairy industry operators.
According to ICOS the existing EU offer in WTO would knock about 15% off the value of EU butter production, and about 5% off cheese and SMP.
The Irish milk price is already on course to fall 8% from 2004 to 2015; ICOS said WTO looks like knocking it by 20%.
The already conceded elimination of export refunds by 2013 will test Ireland’s ability to compete in third countries, it was pointed out. ICOS says the EU needs a subsidy to compete on world markets, with the world market competitiveness of EU products continually declining, relative to product from New Zealand and Australia.
These exports were critically important for EU market balance, not least because any loss of third country sales would add to over-supply in the EU.
ICOS summed up by warning that Irish dairy farmers face a volatile and difficult few years.
Added to frightening dairy product market prospects are the ongoing cost increases in EU farming, particularly for energy. The Irish dairy industry carries an extra heavy energy cost burden, paying 31% more for electricity in 2005 than the EU-15 average price.
Meanwhile, farmers have to get over the implementation of the Nitrates Regulations, and see if Environment Minister Dick Roche makes changes to his legislation. At least that should be concluded by the time farmers start bidding for milk quota.
Unless there are changes, dairy farming will be a lot harder; Pat Dillon of Teagasc made that clear at the conference.
Something that will still be hurting the dairy industry next year is the power of the multiple retailers as their huge buying power expands, and the protection of the Groceries Order disappears in Ireland.
Speakers at the conference confirmed IFA president Padraig Walshe’s recently expressed fears that rising costs and income pressures pose the most serious challenge in 30 years for the Irish dairy industry.
He warned that dairy farmers will not continue milking cows for little more than the minimum wage. They may get their chance to cash in next April, and there should be no fears of letting dairy farmers themselves decide what’s best for their business, said Jim Beecher of the Department of Agriculture.
After last week’s ICOS conference more farmers would probably decide to sell quota rather than buy it.
But there will be a lot of developments between now and the arrival of open-market milk quota transfers in 11 months time, which will determine the trend in this crucial new market for dairy farmers.
