138,000-gallon quota equals average pay
However, the difference between the most efficient producers and the average producer is so wide that the top 33% would require a quota of only 68,000 gallons to achieve the 2007 average industrial wage.
This was revealed by Glanbia Group Managing Director John Moloney in his address to last week’s Agricultural Science Association annual conference in Kilkenny.
He also disclosed details of quota restructuring models based on the Danish and German systems, which Glanbia is discussing with the Department of Agriculture and other relevant bodies.
Assuming a milk price of 114 cent per gallon (25 cent per litre) in 2008, he said Glanbia’s monitor farms would need to increase quota by 75% to maintain “real” incomes at 2002 levels.
These farms (used in the group’s farmer advice programme, in conjunction with Teagasc) averaged 59,000 gallon in 2002; they need average quotas of just over 100,000 gallons in 2008.
“Within the Glanbia quota of 1.4 billion litres, we need to go from 5,500 farmers delivering an average of 250,000 litres to 3,000 production units delivering 450,000 litres, by early 2009.”
Mr Moloney said the existing national quota restructuring scheme will not deliver this result. Less than 2% annually of Glanbia’s quota has been restructured over the last six years.
“To achieve our target, we need a minimum of 5% average quota restructured annually over the next five years”.
“Restructured quota also needs to be available at an economic market based price that is fair to producers who wish to expand and producers that wish to exit dairy processing.”
The key elements are:
*The 4:3:1 allocation system is de-activated and milk is directed in sufficient volumes towards those dairy farmers who will be most productive and profitable in the future.
*The land-quota link is effectively broken. However, where a farmer wishes to dispose of his farm and quota together, they are jointly sold and the link remains, as at present.
*The scheme would be operated as a quota exchange whereby, twice a year, dairy farmers will be able to offer quota and bid for quota.
Mr Moloney said supply and demand as set by farmers would decide the price of the milk.
Producers could sell at a price lower or equal to the quota exchange price or buy at a price equal or higher.
“All other offers are rejected, but the volumes offered or sought may be re-entered at the next exchange date,” said Mr Moloney .
A reserve milk pool for special cases would be created, representing 5% of quota offered for sale.
This would be clawed back at 50c per litre and re-allocated to new entrants, successors in family milk producing partnerships and to milk partnerships.
