Tough time for milk producers

CHAOS looms in 2004 for milk producers, as owners of milk quota position themselves to take full advantage of earlier de-coupling of the EU dairy compensation payments, which commence next year.

At the other end of the scale, compensation for milk price support cuts will not be paid for additional quota acquired by expanding farmers after April 1, 2005.

Committed milk producers are being urged to increase production, if they want to maintain or increase their current incomes.

But their expansion plans will come up against a countrywide milk quota famine in the next marketing year (which starts on April 1).

And thousands of dairy farmers currently leasing milk quota may find it difficult to retain that quota, as its owners attempt to claw it back, so that they can benefit from the new compensation scheme.

While there was an overall welcome last week for the EU agreement bringing forward the date of decoupling for dairy compensation payments from 2007 to 2005, serious implications are now emerging for dairy farmers.

Senior Department of Agriculture official Andy McGarrigle told a CAP Reform information meeting at Limerick that the decoupled payment, increasing in 2006 to 16.6 cent per gallon, will be paid on the amount of milk quota held by each farmer, whether owned or leased, on March 31, 2005 (rather than the amount of milk produced during the year ending on that date).

He confirmed that the decoupled cheque €8,285 for a 50,000 gallon quota in 2006 will be paid in each of the following years to the person who held the milk quota on March 31, 2005, and no decoupled payment will be made to farmers for quota leased or purchased from April 1, 2005.

"The payment will remain with the farmer who held the quota on the reference date", he said, "and will be converted into a direct payment per hectare of the farmer's land, like the other premia rights".

The payment starts at 5.5 cent per gallon of quota, owned or leased, held by a farmer on March 31, 2004, the reference date on which the quota is coupled to the land.

In 2004, owners of milk quota will endeavour to position themselves to take full advantage of decoupling, leading to many leases expiring on March 31 next not being renewed, where the owner is in a position to capitalise on direct payments for the next ten years, by retaining the quota up to March 31, 2005.

This could leave many farmers reliant on leased quota in a precarious position next year, and as longer term losers with no direct payment for decoupled milk quota leased after April 1, 2005.

National Dairy Show feature issue next week: 2004 quota planning.