Co-ops split over quota exchange
Dairygold Co-op has supported the idea in principle, and farmers are split also over the Minister's plan, with IFA giving it a guarded welcome, but ICMSA and Macra rejecting it.
Lakeland Chief Executive Ed Prendergast warned that the proposals are unworkable, unfair and they will also undoubtedly open the Minister to a wide range of compensation claims from farmers who have already made decisions under existing conditions.
He said many milk producers have sold quota at a fixed or maximum price in recent years, believing that this was the best course of action in line with previously stated Department policies.
He warned that there could be legal action also by farmers who decided to exit dairying this spring.
"They will not have inseminated their cows and will not be able to reconsider that decision and stay in business until 2007 to benefit from the increased quota prices which will clearly arise".
Mr Prendergast warned that the proposals will have an immediately destabilising effect on the entire industry. "They will polarise milk producing communities from each other on a widespread basis with considerable antagonism and disadvantage arising between high and low priced quota regions," he said.
"You would have to wonder whether or not we are also looking at attempts to introduce a nationalised quota exchange system by the back door. Such systems have been discredited on other countries because they create ranch-style farming and do not underpin the rural development concept.
"The obvious viable alternative to the Minister's proposal is that the price of quota should be managed down to zero and left at that.
"Lakeland Dairies is asking the Minister to withdraw these proposals before starting a consultation process and then re-introducing a proposal that would be fair, workable and worthy of a comprehensive discussion among all stakeholders," Mr Prendergast said.
Lakeland, Ireland's fifth largest dairy co-op, operates across 13 counties in the north-east, and Mr Prendergast said the North East, North West and West will be worst hit by what he called the Minister's cheque book quota system.
Farmers in these areas, who are significantly below the national average quota size, could not compete to buy quota and would be forced out of business, warned the Lakeland boss.
"Farmers will be sucked into bidding wars against their neighbours, leaving them with heavy debt burdens to carry against a backdrop of declining product prices and rising input prices.
"Farmers will then also seek to transfer quota to co-ops where it will sell for more, this will denude some co-ops of milk, thereby reducing their processing efficiency, increasing their costs and depressing the price they can pay for milk. Other co-ops will, of course, gain significant milk, which will have to be transported large distances at significant costs.
"Off peak these co-ops will probably decide not to collect from suppliers at a distance. While at peak these co-ops will then not be able to process increased volumes without significant capital development", warned Mr Prendergast.
He said expensive quota will reduce the competitiveness of the dairy industry, and the proceeds of quota sales will become liable to Capital Gains Tax, which would benefit the Department of Finance, but not Irish agriculture.
He said the Minister's suggestion that quota may be traded in marts is inconceivable, and highlighted how little planning went into the announcement. "Selling quota is a complex issue, where the first step is verifying how much quota you are entitled to sell and how much has to revert to the National Reserve, among other factors. The next point is to get a declaration from a solicitor that you are the legal and beneficial owner of the quota and that there are no other claims against it. This is a long step from the mart auctioneer declaring that 'the next cow is in calf to AI and carries a few thousand litres of quota on her back,'" said Mr Prendergast.
"It has been stated that this proposal is the start of a consultation process. However, the timing is bizarre coming less than two days after the 2006 quota scheme for this year was announced. This year's scheme has now been totally undermined.
