CAP Health Check proposals unlikely to change dramatically
The outcome is unlikely to change dramatically from the proposals. There is relief for some that the single payment will remain in place for another five years; concern over a proposed substantial increase in the modulation reduction from the payment; welcome for an increase in milk quotas; and more certainty that the ‘freedom to farm’ will mean what it says for dairy farmers in a milk quota-free environment after April, 2015.
Whether in dairying, cereal production or beef finishing, farmers must be aware that supply and demand have consistently been the key to returns. That is unlikely to change.
The late TJ Maher always reminded farmers that market shortages paid farmers, while they were penalised in a surplus situation. More importantly, he defined a very narrow line between shortfall and over-supply — the difference between 99% and 101% of market requirements, he said.
Farmers who had the scope and desire to expand milk production did not like the quota system. Securing the licence to produce more was difficult, and could be very costly. But quotas contributed to market balance and relatively stable milk prices.
In 2015, when more than 30 milk quota controls end, it is reasonable to assume that those with the capacity to increase production will boost output. Will they flood the market with milk across Europe? Will markets respond with lower prices? Will economy of scale dictate that only the low-cost “factory-farms” will succeed?
The opposition to milk quotas three decades ago was understandable. Professor Seamus Sheehy asked farmers then if they wanted to produce a quota of 25,000 gallons of milk at 100p/gallon, or 50,000 gallons at 50p/gallon.
Will the removal of the milk quota create more problems that it will resolve?
