No rescue from dairy fines
It seems that every new agri-conference brings with it some fresh myth about how superlevy fines will be miraculously avoided — secret EU plans for a soft landing; extra quota sliding in over the next few years; a big enough price per litre to justify going over quota (an idea which defies fundamental supply and demand economics); and, best of all, a U-turn by France and Germany on their milk quota regulatory hardline.
All wishful thinking. All baseless rumours. But yet another fairytale was evident in some chat behind the scenes at last Friday’s launch of the Irish Dairy Board and Teagasc’s new Dairy Innovation Centre in Fermoy, Co Cork. The rumour: “The EU will roll out a ‘European quota’, with the 7% of the EU27’s unused quota from 2010 being shared out by those that need it most — the Irish and the Dutch.”
In reality, there will be no relaxation on quota. France and Germany hold the power in the EU, and they already regret having agreed to the abolition of quota in 2015. In all probability, the French and Germans would only ever concede to a soft landing if the abolition of quota was stretched out for another five or even seven years.
In other words, a soft landing would only come at the price of restrictions on output volumes being extended to 2020 or even 2022. To believe that this threat is not real is to seriously misread the balance of power in the EU.
Least we forget, Europe is coping with the world’s worst ever economic crisis. Most EU-sourced bailout funds are coming from Germany and Britain, with core EU founders like France still holding the moral authority. From their point of view, they made Europe. It’s their ball, their rules.
The bigger picture is that the eurozone could yet very easily switch to a two-tier currency system. Only the EU-wide shared desire for ongoing peace is protecting Ireland, Greece and other under-performers from a few seasons on the European subs’ bench. Europe’s bigger players are carrying the likes of Ireland for laudable political goals, rather than any shorter term pragmatic economics. And they are carrying us against a backdrop of increasing domestic unrest — including, critically, several electoral swings towards rising right wing, anti-EU, protectionist parties. So the damage to young Irish dairy farmers being hit with €50,000 superlevy fines for having soared over quota is not a priority for them. However, it is a priority for Agriculture Minister Simon Coveney. Speaking in Fermoy last Friday, Mr Coveney said: “Between now and 2015, we have significant short term difficulties with quota. I am convinced that we will be significantly over quota next year. My message to dairy farmers is simple — do not produce too much milk.
“More and more farmers are telling me that they will be out of quota by September, asking what are they supposed to do from then to next March. We are already more than 5% above quota for the first quarter of the year. We must pull in the reins on farmers who are over quota.
“Let’s be clear, we do not have a political solution. There is no soft landing. We are working for that with Netherlands, Denmark, Belgium and the Eastern European colleagues, but we are not getting the response that people are hoping for. Month on month, it’s clear that people are just not heeding the warnings.
“I would hate to see young farmers starting out in their dairy careers carrying a huge debt. We want them to be successful, and to stay in dairy farming. We will need them, particularly when the sector expands post-2015. For now, however, they need to heed the message and reduce output. I am genuinely very concerned about this. It will be up to me to help people deal with the consequences of any superlevy fine.”
* Farming Editor Stephen Cadogan returns next week.
