ICOS rejects back-door milk quota in CAP reform

Ireland is potentially on the cusp of unprecedented dairy industry development.

We have so much in our favour. (This levy) reduces clarity for co-ops

Conor Mulvihill of ICOS says the levy which MEPs want in CAP reform would amount to milk quotas by the back door.

The European Parliament wants CAP reform to include a payment to dairy farmers who cut production by more than 5% in times of market crisis, which would be financed by a levy on farmers who increase production by more than 5%. It is unlikely to be part of the reform, with neither the commission or the council of ministers having it in their official CAP positions, as co-decision negotiations between the three institutions approach.

But it is taken seriously by ICOS, the Irish Co-operative Organisation Society, which has formed a coalition of co-op and farming organisations in 13 dairy producing countries to oppose the proposal.

ICOS European Affairs Executive Conor Mulvihill says the EU could use this proposed levy to curtail milk production, even though the milk quota system will be abolished in 2015.

Q. MEPs say the proposal is designed to avoid a serious over-supply crisis in the milk sector like that seen in 2009. Does ICOS see any merit at all in it?

A. The overall concern of ICOS is to see a vibrant future for Irish co-operative dairy farming and co-operatives. There is no merit in an ill-defined proposal. It could undermine the Irish dairy industry’s expectation that quotas be fully abolished in 2015, and the preparations for that.

Quotas were in existence in 2009, and they did not prevent the crisis then. Dairy markets are now dictated by world market movements, and not regressive market management tools such as this proposal.

Respected Cork-based dairy economists, Professor Michael Keane and Declan O’Connor, presented a paper in Brussels recently, stating if such a market management measure was in existence, and applied in 2009, it would have had no effect, and would have been a waste of farmers’ and taxpayers’ money.

When I sought clarification on behalf of ICOS from the MEP proposing the measure, France’s Michel Dantin of the EPP, as to how this would work and how farmers could ‘turn off the tap’, he said farmers could easily and quickly do it by reducing feed rations. He is therefore not directly aware of circumstances in the Irish dairy industry. Mr Dantin was unable to answer, ‘How do we tell Irish cows in the field to stop eating grass?’

ICOS fully supports and promotes proven dairy mechanisms that can protect farmer’s incomes, such as private storage aid and intervention, as well as other progressive initiatives. However, we believe that this is a reactionary proposal that belongs more in the ’80s than in a modern, forward-looking dairy economy.

Q. Who are the organisations joined with ICOS in opposition?

A. ICOS sees the proposal as a danger to plans to grow our native co-operative based dairy industry, constrained by quotas for the last 30 years. To counteract this, we have gathered the representative dairy organisations from within Copa-Cogeca — the main umbrella farm and agriculture co-operative organisation in the EU.

The IFA and the Ulster Farmers Union have joined the ICOS position in Ireland, along with the main German Farmers Union, the DBV, and the main unions in fellow progressive and outward-looking dairy economies such as the Netherlands and Denmark, among many others.

The ICOS message has also been echoed by the key dairy industry representatives in Europe such as EUCOLAIT and the European Dairy Association.

Q. How would the levy proposal interfere with expansion?

A. Ireland is potentially on the cusp of unprecedented dairy industry development. We have so much in our favour; the industry is still in the hands of Irish farmers through their co-operatives; we have a sustainable grass-based dairy system; and world population and dairy demands are growing.

This levy would amount to quotas by the back door. It reduces clarity for hardworking co-op boards and management who are investing millions of euro on behalf of co-operative members across the island in preparation for the lifting of quota.

Q. So is there any scope for proposals aimed at controlling production after quotas go?

A. Irish farmers and their co-ops have always proven that they can react appropriately to market signals. In the long run, we are moving towards a more liberalised marketplace. As we export most of our dairy produce, we need to be in a position to take immediate advantage of the growth period ahead, and then gauge the markets carefully thereafter.

We need to support the efforts of key co-operatives such as the Irish Dairy Board and our other dairy exporters to market Irish product aggressively to ever more countries and populations.

To do this, we have to follow the growth trends, and look to supply exactly what each market wants, to the highest standards and at the best price.

We need to brand cleverly and certify the high quality of our grass-based system. This will help to ensure that Ireland is recognised by dairy buyers and consumers as the first-call supplier of dairy produce.

We should also examine opportunities through EU funding to support innovation and to climb the dairy value chain in areas such as functional foods and pharmaceutical opportunities.

Q. Would the European Parliament proposal not help, if global over-production brings about a repeat of 2009, when milk prices collapsed worldwide?

A. The possibility of volatility will be a part of the dairy industry for the future. A levy on production would not protect returns to Ireland if global milk prices should collapse. Total Irish production is less than 1% of global dairy production, so there is room for growth in line with market conditions as they unfold. Farmers need the space to gear up prudently and appropriately, supported by a dairy co-operative framework which provides strength and solidarity in approaching the markets.

ICOS is working with our co-operative members to prepare for the opportunities and challenges ahead, including advice in relation to milk supply agreements, forward selling contacts, risk management initiatives, training and governance at home. We are active in Europe around issues, including Single Farm Payments, EU trade agreements, rates of intervention and private storage aid.

We are battling on many fronts on behalf of our members and the industry. What drives us to do this is our belief in the protection of the co-operative business model that has retained control of their own future in the hands of Irish co-operative dairy farmers. That is our main interest in opposing this levy proposal.

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