Once-a-day milkers have seen the writing on the wall
The Italian presidency of the EU has stopped discussions of easing superlevy restrictions ahead of their disappearance next April.
Ever since 2011, there have been efforts by Irish agriculture minister to get yet more quota for Ireland, but they might have been better off not to raise farmers’ hopes.
At the July Council of agriculture ministers, Ireland, Poland, Spain, Luxembourg and Latvia supported quota easing moves by Germany, Austria and the Netherlands.
But France, the UK, Portugal, Hungary, Bulgaria, Cyprus, Romania, Hungary, Slovakia, Slovenia and the Czech Republic, created a blocking minority.
Even after the Italians have hit it on the head, there is still talk of a 2% improvement in quotas before they disappear next April, but relying on it is very foolish.
In 2008, the CAP health check agreement allowed Ireland to produce about 20 million gallons per year extra before superlevy is payable, to come from the more than 90% of dairy farmers whose actual milk butterfat levels were higher than the reference figure by which Ireland’s milk quota had been butterfat adjusted since 1997.
The agreement also allowed 1% per annum quota increases for five years.
Six years on, as milk prices fall over the coming months, the opposition to weakening the 2008 CAP health check agreement rules on quota can only intensify among member states who fear the effect of rising supply on prices which are already rapidly weakening around the world.
Some farmers at least see the writing on the wall, with Teagasc reporting that many have already commenced milking once a day, because of the current supply of milk in excess of quota, running at a record 7.05% by the end of the end of June.
Hence the move to milking once a day, which has a dramatic effect on milk yields. In a previous Teagasc Moorepark study, cows milked once a day from early October produced approximately 30% less volume, but higher fat and protein content, than cows milking twice daily. This option should only be considered in herds where currently the cows have a somatic cell count of less than 150,000 cells/ml. In herds with high SCC,
Teagasc recommends either drying off high SCC cows or individual high SCC quarters, if milking once a day is to be considered.
And Teagasc says that in an over quota situation, meal feeding is simply uneconomic, where the grass supply is adequate.
IFA National Dairy Committee Chairman Sean O’Leary says farmers may be heading for a record superlevy situation in the last year of the quota regime.
He warns this would impose a high cost, and called for prudent planning, and assistance from advisors, co-ops, and banks, so that farmers can both minimise and finance this extra cost of expansion, without damaging cash flow or herd potential.
Even though dairy farming conditions and on-farm profitability are good now, financing the superlevy bill must be planned as early as possible, to protect cash flow, warned O’Leary.
Last spring, farmers who believe they can remain profitable while paying the superlevy fine of 28.6c per litre helped to tip Ireland over the edge into superlevy territory for the first time since 2012.
Across the EU, farmers in many countries ignored the superlevy risk and didn’t slow production, in full knowledge they would pay a superlevy fine — because they believed they were efficient enough to still make a profit at current high milk prices.
As a result, one of the highest ever EU milk over-productions is likely to result.
But they had a rising milk price on their side, now a decline on milk prices in on the cards, due to rising global production and falling demand.
As a result, dairy product prices dropped by an average of 8.4% at this week’s Global Dairy Trade auction run by Fonterra, with butter down 9.6%, butter milk powder by 10.1%, and skimmed milk powder by 6.5%. It was the eleventh auction since February to see a price decrease.
