EU milk superlevy continues to ignore commercial realities

It seems almost unbelievable that the “decision makers” in Brussels will take their foot off the throat of the dairy industry next April.
EU milk superlevy continues to ignore commercial realities

Since 1983, they have controlled European milk production, slapping a fine on farmers every time they went over quota.

While European milk production was frozen by Brussels, New Zealand quadrupled its milk production, and on average, its farmers enjoyed a 100% milk price increase.

It was particularly galling for Ireland, which comes nearest in Europe to competing with New Zealand milk production costs.

While our competitors down under secured huge market share in key third country markets around the globe where dairy demand is rising, Ireland’s industry was frozen.

Even now, the “decision makers” in Brussels continue to stick to the letter of a six-year-old agreement on how to end milk quotas, rather than open their eyes to the commercial realities of the dairy market place.

So they have come down heavy on EU farmers who over-produced in 2013-14, fining them €409 million, at the very time when farmers need every euro to invest in the new era when milk production will be unlimited by quota, from next April.

Instead, farmers are hammered with a bill nine times larger than the €45m paid in the previous year.

Farmers in Germany face fines of €163 million, farmers in the Netherlands have to pay €132 million.

Dairy farmers in Poland, Ireland, Denmark, Austria, Cyprus and Luxemburg also have to pay.

Even though the totality of dairy farmers across the EU stayed within quota, producing only 95.4% of what is allowed, the accountants in Brussels still insist they are paid by the individual countries which over-produced nationally.

Meanwhile, because of other “decision makers” in Brussels, and their geopolitical sanctions against Russia, the EU has lost dairy sales to Russia, which included one-third of EU cheese exports.

Regardless of the market difficulties that has caused, fining dairy farmers for every litre of milk over-produced, while expecting them to adjust to an abrupt end to quotas on April 1 next, could only have been dreamed up in Brussels.

They must think milk can be turned on and off like a tap.

Even the sensible Germans are over-producing again this year, 4.4% ahead year-on-year of last year’s production, which ended up costing them a record EU fine of €163 million.

And further proof that the superlevy has become a useless EU regulation comes from Irish farmers, who are on course to produce a massive 9% more milk this year, despite their €10m superlevy fine for over-production up to last April,

While always advising Irish co-operative dairy farmers to work within the existing quota rules, ICOS has long campaigned actively in Brussels to pursue a butterfat adjustment to mitigate these fines for producers.

That was the background to a Polish proposal at last Monday’s EU Council of agriculture ministers.

It sought elimination or reduction of 2014/15 superlevy fines for over-quota farmers in recognition of the pressure on milk prices, linked to the Russian ban, and also sought reintroduction of export refunds to clear surplus dairy product from the EU market.

Here, IFA has suggested the €409m in EU superlevy fines be used in full to support dairy markets.

ICOS also wants these fines ring fenced for support of dairy farmers and their co-ops, and suggests — among other measures— a 2014/15 butterfat adjustment to allow the EU’s promised ‘soft landing’ ahead of quota abolition. ICMSA too has called for butterfat adjustment.

Mairead McGuinness, MEP, has called for the EU to immediately drop the super-levy system, in light of the Russian market disturbances.

However, these sensible proposals were all in vain last Monday.

EU Ministers discussed the possibility of additional milk market support to offset the Russian ban on EU agricultural products, and it was indicated there will be targeted compensation for the worst affected countries.

But relaxing the 31-year old superlevy system ahead of its demise next April wasn’t even on the agenda.

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