Dairy sector faces into year of challenges

We’re well into the second half of 2015 and while we’re not expecting anything like a repeat of the annus horribilis that was 2009 it must be said 2015 will not be a vintage year for Irish farming — notwithstanding the fact that it saw the end of milk quotas and the attendant optimism.

Concern about the slide in milk price has now become outright worry and we in ICMSA are becoming as anxious about the lack of EU response to the slide in dairy prices as we are by the slide itself. We must — and do — accept that the recent overall background crisis in both China and within the EU has certainly not helped in terms of instilling the kind of stability that any market always likes.

And we likewise accept that much of this background tumult is outside the control of Government or the Commission. But we also insist that not being able to alter events decisively is not an excuse for doing nothing at all.

And that is what we have had to confront at both national and EU level for the past year as dairy farmers have watched their milk price fall by circa 35%: a “do-nothing” policy.

Certain realities should have informed the decisions of the processor and Co-op boards that have met over the last week and those still to meet over the coming day to set milk prices.

Everyone will surely agree that it is critical in times of uncertainty to seek out certainty. And that is the context in which we can say that it’s absolutely certain that the Ornua PPI currently justifies a milk price to farmers in excess of 28 cents per litre — that is a simple fact and ICMSA demands that it be recognised.

In this respect, Carbery have shown leadership and principle and are setting the kind of example that more high profile processors would do well to imitate.

ICMSA welcomes Agriculture Minister Simon Coveney’s somewhat belated acceptance that his department’s “hands-off” policy is simply unequal to the huge challenges now facing milk suppliers. He must now exert serious pressure on European Commissioner for Agriculture Phil Hogan to start getting real about implementing meaningful price supports immediately.

We have to see an end to the current policy of complacency on the part of the commissioner, and an energetic effort must be made to get to grips with a situation that is rapidly undermining large numbers of our dairy farmers in the very first year of the post-quota era — dairy farmers who, it’s worth remembering, are considered amongst the most efficient producers in the EU.

This week will also see a convening of the Beef Forum.

I welcome the fact that Mr Coveney, after some disappointing foot-dragging on the matter, has accepted that his bulletin after the November Beef Forum meeting did, in fact, commit the forum towards the kind of fundamental review now manifestly required.

This week’s meeting must see the minister come forward with some hard information regarding the make-up of the review body and the timeframe within which that body will be completing its review and reporting back to the forum.

The present tentative price recovery notwithstanding, there can be no doubt that certain fundamental issues within our beef sector remain to be addressed and dealt with if the farmers are to be given the necessary security regarding their future.

Another problem that is within our remit is the question of curbing excessive and destructive farm income volatility.

Last Thursday, I was at Dublin Castle where I attended the National Economic Dialogue and repeated our organisation’s call for the introduction of a Farm Management Deposit Scheme (FMDS) in Budget 2016 as a means of smoothing-out excessive farm income volatility and also putting farm financing on a viable, efficient, long-term footing.

The ICMSA proposal is based on the tried and trusted Australian model, where approximately 3,000 farmers already avail of the system which allows them to deposit money in the scheme in relatively “good” years for the purposes of setting aside funds for possible income tax liabilities and allowing the participating farmers to claim a tax deduction for that year.

In the event of the farmer withdrawing monies from the FMDS, then the appropriate amount of the deduction is included in the tax assessable income in the income year the deposit is repaid to the farmer and so the deduction is recouped by the State.

The scheme had been a measurable success in Australia and a recent review by the Government there recommended not alone a continuation of the scheme but the reduction and eventual elimination of the off-farm income that could be deposited under the scheme.

We badly need an effective tool to address the kind of income volatility that every expert predicts will be a feature of farm income going forward and from which our milk suppliers are suffering right now.

In ICMSA’s opinion, the Australian FMDS is a proven and tested response that allows farmers to, effectively, deposit money when they have it and withdraw the money in leaner years, all under the auspices of the Government and in a tax-efficient manner that facilitates both farmers and authorities. The Government should look at the Australian model and simply cut-and-paste it. You don’t always have to reinvent the wheel.