IFA's Seán O’Leary urges officials to reconvene the Dairy Forum
Pure economics dictate that low prices lead to low or negative profitability on farms, and in time to lower production.
While farmers may first prioritise cash flow generation, they cannot sustain this for long at a loss or when processing capacity becomes insufficient (e.g. Friesland Campina last month).
So, the current low prices will turn around for sure, the only question even expert analysts cannot answer, is how long into 2016 it is going to take.
I have made it clear, first to the Agriculture Minister Simon Coveney and to the Department of Agriculture General Secretary last week, that we urgently need them to drive a short term strategy with all relevant parties.
The Dairy Forum, established last autumn by Minister Coveney, is the environment to co-ordinate delivery of the required actions.
Co-ops have supported milk prices in different ways. Ornua played its part, returning more to co-ops than commodity prices alone, as evidenced by its Purchase Price Index (PPI).
It is vital that this support would continue, ideally frontloaded to the expensive early months.
Co-ops and Ornua have also worked together to bring forward fixed price contracts allowing farmers to hedge the price for a portion of their milk.
This option must be made available to more farmers and for more milk.
Postponing merchant credit repayments to peak months has been helpful, and all co-ops should examine what they can offer in this area.
Banks must match their offerings to farmers with their supportive marketing message, and provide farmers with flexible, low cost short term cash flow funding options.
Long term, internationally competitive funding allowing farmers take repayment holidays without additional costs must become the norm.
The Strategic Banking Corporation of Ireland has so far spent 26% of funds on agriculture.
It must be made available to farmers at lower costs, and for short, as well as long term, funding.
To increase competition and reduce costs in our banking sector, government must be more pro-active in securing European Investment Bank (EIB) funding for farmers.
The government and the Financial Regulator must also vet alternative financial providers, such as investment funds, while protecting farmers.
Teagasc can help farmers with practical financial, budgeting and sound husbandry advice. Some co-ops already operate joint programmes with Teagasc which, among other things, identify those in need and offer assistance with on-farm budgeting.
This type of support must be extended.
Teagasc must also provide cost-cutting strategies to help farmers regain control of cash flow without harming the long term sustainability of farm and herd.
IFA’s taxation proposal was a major element of our General Election lobbying.
We want the new government to deliver flexible taxation solutions allowing farmers individually to smooth out their highly volatile incomes.
We need a more proactive approach to prove the market failure that is the higher cost of finance for Irish farmers to secure access to lower cost finance through the European Investment Bank.
The incoming Minister for Agriculture and his officials must also critically examine CAP in the context of volatile dairy prices.
The intervention “safety net”, unchanged since 2008, must be reviewed, market support schemes such as APS made more flexible, and new instruments such as margin insurance schemes, and milk price hedging be facilitated, among other things by reconsidering the rules governing State Aids.
Farmers are experiencing a prolonged cash flow crisis, and they need urgently organised support.
Necessary actions by the dairy industry, banks, government and state agencies can be best highlighted and co-ordinated through the Dairy Forum.
In addition, the Dairy Forum can help the sector learn from the current crisis to develop industry, state and EU tools to help farmers cope with volatile incomes into the longer term.
