EU likely to move to control of milk supply

A new EU aid package for dairy farmers in July is likely to be linked to an EU-wide milk supply control measure — and may be partly financed from a crisis reserve fund taken out of farmer payments.

Agriculture Minister Michael Creed said Ireland accounts for only 4% of production in Europe and 1% globally, and will resist any EU pressure to scale back milk production.

He said there is no appetite in Ireland to go down the route of voluntary or compulsory cuts in production, other than support from the Irish Creamery Milk Suppliers’ Association.

But European commissioner for agriculture and rural development Phil Hogan told this week’s meeting of EU agriculture ministers that growth in EU exports is still far from being able to cope with the increase in milk production, which is seven times higher, demonstrating that “issues on the supply side have got to be addressed.”

He said the market remains weak, and income for dairy farmers is severely affected, hitting smaller farms hardest.

“On that basis, the provision of further support for that sector is justified, and I am working towards that objective.”

He confirmed that “the commission is working on a support package for the dairy sector, with financial resources if necessary, which I expect to be in a position to present to the [European] Council in July.

Given that there are limitations on what can be done to encourage demand, we must inevitably focus on the supply side of the equation.”

He said any new package will, in addition to addressing stabilisation and reduction of production, have to be equitable in its treatment of dairy farmers throughout the EU.

Martijn van Dam, Dutch minister for agriculture and president of this week’s agriculture council, said most member states are willing to use part of the crisis reserve into which EU farmers pay about €425m per year.

Up to now, that has not been tapped, and was returned to farmers.

But Mr Van Dam said the council has asked the commission to look at the existing budget first and then possibly the crisis reserve fund.

Mr Hogan said prices for dairy products generally increasing over the last month was encouraging, but it will take some time for these improvements to translate into farm gate milk price increases.

Meanwhile, ICMSA president John Comer said every serious observer now agreed that the essential EU dairy problem of a temporary over-supply must be addressed.

He said the onus was on ministers to convince Mr Hogan that the central question of over-supply had to be addressed at source by subsidising farmers to cut production, while allowing farmers who wished to expand to do so.

Mr Comer said this week’s CSO figures for 2015 showed Irish dairy farm income in 2015 down €222m, despite a 14% increase in milk production.

Farmers were working harder but suffering significant income loss.

Mr Comer welcomed growing support across the EU for incentives to reduce milk production.