Farmers are the only ones in the dairy sector to suffer

Describing any situation as ‘critical’ is obviously a subjective exercise: what I deem to be an emergency might not meet your definition.

But no rational observer of the chaos and despair afflicting the EU’s dairy farmers at the moment could be in any doubt that is actually the only word applicable to the Farm Council held on March 14.

It’s important to note the distinction I made there: we say ‘EU’s dairy farmers’ as opposed to ‘EU’s dairy sector’ because that latter entity is doing very nicely, thank you.

Several of our own processors announced eye-wateringly high profits recently and, as usual, the retailers who complain and campaign against any moves to regulate their margins are still raking in astronomical sums from consumers.

No. The only part of the EU dairy sector that has seen revenue and margins wiped out are the farmers — the ones on whom all the other parts of the sector effectively rest while receiving a price that is actually below the cost of production.

For long months now ICMSA has been warning that this situation is untenable but neither should we succumb to the ‘Siren’s Call’ and apply rigid supply-side measures or reintroduce quotas by another name.

Our position has never wavered: quotas were not fit for purpose and had long since outlived any usefulness.

They were hobbling our best producers and they had not saved us from the similar income wipe-out experienced in 2009. But that cannot be the end of any attempt to match supply to demand and go forward with a coherent policy.

And, goodness, we so badly need a coherent policy aimed at restoring dairy markets and milk price. Some figures will illustrate the extent of the haemorrhage of money from farmers and the local rural economies that depend on the ‘farm spend’.

As of last week, ICMSA estimates that milk payments to Irish farmers plunged €628m from 2014 to 2016. As that money was spent into the farmers’ local economies and applying the standard multiplier (1.7), we are now estimating that falling milk price has cost the wider rural economy at least €1.5bn over the two years. Cork’s economy is down about €282m in dairy spend; Tipp’s about €120m and Limerick’s about €91m.

These are absolutely vast sums in the context of local rural economies.

The proposals coming out of March 14 Farm Council represent a welcome realisation that things will not ‘work out by themselves. They certainly haven’t been working out for themselves so far and we have ended with the kind of supply-demand imbalance that enables the retail corporations to ‘buy forward’ at prices pushed down and passed back till they have wiped out the farmers’ incomes.

It seems to have been the French who decided that this tragic ‘hands off’ farce would have to be brought to an end and we may assume that they convinced the German government.

Doubtless the electoral reverses suffered by the CDU in regional elections the weekend before the Farm Council helped to concentrate minds as well. The main plank arising from the council is the decision to pay a subsidy to suppliers not to produce milk in an effort aimed at lowering the total volume of EU milk. ICMSA has no objection whatsoever to any effort by individual member states to pay such a subsidy to individual milk producers on a purely voluntary basis.

That may well have some impact on the volumes but if the object was to reinforce farmer milk price and start rebuilding the price then we do not believe that either this measure or the other measures tabled will provide the necessary impetus.

If the desire was to immediately signal that farmer milk price was going to be rebuilt then in ICMSA’s opinion we needed: (a) an immediate increase in intervention price to 28cpl, and (B) a massive upgrading of the volumes and options around storage.

Those were the best options and in answer to critics who note that neither would deal with the underlying problem, I’d say only that the EU doesn’t lose money on intervention; quite the opposite: selling back into a rising market is actually a very sound commercial option. The other point that this doesn’t deal with the underlying problem depends on what you think the underlying problem actually is.

As far as ICMSA is concerned the underlying problem is the inability of a family farmer to earn any kind of proportionate and fair income despite being the foundation stone of a hugely profitable multi-billion euro sector. That’s the underlying problem and other considerations are absolutely secondary to that.


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