Farmers on track with super levy for exceeding final year quota

Ray Ryan reports that 6,400 Irish dairy farmers who accrued a €71m liability when the EU ended milk quotas are on target with repayments

MILK producers are on target to fully discharge a €71m superlevy bill imposed on them by the European Commission for exceeding their final year quota.

Some 6,400 Irish dairy farmers accrued the liability when the EU milk quota was abolished in April 2015. However, the bill became due for payment at the height of a dramatic slump in the prices paid to farmers due to market volatility and other issues.

European Agriculture and Food Commissioner Phil Hogan decided to assist with the large superlevy bill across member states by introducing an optional scheme. It meant the milk quota levy incurred by producers in the final quota year could be paid in equal instalments over three years from 2015 to 2017, inclusive, without interest.

This repayment would take the form of a 33% lump sum in 2015 and the balance to be spread over equal instalments in 2016 and 2017. Ireland was one of seven member states which opted to introduce this scheme to assist farmers through a period of market volatility.

In November 2015, the Department of Agriculture paid Ireland’s superlevy bill of €71m to the EU. It was made up of €35.4 m collected from farmers that year and €35.6m from the Department’s funds. This latter figure was required to be paid back by farmers under the instalment scheme as a condition of the governing regulations.

Some 2,700 producers opted to pay their full levy in 2015, while the remaining 3,700 opted to join the instalment scheme.

Minister for Agriculture Michael Creed told the Dáil earlier this month that €17.8m was paid in five equal instalments from May to September 2016, and €17.8m is to be paid in five equal instalments from May to September this year.

The first instalments were due in May 2016 and were repaid in each month up to September. These months were chosen to coincide with peak production periods for farmers. End- of-year results indicate over 99.7% of the expected payment was received.

“The outstanding debt for 2016 is now down to three participants owing €12,700,” said Mr Creed. “My department is in ongoing contact with these farmers to arrange their repayment as required under the relevant regulations.

“To date, €53.2m of the €71m in respect of this scheme has been returned to the Exchequer, with the 2017 instalment balance making up the remaining liability. It is expected that by the end of this year, the entire superlevy will have been repaid in full by farmers.”

Mr Creed, who was replying to Social Democrats joint leader Catherine Murphy, said the rationale for the scheme was twofold. There was a very significant superlevy bill not just in Ireland but across the EU.

A number of member states decided to avail of the latitude which was offered by the commission in paying the superlevy over a period rather than up-front.

It was also a reflection that at the time milk prices began to go south, which put additional repayment capacity difficulties on farmers. The staggered approach was welcomed by farmers.

“I accept that, welcome as it was, in a very difficult year in 2016, it put farmers to the pin of their collar,” he said. Mr Creed said that, in light of the overall cost, it was not a bad level of compliance in what was a particularly difficult 2016.

Global dairy markets have recovered somewhat and that graph is going in a different direction, fortunately, as prices rose. That will give farmers some leeway and breathing space in terms of commitments. The department is budgeting on the liability being met in full, he said.

Brussels has meanwhile disclosed that nearly 44,000 farmers from member states have applied for support from the EU for agreeing to voluntarily reduce their production of milk by nearly 852,000t in the last quarter of 2016.

Mr Hogan said this scheme, launched last summer with €150m, was one of the commission’s flagship measures to face the milk crisis and had been a clear success.

“There has been a slow but unmistakeable price recovery, with the milk market witnessing a rising trend for a number of months,” he said.

Farm leaders in Ireland have meanwhile called on the country’s co-ops to reflect the improving market returns in the prices they will pay for milk supplies.

IFA dairy committee chairman Sean O’Leary said EU dairy prices continue to return around 36 c/l gross (before processing costs). This should help Irish co-ops to pay a realistic average base milk price of 33c/l for 2017. Gerald Quinn, chairman, ICMSA dairy committee, called on all co-op boards to set a milk price for February of at least 32 c/l and he described that figure as fully justified and based comfortably upon market returns.

Meanwhile, the IFA will launch a new liquid milk strategy in Dublin tomorrow. It will outline policies and regulations, new approaches in contracting and pricing, and call for greater engagement by all stakeholders with the economic challenges facing producers.

Joe Healy, president, said the milk that people put in their cereals and cups of tea each day depends on 1,800 specialist producers milking cows 365 days a year.

“Historically, we have been able to take the availability of fresh milk for granted, but times have changed and with Brexit now upon us, our fresh milk market in which 25% of sales are sourced in Northern Ireland, needs such a strategy even more urgently,” said Mr Healy.

Liquid Milk Committee chairman John Finn said premiums paid to specialist farmers have been eroded from an average of 4.6c/l over creamery prices from 1995-1999 to less than 2c/l for the five years to 2015.


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