The EU’s new scheme to pay dairy farmers to produce less milk can increase milk prices much earlier than expected, and get farmers back into a profitable situation, said ICMSA president John Comer.
He said the scheme will also focus minds at milk processor level, because farmers now have an option to supply or to reduce production.
“If milk processors across the EU need milk in the fourth quarter this year, they are now going to have to recognise that milk production in the fourth quarter will be back 1.1m tonnes, and that should mean stronger returns from the marketplace and stronger returns for the farmers.”
Details of the scheme are awaited from the Department of Agriculture, Food and Marine but, according to ICMSA, the €150m voluntary supply reduction scheme offers a payment for the amount of milk not produced, where a farmer opts to reduce production in the October to December 2016 period, compared to production in the same 2015 period.
For example, if a farmer produced 50,000 litres in the October to December 2015 period and opts to produce only 30,000 in the October to December 2016 period, he/she will receive a payment on the 20,000 litres not produced.
The payment rate is expected to be approximately 14c per litre, and the payment will be made in late January or early February, 2017. To make the scheme even more attractive, member states can complement the 14c per litre of milk not supplied on the market.
Some of the measures adopted by member states using their conditional adjustment aid (the €350m part of the package, plus any national top-ups) might also result in lower production, depending on the options chosen.
Farmers are likely to have to apply to either the Department of Agriculture, Food and Marine, or their milk processor. The closing date for applications will be either September 12 or September 19.
According to ICMSA, if the €150m is not used in the first scheme, there will be a further three-month scheme. The scheme is to be offered on the same terms across the EU.
Mr Comer said it is important the scheme is finalised quickly, and that farmers know where they stand well in advance of the October 1 start date.
He said ICMSA lobbied for the introduction of this scheme despite a lot of opposition from dairy processors and others in Ireland.
“We firmly believe that the scheme will deliver stronger milk prices for farmers and in addition will provide all dairy farmers in Ireland and across the EU with an option to reduce supplies while milk price is below the cost of production, while not preventing those who wish to expand to continue to do so.”
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