Farmers who decide to exceed their milk quotas have been warned that they could pay a superlevy fine of up to 33.9c per litre for the high butter fat milk produced by spring calving herds in late season.
The standard superlevy fine is 28.7c, but a farmer achieving a butterfat of 5.2% would incur a fine of 32.8c per litre, says AIB agri-advisor Patrick O’Meara.
He has encouraged over-quota farmers to calculate their potential exposure and consider the financial impact of a fine on farm cash flow.
Referring to milk produced by a spring calving herd in October, November, and December, he advises, “It would be misleading to simply subract the standard superlevy fine from the milk price received, as the butterfat percentage in milk increases at the latter end of a cow’s lactation.”
“While it is true that farmers with a higher percentage of butterfat receive a higher payment per litre, they will also get penalised to a higher extent under the milk quota regime.
“Farmers will usually factor the higher price they receive for the milk into their plans, but I would also encourage them to calculate the actual superlevy fine on the same litre of milk.”
He said it is likely that some farmers who previously never paid a super levy fine will incur one for the first time this year.
He advised farmers likely to incur a super levy fine to examine how they can minimise their over-quota exposure.
Options to minimise a potential super levy include once-a-day milking, drying cows off early, reducing concentrate feed, leasing cows out, feeding high levels of whole milk to calves and/or culling certain types of cows.
“These options could make a significant difference to the profitability of the business, particularly in an environment of a reducing milk price.”
He pointed out that the superlevy is not a flat rate penalty, as an adjustment is made for the level of butterfat compared to the butterfat reference of a farmer’s milk quota. (For every 0.01% of butterfat produced in excess of a farmer’s reference, his quota volume will be reduced by 0.09%).
As shown in the accompanying table, every 0.4% rise in the butterfat percentage , increases the super levy fine by 1.033c/l , where quota volume and butterfat reference are exceeded.
“Ireland will certainly incur a surperlevy fine in this the final milk quota year. Any farmer who is likely to supply more milk than his opr her milk quota should evaluate their position, and enlist the support of their Teagasc Advisor or Agricultural Consultant if necessary,” said Mr O’Meara, who is abased in AIB, Nenagh.
“A good starting point would be to quantify the likely over supply, evaluate options to manage milk supply, and quantify the impact on cash flow in spring 2015. Armed with this information, you will be well placed to put a plan in place to manage your position to the end of the milk quota regime.”
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