Government and co-ops sizing up the superlevy

With an €11m superlevy fine hanging over them, there are cashflow issues for many dairy farmers.

ICMSA deputy president and dairy chairman Pat McCormack reminds them that the superlevy is going to remain a major challenge up to 2015.

He says it is essential that the department and co-ops agree a consistent and standardised calculating formula for reporting the quota position throughout the year. He said there were “unacceptable” significant divergences between the department and co-ops figures in 2011-12, with department figures finally proving the more accurate.

“We would remind co-ops that they do not have to pay superlevy fines until Sept 1, and the collection of fines needs to recognise this,” he said.

“In that context, it’s worth noting that some co-ops have been deducting fines from some farmers since last summer, and ICMSA would point out that if a farmer owes a co-op a bill, the co-op charges interest on the amount outstanding. Given that co-ops have been deducting money from farmers for the purpose of paying fines not due till next September, it seems only fair that the interest on those deducted monies should be payable to the farmers concerned.”

* How did department and co-op monitoring of over-quota farmers diverge?

>>It was very evident last summer, when co-ops estimated over-delivery running at a double digit percentage, but the department said 4%-6%. They use different supply patterns in their calculations. Co-ops used the 2010 pattern, when milk production didn’t take off until after the harsh April weather. The department used a three-year average supply pattern.

* How were suppliers affected?

>>Farmers in some co-ops which finished up under quota could have pushed on more, if their co-op’s quota situation was predicted more accurately. Of course, it all depends on weather, milk price etc.

Looking ahead, the one guarantee every farmer has is that between now and 2015, all he can rely on is his quota, and not one gallon more, including this year’s 0.75% increase, after the 0.25% for new entrants is taken out.

We will continue to lobby for more quota, but it is unlikely to happen, that EU dairy product prices are under pressure.

* How can co-ops recognise the plight of farmers when collecting superlevy fines?

>>Farmers’ bills for spring fertiliser and feed bought on 90-day credit terms are coming due now. Co-ops do not have to pay superlevy fines until Sept 1, and should help farmers with their cash flow now.

Also, farmers are paying 1.25%-1.5% interest on their co-op bills. Where the co-op has withheld superlevy fine money from them, since last summer in some cases, the same interest rate should apply.

* Is any particular category of farmer hit hard by the superlevy?

>>One farmer who contacted ICMSA said he has a €65,000 superlevy bill facing him.

Quota exchange prices showed how short of quota farmers in Glanbia and Dairygold were. Another group hit by superlevy are those over 350,000 litres. Most of those under 350,000 litres will get away, thanks to fleximilk.

ICMSA is calling on the department to finalise the fleximilk calculations as soon as possible.

Some farmers who have big bank repayments after expanding now have a big superlevy bill.

In general, the vast majority of the superlevy is paid by a minority of farmers.

* How can banks assist farmers who have superlevy bills?

>>Some of these farmers have expanded, and will be very viable in 2015, if the banks are patient and flexible with them.

* For farmers who never paid superlevy before, what is the procedure?

>>The department will finalise the fleximilk calculations, the processor will write to the farmer to tell him the final fine, hopefully about May 20, the processor will give back some of the withheld money in some cases, [and] the fine will be paid to the department by Sept 1.

* Any particular difficulties encountered by farmers in trying to stay within quota?

>>A lot of farmers who milked once per day are still at it, and won’t go to twice per day until mid-June. They don’t want to interfere with cow routines during the breeding season, and they want to get the bonus in some co-ops for staying under 15.7% in their peak month. Some of them have very high solids and get a fantastic milk price, in once per day milking. If they have a large land base, they can keep excess cows in anticipation of 2015.


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