Response could be vital for coalition - Falling milk prices

With Irish dairy farmers set to reap a bonanza as the fastest growing milk producers in the world over the next five years, according to Agriculture Minister Simon Coveney, the big challenge foreseen by Teagasc, the science engine room at the heart of Ireland’s multibillion-euro agri-food industry, is that milk prices could fall by a whopping 50% next year.

With dairy prices already falling dramatically following bumper grain harvests, effectively flooding the market with an ocean of cheap milk, Mr Coveney admits he is concerned. The picture no longer looks as rosy as it first seemed when the EU decided to put an end to the milk quota system, which since 1984 has greatly benefited Ireland, in the spring of 2015. Ever since that announcement, farmers across the country have been gearing up, investing heavily in bigger herds and new dairy production units with the aim of cashing in on a free-for-all global milk system.

From the outset, the aim was that farmers would replicate the spectacular performance of their counterparts in New Zealand where, under a programme introduced in the 1980s, dairy farmers doubled milk output within a decade and became rich. However, hopes the income of Irish dairy farmers would also increase dramatically are now diminishing.

The squeeze is also likely to be felt by Irish farmers because sooner or later, they will feel the impact of Russia’s ban on most agricultural products in response to western sanctions that is now biting across Europe. Not surprisingly, against this somewhat depressing backdrop, the country’s 17,000 dairy farmers who export products worth over €2bn through regional co-ops, are getting nervous, and in characteristic fashion look to the minister to do his job by bailing them out.

As part of the emergency package being put together, he aims is to put pressure on the banks in the hope they will cushion the most productive element of Ireland’s biggest industry. Given it was the taxpayer who bailed out the banks and saved from closing, it is the least they could do in return, but the mortgage experience suggests farmers would be ill-advised to hold their breath where banks are concerned.

He is also looking to Ireland’s European Commissioner, Phil Hogan, to come to the rescue. As Europe’s agriculture supremo, the ex-Fine Gael environment minister would seem to be uniquely placed to lobby support for the plight of Irish farmers. Though expected not to take sides and remain impartial in dealing with national issues, no doubt “Big Phil”, as Fine Gael supporters call him, will be reminded by the party’s strong farmer lobby how he landed the plum Brussels job. One way or another, they will tell him it’s pay-back time. Arguably, whether or not he delivers, the outcome could have an impact on the forthcoming general election.

As Mr Coveney succinctly put it: “We have this unusual situation. The year and the moment that most dairy farmers have been looking forward to for years, in terms of dairy expansion, are now posing big difficulties in terms of income”. Come election time, if things have not significantly improved, that could be a big political problem for both the minister and this increasingly unpopular coalition government.