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As the dairy industry faces into life post-quota and with milk prices in free-fall, it is a worrying time for many dairy farmers across Ireland.
While it is not the first time that dairy farmers have faced pressure on prices, what is different this time is the very heavy burden of debt that many farm families and young new entrants are carrying.
Much of this is due to the manner in which the current Minister for Agriculture, Food and the Marine has been relentlessly promoting dairying as a panacea to all the country’s ills.
Even before the current price slump the Minister’s over optimistic predictions were not based on the economic reality of the world commodity markets.
Presently world consumption for dairy products is increasing at 2% per annum and probably slowing due to economic factors, while production is increasing at 4% per annum and all major producing blocs have signalled their intent to increase production; this has been the case for several years now in the run-up to the removal of quotas.
In this climate then, for the minister to be advocating and actively promoting a massive 50% increase in production without ever at any stage “stress testing” these plans against either a global price dip or an interest rate rise, or without factoring in the weakness of the euro which makes our current exports more competitive on international markets, showed poor leadership and a lack of understanding of the market.
What if there is a price dip, or an interest rate rise, or if the euro gains strength?
The minister’s insistence that the solutions lie in opening the intervention markets, resolving the Russian embargo, and that Ireland has a cost competitive advantage in producing milk are all erroneous and further misleading farmers.
Intervention is a short term solution which does not address the problem, as for the Russian embargo — this has caused problems for the Baltic States but Russia is still a buyer on the world market, just not from the EU; if the embargo was removed it would not change the oversupply situation on the world market.
The constant refrain that Ireland has a competitive advantage in producing milk again does not stand up to scrutiny. While grazed grass is price competitive, other costs in Ireland are high by international standards and leave Ireland mid-table in terms of production costs.
The previous government is now held to account for their mismanagement of the construction industry; this minister may well be held culpable of creating a similar bubble in the dairy industry, the effects of which will be felt for a long time as indebted farmers struggle in silence to stay afloat
Luke Ming Flanagan
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