Dairy farmers could face ‘perfect storm’ over prices and superlevy

Concerns that dairy farmers are heading for a "perfect storm" have been raised by members of the Oireachtas Committee on Agriculture.

The milk quota regime will end on March 31st, leaving farmers free to produce as much milk as they like, but Teagasc has forecast dairy farmer incomes could drop by as much as 50 per cent this year because of falling milk prices.

Farmers are also facing a major superlevy bill for producing more milk that their quotas allow. Late last year farmers were 6.5 per cent over quota compared with 1.38 per cent at the same time in 2013.

Irish Dairy Board (IDB) chairman Aaron Forde told the committee the superlevy bill would be "potentially one of the highest ever imposed", and he urged the Government to work with the EU to have it reduced and not just deferred.

He said there was a difficult year ahead but farmers were aware of this expected volatility for some time, and the medium- to long-term outlook was very good because of the growing global population.

"In 2013 IDB had more demand for dairy than it actually had supply, particularly butter."

Mr Forde said average milk prices to farmers of 26-28 cent per litre were being predicted for this year – a drop of more than 10 cent a litre compared with highs of 2014.

Labour TD Willie Penrose said he feared dairy farmers were facing a "perfect storm" because of these factors, and he said the superlevy bill must be reduced.

“There’s a pathological resistance at EU level [to reducing it] . . . but unless there’s a budge it’s part of that perfect storm so you couldn’t have a worse confluence of circumstances.”

Plough ahead

He said some farmers were determined to “plough ahead but I think they should hasten slowly”.

Fine Gael TD Pat Deering pointed to a Teagasc estimate dairy farmers were facing a 50 per cent drop in income this year, and said many farmers would have invested substantially and borrowed money.

“If we are facing the possibility of a 50 per cent reduction in income then we are going to create, and I don’t mean to be alarmist, maybe a situation whereby we are hitting the building bubble in agriculture. Have we plans for that?”

Research published by Teagasc and Bank of Ireland on Wednesday found that dairy farms had the highest level of debt of all farm sectors in 2013, but said debt levels of Irish farmers were low by EU standards.

Meanwhile, IDB secretary Anne Randles criticised the fact that the EU still does not have a free trade agreement with China which put Irish exporters at a significant disadvantage as compared with countries such as New Zealand and, most recently, Australia.

Frustration

"There is a certain level of frustration at a European level and certainly at an Irish level . . . that China is not on the list of countries that the European Commission is prepared to negotiate a free trade agreement with," she said.

“And therefore the opportunity in the short to medium term of us gaining similar market access to the most important import market in the world for dairy products is not going to happen.”

Bord Bia’s annual review released on Wednesday found dairy exports had increased by 3 per cent last year to top €3 billion, confirming its status as the State’s most valuable food and drink export.