An agri-competitiveness council should be established to investigate how to underpin a secure future for commercial dairy production, the national conference of the Irish Co-operative Organisation Society heard yesterday.
Prof Gerry Boyle of NUI Maynooth told delegates that following the review of the Common Agricultural Policy in Luxembourg, too few dairy farmers were operating at the level necessary to secure their future.
"The required threshold level of output for long-run competitiveness would need to be somewhere around the 100,000 gallon level given our milk yields," he said. He said only 42 per cent of dairy herds here had 50 or more cows, less than half the number necessary to fill such a quota.
During the 1990s Irish farmers had maintained their lead as low-cost milk producers, but in the new situation many small producers could be unsustainable.
However, Prof Boyle said, the potential existed for structural change which provided a basis for optimism but that would not be easily or cheaply achieved.
The director general of ICOS, Mr John Tyrrell, said the CAP agreement would have a major and possibly negative impact on co-ops and producers, unless appropriate strategies were implemented.
He said there was a clear demand for a change to the milk quota restructuring regulations and he called on the Minister for Agriculture and Food to give a clear signal to producers about the restructuring options for next year and 2005.
It was now recognised that the milk quota needed for survival was much higher than the current average and something needed to be done. "Those who are considering expanding or exiting will require advance notice of any changes so they can make informed choices. In this respect, it is our view that the Minister should give a very clear signal before Christmas about what system will apply in 2004 and 2005," he said.
Mr Tyrrell added that the manner in which the EU Commission managed the dairy division was important.
"It is not in the interest of the EU or the Irish dairy sector to increase the level of dependence on intervention as an outlet.
"In view of of the expected volatile and difficult market over the next four years arising from the CAP reform milk price cuts, ICOS is intensifying its lobbying of the Commission to utilise export refunds and other milk market supports so that the EU can competitively export milk products."
Dr Noel Cawley, managing director of the Irish Dairy Board, said dairy farmers faced the combined effect of the reduction which was the equivalent of 21 per cent drop in the intervention price of milk.
"The reduction in support prices is likely to be reflected fairly quickly across the whole spectrum of EU prices for milk and milk products," he said.
The reduction in farm gate prices would clearly have a significant impact on producer incomes despite the input of direct payments from next year as would lower returns from the markets.
However, despite the significant challenges, there would also be opportunities if Ireland looked at its current product mix and had a flexible approach to change.