Dairy Meeting In Strasbourg

Luke Ming Flanagan discusses the Extraordinary Meeting of the Agriculture Council.  This meeting, that was held on Monday last to discuss the difficult situation on agricultural markets, is in itself is extraordinary, given that only last July, when the ‘Milk Package’ was voted on in Plenary, Agriculture Commissioner Phil Hogan and his supporters were insisting that the problems in the dairy industry were of a short term nature, the fundamentals of the market were sound, market conditions were favourable and that there were major exporting opportunities to be exploited worldwide.
So confident were they of this assessment, they recommended that the European Strategic Fund for Investment should be used in driving this expansion, and further, that the Futures market should be examined as a means to hedge against price troughs.
This is taking farmers in the wrong direction and this will not lead to a sustainable growth in the industry. While world demand is growing at 2% per annum, world production is increasing by 4% per annum and all major producing blocs have signalled their intent to increase production – due to simultaneous economic and geopolitical factors, this is a depressed market, which can only lead to continued pressure on prices.
OPTIONS OPEN TO THE COMMISSION AT THIS STAGE
Tools being discussed are:
• Extending intervention from September to February 2016 which means in effect there will be no closed period of intervention (it’s normally open only from March through August);
• Raising the intervention price is being mooted but this is a cumbersome process, goes through under EU regulation, can take up to 18 months;
• Increasing the budget for marketing and identifying new markets for dairy products (per the July Milk Package);
• It is suggested that the monies paid by farmers in super-levy fines be returned to the industry in some sort of a support payment. While this sounds attractive it may be difficult to achieve as this money is returned to the Agricultural budget and assigned to different areas;
• Other measures being discussed are early release of farm payments – this may ease cash flow problems but it is not new money.
QUESTIONS FOR COMMISSIONER HOGAN
It’s welcome that finally Commissioner Hogan recognises that there IS a crisis but there are fundamental questions to asked:
• Are we on the right path?
• Are we setting realistic goals that can be achieved in a sustainable manner?
• Should we be consolidating our manufacturing base in milk processing, as is suggested, producing a commodity product to be exported around the world at a cost or should we be broadening our processing capacity to exploit the entrepreneurial flair of the individual?
I believe we’re on the wrong path, setting the wrong targets.
THE WAY FORWARD
Currently, out of approximately 1,000 food products registered in the EU under the PGI (protected geographic indication), and PDO (protected designation of origin) schemes, only four are Irish, with a few more pending – way behind the European average. Along with our ‘green’ image, this is an avenue to be exploited, to add value to production. A salient fact – 90% of EU produce is consumed within the EU itself, but we actually export 80% of our dairy products, which has huge added costs. Gaining a greater share of the high-value market should be our primary aim.
One of the better elements of the July Milk Package was the proposal to introduce producer groups to give farmers more power in the food supply chain, with real power to negotiate on behalf of the farmer. This envisages funding being made available from Pillar II to provide training in skills to manage these producer groups, whose sole focus would be on getting the best deal for the farmer across a geographic area in both inputs and outputs.
The situation in the world dairy markets mirrors that of other agricultural ‘commodities’ (because unfortunately food is now seen as a mere ‘commodity) and proves yet again that now more than ever, the primary producer is left exposed to price change, with few options in the market place. Experience from New Zealand and closer to home in Switzerland shows that rationalisation comes at a huge personal cost to the farmer.
In the last CAP reform the EU Commission proposed a flat-rate payment to allow the farmer freedom to produce whatever the market required. This was opposed by many Member States pandering to vested interests, with the result that Member States are paying farmers to maintain and increase production which is adding to the over-supply problem. It is estimated that one in every second dairy cow is receiving coupled support – this could and should be revisited in the mid-term review.
With the onset of industrialisation, pigs, poultry, beef-cattle and sheep farming are all now low margin and part-time sectors. Dairying has consistently been the most profitable sector of agriculture and is the backbone of Ireland’s rural economy. It’s critical that we properly manage the changes it is going through now, or we will end up going down the road of those other sectors.