IFA National Dairy Chairman Sean O’Leary outlines what is known, and what IFA expects from the EU aid package.
The finer details of the €500m EU aid package agreed by the EU Agriculture Council and the Commission on 18th July last will be decided in the coming weeks, and voted on 25th August. Meanwhile, farmers have many questions on both the €150m voluntary milk production reduction element, and the €350m farmer ‘adjustment aid’ element.
€150m milk production reduction
The highest profile element of the package is the €150m scheme which promises to compensate by 14.4c/l the farmers who reduce their production in the final quarter of 2016, and possibly the subsequent months.
This scheme was a political response to intense pressure from some member states who felt that rising post quota EU milk production was the cause of the slump. Production growth was not limited to the EU and lower purchases from China, the extended Russian ban and lower oil revenue all impacted markets.
How will it operate?
Farmers who wish to avail of the scheme will have to apply – presumably through their co-ops – documenting production for the October to December 2015, or one of the subsequent three-month periods corresponding to that for which the farmer plans to reduce production in 2016.
Once approved – and this may involve adjusting the planned reduction if the scheme is oversubscribed – farmers will proceed with the reduction. This is a first come, first served scheme across the entire EU, so it is vital that the Department works with co-ops to ensure an efficient and speedy application process.
Within 45 days of the end of the period farmers will claim their payments, proving the reduction with milk statements. The Department will issue the payment once the claim is verified.
Who might it suit?
Farmers will need to think carefully before applying for this scheme. Some farmers may have contractual obligations – say liquid milk producers , participants in a fixed price contract, or a peak management agreement or forecasting requirement – may be able to reduce production and get paid for it, but will have to bear in mind that it might interfere with those obligations.
It may suit some suppliers to dry off cows earlier or perhaps introduce once a day milking in order to meet the scheme’s requirements.
All farmers will need to weigh up potential additional cash flow from high constituents autumn supplies versus compensation payments which could be 5 or 6 months coming.
Supplies have already started to fall in the EU and globally, and dairy market prices are starting to recover which will make farmgate price increases possible over the coming months.
€350m ‘exceptional adjustment’ aid
Ireland’s share of this fund is €11,1m, which can and must be matched by Minister for Agriculture Michael Creed to a total of €22.2m, to optimise the value of the aid for Irish farmers.
The draft scheme is targeted to support dairy and other livestock farmers. Unconditional payments, such as were made last year, are not allowed under this scheme.
IFA has stressed that, with all agricultural produce prices at historically low levels, the cash flow shortages remains the single biggest issue for farmers in all sectors. We have called on Minister Creed to secure maximum flexibility in Europe to be able to use the scheme to introduce the IFA proposal for state backed loans, or otherwise reduce the cost of farmers’ cash flow finance.
IFA proposal for state-backed loans
Earlier this year, the EU gave member states concessions on state aid rules to support farmers’ cash flow, with possible aid of up to €15,000 per farmer to cover the cost of loans or guarantees.
IFA has been lobbying the Minister and his officials to deliver short term, low cost cash flow loans under this provision for farmers in the dairy, pig and horticulture sectors, and under the ordinary state aid rules for farmers in all other sectors.
Our proposed loan scheme would allow farmers to package exceptional merchant credit, utility, superlevy and other bills for a period, with repayments starting when product prices have recovered.
The response to our proposal from the Minister and his officials has been constructive, but it now needs to be delivered urgently.
Farmers are increasingly contacting IFA outlining the financial and emotional strain they and their families are experiencing.
Action is needed now: the Minister must respond to this stark reality of the farm income crisis.