31 Years of superlevy

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31 Years of superlevy

31 years of superlevy – a brief overview

Stressed dairy farmer

With milk quotas at an end, IFA Dairy and Liquid Milk Committees Executive Catherine Lascurettes looks back at 30 years of superlevy for Irish farmers.

Over the last 31 years, Irish farmers have paid a total of €144m worth of superlevy (see table below) – and the record €71.2m bill expected for this, the 31st and last year, increases that to €215.2m!

Irish farmers have paid superlevy, on average, every second year. This is more than most of the other few member states for which superlevy is a recurring issue – and those are in a minority in the EU.

Between superlevy fines, quota purchases and leases, Teagasc estimate in their excellent “The end of the quota era” report published in April 2015 that farmers invested approx €1.4b in milk quotas over the life of the regime.

In the early years of the regime, because Irish farmers were producing less butterfat than the reference they were allocated, significant amounts of milk were produced with limited or no superlevy. After 1997/98, the first year in which the butterfat reference was triggered, because butterfat production exceeded the reference, it is clear from the table that the scope for volume was significantly reduced.

Our largest ever superlevy fine, at over €18m, was incurred on 1995/96 production, before the introduction of the butterfat adjustment. However, it reflected a much higher per litre rate of 38.65c/l, and less milk than the next highest, incurred in 2011/12. This was the largest oversupply todate at nearly 58m litres after butterfat adjustment, and with today’s fine of 28.66c/l, it totalled just over €16m.

The superlevy rate payable for every litre of over quota milk varied significantly over the years. While it may not have reflected exactly every year the level of market support available from Brussels, increases and falls in intervention prices were certainly part of what was used to calculate it.

I has remained unchanged at 28.66c/l – close enough on the current before VAT milk price paid by most milk purchasers – since the implementation of the Health Check began in 2007/08.

So, what will happen on 31st March 2015? Some commentators have stated that the total national superlevy fine could reach or exceed €100m – over 2/3 of what farmers have paid in total since 1984! While there is no doubt that farmers will be faced with the largest ever bill, they have been pulling back on production, many will feed milk to calves this spring, co-ops and farmers will undoubtedly manage collections in the last few days of March, so that the liability will be somewhat reduced.

But every 1% of milk produced over quota increases our fine by €16m, and we are ending 2014 a whopping 5.93% over quota. There is no doubt that 2014/15 will see the largest ever fine – and not just in Ireland.

For farmers in the chronically over quota countries, where industries have ambitions to expand to respond to world market demand, it is hard to understand why the massive costs of superlevy fines must be let beggar them long after the 30-year regime comes to an end.

But in countries where supplies have always been under quota, and where all or most supplies are consumed domestically, the view is that farmers who have over produced have gone against the rules, have contributed to market imbalance, and cannot be spared the consequences.

Though IFA continues to lobby for a reduction of farmers’ fines, concerns over weaker dairy markets and political pressure from the likes of the European Milk Board for the introduction of a new production management system, mean the prospects for concessions are poor.

There has been some talk that the EU Commission may consider giving farmers longer payment periods after 31st March. IFA has raised this with the new Agriculture Commissioner Phil Hogan, and got a good hearing, but no final answer as of yet, and we understand some member states may have raised concerns. We can only hope that this does not meet with the same political hostility as the proposal to abolish the butterfat correction.

 

SUPERLEVY LIABILITY – 1984/85 TO 2013/14

superlevy

Based on data from DAFF
CL/IFA/30th Jan 2015 – reviewed 6th Nov 2015

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