Ireland chafes to end milk quotas

Shane McEntee Photo credit: Merrion Street

Writing in his latest newsletter, the Irish minister of state for agriculture, Shane McEntee referred back to a speech he gave in late January to a Bank of Ireland Agri Seminar in Co. Tipperary.

After enjoying a moment of reflected glory in Ireland’s food export acheivements in 2011, McEntee predicted even better things ahead for the Irish agri-food business, based on the Irish government’s long-term policy document, Food Harvest 2020 . This includes a target of a 50% rise in milk production once quotas end in 2015, as well as a 50% lift in pigmeat production and a 20% increase in the value of Irish beef production.

“Dairy markets have recovered fully from the 2009 price collapse,” he told his Agri Seminar audience, adding that Ireland exports more than 80% of its dairy production. Producer prices for milk rose from 30 centimes/litre in 2010 to 34 centimes/litre in 2011, but sustained growth in production capacity could send prices tumbling again.

Depending heavily on sustained demand in a wider European economy, or even further afield, is hardly a secure foundation for a national policy. It is more an expression of faith in foreign economies. Expanding output at the same time just increases the risk for those investing in additional capacity.

In late January, there were already predictions that Irish milk production would be less than 0.1% inside quota for the year. For the remaining years of the milk quota system, the country’s dairy producers will routinely face the risk of superlevy penalties for overproduction. As McEntee advised: “…it is essential that any expansion be timed to coincide with the gradual increase in quotas and their abolition in April 2015.”

Current provisions for a so-called ‘soft landing’ during which milk quotas are increased as their demise draws near means that Irish quota will increase by more than 7% in quota year 2014 compared to 2008. McEntee is concerned, however, that the Irish dairy industry will outrun its quota ‘soft landing’ margin. “Contrary to the general situation across the EU, Ireland and a small number of other Member States are in continuing danger of going over quota, and the value of milk quota is remaining stubbornly high.”

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Peter Crosskey is based in the UK.