Given the current weakness in dairy markets, and the associated stress at producer level, it’s quite understandable that all parties should seek to find structural solutions to our problems. There have been some suggestions that the solution might lie in Ireland adopting the type of voluntary milk supply reductions envisioned in the Article 222 of the CAP Regulation.

The argument put forward is that if farmers were paid (perhaps 10c) per litre of milk volume reduced, then the overall reduction might be enough to bring global supply and demand back into line, and lead to a resurgence in milk prices.

That argument is simply wrong.

First of all; who would pay the farmer to reduce supply? The European Regulation says that such a measure could only be implemented by co-ops (or Producer Organisations) as a voluntary measure, and wouldn’t be a National Scheme. In addition, both the Commission and the Irish Authorities had said they will not be funding such a scheme, so is a co-op to fund suppliers to reduce supply? Don’t co-ops have enough on their plates trying to sustainably develop their businesses and support their suppliers over this difficult period, without suggesting that they weaken their balance sheets further by funding an exercise that is doomed to fail.

Secondly, such a scheme couldn’t work, as, short of spilling milk out of the bulk tank, the only way a farmer can reduce milk supply is to either cull cows or bull less heifers. If he culls cows, what will he do when markets improve (hopefully early next year), he won’t have the stock to capitalise on the upturn. If he bulls less heifers, the supply reduction won’t take effect until 3 years’ time, by which time the dairy markets will surely be in a different place.

Thirdly, were Irish farmers to pull back production, we’d have to withdraw from world markets, and leave the pitch clear for the Kiwis and the Americans, who can guarantee consistent supplies.

Finally, what about the c€1 billion of farmers’ money that’s been invested in processing capacity, innovation and routes to market over the past 3-4 years?

Volatility, unfortunately, will be a persistent and recurring feature of world dairy markets. One which all parties need to work to counter. A voluntary supply reduction by Irish farmers, however well meaning, would have no effect on the world supply-demand balance.  Furthermore, it would do untold damage to the industry that those farmers have struggled to build up over the past few years.

TJ Flanagan

Dairy Policy Executive