The fine print of the voluntary supply reduction scheme has been finalised, with the deadline to apply for the first period (October to December) set for 15^th September.

The European Commission now expects that the scheme will be oversubscribed after the first period, with milk output in Germany, France and the UK slowing over recent months. If it does transpire that the scheme is indeed oversubscribed, it will be closed and an allocation coefficient will be established, that will diminish the volume eligible for payment per farm.

Dairy farmers will need to carefully consider the pros and cons of the scheme. For example, a spring calving herd will have to consider the value of his output including higher autumn solids compared to a payment at 14c/l for reduced output under the EU scheme, paid out at the end of March next year at the earliest. Delayed payment will raise concerns over cash flow in the minds of potential applicants.

Furthermore, farmers with contractual supply arrangements, such as fixed milk price schemes, liquid milk contracts, winter milk schemes or seasonality schemes should check with their processor on their available volumes for the period of the scheme.

While the scheme may suit some farmers, and Irish co-ops/processors are willing to facilitate the scheme for those interested, it does appear that the measure will flatter to deceive for many farmers.

From the outset, ICOS has viewed supply reduction measures mooted at EU level as a distraction at best, and deeply flawed as ultimately, it requires European dairy farmers to act as the regulators of global dairy markets.

As cash flow remains a serious concern on many dairy farms, with tax bills on the horizon, ICOS urges the Government to distribute the €11.1 million with co-funding to farmers as quickly as possible.

ICOS is also calling on the Government to support in the upcoming budget, a strategic, co-op structured measure that would allow a farmer to voluntarily defer up to 5% of his income during a year, to be drawn down any time within 5 years. This would allow a farmer to draw upon additional revenue when needed most, and as part of a suite of measures, would help farmers to better manage the extremes of volatility.

By Eamonn Farrell

Agri-Food Policy Executive