Irish farmers will welcome this, but will remain concerned at trends since the abolition of quotas in March. Milk prices to farmers have fallen sharply and the big question is whether this is temporary or a fundamental price weakness which is set to persist.
A rise in supply since the abolition of quotas is no doubt a factor, though supply from other milk producers such as the US and New Zealand has increased more rapidly. Meanwhile issues affecting demand are probably key to what is going on. Russia’s ban on dairy imports – imposed as a retaliation for Western sanctions on Russia – have been vital, with product normally going to Russia flooding on to other markets. Falling demand in China has also hit prices and other markets, including some in Africa and the Middle East, are also importing less from the EU , for a variety of reasons.
No doubt some of these factors will change over time, but how quickly is impossible to guess. Meanwhile more EU product is going off the market and in to intervention, but this will have to be released back in to the market at some stage. A level of management thus remains in the milk market despite the abolition of quotas.
Farmers complain that the EU’s action, led by commissioner Phil Hogan, is insufficient. To some extent farmers are, as their representatives say, a victim of political factors outside their control. The history in such matters over many years is of the Commission going so far and farmers seeking more. Given tight budgets, the commission plan is a significant step, going some way to support farm incomes and improve cash flow, in what will be a difficult year.
The abolition of quotas had appeared to open new opportunities to the Irish dairy sector. This may well still be the case in the years to come, given the advantages of our grass-based system. However the recent trends are sobering and are a signal that the drive for efficiency at farm and producer level and the move towards value added products and new markets must continue relentlessly.
Source: IrishTimes
