End of milk quotas: a new dawn for farmers?

When Mike Magan began farming, in 1971, there was a feeling that anything was possible. Ireland joined the EEC in 1973, “and the following years were just extraordinary”, says the dairy farmer from Killashee, in Co Longford. “There was a sense of excitement and opportunity, and everybody embraced it.”

But everything ground to a halt in 1984. Farmers had been increasing production, but demand in Europe was static; butter mountains and milk lakes began to form. The idea of milk quotas, to reduce production, gathered pace. “Europe said let’s try curbing production for five years, and the five years ran into 30 years of quotas,” says Magan.

But now that sense of exhilaration is back. The milk-quota regime is finally being abolished, 31 years after its introduction, and from April 1st farmers will again be free to produce as much milk as they wish. Farmers expect to be producing at least 50 per cent more milk by 2020.

So will our supermarkets be flooded with cheap milk? That’s unlikely, because the milk in our fridges accounts for a tiny amount of the total milk produced. Liquid milk, as it is known, accounted for just 8.4 per cent of last year’s total output, according to Catherine Lascurettes of the Irish Farmers’ Association. The rest went into dairy products and ingredients, mostly for export.

Lascurettes says the liquid-milk market is fairly static in terms of consumption and sales, so there doesn’t look to be much scope for these specialist farmers to increase production.

So where will all the extra milk go? The global population is expected to exceed nine billion by 2050, and demand for dairy produce is soaring in Africa and Asia.

Mike Magan is glad to see the end of quotas. He says the worst of both worlds followed after quotas came in, because milk prices fell. “Most businesses tackle a falling return by producing more, but that wasn’t open to us. So that meant the 68,000 farmers dropped down to 18,000 farmers over time. I know many great colleagues who left dairying in frustration at the quota regime.”

Magan believes that the end of milk quotas could transform rural Ireland. “Milk production brings building, fabrication, manufacturing, a huge amount of ancillary supports,” he says. “I would reckon there’s about 15,000 to 20,000 jobs for the rural economy by 2025 if we do it right. And they are real, sustainable jobs: the plumbers, the fitters, the electricians and the tanker drivers. They live locally. They spend locally. It’s a classic way of developing a rural economy, by boosting things that use resources, like rain, grass, sunshine, and turn them into a product that gets exported.”

Minister for Agriculture Simon Coveney is upbeat about the prospects in the coming years. “People outside farming have no idea of the significance of this,” he says.

He points to a study, by Cork Institute of Technology, that says 4,000 jobs could be created in Co Cork because of the dairy expansion. “If you were to extrapolate that outside of Cork, you’ve got to be talking about a figure of 20,000 jobs by 2020 . . . But certainly we’re talking about 10,000 jobs or more coming from dairy expansion in rural Ireland,” he says. “If I was announcing in the morning 10,000 new jobs in rural communities it would be on the front of every newspaper in the country, and it would be at the front of the news cycle for a week, because 100 jobs in some rural parts of Ireland are as good as 1,000 jobs in Dublin 2 or Dublin 4.”

Milk output is expected to increase from five billion litres to eight and a half billion litres by 2020. “That means exporting an extra €1 billion worth of milk. It means increasing the herd size by somewhere between 300,000 and 400,000 cows, which means increasing the number of people who are physically milking by between 4,000 and 5,000,” Coveney says. “It will make Ireland the fastest-growing dairy producer on the planet for the next five years – and probably for the next 10 years.”

Could the dream turn sour?

That all sounds great, but could the milk dream turn sour? Now that we are competing in a global market, prices will be volatile. The price a Kerry farmer gets for a litre of milk will be dictated by a drought in the US or grass growth in New Zealand.

The president of the Irish Creamery Milk Suppliers Association, John Comer, fears that the removal of quotas will spark a major increase in milk supply across Europe, followed by a collapse in prices.

“I’m not in favour of quotas, but the exact opposite is not the answer either,” he says. “We need more debate and more discussion on this. We don’t want to see farmers being forced into insolvency when there’s an oversupply. And then it turns into a factory situation, where family farms are bought out by big companies. That’s not good for me as a producer or you as a consumer.”

The European Commission has started to monitor the global dairy market in order to predict a potential oversupply or price collapse months in advance. “It should go a step further and have legislative powers, so it could do more about controlling supply in the marketplace,” Comer says.

Dairy farmers are at the top of the range when it comes to farm incomes, earning an estimated €60,000 on average last year, but Teagasc has calculated that that income will be halved this year because of the fall in global milk prices.

Magan says people who spent a lot of money on buildings, or bought heifers, will be more vulnerable as they try to pay back their loans with a poor milk price. While the best farmers can produce milk at 20c to 25c a litre, he says, average production costs are in the high 20s or even the low 30s. Today’s price of about 30c a litre means they are barely breaking even.

Magan says this is where family farms show their mettle. They can take a lower income in hard times and work longer and harder until things pick up. “We’re an extraordinarily resilient industry that way,” he says. “We suck it up and struggle on until the next time.”

The IFA’s dairy chairman, Seán O’Leary, would like to see more co-ops follow the lead of Kerry Group and Glanbia by giving farmers the chance to fix a price for a percentage of their milk, so that they have a guaranteed price for some of their milk in volatile times.

O’Leary says farmers must avoid getting carried away on a wave of enthusiasm and look inside their own farm gate. “As farmers we have a tendency to look at the neighbour, to see what he’s doing, and say: ‘We’d better do it, too.’ But you have to look at your business, your family situation. Have you a successor coming behind you? If you increase to the next level you’re going to need an extra labour unit, and you’ll have to do a lot of extra work to pay that person.”

Having 300,000 more cows in our fields means more methane gas, slurry and fertiliser, so it’s not surprising that An Taisce has concerns about the planned expansion. “We have huge issues with this,” says its natural-environment officer Fintan Kelly. “Although the size of the herd is going up we’re not hugely increasing the amount of land, so the impact of those extra animals will have to be absorbed by the environment that’s already in place.”

He says this will have implications for water quality, biodiversity and climate change. “Twenty-nine per cent of our rivers and canals wouldn’t be considered to be of good or high status in terms of water quality, but if you go to lakes that jumps to 53 per cent. So if you intensify the amount of slurry you’re producing it’s just going to get worse.”

But Coveney argues that the expansion is being planned sustainably. He points to Bord Bia’s Origin Green and dairy sustainability programmes, which set environmental standards for farmers and processors.

“We’re measuring carbon footprints in our herds. We’re measuring feed conversion efficiency, in terms of how efficiently we feed animals to produce milk,” he says. “We’re talking about better breeding programmes and better grazing programmes, so the carbon footprint for a litre of milk gets better all the time. We’re starting from a good place, because we are currently producing milk with the lowest carbon footprint in the world. But we can be better.”

Kelly says the emphasis on reducing the carbon footprint is misleading. Keeping animals outdoors for longer reduces the need to import grain, thus keeping the carbon footprint lower, but this increases the need for more fertiliser.

He says that when people think of climate change they think of industry emitting clouds of smoke. “When they look at a field of cows they don’t think that’s an issue. But cows create methane, which is 20 times worse as a driver of climate change than carbon dioxide over 100 years. Agriculture is the biggest emitter of greenhouse gases in the country. It accounts for 32 per cent of all greenhouse-gas emissions.

“Because agriculture is not reducing its footprint, that means other sectors, like transport and energy, have to make up the difference. If we don’t reduce our greenhouse-gas emissions Ireland is going to have to pay huge fines, and it’s not going to be the Department of Agriculture that pays that. It’s going to be the Irish taxpayer.”

He does concede that Ireland’s farming system is better than that practised in many countries. “We have grass-fed animals out on the land. It’s not a situation where you have a lot of imported grain and animals are in sheds all the time. Yes, we are better than some countries, but every sector needs to contribute.”

Magan says he is conscious of the environmental implications but asks: “Are we not better to do it in a carbon-friendly environment that is grass production in Ireland than doing it from milk produced from grain-fed animals in some place with a much, much higher carbon footprint?”

The future looks very bright for the dairy sector, he adds. “We should have a national task force looking at how to exploit the potential for growing milk output at county level. We are on the cusp of a great opportunity that we haven’t had since the early 1970s. Good riddance to milk quotas. I disliked them from the first day.”