Dairy farmers in a quandary

By James Campbell

It looks like the milk year 2003/04 is not the year to quit dairy farming. That is if the EU Agriculture Ministers eventually agree with Commissioner Franz Fischler's proposal to use each individual's milk quota "actively held" at 31 March 2004 as the basis for future dairy premium entitlements of those individual quota holders.

If that is to be the case it poses serious problems for some and opportunities for others to maximise their future entitlement to the "brown envelope" dairy premium, which seems set ultimately to be part of any "decoupled" payment for dairy farmers.

A host of scenarios spring to mind.

Will the dairy premium entitlement be payable to quota holders who fill less than 70 per cent of their quota in the year to 31 March 2004?

Will UK non-producing quota holders (NPQH) have to sell quota before 31 March 2004 or have it confiscated?

In the wake of the Thompson case, proposals are expected soon from the UK Government on a timescale for NPQH to relinquish milk quotas.

What entitlements will there be for herdowners whose milk production in 2003/04 has been cut back due to TB, Brucellosis or other problems?

Could the dairy premium entitlement be based on milk produced in 2003/04 even if above quota? (This seems unlikely, as it would be rewarding the producer for exceeding quota).

Could an active dairy farmer increase future entitlements by leasing in additional quota in 2003/04 even if only producing slightly over 70% of the total of owned and leased quota?

This seems set to put new life into the milk quota trade for 2003/04. It could also see active dairy farmers stepping up production and inactive ones returning (temporarily) to milk production.

Prices for dairy cows could get a temporary boost. But with no clear decisions likely to be made soon, it will be a gamble.

There could be a case for reverting to an earlier year or to 31 March 2003 as the basis for quota used to calculate dairy premium entitlements in order to avoid market disruption.

Forward leasing of quota for 2003/04 is not yet available. "Clean" quota for purchase at present is making 9.5 to 11 pence per litre. What will be a sensible price to pay for quota? This will depend on the value of the dairy premium entitlement per litre of quota held at 31 March 2004.

Until the payment is "decoupled" will there be a requirement that the farmer keeps milking a certain number of cows in order to be paid full dairy premium entitlement? What a way to run an industry!