When legislation was introduced to deregulate milk marketing in the UK (Britain and Northern Ireland) in 1994, Northern Ireland’s dairy farmers could, for the first time, purchase or temporarily lease milk quota from across the United Kingdom. Several auctioneers and agents had brokerages specialising in milk quota trading. It was traded in all directions within Scotland, England, Wales and Northern Ireland. However, from about 1996 onwards, the net effect was a clear flow of quota into NI from the other three countries, where many producers gave up milking cows. Many of these farmers were taking a “golden opportunity” to cash in their quota, with strong demand from NI pushing quota prices as high as 70p/litre to buy and over 10p/litre to lease for one year.

At times of high milk prices and when there was a risk of superlevy, farmers and bankers justified these prices in their hunger to expand. Finance was generally available from the banks, but some farmers found that they were working for very little return after paying for the leased quota or meeting their borrowing commitments. When prices dipped there were some forced sales of quota and a few sold farms and moved out of Northern Ireland to farm elsewhere. Some still carry the debts today, with heavily borrowed dairy businesses.

Competing buyers in the market for ex-farm milk in NI also got involved in providing loans (at reduced or nil interest rates) for quota purchase, encouraging their suppliers to expand milk output.

All of this had profound effects on Northern Ireland’s milk industry. Between 1997 and 2014, the milk produced in Northern Ireland increased by 54% from 1.3 billion litres to almost 2 billion litres. In 2015 it passed 2 billion litres. It has proved to be a harvest for processors based on the southern side of the border who buy most of the increased supply.

During this time, the number of dairy farms dropped by 41% and herd size increased from an average of 48 cows per farm in 1997 to an average of 86 cows per dairy farm in 2014. Many of the farmers quitting production in NI were also seizing the opportunity to take the “golden goodbye” package while quota had a sales value, and this accelerated the exit from dairy farming and reduction in number of milking herds. The post-quota era does not offer the same incentive for farmers to quit!

As mentioned, milk production increased by 54% but cow numbers only increased by 5.7% over the 17-year period, so there was a big increase in production per cow. Statistics (from DARD) show that milk yield per cow increased from slightly less than 5,000 litres per cow in 1994 to over 7,000 litres per cow in 2014.

A significant proportion of the increased milk came from more meal feeding per cow, which increased from about 1.1t in 1994 to 2.6t per cow in 2014, an increase of 136%. Looking purely at production costs per litre and margins per litre, the question would be “why did the producers do this?” But compared to buying or renting additional land for expansion, the system of more intensive production with additional meal feeding provided an option for many who wanted to grow their business. In many cases extra land locally could not be obtained at any cost. The top performing producers have managed to grow profitably. At times of strong milk prices the figures generally stacked up but average producers could run into losses when the milk to feed price ratio moved against them.

For many years, farmers in the republic were envious of the Northern Irish farmer’s ability to acquire quota freely and especially so when it became available at low cost. This happened from about 2005 onwards, after quota was used as the ‘once-off’ measure to determine the single farm payment on dairy farms and it became clear that declining production in Britain meant that the UK as a whole would not go over quota and there would be no superlevy in Britain or Northern Ireland. However, in many respects, the only thing low cost about Northern Ireland’s dairy expansion in more recent years was the milk quota itself.

This article features in an 80-page End of Milk Quotas magazine which is available to all digital subscribers of farmersjournal.ie from 6am on 1 April and to all print customers on Thursday 2 April