Following on from another meeting of dairy processors, farming representatives, DARD, the banks and the feed trade this week in Belfast it is clear that there are no easy solutions to the difficult financial position facing Northern Ireland dairy farmers.

Commenting after the meeting, Agriculture Minister Michelle O’Neill described the latest get-together as "productive". She has tasked officials to work with industry representatives to establish a dedicated working group to address the issues facing the dairy sector at present.

Her statement afterwards also mentioned the need to address issues such as cash flow on farms and the current over-supply of milk, having further engagement with banks and finance companies, and meeting Commissioner Hogan ‘to press him on intervention volumes’.

It is a combination of issues at the heart of the current crisis.

Inteervention volumes

While the industry in NI spent much of 2015 pushing for an increase in intervention base prices, the much more important issue in 2016 will be the volumes allowed into intervention. Unless something changes very soon, intervention will be an important market for Irish product this spring. If volumes are capped, a market without intervention could be under even more pressure.

Cash flow is also an on-going concern, especially heading into the spring with significant fertiliser bills pending.

Capital holidays

The Ulster Farmers Union has called on banks and other lenders to be more open about capital holidays to get through the crisis. However, sources in the banks maintain that they now have customers moving into their second year of interest-only loans. “It is not something we routinely offer across all sectors. It highlights our commitment to the industry. But the flipside is that farmers must be able to cover the interest. If they can’t then they are in a very serious position” commented one senior banking figure. He acknowledged that extending overdrafts and loan repayments will mean that even if they do survive, many businesses will be “seriously damaged” by the time the market recovers.

quote>The philosophy is nuts if you are losing money on every litre of milk, and until that cycle is broken the market will not recover

He also pointed out that the market is over-supplied with milk, and that is the responsibility of farmers and processors, not politicians or the local banks. “Farmers in NI and further afield are continuing to respond to lower prices with more milk. The philosophy is nuts if you are losing money on every litre of milk, and until that cycle is broken the market will not recover,” he said.

There are a couple of recent examples of farmers selling out their fresh calved cows over the last few months, allowing them to pay down their overdraft. They will start milking again this autumn once heifers calve, and if the market is showing signs of recovery. “Why would I milk cows to lose £40,000 over the next six months?” commented one Co Armagh farmer.

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