Macra set out post-quota blueprint

''Heifer calves conceived this spring will calve down in a post-quota world,'' Macra na Feirme president Alan Jagoe points out. This fact highlights the need to urgently address the core issues facing the dairy sector. With this in mind, Macra na Feirme have established the ten fundamental principles guiding the milk producer/co-op processor relationship in the post-quota era. Pat O'Toole met with Macra president Alan Jagoe, chief executive Edmond Connolly and ag affairs manager Derry Dillon to discuss their proposals

The 10-point plan follows a consultative process involving Macra's ag affairs committee and young farmer discussion groups around the country, with ag affairs chairman Eric Driver playing a key role.

They now want ICOS and the dairy co-ops to take it on board, and to adopt guiding principles for the producer/processor within six months.

''We need to start setting deadlines and meeting them,'' says Jagoe. ''Farmers, and indeed processors, require clarity to inform the medium and long-term strategic decisions that must be made to allow us reach our potential when we are finally freed of the shackles of quotas.''

1 Existing quota

''Existing quota held by all farmers on 31 March 2015 should form the basis of their future production supply arrangement with their co-op,'' says Macra president Alan Jagoe.

The most accurate term for this type of arrangement has proven elusive to date.

''We have used 'license', but in the sense that it is an entitlement to supply,'' he explains.

''The key thing is that the co-op will not be able to alter this entitlement unilaterally, granting certainty and security to farmers.''

2 Milk sought for existing capacity

Of course, continuation of supply at existing levels is the simple part of the post quota/2020 expansion equation.

Macra next address the issue of milk sought by co-ops for existing extra processing capacity at no cost.

They hold that new entrants and small scale producers -- which they define as under 300,000 litres (66,000 gallons) -- should be given priority, with existing suppliers offered the balance of the additional capacity, also at no cost.

3 Milk sought for additional capacity

The next scenario is where additional milk is wanted, but additional processing capacity is necessary.

Here, Macra propose that farmers should be required to invest in co-op shares in return for extra processing capacity.

''In our opinion, farmers should carry a fair proportion of the investment required,'' says Edmond Connolly.

''Our proposal is it should not exceed 30% of the required investment, a figure echoed by Dairygold's Jim Woulfe at last week's ASA conference.''

Again, Macra believe that new entrants and producers under 300,000 litres should be given priority access.

4 New entrants after 31 March 2015

Macra want to see arrangements in place to encourage a steady flow of new entrants post-quotas.

''Co-ops should provide production 'licenses' of 300,000l per new trained entrant under 35 at no cost,'' says Jagoe.

''This would encourage start-up dairy farms.''

He believes each co-op should set a target for the number of new entrants required annually to sustain and grow the supplier base.

''This should be based on the profile of existing suppliers and on expansion projections for the co-op.''

Macra recognise that a ''transparent and equitable'' mechanism to determine eligibility of new entrant status is required.

5 Transfer of production license

Macra are proposing a ''use it or lose it'' system for milk production post quota.

''Suppliers should be able to transfer their production license within the family, or to a favoured nephew or niece,'' says Jagoe.

''Otherwise, that production license should revert to the co-op for re-distribution at no cost. No value should be attributable to the 'license' to supply milk.''

''If a successor is then identified within ten years, they should have priority access to an equivalent license,'' says Macra's ag affairs manager Derry Dillon.

''It's important that we don't have a repeat of the situation where expanding suppliers had to invest precious capital resources in quota purchase.''

It might seem harsh on retiring farmers who built up quota, but the option is there to exit now, when quota has a significant value.

And Macra are proposing an alternative to exiting production -- partnerships.

6 Partnerships

Partners under 35 who are new entrants to dairying should be entitled to a license for 300,000 litres. This license should not be transferable between the partners or to another farmer.

''There is huge potential to expand production through partnerships,'' says Jagoe.

''A young farmer brings energy and enthusiasm, the established partner a wealth of experience and a working dairy unit. New blood is essential in the sector, and this is an effective mechanism to provide it.''

7 Farming through a company

Supply 'licenses' should only be held by farmers in their own name, and not held by a company.

Farmers could still operate their business through a limited company structure, while ensuring the family farm model is retained.

8 Control ofCo-operatives

Co-op control should be retained by active suppliers (not just of milk -- also grain etc) with mechanisms introduced to facilitate share transfer from inactive to active shareholders over time.

9 Oversight

The Department of Agriculture must maintain a register of all production 'licenses' held, and maintain a central role in ensuring that their allocation/reallocation is fair and transparent, with an appeals mechanism to resolve disputes. Milk should only be collected from registered 'license' holders.

10 Force majeure

Force majeure provisions should exist ''for where unforeseen circumstances outside a supplier's control put them at a disadvantage'' as Jagoe puts it.