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This week, Jack Kennedy details measures announced by Glanbia Ireland to restrict milk production during April, May and June. The move not only represent a major blow to Glanbia suppliers but the wider dairy industry.
For a three-year period from 2022, Glanbia suppliers will be restricted in the pace of future growth – limited to a compound rate of between 2.5%-5% per annum. Herds producing over 550,000 litres per annum will face the strictest limits.
Where the growth cap is exceeded, the price paid for surplus milk will be reduced by a minimum of 30%. Potentially farmers could be charged by the processor.
A new-entrant scheme will remain open for co-op members but the processor will no longer be accepting new entrants that are not existing members. There will be flexibility for those who can demonstrate growth is linked to implementation of a pre-existing business plan.
Glanbia intends to distribute any pot of money created from the peak penalty back to farmers through bonus payments in the December to February period
Stressing that the move will be cost-neutral to the business, Glanbia intends to distribute any pot of money created from the peak penalty back to farmers through bonus payments in the December to February period. A reserve fund will be generated through the introduction of a voluntary early retirement scheme.
Among Glanbia suppliers, the announcement has been met with a mix of disappointment, concern and – in some instances – anger. Management stress their continued commitment to growth and lay blame for the introduction of peak supply restrictions at ongoing delays in securing planning for the construction of a new cheese facility. But the failure by Glanbia Ireland to review the Profit After Tax (PAT) margin of 3.2% indicates that the full financial impact is being carried by farmers.
The consequences of the announcement to the wider dairy industry should not be ignored. Allowing even a small volume of heavily discounted milk to be available in the market has the potential to undermine the entire Irish milk pool. Any discount applied to the price paid to Glanbia farmers for surplus volume must be continually adjusted to reflect the actual added processing costs incurred. It is essential that a fully transparent mechanism is developed and one that ensures the processor does not gain unfair advantage in the marketplace.
The easy option is to focus blame towards those submitting anti-livestock motivated planning objections to the development of the Glanbia cheese facility
Meanwhile, in respect of introducing bonus payments for December to February, the logic of introducing measures to incentivise major structural change at farm level within a temporary programme should be given careful consideration. A recent Teagasc/CIT report put the cost nationally to farmers of moving from a spring- to a spring/autumn-calving system at €128m with limited impact on improving utilisation of processing capacity.
Looking beyond the immediate fallout, it is important that the dairy industry and wider agricultural sector stand back and look at why the opportunity for some farmers to optimise the profitability of their farm is now being curtailed.
The easy option is to focus blame towards those submitting anti-livestock motivated planning objections to the development of the Glanbia cheese facility and the inability of our planning laws to deal with these in a timely fashion. Both are valid areas in which to direct anger. But we should also have a wider discussion – one that focuses on why we have allowed the narrative that agriculture is bad for the environment become so deeply rooted.
Does it reflect the extent to which we have allowed the research agenda over the past decade focus almost solely on establishing the negative impact of the sector on the environment – particularly around emissions? This is not something we can afford to ignore and the range of mitigation technologies that have been developed from this research should be welcomed.
However, allowing the environmental dividend of grass-based agriculture, through its role in the sequestration and retention of atmospheric carbon in our soils, to have largely been ignored, nationally and internationally, has failed farmers. It is a failure that must be corrected.
The first hurdle will be a requirement for significant investment in establishing national baseline data
Doing so will require real ambition if we are to receive recognition that alongside their animals, Irish farmers also farm trees, hedgerows and soils to the benefit of the environment. It will require a national audit process that through measurement, reporting and validation scientifically establishes, and moves to verifiably improve, agriculture’s net contribution to the environment – recognising our agricultural sector as both a source and sink of emissions.
The first hurdle will be a requirement for significant investment in establishing national baseline data. Does the level of ambition extend to using a portion of the Brexit Adjustment Reserve (BAR) to kick-start a national five- to 10-year plan to bring balance back into the debate?
Undoubtedly if we continue with the status quo we will see the introduction of a national environmental quota.
In a recent editorial, we highlighted the extent to which the Government is taking a very different policy approach to cars than it is to cows.
Over the past 20 years, car numbers have increased by 61% or 800,000 while cow numbers have increased by 4%. Yet we see the focus on reducing cow numbers with no discussion around policies to reduce private cars.
As Colm McCarthy highlights, we see the same policy divergence in relation to data centres. While on the one hand highlighting the need to reduce cow numbers to meet climate obligations, we see Government championing the establishment of energy-hungry data centres through granting low-cost grid connections. Claims that these facilities are 100% powered by renewable energy sources is flawed. Their constant demand for energy and the intermittency of renewable sources requires backup from the grid or on-site non-renewable sources.
Transforming the electricity system away from fossil fuels towards low- or zero-carbon technology is both challenging and expensive.
Why are we adding to the challenge by allowing a scenario develop where 30% of electricity demand will be consumed by the explosion of data centres that contribute little to the national economy?
In the world of social media, a Caesarean section appears to be a badge of honour with some farmers. We should remember that the often graphic pictures and associated commentary travels far beyond farming. Complications will inevitably dictate that in some cases a C-section will be a necessary intervention. However, in the vast majority of instances on commercial farms, it reflects either flaws in the breeding programme or management of the cow during the dry period. While breeding programmes that result in high levels of C-sections or difficult calvings might produce the occasional show-stopper, they are seldom profitable.
Our weekly tillage series From the Tramlines returns for another year. Over the next 38 weeks, we’ll follow the progress of 12 of Ireland’s top tillage farmers. This year’s farmers are diverse, growing a wide range of crops, farming under several different business structures and spanning from north to south.
With strengthening grain markets and the introduction of the Straw Incorporation Measure, 2021 is shaping up to be an interesting year for the sector. I’d like to thank all of our farmers for agreeing to take part in the series this year and we look forward to reading about you throughout the season.
We report on remarks made by NI agriculture minister Edwin Poots, where he acknowledges the need for his department to help protect the EU single market, while at the same time pointing out flaws in the protocol. His claims about the number of checks required at NI ports are not superfluous and are backed up by his senior officials. The current model is clearly unworkable.
It is time that the EU and UK started working on practical solutions. The most obvious is a UK-EU veterinary agreement. Such agreements often follow on after initial trade deals, and would significantly reduce the trade friction between Britain and NI. It would also benefit Irish suppliers into Britain, who are yet to be fully exposed to checks on trade in the other direction. The Irish Government needs to exert its influence.
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