Editorial: dairy farmers urgently need processing and policy clarity

The announcement last week that the board of Lakeland Dairies has agreed to introduce a two-tiered pricing policy on milk produced during the peak milk period of April to June is hugely significant. It is the first time we have seen a co-op voluntarily decide to curtail peak milk production and pause new entrants. In the case of Glanbia, the decision was forced upon them due to planning delays.

The reason for the move by Lakeland is far from clear. The obvious conclusion is that the board took the decision to restrict seasonal grass-based production rather than making the necessary investment in additional processing capacity. But a price penalty does not remove the need to have adequate capacity in place to process increased volumes during peak months. While incentivising farmers to produce more milk from an emission intensive indoor system, it does ultimately limit cow numbers. Is this the objective?

The timing of the move is also interesting coming as concerns mount that a key recommendation within the Food Vision Dairy Group report will be the introduction of some form of dairy retirement scheme.

Environmental permits

Meanwhile, as Amy Forde reports this week, the European Commission has created further uncertainty in proposing that cattle and dairy farms with 150 cows or more will need to hold an environmental permit. Such a mechanism could potentially place further demands and costs on farms outside of the CAP.

Farmers’ capacity to plan with any degree of certainty and realise existing plans is challenged by such uncertainty around policy and processing. Surely those farmers currently expanding milk production would have benefited from advance notice of Lakeland’s plans before committing to investments and possibly debt finance.

There is a need for a clear farmer-led blueprint to be developed to chart the future direction of milk production and processing over the next decade.

Meanwhile, it is positive to see Glanbia moving to link feed prices to fixed milk price contracts. Ultimately the goal should be to allow farmers the option to fix their margin, through a basket of key farm inputs, when fixing milk price.