June 9th, 2010

Cahill describes High Level Group draft report as “another lost opportunity” and warns against futures market

ICMSA have stated that the High Level Group on dairying looks likely to represent yet another lost opportunity to move the European dairy sector onto a basis of sustainability and stability. Jackie Cahill, the ICMSA President, said that this was the only conclusion that could be arrived at based on the draft report and he said it was a damning indictment of the abilities of some of the Member States’ ‘best and brightest’ that they had proved singularly unable to come forward with workable proposals that addressed the two fundamental challenges: adequate price for the primary producers of milk and price stability. He was highly critical of the stance Ireland adopted in not seeking proper supply-management conditions and in advance of the critical meeting in Dublin tomorrow, the ICMSA President said there was absolutely nothing in the proposals contained in the document that might prevent a recurrence of the kind of price ‘meltdown’ seen in 2008 and 2009. Mr Cahill said that the civil servants and others were busy airbrushing the worst dairy price crash of recent times out of the record, “it’s as if it never happened”, he said, before describing the idea that voluntary contracts will provide for a balanced market conditions in the long or short term as “either nonsensical or naïve”.

Mr Cahill said that the idea of voluntary contracts as a kind of ‘silver bullet solution’ was most questionable. So far from being a positive development, voluntary contracts could become detrimental to Irish dairy farmers.

“The evidence is all around us - and actually increasing - that the European dairy market is becoming regionalised and nationalised behind a whole array of restrictions, to which we can now add labelling and contracts of supply, all of which will favour local production to the detriment of production elsewhere in the community from export-orientated sectors such as Ireland.
Warning sirens should have been sounded long ago in Ireland on this matter”, stated Mr Cahill. However, he accused some people in the Irish industry of being preoccupied with managing the intervention stocks for the Commission which the Commission had only had to buy in the first place due to their catastrophic mismanagement of the dairy sector in 2008 and 2009.

“There are grand plans to provide for price stability through the mechanism of a futures market. Essentially this is to pay individuals a premium to balance out the market price. It does not in itself give a sustainable price to milk producers in Ireland or Europe; it merely smoothes out the price curve at a cost to producers. The cost being the premiums taken by the people involved in the futures market. Is it not paradoxical – indeed farcical - that at a time when confidence in the so-called unregulated free market is at an all-time low that the Commission and senior civil servants with responsibility for agricultural policy are adopting futures mechanisms of the type that have plunged the global economy into its worst crisis since 1929? Just as everyone realises that prudent regulation is required, we see the Commission privatising their own responsibility and providing an income for speculators through a futures market? I ask this with absolute certainty that the answer is ‘no’ and I challenge anybody to reply: Is there anyone with any knowledge of the European dairy sector who thinks that a so-called futures market will work to the benefit of dairy producers? Once more, ICMSA has to draw the attention of our policymakers to the definitive research work done in the United States that clearly demonstrates that dairy farmers who operate in the futures market have, over the long-term, received less for their milk than would otherwise have been the case”.

Mr Cahill said that Ireland seems to put unjustified reliance on what he called ‘stripped-down’ intervention mechanisms that had demonstrably failed in the very recent past and were, in any case, only activated where price had collapsed to the order of 20 to 22 cent per litre.

“If the final report is similar to the draft then it represents another lost opportunity to quit the daydream and start living and planning in the real world of supply and demand. The acceptance of such a report means that the views of some continental Member States and powerful dairy interests in those States have won out and they will have got rules for their own market. The consequences for Ireland are that we may be forced to become an even more commodity-focussed dairy sector as we are thrown on the World market without price supports while attempting to break into an increasingly regulated network of local and nationalised dairy sectors in Europe. Tomorrow’s a very important day for the Irish dairy sector and the signs aren’t looking too good just now”, concluded Mr Cahill.

Ends. 4 June 2010.

Jackie Cahill, 087-2820663
President, ICMSA.

Or

Cathal MacCarthy, 087-6168758
ICMSA Press Office

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