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Milk battle

By Oliver O’ Connor

The ending of milk quota has been greeted with almost unbridled hoopla in Ireland. From the countdown clock in Ag House, where the Department of Agriculture has its HQ to features on foreign media about Ireland and milk, the coverage has been, mostly, glowing.

So what was this quota thing the agri-food sector is so happy to be rid of? Quota was a limit, an imposed ceiling, placed on milk production 31 years ago. This was an era of milk lakes and butter mountains, when Europe could produce far more than it or anyone else could consume. Levies were imposed when production went over the pre-set level.

Now, with strong export potential in emerging economies, especially China, quota has been lifted and production can rise again. World trade in dairy has grown from 53 to 65 billion litres in just four years, while demand in China is expected to grow by 43% by 2019.

By European standards, Ireland is a big shot in dairy in many respects. While quota has limited production to about 5 billion litres, Ireland has compensated by placing more emphasis on processing and value-adding than other big producers such as Germany. Companies based in Ireland trade over 15% of the world’s infant formula, while new processing plants, such as Glanbia’s €235m unit in Kilkenny, have opened to much fanfare. Ireland has also already begun investing far more in dairy-processing research and development than its EU competitors do.

Food Harvest 2020 has been the blueprint document for much of this growth. Ostensibly not a Department of Agriculture plan (despite the Department logo being the only one on the front cover page) this industry growth plan predicts a 50% increase in milk production in Ireland by 2020. And Ireland is on target to deliver this.

Dairy is already the wealthiest of all the sectors in Irish agri-food. Dairy farmers are price-makers and not price-takers, in part because they have worked together for decades, generating the benefits of economies of scale while retaining ownership or strong interest in the upstream sellers. Land prices are strong, in part because of demand from the dairy sector.

Many in the sector look to New Zealand, which now produces 18 billion litres of milk annually. When quota came in in 1984, like Ireland, they too produced 5 billion litres.

10,000 new jobs, and 300,000 new cows, are projected to come from this milk bonanza in Ireland.

What’s not to love? A lot, according to those concerned with environmental issues, from water quality to climate change, and to those on what can be called the rural left.

Beef production in general is very inefficient with extremely high carbon emissions per kilo. Dairy cattle in Ireland produce 9% more methane emissions per head now than in 1990, though they  are admittedly producing more per head. Simon Coveney has said he is determined to make sure Irish farmers do not have to scale back on environmental grounds: “Any old fool can reduce emissions by simply reducing production. There’s no challenge in that”, he told the Dáil last month…The challenge for the globe, and for Ireland in terms of giving leadership in this area is finding a way to produce more food while reducing the overall emissions footprint of our production systems”.

The IFA without whose say-so Coveney never even gets up in the morning has welcomed the absence of what it calls “divisive and unachievable sectoral targets” in the Climate Action and Low Carbon Development Bill. This is code for welcoming the absence of effective, sustainable, time-tabled targets.

The Taoiseach and Minister Coveney have argued that Ireland’s national emissions reduction target which is to be agreed at EU level “must take account of Ireland’s specific circumstances including the size and importance of our agri-food sector”. Try selling this message to other unsustainable sectors like Polish coal-miners. Ireland’s binding 2020 emissions target is to achieve 20% reductions in emissions relative to 2005. Currently, we will only achieve 2%. As Irish agriculture produces nearly a third of national emissions, it is a major part of this national failure. Agriculture had steadily reduced emissions until 2011 but Food Harvest 2020 plan is rapidly reversing that progress.

“Rural left” sounds like an oxymoron in Ireland. However, agri-food is so dependent on subsidies, that the distribution of this bounty has helped foster a divide between notions of fairness and productivity around Europe, including in Ireland. The new Common Agricultural Policy (CAP) was supposed to be fairer – to distribute funds in a more equitable manner. This has been curtailed, due to the hard work of Minister Coveney and others, who have argued that fairness would somehow punish those who are more ‘active’ and productive.

The 10,000 member ICSA – Irish Cattle and Sheep Association – have in some significant ways broken ranks. Unlike Simon Coveney, they see the need for a beef regulator, criticise the Bord Bia Quality Assured scheme, and argue against the unfair implementation of the CAP and the potential sacrifice of an Irish beef industry in the EU-US trade agreement, TTIP (Transatlantic Trade and Investment Partnership). Similarly, farmers in the BMW (boarder midlands west) region and other places traditionally considered to have poorer land are forming small organisations opposed to current political trends, or joining the organic-farming scheme in increasing numbers.

This rural left is represented in European dairy affairs by organisations like the European Milk Board. It is not so much potential growth in dairy that this organisation worries about but rather the effects of price volatility and the loss through consolidation of small-to-medium-sized producer.

Their protest in Brussels on 31 March reflected this. Seeing a real shift in power from producers to companies, the president of the EMB Romuald Schaber warned “thanks to the expected milk surplus, as of now conglomerates will dictate terms and conditions to the farmers even more than before. Prices will be rock-bottom, as Europe’s farmers will have even less market power to achieve a cost-covering milk price in the future”.

The EMB suggest what they call a ‘market responsibility programme’ to ease the transition from quota.  This would balance production, based on price and availability, and penalize over-production if the demand is not there.

Certainly more volatility is on the cards – even according to bullish EU Agriculture Commissioner Phil Hogan. Volatility will hit those with fewer economic resources the hardest. A smaller producer suffers more, proportionally, with a plummeting price than the better resourced farmer. It’s a get-big or get-out dynamic, as debts get racked up to grow the business, in a context of severe price fluctuations.

the future: Glanbia, Kilkenny
the future: Glanbia, Kilkenny

Consolidation too by definition excludes the smaller farmer. While 10,000 jobs are predicted for Ireland, 40,000 have been lost in the last 30 years in dairy already anyway, as the remaining 18,000 dairy farmers hoovered up or rented their land, and available quota.

How long before land-grabbing, so prevalent in eastern Europe, where farms of many thousands of hectares now operate, emerges in Ireland?

It was not always going to be thus. In what was purportedly Ireland’s first sociology book – ‘Power Conflict and Inequality’ (1982) – Hilary Tovey wrote of processes of modernisation and marginalisation through milk. Dairy co-ops, when first established were a core part of the drive towards independence and expressed something of a collectivist, socialist vision of and for rural Ireland. The means of production (through the Land Acts) and then distribution (dairy co-ops) were, quite suddenly, in the hands of the formerly oppressed.

The genuinely co-operative nature of the movement lessened as a professional managerial class emerged, with the interests of the larger, wealthier producer at heart. Then sell-offs, where some got very rich while others, and the rest of rural Ireland, were cast aside became pervasive and characteristic. Some genuinely co-operative models still exist, such as Carbery in west Cork, but the momentum has been in the wrong direction.

Nothwithstanding the breaking of rank by beef farmers, what’s curious is how difficult it is for farmers, to go against the grain in Ireland. This is particularly true of the dairy sector which is conservative despite, or perhaps because of, the co-operative dimension. Barely a whisper of concern – the opposite in fact, envy – was raised when word of a 500-cow unit in Kilkenny first emerged.

Elsewhere in Europe, the small guy rails against this. In France there is a strong ‘anti-massification’ movement against the emergence 1000-cow – diary units. Spearheaded by small-farmer organisation Confederation Paysanne, hundreds regularly attend what are often very militant protest actions, including one involving the actual dismantling of a 1,000 cow unit (and another famously demolishing a McDonalds). An uneasy compromise of 500-cow units now prevails in France following the attempt at 1,000-cow units.

Confederation Paysanne and other small farmer organisations want to keep rural areas vibrant and to keep small farmers on the land.

Consolidation connotes ever bigger, more mechanised farms with larger fields, higher-yielding cows, fewer hedgerows, more nitrogen run-off, more methane emissions and more agri-industrial inputs. It means a continuation of rural population decline, as ever fewer people own land, and the jobs that are left are for labourers and in processing units.

So will the rising milk tide lift all rural boats, or smash them in a tsunami and destroy rural life and its setting?

Processing and industry jobs in urban areas may rise, but the mosaic landscape with patchworks of fields bounded by biodiverse hedgerows, where a large number of landowners reside will fade away with consolidation.

If co-op federations emerge, like Valio in Finland, which is owned by 17 co-ops and itself owns 15 processing plants, the wealth may continue to be somewhat spread out, at least among dairy farmers. For the rest of us in rural Ireland though, expect to be looking at a lot more cows than people in the years ahead. •