FREQUENTLY ASKED QUESTIONS ABOUT MILK QUOTAS - 2014

The following are the most frequently asked questions received by IFA from dairy farmers about milk quotas, superlevy and the “soft landing” towards EU quota abolition in 2015.
The details below are relevant to the 2013/14 and 14/15 milk quota years.

Disclaimer: While every effort has been made to ensure the accuracy of the information in this FAQ, IFA cannot accept any responsibility for damage or loss occasioned to any person acting or refraining from acting as a result of the information contained in this FAQ. Farmers entering into quota transactions should seek appropriate professional advice and refer to the relevant milk quota legislation (SI 227 of 2008 as amended and Council Regulation EC 1234/2007 as amended) and the detailed provisions of the relevant schemes.

QUOTAS

Will quotas really be abolished in 2015? /
  • Yes. EU Council Regulation No. EC 1234/2007, Articles 66 and 204 point 4, provides for the continuation of milk quotas for 7 more years from 1st April 2008, ending on 31st March 2015.

How can I acquire extra quota before 2015? /
  • You can buy quota from your co-op, without land, through the Milk Quota Trading Scheme (MQTS);
  • You can buy quota with the landit has been produced on from another farmer;
  • Since 5th October2011, it is no longer possible to buy quota with land and sell the land on immediately while retaining the quota. The land and quota now remain linked until the end of the quota regime.
  • You can buy quota without the land if you buy it from a qualified relative;
  • You can lease quota from your co-op, without land, through the Temporary Leasing Scheme, for one quota year at a time;
  • You can lease quota with land if you lease it from a qualified relative.
  • If eligible, you can apply for New Entrant quota in the quota years 2012/13 and 2013/14. This scheme uses ¼ of the 1% “soft landing” quota increases to make parcels of free quota available to totally new entrants and recent entrants who bought small amounts of quota from the MQTS as new entrants, or as successors. Eligibility conditions include agricultural qualifications and a detailed 5-year business plan.

What other schemes can I use to get extra quota? /
  • Fleximilk– at the end of the quota year, unproduced milk quota is redistributed at co-op level, then what is left at national level. In 2013/14 85% of fleximilk will go to producers with quotas under 350,000 litres, and 15% to those above, while in 2014/15, 80% will go to producers over 350,000 litres and 20% to those below that figure.
  • Milk quota appeals tribunal - permanent hardship allocations from the National Reserve. Applications fromfarmers with small quotas in hardship situations are examined case by case for possible free, permanent quota allocations.
  • Milk quota appeals tribunal - temporary animal disease allocations from the National Reserve. This scheme offsets someof a farmer’s over quota suppliesresulting from his herd being restricted. Cases are examined individually, including production records for the previous 3 years. The length of time a herd was restricted, as well as their pre-restriction superlevy record are taken into account. Successful applicants get a temporary free quota allocation in the New Year to cover some of their excess over quota.

What is the price of quota? /
  • In a superlevy year, quota will always be scarce and dear, with most schemes oversubscribed.
  • Quota purchased from the Milk Quota Trading Scheme sells at an equilibrium price calculated for each co-op based on buyers’ and sellers’ bids through an exchange procedure. Prices vary.
  • Quota purchased with land from another farmer is priced based on an agreement between the land owner and the buyer;
  • Quota leased from the Temporary Leasing Scheme costs 2c/l in the first phase, and 1c/l in the second one (2013/2014);
  • Quota leased with land from a qualified relative is priced based on an agreement between the land owner and the lessee.
  • With less than 1 year left in the milk quota regime, farmers should make quota price decisions based on economics. The cost of superlevy is 28.66c/l.

Where can I find out about all quota schemes? /
  • Current quota schemes are all documented in this section of the IFA website
  • They can also be found on the Department of Agriculture, Fisheries and Food website at
  • Application forms for the various schemes can be obtained from your co-op or from the Department of Agriculture.

SUPERLEVY

When do I have to pay superlevy? /
  • For a farmer to be liable to superlevy, Ireland must be over quota, his co-op must be over quota and he/she must be over quota. If any one of these three conditions does not apply, no superlevy fine arises.

How much is the superlevy fine? /
  • The superlevy fine is €27.83 per 100 kilos of milk – or 28.66c/litre. The fine applies to all milk quota supplied in excess of owned + leased + other temporary or permanent allocations + fleximilk quota.
  • Hence, a producer with a total quota of 250,000 litres who supplies 20% more milk, i.e. 300,000 litres, could be liable for a penalty of 50,000 litres x 28.66c per litre = €14,330.

How do I avoid a superlevy fine? /
  • Plan early and aim to match production and quota as closely as possible.
  • Keep in touch with your co-opregularly and frequently: if your co-op is not over quota, even if the country and you are, you will not be liable to a fine.
  • If you are already exceeding your quota,get quality production advice on feeding, milking and other methods to reduce supplies without damaging your cows.
  • In extreme situationsreduce your herd temporarily, by leasing or selling cows.

Can my co-op collect superlevy early? /
  • Yes, your co-op can do so, once you have filled your entire quota.
  • However, the money collected must be put into an interest earning account, and used only to pay the superlevy fine or be refunded, interest and all, back to the farmer(s) concerned if there is no superlevy.
  • IFA has asked co-ops to deal case by case with farmers in cash flow difficulties where superlevy is collected early.

How does my butterfat reference affect my quota? /
  • Your quota is a volume quota, but it is adjusted downward if your butterfat production exceeds your butterfat reference, and vice-versa.

How is the butterfat adjustment calculated? /
  • For every 0.01% of butterfat produced in excess of a farmer’s reference, his quota volume will be reduced by 0.09%. For every 0.01% of butterfat below the reference,hi quota volume will be increased by 0.18%.
  • Your co-op routinely provides you with butterfat adjusted milk delivery data on your monthly milk statement.

“SOFT LANDING”

Will quotas really be abolished in 2015? /
  • Yes. EU Council Regulation No. EC 1234/2007, Articles 66 and 204 point 4, provides for the continuation of milk quotas for 7 more years from 1st April 2008, ending on 31st March 2015.

What is the “soft landing”? /
  • Having decided on quota abolition from 31st March, 2015, the EU Commission and Council agreed to a “soft landing” in which incremental quota increases between 2008 and 2014 would help reduce the value of quota in preparation for total abolition in 2015.
  • While the vast majority of EU member states have low quota values and supplies below quota, a small minority, including Ireland, is not experiencing a “soft landing”.

What are the “soft landing” measures relevant to Ireland? /
  • In 2008 - halving of the butterfat downwardadjustment, equivalent to a 2% quota increase for Ireland; Theupward adjustment was unchanged.
  • 1% quota increase for each of the following five quota years: 2009/10; 10/11; 11/12; 12/13; 13/14. That means we have two more 1% increases.
  • Two reviews of the soft landing provisions by the EU Commission: end 2010 and end 2012.
  • No quota increase in the last quota year 2014/15.

What are the chances of greater flexibility in quotas before 2015? /
  • Any change to the “soft landing” measures agreed in 2008 will require a qualified majority vote among 28EU member states. Few are having quota difficulties, most don’t want any change and the EU Commission is reluctant to revisit the issue, so obtaining flexibility will be very difficult.
  • The EU Commission’stwo reviews the “soft landing at the end of 2010 and end of 2012, concluded that the process was going well in the majority of member states, and required no further measures.

CL/IFA/04/02/2014