End of Milk Quotas in Ireland

A new era began for Irish dairy farmers on April 1, 2015, when the European Union’s milk production quota system, in operation from 1984, was abolished. Already, there is considerable investment underway in production and processing facilities as well as international marketing to take advantage of unrestricted output. Green and misty Ireland has considerable natural competitive advantages in growing grass and producing safe good quality food products. As a result, the country is now expected to become the fastest growing dairy producer in the world.

Dairying was an important source of regular income for many farmers during the twentieth century. When Ireland joined the European Economic Community on January 1, 1973, a new era began for Irish farming. Under its Common Agricultural Policy (CAP) guaranteed prices were established for the wholesale market and these were maintained by a number of policy instruments like import tariffs, intervention purchases of surplus products and export subsidies. This ended Ireland’s dependence on the low price British market for exports of farm products, resulting in increased prices, production, exports and incomes. Milking parlours and new buildings for housing animals in winter and slurry tanks were erected as well as other facilities. Production switched from traditional mixed farming to milk, beef and, to a small extent, sheep. Ironically, one of the great architects of the Common Agricultural Policy, Sicco Mansholt (1908-1995), European Commissioner for Agriculture from 1958 to 1972 and fourth President of the European Commission in 1972/73, was not a champion of farmers with small holdings. His agricultural plan sought to remove small holders from the land and consolidate farms in larger and more efficient units, but it was defeated by powerful farming lobbies across Europe. Later, agricultural price-support led to surplus production, with ‘mountains’ of beef, butter, powdered milk and grain, which led to escalating costs for intervention storage, dumping on international markets, as well as demands for reform. Various initiatives were introduced to deal with the problem, the best known of which were the introduction of milk quotas from 2 April 1984 and changes initiated by the EU Commissioner for Agriculture Ray McSharry in 1993.

The introduction of milk quotas ended the rapid expansion of milk production in Ireland. Overnight, milk quotas acquired an economic value under a trading scheme introduced by the EU and operated through the dairy co-operatives. Large producers wishing to expand milk production were able to buy quotas from thousands of small producers who cashed in their quotas and ceased production, particularly in the West of Ireland. Changes introduced by Ray McSharry included reductions in support prices, new supply control methods and compensation through direct payment to farmers. These initiatives were intensified under the EU Agenda 2000 agreement and direct payments increased. These payments were linked to production and known as ‘coupled payments’, which generated considerable administration.

In 1994, the Rural Environment Protection Scheme (REPS) was introduced to support environmentally friendly farming practices. It was open to farmers with more than three hectares, who were prepared to farm within the nutrient limits specified, to carry out protection work on the environment, to protect wildlife habitats as well as endangered species of flora and fauna. Under Franz Fischler, EU Agricultural Commissioner from 1999 to 2004, further reform of CAP was initiated in 2003. The first big change was the introduction of a single farm payment from January 2005 to replace all livestock premia and arable aid payments received by each farmer in the reference period 2000 to 2002. This payment was decoupled from agricultural output in an effort to get farmers to make production decisions based on expected market returns and not on the subsidy available. Direct payments were also subject to modulation, with reductions over the following three years. These developments resulted in a considerable amount of paperwork and administration, with area maps required for all farm land owned and leased. Documentation was necessary for all livestock, including records of births, purchases, sales and deaths, as well as the history of veterinary medicine used and traceability in the food chain from farm to fork. The long term trend in farming was towards the production of sustainable, traceable, competitive agricultural products based on market demand and responsible environmental management. The numbers employed in Irish agriculture fell from 330,000 in 1960 to 109,100 in 2006, and with downward pressure on farm incomes, this figure has continued to decline. Farming production and incomes were always subject to price fluctuations, a factor which prudent dairy farmers have to keep in mind in the new unregulated era.

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