While the dairy industry struggles with low prices, Northern Ireland MEP, Jim Nicholson is preparing a report on the prospects of the dairy sector after the abolition of milk quotas on April 1.

As part of his report, a hearing on “The milk package and the prospects for the dairy sector” was held at the European Parliament last week attended by The Impartial Reporter.

Chaired by the Chairman of the Committee on Agriculture and Rural Development, Mr. Czeslaw Siekierski, the opening remarks were made by Mr. Nicholson who said dairy farmers were operating in a volatile market and had fears what might happen from April 1.

He wanted to know how they could solve the problems and look to the future, rather than dwell on the issues.

He said he hoped to have his report as rapporteur, ready by the end of February and which would then be discussed by the Committee over the subsequent months.

Jim Nicholson, the Ulster Unionist MEP for Northern Ireland, said it was important for dairy farmers in Europe to increase their share of the world market and after listening to comments from the European Commission representatives, he took issue with them when they said they did not think there was a crisis in the industry at present.

“We do not want a repeat of quotas and create milk lakes and butter mountains but I feel we have not used all the tools in the box,” he told the hearing during the summing up.

“Farmers have got to be responsible and there must be equilibrium in the market. The dairy sector must get used to price volatility.” Answering those MEPs who called for milk quotas to stay, he replied: “Milk quotas have served their purpose. We are where we are and must find a solution. Quotas are not going to come back in the short term.” The hearing brought together experts from the dairy industry around Europe and these included Dr. David Dobbin, Group Chief Executive of United Dairy Farmers and National Vice-Chairman of Dairy UK.

He explained the structure of his company, buying milk from 1450 farmers, employing 1300 people and handling one billion litres of milk.

Now with eight processing plants including their specialist cheese operation at Fivemiletown Creamery, products are marketed to 45 countries worldwide.

He told the hearing attended by a large number of MEPs and industry repressentatives from around Europe that 80% of Northern Ireland’s output must be exported and they were first to feel the impact of falling EU markets.

He said the current crisis was of great concern to farmers.

“The dairy market cycle is driven by supply not demand. If you want stable prices, you must control output and contracts will be needed to control output. Most farmers have a one-year contract, “ he suggested.

He said on global dairy trade they were being told it was stabilising.

“There has been a surge of production from good weather and strong prices from before that and supply is well ahead of demand,” he said also pointing to currency volatility especially the weakness of the euro affecting export prices “We know certain countries are going to grow, Ireland, Germany, Holland, Poland and Denmark but how do we make things better? “ he asked.

“We need a transparent dairy futures market, develop new export markets to replace the Russian business and develop preferential trade agreements with key partners such as China.

“We need to encourage long term integrated supply chain contracts between farmers, processors and customers. We need to increase the intervention price to a more realistic level and to create a market floor.

“Farmers say there is a crisis and everone is worried about a double dip effect,” he warned.

Dr. Dobbin welcomed a suggestion by the European Milk Board which advocated a system where a threshold of production was set and if farmers reduced their production by five per cent, they would receive a bonus however if they over produced, they would have to pay a levy and those remaining on a constant production level, received the same price.

Northern Ireland MEP, Diane Dodds also called for higher intervention price to put a floor in the market but other MEPs had contrasting views on this.

* Yesterday, the Fronterra(GDT) auction returned increases of 9.4 per cent with Whole Milk Powder prices increasing by 19.2 per cent, the largest increase since March 2013.