By using this website, you consent to our use of cookies. For more information on cookies see our privacy policy page.

Text Size: a a
Home A-Z Index Subscribe/RSS Contact Us Twitter logo small white bird

Coughlan announces Third Milk Quota Trading Scheme

Scheme remains largely unchanged due to previous success

The Minister for Agriculture, Fisheries and Food, Mary Coughlan T.D., today announced the third Milk Quota Trading Scheme, which will be the first of two Trading Schemes to allocate quota for the 2008/2009 milk quota year.

The Minister confirmed that the structure of the Scheme will remain largely unchanged. The Scheme will again be run in respect of each co-op area, and will again be comprised of a priority pool and a market exchange. However, the method of distribution of priority pool quota will be refined and a mechanism aimed at increasing the amount of quota traded on market exchanges in particular co-op areas will be introduced.

"I have listened very carefully to the views of the farming organisations and ICOS in the course of a summer of consultation on the operation of the Milk Quota Trading Scheme. The very clear message has been that the Scheme has functioned extremely effectively. However, some farmers have continued to experience difficulties getting access to quota, and some co-op areas have experienced trading problems due to supply and demand factors. These issues will be addressed in the new Scheme".

Priority Pool

The Minister restated her commitment to priority categories, indicating that she will retain the priority pool structure in its current format. Thirty per cent of all quota offered for sale will continue to be made available to priority categories, although sellers who have already contributed thirty per cent of their quotas to the priority pool in previous schemes will not be required to do so this year.

The maximum price at which quota is traded in the priority pool will remain at 12 cent per litre, unless the exchange price for that co-op area drops below 12 cent, in which case the priority pool price will be the same as the exchange price.

The Minister said that she has also given careful consideration to concerns expressed during the consultation process about the distribution of quota from the priority pool, particularly as regards the amount of quota being made available to Category 1 producers, i.e. those with quota of up to 350,000 litres. She has therefore decided to modify the distribution criteria to make larger amounts of quota available to such producers.

"It is clear from the results of the first and second Trading Schemes that Category 1 producers have fared relatively poorly under the traditional arrangements whereby they received only the quota remaining after the other priority categories had been satisfied. To address this imbalance, after the needs of successors and lost leases have been met a 3:2 distribution ratio will apply to the amount of quota to be made available to young farmers and Category 1 producers in each co-op area."

Market Exchange

The Minister confirmed that the market exchange element of the Trading Scheme will again function largely as before. Bids and offers will be accumulated, and after an initial equilibrium price is calculated, a 40 per cent price corridor will be applied in order to remove bids at prices of 40 per cent or more above the initial equilibrium price. The final Market Clearing Price will then be calculated.

The Minister has also decided to raise the maximum amount that may be purchased on the exchange from 60,000 to 80,000 litres.

"Having carefully considered the potential implications of a change in this area, and again taking cognisance of the views expressed by the farming organisations and ICOS, I am satisfied that raising the bid limit to 80,000 litres is the right course of action. It further facilitates purchasers wishing to obtain larger amounts of quota while retaining a reasonable limit that avoids speculative or destabilising bids. It may also help to bridge the gap between supply and demand in some co-op areas."

Low Volume Exchanges

In order to deal with difficulties experienced in particular co-op areas where low volumes have been traded at low prices, the Minister has announced that sellers in such areas will be given the opportunity to sell their quota at up to two cent less than their original offer price, if this brings their price to the Market Clearing Price.

"A Market Clearing Price will be calculated as normal, using every seller's original offer price. Where the volume traded is very low, sellers originally offering quota at either one cent or two cent per litre above the Market Clearing Price, but who are prepared to sell at the Market Clearing Price, will be allowed to sell. Quota will be taken from all such sellers until the maximum possible level of demand at the Market Clearing Price has been satisfied."

The Minister further explained that this option will be made available to sellers in co-op areas where supply exceeded demand on one or both of the first two exchanges. These producers will receive a slightly different application form to sellers in the rest of the country, in that they will be asked to indicate in advance whether they would sell at the lower price. If subsequently the level of demand satisfied on the exchange is below 50 per cent, then those offering quota at one cent more than the Market Clearing Price, and who have indicated their willingness to sell at one cent less than their original offer, will sell their quota. If the full level of demand has not been satisfied, then those offering quota at two cent more than the Market Clearing Price, and who have indicated their willingness to sell at two cent less than their original offer, will sell their quota.

The Minister has also decided to make the same application form available to sellers in co-op areas where no Market Clearing Price was struck on one or both of the first two exchanges. If the market again fails to arrive at a price in such areas, then those who indicated a willingness to sell at one cent less than their original offer will have their offers modified accordingly, and the exchange will be re-run. If this also fails to generate a Market Clearing Price, a similar modification will be carried out in the case of those who indicated a willingness to sell at two cent less than their original offer price, and the exchange will again be re-run.

"I am committed to making every effort to ensure that milk quota is traded in the highest possible volumes across the country. While the majority of quota will continue to be traded on efficient exchanges, this mechanism will enable further trade to take place on exchanges which have functioned at less than optimal levels due to local supply and demand characteristics, without interfering with the integrity of the exchange mechanism".

Closing Date

The Minister announced that the closing date for receipt of applications to the third Milk Quota Trading Scheme will be 26 October 2007. Details of the Scheme will be published in the farming press next week and application forms will also be available from co-ops next week.

Conclusion

In conclusion, the Minister said that the Milk Quota Trading Scheme is now an important feature of the dairying landscape as the sector faces into a radically altered market situation and the challenges associated with quota reform, and she expressed the hope that the modifications to the Scheme would further facilitate quota trade. She also expressed her renewed appreciation to the farming organisations and ICOS for their constructive engagement in the recent consultations on the operation of the Scheme, and looked forward to their contributions to the next review, which will take place before the next Scheme, in the new year.

25 September, 2007

Date Released: 25 September 2007