The island’s leading milk processor and the farmers are over the moon regarding the incentives and subsidy announced in yesterday’s Financial Statement and Budgetary Proposals presented in Parliament by Minister of Finance Chris Sinckler.
Minister Sinckler outlined a five-point plan of targeted subsidy/incentive with which he said farmers would be able to reduce their farm gate price to the processor and the savings thereon would flow through the system to the consumer.
He proposed that the farm gate price for milk collected from farms would therefore increase by $0.25 per kg.
The Minister believe that this was an important element of the proposal to incentivize farmers to expand production so that the processor can access the additional supply and gradually reduce import quantities of power.
He said the subsidy from Government would be fixed at $1.17 per kg and this subsidy would be paid directly to the producers based on their supply.
Sinckler announced that the subsidy would apply solely to milk utilized in the processing of milks which contain, at a minimum, 60 per cent of liquid cow’s milk.
He also stated that the CESS would be levied at two rates – a five per cent rate on milk containing no less than 60 per cent of liquid cow’s milk and a 10 per cent on all other milk and milk substitute products.
The Minister noted that with the availability of the reduced farm gate price [post subsidy], the processor would be able to replace 25 per cent of its 800,000 kgs powder requirement with fresh milk.
He said this would save the country about US$1 million annually in foreign exchange and faciliate growth in output at the farm level by as much as 50 per cent, once the farms fully gear up their production.
He contended that the lower price facilitates the industry moving into the export market with fresh milk, noting that currently, that activity was limited to milks reconstituted from imported powder.
He assured that consumers would also benefit.
“The current economic pricing required, means that consumers pay a higher price for a product which elsewhere is kept low through various incentives/subsidies. With the subsidy/incentive, the recommended retail price for fresh milk will fall by approximately 11 per cent.”
Sinckler revealed that the plan would be funded through the introduction of a CESS on all milk and milk substitutes affective August 1.
In response, Richard Cozier, Chief Executive Officer of the Banks Group of Companies which includes the Pine Hill Dairy (PHD), said the milk subsidy was something the industry had lobbied for for a long time.
Cozier, who is also a director of the PHD said this is a pleasing feature of the budget, seeing that a matter which had been campaigned for years, had finally come to reality.
“It will be beneficial to everybody in the industry and the country and consumers as a whole. Everybody will benefit in some form or fashion.
“Consumers will see a reduced price, farmers will see an increase in price and an increase in the demand of the product from their farms and country stands to save foreign exchange as farmers gear up to send more milk . . . as a processor will change some old formulations utilize more of that in areas that we currently can’t because of pricing.”
Speaking on behalf of the farming community, Chief Executive Officer of the Barbados Agricultural Society James Paul also said the new incentives/subsidies were welcomed since they were something the sector has been requesting a long time.
Paul, who is also a Government MP, expects to see benefits across the board in addition to an expansion in the industry.
“This is something the industry had actually asked for; this is the total industry including the milk farmers and the Pine Hill Dairy; the proposal was put and we feel that it would give a tremendous incentive to first of all, increasing milk production overall and would also provide the type of development funds that would allow the industry to engage in certain activities to, reinvigorate itself and become more efficient,” the BAS head stated.
He visualizes the increase in production benefiting more farmers resulting in an expansion in the industry in Barbados.