The dairy premium for 2004 will be approximately 1.22 cent per litre. As the total compensation available is based on Ireland's quota for 1999/2000, the premium will be payable on approximately 97% of each producer's milk quota available on his/her holding on 31 March 2004. Accordingly, the premium on a 32,000 gallon quota will amount to approximately €1,722.
In 2005, the single farm payment will replace the dairy premium and all other direct payment schemes and the producer's single farm payment will include payment based on the milk quota available on the holding on 31 March 2005. The gross amount will be 2.44 cent per litre which, when calculated as above, amounts to approximately €3,444 in respect of a 32,000 gallon quota. From 2006, the gross payment will be 3.66 cent per litre, amounting to approximately €5,165. As the dairy premium will be decoupled in 2005, the reference date for that payment will be 31 March 2005 for the duration of the single farm payment scheme.
The single farm payment will be subject to reductions in respect of modulation at 3% in 2005, 4% in 2006 and 5% in subsequent years and linear reductions in respect of the hardship reserve and the national reserve. The percentage reductions for the hardship reserve and national reserve are not yet known. The amount deducted in respect of modulation on the first €5,000 of the single farm payment in each year will be refunded to the producer. Therefore, if the dairy producer with 32,000 gallons received no other direct payments in the 2000-2002 reference period, his/her single farm payment would not exceed the €5,000 threshold so, in effect, no modulation reduction would take place. The linear reductions for the hardship reserve and national reserve will, however, apply.
The dairy premium will be paid in 2004 as a coupled payment and the single farm payment scheme of which the decoupled dairy premium forms part has been put in place for the period from 2005 to 2012. In order to be eligible for the decoupled dairy premium in 2005 and subsequent years, a producer must be a quota holder on 31 March 2005 and have made milk deliveries in the 2004-05 milk quota year. He/she will continue to be eligible for the premium if the quota is sold after 31 March 2005. However, in that situation a farmer would still be required to comply with certain conditions to continue to retain eligibility for the single farm payment.