30 Mar EU: Abolition of milk quotas will create significant opportunities
This week, the EU milk quotas that were set in 1984 when there was a huge milk and butter surplus, will end. Many farmers and dairy cooperatives are looking forward to the change, which will lift any restriction on how much milk they produce.
However, while some reports suggest an air of excitement and opportunity, the current over production, the Russian import ban and China’s less than enthusiastic imports, as well as a crisis involving milk prices, beg the question of whether anyone will really benefit from being allowed to draw unlimited milk.
A report published by the US Dairy Export Council (USDEC) predicts that milk production will increase by 11% in the years following the quota removal, and that most of this production (76%) will be concentrated in six Northern European countries, namely Ireland, Denmark, Netherlands, France, Poland and Germany. It expects that by 2020, the EU will produce 15.4 million metric tonnes more milk than in 2014.
The study further predicts that much of the production will be processed into commodities such as cheese, with production increasing by 660,000 metric tonnes by 2020. Whey, butter and milk powders are also predicted to increase significantly.
At its introduction, the quota regime was one of the tools used to overcome these structural surpluses. Successive reforms of the EU’s Common Agriculture Policy have increased the market-orientation of the sector and, in parallel, provided a range of other, more targeted instruments to help support producers in vulnerable areas, such as mountain areas where the costs of production are higher.
The final date to end quotas was first decided in 2003 in order to provide EU producers with more flexibility to respond to growing demand, especially on the world market. It was reconfirmed in 2008 with a range of measures aimed at achieving a “soft landing”. Even with quotas, EU dairy exports have increased by 45% in volume and 95% in value in the last five years. Market projections indicate that the prospects for further growth remain strong – in particular for added-value products, such as cheese, but also for ingredients used in nutritional, sports and dietary products.
Speaking ahead of the end of the quota regime, EU Commissioner for Agriculture & Rural Development Phil Hogan stated: “The end of the milk quota regime is both a challenge and an opportunity for the Union. It is a challenge because an entire generation of dairy farmers will have to live under completely new circumstances and volatility will surely accompany them along the road. But it certainly is an opportunity in terms of growth and jobs. Through increased focus on valued added products as well as on ingredients for “functional” food, the dairy sector has the potential of being an economic driver for the EU. More vulnerable areas where the end of the quota system may be regarded as a threat can benefit from the pallet of rural development measures following the subsidiarity principle.”…..
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Anticipation and angst as Europe ends milk quotas
European dairy farmers are facing the end of three decades of milk quotas on Wednesday with a mixture of anticipation and angst as it will allow them to serve growing demand in emerging markets, but could also cause a crash in prices.
Starting April 1, farmers will be allowed churn out as much milk as they want.
While the quotas had been increased in recent years — growing 1 percent a year between 2009 and 2013 — the complete liberalisation of the market is seen as a game changer for producers.
In northern Europe, farmers have hailed the move as a chance to cash in on the growing global thirst for milk, particularly in China.
Ireland has already announced plans to boost its milk output by 50 percent by 2020. The Netherlands and Germany, Europe’s largest producer, are gearing up for increases of 20 percent.
“We’re happy the quotas are being scrapped. We’re prepared,” said Karl-Heinz Engel, president of the German dairy industry association, MIV, insisting that the sector was “export-orientated and competitive”.
But many farmers in France, Europe’s second-biggest milk producer, have adopted a wait-and-see approach, preferring to wait for the demand to pick up before ploughing money into boosting their output.
The quotas were introduced in the mid-1980s to staunch the infamous milk lakes and butter mountains that had built up on the back of generous EU production subsidies.