EU fines for exceeding milk quota

By Chris Mercer

- Last updated on GMT

Related tags: Milk quotas, European union

The EU fines for member states exceeding their milk production
quotas highlight a problem in the system, but there are more
pressing issues for now, says the director general of Dairy UK to
DairyReporter.com

The European Commission has issued €364m in fines after nine member states exceeded their milk quotas for the year up to 31 March this year.

The states - Belgium, Denmark, Germany, Ireland, Italy, Luxembourg, the Netherlands, Spain and Austria - accounted for a combined overrun of one million tonnes.

Jim Begg, director-general of industry association Dairy UK, said the fines were saddening to see because they were a "huge waste of industry money"​. The total EU fine was higher at €385m in 2003/04.

"Maintaining revenue and profit is difficult enough to achieve without this kind of thing,"​ said Begg, adding that the fines nevertheless challenge dairy industries to organise themselves better.

Conversely, the UK dairy industry has the opposite problem. A recent report commissioned by agriculture ministry DEFRA warned that the country was "facing a worst case scenario" of milk production falling to more than one billion tonnes below quota by 2007/08.

More worryingly, a major reason for this was that greater numbers of larger, more efficient dairy producers had left the industry than was originally forecast.

"Many people in the UK question the relevance of the quota system now,"​ said Begg, highlighting the increasing preference for milk supplies controlled by contracts with processors.

But, he believes the question marks over milk quotas cannot be isolated from the whole EU CAP reform process and will be put on hold for now.

"Most people are staying fairly open-minded at the moment. Most would probably wait and see what the impact of CAP reform is,"​said Begg.

The EU Council of Ministers has agreed to keep the 20-year-old milk quota system until 2015, after the current CAP reforms are due to finish.

The move toward single farm payments, starting next February in Britain, has been seen a tentative move away from quota systems. Under the scheme, EU subsidies will be 'decoupled' from production and paid according producers' attention to environmental and safety issues.

Begg said that in light of these changes, as well as difficulties in raising value in the dairy sector, milk quotas themselves were not such a pressing issue in the UK.

In the meantime, political wrangling over CAP reform and Britain's EU rebate mean that the EU still has no approved budget for the 2006-2013 period.

Ministers will meet in the next few weeks to try and agree a deal, though success is far from certain as Britain and France remain at loggerheads over the validity of the UK's rebate and proposed CAP spending.

The EU currently spends around 40 per cent of its budget on agriculture, a figure criticised very publicly by the British Government.

France, as the biggest beneficiary, has vehemently opposed any change and wants to stick to the original agreement between member states in 2002, which pledged to maintain CAP spending at €43bn per year until 2013.

Britain is the fifth largest recipient of EU agricultural aid, receiving €9bn per year of which €3.5bn is given in subsidies. France is the largest recipient, getting around €23bn in aid - €9bn more than any other member state.

Related topics: Markets, Fresh Milk

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