Life without EU milk quotas
dairy producers and processors to become more competitive in the
world dairy market, says a new report.
Milk quotas will become less relevant for dairy farmers' incomes as EU dairy intervention prices fall further and EU market prices come closer to world market levels, Siemen Van Berkum will tell dairy industry officials at today's World Dairy Forum event in Copenhagen.
Abolishing milk quotas is also likely to help larger dairy producers and processors to expand, speeding up the consolidation trend within the sector, he will say, quoting from his new report on the impact of scrapping the quota system.
Debate over the relevancy of 25-year-old EU milk quotas for today's dairy industry regularly divides the sector.
Current rules would keep quotas in place until 2015, but the European Commission has said this will be re-visited as part of a dairy market review in 2008.
Van Berkum's report, based on a case study of the Dutch dairy sector, assessed the impact of phasing out milk quotas from 2009. He found this, together with further trade liberalisation connected to any World Trade Organisation deal, could send EU milk prices down by another 15 per cent.
He told DairyReporter.com this would hit smaller producers hard, but could help larger ones by accelerating industry consolidation.
"These farmers are keen to expand the farm in the coming years and, in the Dutch case, abolition of the quota system avoids extra quota costs." Producers must pay to get extra quota, while there is also super levy charged to member states exceeding their milk quota. Nine member states were charged a combined €364m for this last year.
A compensation scheme set up by the European Commission could help ease smaller producers out of the sector, the report says.
Van Berkum's study may kick-start more meaningful discussions on the quota system in the build up to the Commission's 2008 dairy review.
Some in the UK dairy industry believe milk quotas have already lost their relevance.
A government-sponsored report has predicted Britain is likely to be one billion litres below its 14bn-litre EU quota by 2008. A smaller UK milk production may even help the sector to become more profitable by tightening supply and demand, Tim Smith, chief executive of Arla Foods UK, said earlier this year.
The move toward single farm payments across the EU, started in February in Britain, has been seen a tentative move away from quota systems. Under the scheme, EU subsidies have been 'decoupled' from production and paid according to producers' attention to environmental and safety issues.