EU mulls milk quota hike to please cheese needs

By Neil Merrett

- Last updated on GMT

Related tags Common agricultural policy European union Eu

The European Commission has proposed a two per cent rise in milk
quotas from April next year in a bid to drive down the price
of the commodity.

With a growing number of dairy manufacturers continuing to face higher raw material prices, the increase, potentially accounting for a total production hike of 2.84m tonnes annually, could help meet growing demand from the bloc's dairy processors.

The EU's Milk quota scheme was originally put in place to limit the volume of product supplied in the bloc, therefore driving competitiveness.

Current rules would keep the 26-year-old 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.

EU Agriculture Commissioner Mariann Fischer Boel said that as the ongoing reforms of the Common Agricultural Policy (CAP) are designed to free farmers to produce for the market, the current milk quotas are inconsistent with this aim.

"In the coming years, demand for high value-added dairy products - particularly cheese - will continue to rise both within Europe and around the world," she stated.

"We need to equip our farmers to meet that increased demand."

Proposals for the current amendments to quotas come after an EU market outlook report found that between 2003 and 2007, growing levels of cheese and milk processing required an additional 5.5m tonnes of milk.

Production output from the bloc's dairy farms has remained relatively stable over the same period of time though.

With further growth expected for milk demand in the EU, in particular from emerging markets in the bloc, unchanged quota levels could hinder healthier prices for the commodity in the long term.

Between 2007 and 2014, an extra 8m tonnes of milk will be needed to accommodate internal demand, primarily for cheese production, according to EU figures.

The outlook for the wider-world market is also positive, with growing demand for EU foods in particular in emerging markets.

Leaving quotas unchanged could therefore prevent the EU from exploiting rising demand and healthy price levels, the Commission says.

The Commission stressed that the calls for price hikes were not prejudging the findings of the ongoing health check of the bloc's Common Agricultural Policy (CAP) reform.

However, the proposals follow on from a decision earlier this year by the EU's dairy management committee to revoke subsidies on all exported dairy products for the first time in 40 years, due to the high price of milk.

Related topics Markets Cheese

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