Abolishing milk quotas could put squeeze on organics

By Guy Montague-Jones

- Last updated on GMT

Related tags: Eu milk quota, Organic farming

A new economic study indicates that the abolition of milk quotas in the EU could have a significant negative impact on the profitability of organic dairy farming.

Writing in the Food Policy​ journal, scientists at the University of Kiel in Germany sought to establish how the removal of the EU milk quota regime in 2015 will affect the earning potential of organic farmers.

Using a Data Envelope Analysis (DEA) model, they studied the accounts of 1300 Bavarian dairy farmers to determine whether the organic or conventional system is more profitable for them under different policy scenarios.

Impact of aid and quota removal

The researchers discovered that the abolition of quotas would significantly reduce the number of farms in the sample for which organic is the best option. They also found that the effect of eliminating quotas would be more significant than the ending of organic maintenance aid.

According to the DEA analysis, organic farming is currently more profitable than conventional for around a quarter of farmers in the sample.

Abandoning organic maintenance aid reduces that figure to just under 10 per cent and removing quotas cuts it to 3.4 per cent. Removing both quotas and organic aid would reduce the number to only 1.2 per cent.

The researchers warned that these estimates should not be extrapolated to the whole EU area as the data set is only from Bavaria and therefore reflects regional circumstances.

Policy implications

However, they warned that the results have implications for food policy. According to their analysis, ending milk quotas could result in organic farming losing market share.

Although the extent of the drop is likely to be limited by the effect of lower supply on the price gap with conventional milk, the study authors said a rethink in organic policy may be​necessary.

“If promotion of organic agriculture remains a political priority, policy makers will have to reconsider organic support policies as the end of the quota system nears.”

Source: Food Policy
doi:10.1016/j.foodpol.2010.11.019
“Organic or conventional? Optimal dairy farming technology under the EU milk quota system and organic subsidies”
Authors: G. Breustedt, U. Latacz-Lohmann, T. Tiedemann

Related topics: Markets, Fresh Milk

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