EU dairy sector hit with milk quota penalties

According to figures published by the European Commission (EC), Austria, Ireland, the Netherlands, Germany, Cyprus and Luxembourg exceeded their national quotas collectively by 283,000 tonnes and were thus subjected to penalties of between €424,000 and €33.6m.

The EU milk quota system was introduced in the 1980s to address the problem of over-production.

Each Member State has two quotas – one for deliveries to dairy processors, and the other for direct sales at farm level. It is, however, set to be abolished in April 2015 and a gradual increase of 1% per year is in place to prepare for the abolition.

When a Member State exceeds its national quota, a surplus levy – or ‘superlevy’ – is applied at €27.83 per 100 kg.

Exceeding quotas​

Austria was worst hit by the penalties. Dairy farmers in the country were handed a fine of €33.6m for exceeding their quota by 120,653 tonnes (4.2%).

Ireland was also hit heavily by the ‘superlevy’ penalties. Suppliers in the country have been ordered to pay a total of €16.6m after over-shooting the national quota by nearly 60,000 tonnes (1.1%).

The penalties, which are applied to individual farmers, could range from hundreds to tens of thousands of Euros. According to reports from Ireland, many farmers have already had this money docked from their co-operative milk cheques in recent months.

Despite the quota overrun in the six Member States, total EU deliveries remained well below the global quota volume. Many Member States produced far below their national quota, with 10 recording deliveries at least 10% below their respective quotas.

Quota abolition​

EU milk production is expected to increase by between 55% and 60% in the five years following the abolition. Many dairy processors based in the region have begun preparations for the 2015 abolition through investment, with many eyeing the lucrative export market for surplus dairy.

Earlier this year, Irish dairy giant Glanbia was granted permission to construct a new facility in the country under a scheme to expand its processing capabilities ahead of the quota abolition.

More to follow……..