End of milk quotas can be 'an economic driver for the EU'

The abolition of milk quotas has been greeted with 'nervousness and trepidation' by MEPs and farming organisations.

By James O'Brien

08 Apr 2015

The removal of the system put in place to prevent the overproduction of milk has received a mixed welcome.

Milk quotas were introduced in the European Union to address oversupply in the market which resulted in so called 'milk lakes' and 'butter mountains' in the late 1970s and early 1980s. This saw a price guarantee to dairy farmers that was considerably higher than the market price.

To address the issue, the European council agreed to a commission proposal to introduce milk quotas, which took effect in 1984. Producers were allocated a fixed quota and if this was exceeded a 'superlevy' was payable by member states. The quotas only applied to cow's milk.

Milk quotas were intended to last five years but the decision on their removal was delayed until it was decided in 2003 that they would cease in March 2015. Production quotas have been increased over the past seven years in preparation for the abolition.

"It was time to end the quota but simply discontinuing it will leave dairy farmers vulnerable to crisis situations" - Molly Scott Cato, Greens/EFA

EU commissioner for agriculture and rural development Phil Hogan has conceded, "The end of the milk quota regime is both a challenge and an opportunity for the union."

He acknowledged that, "It is a challenge because an entire generation of dairy farmers will have to live under completely new circumstances and volatility will surely accompany them along the road."

However, he also believes the lifting of production caps presents opportunities for jobs and growth and "has the potential of being an economic driver for the EU".

The commission believes that increased output can be offset against higher exports to growing markets such as China.

The abolition of milk quotas received a mixed reaction from MEPs. The chair of parliament's agriculture and rural development committee Czesław Siekierski said, "Milk quotas did not safeguard the market from significant fluctuations in prices, incomes and production."

The Polish EPP deputy added that, "The Russian embargo forced a search for new export markets, which will be helpful after the abolition of milk quotas. Some opportunities to secure new markets also emerge through bilateral trade negotiations."

Russia imposed a ban on certain agricultural products from the EU in retaliation to sanctions imposed in response to the Ukraine crisis.

James Nicholson, parliament's rapporteur on the prospects for the EU dairy sector - review of the implementation of the 'dairy package' said, "After 31 years it will understandably be cause for some nervousness and trepidation for dairy farmers."

The ECR MEP also said he believed the abolition of quotas was "an opportunity to build a more confident and robust dairy sector for the future".

Molly Scott Cato of parliament's Greens/EFA group said, "It was time to end the quota but simply discontinuing it will leave dairy farmers vulnerable to crisis situations, like oversupply and price shocks."

The British deputy warned that "Further liberalisation of the dairy sector would lead to an industrialisation of the sector, with farms compelled to expand and take on debts to compete or close down."

Scott Cato warned that this could undermine attempts to introduce a more sustainable agricultural model and called for greater focus on measures shorter supply chains and origin labelling rules.

The removal of quotas was strongly criticised by the European milk board (EMB). The farming lobby group predicted that, "big food conglomerates […] will be able to fill their boots".

Romuald Schaber, president of the EMB said, "Europe's farmers will have even less market power to achieve a cost-covering milk price in the future."

The EMB, which organised protests in Brussels to mark the occassion, is calling for the introduction of a market responsibility programme to ensure farmers do not confront "rock-bottom prices time and again".

Since 2010, EU dairy exports have increased 45 per cent in volume and 95 per cent in value. The EU dairy processing industry employs over 300,000 people.

There are 650,000 dairy farms in the EU with an output worth €55bn or 15 per cent of total agricultural output. Germany, the Netherlands and Ireland are expected to dramatically increase milk production in response to the lifting of restrictions.

 

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