Dairy Market: Council Approves 2 Per Cent Increase in Milk Quotas From April 2008

EU - European Union agriculture ministers on Monday approved the European Commission's proposal for a 2 per cent increase in milk quotas beginning on 1 April 2008 to meet growing demand both within the European Union and on global markets.
calendar icon 18 March 2008
clock icon 3 minute read

The increase, a total of 2.84 million tonnes, would apply on an equal basis to the 27 Member States. It does not prejudge the ongoing review of the dairy market in the Health Check of the Common Agricultural Policy, where the Commission has suggested a gradual increase in quotas before they expire on 31 March 2015.

In December, the Commission published a report showing that demand for milk has grown between 2003 and 2007 and is expected to continue growing between 2007 and 2014.

The outlook for both demand and prices on the world market is equally positive. The report showed that a 2 percent increase was fully justified.

"I am delighted that ministers have backed an increase in quotas," said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development. "We have seen clear increases in milk prices over the past year and a growing call for higher quotas. In the coming years, demand for high value-added dairy products will continue to rise both within Europe and around the world. We need to equip our farmers to meet that increased demand. We will come back to this issue in May in the Health Check proposals. We need to prepare a soft landing for the expiry of milk quotas in 2015."

As part of the 2003 CAP reform, the Commission originally proposed an additional 2 percent quota increase on top of the 1.5% already agreed for 11 Member States in Agenda 2000. The Council decided against the additional increase but called on the Commission to report on the market situation, once the reform was fully implemented, before a final decision was taken.

The 2003 reform also made a number of other changes to the dairy market regime to make it more responsive to market signals, including a reduction in the intervention prices for butter and skimmed milk powder. It also agreed that quotas would end in April 2015. Positive market developments combined with the reform have contributed to a situation where all export refunds are now at zero for the first time since the system was set up in 1968 and intervention stores are empty. Internal disposal aids are zero as well, as was foreseen to be the case after the reform.

The market outlook report concludes that between 2003 and 2007, expanding cheese and fresh milk production absorbed an additional 5.5 million tonnes of milk, while overall milk production remained stable. According to the Commission's analysis, between 2007 and 2014, an additional supply of about 8.0 million tonnes would be needed to meet growing internal demand, particularly for cheese. Meanwhile, the outlook for the world market is positive, with growing demand for EU foods in particular in emerging markets. Leaving quotas unchanged would prevent the EU from exploiting rising demand and healthy price levels.

The Commission's analysis shows that the market offers ample opportunities to absorb a 2 percent quota increase. While it assumes that the increase will be fully utilised, the actual impact on production is likely to be more limited, taking into account the current situation where national quotas are not fully utilised in a number of Member States.


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