Life after quotas and the Russian issue in Austria

The end of the quota system means that milk deliveries will increase significantly, the export market will grow in importance and above all competition will increase and thereby the challenges for the Austrian dairy industry, as throughout Europe the farmers already are preparing for the phasing out of quota and a corresponding increase in the milk delivery. So says president of the association of Austrian dairy producers Vereinigung Österreichischer Milchverarbeiter (VÖM) director Helmut Petschar, at a dialogue forum in the chamber of Agriculture of Austria

“With milk quotas expiring in March 2015 much more milk in Austria and EU-wide is to be expected. Despite the long-term positive outlook for the dairy market, the management of this fundamental system change will be no easy task for the entire dairy industry,” he notes. “Austrian dairies have been preparing intensively for a long time for this moment; it is important to improve the performance of the Austrian dairy industry further to ensure the best possible processing and use of our high quality milk for the period on the open dairy market after the expiry of the quota.”

The market prospects both in Austria and around the world were, until to the Ukraine-Russia crisis and the following embargo, quite positive. The milk market is growing worldwide and by the year 2020/21, cow milk globally is expected to reach a production of 740 million tons – a 24% increase. The increasing demand is due to population growth and increasing demand in emerging markets, especially China.

Due to the Russia-Ukraine crisis, the market has changed a lot for Austria and other countries in the last few weeks. For example, of the 800,000 tons of cheese exported from the EU, about 260,000 tons was exported to Russia. The amount of dairy products, that are not currently going to Russia, press the European market downwards. Particularly in Germany, it has already been pushing prices lower, with the same effect felt in Austria as well.

“Austria’s strategy after the end of quota continues to focus on the uncompromising quality of Austrian milk. The Austrian dairy industry does a lot more than making the highest quality products, it also ensures our beautiful landscape,” notes Petschar.

There is also on-going debate in Austria about discounted milk. Price developments have been more favourable for milk and milk products following EU membership in 1995. Petschar states that the confusion about different milk quality products creates uncertainty among consumers and especially put the value of Austrian milk and dairy products in question. He notes, “Highest quality at the cheapest price do not exist.”

The problem for the Austrian dairy industry is that national traders ultimately use Austrian high quality GMO-free dairy products as bait: buy one get one free sales, or 25% and 50% discounts on high-quality milk and dairy products. The industry fears that the consumers no longer can see the difference between high and low quality products, as the high quality image is very important for the Austrian dairies, as it their stepping stone to the competitive market.