Fears grow over impact of EU quota abolition

By Keith Nuthall

Serious concerns were raised at the European Parliament over the impending abolition of European Union (EU) milk production quotas, as dairy prices continue to fall. A special hearing on the future of the industry heard (on Tuesday 27 January) how the sector had been taken by surprise in the past year by production increases and export market losses through Russia’s embargo. A European Commission official admitted to MEPs that the market falls “had taken us by surprise” and that they were “worrying”. He said that milk prices had declined from €0.40 per kilo in December 2013 to €0.34 in December 2014. Meanwhile production had actually risen 5%. He said the EU’s milk policy package that has been in force to prepare producers for dairy liberalisation had not been fully utilised. He suggested that previous higher prices had maybe deterred farmers from making the changes that might have been needed, for instance banding together in producer associations.

Mansel Raymond, chairman of the EU producers association Copa-Cogeca’s working party on dairy and milk products, says a restoration of quota was no guarantee against market volatility, noting that milk prices have fallen steeply in the 30 years that EU quotas have capped production. But he did call on the EU to consider spending money on helping EU producers break into new overseas markets, for instance offering credit refunds and credit insurance, although he stressed he was not advocating a return to comprehensive export refunds. “If you want investment, you need a growing industry,” he said.

Some MEPs speaking to the Brussels hearing were far from optimistic that this would happen in the wake of quota abolition on March 31, with widespread fears that large manufacturers would continue to drive down farm-gate milk prices to unsustainable levels.

Spanish European United Left – Nordic Green Left member Lidia Senra Rodríguez said the end of quotas was going to “have real consequences” and “real thought” was needed to devise an alternative management system.” Let’s not destroy this sector,” she said. Rodríguez opposed the spending of tax payers’ money on expert subsidies, however.

German Greens/European Free Alliance member Martin Häusling also opposed finding export refunds as an “obsolete policy”. He called on the EU to develop sales in European domestic markets to underpin the future of its dairy sector: “We have to focus our attention on the European internal market,” he told the hearing. “And not hope our redemption lies in Russia, China and elsewhere.”

Slovene Christian Democrat Franc Bogovič warned: “Circumstances have changed. They are not the same as when we abolished the quota system [in 2003].” He said long-term development project were needed to prevent dairy production disappearing from large areas of Europe and “only taking place in certain areas.” Disadvantaged areas would find it increasingly difficult to maintain dairy sectors after quota abolition, he warned.

French right winger from the country’s Front National Edouard Ferrand called for a review of the policy and to “maintain in Europe milk quotas…” And another France FN MEP Philippe Loiseau argued that in the last 10 years, 40% of farms in France had closed, with large agri-business expanding.

Prominent French green José Bové (pictured) called for the European Commission to take action and decided what constituted a “crisis situation” within the sector, to guide any response to problems following quota abolition. He wanted more price transparency and the “management of volume and prices that is apposite.”

The hearing had however heard a more pro-market view from an English dairy farmer Duncan Maughan, who is based in Cumbria. He told MEPs of a sophisticated contract he has struck with Nestlé which will see him paid more for higher protein concentrations in the milk he must deliver to rigorous quality specifications. Maughan welcomed the support he had received from the manufacturer to restock his herd after it was struck down by mycoplasma bovis. He also called on the milk sector to become more involved in branding, and focused on producing specialist types of milk such as high omega-3 content. And he called for an end to the practice of supermarkets using milk as loss leaders to attract customers: “Milk is cheaper than bottled water, and that’s a disgrace,” he told MEPs, while stressing the nutritional value of a glass of milk.

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