Tomorrow sees dairy producers in Wales waking up to the abolition of the European quota system that has operated to limit EU milk production for 30 years.
“While Britain remains under quota, the potential addition of more production to the EU milk glut has led the FUW to repeatedly express concern about further increases in price volatility in an already saturated marketplace,” said FUW senior policy officer Dr Hazel Wright.
Several European countries, such as Ireland, Germany and the Netherlands are already bursting at their quota seams and seem well placed to take advantage of a deregulated production system.
Although several Northern European countries have their own production constraints – such as the environmental regulations in the Netherlands – it would seem that an increase in EU milk production is all but inevitable.
Last month, several EU Member States urged the European Commission to guarantee that the post quota milk market will be closely and properly monitored in order to ensure that volatility is not further increased.
“The union recognises the role of the Milk Market Observatory in monitoring the market and hopes that it will also have an effective role in offering mitigation measures where needed. However, in a quota-less system it becomes much more difficult to justify emergency intervention buying at times when the sector needs desperate support, which is an added concern for the FUW,” added Dr Wright.
Numerous studies have attempted to predict volumes and prices in a post-quota market. The most concerning post-quota price predictions cite milk price drops to around four pence per litre and, whilst such predictions are extreme, it is impossible to imagine any producer being able to stay in business if prices fell to such a low, even for a short period.
Dr Wright further said that the FUW has been firmly against quota abolition since the idea was mooted almost a decade ago and the warnings and concerns expressed by the union on the implications of abolishing milk quotas are no April fool’s joke.
“Given such warnings, it is imperative that processors work to prevent the type of boom and bust price volatility which could follow quota abolition. Indeed, it is essential that transparency and fairness in the dairy supply chain is improved in order to allow producers and processors to be well placed to maximise those mainstream and added-value opportunities that are set to arise in the export market following future growth in the demand for dairy products,” she added.
The Welsh dairy sector is an innovative and efficient sector which produces high quality dairy products from high welfare cows and it is therefore imperative that producers in Wales are able to take advantage of such markets rather than losing them to our European competitors.