September 21, 2007

EU to raise milk production on dwindling supply

The plunging milk supply in EU will likely push the European Commission to consider raising quotas on milk production to ease the industry's woes.

Adverse weather conditions in Australia and increasing demand in China and Eastern Europe are putting the squeeze on industry margins.

The ongoing reforms of the EU's common agricultural policy (CAP) is another factor in the tightening supply as farmers in the bloc are increasingly being moved away from uneconomic crops.

Though these reforms are set to be reviewed over the next few years, EU agriculture commissioner Mariann Fischer Boel has suggested she may open debate to find solutions for high prices.

However, such a move would be a reversal of general European policy to remove protection in the market, to comply with ongoing talks between the EU and the World Trade Organization (WTO) over trade. 

In June, the policy of subsidising milk exports from the bloc's producers was scrapped for the first ever time since their inception, due to strong prices of milk on the commodities market.