November 27, 2007

 

EU may raise milk quotas in 2008

 

 

An official from the EU commission has suggested an increase of milk quotas from April of next year but dismissed the idea of a single EU-wide quota.

 

Lars Hoelgaard, EU deputy director general, said the quota raise would be likely though he didn't mention how much.

 

A report on the dairy market, to be published by the Commission on December 12, would flesh out this proposal, Hoelgaard told the Teagasc (Irish Agriculture and Food Development) Authority conference in Kilkenny, Ireland last week.

 

The move is seen as a first step in the process of ensuring a "soft landing" for the dairy sector. This proposal involves a gradual increase in quotas over the next five years and is one of the recommendations included in the CAP (Common Agricultural Policy) Health Check.

 

Hoelgaard said the recent quota system "failed to fulfil many of its key objectives and had led to some unwanted results".

 

He pointed out that farmers still continue to exit the business in many countries, despite the current regime.

 

In addition, he said the failure of France, Britain and Germany to fill their quotas confirmed that production was continuing to fall across much of the EU.

 

The quota regime had also become a serious impediment for restructuring the sector, as it put additional costs on new entrants to the business, Hoelgaard stated.

 

The EU official insisted that the challenges which would flow from the next WTO agreement -- which he said would come in time -- meant that the EU dairy industry had to be "competitive on a world basis".

 

Despite the push for change, Hoelgaard said the introduction of a single European-wide milk quota is still not an option.

 

He said national quotas were a "sensitive issue" and that it was difficult to see them traded between member states.

 

However, he said it should be possible to discuss a situation where the legal right to produce milk would be retained by farmers, but that there could be some form of "netting out" between member states. This would allow over-production in one country to balance under-production in another.

 

Meanwhile, Hoelgaard said society could question the need for the single farm payment being made to milk producers, given the current buoyancy in dairying.

 

He said the decoupled payment had been introduced to counter the drop in farmer incomes, which had been anticipated in the wake of reduced intervention prices for butter and skim milk powder.

 

However, Hoelgaard claimed that the recent hike in milk prices had changed the situation. He questioned whether there was justification for compensation, since the expected price reduction didn't happen.