“Farmers and dairy processors here do have some concerns about how other EU countries will react to the ending of quotas,” said NFU dairy board chairman Rob Harrison. “Some are rapidly increasing their output without an end market for these goods.
“With milk prices yet to show any strong signs of recovery, this could push farmgate milk prices down further in the EU, and stall any recovery in the dairy markets. It’s vital that expansion in any Member State is planned in accordance with available market opportunities.”
Harrison recognised that “tough challenges” lay ahead for the UK industry, “especially with prices”, but insisted the long-term outlook was good, with growing demand and production opportunities. However, he called on the next government and the EU to do more to ensure a sustainable future for the dairy sector and help make tools available for farmers to manage market volatility.
“We also need UK dairy processors to recognise and promote potential markets both at home and abroad and look to develop new products such as sports drinks,” he said.
The Farmers’ Union of Wales (FUW), which has vociferously opposed abolishing the EU milk quota system, warned that a massive upsurge in production was highly likely.
Nor could emergency intervention buying to shore up underperforming markets be relied upon, said FUW senior policy officer Dr Hazel Wright. “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,” she said.
“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.”
The most concerning post-quota price predictions cited milk price drops to about 4p a litre, the FUW said. While these were extreme, it was impossible to imagine any producer being able to stay in business if prices fell to such a low, even for a short period, it added.
‘Boom and bust’
“ … It is imperative that processors work to prevent the type of boom and bust price volatility, which could follow quota abolition,” said Wright.
“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.”
Meanwhile, Dairy UK welcomed the end of milk quotas. “Although quotas may have been considered as an appropriate response at the time of their introduction, they also held back the development of a truly efficient and competitive European dairy industry over the last 30 years,” said Dairy UK ceo Dr Judith Bryans.
Bryans said the system’s abolition on April 1, 2015 would no doubt make the dairy market more volatile, but that the UK dairy industry was ready to face the challenges that lay ahead.
Milk quotas were introduced in 1984 to address the structural oversupply on the EU market of the late 1970s and early 1980s that had led to the infamous milk lakes and butter mountains.