Milk quotas to end within days, but why were they introduced?
With the end of the EU milk quota system less than seven days away we look back at why they were introduced in the first place.
With the success of the Common Agricultural policy in its early years dairy industries in Member States were encouraged to modernised their sectors and increase production. Through the 1970s the EU moved from being an importer of dairy products to constant surpluses. With supplies becoming increasingly out of step with demand downward pressure on price became inevitable.
Initially farmgate prices were maintained through the introduction of import tariffs and intervention. Both policies placed an increasing financial burden on Member States. In the 1970s and early 1980s more than a million tonnes of Skimmed Milk Powder and Butter was in intervention.
Thus the EU milk quota system was originally introduced in 1984, in order to limit public expenditure on the sector, to control milk production, and to stabilise milk prices and the agricultural income of milk producers. At that time Ireland’s annual milk production was in the region of five billion litres.
In the years post its introduction, milk quota has become a scarce production factor for farmers across Europe.
On one hand, its introduction limited milk production while, on the other hand, it stabilised milk producer prices and maintained dairy activities in less competitive regions.
However, in the course of time, European dairy policy has been continuously changing and has increasingly encouraged producers to be more market-oriented.
Policy developments, including reductions of intervention prices and specific quota increases of various amounts to Member States, together with most recent market developments, have provoked that quota is no more binding in some Member States and regions of the EU.
With the Luxembourg Agreement on the Mid-Term-Review (MTR) on 26 June 2003, the spotlight shifted again on the EU’s milk quota regime, because the MTR stipulated that the milk quota system will come to an end in 2015.
Within the Health Check of the Common Agricultural Policy (CAP) the European Commission endorsed the proposal of milk quota abolition and suggested an increase of quota by 1% annually from 2009 to 2013 to allow a ‘soft landing’ of the milk sector to the end of quotas.
This April 1, the milk quota regime will come to an end.
Production in Ireland is expected to increase by more than in other EU Member States, partly due to Ireland’s favourable international competitiveness position, but also due to the relatively restrictive approach adopted in Ireland to the transfer of quota between farmers.