EU voluntary milk reduction scheme deemed ‘a great success’

The voluntary milk reduction scheme launched in the EU in July 2016 has been deemed “a great success” by a study carried out for the European Milk Board (EMB).

Officially known as the Voluntary Supply Management Scheme for the Dairy Sector, the aid scheme aimed to fund milk producers who voluntarily engaged in milk production reduction over a three-month period.

A total budget of €150 million had been allocated to the scheme for the EU as a whole – equating to a reduction in production of 1.1 million tonnes if fully utilised.

Running from October 2016 to January 2017, the scheme gave farmers the opportunity to voluntarily reduce their production volume in exchange for compensation.

Farmers received 14c/kg for undelivered milk over a period of three months compared to the same period in the previous year.

As well as this, member states could increase this aid for reducing milk deliveries or for not increasing production.

Results

Implemented across 27 of the 28 EU member states, a total of €111.6 million was paid out under the scheme.

According to the report, the programme was taken up very quickly – particularly in major member states that produced and exported milk.

The highest participation in terms of reduced volumes was recorded in Germany (232,300t), France (152,732t), the UK (90,814t) and the Netherlands (56,117t).

Meanwhile, Ireland had the highest percentage of participating farms – standing at 21% – and recorded a reduction in volume of 4%.

Initially, four volume reductions periods were scheduled – but due to the large number of applications in the first phase of scheme, the total volume of available EU funds had almost been fully subscribed.

Coupled with a lack of further funds, only 48,200 European milk producers actually had access to this aid, the report explained. This equated to around just 3% of all European dairy farms.

The volume reduction covered by this aid amounted to 833,551t, which is 18.4% less than the quantity
applied for.

The report noted that the farm-gate milk price – the average EU milk price stood at €25.68/100kg in July 2016 – started to recover in the same month as when the reduction scheme was launched.

The recovery “accelerated further during the reduction scheme”, with the average EU milk price rising to €33.43/100kg in January 2017, the report explained.

‘This correlation cannot be denied’

The report states that the reduction in milk volumes as a result of the scheme “surely took pressure from the market”.

Concluding, it said: “The fact is, however, that a small reduction in the delivery volume was observed at the same time as a large effect on prices.

This correlation cannot be denied and confirms the experience already gained with the first major milk crisis of 2009: comparatively small changes in volumes can have a big  impact on prices.

“Even though not all price effects can be attributed to the reduction programme, it has helped to support and maintain the development that began in July 2016.”