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Too much milk or not enough support?

On 02 April 1984 milk quotas were first introduced, their purpose was to bring rising milk production under control. They were introduced under the now Common Agricultural Policy and originally were only set to run for five years, and were eventually abolished in March 2015.

Milk quota was one of the measures used by governments in the EU to intervene with agriculture. Quotas were attached to land holdings and they represented a cap on the amount of milk that a farmer could sell every year without paying a levy. Milk quotas were assets; they could be bought and sold, or acquired or lost by other means, and there was a market for them.

At its peak milk quota reached 80p per litre. It was not intended for milk quotas to attract a value. However they became a valuable asset, although prices fell towards the end of their life.

More recently, to reduce the amount of European milk output, there is speculation that France and Germany are suggesting the introduction of supply management/quotas. DEFRA’s responded that the UK is against the European Commission introducing any supply management measures or further market support measures for the European dairy industry.

Tom Selby of Rostons stated “In any industry where supply outweighs demand, the sale price of the product decreases and currently there is too much milk and not enough demand. The ‘Spring Flush’ is almost upon us and production will only increase, resulting in more milk on the market.

Are quotas the best way to go? Probably not, but if production increases and there are no markets available it is for those at the top to find new markets. Why would those on a good contract decrease production and effectively their profit?

In most cases a farmers cows are seen as their pension or an investment to pass on to the next generation and even this glimmer is getting bleaker. The question is how long can this continue for?”

For further information contact the Rostons office on 01829 773000