21 November 1997

Phase out milk quotas, urges top MAFF man

By Johann Tasker

QUOTAS should be scrapped and support prices cut by 30% so farmers can compete on the world market, a senior government official said this week.

"Milk quotas have severely disadvantaged the UK dairy industry," Peter Nash, MAFFs head of milk told the Agra-Europe dairy conference in London. "They have resulted in the UK being less than self-sufficient, despite us being a low-cost milk producer."

Mr Nash proposed the removal of quotas over a five year period beginning in the year 2000. Financial savings from reducing support by 30% could be used to compensate farmers, he said.

But EU proposals to cut support by only 10% – as outlined under Agenda 2000 – were sufficient, according to commission deputy head for milk and dairy products, Toon Leenders. "Our proposed price reduction will not close the gap between EU and world prices," he acknowledged. "But it will have a positive effect on internal consumption and will allow exports of dairy products without refund.

"The quota level is not written in stone," Mr Leenders added. "We have said that they will remain until 2006 but we are not saying that they will remain at the same level until then."

Further details of the EUs reform package for the dairy sector are expected to be revealed early next year – after the EU presidency passes to the UK. France is in favour of two-tier pricing, while Germany is in favour of maintaining quotas. Both are resisted by the UK.

&#8226 Milk Marque is planning to offer dairy companies four or five-year contracts, linked to commodity market movements, in an attempt to encourage long-term investment, writes Philip Clarke.

Speaking at this weeks Agra-Europe dairy conference, chief executive David Yeomans said contracts linked to a market-related index would provide customers with the security and confidence to invest for the future.

"Beyond 2000, we face increased competition as markets open up. Domestic milk production will rise as quotas are relaxed. The UK dairy industry needs to invest to substitute for imports, find new export markets and create demand."

Discussions are already ongoing with the trade to try and link selling prices with currency markets. The aim now is to broaden this and develop an index that reflects movements in key commodities, such as the Dutch and German butter and powder markets.

How often rates would change is open to discussion. "It would not be daily – maybe not even monthly," said a spokesman. "But the trade tells us prices fixed for six months is too long, given the volatile currency situation. We can understand this concern." &#42