17 November 1995

Quota straitjacket threatens future of UKs dairy industry

By Tim Relf

EUROPEAN dairy farmers are in danger of becoming uncompetitive in the world market.

In the UK the cost of quota, land and the cow is about £1.40/ litre of milk produced, Midland Banks agriculture director Nor-man Coward told a conference at Ardingly, West Sussex, last week. In California, where the average yield is over 8000 litres an animal, the figure is 35p/litre. And in New Zealand it is 25p/litre.

The quota regime is constraining expansion in the UK, said Mr Coward. And in an increasingly competitive international market, this was a cause for concern.

"The straitjacket of quotas should be gradually and intelligently reduced after the year 2000," he suggested. Although quotas have enabled milk prices to keep pace with inflation in recent years, they have acted as a tax upon consumers and are not sustainable, he said.

After the 10% rise in milk price seen over the past 12 months, no major change is likely in the next two years, predicted Mr Coward. But reductions in cow numbers and beef productive capacity should help returns from cull cows and calves. But profits would be slightly eroded as agricultural input costs rose faster than the Retail Price Index.

With regard to feed costs, Mr Coward suggested they were unlikely to fall even if there was an excellent 1996 world grain harvest. "It will probably take another good crop in 1997 before feed wheat comes down to the $100/t mark," he said.

World markets in wheat are currently trading at $200/t. &#42