21 March 1997


By Sue Rider

UK DAIRY farmers are well-placed to be competitive in the world market.

Speaking at the Royal Association of British Dairy Farmers annual conference at Malvern, Worcs, Prof David Harvey of Newcastle Universitys department of agricultural economics and marketing said UK dairy farmers could produce milk as cheaply as the most efficient suppliers – the New Zealanders.

He suggested the EU "buy up" quota and allow production at free trade prices to enable it to maintain its share of the world market.

Adopting a two-tier solution with lower support prices and direct payments to adjust to real world prices was the best way forward.

"The only two-tier way is to drop support prices close to free trade world prices and pay the difference as a direct subsidy to a limited fraction of total quota," he said.

If the US and EU removed dairy support, prices would rise by about 40% – giving a free trade world price of 14p/litre.

"About 75% of EU producers, given appropriate adjustment in their capital asset base, could be profitable at that price." After all, producers were currently paying 11p/litre for quota against a market price for milk of 24p/litre. That left a net farm price, excluding quota, of 14p/litre – no more than the likely free trade price, he reasoned.

But Andrew Dare, Milk Marque corporate director, disagreed with the analysis that world milk price would firm at 14p/litre without subsidised exports.

"Without quotas milk production will increase and even a small increase in production against demand will have a disproportionately negative effect on market price – to a level below 14p/litre," he said.

Prof David Harvey…. lets adopt a two-tier system with lower support prices coupled with direct payments.