The balance of power in European dairy markets could swing away from farmers once milk quotas are lifted in 2015, according to a new study.
A report on the abolition of supply management in Switzerland five years ago showed that dairy farmers had become more efficient, but the industry had not become as competitive as was hoped.
The biggest dairy companies strengthened their share of the market and farmers saw the value of their milk slide in the run-up to and after abolition in 2009.
The study, commissioned by farmers’ group the European Milk Board (EMB), concluded the EU could learn from the Swiss experience by focusing on producing high-value products and encouraging farmers to collaborate.
“The dairy [processing] industry does not only have a size-related advantage, but also an information advantage, which dairies will use during contract negotiations,” said the author, Dr Therese Haller, from Bern University.
“Overcapacity issues are to be expected, which could result in high competition for milk,” she said.
“Milk producers thereby risk becoming puppets of the large corporations.”
Swiss politicians voted in 2003 to abolish quotas, which were fully lifted in May 2009.
Dr Haller’s study showed milk was worth about 24% less in 2010-12 compared to 2000-02, a bigger drop than the government had predicted.
It also revealed the four largest processors increased their share of the milk market from 44% to 56%.
EMB president Romuald Schaber said the EU’s liberal blinkers should be removed and price-stabilising tools put in their place to stop market collapses.
“Politicians would be well advised to read the study carefully and learn from the Swiss situation, so that they apply at least effective instruments to crisis situations,” he said.
NFU chief dairy adviser Rob Newbery said exposure to world markets and global demand was supporting British milk prices.
“We have got long-term, sustainable market forces and factors keeping our milk prices up rather than government policy that is in the long term unsustainable,” he said.
“[The EMB] are talking about calcifying structures that exist today and history tells us that does not work.
“There is a risk in the short term that we are oversupplied but that is the nature of a volatile market.”