CAP reforms increase risk in dairy sector

By FWi staff

IT is unlikely that the EU will be able to export large amounts of milk without subsidies under the Agenda 2000 reforms.

Speaking to delegates at the Meat and Livestock Commissions (MLC) Agenda 2000 conference yesterday (Tuesday), Milk Marques senior business analyst, Paul Allsop, said that the CAP reforms impose an increased risk to the dairy sector.

World prices will have to substantially increase for the EU to be competitive, said Mr Allsop. “And considerable pressure from the next WTO talks might force a review of the reforms before the planned 2002 discussions,” he added.

Milk prices are targeted to fall 17% over three years under the reforms, with a 15% drop in intervention prices between 2005 and 2008.

Partial compensation will be paid at 60% per tonne of quota on the basis of the amount of milk quota held at 31 March each year. A further 40% will come from national envelopes.

But despite this compensation, revenues are likely to decline by almost 7%. This is likely to enhance rather than diminish the drive to low-cost dairying, said Mr Allsop.

“The number of producers has declined by 30% over the past 10 years and the drop in revenue under the reforms will accelerate this,” he added.

Mr Allsop also warned that milk quotas cannot viably be removed until dairy products can be exported at world prices.