EU dairy pressures may hasten reform

By Philip Clarke

EU DAIRY markets are inherently unstable there is pressure that could lead to reform of the sector well before the 2005 start date.

The date was set by heads of state at their Berlin summit last March.

Of immediate concern to UK producers was the additional milk quota allocated to Ireland under Agenda 2000, which kicks in next year, NFU president Ben Gill told this weeks Agra Europe dairy conference in London.

Given that Ireland is already 1000% self-sufficient in butter and 300% self-sufficient in cheese, and considering the strength of Sterling, it was likely that the bulk of this extra production would end up in the UK.

EU-wide, the allocation of an extra 1.35 billion litres of quota to certain states by 2002 could only add to the EUs supply problems.

Other pressures arose from the continued application of the last GATT agreement, which limited the EUs ability to use export subsidies to dispose of surplus dairy products, such as cheese (see graph).

The Russian crisis had also increased the amount of product looking for a home. “In 1997 around 30% of EU cheese exports and 38% of butter exports were sent to Russia.

These have dropped dramatically,” said Mr Gill.

Even before Agenda 2000, the commission had predicted rapidly expanding dairy stocks, he added.

Looking ahead, the next round of WTO talks were due to get under way in Seattle in November, with real pressure to increase market access and reduce export subsidies further, and have the whole thing wrapped up by 2003.

The last GATT round was largely a bilateral affair between the EU and US, said Mr Gill. “This time the Cairns Group of countries intends to play a bigger role.” EU enlargement could also raise the stakes for the dairy industry.

Recent events in Serbia had increased the case for neighbouring Balkan states such as Croatia, Slovenia and Macedonia to join the EU, which in turn could accelerate the accession of Poland, Hungary and the Czech Republic.

Poland alone would add 5m cows and 1m producers to the EU.

“All the signs are that there will be another reform of the CAP as early as 2002/03,” said Mr Gill. Until then, the pressures on UK dairy producers would continue.

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