Reform of dairy policy saves society £209m
Reform of dairy policy saves society £209m
By Philip Clarke Europe editor
LOSSES to dairy farmers from the removal of quotas, price supports and compensation are more than offset by gains to Europes consumers and taxpayers, according to a new study for the UK government.
Using the best forecasting models available, the report shows that EU dairy farmer revenue would drop by k9.94bn (£6.11bn) by 2010 under this total free market scenario, compared with the more modest changes planned under Agenda 2000.
But for consumers, the gains from cheaper milk would amount to k6.57bn (£4.04bn), while taxpayers would save k3.71bn (£2.28bn) from no longer forking out for dairy cow premiums and export subsidies.
The net benefit to society is put at k340m (£209m).
But it does not stop there. The researchers also point to the reduced administration costs from abandoning quotas and the gains as this money is invested elsewhere in the economy.
There would be further dynamic improvements as high-cost farmers leave the industry and low-cost producers expand. Similarly, processors would concentrate more on high value dairy products and less on intervention.
Building these in, it is estimated that liberalising the dairy sector would generate a net gain to the EU of k2.27bn (£1.4bn). "Dairy policy reform, including the elimination of quotas, would seem to be a very sensible option," says the report.
The findings, presented this week at a Centre for European Policy Studies seminar in Brussels, will form part of the UKs contribution to this summers mid-term review of Agenda 2000 and will be used to press the case for more radical reform.
The dangers to farmers were highlighted in a paper from the Irish advisory body, Teagasc, which warned that abandoning quotas would boost EU milk output by 8% leading to a 27% reduction in price.
At this level, Irish farmers, who are most dependent on intervention and export markets, would have to more than double production just to maintain income. About one-third of producers with less than 135,000 litres of quota would not be capable of achieving this level of expansion and would face bankruptcy.
• Our latest milk price table (for March deliveries) reflects cuts made by three buyers during the month. Robert Wiseman Dairies reduced its base price for all partnerships by 0.6p/litre, and Lancs Dairies pulled its base price down by 0.2p/litre. United Milk cut its fixed protein and butterfat element, giving an overall reduction of 0.5p/litre.
However, much bigger changes are afoot next month with cuts of 2p/litre and more already announced by several firms. *