Is EU Milk Quota Liberalisation Only a Drop in the Ocean of Global Demand Growth? 

21 November 2012

By 2015, EU milk production growth will have been contained by the milk quota system for over 30 years and despite a growing pile of research papers and scenario analyses, no one really knows what will happen when the system will be abandoned in 2015. That’s the view of Mark Voorbergen, Independent Dairy Consultant, speaking at the Teagasc National Dairy Conference in Mullingar, today, Wednesday, 21 November.

He said that at some point in time, economic rationale will take over, but in the initial years after the termination of the quota system, market turbulence seems inevitable. Processors in the European growth regions will find themselves busy building the required capacity and creating new market access for these volumes.

He said: “Looking through the increased volatility of recent years reveals an overall upward trend for global commodity prices since 2001. Every peak tends to be higher than the last one and lows get higher as well. Developments in recent months indicate that supply is increasingly challenged to keep up with global demand growth. Despite an 18-month series of almost perfect supply conditions, resulting in very strong growth rates in all of the major export regions of the world, dairy commodity prices were barely pushed below the USD 3,000/t mark in the first half of 2012. Currently they already seem back on their way to the next peak in 2013.”

Mark Voorbergen said that Irish farmers have a great starting point as being among the most efficient producers of milk in Europe. However, the opportunities in the global market also require competing with several of the most consolidated and dominant marketing machines in the world. Is the Irish dairy chain ready for the opportunity?