There will be some clear winners, but many losers as the EU dairy quota system is abolished, creating an industry that is closer to the New Zealand model, with its unsentimental focus on scale and efficiency.
Share of Global Production
The European Union is the largest producer of dairy products in the world, accounting for 20 percent of global production in 2013. However, production levels have actually decreased by five percent since 1990, when the EU’s share of global production was 31 percent.
The quota system was introduced in 1984, to control escalating production levels while maintaining the price-support structure of the Common Agricultural Policy (CAP). The core aim of the CAP was to support farmers’ incomes while ensuring an affordable and plentiful supply of food within Europe. This inevitably led to a distortion of market forces, which limited the sector’s competitiveness and ability to respond to increased global demand for dairy products.
Post – Quota World
In April 2015, the EU’s dairy farmers were released from the constraints of the dairy quota system and industry participants are now focused on the present realities and future prospects of the post-quota world.
Industry analysts and participants have outlined two alternative future scenarios. The first possibility is that a two-track European dairy industry will emerge, which will result in no significant change to the production capacity of the EU.
This forecast would suggest that the countries that are currently at, or above, their milk quota will continue to increase production.
In contrast, those countries that are currently below their assigned quota limit will allow production to fall even further. Those countries likely to expand production are in northern Europe, along a line stretching from Ireland in the west across northern France as far east as Poland and the Baltic countries.
Farrelly Mitchell: Dairy market consultants
As the EU transitions away from the dairy quota system, navigating the new landscape requires strategic insight and adaptation. At Farrelly Mitchell, we offer comprehensive support to businesses throughout the dairy sector, providing actionable insights and recommendations on profitability, sustainability, and efficiency.
Our consultants possess deep knowledge of the dairy industry landscape, offering expert guidance on policy and regulations, market entry & development, sustainability and esg, operational improvement, and much more. We are well-equipped to assist businesses in capitalising on the opportunities presented by market and regulatory shifts, ensuring they are positioned not just to survive but to thrive in the evolving dairy industry landscape.
