The European Union is turning the page on milk quotas, introduced in 1984 to check the growth of butter mountains and milk lakes. While the market factored in the decision, taken in 2003, to end production limits, making significant investments, the public authorities haven’t. There has been a range of measures to ensure a ‘soft landing’ as quotas have been phased out, but these have neglected two key needs for the future:
- Due to a lack of consensus on the European scale no clear policy framework to support farms into the post-quota period has been put in place;
- The changes currently affecting farms have not been explained to European citizens : the farm of today, and of tomorrow, cannot be like the farm as we have known it.
As we approach the end of quotas the Union’s policy is, therefore, at sixes and sevens, with, on the one hand, production areas or businesses that are targeting international markets and must do so aggressively and, on the other, regions whose agricultural sectors are fragile and which are seeking new strategies to market their products and secure their future in the international market place.
For both of these realities, policy tools are needed to help stakeholders steer a steady course through the post-quota period as well as to ensure that the European Union is equipped to transform this challenge into a genuine opportunity for sustained growth.
What is needed, first and foremost, are policy tools that enable businesses to conquer new markets including effective measures to mitigate the effects of crises – the producers who will be the most exposed to crises in the coming years will not be those we might at first expect. Buying or modernising a farm is extremely costly – on its own, a milking robot for 60 dairy cows represents an investment of 100,000 Euros. In a period of crisis, how can farmers afford such investments?
The market crisis reserve set up by the last CAP reform has a fund of 400 million Euros. It was not designed to cope with a crisis in milk markets such as the one that occurred in 2009. Then, the community budget provided more than 600 million Euros, with, in addition, massive national financial support being provided in some MS, in particular in France and Germany. In light of the current state of public finances, it is unlikely that such national support will be forthcoming should another crisis strike.
The stakes are high: Europe has substantial assets and can meet international demand, but she is not alone. New Zealand, Australia and the United States are on the offensive. In recent years, the European Union’s share of the international market has dwindled by 10 percentage points, from 40% to 30%.
Policy tools are also needed to support production in the most fragile regions and to help agricultural industry to design and implement sustainable business strategies. In these regions, milk production has no real alternative if it is to continue to be viable and capable of providing a platform for the development of other related industries and services. Niche products such as certain high-value added PDO cheeses or fresh creams cannot be the one and only solution for all the regions concerned. Nor is it sure that maintaining support for milk production in mountainous areas will be sufficient to persuade a new generation of farmers to take on the risk of setting up there.
Milk and other agricultural industries also need to be able to innovate, invest and work together as a unit if they are to consolidate and develop their markets, and be resilient through difficult times. They must be able to count on a European political leadership that can plan ahead and limit the risk of contagion from global crises affecting commodities on their regional markets.
In short, in terms of policy, the rules of the game are, today, far from being clear or adequate to the task of coping in an effective way with a crisis. In the event of a serious crisis, even if the the entire market crisis reserve facility were provided as emergency relief to farmers, this would only provide a cheque of 600 Euros per farm on average. This would no doubt alleviate political pressure on European institutions, but it would have virtually no economic effect. Further analysis as well as a clarification of policy aims are now needed.