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Mixed feelings as EU ends 30 years of milk quotas

© Georges Gobet, AFP | A cow about to be hooked up to an automatic milker in Brittany, western France.

Text by FRANCE 24

Latest update : 2015-03-31

Europe's dairy farmers are preparing for the end of three decades of milk quotas on Wednesday with a mixture of excitement and foreboding, with critics fearful the move will destroy a key tenet of the EU’s agricultural policy.

Farmers in the EU’s 28 member states will be allowed to churn out as much milk as they want as of April 1, a move northern European countries have hailed as a chance to cash in on growing global demand.

Dairy producers in Ireland’s Tipperary will be throwing a party, with full orchestra and a milking machine, to mark the occasion. The government has announced plans to boost milk output by 50 percent by 2020.

Dutch and German farmers are also ramping up production. But many farmers in France, Europe's second-biggest milk producer behind Germany, say they prefer to wait for demand to pick up before gambling with higher output.

France’s dairy industry, which employs some 200,000 people, fears the sudden flood of extra milk will cause prices to collapse, undermining decades of EU policy aimed at guaranteeing farmers’ livelihoods.

‘Butter mountains’

Bolstering prices – at a hefty cost for the EU – has long been a cornerstone of the bloc’s Common Agricultural Policy (CAP), and no country has defended the principle more fiercely than France, widely regarded as its chief beneficiary.

With the CAP's launch in 1962, generous subsidies encouraged ever greater output – but market demand was left out of the equation. Soon Europe was drowning in excess dairy products, which the EU was compelled to purchase in order to save farmers from bankruptcy.

The infamous “milk lakes” and “butter mountains” of unsold dairy products led to the introduction of quotas in 1984. Fines slapped on farmers who breached the quotas prompted angry protests, including milk being poured on motorways, public squares and the steps of parliament.

Some countries opted to pay yearly fines rather than cap output. Germany, the chief offender, has exceeded the quotas 21 times in 30 years, paying a total of €2 billion in penalties.

Others, including France’s numerous small, family-run businesses, felt protected by the quota system, which offered price stability and a minimum income.

“We were in a stable and protected system,” Dominique Chargé, the head of France’s National Federation of Dairy Cooperatives, told Le Figaro daily. “We are now entering an extremely volatile system.”

Chinese thirst

Vincent Chatellier of the French National Institute for Agronomic Research has downplayed fears of a “big bang” once the quota system is lifted. “Most European countries already produce less than the quotas allow, so their disappearance won’t change much,” he told FRANCE 24.

Phil Hogan, the EU’s agriculture commissioner, argues that Europe’s farmers have a lot to gain from the end of quotas. While acknowledging the risk of volatility in prices, he has stressed the “opportunity in terms of growth and jobs”.

That opportunity is widely equated with China, where consumers have turned to imports, particularly for baby formula, in the wake of a tainted milk powder scandal in 2008 that left six dead and more than 300,000 sick.

Chinese companies have sought to cash in on the European reputation for quality, teaming up with dairies in France and Denmark to invest hundreds of millions of euros in milk-drying facilities. In turn, growing demand from China has helped push up the price of powdered milk, boosting dairy producers’ profit margins.

But a sudden surge in production could just as easily reverse the trend in prices, particularly as European farmers are not alone in churning out milk to meet Chinese demand. Their competitors in the US, Australia and New Zealand have take advantage of EU quotas to flood the global market with their production.

Massages and carousels

In an effort to meet the challenge, Germany has invested heavily in large-scale facilities where greater efficiency can help farmers survive on the industry’s thin margins.

At mega-farms such as Richard Reiss’s Heideland, south of Berlin, 1,200 dairy cows go through a computerised "milking carousel" that allows them to be milked three times per day instead of the normal two. The farm’s high-tech facilities include methane-capturing systems to generate energy.

"As soon as we heard that Brussels was considering scrapping the quotas, we started thinking about how to respond," Reiss told the AFP news agency. "Since 2012, we've done nothing but prepare for this."

Europe’s largest milk producer, Reiss boasts that his cows even get a massage before milking. But they are unlikely ever to graze in a meadow, and critics of the environmental impact of large-scale, industrial farming have become increasingly vocal.

In January, tens of thousands of demonstrators took to the streets of Berlin to protest against the industrialisation of agriculture and call for a more ethical and sustainable way of feeding the planet.

This is where France’s premium cheese farmers, a key segment of the country’s dairy sector, feel they have a chance. The “land of 246 kinds of cheese”, as General De Gaulle famously quipped, has strict rules governing location and production methods that give it an edge among consumers eager for quality and accountability.

With their minds focused on generating higher margins from value-added products, the producers of Comté, Beaufort and other French delicacies are largely unmoved by the quota saga. They say their business is about quality – not quantity.

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Date created : 2015-03-31

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