Almost two years before the end of milk quotas in the EU-28, the question arises as to what power the quota system still has to restrict or influence the price of milk production. This is based on the fearful assumption that the release of unrestricted milk production could lead to a massive price collapse.
If we look at the figures from recent years, we see that the EU-wide utilization of the milk quota has been well below the 100% mark for several years. There are actually only 6 predominantly small countries that are still over-supplying. These include Austria, Cyprus, Malta, the Netherlands and some Baltic states.
Germany always moves between just under and over supply. In contrast, large milk-producing regions such as France and the UK have been producing below the 95% mark for years.
However, the question arises as to how strongly milk producers react to prolonged high milk prices well above the 30-cent-per-kg mark, whereby the dampening effect of high concentrate prices should not be disregarded.
The most recent comparison of the Jan/Apr 2013 period with the previous year confirms a behavior that has been observed over several years. In only a few countries is there a moderate expansion. In Germany, the delivery volume increased by 0.1 % and in 3 other small countries in the Baltic region and Greece, the volume rose by 2.1 to 6.3 %.
In the majority of other EU member states, there were clear declines of between -0.1 % and -6.9 %. It is noticeable that Italy, England, Portugal and Ireland have recorded the highest declines above -6%. And these are not necessarily all small milk producers.
With concentrate prices currently falling again and milk prices expected to remain stable, the profitability of milk production will improve significantly in the foreseeable future. Whether there will then be the same strong restraint as before remains an open question for the time being.
But one thing can already be said. The quota system has long since lost its original function of limiting production. As a result, its function of influencing prices has also disappeared. What remains is a safety net intervention for the conceivable worst-case scenario. Milk prices have long been decided on the receptive world market. With a level of self-sufficiency above 115%, exports are the decisive price support.
