Brussels, 24/07/2014 (Agence Europe) - A study of the dairy market in Switzerland, which was published in Brussels on Wednesday 23 July, somewhat demonstrates the disruptive effects of the end of milk quotas. According to the president of the European Milk Board (EMB), a similar fate could await the EU once dairy quotas are abolished in 2015.
“Five years after the quota system was abolished, producers still have no stable market conditions”: this is one of the conclusions of the study, which looks into the effects of the abolition of milk quotas in Switzerland in 2009.
According to the study, increases in volumes as a result of the end of quotas have had the effect that, in comparison to the average price paid to producers during the years 2000/2002, Swiss industry milk had lost around 24% of its value by 2010/2012. Cheese dairy milk and organic milk lost 15% and 19% of their value respectively. So far, no effective private law measures to stabilise farm-gate prices have been implemented, because of disunity among the market stakeholders. “The decision to abandon the quotas was based on studies and expectations that have proven to be totally wrong”, says Werner Locher of BIG-M, the Swiss milk producer organisation. “The continuing poor prices have forced many farmers out of milk production - even some that actually had good farm structures”, he continued, adding: “If the producers are not paid cost-covering prices, this has repercussions extending far beyond agriculture”.
The study goes on to explain that the market concentration of processors in Switzerland has increased since the end of milk quotas and that this has contributed to weakening the position of the producers. Between 2003 and 2012, the four largest processors handled volumes which were up by 38% and their market share in Switzerland rose from 44% to 56%. The study also criticises the growing divide between mountain and valley regions following the removal of quotas.
Romuald Schaber, President of the EMB, says that there are similarities between the Swiss situation and the one to be expected in the EU when quotas come to an end in 2015. “Even if the developments are not all transferable 1: 1, it is nevertheless a fact that the EU also has very difficult times ahead”, he predicts. He believes that the market and the producers will be left to their own devices. “Without effective mechanisms - without cost-covering prices - large number of farmers in the EU will also have to give up very quickly. In the end, entire regions will simply be left without any milk production”.
The Bern study also reaches some conclusions on the EU's imminent abolition of the milk quota system: - if milk production disappears from entire regions of the EU, it will be a loss to local cultural assets (the risk of rural exodus is specified); - distortions on the processor side can be expected if less is produced/sold in the long term than expected (factory closures would entail far-reaching consequences on a regional level); - the balance of power in the milk sector is not in the producers' (or the consumers') favour. The study also stresses the need to bear in mind the issue of quality assurance and food security standards, socially acceptable working conditions and animal welfare. (LC)