Today’s start of a European Union dairy industry without milk production quotas is being met with varying reactions.
In Brussels, dairy farmers hit the streets March 31 to protest the lifting of EU milk quotas, fearing that the move will flood the market with cheap surplus milk.
On the same day, the Irish Dairy Board — Ireland’s largest exporter of Irish dairy products — unveiled a new global corporate identity. Now known as Ornua, the new name “marks the next step in its exciting journey” and a “new era for Irish dairying” as Ireland optimistically prepares for a future without milk quotas, according to the March 31 news release.
After 30 years of milk quotas, the EU’s new era brings fear, optimism – and key questions: How much more milk will the EU produce? Which dairy products will be most affected? Will the EU will be more aggressive in exporting dairy products? And how should U.S. dairy exporters compete?
More Milk and Cheese Ahead, USDEC Study Says
According to a just-released analysis by U.S. Dairy Export Council (USDEC), the end of European quota limits is likely to increase EU milk production 11% by 2020. It’s also likely to benefit six EU countries the most.
USDEC says the EU could produce 15.4 million more metric tons by 2020, compared to 2013 data. Seventy-six percent of the extra milk is expected to come from just six of the 28 EU countries—Ireland, Denmark, France, Poland, Germany and the Netherlands.
“Germany is the largest milk producer in the EU,” notes USDEC’s Mark O’Keefe. “Increasingly large dairy cooperatives in that country will encourage growth in production volumes and the development of export markets.”
O’Keefe projects the annual increase in Germany’s milk production at 1.8%. Yet he forecasts even higher annual growth rates in Ireland, up 4.6%; the Netherlands, up 3.7%; and Denmark, up 3.0%.
Much of that new milk will be turned into exportable commodities, led by cheese, USDEC’s analysis says. It predicts the end of quota limits will lead to 660,000 more metric tons of EU cheese on the market in 2020 than in 2013.
EU dairy companies will invest billions of dollars in processing capacity, USDEC says. Investments totaling more than $2.7 billion (U.S.) have been made in EU dairy manufacturing and processing facilities. Half of this amount, $1.38 billion, is in Germany and the Netherlands.
While higher milk production is expected in the EU, USDEC says falling milk prices could moderate the immediate impact of quota removal.
What will this mean for U.S. exports?
Additional dairy commodities produced by the EU will mean increased competition with the United States and other dairy-exporting nations, USDEC says.
On the positive side, however, USDEC research concludes that although a bigger European export presence would create greater competitive challenges for U.S. suppliers, continued rising emerging market demand would absorb increased EU volumes and still leave ample opportunity for U.S. suppliers in nearly all sectors.
Even so, it’s incumbent on U.S. dairy suppliers to become even more customer-centric as the EU ups its game, says USDEC.
“If U.S. dairy exporters stress the fundamentals of doing the right things—improving the quality and range of products, improving customer service, getting closer to customers—the U.S. should continue to build share in the global marketplace despite increasing competition from EU countries,” the USDEC study stresses.
The EU introduced its milk quota system in 1984 to try to halt massive overproduction there. EU leaders hope the ending of milk quotas will allow European producers to compete with U.S. and Australian farmers targeting the burgeoning markets of countries like China and Korea.
By Catherine Merlo, Dairy Today Western & Online Editor
Source: Dairy Today, AgWeb.com