EU ditches milk quotas

As of Wednesday, dairy farmers in the EU will no longer have to watch their output from month to month, after the bloc lifts its longstanding quotas on milk production. The quotas were first introduced in 1984, part of efforts to stem oversupply in Europe.

Top producer Germany and key export country Ireland both welcomed the changes, but other dairy farmers on Tuesday staged a vigil outside the European Parliament in Brussels, holding a symbolic funeral march and lighting a "warning fire."

"We're really scared that production is going to explode and we won't be able to pay our costs anymore," Belgian farmer Yvan Deknudt told an Associated Press reporter at the demonstration in Brussels. "My son has already given up on the idea of producing milk. We have a great farm. It's a shame for it to go to waste."

Critics of the decision argue that it will lead to a drop in prices for milk, driving smaller farms out of business and favoring major producers. Protesters in Brussels set fire to flags of major food producing companies, arguing that the move would play into the hands of big business like Nestle, Danone or Campina.

"Chronic price collapses are inevitable, the next crisis is on its way," said Romauld Schaber, president of the European Milk Board - a federation of dairy famers with members in 13 countries.

Germany, Ireland eye production boost

However, the German Farmers' Association (DBV) responded positively, saying that the move would benefit Europe's largest milk producer by volume.

"Milk producers will be freed from the costs of the quota," the DBV said in a statement. "In the period of the quota, German farmers had to shoulder an estimated 15 billion euros ($16.14 billion at today's rate) in costs for levies, purchasing quotas and quota fees."

The organization acknowledged that "more fluctuations in milk prices" were possible, but said this was counteracted by "more freedom for commercial decision-making" within the industry.

Ireland, which already exports around four-fifths of the milk it produces, also welcomed the opportunity to ramp up production. The Irish Farmers' Association (IFA) estimated in a study that ditching quotas would create 9,500 additional jobs and generate upwards of 1.3 billion euros in additional annual export revenue.

"Facts would suggest that Irish dairy farmers are well placed to capitalize on the end of quotas, and in so doing help develop the dairy and agribusiness sector with major increases in direct and indirect employment," said IFA National Dairy Committee chairman Sean O'Leary.

With the global population still soaring, and a dairy market solidifying in countries like China and South Korea, the abolition of quotas is designed to permit the EU's agriculture sector to compete with other major producers like the US and Australia on emerging Asian milk markets.

For all the debate, the move is no great shock. The abolition of milk quotas was first announced in 2003, with limits gradually raised in recent years to acclimatize farmers to higher levels of production.

The outgoing quota model included individual and national production quotas. Individuals faced the threat of fines for overproduction, but only if the national quota was also exceeded.

msh/bk (AFP, AP, Reuters)