The abolition of Milk Quota

As I sit writing this article on April Fools Day, I cannot let the day pass without making mention of the abolition of Milk Quota.

It was introduced across the then EEC on April 2, 1984, some 31 years ago almost to the day as a mechanism to control milk production because of the “milk lakes” and “butter mountains” which were growing in intervention stores.

How times have changed: back in 1984, under the Common Agricultural Policy, famers received support not through direct payments but via the support of commodity markets. When a commodity fell in price, it was bought into intervention stores thereby supporting the market price, which not surprisingly encouraged overproduction.

Since 1984 intervention support has all but disappeared and farmers now receive support through direct area-related payments not linked to production and they then have to sell their produce at whatever price they can get.

Accordingly farmers are now exposed to world commodity prices which tend to be volatile and dairy farmers are currently facing very low milk prices due to an oversupply on global markets.

But back in1984 when quotas were introduced, it was not the price that was the problem, but the fact that without warning farmers were forced to cut their production to stay within the level of Milk Quota they were allocated.

Failure to do so would result in fines at the end of the year. As a result milk quota became very valuable because farmers could not expand without securing extra milk quota.

Milk Quota rather than milk price was the limiting factor.

I cut my teeth as a young surveyor back in the 1980s dealing in milk quota and I can remember trading quota at more than 80p a litre for sale and 22p/litre for lease.

These were crippling prices for some but in more recent years the UK has remained under quota and as a result the value of Milk Quota plummeted to a fraction of a penny and now has finally been scrapped altogether.

However, other European countries such as Germany, the Netherlands and Ireland have all been going over quota on a regular basis and it is assumed that without the constraint of Milk Quota, production there will rise.

It is estimated that across the EU the additional milk production following the lifting of quota is likely to be similar to the total production of Ireland and there are fears this will hinder the recovery of milk prices, particularly here in Europe.

So, although the passing of milk quota will not be mourned by many it does represent the end of an era of EU agricultural policy which encouraged production without heed to whether there was a market for the produce.

That era has now well and truly passed and dairy farmers currently find themselves all too exposed to the reality of “the market”.  

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk