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Without milk quotas, what will happen to the price of a pint of milk?

It’s largely positive news for farmers.

Image: milk via Shutterstock

AFTER YEARS OF living in fear of milk lakes and butter mountains, milk quotas imposed by the European Union were abolished at midnight.

But ‘only time will tell’ what effect it will have on your pint of milk in the shops.

Quotas

Milk quotas were imposed in 1984 to prevent overproduction.

This has meant that Irish farmers have been unable to take advantage of the growing world market for milk in areas such as south-east Asia and Africa.

Ireland has produced around 5.4 billion litres of milk per year for almost three decades now. New Zealand, in the same period, increased production from 7.6 billion to 19 billion.

Many dairy farmers are expected to expand their businesses and ramp up production to take advantage of these new markets – as much as 50% over the next four years.

Minister for Agriculture Simon Coveney has called it “a great day for Ireland”.

“The direct and indirect economic benefits will be felt all over the country. Quota abolition means the potential for increased employment, with Teagasc estimating that it could create 15,000 new jobs over the next 5 years”

Increasing dairy production will dramatically increase the value of exports, and is already resulting in increased employment creation and investment in rural areas.

“Increased output will be exported, and demand will be driven by global demographics,” the Minister added.

Coveney noted that prices for farmers have been volatile over the past few years. It is predicted this will be unchanged, or exasperated, by the abolishment of quotas.

Cows on Butser Hill Source: lostajy via Flickr/Creative Commons

What about consumers?

Catherine Lascurettes of the Irish Farmers Association’s (IFA) Dairy Committee noted that unlike globally, demand in Ireland for liquid milk has remain largely unchanged, if not slightly down, over recent decades.

“There isn’t going to be a lot of opportunity for dairy farmers in Ireland to produce more milk for the Irish consumer,” she told TheJournal.ie, meaning the Irish market won’t be flooded with milk.

But she noted that some farmers may end up increasing their export production, while reducing the amount for home markets.

A majority of the produce exported will be skimmed milk and cheese.

Lascurettes said that farmers don’t set the price of milk, and stressed that it is hard to see how it will play out for consumers.

She said that price volatility for farmers doesn’t necessarily mean the consumer prices for milk and butter will change, adding that if prices vary dramatically for farmers, the costs involved can be ‘rejiggled’ between the main players involved.

Agriland notes that a price rise in the first half of 2014 for farmers resulted in changes in the price of milk and cheese of +8.4% in Germany, but just +0.8% France.

Read: The Irish Dairy Board is getting fierce fancy >

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Nicky Ryan

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