Farming Insights – The End of Milk Quotas

Milk quotas were introduced by the EU in 1984 in order to curb the increase in dairy production.  You may recall the “Butter Mountains” and the “Milk Lakes” of the 1970’s?  The introduction of quotas applied to both milk and other dairy products.

With the abolition of the EU milk quotas, taking effect on 1st April this year, it means for the first time in a generation dairy farmers can now produce as much as they wish; without the fear of financial penalties being applied. However, as good as this sounds, it is worth remembering that the amount some dairy farmers receive per litre of milk produced can be as low as the cost of production, or even lower.  The increasing availability of imported goods in shops could result in the price being paid to the farmer for production to fall even lower than before, as farmers start trading their produce on the open market.

Over 40% of dairy products consumed in the UK annually come from imported goods.

The number of dairy farms in the UK has dropped to almost a quarter compared to 30 years ago.  Having said that, the size of the average herd has risen from less than 70 head to more than double the number of milking cows in the same period.

Some dairy farmers are preparing to weather the storm on prices, believing that the market will resolve itself and these farms are increasing their herd numbers and levels of production. They may even be investing in new milking parlours and robotic milking machines. Others though, due to the uncertainty of the market, are considering leaving the industry altogether or changing their farming direction into beef cattle and other areas.

There are still areas of dairy farming that attract a premium price for their product – Jersey cows for example, where a premium product still demands recognition within consumers and retailers.  The demand and supply for these top-end products may be waning as consumers still seem to be looking to reduce their food expenditure.  A survey carried out prior to the financial crash showed the consumer in Italy spending up to 25% of take home income on food compared to only 10% in Scotland.  This is unlikely to have changed during the recession.

Any comments or questions?  Please contact Jean Arnott on 07881 093485 or email [email protected]