EU farmers should be able to produce more subsidised milk next year to help temper spiralling dairy prices and cushion the blow of the quota scheme's planned abolition in 2015, the European Commission said today.
Citing growing demand for high-value products like cheese within the European Union and on world markets, the Commission will recommend that milk quotas be increased by two percent from April 1st, 2008. EU farm ministers will now discuss the idea.
"We have seen a sharp rise in milk prices over the past year and a growing call for higher quotas," EU Agriculture Commissioner Mariann Fischer Boel said in a statement, adding that demand for dairy products would continue to rise.
"We need to equip our farmers to meet that increased demand," she said. As part of the EU's mammoth farm reform in 2003, ministers agreed that Europe's system of subsidised production quotas would be scrapped on March 31st, 2015.
IFA dairy committee chairman Richard Kennedy said the 2 per cent quota increase announced by the EU Commission falls short of the original 3 per cent proposal made by IFA as early as last June, but it was a step in the right direction.
Mr Kennedy said: "this quota increase must benefit all milk producers in Ireland. While few member states will fill the increased volume, the capacity does exist here to meet the increase".
Commission experts have forecast that the EU will need an extra 5.5 million tonnes of milk up to 2014 to satisfy growing internal demand for dairy products, particularly for cheese.
If ministers agree to the two-percent quota rise from next April, it should create an additional 2.84 million tonnes, they say. Fischer Boel has also suggested gradual increases in quotas before the scheme's expiry but no figures have yet been floated.
Germany, the EU's largest milk producer, will get an increased quota of 28.85 million tonnes, then France with 25.09 million. In terms of output, they are followed by Britain, the Netherlands and Italy.
Prices of agriculture products have surged across the board this year, hitting everything from cereals to milk and meat. Some economists have labelled the rise "agflation", attributing it to tight stocks and surging demand from developing countries.
For months, several European Union governments have suggested higher allowances from 2008/09 ahead of the scheduled abolition of production quotas, as a response to soaring prices - particularly for butter and skimmed milk powder.
EU dairy prices have rocketed, partly due to a much firmer world market but also because of very tight EU-27 conditions.
Milk quotas have a long history of assuming an importance that diplomats say is disproportionate to their significance, even souring the harmony of EU summits and other major meetings.