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Economic Impact of the Abolition of the Milk Quota Regime – Regional Analysis of the Milk Production in the EU –

The major domestic support measure besides the milk quota system is public intervention (buying into storage) for butter and SMP. By administering the market price for butter and SMP through intervention purchases, the EU aims to put a floor on the producer milk price. If market demand is satisfied, minor surpluses or deficits will, in principle, show up through changes in the level of intervention stocks, but the market prices will not fall much below the respective intervention levels. . | EUROPEAN COMMISSION JOINT RESEARCH CENTRE Institute for Prospective Technological Studies Agriculture and Life Science in the Economy Seville 20 February 2009 Economic Impact of the Abolition of the Milk Quota Regime - Regional Analysis of the Milk Production in the EU - Prepared by IPTS with the collaboration of EuroCARE GmbH Bonn Executive Summary Background The dairy sector makes a substantial contribution to the agricultural turnover in many Member States MS of the European Union EU as well as in the EU as a whole. Nevertheless within the EU-27 the size and agricultural importance of the dairy sector varies considerably between MS and across regions basically reflecting climatic and other agricultural factors. The EU dairy market is regulated by the Common Market Organisation CMO for milk and milk products of which the milk quota regime is one of the most noticeable elements. The EU milk quota system was originally introduced in 1984 in order to limit public expenditure on the sector to control milk production and to stabilize milk prices and the agricultural income of milk producers. Since the milk quota regime was introduced milk quota has become a scarce production factor on the one hand limiting milk production and on the other hand stabilising milk producer prices and maintaining dairy activities in less competitive regions. However in the course of time European dairy policy has been continuously changing and has increasingly encouraged producers to be more market-oriented. Policy developments including reductions of intervention prices and specific quota increases of various amounts to MS together with most recent market developments have provoked that quota is no more binding in some MS and regions of the EU. With the Luxembourg Agreement on the Mid-Term-Review MTR on 26 June 2003 the spotlight shifted again on the EU s milk quota regime because the MTR stipulated that the milk quota system will come to an end in 2015. Within the Health Check of the .