Author: Laura Nobel
Brussels, 2 dicember - The DG Agriculture and Rural development of the European Commission held a
two day conference on the first and second of December containing
topics about the new developments in the agriculture sector,
including a discussion on the prospects of the European dairy sector.
With the milk
quota abolished spring 2015, the EU supplies production growth and
wishes to gain market shares on the world market. Growth is estimated
on 15 megatonne in 10 years.
The questions raised
during the discussion were about export, value of the product and how
to deal with volatility. The first point raised was the increase of
milk production in all EU member states. Farmers are allowed to
produce as much milk as they see fit, which creates more opportunity
for export outside the European Union (EU). Currently, New Zealand is
on top in the export market for dairy products. The United States
follows closely behind. This is a great competitive world market the
EU wishes to join in on. With higher production, the EU won’t be
able to absorb the entire internal dairy market and therefore makes
export a commodity. New Zealand has its benefits of cheap production
costs, which means they are also able to sell their products easily
on the world market.
The prices and costs for production of agricultural products does not have a fixed price and has many factors at play for the increase or decrease of one another. This is also called volatility. The EU has a low volatility percentage of 9%, while in the US it remains on 15% and in New Zealand 21%. When expanding trade outside of the EU, it is inevitable that the volatility of the milk price will increase. The question is whether farmers and other stakeholders in the supply chain are able to cope with it.
