Anticipation and angst as Europe ends milk quotas

European dairy farmers are facing the end of three decades of milk quotas on Wednesday with a mixture of anticipation and angst as it will allow them to serve growing demand in emerging markets, but could also cause a crash in prices.
Starting April 1, farmers will be allowed churn out as much milk as they want.
While the quotas had been increased in recent years -- growing 1 percent a year between 2009 and 2013 -- the complete liberalisation of the market is seen as a game changer for producers.
In northern Europe, farmers have hailed the move as a chance to cash in on the growing global thirst for milk, particularly in China.
Ireland has already announced plans to boost its milk output by 50 percent by 2020. The Netherlands and Germany, Europe's largest producer, are gearing up for increases of 20 percent.
"We're happy the quotas are being scrapped. We're prepared," said Karl-Heinz Engel, president of the German dairy industry association, MIV, insisting that the sector was "export-orientated and competitive".
But many farmers in France, Europe's second-biggest milk producer, have adopted a wait-and-see approach, preferring to wait for the demand to pick up before ploughing money into boosting their output.
The quotas were introduced in the mid-1980s to staunch the infamous milk lakes and butter mountains that had built up on the back of generous EU production subsidies.
- 'Incredible opportunity' -
"The quotas were introduced because there was too much milk on the market compared with demand but the situation has changed greatly since then," Rene van Buitenen, a spokesman for the Dutch dairy association NZO, told AFP.
The upshot of the quotas had been to give "the United States and New Zealand an advantage" in the global market, he complained, calling the lifting of the quotas an "incredible opportunity".
That opportunity is China, where since a tainted milk powder scandal in 2008 left six dead and more than 300,000 sick, Chinese consumers have preferred imports, particularly for baby formula.
Chinese companies have sought to cash in on the European reputation for quality, teaming up with dairies in France and Denmark to invest hundreds of millions of euros into milk drying towers to produce powdered milk and baby formula for export.
And prices have been rising internationally recently, with the price of powdered milk picking up by 500 euros over the past month to 2,350 euros per tonne.
But a surge in production could easily push down prices, and in Germany many farmers already receive no more than a paltry 0.28 euros per litre.
"Twenty-eight cents is the equivalent of being on life-support. I'm for a price of, say, thirty-five cents," said Richard Reiss, who runs the 1,200-cow Heideland farm a hundred kilometres (61 miles) south of Berlin.
Heideland has invested 8 million euros over the past few years to modernise and expand its facilities, including a milking carrousel and a machine to massage the cows to ensure peak performance.
Germany has over the years developed lots of large farms, where efficiency can help them survive thin margins, and can serve processor orientated towards exports.
- Quality over quantity -
But in France, many dairy farmers are opting for the opposite strategy: generating higher margins on value-added products from consumers willing to pay more for quality and traditional methods.
In the land of a thousand cheeses, there are strict rules governing location and production methods to ensure the quality of the delicacies under the Protected Designation of Origin (AOC) label.
"We don't produce milk here, we produce comte," said Richard Moyotte, as he prepared to milk by hand his 24 ochre and white Montbeliarde cows in the pastures above the village of Lozay.
The breed is native to the eastern region along the border with Switzerland, and each cow must have a hectare (2.5 acres) of grass to make comte.
The strong, slightly sweet hard cheese made from unpasturised cow's milk is one France's most popular AOC label cheeses.
Farmers in the region who meet the strict comte criteria can fetch 0.50 euros per litre, compared to the national average of around 0.35 to 0.38 euros.
"You could say our ancestors had a good nose for business," said Damien Pobelle, a farmer and head of the Groupement, one of the 165 cooperatives in the Franche-Compte region that makes comte.
"We aren't interested in increasing volume, but increasing value," said Patrick Roulleau, head of the Sevre cooperative, one of the dairies producing Echire AOP butter in the Poitou-Charentes region in western France.
Source: AFP