The ending of milk quotas on March 31 has exposed milk producers to the global phenomenon of market volatility.
Milk quotas were introduced in 1984 to address the structural oversupply on the EU market of the late 1970s and early 1980s that led to the infamous milk lakes and butter mountains.
The regime required a quota to be fixed for each individual producer, with a levy payable for those who exceeded their quota. Subsequent changes meant producers only had to pay the levy when the Member State also exceeded its national quota.
Since then there have been other important changes to the Common Agricultural Policy (CAP) which have led to a much more market-orientated sector. Successive reforms of the CAP have seen a reduction in guaranteed prices, with a range of policy tools aimed at stabilising farm revenues, notably the system of direct payments, primarily decoupled from production.
Copa-Cogeca Secretary-General Pekka Pesonen stressed: "In this new post-quota era, the right tools must be in place to help milk producers and dairy co-operatives cope with its effects. Although the EU's regulatory framework already includes market measures which could help protect producers against this volatility, like EU public intervention and private storage, they no longer represent a real "safety net" able to help milk producers in times of severe market imbalance. These tools need to be adapted and made more efficient to take account of rising production costs and market realities.
"Other tools for risk management are needed and could include encouraging the development of futures markets to take some volatility out of the market. Income/margins insurance could be investigated or better adapted in order to help farmers manage the multiple risks.
Mr Pesonen went on: "In a post-quota era, it is more important than ever for producers to join co-operatives to improve their position on the market, enabling them to get a better price for their milk. In addition, the EU milk package provisions which aim to strengthen contractual relations between farmers and processors are important. Also, the dairy supply chain needs to properly and fairly function and the market needs to better remunerate milk producers."
Market round-up
United Auctions sold 804 store heifers at Stirling on Wednesday to a top of 279.2p per kg and an average of 228.3p (+1p on the week), while 1139 store, beef-bred bullocks peaked at 292.9p and levelled at 241.2p (+11.3p). Sixty-eight store, B&W bullocks sold to 191.2p and averaged 163.3p (-2.7p).
In the rough ring 76 cows averaged 127.1p.
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