Quota increase will benefit country

A LARGE expansion of the European Union milk quota would benefit the Irish dairy sector in advance of milk quota abolition, but it may not suit all dairy farmers, according to a new economic report on the sector published yesterday.

The report by the FAPRI-Ireland Partnership revealed that Ireland is well placed to increase its milk production and that an early end to the quota constraint would see it benefit at the expense of competitors in the EU.

Ireland has traditionally been a supporter of the milk quota system, which has managed the supply of milk and supported the price paid to farmers, since it was introduced at EU level in 1984.

However, the recent improvement in international dairy markets has caused many in the industry to question the continued usefulness of the quota system.

Teagasc economist Trevor Donnellan said if a large quota increase was agreed as part of the upcoming CAP Health Check, few other EU member states would have the potential to increase production significantly.

He said if milk quotas were increased considerably, it would allow Ireland to increase its milk production by 20% by 2015, when the milk quota is expected to be abolished.

Dr Thia Hennessy, Teagasc Rural Economy Research Centre, said an aggressive reform of milk quota policy would see the farm milk price decline, but an increase in quota of 20% would be sufficient to leave many farmers better off. By contrast she said that Irish farmers would be worse off if the EU chooses to increase milk quotas by only a small amount in advance of their abolition. A 3% increase in Irish milk quota would not offset the decline in milk price paid to Irish dairy farmers, leaving them worse off.

The results of the analysis show that significant expansion capacity exists at farm level and that the majority of this increase in production can be achieved using existing farm resources.

There are winners and losers under this quota expansion scenario. The extent to which individual farmers would benefit from a large milk quota expansion depends on the availability and cost of milk quota on the existing milk quota exchange scheme.