The cost of dairy products could plummet as a price war is set to hit Europe’s shelves following the removal of restrictions on milk production.
Milk, yoghurt and cheese prices are all set to be affected as the European Union scraps the 30-year-old milk production quota, allowing farmers to sell as much as they like across the world, the Telegraph reports.
Previously, eurocrats in Brussels tried to steady the price of agricultural products, which have a notoriously volatile price thanks to the inflexibility of production and supply. But instead of establishing reliable incomes for European farmers, it resulted in ‘butter mountains’ and ‘milk lakes’ of the 1980s when more was produced than people could drink.
But with the restrictions removed, an increase in supply would likely lead to a price war, experts have said before warning that “the next crisis is on its way”.
Romuald Schaber, president of the European Milk Board, cautioned it was “inevitable” a boom in production would cause “chronic price collapses” as farms in Germany, Netherlands and Ireland will all compete to supply businesses across the continent.
This view was backed up by business analysts who said milk “flooding in” would cause prices to “plummet” as major retailers, including supermarkets, use the freeing up of the market to make farmers slash prices.
Will Hayllar, of advisory group OC&C Strategy Consultants, said: “All consumers are really looking for is low prices, and as a result supermarkets use milk as a key price fighting product, reducing prices to drive footfall into their stores and demonstrate their value for money credentials.”
And a specialist from the National Farmers Union in Britain said that there were “some concerns” following the move.
Rob Harrison, the NFU’s dairy board chairman said, “Farmers and dairy processors here do have some concerns about how other EU countries will react to the ending of quotas. Some are rapidly increasing their output without an end market for these goods.” But a spokesman for the group said that prices would not drop much below 49p a pint.
He claimed there would be “no impact whatsoever” on milk prices for consumers, adding “people won’t see any changes on the supermarket shelves”.
Last year, dairy farmers hit by a series of price cuts took direct action against the threat on their livelihoods after the amount they received for their milk was slashed each month between June and October.
“Dairy farming is now entering the world already occupied by pig, poultrymeat and egg producers,” the farmer and MEP said.
“Recognition by the industry that it is part of a chain and must get more closely aligned to its customers is essential. Expansion of a dairy herd should be a result of a customers request and not an absolute right, which politicians are then asked to sort out when it goes wrong.”