Milk quotas may soon be traded between EU states, a move that could leave processors in the UK desperately short of raw material.
Farmers across Europe are gearing up to test the mettle of Brussels by attempting to buy quota cross-border.
This is currently forbidden by EU rules, but some producers on the Continent are prepared to force the Commission to take legal action in a bid to get the law ruled unjust.
The ban on trading quota across borders results in low prices for quota in some countries, such as the UK, and high prices elsewhere.
In the Netherlands, for example, quota prices are as
high as £1.35/litre. Italian farmers, meanwhile, have to pay around 54p/litre. In the UK, quota trades for just 6.3p/litre.
Farmers in Holland and Italy, as well as those in Ireland, have a voracious appetite for quota. One Italian farmer, at last week’s European Dairy Farmers Congress in Metz, France, told The Grocer that he represented producers who were prepared to purchase 120 million litres from UK farmers in a first wave of quota buyout.
Supporters of cross-border trading say it would increase the asset value of UK quota, allowing hard-up dairy farmers to sell up some of their quota to fund much-needed investment in their businesses.
But it would also bolster milk prices here, as dairies would not want to see quota migrate abroad. Their only recourse would be to ensure it was more profitable for farmers to produce milk from their quota, rather than to trade it.
However, UK quota broker Ian Potter said the chances of cross-border trading being permitted were remote. “I can’t see it being allowed in the short term.”
Chris Walkland