Milk prices will remain strong next year but could fall off in 2009, according to research from Rabobank.
The global milk shortage would keep world dairy prices around current levels claimed global dairy analyst Mark Voorbergen.
"EU dairy farmers can look forward to the same strongly improved returns next year as as they've had in 2007," he said. "After that we may see some easing in milk prices again but ongoing tight global supply will prevent prices falling back to 2006 levels."
Farmgate milk prices have risen 30% year-on-year, doubling the price of commodities such as SMP and butter. But the dismantling of EU market support measures was making prices more volatile, Rabobank said. Unless the EU's milk quota system were relaxed, EU milk output would not grow and prices would remain high.
EU commissioner Mariann Fischer Boel will shortly propose new CAP reform measures including raising quotas to stimulate production in some countries.