‘Looming wave of European milk’ no threat to Australian dairy exports – visiting expert

Posted by AFN Staff Writers on 5th March 2012

The Australian dairy sector has little to fear from an estimated nine billion additional litres of milk expected to “flood” the global market once European dairy quotas are fully lifted in 2015, according to a visiting expert in European dairy.

Kevin Bellamy, senior global dairy analyst for Rabobank, covering Europe, has told Australian dairy producers and exporters that the staged lifting of quotas – which have historically capped dairy production in European countries – that is due to be completed in 2015 is unlikely to have an adverse impact on the Australian industry.

“While there will be some increase in European dairy production as a result of the quotas being lifted, it is unlikely to be the tidal wave that some people are fearing, and continued strong medium-term growth in world demand for dairy is set to absorb the additional supply,” Mr Bellamy said.

European production lift

Rabobank forecasts indicate that when quotas are fully lifted, an additional nine billion litres of milk will be produced out of Europe between 2015 and 2020.

“Of this additional production, it is estimated that 3.6 billion litres will be absorbed by additional demand out of the EU,” he said. “While the remainder will likely find its way on to export markets, it will be to destinations such as the Middle East and Russia, not into Australia’s main export markets of South East Asia and China.”

Mr Bellamy – who is in Australia as part of Rabobank’s ‘Visiting Experts’ program, which brings international agricultural industry specialists to the country to share their global expertise – said the role of quotas in suppressing EU milk production had been somewhat over-stated.

“Quotas are not currently a constraint in most EU regions, with many areas producing below the quota amounts anyway, due to other limiting factors,” he said.

These included limited availability of agricultural land, high cost of finance, environmental restrictions and retail price wars (shrinking farmer margins) which have lowered the price of milk.

“There’s no reason this will change as a result of quotas being lifted,” Mr Bellamy said.

The countries with the most potential to increase their dairy supply include Denmark, France (western), the United Kingdom, Ireland, the Netherlands and Germany (northern).