What will a quota-less EU mean to us?

They say there’s nothing new under the sun, but there might not be anyone in the U.S. dairy industry today who still remembers when the European Union had no production quotas. When the sun rises on April 1, we’re all going to see a new landscape.
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Even with 30 years of quota limits on expansion, the EU accounts for nearly a quarter of the world’s cows’ milk production and dairy trade. Milk collections increased 1.1% per year from 2009-13. Left to production decisions based on market signals, output is expected to increase by about 1.7% per year for the balance of the decade – a gain of 2.2 million tons (4.9 billion pounds) of milk annually – according to recent research conducted by the U.S. Dairy Export Council.
Not every country will expand, of course. Nearly all the growth is expected to come from just six countries: Germany, France, the Netherlands, Ireland, Denmark and Poland.
Though a good portion of this incremental milk will be consumed internally, more milk means more exportable dairy products. This further heightens the presence of an already-formidable competitor on the world market. Export volumes are expected to increase across all product categories, according to USDEC research, though each country will develop differently.

Milk powder to China, cheese to Japan

For instance, Ireland and Denmark’s gains are expected to come primarily in whole milk powder. The Netherlands is forecast to increase exports of cheese and butter. France is projected to boost overseas sales of skim milk powder, cheese and whey.
The research findings determined that European companies are targeting China for milk powder, infant formula and whey; the Middle East/North Africa region for butterfat, cheese and milk powder; and Japan for cheese. Most of these market sectors are important to U.S. suppliers.
In short, this extra supply creates more competitive pressure. Major EU dairy cooperatives and processors aren’t shy about investing in and for emerging markets, where the customers are. New entrants into the export arena also can be expected – suppliers who may compete on price in the absence of an established value proposition.
It also tweaks the overall supply-demand dynamic that has characterized world dairy trade for the last decade. To be clear: I’m not suggesting these new EU supplies will cover the substantial growth in global dairy demand in the years ahead.

Prepare for lower world prices

Today’s weak dairy markets are dampening EU farmers’ enthusiasm for expansion in the short term, effectively muting what could have been a tidal wave of milk immediately after the reins came off. And expanding dairy consumption in emerging markets is still expected to strain global supply over time, current conditions notwithstanding. But whereas the world has been relatively under-supplied in recent years, leading to stronger prices, the added quantities from the EU narrow the gap between supply and demand, relieving some of that commodity price pressure.
In other words, U.S. suppliers may need to prepare for an era of world prices that are lower than what they have seen in the last few years. Fortunately, the United States has a relatively low production-cost structure. But U.S. suppliers are going to have to continue to build upon its recent gains.
Though the sunset of EU quotas alters the competitive landscape, success is still in our own hands. If U.S. suppliers continue to develop core competencies such as meeting tight product specifications, providing pre- and post-sales technical and customer support, and improving supply chain management, they can expect to carry on their evolution as global players and defend and grow their export business.
 
Source: Dairy Foods
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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