The European Union plans to scrap its system of dairy production quotas and price supports within five years, opening its dairy industry to market forces.
The EU will also eliminate its mandatory land set aside policy next year, and plans to get rid of the “intervention” policy that has traditionally required the government to support prices by spending billions of dollars to buy and store surplus production in various sectors.
It is a “policy revolution,” a senior European agribusiness executive and markets analyst told a grain industry symposium Nov. 20.
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“There is a clear understanding throughout the industry that decoupling government support from production is the way to go,” said Klaus Schumacher, head of the economics department at the German trading company Toepfer International.
“The times of oversupply are over. We have to use our production capacity to its maximum. The days of a policy driven industry are over.”
It is a remarkable change in less than two decades as the EU has moved from an agricultural economy in which production routinely was subsidized and prices propped up to the outline of an agricultural economy in which export subsidies are eliminated, production supports gone and production quotas largely set aside.
“It really has been a revolution and in a relatively short time,” Schumacher said in an interview after his speech.
It helps explain the EU opposition to Canada’s defence of the Canadian Wheat Board export monopoly.
Schumacher said it will also make Europe less sympathetic to Canada’s defence of the protectionist and production-limiting supply management system.
Part of the European policy reform flows from a change in perception that the problem facing the farm community is food surpluses. Now, world food shortages are seen as the issue.
And part of it, said Schumacher, is recognition that the introduction of a dozen new EU members in recent years has added millions of new farmers in underdeveloped countries to the EU support system.
Applying traditional supports to them would have broken the bank.
World Trade Organization rules also have been a factor.
However, he said Europe continues to pursue policies that create import barriers and are hostile to agricultural biotechnology.
Despite claims that the moratorium on imports of genetically modified varieties has been lifted, barriers remain.
“There are delays in approvals and the approvals and testing process has been politicized,” Schumacher said.
“We have not solved the problem yet.”
He said there also is pressure from European farmers to force the certification of imported oilseed feedstock for biodiesel plants to prove it has been grown in a sustainable manner.
It would add cost and bureaucracy to the import of canola oil as a biodiesel feedstock, he added.
European farmers also are pressing the EU to try to designate biofuel as a sensitive product under World Trade Organization rules to protect it against competition from import of cheap or subsidized sugar-based ethanol from Brazil.
