Further up the food chain - European Union milk quotas, potato production - Brief Article - Statistical Data Included

Eurofood, Oct 11, 2001

Milk quota call falls on stony ground

The Court of Auditors' call for milk quotas to be abandoned and production brought "into line with unsubsidised internal consumption and potential unsubsidised imports," has fallen on stony ground. The European Commission's reply states that adapting production to internal consumption "was neither a political nor an economic objective," and that the report "does not put forward sufficient grounds for abandoning the regime."

The Court makes entirely reasonable criticisms of the regime, highlighting the double cost represented by taxpayer funding and the high prices paid by consumers. It also raises one of the CAP's taboo issues: advocating the cross-border transfer of individual quotas. Ware potato production (see also below) gives an indication of what might have happened without the 1984 imposition of milk quotas.

The ware potato sector is entirely outside the CAP and subject solely to market forces. The lack of any policy constraint has resulted in a huge concentration of production over the past 20 years in five centrally-located producing countries where yields per hectare are highest.

By resisting the quota abolition call, however, the EU is only reflecting the political reality. A majority of EU countries, led by France, back the status quo because the budgetary cost of compensatory payments rule out significant support price reductions and they also want to keep tabs on production in acceding Eastern European States.

EU shortage of potatoes

The EU will be short of potatoes over the coming maincrop season, which, thanks to sophisticated storage systems, now extends from October through to the following June or July.

Following two seasons of glut and very poor prices in Continental countries, growers cut back their plantings and extended wet weather in the spring meant that at least 50% of the crop was planted in May. Provisional yield estimates are confirming that the late planting has resulted in a significant reduction in yield.

The UK and Ireland were the exceptions last year. A combined total of around 25 000 hectares of potatoes had to be over-wintered and most of these potatoes were lost, resulting in market shortages, high prices and rocketing imports. Both plantings and yields have recovered this year, although the harvests are still likely to be below the long-term average.

The combination of the two means that the best the EU could hope for is a harvest of 45 million tonnes this year compared with close to 49mt in both 1999 and 2000. As a result, the average of the main price quotations in Germany, the Netherlands, the UK, France and Belgium, which together account for around 86% of total EU production, should return to around 150/tonne over an October-May season compared with only 60/t [European Dollar] in 1999/ 00 and 86/t [European Dollar] in 2000/01.

But this assumes a successful completion of the harvest. The relentless wet weather means that only Germany of the northern EU countries is approaching a 50% completion of the harvest, and even here there is concern that not all crops might be lifted until winter sets in. The situation is even more serious on the low-lying heavy clay soils of the Netherlands, where the best quality Dutch potatoes are grown.

If some crops have to be over-wintered and there are problems from putting wet potatoes into store, then the shortage could become acute and the EU-5 average price could exceed 200/t [European Dollar].