THE top 14 milk producing countries in Europe will increase their production by between 6.8 and 23.2 billion litres a year by 2020 following this month's ending of the milk quota regime, according to major research by Promar International.

"Although milk quotas have been a feature of the EU dairy landscape since 1984, their impact on the industry in the last five to10 years has been limited in many countries," said Andrew McLay, Promar senior consultant and report author.

"However, many countries are taking the cessation of the scheme as a signal to increase production, with the biggest increases likely to be seen in France, Germany, Ireland, Poland, the UK and the Netherlands."

Mr McLay said the report indicates growth in output of five to17 per cent over the European Union’s (28 countries) 2013 production, of around 140bn litres. With low level demand growth for many dairy products in Europe, it is inevitable that almost all additional milk produced will have to be exported.

This means the growth of EU milk production will be heavily influenced by global dairy prices and driven mainly by external factors including weather, supply and demand shocks and input prices.

“Although the Russian import ban and slow down in Chinese demand may temper production growth in 2015, and even 2016, a return to more favourable external factors in subsequent years will see a return to strong milk growth in Europe.”

The report forecasts continued change in the dairy farm sector. Over the last seven years, European dairy farm numbers across most countries have declined and Mr McLay predicts farm numbers will continue to fall, but in parallel with a continuing trend towards increasing herd size.

Countries that have been most constrained by EU quotas should show the greatest increases, but European herds will still be relatively small compared to those in export competitor countries, such as the Western US, New Zealand and Australia. The report considers how each of the major EU milk producing countries will respond to quota removal.

“Although we also see the removal of EU quotas as causing change and pain for many producers, overall, the changes will be positive and lead to a more productive and competitive European dairy industry," he said.

"A freer milk market paves the way for the EU to lead the world in developing a truly sustainable dairy industry with significant improvements in animal welfare, environmental impact and profitability for the farmer."

The report, “The European Dairy Sector Towards 2020” assesses the key implications of the removal of EU quotas for the European dairy sector overall and specifically for dairy farmers, input supply companies, dairy processors and industry stakeholders.

It profiles in detail the nine leading dairy producing countries.

Ends