EU-28 Voluntary Milk Reduction Scheme Update
The European Commission announced a €150 million voluntary milk reduction scheme in Jul ’16 which was implemented to incentivize a reduction in EU-28 milk production over the final quarter of 2016. The measure will come into force on October 1st and continue until the end of the year. Aid was set at a rate of €14/100 kg of reduction in production from the previous year, the equivalent of approximately $7.15/cwt, or 55% of current EU-28 milk prices. Milk deliveries during the final quarter of the calendar year will be compared to the same three months of 2015 to determine volumes eligible for payments.
The temporary measure was nearly fully subscribed to during the Sep ’16 open application window, with 1.06 million tons of the 1.07 million available tons, or 98.9% of total tonnage, being claimed. A second round of volumes will be offered for the remaining 1.1% of available aid for the period of Nov ’16 – Jan ’17. The second round of aid will be only open to those who did not apply for participation within the first round. Assuming all available tons are subscribed to and reductions are made, the milk reduction scheme will result in a 2.9% year-over-year (YOY) reduction in total EU-28 milk deliveries over the final quarter of 2016.
Over 52,000 dairy producers throughout 27 member states enrolled in the milk reduction scheme. Germany accounted for over a quarter of all aid applied for, followed by France, the U.K., the Netherlands, Ireland and Poland.
On a percentage of milk production basis, Ireland led all member states in applications, followed by Bulgaria, Hungary and Portugal. Ireland applications would result in a 6.8% reduction in production throughout the final quarter of 2016, however the decline would account for less than a fourth of the YOY increase in milk production experienced during the final quarter of 2015.
EU-28 milk production has declined by a total of 1.4% on a YOY basis over the most recent two months of available data when compared to record high production levels experienced throughout the first year of post-quota production. Ireland and Bulgaria have increased production volumes over the two month period, however the following 12 largest member states applying for aid on a percentage of milk production basis have already shown a decline in milk production over the period. Of the top ten member states applying for aid, Portugal, Lithuania, Latvia, Belgium and the United Kingdom have already experienced recent declines in milk production greater than those required for the aid payments. Assuming current two month average growth rates continue going forward, the milk reduction scheme will result in a 1.5% YOY reduction in total EU-28 milk deliveries in addition to currently experienced YOY declines.
The temporary measure was nearly fully subscribed to during the Sep ’16 open application window, with 1.06 million tons of the 1.07 million available tons, or 98.9% of total tonnage, being claimed. A second round of volumes will be offered for the remaining 1.1% of available aid for the period of Nov ’16 – Jan ’17. The second round of aid will be only open to those who did not apply for participation within the first round. Assuming all available tons are subscribed to and reductions are made, the milk reduction scheme will result in a 2.9% year-over-year (YOY) reduction in total EU-28 milk deliveries over the final quarter of 2016.
Over 52,000 dairy producers throughout 27 member states enrolled in the milk reduction scheme. Germany accounted for over a quarter of all aid applied for, followed by France, the U.K., the Netherlands, Ireland and Poland.
On a percentage of milk production basis, Ireland led all member states in applications, followed by Bulgaria, Hungary and Portugal. Ireland applications would result in a 6.8% reduction in production throughout the final quarter of 2016, however the decline would account for less than a fourth of the YOY increase in milk production experienced during the final quarter of 2015.
EU-28 milk production has declined by a total of 1.4% on a YOY basis over the most recent two months of available data when compared to record high production levels experienced throughout the first year of post-quota production. Ireland and Bulgaria have increased production volumes over the two month period, however the following 12 largest member states applying for aid on a percentage of milk production basis have already shown a decline in milk production over the period. Of the top ten member states applying for aid, Portugal, Lithuania, Latvia, Belgium and the United Kingdom have already experienced recent declines in milk production greater than those required for the aid payments. Assuming current two month average growth rates continue going forward, the milk reduction scheme will result in a 1.5% YOY reduction in total EU-28 milk deliveries in addition to currently experienced YOY declines.