Home > ‘Looming wave of European milk’ no threat to Australian dairy, says visiting Rabobank expert

‘Looming wave of European milk’ no threat to Australian dairy, says visiting Rabobank expert

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article image Kevin Bellamy, senior global dairy analyst for Rabobank,

A visiting expert, consulting for Rabobank  in Europe believes that the Australian dairy sector has little to fear from an estimated nine billion additional litres of milk expected to flood the global market once European dairy quotas are fully lifted in 2015.  

Kevin Bellamy, senior global dairy analyst for Rabobank, covering the European dairy market informed Australian dairy producers and exporters that the staged lifting of quotas, which have historically capped dairy production in European countries, is unlikely to have an adverse impact on the Australian industry.

Mr Bellamy is currently in Australia as part of Rabobank’s Visiting Experts program, which brings international agriculture industry specialists to the country to share their global expertise.  

According to Mr Bellamy, though some increase in European dairy production can be expected as a result of the quotas being lifted, continued strong medium-term growth in world demand for dairy products will absorb the additional supply, minimising any impact on the Australian dairy industry.  

Rabobank forecasts indicate that an additional nine billion litres of milk will be produced annually out of Europe when the quotas are fully lifted. Out of this, 3.6 billion litres will be absorbed by additional demand out of the EU while the remainder will likely find its way to destinations such as the Middle East and Russia, not into Australia’s main export markets of South East Asia and China.  

Mr Bellamy also said that the role of quotas in suppressing EU milk production had been somewhat over-stated since quotas are not currently a constraint in most EU regions, with many areas producing below the quota amounts due to factors such as limited availability of agricultural land, high cost of finance, environmental restrictions and retail price wars.  

The lifting of quotas is not expected to change the current industry situation. Mr Bellamy believes that dairying will move from the less efficient production regions in the south and east of Europe to the north and west, where production will increase if price incentives remain high enough.  

The countries with the most potential to increase their dairy supply include Denmark, France (western), the United Kingdom, Ireland, the Netherlands and Germany (northern).

Mr Bellamy adds that the cost of producing milk in Europe should reduce as milk supply moves from less favourable areas and the consolidation of farms achieves some economies of scale.  

Based in Rabobank’s global head office in Utrecht, the Netherlands, Kevin Bellamy has more than 25 years of experience in the global dairy sector.

Rabobank is a leading food and agribusiness banking services provider.

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