How has the changing market outlook overtaken the dairy quota system?
The quota regime was introduced in 1984 in order to limit the production effects of price-support policy in the context of depressed world prices. However, demand for dairy products has considerably increased in both the EU and the world in recent years, and is projected to grow even further in the future. Instead of high supply and depressed prices, the dairy sector is now facing strong internal and external demand and high prices. In this context, the quota acts as a constraint hampering the sector to benefit from favourable prospects. How do changes in dairy support affect the dairy quota system? The 2003 dairy reform decreased the level of EU dairy price support in a manner that reflected world market realities. A higher price cut and stricter limits in intervention were introduced in the product whose price was more out of line with world market prices (butter), while decoupled payments were introduced to lead the sector towards increased market-orientation and competitiveness. In
