As a dwindling milk supply continues to bite into the profits of European dairy processors, the European Commision hinted this week that it may consider raising quotas on production to relieve the industry's woes.

Adverse weather conditions in key have create markets like Australia as well as growing demand from emerging economies in markets like China and Eastern Europe are putting the squeeze on the industry's margins.

Ongoing reforms of the EU's common agricultural policy (CAP) is another of the factors attributed to the tightened supply as farmers in the bloc are increasingly being moved away from uneconomic crops.

Though these reforms are set to be reviewed over the next few years, EU agriculture commissioner Mariann Fischer Boel has suggested she may open debate earlier on the issue if required, press reports have said.

"I'm not stubborn," she was quoted assaying by the Reuters news agency at an informal meeting of EU farm ministers.  "If there's a huge demand for discussing this before 2009 because of the high prices, then let's discuss what solution we can find."

By removing or loosening the restrictions on the amount of milk individual nations can produce, fears by processors over supply could

However, such a move would be a reversal of general European policy to remove protection in the market, to comply with ongoing talks between the EU and the World Trade Organization (WTO) over trade. 

In June, the policy of subsidising milk exports from the bloc's producers was scrapped for the first ever time since their inception, due to strong prices of milk on the commodities market.

By Neil Merrett
foodproductiondaily.com