Many of the visitors to my page from North America have
been enquiring as to how our milk quota system operates. This page is an
attempt to answer those questions.
Milk quotas were introduced on the 1st of April 1984. they were introduced
to try and stop over-production in Europe. They were based on production of the
previous year minus 10%. So in other words a dairy farmer who produced 300,000
litres of milk quota from April '83 to March '84 would be granted a milk quota
of 270,000 litres. There have since been further reductions in quota of around
9%.
Attached to milk quota is a butterfat base. The reason behind this is that the higher the percentage butterfat the more dairy products can be made out of that milk. 300,000 litres of quota at 4.4% butterfat is obviously going to contribute more to the butter mountain than 300,000 litres at 3.8% butterfat (To the best of my knowledge the butter mountains have now been eradicated). This butterfat base is based on the producers butterfat levels during '83-'84.
For every 0.01% above/below base the farmers production rises/falls by 0.18%. Let us say for example that a farmer who has a butterfat base of 4.00% produces 500,000 litres of milk at 4.05% butter fat. Because he has produced milk at 0.05% above his butterfat base 0.9% (0.18 x 5) is added to his quota. Thus giving him a total production of 504,500.
Each year depending on how much the country as a whole is over quota, a superlevy rate is set. This can be anywhere from 0.5% to 6% however the average is generally around 2%. This basically means that the producer is given 2% grace on his quota. So a person with a 500,000 litre milk quota now has in effect a milk quota of 510,000. Anything produced above this will incur a superlevy. This is a fine that is set at 25% above the price of milk. So let us say that a farmer has been paid 25 pence per litre for milk over the past year he will then be fined 31.25 pence for every litre produced over quota (after butterfat adjustments have been made). Thus giving him a net loss of 6.25 pence per litre (not including production costs).
He can either lease or buy quota. Leasing can be done anytime up until the 31st December in a quota year (April - March). . This quota transfers back to the original owner at the end of the year.
Purchasing can be done until 7 days after the end of the quota year. The transfer is permanent.
I hope this page answers the questions raised. If you have any further questions or if you have spotted any errors (I am not an expert) then do feel free to e-mail me.
Page created 11th February 1996