The evolution of the milk sector in Portugal: Implications from the Common Agricultural Policy

Vítor João Pereira Domingues Martinho

doi:10.1515/opag-2020-0061

Abstract

AbstractThe milk sector across the European Union (EU) has experienced several changes, due to the intrinsic characteristics of its respective structures of production. In fact, due to significant increases in production, this sector has suffered dramatic surplus supplies, which have had a relevant impact, namely on the market’s management. In this framework, the EU created the milk quota system in the 1980s to control the milk markets and prepare the sector for the subsequent reforms verified by the agricultural policy instruments. However, this system was a temporary measure from the Common Agricultural Policy (CAP) and was removed in 2015, having new and relevant impacts on the sector around Europe and, specifically, in Portugal. In this context, the main objective of this research was to assess the several impacts from the several reforms of the CAP instruments for the milk sector within the Portuguese context. For this, a literature survey from the Web of Science (Core Collection) was carried out searching for the topics “milk” and “Common Agricultural Policy.” From this search, 57 documents (only articles were considered, excluding, for example, proceedings papers) were obtained. To complement this literature review, several data from the Eurostat and from the Portuguese agricultural market information system were considered and explored through econometric approaches. The main insights obtained show that the milk sector is a controversial topic, which continues to need special policy attention, namely to avoid asymmetries across the several EU member-states.

Highlights

In consequence of the Common Agricultural Policy (CAP) instruments for the several sectors, including, for dairy activities, namely through guaranteed prices and export subsidies, milk production in the European Union (EU) increased significantly creating surplus supplies and causing difficulties in the dairy markets
In the CAP “Health check” framework, from 2009, the EU prepared for the end of the milk quota system in 2015, from a perspective of market protection reduction and affording the farmers and the respective institutions more responsibility towards managing the markets and taking advantage of the international market potential (Eurostat 2018)
The statistical tests show that there are no problems with unit root or cointegration, but autocorrelation was found

Summary

Introduction

In consequence of the CAP instruments for the several sectors, including, for dairy activities, namely through guaranteed prices and export subsidies, milk production in the European Union (EU) (before 1992 European Economic Community) increased significantly creating surplus supplies and causing difficulties in the dairy markets. To avoid any dramatic impact on the markets, the EU introduced the milk quota system in 1984, where limits in production were defined by punishing farmers who exceeded those maximum limits with a levy (Eurostat 2018). In the CAP “Health check” framework, from 2009, the EU prepared for the end of the milk quota system in 2015, from a perspective of market protection reduction and affording the farmers and the respective institutions more responsibility towards managing the markets and taking advantage of the international market potential (Eurostat 2018). The milk quota system is a controversial issue, namely with its impacts across the several farm domains, including efficiency (Areal et al 2012) and scale economy fields (Corbett 1992). The potential to take advantage of new opportunities arising from the abolishment of the quota system seems to be greater in larger rather than in smaller farms, calling again, for policy interventions (Groeneveld et al 2016)

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Conclusion