If the EU abolishes milk quotas in 2000, whole regions would be forced out of dairying and milk prices for farmers could fall by a almost third, according to a study.
Milk production would, however, increase significantly with the elimination of quotas and EU price supports, according to the University of Missouri study commissioned by Teagasc and funded by the IFA and the Department of Agriculture.
Ireland's vulnerability to quota abolition is underlined by a finding that milk accounted for 34 per cent of the total value of agricultural production in 1996, the conference heard.
One of the study's authors, Mr Pat Westhoff, an economist, said milk production would increase by 5 per cent and milk prices fall by 20 per cent in the first year of abolition. In subsequent years, production would increase by 9 per cent and prices fall by 27 per cent.
Without quotas and price supports, low-cost producers could expand, leading to EU dairy products becoming more competitive on world markets. "The downside is high-cost producers and those with lower milk output would be forced out of milk, resulting in entire regions being forced to cease milk production," Mr Westhoff said.
Gradually reducing EU supports and expanding quotas would ultimately result in the same price impact, while providing compensation under a quota expansion scenario would inflate quota prices. Cutting the tie between production and compensation, however, would allow farmers to receive payments without producing milk, he said.
The fate of milk quotas and Agenda 2000 negotiations on EU agricultural reform meant the agri-food sector was facing its most crucial period since joining the European Community, the Teagasc chairman, Dr Tom O'Dwyer, said.
World Trade Organisation negotiations on further liberalisation of trade would follow, he added. "Both events will have enormous impact on the type of farming undertaken over coming decades and on the fabric of rural Ireland. It is vital we have the most detailed and objective information on which to base our negotiations."
