Federal Department of Economic Affairs,
Education and Research EAER
Federal Office for Agriculture FOAG
Communication Unit
Fact Sheet on the Abolition of Milk Quotas
03.10.2013
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Background
Dairy farming plays a key role in Swiss agriculture. The production of milk has always been
the area of Swiss agricultural production that has the greatest comparative cost advantages.
The reform of Swiss agricultural policy under AP 2002 brought with it a decisive step towards
improving the competitivity of the Swiss dairy industry (abolition of price and market guarantees; quota trading regardless of area of land farmed).
The Swiss dairy industry had to face stiffer competition with the deregulation of the markets
(WTO obligations: abolition of export subsidies) and the opening up of the Swiss borders
(free trade in cheese from 2007 on as part of the 2nd round of bilateral agreements with the
EU).
The domestic milk market is saturated while worldwide the milk sector has an enormous potential for growth: the aim of raising milk production can be achieved first and foremost by increasing exports of dairy products (cheese).
The system of milk quotas led to increased production costs which basically compromised
competitivity from the point of view of price. The introduction of quota trading in 1999 constituted a major change in the system. It was subsequently seen that quota trading did indeed
result in the desired flexibility for adapting farm structures, although these possibilities for adaptation came at a price. Average milk production costs rose steeply as a consequence. For
example, in the first two years of quota trading, milk producers paid out a total of Fr. 233 million for “renting” and purchasing milk quotas, part of this amount draining away from the agricultural sector (message AP 07, pages 4795 ff.)
It was decided to abolish milk quotas as part of the revision of the Federal Agriculture Act
(AgA) in 2003. This was a logical move in the implementation of a market-orientated agriculture policy. Factors that affect production and sales, and thus distort competitivity, were to be
eliminated as far as possible (support for milk prices = subsidies).
Federal Office for Agriculture FOAG
Jürg Jordi
Mattenhofstrasse 5, 3003 Bern
Tel. +41 31 322 81 28, Fax +41 31 322 26 34
[email protected]
www.foag.admin.ch
023.12/2004/07380 \ COO.2101.101.5.1403154
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Legal provisions
Under the Act
Article 36a of the Federal Agriculture Act (AgA; SR 910.1) gave dairy farmers and organisations that wanted to take on in advance the responsibility of producing and processing their
milk themselves the possibility of voluntarily opting out of the milk quota system prematurely
on 1 May 2006, 2007 or 2008. State milk quotas were finally abolished on 1 May 2009.
Should there have been a significant change in the economic circumstances or the international situation, there was the possibility of postponing the abolition of milk quotas by up to
two years.
Article 36b of the AgA (approved in parliamentary debate) stipulated the periods from the first
possibility of opting out of the system until the year 2015. Producers who were members of a
branch organisation (BO), a producers’ organisation (PO) or an organisation of producers
and processors PPO) could opt out of the system. For all three types of organisation, a coorporate amalgamation of the producers was required. In addition, decisions concerning opting
out of the quota system had to be passed by at least a 2/3 majority.
This article also included restrictions as to the sale of milk by producers and stipulated in particular that the producer and the next purchaser in the chain had to be bound by a contract of
at least one year, as well as agreeing fixed prices. This provision remains valid until 2015.
Under the Ordinance
On request, the FOAG would recognise the organisations that opted out (statutes and rules).
The quota allocated to producers (including “rented” quotas) for the previous year would be
withdrawn and allocated as a basic quantity of the organisations that opted out.
Responsibility for managing milk quantities and sales would be transferred to the market
players who were directly involved. The state would restrict its own activities to monitoring
quantities.
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Accompanying measures
Possibility of opting out prematurely, staggered as from 1 May 2006.
Applications for increased quantities could be submitted to the FOAG. This concerned almost
exclusively export projects. Quantity increases allocated by the FOAG were valid for one
year.
Payments for milk processed to make cheese and feeding cattle without the use of silage
would be continued in order to support the “cheese train”. The legislators’ intention was in
fact to abolish this as of 1 May 2009 (measures in amber box)?. As part of the 2011 policy on
agriculture, the Swiss parliament decided to include both payments in the Agriculture Act.
The possibility of returning to the milk quota system was excluded in that the quota withdrawn was definitively added to the basic quantity of the organisations that opted out. It
would only be possible for a milk quota to be reallocated to a farmer if he or she had been
excluded from an organisation that had opted out.
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Political implementation
No abolition of quantity restrictions that could lead to a slump in prices during the 3-year
transition period.
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The aim of the procedure in the three years up to 2009 was to be able to abolish the milk
quota system without the milk market suffering negative consequences with marked fluctuations in prices and supplies. The high price of milk worldwide in 2008 led to a considerable
increase in milk production. The excess supplies in Switzerland, probably partly due to the
intervention of milk processing companies, led to a sharp drop in prices in 2009 when the
milk quotas system was finally abolished.
In order to achieve a degree of concentration of supplies, the organisations that opted out
had to produce a certain quantity of milk (PO 50 million kg; PPO 20 million kg).
It would be preferable not to have too many organisations that opted out because this had a
negative effect on the concentration of supplies. A total of 39 organisations that opted out
were recognised in the last year when opting out was an option.
Thanks to the DbMilch.ch electronic application – the so-called quantity broker – it was possible to keep a daily check on the total basic quantities (= supply rights) and the excess
quantities supplied by all organisations that opted out: early recognition of an uncontrolled increase in quantities.
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