Milk drought follows quota storm

MILK supplies are drying up because of the drought, only months after dairy farmers were pouring thousands of litres away to comply with European Union production quotas, the Independent on Sunday has learnt.

Government figures show that, in the year to March 1995, British farmers paid pounds 43.3m in fines for exceeding the wholesale milk quota by 152 million litres. The figures do not include the amount dairy farmers tipped down the drain to avoid paying the hefty penalties.

According to the Intervention Board, a government body responsible for monitoring agricultural goods, the levy is designed to deter dairy farmers from producing excess milk that could not be sold without the aid of a subsidy. The annual cost of EU market support in the dairy sector currently runs to pounds 3.4bn.

Now, though, there is a milk shortage. Cows are producing far less than anticipated this summer because there is not enough good grass and the quality of milk has been affected as the proportion of protein and butter- fat content has fallen.

Milk Marque, Britain's biggest milk wholesaler, which supplies about 70 per cent of milk in England and Wales, last week warned that milk production was 10 per cent lower than forecast for August. Supplies to its 300 dairy customers are being cut by around 3 per cent below contracted volumes until further notice.

However, dairy companies do not expect the shortage to lead to higher prices for consumers in shops and supermarkets because their own supply prices are fixed. Last November, Milk Marque pushed through an 11 per cent rise in milk prices - a move which accelerated the decline in doorstep sales and led to widespread job losses as leading milk deliverers such as Unigate and Northern Foods closed dairies.

Nobody knows how much milk was thrown away when dairy farmers ran up against their quotas as the levy year drew to a close. Faced with fines of 30.5p a litre - 15 per cent above the target price set by Milk Marque - if they sold their milk, some farmers improvised.

"We ended up tipping it out on the muck spreader," said Andrew Wood, who runs a small dairy farm near Poynton, Cheshire. "We stopped selling milk in February and March because of the quota system. It was hardly worth getting up in the morning to make the stuff."

The Intervention Board puts the dramatic fluctuation in milk supply down to seasonal variations, but others disagree. "It's a crazy quota system," says a source at Farmer's Weekly, a leading trade journal. "You cannot simply switch cows on and off."