Milk Quotas: an Instrument of the EU Common Agricultural Policy for Market Stabilisation

The Common Agricultural Policy (CAP) of the European Union (EU) as a market-stabilising instrument was introduced in 1984 to prevent overproduction. The dairy industry plays an important role in agriculture in both the EU and Latvia, as this industry has provided 14% and 22%, respectively, of the total value of final agricultural products, measured at base prices, in 2010. The total milk quota is almost 146 million tons a year, and 70% of it is allocated to six EU Member States; Latvia's milk quota accounts for only 0.5% of the total EU quota. After the accession to the EU, the milk quota in Latvia was implemented by 85% on average and it was not fully implemented in any quota year, which points to unused opportunities for the industry. Milk producers have to be prepared for the abolishment of milk quotas in 2015 to be able to compete on a free market.