The European Dairy Market in Transition - New Challenges for Dairy Farmers and Dairy Cooperatives in Baden-Wurttemberg

The current EU milk quota system will most likely be terminated in 2015. This requires adaptation measures by the milk producers as well as the milk processors. These adaptations will presumably lead to structural changes at both the regional and at the enterprise level, especially in the mainly small structured and heterogeneous federal state of Baden-Wurttemberg. This contribution outlines the development of the milk quota system and its changes and adjustments since 1984. It describes the structures of dairy production and processing for Baden-Wurttemberg and derives the requirements for their structural adjustment. In addition, the attitudes of the actors of the dairy industry towards market changes and their consequences are presented. Based on these findings, the author suggests that structural change of the dairy farms is needed and that the management and entrepreneurial skills of farmers will become more important in a liberalised market. Dairies are advised to make use of existing structural reserves and to strengthen confidence in the internal relationship with their members. Moreover, they should found strategic alliances with competitors in order to cope with increasingly global markets. All actors claim that political support is vital for a sound structural adjustment to the new conditions; a difficult albeit extremely important task for policy-makers. It is recommended to clearly focus on the competitiveness of the Baden-Wurttemberg's milk producers by supporting investments. In addition, dairy farmers of the most disadvantaged regions should receive compensatory allowances for grassland and pasture and additional options within the scope of agro-environmental measures should be used to mitigate the negative consequences of adaptation.