Prospects for the Hungarian and European Union dairy sectors after the abolition of the milk quota

Our study determines the competitive positions of the dairy sectors of Hungary and the other European Union (EU) Member\udStates in the light of the abolition of the milk quota. We analyse the recent market positions of the EU Member States, the\udchanges in the relationships between global, EU and Hungarian milk procurement prices, and the medium-term forecasts for\udthe international markets for milk and milk products, including the results of our own model. In most Member States, milk production\udis below the quota level, although the most competitive countries are paying substantial penalties for excess production.\udThe medium-term projections and the price relationships underline the fact that, due to the liberalisation of the milk market\udand the rapid rise in global demand, the impacts of global market developments in the EU will be further enhanced. Owing to\udsustained international demand, the EU’s export opportunities will improve, reducing the pressure on the internal market, and\udthis will have a spill over effect on Hungarian milk prices. Although in terms of trade balance and quota utilisation Hungary is\udone of the least competitive Member States, the concentration, modernisation and selection processes that have taken place\udin the country’s dairy sector in recent years could, taking into account the favourable medium-term market forecasts, result in\uda slight increase in milk production levels. Thus, in contrast to the European Commission’s projection, according to our profitability\udbased model projection the Hungarian dairy herd and milk production are expected to increase slightly during the period\ud2016-2020