The impact of the Berlin accord and European enlargement on dairy markets

Using a world agricultural model, we analyze the impact on dairy markets of the Berlin Accord on the European Union (EU) Common Agricultural Policy (C AP) Reforms. We also investigate the consequences of enlargement of the EU to include the Czech Republic, Hungary and Poland for the same markets. We produce a market outlook up to 2010 for these two scenarios. The Berlin Acc ord induces lower EU milk and dairy prices. A change in relative prices bet ween cheese and butter-skim milk powder (SMP) occurs after 2005 and induces an expansion of cheese production, consumption and exports at the expense of the butter-SMP sector. Accession of the three central and eastern Europe an countries (CEECs) leads to a permanent but moderate decrease in EU price s of milk and dairy products. For the three acceding CEECs, domestic prices increase dramatically. Their final consumption of milk decreases and dairy product consumption drops considerably. The derived demand of milk in diar y production increases, however, because of the higher prices for dairy pro ducts, benefiting dairy producers in these CEECs. Dairy exports of the thre e acceding countries to the EU-15 increase by one to three orders of magnit ude, despite building large inventories. The impact of accession on world m arkets is small.