17 September 2009

4 minute read

The package of measures, presented today to the European Parliament, follows up the Commission's report from July and looks at both short-term measures and actions to secure the longer-term future of the dairy sector.

The Commission has already started the process of allowing Member States to pay temporarily aid of up to €15,000 to farmers. It also proposes that the dairy sector should be covered by an emergency clause which already exists for other farm sectors, to allow a quicker response to future market disturbances.

Changes to the operation of quota buying-up schemes by Member States will make sure that bought up quota which is kept in the national reserve should no longer count as part of the national quota when it comes to deciding whether or not superlevy is due. If superlevy is then collected, the part corresponding to the bought-up quota can be used for restructuring.

With a view to the longer term, the Commission will establish a working group of experts from the Member States and the Commission. This will look, among other things, at contractual relations between farmers and the dairy industry, the results of the report into the workings of the food chain in the dairy sector - which will be published before the end of the year - and the possibility of a dairy futures market.

"This package builds on the numerous actions we have already taken, and which seem to be working well," said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development.

"We are beginning to see light at the end of the tunnel for our dairy farmers. That's why I am more determined than ever not to go 'back to the future' in ways which would hurt our dairy sector in the long term and leave farmers without any sense of predictability.

"Making a U-turn on decisions taken in the Health Check is not an option, and is something the European Council asked us explicitly not to do. I am convinced that today's ideas will provide real concrete help to our milk farmers. We also need to do some thinking about steps for the medium and longer term. Here, we already have constructive ideas put forward by France and Germany."

Short-term Measures

The Commission will in the coming weeks change the rules on state aid to allow Member States to temporarily offer aid of up to €15,000 to farmers under the Temporary Crisis Framework.

The dairy sector will in future be covered by Article 186 of the Single Common Market Organisation, which allows the Commission to take temporary action quickly, under its own powers, during times of market disturbance.

The Commission proposes changes to the operation of quota buying-up schemes by Member States. Currently, for purposes of restructuring, Member States can 'buy' quota from farmers and put this quota in the national reserve. The national reserve counts as part of a Member State's total quota. If individual producers go over quota, but the Member State as a whole does not – with the national reserve included – no superlevy is paid.

The Commission proposes that bought-up quota which is kept in the national reserve should no longer count as part of the national quota when it comes to deciding whether superlevy is due or not. If superlevy is then collected, the part corresponding to the bought-up quota can be used for restructuring.

Medium and Long-term Measures

The Commission suggests the establishment of a working group of experts from the Commission and Member States. This would look in detail into a number of issues, including:

• The possibility of establishing a legal framework for contractual relations between milk farmers and the dairy industry to better balance supply and demand on the market, while safeguarding fair competition.
• The conclusions of the report the Commission has promised to deliver by the end of the year on the workings of the dairy sector supply chain.
• Whether a dairy futures market in Europe would help make prices more transparent in the long term.
• How to spread good practice in terms of production costs and innovation throughout the European dairy sector.

Recent Developments in the Dairy Market

The most recent data show that prices are starting to improve. In one month, butter prices have risen 4 percent in France, 8 percent in Germany and even more in the UK.

Skimmed milk prices have risen by two to three per cent on average in the EU. Cheese prices have climbed five to seven per cent since the export rules were amended in August. The average EU milk price rose by almost two per cent in August and intervention buying has almost ceased.

Measures Already Taken

The Commission expects to spend an extra €600 million on market measures this year.

In all 70 per cent of direct payments may be paid earlier than usual this year in October. Under the Health Check and the Economic Recovery Package, an extra 4.2 billion is available to address 'new challenges', including dairy restructuring.

This comes on top of what is already available in Rural Development policy.

The Commission has also reinforced the School Milk Programme and promotional measures for dairy products.

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