Draft EU Regulation on Milk Contracts to Be Amended to Allow Fairer Prices for Farmers

To correct the imbalance in bargaining power between farmers and dairies, farmers should be able to join producers' organisations that can negotiate raw milk deliveries for them.

6/28/2011 --- To boost dairy farmers' bargaining power, they must be enabled to negotiate fairer prices through producer groups, pricing practices must be made clearer throughout the distribution chain, and dairies must be made to report their monthly purchases, said the Agriculture Committee on Monday, amending a draft EU regulation on milk contracts.

The new rules will apply only until 30 June 2020, and will be reviewed in 2014 and 2018.

To correct the imbalance in bargaining power between farmers and dairies, farmers should be able to join producers' organisations that can negotiate raw milk deliveries for them and ensure that they get a fairer share of the price paid by consumers, inter alia to cover rising production costs, says the committee

To avoid the formation of cartels, the volume of raw milk covered by such negotiations and produced or delivered in any Member State may not exceed 40% of total national production of that state - i.e. 7% more than in the original EC proposal - and 3.5% of the total EU production. However, to prevent serious distortions of competition, a national competition authority or, if the negotiations cover more than one Member States, the European Commission, may decide that the agreement must either be renegotiated or not put into effect.

Under the new regulation, every raw milk delivery from a farmer to a processor would have to be covered by a written contract. If the delivery is made through one or more collectors, it will be up to the Member State concerned to decide which stage should be covered, says an amendment inserted by the committee.

These contracts would have to be concluded before the delivery, and would have to state a milk price fixed for no less than one year, say MEPs. At present, milk prices are often fixed only after delivery, on the basis of the profits made by dairies, which means farmers must sell without knowing how much they will earn notes the committee. 

Production volumes and average prices paid for raw milk would have to be declared by the first purchaser each month under an amendment approved in committee. MEPs also call for a Market Monitoring Agency to be established to collect and disseminate various production and supply data in order to give early warning of possible future milk market imbalances.

To improve the working of the market for dairy products registered under a protected designation of origin (PDO) or protected geographical indication (PGI), the committee proposed a supply management system, which Member States may establish provided that it will in no way harm competition on the single market or lead to small producers being adversely affected.

MEPs, concerned that these new rules may not suffice to overcome all the difficulties facing dairy farmers, and especially those with small herds or in remote areas, called on the Commission to table further measures for dairy farmers in its legislative proposal, due in late autumn 2011, for the Common Agricultural Policy (CAP) reform. The report, drafted by James Nicholson (ECR, UK), was approved with 34 votes to 3.

The report will be put to a vote by Parliament as a whole by the end of the year. MEPs will in the meantime launch an informal three-way talks with the Commission and the Council with a view to reaching a first-reading agreement before the plenary vote takes place.