European Commission Proposes Measures to Stabilise Dairy Market

The Commission will continue to use instruments such as intervention, private storage aid and export refunds. It will allow direct payments to farmers to be paid early and has just launched a new round of dairy promotion programmes.

23 Jul 2009 The European Commission will continue do all it can to support milk farmers and stabilise the dairy market. In its newly published dairy market situation report, the Commission sets out the catalogue of measures available to help alleviate the very difficult market situation. The Commission will continue to use instruments such as intervention, private storage aid and export refunds. It will allow direct payments to farmers to be paid early and has just launched a new round of dairy promotion programmes.

Other potential measures include using levies on producers who exceed their quota to finance voluntary retirement from milk production, and the extension to farmers of the Temporary Crisis Framework for state aid. Member States also have the possibility to redistribute aid to the dairy sector under last year's Health Check agreement, while there are a number of possibilities to help milk farmers within Rural Development policy. The Commission is continuing its examination of potential anti-competitive practices in the food supply chain, especially the dairy sector. In line with the conclusions of the June European Council, the Commission will not reverse decisions already taken on the quota system.

"We have to do all we can to help our milk producers, who are having to deal with a dramatic fall in prices," said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development. "We will continue to use all the measures we possess to stabilise the market. But, as clearly stated by the European Council, we will not reverse our policy of gently phasing out quotas. Putting this into doubt would only create uncertainty and would do nothing to help the situation anyway."

Measures available:

• The Commission opened private storage aid for butter at the beginning of January, and so far this year 113,500 tonnes have been stored. The period for PSA will be extended to the end of February 2010.

• Intervention buying started on March 1 for butter and skimmed milk powder and the Commission has now proposed to extend it until 28 February 2010, when the new intervention season begins. The Commission has also proposed that it be empowered to do the same in 2010 if the market situation requires. So far, 81,900 tonnes of butter and 231,000 tonnes of SMP have been bought.

• Export refunds for dairy products were reactivated in January. Refunds have been awarded at a prudent level to allow our exporters to compete without undercutting world prices. The Commission will continue to provide refunds for as long as needed.

• The EU school milk scheme has recently been improved and discussions are now ongoing to make it more attractive still.

• The Commission will exceptionally allow Member States to pay up to 70 percent of direct payments to farmers from October 16 instead of December 1.

• Member States may also grant de minimis state aid or loans at market conditions to help milk producers with liquidity problems.

• A modification to the Temporary Crisis Framework for state aid could be envisaged.

• This could allow up to €15,000 to be paid per farmer up to the end of 2010, minus any de minimis aid received by the farmer in question.

• Earlier this month, the Commission proposed an additional round of dairy product promotion programmes.

• The Health Check introduced the possibility to redistribute a certain amount of direct payments between farmers and sectors within a Member State. They can, for example, establish specific aids for vulnerable types of farming in the dairy sector.

• Rural Development policy has a number of measures to help restructure the dairy sector. The Health Check identified 'dairy restructuring' as one of the new challenges on which money added to the Rural Development fund may be spent.

• Options include early retirement, investment support, payments for milk farmers in Less Favoured Areas, support for environmentally-friendly forms of milk production, and aid for practices which improve animal welfare.

• The Commission is implementing the Road Map proposed in its Communication on Food Prices in Europe, and is looking at setting up a new system for price monitoring.

• It is also examining potential anti-competitive practices in the food supply chain, especially the dairy sector.

• If the Commission finds that competition is not functioning, it will not hesitate to use all its powers under the Treaty. National competition authorities have an equally important role to play.

• Dairy farmers should be encouraged to co-operate more effectively through producer organisations to increase their bargaining power.

The European Council called for 'possible options for stabilising the dairy market, while respecting the outcome of the Health Check'.

Changes to the quota system would not respect the outcome of the Health Check. This therefore excludes the idea of quota cuts or a freeze on the already agreed quota increases.

Production is, in any case, currently 4.2 percent below quota.

The Commission suggests that Member States could charge super levy on those producers who exceed their individual quota and use the money to finance voluntary retirement from milk production or redistribute it to priority groups.