Commission targets new Asian markets for EU dairy exports

Farmers block Piazza Schuman. Brussels, 7 September [Joel Schalit/Flickr]

A €500 million agricultural aid package adopted by the European Commission on Monday (7 September) will aim to develop new dairy export markets in Asia, an EU source said.

The European Commission has unlocked an estimated €500 million in aid to farmers hit by falling prices and a ban on exports to Russia, as angry protestors took to the streets of Brussels yesterday.

>>Read: EU throws lifeline to farmers as protests bring Brussels to a standstill

The cash-flow difficulties farmers are facing, the functioning of the supply chain, the stabilization of markets, and social assistance, will be the main priorities of the new aid package.

The package satisfied member states

The Commission’s package was presented yesterday by Vice-President Jyrki Katainen during a council meeting of EU agriculture ministers, who according to the same source, were surprised by the amount it included.   

“The proposal submitted by the EU executive was not expected by the EU ministers,” said the source, adding:

“We are happy about the way EU ministers responded to our package […] I didn’t hear anyone saying I don’t want this,” they stated.

The big question that remains how these funds will be allocated among the 28 member states.

“In yesterday’s meeting, the European Commission wanted to ensure the political support and get the feedback from EU member states […] the details of the aid distribution will be available in a few days.”

According to the official, the aid will be distributed fairly, and targeted, and will focus on the farmers “who are in real need” as well as those “who have a future”.

New Asian markets for dairy products

The source stressed that part of the 500 million euro aid package will be used to promote dairy exports, in order to open up markets in third countries, with a special focus on Asia.

Asked by EURACTIV to specify which Asian countries are on the European Commission’s list, the official said Japan and Vietnam, and possibily India.

Vietnam concluded a free trade agreement with the EU this summer (4 August), while Japan and India are negotiating deals with Brussels.

>>Read: EU, Vietnam reach deal to boost trade

“So, all of them [trade pacts] have an agriculture chapter, which is obviously helping us to sell our products,” the source said, underlining though that the EU sanitary standards should be respected.

Stabilizing the market

According to the EU official, in order for the market to stabilize, the oversupply of milk should be dealt with.

“There is too much milk in the EU. Combining that with the Russian ban [last year] the prices were fallen”, he said.

The EU 28 produces 151 million tones milk per year, with 90% of it is consumed within the EU.

But another EU source said that the dairy industry crisis is not only a European problem.

“The biggest problem (of) dairy worldwide is that there have been far less purchases by China, 53% less over the last months. So it’s an issue that not only the European diary industry is suffering from,” he noted.

Russia used to be the first destination of EU dairy product. The ban introduced by Moscow last year was a major blow to the EU diary sector, the source admitted.

The official added that the demand of China was still there and it was still growing but less than it was before. Beijing’s main supplier is New Zealand due to geographical reasons.

“We cannot assess clearly what the situation is in China now and if it has still big stocks from the big purchases in 2013 […] some argue that Chinese stocks are about to finish and others (say) that this is not the case”. 

Russia banned the import of certain foods and drinks originating from the European Union, in response to Western sanctions over Ukraine’s crisis.

The Russian food ban, which took effect in August 2014, forced the European Commission to use agricultural funds to help EU producers hit by the trade restrictions.

Russia is the second most important destination for EU food exports after the United States, representing in total a value of about € 11.8 billion in 2013, or roughly 10% of all EU agri-food exports, according to the Commission. The food products covered by the Russian ban represent a value of € 5.1 billion in 2013 exports, it said in an information note, or 43% of EU agri-food exports to Russia.

Some sectors are affected differently however. Apart from emergency market support measures for the dairy sector, at the beginning of August, the Commission announced roughly €32 million aid for peaches and nectarines, and €125 million for perishable fruits and vegetables.

>>Read: Dairy sector to receive emergency EU funding following Russian trade ban

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