EU backs milk production cuts to tackle low prices

Phil Hogan [European Union]

The European Union voiced support on Monday (14 March) for temporary cuts in milk production by farmers in member states in a bid to reverse the plunge in prices that has shaken the dairy industry.

The European Commission, the executive of the 28-nation bloc, said it would soon send member states the proposal which is required as an emergency exception to rules guaranteeing economic competition.

Overproduction of milk since EU quotas were abolished in April 2015 triggered a collapse in prices that have not recovered despite a €500 million aid package announced in September.

“I am prepared to propose the application of such rules whereby the Commission… would decide to permit on a temporary basis such voluntary agreements for the dairy sector,” EU agriculture commissioner Phil Hogan told a crisis meeting of agriculture ministers in Brussels greeted by scores of protesting farmers.

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A combination of factors, including changing dietary habits, slowing Chinese demand and a Russian embargo on Western products in response to sanctions over the Ukraine conflict, has pushed down prices for beef, pork and milk.

Hogan, a former Irish environment minister, acknowledged “the depth and duration of the crisis” when he joined the emergency ministerial meeting, the second in six months.

François Lejeune, a farmer from Belgium’s southeastern region of Liège and a union leader, told AFP that liberal European farm policy was weakening and even bankrupting farm businesses.

“We are working at a loss in many sectors and it is not sustainable,” Lejeune said during a protest of about 100 people where farmers brought a couple of cows, a few piglets, goats and lambs.

“We need price increases and for the EU to buy back excess produce,” he said. “We must fight the invisible hand of the market.”

The commissioner said he would fully consider backing other measures that have broad support like allowing member states to help individual farmers by up to €15,000 per year.

No ‘magic bullet’

Citing broad support, he also proposed temporarily doubling the size of a private storage scheme for skimmed milk powder and butter to help reverse the price drops.

Hogan said the commission was also open to a similar scheme for pigmeat which he admitted “would come at a cost to the EU budget.”

He said an earlier pigmeat scheme in January was closed after just three weeks during which 90,000 tonnes were removed from the market at a cost of €28 million.

Hogan also called for more funds to promote EU farm products while saying the commission will work with the European Investment Bank in a bid to develop financial instruments to help farmers and processors become more competitive.

Hogan also said he would consider extending for another year a multi-million-euro aid package to help European fruit and vegetable growers hit by Russian sanctions that is due to expire 30 June.

Stung by an EU decision to impose damaging economic sector sanctions after the shooting down of a Malaysia Airlines plane over eastern Ukraine in July 2014, Moscow retaliated with a ban on a wide range of agricultural imports.

“This package of measures is not intended as a magic bullet but I believe that we should give it a chance to succeed,” Hogan said.

Alexander Anton, European Dairy Association’s (EDA) Secretary General, told EURACTIV:  “Under the quota regime, farmers paid up to 28 cents penalty per kilo of surplus milk. And this did not prevent farmers from heavily overproducing. This may give you an idea of what compensation would be needed to make a voluntary reduction scheme work.”

The lifting of EU milk quotas in March 2015, combined with declining Chinese demand, changing dietary habits, and a Russian embargo on Western food products, have combined to push down the prices of beef, pork and milk.

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The details of the 'flexible aid package' were unveiled on 15 September by EU Agriculture Commissioner Phil Hogan.

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