EU farm chief rejects calls to restore milk quotas

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Marianne Fischer Boel, the EU’s agriculture commissioner, yesterday (23 March) dismissed calls by Germany and four other EU nations to reinstate milk quotas in an effort to support prices, which have plunged dramatically in recent months.

At least five countries have called for urgent action and a possible delay to annual rises in EU milk production quotas, agreed last November under the ‘health check’ – or mini-reform – of EU farm policy, to give prices a chance to recover.

Austria, Germany, Hungary, Slovakia and Slovenia circulated a joint note to the European Commission and other national EU delegations suggesting several support measures to help milk prices, arguing that “unconventional approaches” were now needed.

Milk prices have dropped dramatically in Europe over the last few months due to falling international demand and in a context of increased competition from non-European producer countries. “As a result, especially small milk farmers are confronted with serious problems,” said the Czech EU Presidency in a briefing note.

In July 2007, skimmed-milk powder was selling for €3,500 per tonne in the EU. In January 2009, the average price has been about half of that, the Czech Presidency said.

Commission rejects quota delays

However, calls to delay milk quota increases were rejected by the Commission as a possible solution to the problem. Speaking at a monthly meeting of EU farm ministers on Monday (23 March), Agriculture Commissioner Mariann Fischer Boel said she was not about to reopen the ‘health check’, adding that suspending the one-percent quota increases would not solve the current problem.

“I want to be crystal-clear,” Fischer Boel told a news conference during the meeting. “I am not going to step back […] on the agreement we made in the health check.”

“That idea is dead,” she said. “So let’s stop this purely political discussion and concentrate on what we can do with the economic problems,” Fischer Boel said, adding that “blurred messages” were causing uncertainty among farmers.

Dairy farmers have protested in several EU countries in recent months about low milk prices, piling pressure on national governments to help in some way. Germany has been particularly hit and was the driving force behind the five-country paper. Last summer, German dairy farmers held a series of “milk strikes” to protest against falling prices.

Market support measures ‘already in place’, says Commission

The EU executive has already taken a number of steps to prop up dairy markets, including the reinstatement of export subsidies and private storage. It has raised ceilings on volumes of butter and skimmed milk powder that can be bought for public intervention stores, to remove supply from the market.

Nearly all EU support tools have been activated to prop up prices, Fischer Boel said. Only two options remained: subsidies to use skimmed milk powder in feed and for processing into casein, an important protein found in fresh milk. But neither would be efficient in current circumstances, she said.

“It’s difficult to see what more the Commission could do. There are a couple of other disposal schemes on the books but they won’t have a major impact on the market,” one EU diplomat said.

Fischer Boel said EU milk production was expected to come in at between four and five percent below the maximum quota quantities this marketing year, with the same undershoot in 2009/10.

“This clearly shows that farmers understand that it is market prices and their cost structure rather than the quota levels that should determine their production decisions,” she told EU farm ministers at their meeting.

“Quotas are not an obligation to produce but a possibility.”

(EURACTIV with Reuters)

The European Dairy Association (EDA), the platform for the European dairy industry, is broadly in favour of abolishing the quotas. It said "the merits of the milk quota system are now difficult to justify given past CAP reforms removing market support mechanisms. To prepare for the end of the quota system, appropriate phasing-out measures are necessary. Up to now, as there is no clear policy direction from the Commission on quota reform, European dairy farmers continue to acquire additional milk quotas. This prevents on-farm investment and acts as a barrier to entry for young farmers and potential new entrants."

European small farmers organisations denounced the Commission's moves to reduce milk prices, claiming that they come at the expense of small producers and profit only industrial milk farms, the agri-food industry and retailers.

In their call, launched on 5 February, the European Farmers Coordination Group (CPE) and Spanish farmers' organisation COAG urged EU lawmakers and stakeholders to put pressure on EU governments to oppose the Commission's reform plans and preserve the current system. The threat, they say, is to "let the market derive towards fewer increasingly large and intensive milk farms".

The Commission presented its proposals for reform of the Common Agricultural Policy (CAP), also known as the CAP Health Check, in November 2007.

Regarding the dairy market, the EU executive suggested a gradual increase in quotas to provide a 'soft landing' for the sector before the quotas expire on 31 March 2015. Under an agreement struck in December 2008, milk quotas are to be increased by 1% annually between 2009 and 2013, up to a total of 5%. They will be abolished altogether as of 2015.

However, dairy farmers are now faced with a demand squeeze on the international market. "After a brief and unprecedented period of record prices for milk and dairy products in 2007 and early 2008, European producers now face weak and uncertain markets, characterised by a sharp drop in global dairy product prices," EU agriculture ministers said at their meeting on 23 March.

Milk quotas have been in place in EU member states since 1984, with the exception of France, where they were only introduced a few years ago.

  • 25-26 May 2009: Meeting of EU agriculture ministers.
  • 22-23 June 2009: Meeting of EU agriculture ministers.
  • 2009-2013: Milk quotas to be raised by 1% each year.
  • 31 March 2015: Planned abolition of milk quotas.

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