EU offers help to dairy sector, refuses quota rises

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Europe’s farm chief yielded some ground on Monday amid demands for aid to help the European Union’s dairy sector cope with low prices and poor exports, offering to advance EU subsidy payments to all eligible farmers. But she rejected calls from small farmers to restore milk quotas. 

France, backed by Austria and Germany, had tabled a series of requests mostly involving increases in EU aid to the dairy sector. These countries say their producers are badly hit by the weaker market and want firm action to bolster farmer incomes.

Dairy farmers have protested in several EU countries about low milk prices, putting pressure on their governments to help.

About 800 farmers, mostly from France and Germany, demonstrated outside the executive European Commission in Brussels on Monday ahead of a meeting of EU farm ministers, police said. The protesters, who had a live cow with them and tractors to block roads, shouted: “Fair prices for milk.”

“I do take it seriously that our dairy sector is in an unprecedently difficult situation with extremely low prices,” EU Agriculture Commissioner Mariann Fischer Boel told a news conference after a meeting of EU farm ministers.

“I did go out there and talk to them (demonstrators). I am not scared … although I did have the impression that some of them had definitely not only been drinking milk,” she said.

In Germany’s capital, Berlin, around 6,500 farmers from across the country rallied to protest low milk prices, as well as high diesel prices, organisers said.

Addressing the farm ministers, Fischer Boel said she would propose that all eligible EU farmers — not just in the dairy sector — be able to receive much of their subsidy payments two months earlier than usual.

“We will be … able to make it possible for member states to pay 70 percent of the direct payment from October 16 to alleviate the difficult economic situation that some farmers are facing,” she said.

The Commission has already taken a string of measures to shore up dairy markets, including reinstating export subsidies and private storage. It has also raised ceilings on volumes of butter and skimmed milk powder that can be bought into public intervention stores, to remove supply from the market.

Subsidies

Fischer Boel agreed to the countries’ request to extend an end-August deadline for EU public intervention buying of butter and skimmed milk powder, although she pointed out that there might be some legal problems in doing this.
Subsidies for private storage of butter might also be extended beyond a mid-August cut-off date, she said. On dairy export subsidies, for which France had wanted guarantees that subsidy levels would not decline in between the EU’s regular tenders, Fischer Boel said it was important to monitor the international market and make sure the EU did not disrupt it.

In a note read to ministers, France said EU cheese exports fell 10 percent in the first quarter and butter exports by 3 percent. It called for cheese export subsidies to be raised “significantly.”

Fischer Boel said she would study the idea.

But she rejected a demand that the EU subsidise skim milk powder for use in animal feed, saying it would be expensive and not add a significant market outlet to absorb dairy product supply.

It would be difficult, she said, for Commission experts to compile a report on the EU dairy sector before the end of 2010, the date scheduled, but quarterly market updates could be given.

No quota rises

Over the last few months, at least five countries have demanded urgent action and delays to annual rises in EU milk quotas, agreed in November under the “health check” — or mini-reform — of EU farm policy, to allow prices to recover.

Fischer Boel has rejected any suspension of the 1 percent quota rises, saying she will not reopen the health check deal and insisting that quotas are not to blame for low prices.
“It’s simply a question of lower demand. What farmers need to do is to produce less, only produce less,” she told reporters. “Consumers are not buying high-quality milk products they used to buy before the financial downturn.”

Fischer Boel has said EU milk production should total between 4 and 5 percent below the maximum quota quantities this marketing year, with the same undershoot in 2009/10.
Dairy prices have roughly halved in the last few months, with analysts saying that although markets may now be close to their lowest point, a significant rebound in demand is needed to regain an upward trend. 

(EURACTIV with Reuters)

Copa-Cogeca, the Europan farmers and agri-cooperatives association, called for measures to be taken fast, saying the dairy crisis required "an exceptional and urgent response". 

"Every second farm in Europe is involved in dairy production one way or the other, 60% of them in less-favoured areas. If nothing is done to help them, the rural economy will be depressed for a long time," said Padraig Walshe, president of Copa.

"The Commission must also allow the market management tools of intervention buying and export refunds to be more widely used," said Pekka Pesonen, secretary-general of Copa-Cogeca

"Aid to use butter for ice cream and pastries needs to be maintained. We need support to use skimmed milk powder in animal feed. The single farm payment must be brought forward to August this year. Finally, the Commission should also strengthen measures to promote the consumption of dairy products," Pesonen said.

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," according to the EDA.

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 for Europe to "let the market derive towards fewer increasingly large and intensive milk farms".

The European 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.

  • 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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