THE European Union is preparing to introduce a tendering system for export refunds for butter and skimmed milk powder. Many commissioners believe that the present system, which involves the EU management committee setting the level of export refund, is not transparent enough.
In fact, tendering for export refunds has operated in other agricultural commodity sectors for some time. Industry experts point out that if this tendering system leads to a lower-average level of refunds, then another form of support to the EU dairy industry will have been reduced.
Indeed, export refunds, and import tariffs - payments that must be made on some dairy products imported into the EU - are coming under increasing pressure to be reduced in the ongoing World Trade Organisation negotiations.
"The combined effect of the recent Common Agricultural Policy (CAP) reform and the possible reduction in export support and import protection are likely to result in much more competitive markets for butter and milk powders and commodity-style cheese, and this is likely to result in lower farmgate prices for farmers supplying milk for those products," said a Milk Development Council (MDC) spokesperson.
Export refunds are payments to compensate traders for the difference between the world price and the internal European Union price, and hence allow the EU to export.The precise details of the EU proposals are not yet known.