World Trade Organisation (WTO)
A global trade deal between WTO members will set the agenda going forward for the EU dairy industry, including guidelines for initial discussions on the European Commission's proposed review of EU dairy strategy in 2008.
Pascal Lamy, WTO director-general, admitted this weekend that talks over a global trade deal were in crisis, largely because the EU and US delegations could not agree on agricultural subsidies.
The dairy industry, among others, will have to wait for a deal. It is still unclear whether this may come by the end of July deadline or whether it will be put off until the autumn.
One of the biggest disputes between the US and EU remains over so-called 'sensitive products'; a list of products, likely to include dairy, that would not be subjected to the most stringent tariff cuts.
The US has proposed that only one per cent of tariff lines should be protected as 'sensitive', while the EU has proposed eight per cent.
Peter Dawson, policy director at industry body Dairy UK, said he thought a last-minute deal was possible. He said both the EU and US wanted a deal, but historically "WTO talks have only really been resolved when they are up against the deadline".
Export subsidies, also a big part of the WTO talks, are likely to continue causing debate between EU member states in the coming weeks.
Talks on cutting export refunds for dairy products, including skimmed milk powder and cheese, hit deadlock last month in the European Commission's Milk Management Committee.
The cuts were intended to coincide with EU price cuts for skimmed milk powder and butter on 1 July, as set out by the Commission's Common Agricultural Policy reform.
Over the long-term, the Commission has pledged to abolish export subsidies by 2013 as part of the current WTO negotiations. Debate on how this will be done is likely to instensify as the WTO talks approach their final deadline.
Concerns are growing over the EU's butter surplus and dairy associations are set to increase their lobbying of the European Commission to get more short-term market support.
The EU's intervention store for butter was filled by the end of May, while the similar system for skimmed milk powder had not been used.
Britain's Milk Development Council warned recently that a butter glut had appeared in the EU because Europeans were buying less and non-EU producers were able to sell butter to the rest of the world more cheaply.
The surplus has sent butter prices down to the EU minimum, or so-called 'intervention' level, putting pressure on processors and producers.
Dairy UK's Peter Dawson said a seasonal drop in production may help the butter market to recover later in the year, but "any stability the Commission is able to give will be a benefit".
UK producers under cost pressure
Dairy farmers in Britain are likely to face higher cost pressures as the UK government begins implementing the EU Water Framework Directive - setting down stricter rules on managing local water resources and cutting pollution.
The framework comes as farmers already face pressure to cut nitrate levels in nearby waterways.
Nitrate levels in Britain's water have been increasing, with agricultural land responsible for more than 70 per cent of the pollution, according to the Department for Environment, Food and Rural Affairs.
Dairy UK said it was examining the issue, which it believes could have a "significant impact" on farmers' costs.