EU export subsidies revoked as dairy prices rocket

By Neil Merrett

- Last updated on GMT

Related tags Dairy Milk

The EU's dairy management committee last week revoked
subsidies on all exported dairy products for the first time in 40
years, as increased demand amongst processors and consumers
continues to drive up prices.

In line with reforms to the common agricultural policy (CAP), the committee will extend the phasing out the refunds to foreign sales of butter and cheese as well as milk powders.

Such a decision is likely to be viewed warily by the EU farmers worried of future protection for their products, though highlights ongoing concern amongst dairy processors over the significant rises in prices for raw materials.

The subsidies have been in place since 1968 to ensure European dairy products remained competitive with rivals over the world.

However as processors continue to face increasing prices for raw materials the subsidies are currently superfluous to demand.

On the international dairy market prices for milk powders are currently well above US$400 (€298)/100kg with cheese prices also approaching the figure in value.

It adds that butter similarly is at a "historically high level."

The EU added in a statement that it would continue to monitor the market to decide if the refunds may again be necessary in the future.

Though industry and official figures vary over the level of export subsidies given to the dairy industry, it is widely believed that about €1.1bn to €1.4bn was handed out in 2005 alone.

Despite possible concern amongst European agricultural groups over possible affects on dairy production, the move is likely to be welcomed by NGO's.

Groups like Oxfam have long complained that the subsidies system is detrimental to farmers within the world's poorest agricultural markets and should be scrapped as a result.

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