EC invokes special measures to address Europe dairy crisis

By Jim Cornall contact

- Last updated on GMT

A European Commission package to assist the dairy industry was announced in Brussels by Commissioner Phil Hogan. Photo: iStock - artJazz
A European Commission package to assist the dairy industry was announced in Brussels by Commissioner Phil Hogan. Photo: iStock - artJazz

Related tags: European union

The European Commission (EC) has announced a package of exceptional measures to support EU farmers, including a limited time when Member States can determine their own supply and production limits.

The series of measures outlined by Commissioner Hogan to the agriculture ministers of the European Union adds to the September 2015 support package of $555.8m (€500m).

“We have been discussing the markets' situation for some considerable time now and that in itself is an indication of how long-lasting and profound this global crisis is. We need to find a solution and we need to give some reassurance to our farmers and some confidence to the markets,”​ Commissioner Hogan told the meeting in Brussels.

He said, “It is now nearly a year since dairy quotas were abolished after a period of 30 years. However, their abolition had been clearly envisaged as far back as 2003 and reaffirmed several times thereafter. Their abolition was always likely to be followed by a period of some volatility.

“What we have seen since is a significant increase in production in a number of Member States which, when taken with the global changes in supply and demand for milk has created a severe market imbalance which is weighing heavily on the market.”

 Voluntary supply management

The Commission said that – for a limited time – it would allow producer organizations, interbranch organizations and cooperatives in the dairy sector to establish voluntary agreements on production and supply.

This is the so-called Article 222 from the Common Market Organisation, which is specific to the agricultural sector and can be applied in case of severe imbalance in the market.

Commissioner Hogan said that the EC measures are adjustable so Member States can use them depending on their specific national situation. But there would not be EC-imposed regulations across the entire EU.

He added that, “it is the common view of the Council that the return to quotas or any other instrument of mandatory supply control is not on the agenda. This is a wise approach.”

EMB slams ‘half-baked’ measures  

The European Milk Board (EMB), in its response to the announcement, said the measures should be coordinated on a central level.

“Voluntary production cuts only at producer organization and cooperative level cannot stabilize the milk market.”

The statement added, “unfortunately the measures that were decided are only half-baked and have not been thought through.”

It said that the increase of production volumes in the coming months will quickly neutralize the potential effect that these measures could have.

The EMB said that because the regulation of volumes will not be coordinated on a central EU level, it cannot relieve the market as a whole.

Measures need central EU control

“As a result, the positive effect reached through the reduction of volumes will immediately be counteracted by the increase in production of other producers,”​ the EMB argues.

It cited Switzerland as an example where producer organizations that implemented production cuts lost members because other organizations imposed no restrictions.

Other organizations and cooperatives have also given bonuses to farmers who limit their supply, but there is no general acceptance of such measures across the EU or within Member States.

Doubling intervention ceilings

Commissioner Hogan also announced an increase in the quantity ceilings for skimmed milk powder (SMP) and butter being put into intervention from 109,000 tonnes and 60,000 tonnes respectively to 218,000 tonnes and 100,000 tonnes.

Dairy UK welcomed the decision to double the intervention ceilings.

Dairy UK Chairman Dr David Dobbin said, “Dairy UK has consistently highlighted the important role that intervention can play in the current crisis especially during this spring’s peak production period.

“With intervention currently filling up quickly, Commissioner Hogan’s proposal to double the intervention ceiling on SMP and butter is very much welcomed.

“It is essential that there is an effective floor in the market and an outlet for short term surpluses. This will help avoid even greater downward pressure on milk prices in the current global over supply situation. We are happy that the Commission has listened.” 

IFA – farmers carry risk

Irish Farmers’ Association national dairy committee chairman Sean O’Leary said it was farmers who carried 100% of the market risk.

"The farmer should be able to decide on whether or not to produce more based on how profitable that would be.” - IFA chairman Sean O'Leary

“We are fortunate that we own our industry through the co-op structure and that some price support has been provided over recent months,”​ O’Leary said.

“Farmers have been asked to commit supplies for a few years through a Milk Supply Agreement. The only quid pro quo is that the co-op will continue to purchase and collect the milk – important, but a little out of proportion relative to the investment made by many farmers and the risk they are now taking,”​ he said.

“We believe a fairer and more sustainable approach would be to set a milk price that would cover at least production costs for at least a portion of the volume committed by the farmer.

“Such a price commitment would allow for much better informed production decisions around volume growth – the farmer should be able to decide on whether or not to produce more based on how profitable that would be​.”

NFU looking for more

The presidents of NFU, NFU Scotland, NFU Cymru and the Ulster Farmers Union did welcome some of the steps Commissioner Hogan announced to help the sector– but urged decision makers to urgently respond to the current crisis in UK farming.

The four farming union presidents said in a joint statement that Commissioner Hogan’s measures are a step in the right direction. 

Four steps needed

However, they added that there are four steps the Commissioner and the Secretary of State could take to help farmers in these difficult times.

The presidents stat that removing tariffs on imported fertilizer is of the utmost importance. 

“Lifting this burden could really help UK farmers to become more competitive against our global counterparts,”​ they said.

The statement continued by noting that work with the European Investment Bank needs to be speeded up. 

“We very much welcome Commissioner Hogan’s announcement that he will prioritise this work – we urge him to keep his foot on the accelerator as much as possible.”  

Reviewing the dairy intervention price could stabilize prices in the milk market, providing support to the sector, they added.

Copa/Cogeca response

The Copa (Committee of Professional Agricultural Organisations) and Cogeca (General Committee for Agricultural Cooperation in the European Union) response was cautious, but they said that the announcement is a move forward and has the potential to alleviate pressure hitting the EU agricultural markets.

Copa president Martin Merrild said, “The package is a step forward but we need to see how it pans out. Many farmers across Europe are facing the worst crisis since the early 1980s.”

Other aspects to announcement

Other measures announced include finding new export markets, reinforcement of promotion measures and use of export credit insurance, loan/debt relief for investments, state aid, and adjustment of the ceiling for de minimis aid, and the extension of the EU milk market observatory to other sectors other than dairy.

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