The EU-wide €150m ($166m) scheme for dairy farmers is to incentivize a reduction in milk production.
The measures were presented to the Council of EU Agriculture Ministers by Commissioner for Agriculture and Rural Development, Phil Hogan.
"Coming at a time of significant budgetary pressures, this package provides a further robust response, and means that the Commission has mobilized more than €1bn ($1.11bn) in new money to support hard-pressed farmers,” Hogan said.
Adjustment aid for Member States
The remaining €350m ($387m) is allocated to Member States that can be matched with national funds, thus potentially doubling the level of support being provided to farmers.
Member States will have flexibility to define the measure or mix of measures they will make available to farmers – such as extensive production methods, support for small farms, cooperation projects, further production reduction support measures, etc.
A range of technical measures were introduced to provide flexibility (e.g. on voluntary coupled support), cash-flow relief (e.g. through an increase in the amount of the advances for both direct and area-based rural development payments) and reinforce the safety net instruments (by prolonging intervention and private storage aid for Skimmed Milk Powder).
The precise details of all the different measures will be finalized in the coming weeks, in consultation with Member States.
The budget implications of the proposed measures will be incorporated in an amending letter to the draft budget 2017 in the autumn.
With many Member States providing voluntary coupled support to the dairy sector (often per cow), they will be granted the possibility to derogate from the obligation to maintain the size of the herd in 2017.
In a repetition of last year's move, Member States will be allowed to advance up to 70% of Direct Payments from October 16 and 85% of area-based Rural Development payments without the necessity of completing the on-the-spot checks.
The Commission said it intends to extend the period for public intervention and for private storage for Skimmed Milk Powder beyond the end of September.
The European Milk Board, however, said the measures fall short, saying they will not provide the urgent reorientation the sector needs.
Romuald Schaber, EMB president, said, "Production cuts is the label used to describe the current package of measures. However, no one wants to take a crack at their proper implementation. Merely €150m shall be used for measures to reduce production. This amount is not nearly enough in light of the severity of the current crisis.
"With prices that are sometimes below 20 cents per liter of milk, we are facing an acute and significant crisis in the dairy sector in Europe. This crisis must be combated with consequent and clear policy."
The EMB statement said "the European Commission and some Member States have been trying to ignore the consequences of this crisis for months now. Sadly, the measures adopted yesterday show that nothing has changed."
The UK's National Farmers' Union (NFU), however, said it welcomed the announcement.
NFU dairy board chairman Michael Oakes said he was pleased that the Commission showed support for the sector.
"However, in terms of a voluntary management scheme, UK farmers have reacted to market conditions accordingly with production already pulled back significantly - daily deliveries for the last two weeks of June are 9% lower than the same period last year," he said.
"While grateful to the Commission for today’s announcement, we all want to see a sector that is competitive and market-orientated.
“It’s also essential that the Commission comes forward as soon as possible with the details on the conditions around the financial support. The UK government must be given flexibility to decide how this money is used and should consult with industry to utilize this money as soon as possible.”