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IP/09/1420

Brussels, 5 October 2009

Milk: High Level Group to look at long-term future of dairy sector

Mariann Fischer Boel, Commissioner for Agriculture and Rural Development, today informed agriculture ministers that a High Level Expert Group on Milk will begin work next week to discuss medium and long-term arrangements for the dairy sector given the expiry of milk quotas on 1 April 2015. The Commissioner told a lunch meeting of ministers that the HLG will study whether new arrangements should be put in place which can further contribute to stabilising the market and producers' incomes, reducing price volatility and enhancing market transparency. The Commissioner also briefed ministers on the most recent package of proposals the Commission is preparing to support the dairy market and gave an update on the market situation, which shows that prices for dairy products are picking up.

"I'm pleased to say that the measures we have already taken are showing clear signs of having a positive effect on dairy prices," Commissioner Fischer Boel said. "But we also need to look further ahead. That's why I suggested last month to set up a High Level Group to look at the longer-term future. This will start work on 13 th October and will be a chance for experts to look at all the issues facing dairying in the future. We need to try to reduce market volatility, improve transparency and discuss how farmers can improve their organisation. Meanwhile we continue our work to solve the short-term problems faced by our milk farmers. In the coming days, we will authorise Member States to pay farmers up to €15,000 in national aid. And I hope that the Council in two weeks will formally agree to our proposal to extend the safety-net arrangements."

High Level Group

The HLG on milk will be chaired by the Commission's Director-General for Agriculture and Rural Development, Jean-Luc Demarty, and will be composed of Member State representatives. The Commission intends to invite experts and stakeholders when appropriate to assist the HLG in its work. It will meet once a month as a general rule and will deliver a report on a regular basis. It is invited to discuss the following items, although this list is not necessarily exhaustive:

  • Contractual relations between milk producers and dairies to better balance supply and demand on the dairy market

  • What can be done to strengthen the bargaining power of milk producers?

  • Are the existing market instruments appropriate?

  • Transparency and information to consumers, quality, health and labelling issues

  • Innovation and research with a view to making the sector more competitive

  • A possible futures market in dairy

Commissioner Fischer Boel also informed the ministers in detail about the latest package of immediate measures, presented on 17 September to the European Parliament, to support the dairy market. It is proposed that the dairy sector should be covered by an disturbance clause which already exists for other farm sectors, to allow a quicker response to future market disturbances. Changes to the operation of quota buying-up schemes by Member States will make sure that bought up quota which is kept in the national reserve should no longer count as part of the national quota when it comes to deciding whether or not superlevy is due. If superlevy is then collected, the part corresponding to the bought-up quota can be used by Member States for restructuring of the sector. The legislative proposals to put these ideas into practice should be adopted by the Commission in the coming days.

Recent developments on the dairy market

The most recent data show that prices are improving not only for all dairy commodities but also for raw milk at the farm gate. The average milk price in July/August is estimated at 25-26 cents/litre and recent information from major European processors suggest a further increase of 1-2 cents for delivery in September/October. Spot prices for milk have increased substantially more since June. Prices for products eligible for intervention (butter and skimmed milk powder) have increased by 7-9% in 3 months and they are now well above the intervention level.

Measures taken previously

The Commission expects to spend up to €600 million on market measures this year. The Commission proposal to extend the intervention period will be voted on by the Council on 19 October. 70 percent of direct payments may this year be paid 6 weeks earlier than usual (from 16 October). As part of the 2003 CAP reform, an additional €5 billion per year was added to the direct payments of dairy farmers to compensate for reductions in intervention prices. Under the Health Check and the Economic Recovery Package, an extra €4.2 billion is available to address 'new challenges', including dairy restructuring. This comes on top of what is already available in Rural Development policy. The Commission has also reinforced the School Milk Programme by extending the range of products and the age groups of children covered by the scheme. It has also opened a new round of promotional measures for dairy products. The Commission is currently preparing a report into the supply chain in the dairy sector, to increase transparency and ascertain whether there are any problems of competition. This will be published before the end of the year and will be discussed by the HLG.


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