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Brussels, 6 December 2011

Commissioner Dacian Cioloş welcomes informal agreement by Council and Parliament on new rules for the milk sector

"One year ago, the European Commission presented a legislative package to strengthen the European milk sector. This morning's informal agreement reached in first reading under the co-decision procedure by the European Parliament and the Council is a very significant step forward for the European milk sector. Once it is formally endorsed by the three institutions and enters into force, it will prepare the milk sector for the new economic context and reinforce the position of the dairy producers in the supply chain. Producers' organisations will have all the necessary tools to better promote their work in the food chain. This new regulation will open the way towards a modern management of agricultural markets, less bureaucratic, better organised between the public authorities and private actors with tools tailored to the new economic challenges. These tools will replace instruments that have lost their effectiveness and did not prevent the 2009 dairy crisis".

Background (see IP/10/1691)

The regulation grants Member States the possibility to make written contracts between farmers and processors compulsory and to oblige purchasers of milk to offer farmers a minimum contract duration. These contracts should be made in advance of delivery and contain specific elements such as the price, volume, duration, details concerning payment, collection and rules for force majeure. All these elements should be freely negotiated between the parties and farmers may refuse an offer of a minimum duration in a contract. Deliveries by a farmer-member to its cooperative are exempted from this contract obligation if the statutes or rules of the coop contain provisions that have similar effects as the prescribed contract.

In order to reinforce the bargaining power of milk producers, farmers can join together in producer organisations (PO) that can negotiate collectively the contracts terms including the price of the raw milk. The volume of milk that a PO can negotiate is limited to 3.5% of the EU production and to 33% of the national production of the Member States involved. For Member States with production of less than 500,000 tonnes (Malta, Cyprus and Luxembourg) the limit for national production is set at 45% instead of 33%.These limits allow negotiations between POs of approximately the same size as a major dairy processor while effective competition on the dairy market is maintained.

In view of the importance of cheeses with a protected designation of origin (PDO) or protected geographical indications (PGI), notably for vulnerable rural regions and in order to ensure the value added and quality, Member States are allowed to apply rules to regulate the supply of PDO/PGI cheeses upon request of a producer organisation (PO), an interbranch organisation (IBO) or a PDO/PGI group. The rules should be agreed in advance by at least two-thirds of the milk producers representing at least two-thirds of the milk production and, in the case of an IBO and PDO/PGI group also by at least two- thirds of the cheese producers representing at least two- thirds of the cheese production. Furthermore, a set of conditions has to be met, notably in order to avoid damage to trade in other products and to protect minority rights. Member States have to carry out checks and, in case of non compliance, they have to repeal the rules.

Specific EU rules for inter-branch organisations in the milk sector allow the actors in the dairy supply chain to dialogue and to carry out a number of activities that will be partially exempted from competition rules. These joint activities concern, amongst others things, the improvement of knowledge and transparency of production and the market, promotion, research, innovation and improving quality.

In order to closely follow the development of the market after the milk quota regime expires and for the sake of transparency, timely information on delivered volumes of milk will be provided.

The measures will apply until mid 2020. The Commission will report in 2014 and 2018 to the European Parliament and the Council on the market situation and the operation of the measures, assessing in particular the effects on milk producers and milk production in disadvantaged regions and covering potential incentives to encourage farmers to enter into joint production agreements.

The agreement still has to be formalised by the plenary session of the European Parliament, the Council of Agriculture Ministers and the Commission in accordance with the appropriate procedures.

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