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SPEECH/ 09/482

Mariann Fischer Boel

Member of the European Commission Responsible for Agriculture and Rural Development

"Dairy market situation"

Figures and graphics available in PDF and WORD PROCESSED

Speaking notes at Agriculture Council of ministers

Luxembourg, 19 October 2009

(Dear Colleagues,)

Let me start with the quarterly report on the situation on the dairy markets which you have got today. The average price for butter is currently 18% higher than the intervention price. Protein products like whole milk powder, skimmed milk powder and whey powder have also started to strongly move upwards. Cheese prices normally follow the commodity prices with a delay of a couple of months The delay between movements in spot prices for dairy commodities and movements in farm gate prices for milk is generally recognised as a natural feature of the dairy market. We saw it when prices were booming in 2007 and we saw it again when the prices tumbled in 2008.

All in all, I am happy to see that we are now in our short term management moving from the previous stormy weather conditions into a scenario where the normal interactions of market forces are more and more prevailing over our safety-net arrangements.

However, this does not mean that we can be complacent and of course we will not. I have obviously been following the intense meeting activity of some of you sitting here today with regard to the dairy issues. Whether you are G-2, G-16, G-20, G-21 or any other number, what matters is that we together must establish the correct path for a sustainable dairy sector in Europe in the years up to 2015 and beyond. In that task, the policy, financial and legal frameworks will have to be complied with.

In this context I have taken note of the recommendations from the Vienna meeting last week and on my side I hope that you have noted that most of them are already covered in practice, covered by today's proposals or covered by ongoing studies or proposals.

Let me start with what is already covered in practice.

This is first and foremost public intervention and I thank you for your support regarding the proposal to extend the intervention period for butter and skimmed milk powder. Your support has made it possible to adopt the proposal as an A point today. The public storage is therefore in place until the start of the next normal intervention period.

As regards export refunds we have reactivated them and kept exports going. But let's be clear. World market prices are rising fast and we have to take them into account when fixing the refunds, if we want, as you say in the paper, to honour our international obligations

As regards the reinforcement of the school milk scheme, this has been achieved via various changes in recent years and weeks. However I will consider your request although it will be very difficult to fit this into our short term crisis management.

On the issue of consumers' information we have regulations in force that provide for dairy products to be labelled as such only when they contain 100% of dairy products. I simply cannot go beyond 100% and I remind you that it is Member State competence to enforce this regulation

Finally I do not disagree with the recommendation that the sale out of intervention stocks has to be done in a responsible way not to jeopardise the market recovery.

Now I come to today's proposals

One of the experiences learned this year is that urgent problems require urgent solutions. Therefore, the first proposal I present you today specifically addresses this issue. Adding milk and milk products to Article 186 of the Single CMO, the so-called disturbance clause, allows the Commission to take quick and effective actions where the market is subject of sudden, substantial movements. The experience since 2007 has shown that it is very appropriate to add the dairy sector to those sectors which could make use of the disturbance clause.

It goes without saying that potential measures taken under Article 186 would be complementary to measures already provided for under the Single CMO. The most appropriate measures will be discussed in the management committee. At this stage I can only say that private storage for different products, and this could include cheese, is a candidate provided the market situation is such that we can justify such an aid.

I am also prepared to propose the allocation of 280 million Euros in our 2010 agricultural budget to other measures under the enlarged Art. 186. The concrete nature of these measures still needs to be decided but it is clear for me that these measures should benefit the dairy farmers directly. I have just said that "I am prepared to propose.." and this is important because it is not the Commission or this Council who has to decide on this budgetary move but the Council of Finance Ministers on the 19th of November. So get your Finance Ministers prepared as well!

Needless to say that if this allocation of the 280 million Euros is approved my purse for 2010 is totally empty apart from the safety margin of 300 million euros which corresponds to the amount necessary to avoid financial discipline. Requests for new spending can not be taken up without changing the pluriannual financial perspective.

In this context, I have also noted, sometimes with satisfaction, sometimes with surprise how the additional money from the Health Check and the Economic Recovery Package is divided. On Rural Development we estimate that 660 million is used for dairy restructuring and on Article 68 we estimate that 240 million will be used from 2010 to 2013. This reflects the Member States priorities. What surprises me is that a number of the most forthcoming Member States of the Group of 21 have not send in any information or use just a small portion for the dairy sector, while asking the Commission to provide € 300 million.

The second part of my proposal today is a temporary stricter application of the quota management. I propose to temporarily deduct bought up quota from the national reserve, so that the super levy is calculated on the basis of a lower national quantity. The difference between the levies collected in this way and the levy due to Brussels can be kept in the Member States to finance further restructuring.

Finally, let's not forget the Commission's proposal to allow for a temporary state aid of € 15,000 which will be adopted by the Commission on the 28 of October.

As regards ongoing studies I am pleased to see that the High Level Group is off to a flying start with full agendas for the various meetings until June next year. In this group issues like a fair and balanced relationship in the chain, transparency and contractual relations are discussed.

Clearly, it is too early to draw any conclusions after only one meeting but I am comforted by the enthusiasm shown both within and outside the Group regarding the various subjects so important for the future of the sector.

As you can see all, but one, recommendations are properly addressed. The only area where I continue to be very reluctant is the aid for skimmed milk powder in animal feed. Until now I have not received any convincing analysis that this would increase demand. Without this additional demand there will be a complete mismatch between what we achieve and the money we spend. And talking about money, you recall that I said that my purse is empty.

Let me finish by saying that it is time to act together again, especially since we all agree that there is no way back to the CAP of the sixties and the seventies.

I am looking forward to a constructive debate on the various issues

Thank you

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