Brussels, 28/10/2010 (Agence Europe) - European Agriculture Commissioner Dacian Cioloº is proposing to strengthen the position of milk producers in the food chain, thereby allowing them to make a better living from the market and get better prices for their products. He is also planning to put in place contracts between farmers and processors (dairies). These contracts will be optional. These proposals are contained in the package of proposals that the Commission is due to adopt in December. The aim is, through learning from the ordeal of the 2009 crisis which the milk and dairy products sector had to face, to respond to the specific problems of this highly individual sector.
According to a draft of this “milk package”, a copy of which has been obtained by EUROPE, and which could very well undergo change during the inter-departmental procedure in the Commission, the current structure of the dairy market exacerbated the seriousness of the crisis: market rigidity (because of the long existence of milk quotas and high institutional prices), lack of structural change, production chain players with little encouragement to respond to signals from the market (including price movement) and try to innovate and increase productivity.
The Commission says that a number of measures are necessary in the medium term, up until and after the ending of milk quotas in 2015. It notes, too, that “often concentration of supply is much lower than concentration at processing level”. This results in an “imbalance” in bargaining power between milk producers on the one hand and the processing industry (dairies) on the other. Furthermore, rigidities in the market mean that farmers have little choice of dairy to which to send their milk. These factors can lead to a serious lack of adaptation of supply to demand and unfair commercial practices. In particular, farmers often do not know the price they will receive for the milk delivered to dairies (the price is often set long after delivery). For the dairies, the quantity of milk to be delivered is not always well planned. Distribution of the added value in the chain is not balanced, especially with regard to farmers, and there is a significant problem of price transmission along the chain.
The Commission proposes to remedy these problems through proposals in four areas: contractual relations, producers' bargaining power, inter-professional/inter-sectoral organisations and transparency.
Written contracts. The Commission is proposing to encourage the use of written contracts, drawn up in advance, for deliveries of raw milk by farmers to dairies. These contracts, which are to be optional will include: - price, timing and volume of deliveries and duration of the contract. This proposal is fully in line with calls from the EU states in the Presidency conclusions of September (see EUROPE 10223). It should be pointed out that, according to the draft, member states can elect to make the contracts compulsory. To take account of their specific nature, cooperatives will not be required to have contracts on condition that their articles of association provide for rules that have the same objective.
Bargaining power. To enhance the position of milk producers in the dairy products supply chain, the Commission proposes to allow farmers to negotiate contract terms, including prices, collectively through producer organisations. For this, the Commission is introducing a provision that complies with agricultural law and makes provision for a quantitative limit expressed as a percentage of EU milk production. Thus, negotiation of such contracts by a producer organisation could take place on condition that, for example, the total amount of raw milk covered does not exceed 3.5% of total EU production, 75% of the total national production of the member state involved in the negotiations. Derogations from competition law apply until 2020.
Inter-professional organisations. While producer organisations are made up solely of farmers, inter-branch organisations also include processors, distributors and retailers. Inter-branch organisations can, therefore, play a useful role in research, improvement of quality, promotion and the sharing of best practice in production and processing methods. The Commission is proposing to apply the rules on the objectives of inter-professional organisations in the fruit and vegetables sector to the dairy sector, with appropriate modifications to tackle anti-competitive practices (price setting and market sharing). Agreements will have to be submitted to the Commission for approval. Inter-professional organisations could improve the quality of information on production and the market, publishing statistical data on prices, volumes and duration of contracts concluded for milk delivery.
Transparency. The Commission is proposing meetings between experts from the EU and from the Commission to assess the market situation and prospects. One of the aims is to encourage operators in the diary chain to assume more responsibility, taking account of market signals and adapting supply to demand.
The High Level Group on milk and dairy products, the recommendations of which provided the benchmark for drafting the Commission's recommendations, broaches other issues than the four mentioned above (contractual relations, producers' bargaining power, inter-professional/inter-sectoral organisations and transparency). The Commission will bring forward proposals on marketing standards and possible place of origin labelling on 8 December as part of its “quality package” (see EUROPE 10234 for the draft text).
The Commission will address the final issue, market measures within the framework of discussions on the reform of the common agricultural policy (CAP). Several EU countries are calling above all for the Commission to investigate new instruments to try to reduce volatility of incomes. The Commission is sympathetic to this request, as may be seen from the communication on the CAP towards 2020, which will be adopted by the Commission on 17 November (see EUROPE 10231 for the details).
Evaluation of the dairy sector will be carried out in 2014 and 2018. (L.C./transl.rt)