Brussels, 09/12/2010 (Agence Europe) - On Thursday 9 December, the European Commission unveiled measures to boost the power of dairy farmers in their negotiations with dairies and to pave the way for dairy quotas being removed in April 2015. We reported on the contents of the draft regulation in October (see EUROPE 10246). It includes written contracts between dairy farmers and dairies, providing the option of collective bargaining for contracts by farmers' organisations (to give farmers greater clout in the negotiations), and introduces rules governing inter-professional organisations and measures to increase transparency on the market. The Commission suggests that the measures apply until 2021 and be subject to two mid-term reviews, one in 2014 and one in 2018. The proposal will be discussed by the EU Council of Ministers and European Parliament next year.
The suggested measures follow on from recommendations from the high-level expert group on milk and are four-pronged: contracts; farmers' negotiating powers; inter-professional organisations; and transparency. The group's other recommendations will be examined in: 1) the discussions about reforming the CAP (responding to volatility and encouraging innovation) and 2) the farm product quality package (sales standards and labelling of origin).
We have to learn from the crisis in the dairy industry in 2009, EU Agriculture Commissioner Dacian Cioloº told the European Parliament's agriculture committee, and take account of the Council's decision to scrap quotas on 1 April 2015. The new legislation aims to ensure security of supply of food and ensure balance in the countryside in many regions of Europe. Dairy production is strongly linked to the land and cannot be easily shifted from one region to another, he explained. Once the quotas are phased out in 2015, he said that dairy farmers would have to take a medium to long-term view to remain in business and invest in order to expand.
Contracts. The draft legislation includes the option of written contracts between dairy farmers and dairies in advance of deliveries that stipulate price, timings and amount of milk to be supplied, and the duration of the contract. Member states can make such contracts compulsory in their own country.
There will be a derogation for cooperatives as long as the way they operate amounts to much the same thing in practice.
Stronger negotiating power. To strike a better balance in negotiating powers in the supply chain, the draft legislation foresees allowing farmers to negotiate contracts by collective bargaining, represented by farmers' organisations. At present, daily farmers often do not know the price they will receive for their milk at the time of delivery because prices are set well after delivery without farmers having any say. Farmers often have little choice about which dairy or which transport company will take the raw milk. Getting together in organisations for the purposes of collective bargaining contravenes EU competition rules that outlaw price-fixing and the Commission is therefore suggesting quantitative limits. Dacian Cioloº explained that the Commission was giving farmers the option of collective bargaining for up to 3.5% of total milk production in the EU and up to 33% of milk production in their own country. This means that there would be at least three or four farmers' organisations per member state (and at least five in France and the six in Germany, the EU's biggest dairy farming countries), he added. The commissioner's department initially planned for 75% of dairy production at national level to be available, but this was reduced to 49% in the document submitted to the college of commissioners for approval on Wednesday 8 December. Under pressure from DG Competition, it has been further reduced to 33%.
The measures are not designed to put farmers at a disadvantage, explained the commissioner, noting that there are more than 950,000 dairy farmers in the EU and 5,400 milk processing plants.
The problem is the balance of power seen in practice and farmers need better ways of organising to negotiate decent prices.
Inter-professional organisations. Unlike farmers' organisations (which are made up of farmers alone), inter-professional organisations cover sections of the entire supply chain from farmers to processors, distributors and retailers. The draft legislation explains that inter-professional organisations can be useful in terms of quality improvements, promoting and spreading good practices and farming and processing methods. It is suggested that the same rules should apply to the dairy industry as apply to horticulture, adapted where necessary, to ensure that the arrangements are approved by the Commission and are not covered by the usual restrictions laid down by the competition regulations (like price-fixing and market share). The Commission suggests that inter-professional organisations would boost knowledge and transparency within the industry by publishing prices, volumes and the duration of contracts for the delivery of raw milk.
Disruption clause. The Commission also endorsed a report on the situation facing dairy farmers and criteria applying to the phasing out of milk quotas. The report concludes that there is no justification for changing the 2008 CAP health check decisions to gradually increase the quotas and end the quota system on 1 April 2015. The report says that in the event of a very serious crisis, it would be possible to consider that the time was right for using the “disruption clause” (Article 186 of the regulation on the common organisation of the market) that allows farmers to be given compensation for reducing milk production in highly specific circumstances. (L.C./transl.fl)