Brussels, 24/09/2013 (Agence Europe) - On Tuesday 24 September, various ideas were presented in Brussels on measures that could be implemented to help milk producers adapt to the end of quotas in 2015. However, it will not be easy to implement these measures - which were presented at the conference on the EU's dairy sector beyond 2015 - as the countries of the EU are so divided on the end-of-quotas issue and the market measures that should be preserved or created.
European Commissioner for Agriculture Dacian Ciolos recalled that the milk package entered into force in October 2012. Its implementation is currently under way. Eleven member states have established obligatory contracts and four plan to do so - essentially, the member states where cooperatives are not strong. Alongside this, the European Commission will continue its work in the more general framework on structuring the food chain to promote a better balance, more transparency and honesty in relations within the food chain.
The CAP reform can bring certain responses: - the new direct payments structure (direct payments more suited to the agronomic specificity of certain land, coupled payments and strengthened aid for disadvantaged areas, first hectares bonus to help small and medium-sized diversified farms); - the possibility of rural development sub-programmes. These could target a sector which is confronted with restructuring. “I think that this is about a tool very suited to certain regions that present a concentration of fragile farms”, Ciolos said; - strengthened tools to manage crisis situations, and tools that are more responsive and flexible.
The issue today is therefore to know if all these tools “are enough to intervene firmly and effectively should there be a crisis of overproduction, a fall in consumption or a quick and sharp increase in production costs without a price increase. Do we have appropriate tools to prevent crisis situations? If there are not enough tools, what type of tools should be implemented that are not too rigid?” These were the type of questions that Ciolos asked.
He admits that farmers from the most fragile regions risk being the first to be affected by a possible crisis. But not only farmers from the most fragile regions - those who are in debt in order to increase their production can also become fragile in certain crisis situations. And Ciolos proposed different options: - could using a form of exceptional regulation for a limited time be envisaged? If this is the case, what would the cost be? Should new forms of crisis management be designed that target areas in excess production more so as to protect the areas that are more fragile? How should structural instruments be used to strengthen our capacity to respond in such situations? Should a support mechanism for exceptional emergencies be envisaged that is targeted geographically and by sector in the case of slippage so as to protect fragile areas? Which is the most effective link on which we should focus our action - farms or dairies - in order to have more effectiveness at less cost to the budget? There is currently the crisis fund, “but we must use this fund in the most efficient way because it must not be forgotten that it has an effect on direct payments, as a result of the financial discipline”.
In order for these instruments to be effective, there is a need for transparency. In the context of the end to quotas, Ciolos says that a new system of data collection should be set up to make analyses available to the sector in a shorter space of time. Ciolos plans to propose this type of tool within the European Commission, creating a market observatory. The observatory would be responsible for making this analysis in the short term and presenting the data to the sector.
Lithuania's Minister for Agriculture Vigilijus Jukna recalled that milk production in Europe (15% of all agricultural production in the EU) plays a very important role in some countries. He spoke of “a number of problems” in the supply chain, and did not believe that all the possibilities offered by the milk package have been used. In Jukna's view, the position of breeders and their power of negotiation in food supply chain should be strengthened. 2015 will be a “delicate” year because the quota system will come to its end. Since the 2004 enlargement, diary production has never exceeded the quotas, which have therefore lost their relevance, in Jukna's opinion. He acknowledges, however, that the ending of quotas will meet with difficulties. “After 2015 we need regulation instruments, combined with safety nets to guarantee that prices don't fall below a certain threshold, and we must fight against the excessive volatility of prices”, he said. In his view, market instruments based on supply and demand must be implemented, and it is important to avoid the EU depending on supplies from outside the EU (and the EU should therefore continue to keep its high standards).
“We are speaking here about the top European agricultural sector in terms of value added”, said Paolo De Castro (S&D, Italy), the chair of the European Parliament's agriculture committee. What has been done thanks to the milk package is “very good, but it's not enough”, in his opinion. It is not enough to fight against the imbalances on the market which will take place after the end of quotas. These have regulated internal supply for over 30 years. There will, of course, be repercussions on the producers, said De Castro. The data do not seem very encouraging - between 2007 and 2013, 30% of dairy farms left the market. There is a trend towards concentration of supply, De Castro stated. Together with the rapporteur Michel Dantin (EPP, France), De Castro had proposed various flexible instruments for cases of crisis - such as the possibility of granting a bonus to producers who voluntarily agree to lower their production should there be an extended period of low prices. However, this controversial tool does not find support in the European Parliament and De Castro fears that they have “missed the boat”. He welcomed the decisions on extending the intervention period for powdered skimmed milk and milk, the reintroduction of private storage for cheese, and the standards on strengthening producers' organisations. “We must continue working on this basis”, said De Castro, who believes that new legislative measures should be introduced in the near future, otherwise there is a risk of a drastic decline in the number of dairy farms and areas for livestock farming, “especially in the most marginalised rural areas”. The Parliament's agriculture committee is working on the adoption of a report on maintaining dairy production in disadvantaged and mountainous areas. De Castro is concerned that the risk of price collapse is imminent.
Hermanus Versteijlen, acting Deputy Director at DG Agriculture in the European Commission, stated in particular that the sector has gained competitiveness quite well in terms of price with regard to the world market. He said that cheese is driving exports. With regard to butter, the market will remain stable until 2022. When it comes to powdered skimmed milk, China has become an important customer for the EU. “We are not expecting shocks in terms of production when quotas end in 2015”, he said (although he expects a small rise in milk production and a fall in the number of dairy cows).
Franck Chevalier presented the conclusions of the independent experts' analysis on the future development of the dairy sector (an EY (formerly Ernst & Young) study).
Romauld Schaber, the head of the European Milk Board (EMB), advocated new market instruments because prices are rising but do not cover the costs of milk production. Furthermore, he believes that there are risks of a surplus of milk in the EU. He advocated the establishment of a monitoring agency allowing flexible adjustment of milk volume to demand, to ensure security of milk supply in the EU. This agency would make recommendations on the volume of milk to be produced.
In the view of Jacques Carles from the movement for a world agricultural organisation (MOMAGRI), it is of the utmost importance to measure the impact of the end of quotas because no model exists that is capable of responding to this - except for the MOMAGRI model that is currently being extended in the dairy sector. Budgetary simulations for the 2013-2020 period show a “realistic” scenario in which prices fluctuate in similar proportions to those observed between 2006 and 2012 - three price peaks in 2015 (€350/t), 2018 (€340/t) and 2020 (€350/t), periods of crisis in 2016 (€270/t) and 2017 (€310/t) and 2019 (€270/t), and an average price of €320/t over the period.
Mansel Raymond, the head of the Copa-Cogeca working group on milk and dairy products, advocated: - a tool for stabilising income; - prioritising market measures such as public intervention and private storage; - and updating intervention prices to take account of the market reality. The futures markets and insurance systems are also included among promising tools, as they can allow market volatility to be diminished. In addition, contractual relations should be strengthened between farmers and processors, and the position of farmers within the chain should be improved, “thus allowing them to obtain a better price for their milk”. (LC/transl.fl)