Brussels, 26/03/2015 (Agence Europe) - The EU milk quota regime will be permanently halted on 31 March 2015. This declaration was made on Thursday 26 March by the European Commissioner for Agriculture, Phil Hogan, who held a brief press conference (five minute intervention, before replying to three or four questions) on a subject that is, however, very sensitive because certain producers have concerns about a sharp fall in prices, following the end to the milk quotas. He said that this news should not be a surprise to anyone because the decision was made 12 years ago.
Phil Hogan said that producers would therefore have to depend exclusively on market forces. The Commissioner' style is rather direct compared to that of his predecessor, Dacian Ciolos. He said that they already had a competitive market and that prospects for market growth stood at 2% a year, “we can therefore look forward with optimism. The middle classes are growing in the world, European exports have more than doubled to South Korea over the past 10 years and the agreement with this country will enable us to benefit from the end of certain customs duties on milk products, particularly cheese, as well as benefit from the recognition of EU geographical indications, especially for cheese”.
Despite the existence of quotas, EU milk product exports have increased by 45% in volume and 95% in value over the course of the past five years. According to market forecasts, growth prospects remain very encouraging, particularly with regard to products with added value, such as cheese, but also the ingredients used in the manufacturing of nutritional products for sports and diet.
Impact on producers. Hogan pointed out that the producers had expressed their concerns but also indicated that in 2014, production had increased by 5.5% (without any problems on the market) and they have every reason to be optimistic about the future. The commissioner said that the European Investment Bank (EIB) and the Commission were planning to introduce a new financial instrument for farmers. In reply to questions from the press, Hogan said that: - after a fall two months ago, prices on the milk market had currently stabilised to the same level as they were two years ago (32.2 cents/litre); -if needs be, additional measures will be taken to help milk producers in the countries most affected by the Russian embargo (Baltic countries and Finland), “but at this stage, intervention is not necessary”.
Instruments exist in the event of crisis. The commissioner acknowledged that “the end of milk quotas could pose short-term problems in terms of price volatility but we have mechanisms available in the event of a crisis”. He referred to fixed-price contracts (between farmers and dairies), which would help to regulate product volume somewhat. The Commissioner explained that these possibilities were worth exploring in an effort to respond to the concerns expressed by producers and he concluded that “we will remain alert”. He said that the Milk Market Observatory would help them monitor action taken by actors on the market.
Extreme price volatility could be mitigated through a safety net organisation (public buying in of butter and skimmed milk powder and private storage aid schemes). The Commission has also the possibility to intervene in exceptional circumstances, as it was the case last year with the Russian import ban in the Baltics countries and in Finland. As well as the system of “decoupled” CAP Direct Payments, member states have a range of options open to them, which they decide at national on regional level. Options include an additional payment for areas with natural constraints and the possibility for voluntary coupled support for certain regions or certain sectors in fragile situations. In implementing the 2013 CAP reform, 18 member states have introduced a coupled payment for the dairy sector - worth just over €800 million in 2015. Also, under Rural Development Programmes, member states or regions have the flexibility to target support at specific challenges such as dairy farms in fragile areas. There is also the Milk Package, such as clearer rules on written contracts but more importantly increased bargaining power for producer organisations when confronting the industry. There is also a role for Interbranch Organisations in the dairy sector and promoting consumption (internal market and third countries). (Lionel Changeur)