Brussels, 11/01/2008 (Agence Europe) - At a seminar on the future of the dairy and dairy products sector held in Brussels on Friday 11 January, the European Commission presented reports and arguments in support of increases of 2% per year in milk production quotas from 2009 until they expire in 2015. This scenario, to which the Commission already gave its support at the start of the debate on the common agricultural policy (CAP) “health check”, would mean that there would be no sudden fall in milk prices in 2015, when milk quotas are scheduled to come to an end.
“There is now a dominant view that quotas should be allowed to expire in 2015, as agreed in the 2003 reform,” Agriculture Commissioner Mariann Fischer Boel told those attending the seminar. However, the best way to do this, causing least upset when quotas end, had to be found. According to the Commission analysis, if milk quotas were to be gradually increased year on year from 2009, the price path should be relatively smooth, the commissioner said.
“If we do nothing before 2015” (when quotas will expire), prices will show an initial increase (following growing demand) before dropping “sharply” when quotas end, Fischer Boel went on.
Pierre Bascou of DG Agriculture presented a report on the impact of ending quotas. A “soft landing” such as is recommended for the moment by the Commission (a small annual increase in quotas between 2009 and 2014, before they expire in 2015) would mean: - stable milk prices before the end of quotas and a slight fall after 2015 (-0.9% if there is an annual 2% increase in, quotas and -2.9% with a 1% increase in quotas); - a slight increase in milk production (+0.8% before 2015, +0.6% after 2015, with the 2% quota increase scenario); - a rise in the price of powdered skimmed milk and a fall in the price of butter.
The Commission had also prepared a simulation of the consequences of this option (gradual increase in quotas between 2009 and 2014: - increased production in Austria, Belgium, Finland, Ireland, Italy, the Netherlands and Spain; - reduced production in Sweden, the United Kingdom and the new member states; - increased production (although lower than the rise in quotas) in the other EU countries.
If there were to be a “hard landing”, i.e. an end to quotas with no previous measures taken, milk prices would rise by 7% between 2009 and 2014 before falling by more than 8% as soon as quotas end in 2015 with disastrous consequences for most producers.
In conclusion, Bascou said that the 2% quota increase scenario was the one which provided the sector with the most gentle adjustment and that aid for butter still played a role in stabilising markets and milk prices.
Fischer Boel also argued for the proposal she made in December 2007 of a 2% increase in milk quotas from 1 April 2008: “The market needs this increase,” she said, given the strong demand from consumers for dairy products. The decision on whether to continue this increase after 2008 will be taken during the debate on the CAP “health check”, she said.
There were options other than increasing quotas to help prepare operators for the end of production quotas. Fischer Boel spoke of the possibility of authorising the sale of milk quotas among member states. This option is unlikely ever to see the light of day since several EU countries do not allow such trading among producers at national level. Other options felt by the Commission to be more realistic were: - getting rid of the levy; - eliminating or phasing out the fat adjustment; - balancing unused quota and quota overshoots at EU level.
Fischer Boel stated too that there were ways to help the areas that would be most affected by the ending of quotas: - rural development measures; - Article 69 of the regulation on the single payment scheme, which authorises member states to pay a part of decoupled aid to certain farms in a given sector.
She also took stock of the other instruments which could bring aid to the milk and dairy products sector.
Export refunds. “We should assume that the days of export refunds are numbered … This does not mean that we should abolish them tomorrow. But they should not be part of our long-term vision.”
Intervention. “Intervention should work as a genuine safety net,” the commissioner argued. “We should not be using it to set market prices.”
Private storage. Aid for private storage of powdered skimmed milk has recently been abolished, but remains for butter and cheese. There would not seem to be any justification for this, particularly for cheese. (L.C.)