Dairy subsidies reintroduced in Europe

Following the recent slump in prices for milk and dairy products, European Agriculture Commissioner Mariann Fischer Boel has pledged to introduce new measures to support the market. The commission is reintroducing export refunds for butter, cheese and whole and skimmed milk powder. When intervention buying for butter and SMP begins in March, the commission undertakes to, if necessary, buy more than the pre-determined quantities through regular tenders. In November, the commission reintroduced private storage for butter with effect from 1 January 2009 — including for butter produced in December. This represented an introduction of private storage earlier than is usually the case.

"The severity of the fall in milk prices over recent months has surprised many," said Commissioner Fischer Boel. "I have spoken to many producers during my travels to different Member States and their anxiety is clear. Now it is time for the European Union to help. Measures introduced in the Health Check will give the dairy sector an important boost, but we need to do something now because the Health Check will only apply from next season. I truly believe the measures I am proposing today will go a long way to stabilising the dairy market.

“Following the unprecedented price rise for milk and dairy products in 2007 and the beginning of 2008, the situation on the dairy market has now been completely reversed. With increased supplies on the world market and reduced demand on the internal market, market prices for dairy products have been forced down to close to or even below intervention levels. Obviously, the price paid to milk producers follows the same route with substantial price decreases already recorded and with further falls likely.

“As regards intervention, buying of butter and skimmed milk powder will resume on 1 March (with production from February being eligible) and remains available until the end of August. The first 30,000 tonnes of butter and 109,000 tonnes of skimmed milk powder will be bought in at a predetermined price (intervention price). We expect that this quantity of butter will be taken quite quickly and consequently it will be necessary to support the market beyond this limit. As was decided in the Health Check, further quantities may be accepted with prices to be fixed through fortnightly tenders. Commissioner Fischer Boel has asked the services to prepare for a decision to be presented to the Management Committee to open up this facility, should the 30,000 t limit on butter or the 109,000 t limit on skimmed milk powder be reached, in order to avoid any suspension of intervention during this period of depressed prices.

“As regards export refunds, it is now time to reactivate this instrument. A sustained period of high prices on the world market led us to suspend export refunds ever since June 2007. With world market prices now below EU intervention and market prices, our exporters are no longer able to compete. This situation is aggravated by the already existing difficulties for our exporters as a result of the financial/credit crisis. Export refunds will be activated not only for butter and skimmed milk powder but also for all other dairy products which were eligible in the past, mainly whole milk powder and cheese. Refunds for butter and skimmed milk powder are fixed by tender with the next round of bids to be decided on next week. The frequency of the tenders will be increased from once to twice a month in order to improve the efficiency of the system.

“As in the past, the use of export refunds will be applied in conformity with our rights and obligations under the WTO. As to the specific level of refunds, this will depend on the offers we receive from the trade and will be judged according to the usual objective criteria in order to ensure that refunds are only given to the extent necessary.

“With these measures, the commission intends to send a clear signal to milk producers and the dairy industry that the commission stands ready to make full use of our available instruments to support the market and the producers' income.”