PURPOSE: presentation of the Commission report on the
development of the dairy market situation and the operation of the
"Milk Package" provisions.
BACKGROUND: the conference "The EU dairy sector:
developing beyond 2015" held in Brussels on 24 September 2013
explored new challenges that the milk sector will face and
discussed whether additional instruments were needed and feasible,
taking into account the end of the quota system in 2015.
This report brings additional elements for the
discussion and the Commission is keen to continue the debate with
Parliament, the Member States and stakeholders on how best to
manage the markets once the quotas have disappeared with a view to
making further proposals where appropriate.
CONTENT: the main findings of the report, presented by
the Commission in accordance with Regulation (EU) No 1308/2013 are
as follows:
- Market development to
date: the EU milk
market is currently in a quite favourable situation. The EU average
milk price in January 2014 was 40.03 c/kg which is 17% higher than
in January 2013, and the highest average milk price for January
ever recorded (statistics since 1977). This upward trend has also
been observed in the price of dairy products, although butter
prices have been under some pressure since the beginning of 2014.
Up to now, the strong global demand has supported firm
prices.
However, a correction in prices should not be
excluded, given the milk production increase observed across the
major exporters. The medium-term prospects for milk and dairy
commodities are favourable on both the world and domestic markets.
World demand remains dynamic, especially in the emerging economies.
Despite the slowdown in economic growth, dairy products are
featuring more prominently in peoples diets due to a higher
proportion of middleclass households. Production increases
resulting from the lifting of quotas can be expected especially in
those Member States currently restricted by the quota such as
Ireland, Germany, the Netherlands, Denmark, Austria and Poland, as
well as in France. Production will depend on the pace of
consumption increase in both the EU and the world and on other
factors such as environmental constraints.
- Milk package
provisions: the "Milk
Package"
was published in March 2012, has been fully in force since 3
October 2012 and applies until 30 June 2020. Implementing and
delegated regulations were published in June and September
2012.
The Milk Package provisions have been
transposed into national legislation. 12 Member States have
provided for compulsory contracts between farmers and
processors. In two other Member States codes of good practice
inspired by the Milk Package have been agreed between farmers and
processors organisations.
Almost all Member States have adopted national
criteria for the recognition of Producer Organisations
(POs), though some only recently. In 6 Member States a total of 228
POs were recognised by the end of 2013, a number of which existed
before the Milk Package came into force. The creation of (new) POs
requires time and of course a strong dynamic coming from farmers
themselves. The recent favourable market developments and prospects
might not have stimulated farmers to join in POs. In this context
potential incentives to encourage farmers to enter into joint
production agreements have been provided in the reformed Rural
Development Policy (support for setting op of POs, new measures on
cooperation and eligibility of groups of farmers for a series of
rural development measures). Furthermore, the possibilities for
extension of certain rules of POs and compulsory contributions for
non-members might stimulate the creation of large POs.
- Collective
negotiations under the Milk Package have been conducted by
recognised POs in four Member States. Such negotiations lead to
actual deliveries in 2013, varying between 4 to 33% of the total
deliveries in the respective Member States. Regulation of supply
for PDO/PGI cheese has, so far, been provided by 2 Member States
for 3 cheeses. Further initiatives have been announced.
- Inter-branch organisations
(IBOs): the
possibilities for extension of rules and financial contributions
referred to above also apply for interbranch organisations (IBOs)
and might be an incentive for their creation. So far, IBOs have
been recognised in four Member States. It is too early to see
significant effects of the Milk Package on the milk sector in
disadvantaged regions. In so far as data are available and based on
the variety of criteria used by Member States to identify
"disadvantaged regions", the trends of milk production in those
regions vary significantly between Member States and between
regions within the same Member State. Nevertheless, in several
Member States the share of deliveries to cooperative processors in
disadvantaged regions is reported to be higher than in other
regions. It was not possible to obtain concrete data on activities
of POs in disadvantaged regions.
- Under the new CAP
(2014-2020), the
dairy sector is equipped with a safety net (intervention buying-in
for butter and skimmed milk powder, private storage aid for butter
, skimmed milk powder and PDO/PGI cheeses), coupled with a
regulatory framework for the Commission to react to exceptional
circumstances (e.g. extension of the intervention buying-in period,
private storage aid for other dairy products, export refunds,
authorise a temporary derogation from competition rules as regards
agreements and decisions of recognised organisations to take
certain measures, exceptional counter-cyclical payments). In
addition, milk producers benefit from direct payments and rural
development programmes, under which Member States enjoy a
considerable leeway to target measures specifically to the milk
sector.
- Creation of a milk market
observatory: the
idea of a European Milk Market Observatory was launched in 2013 and
is currently being implemented by the Commission services. The
Observatory is a tool within the European Commission responsible
for the dissemination of market data and short-term analysis for
the dairy market, with the involvement of producers, processors,
trade and retail as well as independent experts, and the ambition
of addressing the growing need for transparency through more
detailed and timely information. Stakeholders contribute with their
expertise and market knowledge, adding a qualitative aspect to the
quantitative approach of data collection and market analysis. The
ultimate objective is to give quantitative and qualitative tools
for economic operators to increase their market awareness and help
them with their business decisions. The Observatory will also be in
a position to send early warnings to the Commission services, when
the market situation so requires.
Next steps: the Commission will pursue the
debate to address these concerns. In particular, it will explore
the need and scope for additional tools for better anticipating
crisis situations and for coping better with crisis situations and
market volatility. Additionally, further analysis is needed
to find more efficient ways of supporting the milk sector so as to
contribute to improved competitiveness and sustainability of milk
supply across the EU after thirty years of milk quotas. The debate
on the instruments already in force and the need for additional
ones will take place without delay, before the next Commission
report on the operation of the Milk Package and on market
developments scheduled for 2018.