MercoPress. South Atlantic News Agency

EU emergency meeting to deal with dairy farming crisis and export subsidies

European diary farmers protest spraying milk in fields

Less than two weeks after the start of a European dairy farmers’ strike, Sweden’s agriculture minister said that he would meet with other European agriculture ministers in Luxembourg on 5 October to discuss the ongoing milk crisis.

The European Milk Board welcomed the news of the meeting, saying that it will provide ministers with a much-needed push to reform dairy policies. Dairy farmers said they would halt their protests until the EU meeting, but threatened to resume if a satisfactory resolution was not reached.

”The politicians are moving. We will pause with one aspect of the farmers’ revolution. We will pause the delivery stop for now,” President of the French APLI Pascal Massol said in a statement. “If there are no serious and clear political decisions being taken to overcome the catastrophic situation of the dairy market, we will immediately start again,” he added.

Over 60,000 European dairy farms stopped or reduced milk deliveries on 18 September to protest a decline in prices and plans to do away with production quotas. Farmers dumped 350,000 liters in protest to follow through with the boycott. According to the European Milk Board, the delivery boycott caused the market to react, triggering an increase in spot prices.

The EU already provides heavy farm subsidies, but by July 2009 European milk prices had fallen 25% from the previous year. Dairy farmers claimed prices were too low to cover production costs. Industry groups are now pushing the EU to force an increase prices to 40 Eurocents per liter of milk. They have also demanded that excess supplies of milk be bought quickly to make a widespread price increase possible.

In November 2008, the EU agreed to raise daily output quotas by 1 percent each year before getting rid of them altogether. The decision dissatisfied dairy farmers, who demanded in a statement in February that the quota increases be “released for production only as and when required.”

To appease the upset dairy farmers, France and Germany have published a draft with new regulations for struggling farmers, which has been approved by 18 EU member states. The publication, presented by EU commissioner for Agriculture and Rural Development Mariann Fischer Boel to the European Parliament, proposes short-term changes to the quota-buying schemes and temporary aid of €15,000 for each member-state’s dairy sector. It also contains suggestions for long-term measures to improve the dairy industry.

But the European dairy sector largely remains unreformed, despite some recent efforts to ‘de-couple’ support from production levels of other agricultural products in the EU. In January of this year, Brussels re-introduced export subsidies for some dairy and poultry products; the payments had been suspended for two years. The move, which put in place 50 percent export subsidies for dairy products, drew harsh criticism from exporters outside the 27-member EU.

Export subsidies have long been one of the most controversial trade-distorting measures employed by rich countries. Many farm-exporting nations expect that a Doha Round agreement at the WTO would do away with such subsidies by 2013, which would coincide with an EU commitment made in 2005. Draft modalities of a Doha trade deal include such a provision, but so far negotiators at WTO headquarters in Geneva have been unable to finalize the accord, which would cut tariffs and subsidies around the globe.