Tag: milk

Posted on

Supply management in milk policy

Over on the ARC2020 website, they are having a debate on the #MilkCrisis to which I was asked to contribute. Below is my contribution to that debate.

“The weighted average milk price for the EU-28 in May was 26.6 c/litre, a price last seen during the last trough in the price cycle in 2009 when the milk price bottomed out at 24.39 c/litre. The reasons for the current downturn are well known.

Global dairy product prices reached record levels in 2014. EU milk prices reached a record high of 40.2 c/litre in the winter of 2013/2014, averaging 37.3 c/litre over the 12 months in 2014. Milk supplies around the world responded to these high prices in the expectation of an inexhaustible demand for dairy products from China.

Increased supplies were facilitated in the EU by the removal of quotas in April 2015 although expansion had begun long before. EU production increased by more between the years ending April 2014/2015 when quotas were in place than it has done between the years ending April 2015/2016 after quotas were removed.… Read the rest

Posted on

Milk policy in the EU – a case of policy incoherence

While milk producers in the EU struggle with low milk prices, the EU and its member states struggle to come up with a coherent policy to address the issue. Milk prices will not recover until there is a better balance between supply and demand. I have previously written a number of posts (here and here) in which I have described the policy responses introduced in response to the sharp fall in milk prices since their record high in early 2014.

These responses include measures designed to reduce supply. Specifically, the Commission has activated Article 222 of the CMO Regulation which suspends competition law in the case of producer organisations, co-operatives and inter-branch organisations and allows them to voluntarily limit supply with a view to raising the price of milk. The Commission has also indicated that it is prepared to approve higher levels of state aid to individual farmers who voluntarily freeze or reduce production compared to a reference period in the dairy, pigmeat and fruit and vegetable sectors.… Read the rest

Posted on

Temporary supply management for milk offers no solution

The agenda for Ministers meeting at the Agriculture Council meeting tomorrow Monday 14th March includes a discussion of the difficult market situation facing a number of agricultural sectors, including dairy, pigmeat and fruits and vegetables. Ministers will assess the adequacy and effectiveness of the market support measures currently in place, and whether additional measures could be envisaged.

At last month’s February Council, member states were invited to submit concrete proposals on possible additional measures, on top of the €500 million aid package adopted by the Council last September (extraordinarily, only 10 out of 28 member states have so far introduced schemes to spend this money). More than 100 initiatives and measures were submitted, which have been summarised by the Dutch Presidency under five headings:

• Extension or reactivation of existing measures, like storage
• Flexibility in implementing the current regulatory framework, for instance as regards the recovery of penalties
• Accelerating already launched initiatives, like addressing unfair trade practices in the food supply chain
• Preparatory and supporting actions like studies or setting up monitoring bodies
• New measures, such as support to producers who voluntarily reduce their milk production.… Read the rest

Posted on

Some thoughts on the European milk crisis

On 7th September, around 5000 European farmers demonstrated on the streets of Brussels due to falling dairy and meat prices. The demonstrators demand, amongst others, a review of the intervention system on the milk market, temporary reinstallation of milk quotas, some early direct payments to solve liquidity problems and a marketing fund assisting to sell agricultural products outside the EU.

While reading the news, an agricultural economist might have the following fundamental questions in his/her head.

1. The end of the quota system, an issue on the European policy agenda for many years, has resulted in limitless production, especially in countries with comparative advantages. However, it seems this crisis was very much unexpected at the Commission despite their economic studies dealing with the post-quota European milk market. Why are we so shocked about the simple fact that increasing supply decreases prices?

2. Farmers are complaining that the price of milk has just fallen dramatically and they are producing loss.… Read the rest

Posted on

Did we really need the Milk Package?

On 25 September last, the Commission organised a dairy conference in Brussels with 400 stakeholders to discuss the evolution of the EU dairy sector after the end of dairy quotas at the end of March 2015. In his opening speech, Commissioner Ciolos noted that the conference was taking place in a favourable context in terms of the milk market but raised the question whether the market management toolbox now available under the CAP post-2013 proposals is sufficient to enable the sector to adequately anticipate and react to crises in the future.
Commissioner Ciolos referred back to the 2009 milk crisis which led to the establishment of the High Level Expert Group on Milk and ultimately to the introduction of the Milk Package in 2012. This has been incorporated into the revised single Common Market Organisation regulation now waiting for approval by Council and Parliament.
What the 2012 ‘Milk Package’ does
The Milk Package contained two mandatory elements and three optional elements for member states.… Read the rest

Posted on

More supply management demanded in COMAGRI single CMO report

The French EPP member Michel Dantin is the COMAGRI rapporteur for the Commission’s draft revisions of the single CMO regulation. His draft report is detailed and comprehensive – he alone has tabled 434 amendments to the Commission’s draft regulation. Many of these amendments implement the two guiding principles which animate his report, namely, distrust in the ability of markets to always work satisfactorily where agriculture is concerned, and the desire to emphasise the legislative role of the Parliament vis a vis both the Council and the Commission.
Mr Dantin is a believer in the theory of ‘agricultural exceptionalism’ and that farmers require state assistance to operate in dangerous markets.

The fact that agricultural markets are, as a result, becoming more volatile implies first of all that the CAP budget, especially where the Single CMO is concerned, has to continue on its present scale if it is to cope with the crises which can, at any moment, threaten Europe’s agricultural production potential and hence jeopardise the CAP’s prime aim, namely to ensure that Europeans can enjoy food security.

… Read the rest
Posted on

Franco-German position on future of the CAP

This week the governments of France and Germany have published a short document setting out their common position on the future of the common agricultural policy. It makes for fairly light reading though the following points are worth remarking on:

– The common position endorses further moves towards greater market orientation in the CAP but suggests countervailing measures are needed “to buffer devastating effects of growing price volatility and market crises”.

– There is nothing concrete on the future budget of the CAP and it is stressed that “a final decision on all questions relating to finances will be made when decisions are made on all policies and the entire EU financial framework”. In other words, there is not going to be another stitch-up like the Chirac-Schroeder deal of 2002 which effectively fixed the CAP budget for the next 11 years, short-circuiting the normal EU budget-setting processes.

– The two pillar structure of the CAP should be maintained, and no national co-financing should be required of pillar one expenditure (i.e.… Read the rest

Posted on

Lessons from the 2009 EU dairy market crisis

The EU dairy market is now recovering from the severe drop in milk prices in 2009. Perhaps the clearest sign of this recovery is the setting of export refunds on dairy products to zero since mid-November, as world market prices for dairy products have strengthened in recent months.

It is thus an opportune time to evaluate the EU’s response to the crisis, and to see what lessons might be drawn for how the Union can address similar problems in other farm sectors in the future. My view is that there is a lot to be learned from the dairy crisis, and that the outgoing Commissioner deserves credit for the way she handled it.

EU milk prices improving

Let us first review the evidence that the milk market is improving. The trends in the EU market prices (proxied by the German price and represented by the blue line) and the EU intervention price (the red line) for butter and skim milk powder (SMP) have been graphed by CLAL.it… Read the rest