€150 million will be assigned to the milk sector in exchange for voluntary reductions in production, said Phil Hogan, the EU Commissioner for Agriculture and Rural Development who presented the measures to EU agriculture ministers on Monday.
Another €350 million will be allocated to EU member states to enhance liquidity and address problems in other areas of livestock farming.
Hogan said the Commission’s ultimate goal was “to see the much needed recovery of prices paid to farmers, so that they may make a living from their work and continue to provide safe, high quality food for citizens”.
Unaffordable production
The abolition of EU production quotas in April 2015 combined with the Russian embargo and dropping demand from China led to a collapse in milk prices.
A previous €500 million support package, agreed in September, recently came under fire by the European Parliament, which said it failed to effectively address market imbalances.
With this new package, the Commission aims to stabilise the market by compensating EU farmers for reduction in production volumes and bringing prices to a fair level.
According to the European Milk Board (EMB), a federation of dairy farmers with member organisations from 13 countries, the cost of milk production is not affordable anymore.
In April, milk production in Germany showed an average price of 25.78 cents, which did not even cover two-thirds of production costs, which are over 44.60 cents per kilogramme of milk. The picture is not different in other EU countries.
With average costs of 41.70 cents in 2015, Denmark suffered losses of over 10 cents, while the deficit for Dutch producers with costs of 44.50 cents was almost 14 cents per kilogramme of milk.
“Can we really treat those producing our food so unfairly and allow production in many regions of Europe to simply disappear?” President of the EMB Romuald Schaber asked.
How to spend the aid
Member states and struggling farmers expressed satisfaction with the rescue package, saying it will cover farmers’ immediate cash needs. But the success of the programme will depend on how the money is used.
Farm Europe, a think-tank specialised in EU farm policies, believes voluntary production cuts are an adequate response to the current market imbalance.
“However, its success will depend on the level of aid [to be decided by the Commission] provided for the tonnes that won’t be produced,” the think-tank said in a statement, adding that this should be greater than the marginal cost of producing a litter of milk.
Farm Europe says the most competitive producers must be encouraged to voluntarily reduce their production and warned that a 8.3 cents aid rate per kilogramme is unlikely to be effective.
The rescue package also provides that member states will have flexibility to define the mix of measures they will make available to farmers in terms of the €350 conditional adjustment aid.
Farm Europe stressed that the Commission should be strict on the measures ultimately decided by the member states, noting that the executive should in no way tolerate this aid to result in increased productions.