Dairy crisis: temporary cap on production is essential

​Jacques Blanc

The regulation of milk production volumes would have a rapid and positive impact on the incomes of all producers according to a study presented to local and regional leaders meeting yesterday at the European Committee of the Regions (CoR) in its Commission for Natural Resources (NAT). In the light of this study, which bears out strong warnings issued by the CoR back in April 2015, the Committee is calling on EU agriculture ministers meeting today and tomorrow in Luxembourg to take urgent steps to stabilise the market.

On the sidelines of the meeting of EU agriculture ministers in Luxembourg, the Commission for Natural Resources of the European Committee of the Regions today held a round table on market measures to cap milk production, at which a study was presented on the “Market Responsibility Programme" (MRP). As the dairy industry is experiencing a serious and persistent crisis, and no response is forthcoming from the European Commission, local and regional leaders, committed to saving jobs and the dairy industry as a whole, wanted to assess the feasibility and potential impact of this programme put forward by the European Milk Board, to be applied when the milk market is threatened by imbalance.

The study shows that:

  • European regulation of production volumes would have a rapid and positive impact on farmgate milk prices. This conclusion calls into question the theory that a decrease in production volumes at EU level alone could not have an impact on European prices in the context of a global market.

  • Temporarily capping production volumes would have a very positive impact on the incomes of all European producers. The baseline scenario, with a 6% cut in volumes of milk over a year, would see an increase in the gross margin of producers of the order of EUR 6 billion as a result of a 14.6% increase in the milk price and a 38% increase in the gross margin.

  • The cost of the voluntary reduction programme would amount more or less to the EU budget made available to finance the emergency measures taken in response to the crisis in the agriculture sector, which had a limited impact on producers’ incomes.

According to Jacques Blanc (France), mayor of La Canourgue and CoR rapporteur for the opinion on regulating price volatility of agricultural products: “This study bears out the opinion of the Committee, if proof were needed. It seems that the Commission has still not grasped the full extent of the problem and is content to offer de minimis aid to producers and an expansion of public storage, with no effect on overproduction. The EU's agriculture ministers meeting in the Agriculture Council today and tomorrow should urgently supplement the measures to aid cash flow with measures that will stabilise the market, rapidly restore milk to a price that guarantees producers a livelihood and secure the future of the sector and of livestock farming regions. The future of our regions depends on it ”.

Back in April 2015, the Committee of the Regions warned the European authorities in its opinion on the future of the dairy industry that the dairy market was deteriorating. The Commission, however, was continuing to insist the market would remain favourable in the short to medium term. The Committee of the Regions called on the Commission to introduce measures to safeguard the incomes of producers and, in particular, to examine the Market Responsibility Programme of the European Milk Board.

Note for editors

- The CoR study Evaluation of the Market Responsibility Programme put forward by the European Milk Board taking 2014 as a test year can be consulted here

- Opinion of the European Committee of the Regions on The future of the dairy sector, adopted on 16 April 2015