1 DAIRY MARKET
SITUATION
(a)
(30825)
12289/09
+ ADD 1
COM(09) 385
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Commission Communication: Dairy market situation 2009
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(b)
(30790)
11905/09
COM(09) 354
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Draft Council Regulation derogating from Regulation (EC) No 1234/2007 ("Single CMO" Regulation) as regards the 2009 and 2010 intervention periods for butter and skimmed milk powder
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| Legal base | (a) —
(b) Article 37EC; consultation; QMV
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| Department | Environment, Food and Rural Affairs
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| Basis of consideration | Minister's letter of 21 October 2009
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| Previous Committee Report | HC 19-xxvii (2008-09), chapter 6 (14 October 2009)
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| To be discussed in Council
| See para 1.8 below |
| Committee's assessment | Politically important
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| Committee's decision | (a) For debate in European Committee A
(b) Cleared
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Background
1.1 Although the dairy sector benefited from the
general increase in food prices in 2007, milk prices then dropped
significantly, leading to what the Commission has described as
"substantial unrest" among dairy farmers. This was considered
by the European Council in June 2009, when the Commission was
invited to present an in-depth market analysis within the next
two months, including possible options for stabilising the market,
consistently with observing the outcome of the "Health Check"
of the Common Agricultural Policy carried out in 2008.
1.2 As we noted in our Report of 14 October 2009,
the Commission accordingly put forward in July 2009 these two
documents. Document (a) is a Communication on the dairy market
situation, which describes the dairy reform process, provides
an analysis of the market situation, summarises Community market
support measures, as well as other available instruments, and
outlines options for further action and discussion (including
measures to boost demand and reduce supply, to support producer
incomes, to restructure the dairy sector, and to increase market
transparency). Document (b) is a draft Council Regulation, which
would give effect to one of the measures identified in the Communication
— to extend during 2009-10 and 2010-11 the period within
which intervention buying may take place.
1.3 In our Report, we also noted that some of the
measures proposed in the Communication — such as extended
intervention and private storage aid, extended promotional funding,
the possibility for Member States to bring forward/offer advanced
payment of the single payment in exceptional cases, and extended
export refunds — had already been agreed in Management Committees
in July, but that the Government expected that there would still
be pressure to continue to increase direct support payments, and
that an initial discussion on other possible measures was due
to take place at the Agriculture Council on 7 September. It had
added that the options were limited, given the budgetary constraints,
and that, whilst a decrease in quotas was not contemplated,
the Commission had suggested that producers exceeding their individual
quotas should be penalised (possibly through the super levy),
on which there were mixed views and possible budgetary implications.
The UK did not however support the proposal to extend intervention,
which it regarded as a short term measure applied to a long term
problem.
1.4 When we considered these two documents on 10
September, we decided that, before reporting them to the House,
it would be sensible to hear what had transpired at the meeting
of the Council on 7 September when they were due to be discussed,
and our Chairman therefore wrote to the Minister asking that we
should in this case receive in good time his Department's usual
account of Council meetings.
1.5 We subsequently received from the Secretary of
State for Environment, Food and Rural Affairs (Hilary Benn) a
letter of 25 September, indicating that there had been substantial
discussion of the dairy market situation, with all Member States
sharing the Commission's analysis, and many wishing to see more
done to provide support (though without always being specific
as to what this should entail). The UK had noted that the market
situation had improved, and had urged caution on enhanced market
measures or changing state aid rules, whilst France and Germany
(supported by 14 other Member States) had tabled a declaration
calling for more support measures, together with a separate declaration
calling for the freezing of the planned increase in milk quotas.
However, as we understood that further discussion was due to take
place at the Council on 19-20 October (and perhaps subsequently),
we decided to draw the documents to the attention of the House,
but to holding them under scrutiny, pending further information.
Minister's letter of 21 October 2009
1.6 We have now received a letter of 21 October 2009
from the Minister of State for Food, Farming and Environment at
the Department for Environment, Food and Rural Affairs (Jim Fitzpatrick),
which says that the proposal on intervention (document (b)) was
formally adopted at the Council on 19 October. As regards the
dairy market situation, he says that, at a meeting of the Special
Committee on Agriculture on 21 September, the Commission told
Member States that it had raised several ideas with the European
Parliament, including doubling the de minimis level for
state aids to €15,000; amending Article 186 of the Single
Common Market Organisation (CMO) Regulation 1234/2007,[1]
to include the dairy sector among those where the Commission may
take action to deal with market disturbances; and providing new
flexibilities as regards the superlevy.[2]
In addition, it had proposed the creation of a High Level Group
to discuss medium term options, with the first meeting on 13 October
having looked at the contractual framework for the dairy supply
chain with particular reference to contract between producers
and processors. The Group is also to look at other areas, including
transparency and consumer information (including labelling), innovation,
research, and the possibility of a dairy futures market), and
is due to report back to the Council by 30 June 2010.
1.7 The Minister adds that, following an informal
meeting of Ministers on 5 October, the Council on 19 October had
a full discussion of a new Commission proposal[3]
on the extension of Article 186 of Council Regulation 1234/2007
and the superlevy, with most Member States supporting the first
of these, but with there being a wide range of views on the second.
The Council also considered a note by 21 Member States calling
for various immediate steps including a further use of market
measures, an extension of products available under the school
milk scheme, caution in selling intervention stocks, and the establishment
of a new €300 million milk fund. The Minister says that,
although other Member States queried the relevance of these proposals,
the Commission did indicate a willingness to propose a new €280
million fund for the dairy sector in 2010.
Conclusion
1.8 We are grateful to the Minister for this update,
from which we infer that there will be further discussion at the
meeting of the Agriculture and Fisheries Council next month, which
will be centred around the latest proposal which the Commission
produced on 9 October. We also infer that a qualified majority
does not exist within the Council for many of the measures put
forward by France and Germany (and other Member States), and that
the action in the short term is likely to be limited to that already
taken by the Commission itself or set out in its latest proposal,
with any action for the medium term awaiting the deliberations
of the High Level Group.
1.9 In the light of this situation, we have considered
carefully how to proceed. We shall in any case wish to consider
the Explanatory Memorandum the Government is due to provide on
the new Commission proposal, but, in the meantime, it does seem
to us that last summer's Communication (document (a)) does raise
a number of important issues in relation to the underlying situation
in the dairy sector, and the measures (and funding) available
to tackle them, which the House should consider further. We are
therefore recommending that document for debate in European Committee
A, but we are clearing the proposal at document (b), which has
now been adopted by the Council.
1 OJ No. L 299, 16.11.07, p.1. Back
2
A superlevy is payable if a Member State exceeds its quota. At
present, a Member State can "buy" quota from its farmers
and put it into a national reserve, which counts as part of its
total quota for determining whether a superlevy is payable: the
change now proposed would exclude any bought-up quota in the national
reserve from that calculation, thus reducing the level of production
at which the superlevy would become payable. Back
3
COM(09) 539, on which we currently await an Explanatory Memorandum. Back
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