The "Milk Package"
The so-called "Milk Package" was designed with a view to the longer-term future of the dairy sector following the end of the quota system in 2015. It has been fully applicable since 3 October 2012.
Drafted on the basis of the conclusions of a special High Level group set up after the 2009 milk market crisis, this series of measures is aimed at boosting the position of dairy producers in the dairy supply chain and preparing the sector for a more market-oriented and sustainable future. For example, it gives Member States the possibility to make written contracts between farmers and processors compulsory in the milk sector, and it allows farmers to negotiate contract terms collectively within certain limits. The new regulation was published on 30 March 2012 and the elements on producer organisations, interbranch organisations and the delegation of powers to the Commission came into force on 2 April, while all other elements entered into force 6 months later.
The package provides for written contracts between milk producers and processors and for the possibility to negotiate contract terms collectively via producer organizations. It also sets out new specific EU rules for inter-branch organizations, allowing actors in the dairy supply chain to dialogue and carry out certain activities. The package also entails a series of measures enhancing transparency in the market. A more detailed overview of the measures can be found below.
The measures established by the Milk Package will apply until mid-2020. The Commission is mandated to report in 2014 and 2018 on the market situation and the implementation of the measures. These reports (to the European Parliament and the Council) will assess in particular the effects of these measures on milk producers and milk production in disadvantaged regions and will cover potential incentives to encourage farmers to enter into joint production agreements.
Regulations and information
- Regulation (EU) No 261/2012 of the European Parliament and of the Council of 14 March 2012 amending Council Regulation (EC) No 1234/2007 as regards contractual relations in the milk and milk products sector
- Commission Implementing Regulation (EU) No 511/2012 of 15 June 2012 on notifications concerning producer and interbranch organisations and contractual negotiations and relations provided for in Council Regulation (EC) No 1234/2007 in the milk and milk products sector
- Commission Delegated Regulation (EU) No 880/2012 of 28 June 2012 supplementing Council Regulation (EC) No 1234/2007 as regards transnational cooperation and contractual negotiations of producer organisations in the milk and milk products sector
- Communication on the publication of the amounts of raw milk production as referred to in Article 126c(5) of Council Regulation (EC) No 1234/2007
- Competent authorities Milk Package as referred to in Article 126c(2)(f) of Council Regulation (EC) No 1234/2007 [187 KB]
- Slide show: The implementation of the Milk Package [2 MB]
The new rules set by the Milk Package
Written contracts between milk producers and processors
Member States have the possibility to make written contracts between farmers and processors compulsory and to oblige milk purchasers to offer minimum contract durations to farmers. The contracts should be made in advance of delivery and contain specific elements such as the price, volume, duration, details concerning payment, collection and rules for force majeure. All these elements should be freely negotiated between the parties and farmers may refuse an offer of minimum duration in a contract. Deliveries by a farmer-member to its cooperative are exempted from this contract obligation if the statutes or rules of the cooperative contain provisions that have similar effects as the prescribed contract.
Possibility to negotiate contract terms collectively via producer organizations
Farmers can join together in producer organisations (PO) that can negotiate contracts terms collectively, including the price of raw milk. The volume of milk that a PO can negotiate is limited to 3.5% of the EU production and to 33% of the national production of the Member States involved. For Member States with a production of less than 500 000 tonnes, the limit is set at 45% of national production instead of 33%. This measure is designed to reinforce the bargaining power of milk producers. The limits allow negotiations between POs of approximately the same size as a major dairy processor while maintaining effective competition on the dairy market.
Regulation of supply of PDO/PGI cheeses
Member States are allowed, under certain conditions, to apply rules to regulate the supply of PDO/PGI cheeses upon request of a producer organisation (PO), an interbranch organisation (IBO) or a PDO/PGI group. This measure is aimed at ensuring the value added and quality of cheeses with a protected designation of origin (PDO) or protected geographical indications (PGI), which are particularly important for vulnerable rural regions.
Specific rules for inter-branch organisations
Specific EU rules for inter-branch organisations in the milk sector allow actors in the dairy supply chain to dialogue and to carry out a number of activities. These joint activities concern, among others, promotion, research, innovation and quality improvement, for a better knowledge and transparency of production and the market.
Increased transparency and better information
Finally, so that developments of the market can be closely followed after the milk quota regime expires, timely information on delivered volumes of milk will be provided.
The Commission proposal of December 2010
>> Read the legislative proposal [61 KB]
>> Read the citizens' summary [26 KB]
The High Level Group
The High Level Experts' Group on Milk (HLG) was created following the 2008/2010 dairy crisis with a view to looking at medium and long term measures for stabilising the market and producers' income and enhancing transparency. The HLG found important imbalances in the supply chain, an increasingly concentrated industry dealing with many and dispersed milk producers and an uneven distribution of the added-value. This situation has led to a lack of transparency, rigidities and problems of price transmission in the supply chain.
The proposed measures stem from the recommendations issued by the HLG and endorsed by the Council's Presidency conclusions of 27 September 2010.
The first report on the phasing-out of milk quotas (2010)
In December 2010 the Commission has also adopted a separate report on the dairy market situation and the consequent conditions for smoothly phasing out the milk quota system. With only 3 Member States (DK, NL, CY) having produced more than their quota in 2009/2010 and milk quota prices now having a very low value, already zero in some Member States, the report concludes that soft landing is on track in an overwhelming majority of Member States.
Under these circumstances, it concludes that there is no reason to revisit the Health Check decisions with regard to the gradual increase in quotas and the end of the quota regime on 1 April 2015.
To further pave the way towards quota abolition, the Commission raises for consideration the organisation of meetings gathering experts of the Management Committee for the single CMO with the Advisory Group on Milk in order to assess market developments and prospects.
The second report on the phasing-out of milk quotas (2012)
In December 2012 the Commission adopted its second report on the evolution of the market situation and conditions for a smooth phasing out of the milk quota system, as requested by the Council as part of the 2008 CAP Health Check.
The report, which has been forwarded to the Council and the European Parliament, concludes that the "soft landing" is on track: in the vast majority of Member States, quotas are no longer relevant to limiting production and the quota price (paid by farmers seeking additional quota) is already zero or close to zero.