Policy instruments for the dairy sector
The EU's dairy policy dates from the 1960s. It helps to create stable market conditions for EU milk producers and processors. The policy has been continuously updated and is increasingly targeted at encouraging the whole sector to be more market-oriented.
Since 2008, the milk sector is integrated into the single Common Organisation of Agricultural Markets where the main market tools are set:
- market intervention,
- rules concerning marketing and production,
- trade with third countries.
EU milk production takes place within the framework of milk quotas which were introduced in 1984 in order to address problems of surplus production.
Each Member State has two quotas, one for deliveries to dairies, the other for direct sales at farm level. These quantities are distributed among producers (individual quotas) in each Member State. Where there is an overrun of the national quota, a surplus levy – or "super levy" - is payable in the concerned Member State by the producers in proportion to their contribution to the overrun during the quota year.
The quota regime will expire in April 2015. To facilitate a soft-landing for the end of the milk-quota system, the 2008 CAP Health Check set a gradual increase in quotas (5 times +1% every year) up to and including the milk quota year 2013/14.
Public intervention and private storage
Some market tools are available in the dairy sector, which work as a safety net in case of serious imbalance in the market.
One of these market tools is the buying-in of butter and skimmed milk powder into public stocks – known as "public intervention".
Another market tool is the granting of a financial support (aid) for private storage costs for butter. Due to seasonal variations in raw milk deliveries the production is high for a short period, which can destabilize markets. This aid helps producers to take product temporarily off the market, as an alternative to "public intervention".
Also export refunds can be used in cases of market imbalances.
Special intervention measures
Specific ad-hoc measures are also available to be mobilised in case of emergency or significant disturbances.
Aid is paid for the supply of milk products to pupils under the so-called School Milk Scheme. The Union aid – which is limited to a maximum of 0.25 litre of milk equivalent per pupil and per day - can be supplemented by National Aid.
The Commission may grant aid for skimmed milk and skimmed-milk powder intended for use as feedingstuffs or to be processed into casein and caseinates, when surpluses of milk products build up or are likely to occur. These aids have not been used since 2006.
Foodstuffs intended for human consumption must comply with explicit marketing standards to be marketed in the EU as milk and milk products or spreadable fats.
A major amendment to the single CMO regulation, known as the Milk Package, was adopted in 2012.
The package deals with contractual relations in the milk sector and provides for written contracts between milk producers and processors and for the possibility for farmers to negotiate contract terms (including price) collectively via producer organizations.
It also sets out specific EU rules for inter-branch organizations, facilitating actors in the dairy supply chain to dialogue and carry out certain activities.
The package also entails measures enhancing transparency in the market and possibilities for the supply management of cheese covered by Protected Designation of Origin or Protected Geographical Indication under specific conditions.
Trade with third countries
An import regime controls the entry of dairy products into the EU. Imports are subject to the issuing of a standardized import license and, in general, payment of an import duty (tariff).
The EU is the main exporter of dairy products worldwide. Under certain conditions, export refunds might be granted to enable exports to countries outside the EU on the basis of world market quotations. Such exports of dairy products are subject to the issuing of an export licence.
The dairy sector also benefits from direct aid and rural development programmes. It is covered by the EU quality policy and has to comply with a number of constraints and rules, notably related to public and animal health.