Secretary Gove, Councillor Hiranaka, Dr Wang, Mr Bauer,
It is an honour to join you in Belfast for the World Dairy Summit. This region has a long and strong tradition of grass-fed dairy farming, and of course Belfast has always been a city firmly associated with global trade, so we are in a good place to host this high-level discussion.
Before I begin, I want to thank Dr Judith Bryans for her superb work preparing this forum. Anyone who knows Judith will not be the least bit surprised - the skill and attention to detail she has displayed in organising this event is also evident in her day job as Chief Executive of Dairy UK. I was indeed honoured to receive an acknowledgment of my work from Dairy UK earlier this year, for which I am grateful.
I want to urge all delegates to use this week productively. The discussions which take place here, and the outcomes you reach, will have a strong influence on the sector's medium-term success. I am therefore calling on you to heed which direction the wind is blowing and make sure the wind is at our backs.
In the 21st century, the dairy sector has a vital role to play in feeding the growing world population with safe and nutritious products. There will be strong opportunities for increased market access and of course, strong opportunities for increased profits.
But dairy product sales in the 21st century must also follow the market imperatives of the 21st century. Put simply, this means that dairy farmers must innovate, cooperate and follow market signals in determining their production choices.
And they must do all this while contributing more to the fight against climate change and environmental degradation.
We all have a role to play in reaching this goal: politicians, policymakers, farmer organisations, co-ops and individual farmers must all assume their share of responsibility.
(Global Markets – EU Exports)
From the European perspective, our dairy sector is still adjusting to the post-quota environment. High hopes for a post-quota bonanza in 2015 were dashed when the industry was faced with a perfect storm of negative factors: the Russian ban, the global dip in commodity prices, a slowdown in dairy purchases by China and domestic increased production.
The European Commission took immediate action, supporting the sector with a package of structured aid measures. These measures have thankfully made a decisive difference, and the EU Milk Market Observatory's data and assessment show that milk prices are moving in the right direction.
Of course, it is still a volatile market, and we will need to watch signals on supply and demand and be able to adapt as quickly as possible.
Average EU farm gate milk prices reached 35.3 c/kg in August 2017, 9% higher than the last 5 years' average.
Our aim now is to continue the march towards stronger market orientation while giving our producers better tools to be more resilient, more sustainable, and ultimately more successful.
Over the next ten years, global consumption of dairy products is expected to continue increasing at an annual rate of 1.8%.
This is why I have been travelling the world to find new markets for our dairy products. And this work is paying off: EU agri-food exports continued to grow in 2017. Our most recent figures showed monthly exports at a record level of €11.5 billion, adding up to a 12-month value of more than €130 billion.
The dairy sector accounts for more than half of our current agri-trade surplus – a fact which confirms the importance of the sector.
EU dairy exports are performing extraordinarily well this year. By August, total dairy exports have increased by more than 8% in volume and close to 23% in value.
This means a total value of some €6.3 billion - €1.2 billion more than last year.
Only butter, due to current high prices, is suffering a fall in exported volumes. But when it comes to value, butter exports have improved by 12%.
EU SMP exports are rocketing with an impressive increase of 43% in the January to August period. And this increased volume translates into a 57% increase in value. The value of EU SMP exports has increased this year by €430 million.
However, we do need the address the issue of the significant SMP stocks accumulated during the crisis years 2015 and 2016.
While this public intervention had an undeniable market stabilisation impact, the very existence of those public stocks is weighing on the market.
I also believe we must avoid new buying-in under public intervention next year, without due market justification.
One option would be to start the next campaign (from 1st March) with buying in through a tender procedure. That means we decide together what volumes should be accepted and at what price.
To make that possible, the ceiling for buying-in at fixed price (currently 109 000 tonnes) needs to be set at zero in 2018. This is a Council competence and the idea is currently being examined with Agricultural Ministers.
You should not misunderstand what I am putting on the table - intervention will remain available as foreseen by the basic act, but it would be operate it in a controlled manner, on the basis of prevailing market conditions. This would be done through decisions being taken on a monthly basis on bids received from operators from March until the end of September 2018.
Meanwhile, figures for EU cheese exports show the strength of the EU dairy sector: in 2016, only two years after the Russian import ban - which meant the loss of an outlet for one third of EU cheese exports - EU operators managed to find alternative customers and outstrip pre-embargo export volumes.
Figures for 2017 confirm this positive trend is far from over: EU cheese exports by August increased by 7% in volume and 14% in value.
But trade has to be seen both as an opportunity and as a challenge for the dairy sector: we need to export some 13% of EU milk production to preserve the domestic balance. This means we have to remain competitive on world markets.
(Market orientation – Risks & Opportunities)
Market orientation and the capacity to adapt to new and unforeseen circumstances are the keys to success.
We have seen recently how big swings in market patterns can occur in relatively short time periods. Butter prices have doubled in only one year, leading to an unprecedented fat and protein asymmetry.
It was not long ago that butterfat was the burden for dairy production and protein the shining star.
After butter reached historical prices, scoring a new record week after week, now they appear to be easing down. Nobody knows where the trend will end although there are reasons to believe that increased demand for butter is a structural phenomenon.
The EU dairy industry must therefore anticipate this evolving scenario and adapt to it accordingly.
Clear market signals must be followed. In recent times, there has been a modest milk production increase, following a period of contraction.
While this is a normal reaction to improved market conditions, farmers need to keep their heads cool and not overreact to increased milk prices. Nobody wants to go through a difficult oversupply situation again next year.
Milk prices are good today precisely because there has been a rationalisation in milk supply, including through the Commission's support measures.
Let's not jeopardize the balance that has cost us so much to achieve. An integrated and professional approach between producers and processors is needed to make the most of this delicate turning point.
(Resilience – Future CAP)
We are putting in place new and improved supports to make farmers more resilient on global markets.
First of all, we are making the CAP far simpler. Indeed, simplification has been a key priority from the outset of my mandate. A lot has already been achieved and efforts are continuing.
In the short-term, Commission services are working on new proposals to incentivise the use of technologies in our control systems.
And we are currently in the final stages of bringing in the so-called Omnibus Proposal, which sets out a range of simplifying technical changes to the CAP.
These include a sector specific income stabilisation tool, simpler rules for accessing credit and other financial instruments, and increased support for Producer Organisations.
It is my hope that these will be applicable as of 1 January 2018.
For the future, we are working towards an even simpler and more modern CAP. The policy already provides a series of complementary instruments to support farmers and make them more resilient:
Direct Payments in Pillar One provide farmers with a basic level of security and stability;
We maintain a safety net for severe market disturbance;
And we have risk management measures in Pillar Two, such as support for insurances, mutual funds and an income stabilisation tool; as well as options for investment and diversification.
Moreover, research and innovation - financed via Horizon 2020 and rural development funding – have a vital role to play. Translating research and innovation into agricultural practice via training and knowledge transfer, and via investment in smart farming and advisory services, is the clear way forward in terms of competitiveness, resource-efficiency and simplification.
These possibilities are already there. For the future, cooperation among farmers and along the food chain should be fostered, including mutualisation and integrated services, for risk sharing purposes.
And we have to invest more in farmers' involvement in the knowledge economy via education, training, networks, and knowledge transfer.
This will strengthen the entrepreneurial capacity of EU farmers, streamline dairy businesses and reduce the workload from both a physical and administrative point of view. And – crucially – it will also enhance the sector's ability to produce in a sustainable and climate-friendly way.
Our international commitments to reduce the impact of agri-food on the climate and environment - notably the Paris Climate Agreement and SDGs - demand action immediately.
And global consumer sentiment increasingly demands more sustainable food production too. So making our production systems greener is a win-win.
Delivering real sustainability through greater innovation will provide new opportunities. It is estimated that investing in the bioeconomy could create 700,000 additional EU jobs by 2030. The role of the farm is central to this equation: more value added will generate more jobs for rural areas.
I would like to recognise the ambition of the dairy sector in meeting this challenge. The FAO took the unprecedented step of signing a partnership with the International Dairy Federation last year, known as the Dairy Declaration of Rotterdam.
The Declaration recognises the role of dairy in helping to deliver the United Nations Sustainable Development Goals. And you are the only sector to sign such a declaration with the FAO.
In conclusion, ladies and gentlemen, we all see the potential for the dairy sector to succeed in the coming years, but we all have to work hard to make it happen.
For my part, I pledge that the European Commission will work closely with you to deliver realistic and results-oriented solutions.
I wish you the very best of luck for this Summit, and I look forward to hearing the outcomes of your discussions. Thank you.