Overview

The European Union is a substantial producer of milk and milk products and they are integrated in the common market organisation (CMO).

Milk production takes place in all EU countries and represents a significant proportion of the value of EU agricultural output. Total EU milk production is estimated at around 170 million tonnes per year (2017 data). The main producers are Germany, France, the United Kingdom, Poland, the Netherlands and Italy. Together they account for almost 70% of the EU production.

The EU dairy herd has been decreasing in recent years as the milk yield per cow has improved. In 2018 there were around 23 million cows in the EU, averaging 7000 kg of milk produced per cow.

Farm and dairy herd sizes vary enormously, as do yields. However, as the dairy sector develops throughout the EU, variations in yield and other technical factors have been reduced – less developed dairy producers are rapidly catching up with those who had restructured and modernised first.

Market intervention

The EU uses a number of mechanisms to protect the milk sector during times of increased market disturbance. Market intervention in particular provides a safety net in case of serious market imbalance, in the form of public intervention and aid for private storage.

Public intervention

Public intervention consists of the buying up of a good by public authorities, placing it in public storage for as long as needed, until market conditions allow for its release back on to the market. In the case of the dairy sector, public intervention is available for butter and skimmed milk powder (SMP).

Between 1 March and 30 September each year, a maximum quantity of 109,000 t SMP and 50,000 t butter complying with specific quality requirements can be offered by private operators, to be bought at a fixed price. Once these volumes are reached, intervention continues by tender until the end of the intervention period.

Public intervention stocks are sold back on the market via a tendering procedure, opened by a European Commission regulation.

The paying agencies of EU countries are responsible for managing and ensuring control of operations linked to intervention measures in the milk and milk products sector.

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Aid for private storage

Aid for private storage is another mechanism through which the EU protects the dairy sector from market disturbance. In the dairy sector, this support is available for butter, SMP and cheeses with a protected designation of origin (PDO)/protected geographical indication (PGI). This aid supports part of the storage costs while the products are temporarily withdrawn from the market. The opening of private storage aid is not automatic (unlike public intervention) and requires the adoption of a European Commission regulation.

Private storage schemes for butter and SMP usually finance storage costs for a minimum period of 90 days and a maximum of 210 days (this is defined in the European Commission regulation opening the scheme). The aid usually comprises a fixed rate per tonne, plus a daily amount per tonne.

Trade with non-EU countries

The EU is a major exporter of dairy products and is the biggest cheese and SMP exporter in the world.

Dairy exports under certain quotas opened by third countries are subject to the issuing of an export licence.

An import regime applies to the entry of dairy products into the EU. Preferential imports are subject to import licences and, in general, payment of an import duty (tariff). Several trade agreements, multilateral and bilateral, have resulted in preferential imports at reduced or zero duty, mostly in the form of import quotas.

Milk Package

The "Milk Package" introduced in 2012 was a series of instruments to improve the supply chain in the dairy sector and to increase its resilience following the end of the quota system in 2015.

Written contracts between milk producers and processors

EU countries can make written contracts between farmers and processors compulsory and oblige milk purchasers to offer a minimum contract duration to farmers. The contracts should be made in advance of delivery and contain specific elements such as 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 contracts.

Collective negotiation through producer organisations

Farmers can join together in producer organisations (PO) that can negotiate contracts terms collectively (within certain quantitative limits so as not to distort competition), including the price of raw milk.

Related information

Publication of the amounts of raw milk production

Rules for interbranch organisations

Specific EU rules for interbranch organisations in the milk sector allow actors in the dairy supply chain to engage in dialogue and to carry out a number of joint activities. These activities concern, among others, promotion, research, innovation and quality improvement, for greater transparency and a better understanding of production and the market.

Regulation of supply of PDO/PGI cheeses

EU countries are allowed, under certain conditions, to apply rules to regulate the supply of PDO/PGI cheeses upon the request of a producer organisation, an interbranch organisation or a PDO/PGI group. This measure is aimed at ensuring the value added and quality of cheeses with a PDO or  PGI, which are particularly important for vulnerable rural regions.

This instrument is currently applied for the following cheeses

Related information

EU quality schemes

The Milk Package report 2016

More information

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Legal bases

The legal bases for the EU milk and milk products sector is covered by EU regulation 1308/2013 on the common organisation of the agricultural markets and by the following regulations.

Exceptional measures

Exceptional ad-hoc measures can be used during periods of severe market disturbance. The legal basis for this is provided for in Articles 219 to 222 of the CMO EU regulation 1308/2013.

The following are two examples of exceptional measures for the dairy sector implemented under Article 219 of the CMO in 2016

Marketing standards

In addition to the marketing standards for spreadable fats, specific definitions, designations and sales descriptions apply to the following products

Market monitoring

The European milk market observatory provides data and information on the milk sector. It follows and analyses past and present trends at a global and European level for topics such as production, balance between supply and demand, production costs and markets perspectives.

Committees

To ensure that the European Commission's responsibility for adopting implementing acts is exercised under the control of EU countries, various committees – composed of government representatives and chaired by a European Commission representative – are linked to the European Commission.

The committee for the common organisation of the agricultural markets meets regularly to discuss areas such as the evolution of market prices, production and trade in the EU and non-EU countries.