Recently, in their endeavour to put pressure on the EU agriculture ministers who were holding meetings at the Council, hundreds of dairy farmers from around Europe protested in Brussels against low milk prices.

Milk prices have fallen sharply as the supply of dairy products in the continent exceeded the demand. 80,000 dairy farmers joined forces and demanded the EU executive responsible for the EU 27 farming policy to remove excess milk from the market. It is estimated that the current production costs are double the price of the product shelved at our supermarkets. Since last year, the situation of the milk industry has become a recurring topic of discussion at the Agriculture and Fisheries Council.

Each year the EU pays the agriculture sector E55 billion for support payments, storage aid, rural development and other projects. Milk is the number one single product sector in terms of value at approximately 14 per cent of agricultural output. During the 1980s, milk quotas were introduced across most of the EU bloc. Last November, the EU agreed to raise dairy output quotas by one per cent annually.

The EU is the world’s largest milk producer and, consequently, milk production is of major importance to its agricultural economy. Milk is produced in all 27 EU Member States. Following the CAP health check last year, the EU hopes to abolish the milk quota system by 2015. These quotas are reviewed every year, until they will be totally abandoned. More than one million producers supply 148 million tonnes of milk annually.

The milk processing sector, which gathers together those producing mainly cheese, butter and drinking milk, employs around 400,000 people and generates a turnover of E120,000 million. According to a study published lately by the EU Court of Auditors, the EU-15 (the “old” Member States) lost half its dairy farms between 1995 and 2007. This amounts to more than 500,000 producers. Last July, the EU Commission presented a report on the dairy markets which includes a market analysis and an account of the different support measures provided for milk production.

Yet, the Commission feels that any decisions as a result of the report should not impact the previous decision that had been taken to phase out milk quotas. However, a number of Member States want the Commission to take more action to stabilise the milk market. Countries like France and Germany support emergency funds to farmers. The UK, on the other hand, feels that it is more likely to restructure and modernise the sector to make it more viable and competitive, rather than granting further subsidies.

A group of EU Member States met ahead of the meeting, agreeing to push for a new system. They came up with a joint statement which demands the European Commission to relieve dairy farmers’ immediate needs. They insist on a new system which would improve the relationship between farmers and food companies to get more stable prices. In reply to their plea, the Commission made it clear last Wednesday that Member States will be able to pay farmers a one-off remuneration of up to e15,000 in state aid but that any additional funds should not be provided from the existing EU budget.

Last week, at its plenary session, the European Parliament voted in favour of this proposal within the framework of the first reading of the EU budget for 2010. These measures will be temporary until next April along with a new quota system which intends to provide Member States with additional resources. A dairy fund will also be set up with a budget of E300 million.

Ms Azzopardi is Research Analyst at the Malta-EU Steering and Action Committee (MEUSAC)