EU re-introduces milk supply controls a year after quotas lifted

The European Commission has re-introduced milk supply control measures for the first time since the lifting of quotas last year albeit on a voluntary basis.

The move, opposed by Ireland, appears to acknowledge that overproduction in Europe is now one of the key metrics underpinning the collapse in dairy prices.

At a Farm Council meeting in Brussels, agricultural commissioner Phil Hogan unveiled a €500 million aid package for the agricultural sector with particular focus on dairy.

Approximately €150 million will go towards subsidising voluntary cuts in production. The way the subsidies will administered has yet to be fully finalised.

Germany, France and Poland, the EU's largest producers, had been pushing for more extensive control measures, however, and the modest nature of initiative is seen as a victory for Ireland and other member states opposed to production constraints.

The package includes an additional €350 million to top up existing aid measures, which will add to existing storage aid subsidies and extend intervention for skimmed milk powder from which Ireland will receive €11.1 million.

Brussels had granted a similar package last September, targeting mainly cash-flow difficulties and market stabilisation, as well as a plan in March allowing producers to freeze milk output. However, take-up of the control measures proved disappointing.

Minister for Agriculture Michael Creed welcomed the new aid package, claiming it afforded member states "maximum flexibility".

“Ireland’s views in relation to supply management are well known and we did not want today’s package to be focused exclusively on production discipline, although there were strong demands for that from some member states,” Mr Creed said.

“So the fact that 70 per cent of today’s package has been directed to adjustment aid is very welcome. In relation use of these funds, I have argued strongly that the maximum possible flexibility needs to be given to members states.”

“ While we still await full details, which we will examine closely, the flexibility indicated by the Commissioner to provide liquidity support to farmers is welcome,” he added.

The downturn in dairy, which has seen prices collapse by about 40 per cent in the past two years, was initially blamed on a combination of falling Chinese demand, the Russian trade embargo and a general glut in global production but, laterally, post-quota production in Europe has been cited.

While Ireland has had one of the largest post-quota increases in milk production, it still only accounts for 4 per cent of production in Europe and its production footprint is relatively small compared to that of Germany or France.