Export refunds, intervention to help oversupply in EU dairy sector

An oversupply in the market has caused the recent slump in prices for milk and dairy products, and Agriculture Commissioner Mariann Fischer Boel has pledged to introduce new measures to support the sector. The Commission will next week reintroduce export refunds for butter, cheese and whole and skimmed milk powder.
When intervention buying for butter and SMP begins in March, the Commission undertakes to, if necessary, buy more than the pre-determined quantities through regular tenders.
In November, the Commission reintroduced private storage for butter with effect from January 1, 2009 – including for butter produced in December. This represented an introduction of private storage earlier than is usually the case.
"The severity of the fall in milk prices over recent months has surprised many," said Commissioner Fischer Boel. "I have spoken to many producers in member states and their anxiety is clear. Now it is time for the European Union to help. Measures introduced in the Health Check will give the dairy sector an important boost, but we need to do something now because the Health Check will only apply from next season."
Following the unprecedented price rise for milk and dairy products in 2007 and the beginning of 2008, the situation on the dairy market has now been completely reversed. With increased supplies on the world market and reduced demand on the internal market, market prices for dairy products have been forced down to close to or even below intervention levels. Obviously, the price paid to milk producers follows the same route with substantial price decreases already recorded and with further falls likely.
As regards intervention, buying of butter and skimmed milk powder will resume on March 1 (with production from February being eligible) and remains available until the end of August. The first 30,000 tonnes of butter and 109,000 tonnes of skimmed milk powder will be bought in at a pre-determined price (intervention price).
As was decided in the Health Check, further quantities may be accepted with prices to be fixed through fortnightly tenders. Commissioner Fischer Boel has asked the services to prepare for a decision to be presented to the Management Committee to open up this facility, should the 30,000t limit on butter or the 109,000t limit on skimmed milk powder be reached.
Export refunds will also be reactivated. With world market prices now below EU intervention and market prices, exporters are no longer able to compete. This situation is aggravated by the already existing difficulties for exporters as a result of the financial/credit crisis. Export refunds will be activated not only for butter and skimmed milk powder but also for all other dairy products which were eligible in the past, mainly whole milk powder and cheese. Refunds for butter and skimmed milk powder are fixed by tender with the next round of bids to be decided on next week.
The use of export refunds will be applied in conformity with the EU’s rights and obligations under the WTO.