Page last updated at 12:45 GMT, Friday, 23 January 2009

EU gives boost to dairy exports

A German dairy farmer (file pic)
German dairy farmers have led demands for EU price support

The European Union has reintroduced export subsidies for dairy produce, arguing that the economic downturn has put many European farms at risk.

The maximum refund for butter has been set at 500 euros (469; $650) per tonne and the maximum for skimmed milk powder is 200 euros per tonne.

The last time such refunds were given to dairy farmers was in June 2007.

The European Commission insists that the subsidies comply with rules set by the World Trade Organization (WTO).

"With world market prices now below EU intervention and market prices, our exporters are no longer able to compete," Agriculture Commissioner Mariann Fischer Boel said last week.

So far, the maximum export refunds apply to 2,299 tonnes of butter and 5,612 tonnes of skimmed milk powder.

Cows grazing
Overproduction by dairies has plagued the EU in the past

The basic level of refunds for dairy produce - known as "standing" refunds - is lower, applying to regular tenders.

"The measure will only apply for as long as market conditions so dictate," a commission statement said.

Price slump

Agriculture spokesman Michael Mann said that in 2007-2008 there was "a huge explosion in dairy prices, but then a slump in the middle of last year, and they are now down to very low levels".

"We're under pressure from member states to stabilise the market. If we didn't act, some small vulnerable milk producers would go out of business," he told BBC News.

Additional support for dairy farmers comes in the form of EU intervention - European Commission purchases of surplus produce at a guaranteed price.

The next round of such intervention will be from 1 March to 31 August, and the annual limit is 30,000 tonnes of butter and 109,000 tonnes of skimmed milk powder.

With Alpine milk farmers, the fear is that if they go out of business, they won't come back
Michael Mann
EU agriculture spokesman

But the agriculture commissioner says she expects "it will be necessary to support the market beyond this limit".

"Further quantities may be accepted with prices to be fixed through fortnightly tenders," the commission said, adding that this was allowed under the revised Common Agricultural Policy.

Mr Mann said the latest measures would not mean any return to the milk lakes and butter mountains of the 1980s, when generous EU price support encouraged farmers to overproduce.

The EU still plans to phase out milk quotas by 2015 and to limit market intervention, with a view to scrapping it in the long term.

Mr Mann said various factors had combined to hurt EU dairy farms, including an increase in dairy output globally and a fall in sales to Russia because of the rouble's devaluation.

"With Alpine milk farmers, the fear is that if they go out of business, they won't come back. They're not just milk producers - there is the environment to consider, too," he told BBC News.

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