Turning more raw milk into value-added products will help protect dairy farmers from falling commodity values.

Lars Hoelgaard, deputy director general of Agriculture at the European Commission, told this week’s Semex Knowledge is Power conference, Glasgow, that although the EU milk price was low – particularly in the UK – it was still about 30% above the equivalent world market price.

“The way forward has to be towards value added production and fewer bulk products,” he said.

That would help counter the effect of WTO agreements that saw EU price support arrangements being dismantled slowly.

For example, intervention storage for EU for butter would fall from 70,000t to just 30,000t in 2008, with any surplus possibly being put out to tender, he said.

“It will hurt, as the world butter price is below that of the EU, effectively preventing exports – domestic prices will have to give.”

The commission remained intent on protecting EU25 producers through a combination of subsidies and limiting market access for competitors within WTO limits, he emphasised.

But some elements of CAP reform might witness a rethink after 2008, including milk quotas, which were expected to run
until 2015, he added.

Individual member states might be able to review quotas particularly in the UK, where production and, hence, quota values had fallen – the latter no longer presenting a serious financial constraint on individual businesses.

Delegates were left in no doubt that Tony Blair’s presidency of the EU had left a bitter taste because of his attempts to trim the bloc’s budget with agriculture being in the front line.

Politicians had to look deeper than the bare headline figures, said Mr Hoelgaard.

“The budget is still only 0.5% of EU gross domestic product, a small price to pay.”

fwbusiness@rbi.co.uk