18 September 1998

Dairy plans face big changes

By Philip Clarke

SIGNIFICANT changes to the EU Commissions dairy reform plans are expected by the time agreement is reached next spring.

Speaking at the recent EuroDairy 98 conference in London, EU specialist Roger Waite of Agra Facts pointed to the 1992 MacSharry reforms as evidence of the likely back-pedalling by farm ministers.

Then, the commission had called for a 3% quota cut over three years, a 15% cut in butter support prices and the introduction of a dairy cow premium. What was actually achieved was an rise in milk quota, a mere 6% price cut for butter and no payments for dairy cows.

But there would be less room for manoeuvre with Agenda 2000, said Mr Waite. In particular, the emergence in recent weeks of the so-called "gang of four", (the UK, Denmark, Italy and Sweden), would ensure that any attempts to maintain the status quo would be resisted.

These countries were seeking a 30% cut in butter/powder prices by 2006 (instead of 15% proposed), a 4% rise in quotas, (instead of 2%), and a doubling in the proposed dairy cow premium.

Negotiations would not start in earnest until December or January, with agreement time-tabled for March 1999. "If farm ministers cant reach agreement by then, the chances are the agricultural budget will be cut," said Mr Waite.

Farm ministers would therefore be finalising their negotiating priorities at the turn of the year, with the Italians likely to go for extra quota, the Irish demanding increased compensation and the Germans wanting smaller price cuts.

On this basis, Mr Waite suggested the final agreement might see support prices down by 10%, with some increase in the level of dairy cow premium.

On the subject of quotas, Mr Waite predicted "an almighty row". While most member states approved of the 2% relaxation of quota restraints, the plan to give half of this to mountain regions would have to change. But, while there would be arguments, Mr Waite dismissed suggestions, currently circulating in Brussels, that dairy reform could be shelved altogether, in the interests of getting agreement in the beef and cereals sectors. lThe need for reform in the dairy sector was spelt out by World Bank economist, Merlinda Ingco. Between 1990 and 1998, the EUs share of world dairy markets had slumped from 56% to 44%, she said.

While the sector had been almost untouched by the last GATT round, that was not sustainable. With World Trade Organisation talks due to begin next year, Europes dairy farmers had to prepare themselves for less market protection, reduced export subsidies and, ultimately, lower prices in order to shift surpluses.

Quota to mountain areas (t)

Country Allocated % share of

quota extra quota

France 305,588 26%

Italy 191,060 16%

Finland 176,012 15%

Austria 159,884 14%

Spain 165,692 14%

Germany 85,256 7%

UK – –