By Philip Clarke

MILK quotas are to be extended at least until 2008, according to draft legal texts now circulating in Brussels.

The documents are designed to implement the agreement reached by EU heads of state in Berlin last month for reforming the common agricultural policy.

The Berlin deal simply said that dairy reform should be delayed until 2005/06. But it was not clear whether the price cuts (15%), quota increases (1.5%), and compensation already agreed by farm ministers would then be implemented in one year, or spread over three.

The problem is that the EU budget has only been fixed until 2006, begging the question where the funds will come from for compensation in 2007 and 2008. Furthermore, the so-called London club, (of the UK, Italy, Sweden and Denmark), believed quotas were only guaranteed until 2006.

“The Berlin summit conclusions were vague, leaving it up to the commission to work out how to implement it,” says Brussels consultant, Trevor Smith.

Civil servants from all 15 member states meet to study the texts next Monday (Apr 19), where discussions could be heated. Another bone of contention is likely to be the mid-term review of quotas, which was originally planned for 2003, but which is now being delayed until 2005.

But any changes are likely to be minimal. The final texts are expected to confirm that butter and powder intervention prices will drop by 5% a year from 2005/06 to 2007/08.

Milk quota will increase by 0.5% a year over the same period, while producers will also get compensation worth Euro5.75/t (0.4ppl) in year one, Euro11.49/t (0.79ppl) in year two and Euro17.24/t (1.19ppl) in year three.

This compensation may be topped up from a national envelope, with payments targeted at specific groups.

But analysts believe the EU will be hard-pressed to stick to this deal. Dairy products are already flowing into intervention, and with an additional 1.2% of quota going to selected member states (notably Ireland and Italy) as early as next year, the situation could get worse.