Fischler urges reform of dairy market system

Date: 15/05/1997

By Michael Mann

EUROPE's dairy farmers will come under ever greater pressure in an increasingly competitive world market unless changes are made to the current system of quotas and market supports.

This is the main conclusion of Agriculture Commissioner Franz Fischler's long-awaited 'situation report' on the EU's milk market, set to be unveiled on 21 May, which will form the basis of reform proposals due this autumn.

But dairy industry analysts believe Fischler's findings have already come up against resistance within the European Commission for being too conservative.

“Although it is only meant to be a factual report, there are those in the Commission who do not want it to appear in its current form. There is a feeling that the Directorate-General for agriculture (DGVI) wants to maintain the status quo as far as possible. That view is not shared elsewhere,” said one insider.

In spite of the range of options laid out before him, Fischler is believed to favour leaving quotas untouched while cutting prices and paying farmers compensation.

His nervousness about stirring up trouble with a wholesale reform of the milk market comes despite evidence that Europe stands to lose out to other producers unless it aligns itself with growing liberalisation around the world.

“Production growth is expected to be concentrated in those countries where production is not subject to a quota system such as Australia and New Zealand ... Overall, it is expected that the EU will lose market share for nearly all dairy products,” concludes the report.

Despite growing constraints on subsidised trade resulting from the 1994 GATT agreement, the Commission forecasts that the price gap between the EU and other large producer countries is likely to remain considerable.

This would force the Union to continue awarding export refunds, even though it has already run into problems this year in respecting limits for subsidised cheese trade.

Falling production over the period to 2005 will be matched by reduced consumption, particularly of butter. The net result could be the build-up of butter and milk-powder mountains.

The report highlights both the advantages and disadvantages of the current quota system, which has been the cause of severe problems over the years, especially in countries like the UK and Italy, which are prevented from producing the quantity of milk they need to fulfil domestic requirements.

Despite the strictures of the system, the Commission believes the industry will become increasingly concentrated around bigger farms as the years go by.

The report, which is due to be discussed by farm ministers when they meet informally in the Netherlands on 25-27 May, goes hand in hand with a sister paper on the beef sector, which emerged from the Commission's 'written procedure' this week and forecast a beef mountain of 1.5 million tonnes by 2005.

With similar reports on the cereals market and 'rural policy' to follow, Fischler faces the unenviable task of drawing together the myriad of ideas floating around and proposing reforms before the end of the year.