Dairy farmers to fight cuts

Date: 01/07/1999

By Simon Taylor

EU DAIRY farmers are steeling themselves to fight planned cuts in spending on the milk sector which could drive down prices next year.

Farm union representatives are warning that milk prices may fall below their current low levels if the dairy sector is not spared the effect of planned across-the-board reductions in agriculture spending next year. "This is a really sensitive point for us because prices are at absolute rock bottom at home." said one UK farm union official.

Milk prices are expected to remain low over the next year because of a combination of reduced export demand as a result of the Russian crisis and oversupply on the EU's 120-million-tonne market. The situation will be aggravated by the decision to allow four member states to increase milk production by 2.4 million tonnes in 2000.

But following a budget-cutting deal agreed by Union leaders in Berlin in March, the EU will have to shave €500 million off farm spending next year. The Commission has proposed slicing 2% from all budget lines, but has already locked horns with farm ministers over how to make the savings. Last month, governments blocked a plan to scrap the EU's €98-million scheme which provides free milk to schoolchildren.

Senior officials in the Commission's milk division have warned dairy farmers' rep-resentatives that the cuts could prevent the Commission from guaranteeing farmers a milk price of €30.98 per litre.

Reducing the budget for intervention buying of surplus butter and skimmed milk powder could undermine the Union's ability to stop prices dropping to levels which may put dairy farmers out of business.

Intervention buying is an essential tool for supporting prices because it offers farmers an alternative outlet for their goods. The EU is becoming increasingly reliant on intervention as a market management tool because a World Trade Organisation agreement is forcing it to cut subsidised exports, the other main mechanism for stabilising the market. This year, the Commission reduced export refunds by 21% while the spending on intervention went up by 38%.

Farm union officials say the impending problems result from France's insistence on delaying dairy sector reform in Berlin.

"We are going to have lower prices without compensation whereas the original Commission reform would have given us compensation for the planned price cuts", said one farmers' representative.