Eucolait supports a market oriented dairy policy. Since the mid 2000’s, the European dairy sector has
gone through significant changes and a gradual liberalisation process, culminating in the abolition of
the milk quota system in 2015. A return to the past is neither feasible, nor desirable. We are therefore
quite satisfied with the single Common Market Organisation (sCMO) proposal presented by the
Commission in 2018 and the position taken by the Council, which contained minimal changes with
respect to the dairy sector. The current sCMO based on Regulation 1308/2013 serves dairy well,
protecting terms reserved for milk products and allowing for a measured level of market intervention.
The market management measures provide a safety net in times of market disturbance and overall
they have proven their value to the sector. A certain degree of price volatility is inevitable and even
needed for a dynamic marketplace, but managing extreme price volatility requires appropriate
instruments, both private and public.
In the context of the ongoing trilogues to finalise a sCMO regulation for the next CAP (as of now
projected to apply from 2023), Eucolait asks legislators not to disrupt a system that by and large works
well for stakeholders in the dairy supply chain. We acknowledge that the EU dairy sector needs to
further enhance its economic, social and environmental sustainability performance but do not believe
these challenges can be addressed by increased market regulation. There must not be ‘change for the
sake of change’.
Comments on key amendments proposed by the European Parliament
Public intervention
Eucolait is strongly opposed to the proposal that the intervention trigger price should be raised and
should be linked to production costs. This would give a wrong signal to operators and defeat the
purpose of public intervention as a safety net, only to be used to tackle the most challenging market
conditions. Such a change would encourage “producing for intervention”, leading to tremendous
public stocks blocking upward price momentum and creating a big hole in the EU budget. It would also
destroy EU’s price competitiveness on the world market and lead to a further surplus of milk in Europe.
Instead of raising the intervention prices, the trigger could be a combination of the SMP and the butter
price. This would avoid buying-in of SMP when butter prices are sky-high (or vice versa) and when the
milk price is decent. Alternatively, the automatic trigger could be scrapped altogether, so that the
Commission would decide on case-by-case basis on when to proceed to buying a particular product
into intervention (by tender), considering the overall prevailing market conditions.
A case can also be made for having public intervention open throughout the year. We have seen during
previous periods of low prices that they do not necessarily coincide with the higher production cycle
during the spring and summer months. From a point of view of certainty and transparency, it would
be better to have public intervention open all the time than extending or bringing forward the
intervention period on an “as needed” basis, as has been done in the past. However, if the current
regime of buying-in at fixed price is maintained, public intervention all year round can also increase
the risk of the Commission being obliged to buy product at a time when it would in fact not be
opportune to do so.
We also strongly oppose the European Parliament amendment calling for the publication of the details
of companies selling product into public intervention or buying product when it is released from
storage, including information on selling/buying volumes and prices. Such information is commercially
sensitive and a mandatory reporting and publication requirement would pose a disincentive to
companies to utilise this market measure in the future, undermining the efficiency of the intervention
mechanism.
Although not directly covered by the sCMO regulation, we wish to highlight the necessity to ensure
that the product sold out of intervention can be used, without undue barriers, for any planned
applications. In the recent past, we have observed obstacles to the commercialisation of intervention
SMP such as the lack of a minimum durability date, difficulties in obtaining veterinary certificates for
exports and requirements under the animal by-products and feed labelling regulations when the
product is to be used for feed. In addition, we have seen that some of the product in public storage
does not in fact correspond to the intervention specification and in some cases the quality has seriously
deteriorated due to inadequate storage conditions (sometimes to the point where the product cannot
be used at all). These are all issues that need to be properly addressed if the system were to be used
again in the future.
Milk production reduction scheme
The milk quota system was abolished for good reasons – it constrained growth, was very costly an
did not prevent structural change in the sector – and we feel that creating a public supply management
system “by the back door” would be a significant step backwards. In particular, the proposal set out in
Article 219(b) that would penalize producers that increase their production at times of perceived
market imbalance takes the sector back to the punitive days of the super-levy. Mandatory public
supply management has no place in a market orientated CAP. Concerning temporary milk production
reduction aid, as implemented by the Commission in 2016, this can already be put in place within the
boundaries of the current sCMO, even if not explicitly foreseen in the regulation. We do not believe
that production can be efficiently managed at European level with the desired result of increasing
prices, not least because of our considerable exposure to the global market. Indeed, supply
management only works in combination with strong border protection and a policy of self-sufficiency
(Canada model). The adjustment of supply to demand must be achieved by the players in the dairy
supply chain. However, if any measures with a view to limiting milk output are to be introduced, they
should always be based on reward rather than the threat of sanction.
Other exceptional measures in cases of market disturbance
We do not see any need for widening the scope of the exceptional measures. In particular, the already
considerable prerogatives of producer organisations and interbranch organisations should not be
extended further. As far as market monitoring is concerned, the Milk Market Observatory has proven
its value since 2014 and should be maintained in its current form. It should remain an observatory, a
forum for the Commission and stakeholders to exchange and take stock of market developments. Its
conclusions should help all operators take the most appropriate actions in a given market situation.
We do not support the idea of a super-observatory covering all sectors and tasked with an early
warning mechanism on which market intervention measures would be based.
Extending EU standards to third country trading partners
In an ideal world, there would be a perfectly level playing field in global trade. We understand the
temptation to request that all imports comply with EU norms, not just on food safety but also for
instance on environmental protection, health or animal welfare. We should however keep in mind that
EU companies export dairy and other agricultural products around the world, without having to fully
align themselves with all legislation of each destination country. Any efforts to impose standards on
trading partners must be taken in a proportionate and prudent way and should always comply with
WTO rules. It is a two-way street and recent history has shown that partner countries are ready to
retaliate at what they perceive as disproportionate action against their industries. Instead of imposing
its standards on all trading partners, the EU should seek solutions to improve the overall sustainability
of food systems through its FTAs and in the relevant multilateral fora.
Marketing standards
We support the enhanced protection granted to dairy terms in the European Parliament’s position. It
is merely a clarification of the existing legal situation, incorporating the case law of the Court of Justice,
but this will help address the misuse of dairy terms to designate plant-based products. The European
Parliament further appears to seek an extension of the scope of the marketing standards to milk and
milk products, beyond the existing marketing standards and sales description covering spreadable fats
and drinking milk, enshrined in the sCMO. In addition to these, marketing standards for dehydrated
milks, casein and caseinates are laid down outside the scope of the sCMO. We do not see a need for
adaption to reflect “constantly changing market conditions” or “evolving consumer demand” and any
additional EU marketing standards should be fully in line with existing Codex Alimentarius standards
in order not to introduce complications in international trade. Codex should also be the preferred
forum for developing new standards. Marketing standards should be limited to basic compositional
requirements and not cover for instance the sustainability features of a product which can be subject
to specific labelling schemes.
Conclusion
In summary, Eucolait hopes to see the current market orientation confirmed in the new sCMO
regulation. Policy efforts and funds should now be focused on making the CAP more sustainable and
not to turn back time to the days of costly interventionist policies.
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