Verbatim report of proceedings

Thursday, 14 June 2012 - Strasbourg

8. European milk producers (debate)

  President. − The next item is the Commission statement on European milk producers.

  John Dalli, Member of the Commission. − Mr President, the Commission has listened carefully to the concerns that many of you have raised concerning a soft landing in a liberalised milk market. There are three main issues that should be addressed.

The first relates to a faster liberalisation of the milk sector by means of more flexibility in the quota scheme. The second concerns the territorial balance of milk production after the removal of quotas. The third concerns the current market situation with growing production and falling prices in the European Union.

On the need for more flexibility in the quotas scheme, the purpose of increasing national quotas by 1% each year and adjusting the milk fat correction factor was precisely to enable farmers to gain experience in adjusting supply to demand. This has indeed been the case, and, for the EU as a whole, milk deliveries in 2011-12 have remained below quota.

The conditions for the phasing-out of quotas were decided in 2008, with the objective of allowing sufficient time for operators to adapt. It would make little sense to change the rules now. The Commission will present a report to Parliament and the Council at the end of 2012 on the development of the market situation and the conditions for phasing out quotas.

Let me turn to the issue of the territorial balance of milk production in the Union. As you know, the Commission is committed to maintaining milk production in all areas as far as possible. In view of the expiry of milk quotas, measures to support the restructuring of the dairy sector have been included in the list of new challenges and EUR 0.7 billion have been earmarked to support the restructuring of the dairy sector. The regional effects on milk production will be analysed in a report due by the end of June 2014.

Finally, I would like to refer to the current market situation. Dairy prices have been particularly high in 2010 and 2011. However, over the past few months, the trend has reversed and prices have dropped. This is not surprising as it coincided with the seasonal peak of EU milk production while other main world suppliers increased their production as well. Prices today are lower than they were some months ago, but are still substantially above intervention levels. Against this background, it would be inappropriate to describe the current situation as a crisis. Besides, the standard safety-net mechanisms, including private storage and public intervention, are open and available to operators who have proposed butter for private storage so far.

According to the latest market information available, prices seem to have bottomed out, and some are even trending higher already. We hope that this trend is confirmed in the weeks to come. Be assured that the Commission is following the market situation carefully, and will not hesitate to take the appropriate measures should these be required, even if this does not appear to be the case at the moment.

  Astrid Lulling, on behalf of the PPE Group. – (FR) Mr President, as I have said, I like Commissioner Dalli and I thank him for being here, but I am a little surprised that the Commissioner responsible for the common agricultural policy (CAP) has not made the effort to come and present his views on this debate. His views have been expressed, and I must tell you that I do not agree with the Commission at all and that it would make no sense to change the rules at this point.

With regard to territorial balance, it is true that you have made an effort. However, as far as the situation in the market is concerned, to say that we are not in the middle of a crisis, to talk about the private storage that is available, is all well and good, but I believe that many dairy producers are experiencing difficulties.

We have stressed in particular that this political agreement on the CAP health check reached in 2008, which provides for the elimination of the quota regime in 2015, nevertheless left a very bitter taste for many Member States, including my own. We accepted the compromise on the condition that measures be taken in good time allowing for a smooth transition from the quota mechanism towards a liberalised production market.

Yet the measures that have been taken are not enough because, at the moment, quotas are being used in some countries but not in others. This means that the competitive environment in the single market is unacceptable because some producers who exceed their individual quotas are sanctioned and others are not, simply because they live a few kilometres apart, separated by a border.

Mr Cioloș must take measures, particularly to reduce taxes in order to progressively and smoothly reduce the existing unfair competition between European producers. The Commission has a monopoly on such measures. It must take action and we demand that it take action.

  Marc Tarabella, on behalf of the S&D Group. – (FR) Mr President, Commissioner, you talked about three concerns.

The first is the accelerated liberalisation of the sector. You can say that again! In all markets, accelerated and unbridled liberalisation leads to deregulation, which causes extreme price volatility, which is the greatest source of insecurity for the agricultural world. The increase in flexibility of 1% per year did not help as, in an unfavourable market context – I remember what happened in the autumn of 2009 – this led to the most serious crisis to hit the sector in the last 25 years.

The second concern is territorial balance. This must be ensured and that is not the case at the moment. You spoke of restructuring measures. Restructuring means that production will disappear in less productive areas. Yet we must do the exact opposite. We must back up our words with actions, maintaining production in less favourable regions too.

The third concern is the current situation in the market. It is falling in on itself, and this is not necessarily due to seasonal peaks; there is clearly growing instability in the milk market.

I wanted to ask you a question, Commissioner. We talk about a ‘soft landing’ for the current system. Should we also be talking about a ‘soft take-off’ and asking the Commission to ensure that the new system, which we have tried to put in place and which will soon take over from the previous system, is safe for all European milk producers?

  President. − Colleagues, please do not exceed your speaking time. The extra speaking time allocated to Ms Lulling was my birthday present to her!

  Britta Reimers, on behalf of the ALDE Group. – (DE) Mr President, Commissioner, ladies and gentlemen, ever since it was decided to abandon the milk quota, people have been watching you closely, Commissioner, to see how you behave and what action you are taking to exit the scheme in a rational way. Is there really any pattern discernible here?

We have had a year of regional over-production and a rise in global production, which is hardly surprising since there was previously a shortage on the market, leading to higher prices. In addition, over the last two years there has been a rise in operating costs of about 20 %, principally due to direct and indirect rises in energy costs. The market reacted in the normal way to the increased supply and came under pressure. This caused prices to drop. The market is now stabilising again because the farmers are displaying an ability to manage the market and are slowing their production more than is usual for the season.

The criticised price decreases have led to a rise in demand in the market. The decline in the euro exchange rate promotes marketability in the global market, making European dairy produce competitive. In the case of cheese, stocks have been reduced to such an extent that more milk is now needed for cheese production. In other words, this is a normal market cycle.

Now we come to the Commission: if the market is working, why do we need a super levy? Is its sole purpose to acquire funds for the EU? Has the time perhaps come to put the super levy on a European footing, finally transferring it from a national administrative level?

  Martin Häusling, on behalf of the Verts/ALE Group. – (DE) Mr President, I believe that both the Commission and Ms Riemers have lost touch with reality a little. Anyone suggesting that this is not a crisis, just a seasonal surplus, has obviously not been watching the markets in recent months. We have witnessed a worldwide increase in production, with a rise of 3.5 % in the USA, 10 % in New Zealand and 3 % in Europe, even though sales are stagnating. I fail to understand how this phenomenon can be explained away as a seasonal surplus.

We are on the verge of a crisis. We cannot wait for prices to reach a level of EUR 0.20, in other words until intervention becomes necessary. We need to respond now, because the recent crisis, as everyone must be aware, has cost us EUR 500 million in export subsidies and direct assistance to farmers. Do we intend providing funding again if we find ourselves in the same situation? I believe that this is quite impossible.

Hence my question: where do the Commission’s responsibilities lie? I am confused to hear the Commission continue to claim that the quota is not filled, so that there is no scope for changing the rules, nor is this necessary. The quota increase was part of the problem because it brought more volume onto the market. The fact that we still have no answer for what is to happen after 2015 is proof of the poverty of ideas among the Commission and the Council, because milk producers will be abandoned to their fate. The dairy package that we have agreed is in danger of complete failure, because by the time we get around to helping the producers there will only be a few of them left. On the other hand, the dairies and retailers are becoming increasingly concentrated, so that dairy farmers have fewer and fewer ways to influence the market price. For this reason, I should like to ask why the Commission does not respond by bringing its report on the dairy sector forward by one year. Why not discuss market regulations for the period beyond 2015 now? The Commission has still failed to provide an answer in this regard. What we are saying quite clearly is that markets require regulation and this is particularly the case in the dairy market. As long as we ignore this fact in discussions, we are steering a course directly towards a new milk crisis.

  James Nicholson, on behalf of the ECR Group. – Mr President, I too would have liked to have seen the Commissioner here this morning, but my understanding is that he is in China, so let us hope he is in China and creating good markets for us to sell our produce out there.

We have once again experienced a downward trend in the incomes of dairy farmers throughout Europe. This brings home to us just how fragile and volatile the dairy market has become.

While it seems that prices have steadied to some degree in recent weeks, no-one can claim that the problem is over. It is obvious that events in the global dairy market have an immediate effect on the livelihoods of producers and processors in Europe.

The Council took, many years ago now, the decision to abolish milk quotas in 2015 – and I was the rapporteur for the dairy package which will be implemented when quotas come to an end in the Member States. But I have this to say that I am not convinced that the legislation will prove to be an adequate replacement for the quota system, for many small dairy farmers will be left very vulnerable in the face of quota abolition. Voluntarily it will not disappear, and we need to be prepared to respond faster and faster response mechanisms, which we have not seen to date.

There must also be enhanced cooperation between the producers and the processors in the industry if the industry is to stabilise and realise its full potential.

Within the overall framework of the CAP reform, we should ensure that adequate market measures are put in place to protect producers against this extreme volatility.

We all speak about, or have heard of, the ‘soft landing’ and I have to say, quoting the former Commissioner, Mariann Fischer Boel, that this has proved to be a nightmare for the Commission in the long-term.

However, may I finish with a point. Let us not talk ourselves into feeling that things cannot be made better. They can be made better if we all work together.

  John Stuart Agnew, on behalf of the EFD Group. – Mr President, the UK diary sector is unique: cooperatives are less important than elsewhere and we have traditionally consumed much more fresh milk. A few years ago I would have added that we alone have doorstep delivery, but that has declined in a decade from nearly half the market to just 5 %. It has been killed by the supermarkets and that is because the British supermarket chains form a complex oligopoly so powerful that it is impossible for suppliers to negotiate as equals. They use their market power to relentlessly dominate and take a greater share of the value.

The milk package was a chance to address this. I am not getting at Jim Nicholson, but it cannot work, because the most important element is missing from it. The whole supply chain from farm to jug is what counts and if the retailers are excluded from this you may as well not bother. What can British farmers do now? They must use the Ombudsman to best effect: to challenge supermarket power; and they must not assume that relentless expansion in cow numbers is the way ahead.

  Patrick Le Hyaric, on behalf of the GUE/NGL Group. – (FR) Mr President, Commissioner, we cannot help but be very surprised that the Commission can say that things are improving for milk producers.

Admittedly, milk prices have increased a little at times, but production costs have increased significantly more than producer prices, and putting an end to quotas will plunge our farmers into competition where small and medium-sized farms will not survive and production will become even more concentrated. At the same time, collection and processing will also become more and more concentrated; that is already happening.

It is not too late to stop jobs and regions from being destroyed by these changes. In order to do so, we must return to mechanisms for regulating production and setting base prices which cover the real costs of production.

From this point of view, a European milk agency would be useful for providing a continuous evaluation of milk needs and ensuring respect for producer prices, which are valid for all producers. We must put a stop the double price we are currently paying for putting producers in a global economic war.

I would suggest, Commissioner, that you listen to the opinion of the Committee of the Regions, for example, on the reform of the common agricultural policy and producer organisations.

We should not leave the milk market, which is a public good for humanity, in the hands of the market alone.

  Albert Deß (PPE). – (DE) Mr President, Commissioner Dalli, I am very pleased that you are here because I know that you are always sympathetic to our concerns. It is very good that you should be made aware of the problems of milk producers.

Opinions differ on the milk quota, even within my own group. I often find myself in agreement with my colleague from Luxembourg, Ms Lulling, however we differ on this point. We, the nine representatives of the German conservative group (CSU) from the last electoral term, already voted en bloc against increasing the quota in 2008. The esteemed Commissioner at the time, Ms Fischer Boel, understood the term ‘soft landing’ to mean an increasing of the quota. Increasing the quota means more volume and more volume means lower prices. This is a fairly simple formula. This is precisely the problem we are faced with at present because there are farmers in the European Union who are delivering too much quota, causing a distortion in the milk market.

I am against reducing the super levy or increasing the quota even further, because dairy farmers also need some contractual security. The quota will be phased out on 31 March 2015 and we need contractual security by then.

We also need other important systems, Mr Dalli: fixed payment deadlines, net-net prices and binding supply volumes. These are the key points we need to work on in order to prepare for a market without quotas.

  Sergio Gutiérrez Prieto (S&D). – (ES) Mr President, Commissioner, I am fully aware that one of the reasons why we have approved the ‘milk package’ is precisely to adapt the sector with a view to a market without milk quotas in 2015.

It is also the case, however, that as this date for liberalisation approaches, uncertainty is increasing within the sector, as there is no clear exit strategy, and the reasons behind the sector requesting caution and thought about our decision also increase. Reasons, for example, like the belief in maintaining vineyard planting rights or maintaining sugar quotas until at least 2020; reasons such as uncertainty in the sector surrounding the real effects of the ‘milk package’ and whether we have had time to assess them properly; and also reasons such as uncertainty about where the common agricultural policy is heading, and in particular, its budget, that is, about the part of the income that does not come from the markets and which affects our farmers.

Therefore, Commissioner what we are asking you to pass on to Mr Cioloş is that we should not undertake a patchy policy, dismantling our protection system, without a serious and rigorous analysis, as the effects on our farmers are irreversible.

Postpone the end of the quota until 2015, to a date the sector feels more assured about, and initiate an open and transparent debate on the regulation mechanisms, given that the markets are increasingly unfair and the farmers are increasingly less protected.

  George Lyon (ALDE). - Mr President, after relatively buoyant prices through 2010, is it any wonder that production rose dramatically and we are now seeing the market oversupplied and prices starting to slide?

The ability of milk producers to turn on the tap has never been easier. The ability to put extra feed into big Holstein cows and knock out a thousand litres per head is just so easy. This is a reflection of the market signals indicating better returns. The question Scottish milk producers are asking is whether this is the start of a long-term slide or just a blip in the market as it evens out. We will have to wait and see.

The biggest concern of Scottish and UK producers has been that of the constant UK price being lower than the rest of the EU. Again, in 2011, we are 11.8 % below the EU price. Part of the problem is the power of the retailers – which one of my colleagues has already alluded to – but another part of the problem has been poor returns from the manufacturing sector due to lack of brands and lack of value-added products.

In the last few weeks we have seen huge changes in the UK market as Arla, the Danish Farmers Co-op, has taken over Milk Link and now controls 25 % of the UK market and Müller has bought Wiseman and now controls 16 % of the UK market. It is hoped that these companies, with their strong brands and their large export markets, will help address some of the fundamental problems that we have had in the manufacturing sector and act as a balance against the power of the retailer when it comes to purchasing milk.

  Janusz Wojciechowski (ECR). – (PL) Mr President, European dairy farmers do not have a high opinion of us politicians, given that we have been unable to devise solutions that would ensure stability in the milk market and offer future prospects to this very challenging agricultural sector. At the present time, dairy farmers live in great uncertainty as to what will happen after quotas are abolished. We do not have convincing economic analyses in this area, and this is yet another agricultural reform in Europe that is being carried out in a manner akin to jumping into a swimming pool without having checked if there is any water in it.

The introduction of milk quotas in Poland put an end to milk production in small farms, and their abolition will most likely result in the collapse of medium-sized farms with only very large farms remaining. On the one hand we seek to support small farms in the future agricultural policy, but on the other we destroy them through our irresponsible market measures. We expect the European Commission to perform more in-depth analyses and to show greater responsibility for the future of milk production in Europe.

(The speaker agreed to take a blue-card question under Rule 149(8))

  Marc Tarabella (S&D), Blue-card question. – (FR) Mr President, I would like, Mr Wojciechowski, ladies and gentlemen, to play advocate for Europe in the wider sense, because liberalisation and the elimination of quotas – which, like many others, I was opposed to – who wanted that? Perhaps it was Ms Fischer Boel, an ultraliberal in the Commission. Fortunately, however, the tone has changed there. Yet it is the majority of Member States, and therefore the majority of governments and national politicians, who wanted this. We should also be able to say at any given moment that Europe is not entirely responsible.

Do you share my idea that national politicians are mainly responsible in Europe for the mess we find ourselves in today, particularly in the dairy sector?

  Janusz Wojciechowski (ECR), Blue-card answer. – (PL) Mr President, I agree that some national politicians are also responsible, however my remarks were addressed to the Commission in the hope of a more detailed analysis. We still know too little about what will happen when this reform is launched. We want to support small farms in line with the direction of future agricultural policy. We want to create better conditions for these farms, but the market reforms in question run counter to this objective, as abolishing quotas will undoubtedly do most harm to small and medium-sized farms, which will not survive. There are of course a number of different politicians who will be to blame for this.

  João Ferreira (GUE/NGL). – (PT) Mr President, Commissioner, dairy farmers are currently facing a very difficult situation. Tens of thousands of farmers have been forced to cease production, but things may get yet worse, with the sector even largely disappearing in certain countries, even in some that are currently self-sufficient, such as Portugal. The reason is simple: it is due to the liberalisation of the sector and the increase in production quotas, which are being scrapped in 2015.

As we warned at the time and experience has borne out, the announced landing has been anything but soft. Despite attempts to pull the wool over our eyes, there is only one reality: the free and deregulated market that they advocate will mean a split in production within the EU, which will tend to concentrate production even further in certain countries and certain large producers. The others will be gradually crushed by production prices that do not even cover production costs.

The situation is all the more serious because they want, at the same time as scrapping instruments for regulating production and markets, to prolong the scandalous imbalances in the distribution of common agricultural policy payments between countries. It is therefore vital to reverse the decision to scrap milk production quotas. These should instead be adapted to the needs of each Member State and to their relative level of productive capacity. We need to put a stop to dumping between Member States, and to establish market production regulatory measures to guarantee farmers fair prices for their produce; prices that, at least, cover the costs of production. That is the simple issue to which so much legislation has been unable to respond.

(The speaker agreed to take a blue-card question under Rule 149(8))

  Albert Deß (PPE), Blue-card question. – (DE) Mr Ferreira, I have just one brief supplementary question: Did you know that in 2008, when the Council discussed increasing the quota, Portugal also voted in favour of this expansion and that only two countries were against increasing the quota, namely Germany and Austria? France abstained from voting. Twenty-four countries, including Portugal, voted to increase the quota, thereby undermining the quota system.

  João Ferreira (GUE/NGL), Blue-card answer. – (PT) Mr President, Mr Deβ, unfortunately, the fact is that governments have done little to protect the interests of their own countries. Portugal has been no different in this regard, and I have also had occasion to criticise successive Portuguese governments for their actions in this area. However, in view of the disastrous effects wreaked by the decision to postpone scrapping the quotas and increase them until 2015, we – and you too – will also certainly be able to help to reverse this situation. This matter is currently being debated and we in Parliament now have the chance to propose reversing this disastrous decision, so that we will again have vital instruments to regulate production and the markets.

  Herbert Dorfmann (PPE). – (DE) Mr President, ladies and gentlemen, there is no doubt that the dairy market is one of the central markets of the European Union and I believe that we witnessed this during the most recent crisis in 2009/2010. I might point out, however, that there are parts of the EU, like the mountainous area I come from, where the dairy market plays a central role. If the farmers in these areas are unable to produce milk, they have no alternative livelihood. What are they supposed to produce on their meadows and pastures if they cannot produce milk? How are they supposed to generate an income, if not with milk?

Mr Dalli, I think that the restructuring you refer to may work well in some parts of the European Union, because alternatives exist there. What scope for restructuring exists for farmers in mountainous areas, however? For them, restructuring generally means locking the cowshed doors and closing down their businesses. I believe that this is why people in these areas feel under pressure and worry about what is going to happen after the quotas are phased out.

We are fooling ourselves if we believe that the solution here is to strengthen the first or second pillar. Farmers cannot live on this in the final analysis. That is why we need intervention in the market with regulatory measures. I could certainly envisage special assistance programmes for producers in these difficult mountain areas, for example, after the quotas have been phased out. If we fail to do this, then we cannot agree to allow the milk quota to be phased out without further ado.

  Luís Paulo Alves (S&D). – (PT) Mr President, favourable conditions and more possibilities for production have led to substantial increases in the amount of milk produced, creating critical situations of surpluses and low prices in the milk and dairy market. Many regions with strong production potential have placed those surpluses on the markets of other countries at a reduced price, putting even more pressure on producers from those countries to lower prices. One example of this has been French milk, sold in France at double the prices that it was sold in Galicia. Today, with the sharp rise in the cost of raw materials and production factors, farmers are seeing their capacity to resist low prices severely reduced. This is a bad omen for many of Europe’s farms and productive areas, and seems to be a clear harbinger of what a future without quotas and suitable instruments for regulating supply might look like.

I therefore call for a detailed audit of the regional impact on the thousands of farms across the EU of scrapping these instruments, which currently regulate supply.

  Valdemar Tomaševski (ECR). – (PL) Mr President, much has been said today about territorial equilibrium or territorial balance. At this point, we must also mention the unequal situation between producers and farmers from Western Europe and those from the countries which did not become EU Member States until after 2004. Farmers in the latter countries are less organised and may suffer most from the future changes. The Commissioner said that we have billions of euros to support milk producers. This is a good thing. However the worry is whether this money will be sufficient and, more importantly, whether it will be distributed fairly. I sincerely hope that this time farmers from certain countries, let us say the Baltic states, Lithuania, Latvia and Estonia, as well as other countries, will not be treated unfairly, as is currently the case with direct payments.

  Mairead McGuinness (PPE). - Mr President, my thanks to the Commissioner for a very clear message here this morning that the Commission is not for turning. It is not what I wanted to hear, but at least it is clear. I think we should say to dairy farmers in several Member States, including my own of Ireland, that this is the position as of now.

However, I am not going to be defeated and just accept the Commission’s word. There are a number of Member States which are farming States, and those people who want the situation to remain as it is should remember that they are paying 56 million to the coffers of the European Union, despite the fact that the European Union is producing milk under its quota at the moment. This is neither fair nor just, and we need to look at reducing the super-levy charge on these farmers.

We also could and should look at the butterfat correction mechanism to make some adjustments and perhaps frontload the quota increase. So, while you are not for turning this morning, Commissioner, please take back some of my ideas to your colleagues and see what might be done.

Can I say generally, on the issue of quotas – which is the broader issue here today – please remember that when we had quotas, the milk price collapsed in 2009. So quotas did not save us from a milk price collapse. Also, it is dangerous for Europe to say that we will restrict production while the rest of the world expands production. We are losing opportunities. We need a more sophisticated debate. We need to protect those vulnerable regions where we want to have production – and we can do that through various mechanisms – but let us not retreat within the European Union at a time when the medium- to long-term prospects for dairying are positive.

(The speaker agreed to take a blue-card question under Rule 149(8))

  Peter Jahr (PPE), Blue-card question. – (DE) Mr President, I have a question for Ms McGuinness. We have already had the milk quota as an instrument to control volume. Was it not always a major political error that this instrument was insufficiently used, in other words that volume was not reduced when there was too much milk on the market? Was it not also an error that politicians were never brave enough to use the quota to halt overproduction, so that milk prices dropped as a result? Incidentally, we were also against increasing the milk volume quota beyond actual demand, because this naturally provokes a drop in milk prices. Is it not the case that the quota policy has failed to a certain extent?

  Mairead McGuinness (PPE), Blue-card answer. – Mr President, I hope I am getting the sense of your question. I mean, I do not mind who is at fault. I think we have an issue here. Dairy farmers want certainty. They have been told that milk quotas will be abolished by 2015 and they were told there would be a ‘soft landing’. We know one of those two things will be delivered on. We have not delivered on the ‘soft landing’.

I am saying that there is an opportunity for the European Union to produce milk in a sustainable way and to feed into global demand for dairy products. It seems to me that our debate this morning is stifling that possibility. I want dairy farmers to understand what the Commission has said, because Irish farmers are paying a super-levy bill of EUR 11 million. They are young, they are enthusiastic and they are those who are our future. They are being penalised for all of those things and I regret that that is the case.

(The speaker agreed to take a blue-card question under Rule 149(8).)

  João Ferreira (GUE/NGL), Blue-card question. – (PT) Mr President, Ms McGuinness, the fact that the quota system has coincided with a sharp drop in prices – and I see that the Commissioner is nodding in agreement, because the Commission often makes this argument – does not mean that the quota system has failed, but simply that the quotas were not properly adjusted to the precise needs of each country, its level of production and its relative productive capacity, so as to prevent certain countries from flooding other countries’ markets. All it has demonstrated is that the quotas were not set at the levels that they should have been; it does not demonstrate that the failure of the quota system. Indeed, perhaps you can clarify for us Ireland’s plans for increasing milk production over the coming years, Ms McGuinness, as it will be one of the countries with most to gain from the abolition of the quota system. There are already plans for a very considerable increase in milk production, so perhaps you can elaborate on some of those plans here.

  Mairead McGuinness (PPE), Blue-card answer. – Mr President, I could answer with a question, but I will be much more direct on this issue. The milk quota system failed to protect farmers from income price collapse in the past, which means that system failed. We have made a decision to scrap it. I wish we would not start talking about possibly changing that decision unless we are clear that can be the case. The decision has been made.

On the issue of milk production, my point is this: if the European Union, and Ireland as a Member State of the European Union, can produce milk competitively – and we supply Europe and beyond – we should be allowed to do that in a sustainable way. I am arguing here not against your point, but against this negative view that we restrict our production all the time, which has worked against us.

The quota system has introduced rigidity and high costs into our system. We can – using politics as Peter Jahr said – have a milk production system in Europe that feeds the global demand. Otherwise we are saying, ‘New Zealand you go do it’, ‘the US, you do it’, and that Europe will retreat. It is not good for farmers in Europe and it is not good for farmers in Ireland.

  Vasilica Viorica Dăncilă (S&D). – (RO) Mr President, if nothing is going to be done until the quota scheme expires in 2015, the high quota values will prevent the more productive farmers from enjoying new opportunities, whereas the least productive in disadvantaged areas, especially mountainous areas, would be faced with major problems due to a significant drop in prices as a result of the abrupt removal of the quota scheme.

This situation naturally raises the following question. Should measures be taken, and if so, what kind, to ensure a slow transition to a market policy in the dairy sector before the milk quota scheme expires on 31 March 2015? Does the Commission have dairy sector policy instruments ready to facilitate this transition? Because it is clear that, before taking certain decisions, we need to assess their impact in this sector.

  Elisabeth Köstinger (PPE). – (DE) Mr President, Commissioner Dalli, I very much welcome this opportunity finally to debate European milk production. The agreed dairy package was a significant first step. However, it is now high time to take a look at the present market situation.

What we are witnessing is not seasonal variation in the milk market, but rather a drastic drop in prices. Many producers have not yet come to terms with the pricing situation of recent years. There is grave uncertainty in Austria in particular. The measures implemented after the quotas are phased out after 2015 will genuinely determine whether or not our farmers survive.

I want to avoid a crash landing for our dairy farmers when the quota is phased out, which is why I am demanding concrete steps from the Commission. We need an adjustment of the fat correction mechanism and, above all, a reduction in surplus levies. We need to ask serious questions about whether it is fair to continue to impose heavy penalties on individual dairy producers. When we hear talk of a ‘soft landing’, then this needs to apply to all measures.

We need to pay particular attention to the areas that have no alternatives to milk production. I demand clear support for our disadvantaged areas. These regions cannot survive without milk production and livestock farming. The dairy market requires clear ground rules.

  Esther de Lange (PPE). – (NL) Mr President, ladies and gentlemen, let us not fool ourselves. The quota system of recent years has not delivered a sound price guarantee. I think that the Commission needs to take good decisions for the whole European Union, and I therefore see three actions that are necessary.

Those production areas that are currently armour-plated in the quota system and that will be moving overnight from the quota system to a quota-free system need to be guaranteed a soft landing. We were promised that much. We need to do something to ensure that that happens. Commission, look beyond your previous limits and do something via fat correction, or make it possible to use the capacity still available in Europe as part of the total quota.

As a second point, I call on the Commission to make it possible for vulnerable regions, such as mountainous regions, to provide additional support via the first or second pillar. I say this because I also do not want to see Alpine cows disappear, but that is a structural problem, rather than just a market mechanism problem.

Thirdly, Commission, I call on you to now, finally, ensure a fair distribution of margins in the chain. Look at the powerful position of the supermarkets and ensure, for example, that it is forbidden right across Europe to sell things below cost price. In some countries that is already the case, and it should be the case right across the Union, certainly in respect of primary food products.

  Franz Obermayr (NI). – (DE) Mr President, I would first like to address the Commission. Of course I do not agree that all is well for our dairy farmers. Quite the opposite is the case. You should visit Austria to see how our alpine producers are struggling to survive. If we are to avoid destroying the livelihoods of many dairy farmers, then we need to retain milk quotas in order to regulate market volume. Otherwise our alpine farmers will be forced to close down because they simply cannot withstand the competition. It is not possible to produce milk in massive volumes in Europe’s alpine regions as farmers in the flatlands of Ireland or the Netherlands can. We need comprehensive EU-wide supply; milk should not be transported from one end of Europe to the other, but should be produced locally in the various regions.

However, from a pan-European perspective, the abolition of the milk quota would also place enormous import pressure on the European dairy market. For this reason, the milk quota needs to be recalculated, as the fact is that, at present, exceeding national quotas by even small amounts can incur penalties measured in millions, despite the fact that there is underdelivery on the overall milk quota at present. That cannot serve any purpose. Finally, we also need an EU-wide price corridor derived from the full cost of production. This would enable a fair price to be determined, both for the producer and for the consumer.

(The speaker agreed to take a blue-card question under Rule 149(8))

  Elisabeth Köstinger (PPE), Blue-card question. – (DE) Mr President, I just have a quick question for Mr Obermayr. You stated that the quota is pretty much the solution to the problems. How then would you explain the fact that the pricing situation in 2008 and 2009 was so dramatic, despite the existence of a quota for our dairy farmers? I would be genuinely interested in your expertise in these questions regarding the current situation and market measures.

  Franz Obermayr (NI), Blue-card answer. – (DE) Mr President, firstly I would like to thank my colleague for crediting me with expertise that I naturally do not have, as I am not an agricultural producer. However, I have numerous friends in the region who cooperate with me as consumers and who keep me well informed. I can only recommend to my colleague that she should also pay attention to this group and not just to the producers and professional groups; after all consumers and interest groups also count.

You may not have listened to exactly what I had to say: I referred to a price corridor, which means that we need to make prices dependent on production costs. This is a fair approach because, as you will admit yourself, production costs vary greatly depending on whether a producer is located in an alpine region or a flatland location. If we take this into account in our calculations, we are sure to come up with a rational solution.

Catch-the-eye procedure

  Maria do Céu Patrão Neves (PPE). – (PT) Mr President, I believe this debate has exhaustively shown that we are not satisfied with what is happening in the European milk sector. There is major volatility, as there has been in the past, and given the measures that have been taken so far, it can only be surmised that the sector will remain volatile in the future. My position on quotas is known all too well: I believe that they are absolutely crucial, but that they have not been used in the proper way to regulate the market effectively. If we are to move towards actually scrapping the quotas, it is necessary and indeed imperative that some sort of market regulation take their place. Otherwise, we run the risk of being without milk producers, particularly in certain countries, not least those of southern Europe. The milk package was designed in such a way that it does not properly serve the southern countries, and regions heavily dependent on the milk sector, such as the Azores, run the risk of complete devastation to their agricultural economies, in addition to social and demographic issues. I call for all decisions to be made based on a holistic vision of the sector and forward-looking regulation.

  Ricardo Cortés Lastra (S&D). – (ES) Mr President, if anything is evident from this debate, it is that the situation in the farming sector is dramatic. As Mr Tarabella said, I think that the national governments have something to say, and I am not going to say anything to the Spanish Government, as they will tell me that there are no problems with the sector.

I am going to list the problems faced by the sector, however: firstly, the price of milk. It is at rock bottom, especially in my country, Spain, compared with that in France, for example. Secondly, an industry that abuses its position of power and the farming crisis. Thirdly, an industry that tells its farmers that there will be a contract, but that they will set the prices and that, also, those prices will remain the same. Fourthly, a depressed sector with no outlook that does not know where to turn for a solution. And lastly, milk in the supermarkets of unknown quality.

  Ana Miranda (Verts/ALE). – (PT) Mr President, the dairy sector is suffering a major crisis, in which public intervention is the only way of guaranteeing minimum prices that cover production costs and maintaining a network of sustainable dairy farms.

Commissioner, I come from a dairy-producing region, Galicia, which is the main milk-producing region in Spain. In my region there are 10 000 small farms dependent on milk production. These create 60 000 jobs, whereas 10 years ago there were 30 000 jobs. The low prices paid to producers, which do not cover production costs, are scandalous, as are the agreements between companies and distributors within the industry on paying at below the cost of production.

I have added my criticisms of the milk sector in Galicia to the proposal to scrap the milk quotas system in 2015. We call on the Member States and the Commission to take responsibility for continued regulation of production that addresses the challenges of maintaining employment and wealth levels, as well as the land, demographic and environmental balance, in order to ensure a milk sector that can guarantee consumers a quality product.

  Andreas Mölzer (NI). – (DE) Mr President, the current dive in milk prices has not materialised out of thin air. In fact there have been clear warning signs for some time, offering plenty of time for political action to prevent this.

The dramatic decline in milk prices in recent weeks and the simultaneous rise in production costs – as we know feed, fertiliser and diesel prices have all increased – have pushed milk producers to the verge of ruin. Thus, many dairy farmers really are fighting for survival.

In addition, demand for dairy products is declining because consumers in many southern European countries can no longer afford milk and dairy produce in the quantities purchased prior to the euro crisis.

Thus, common agricultural policy reform is hugely important, particularly in the context of the current crisis in the dairy industry, because a massive decline in farming could indeed undermine the self-sufficiency of the EU Member States. Clearly, those worst hit by this are those in disadvantaged areas, such as the outermost regions, but also farmers in mountainous regions like we have in Austria, on whose behalf the EU must finally take action.

  Elena Băsescu (PPE). – (RO) Mr President, after the quotas are phased out in 2015, a major change will take place in the dairy product sector. New legislation is aiming to increase the negotiating power of dairy producers so that they can obtain the best price. In this regard, their involvement in producer organisations still ought to be encouraged. The dairy product sector is the only one in agriculture where producers can negotiate their price collectively. This ensures a fair standard of living for farmers and rational production development.

Although Romania does not have many large farms involved in processing milk, my country appears halfway in the ranking of the biggest dairy producers in the European Union. They need to be supported and protected during the period after the quotas are phased out to ensure a stable future for the sector.

  Luis Manuel Capoulas Santos (S&D). – (PT) Mr President, we are debating this issue here because there is a real problem in European society. The milk sector is once again being affected by a very difficult cycle of falling prices, and we politicians must find solutions, so that anxiety does not become a permanent state of mind for milk producers. This sector is of great social importance, so we cannot look at it solely from the competitiveness point of view. If we go down that route, total liberalisation and the lionisation of the market would clearly resolve the problem, but we also have to think about it from a social perspective.

The 2003 decision to scrap the quota system was made at a time when the craze for liberalism was at its peak. Over the last few years, we have seen that this is not the right remedy for the problems facing the European economy, and the debate here has also shown that we are now curbing common agricultural policy reform, with an growing tendency to extend the quota system to other areas, such as sugar and the right to plant vines. In other words, we cannot be liberal in one area, yet advocate intervention in another.

The Commission must therefore reflect on why the solutions adopted have not been able to resolve this major problem.

  José Bové (Verts/ALE). – (FR) Mr President, we are currently experiencing a situation where production is increasing by more than 2.5%. At the same time, industrialists are lowering their prices. In Italy, Germany, the United Kingdom and throughout European countries, prices are falling. This clearly means that prices are linked to production volumes and that we must organise production volumes as well as prices.

At the same time, today, producers are falling victim to an increase of more than 44% in the price of vegetable proteins and 30% in the price of cereals. Parliament has already voted on the need to ensure that added value is distributed among producers and that farmers do not become the victims of companies and large-scale distribution.

I would therefore ask the Commission today, but also the Council, to once again call into question controls on production, but at the same time, and I say this very clearly, Member States must get their own house in order because there are countries which have respected the quota rules and others which have not. This is another reason why these quotas have been called into question. There is therefore a double responsibility on the part of the Commission and the Member States.

  Peter Jahr (PPE). – (DE) Mr President, I have three comments to make. Firstly, we should be honest enough to admit that the milk quota has failed as an instrument for stabilising prices. This was not the fault of the farmers, but rather of the politicians, who have always allowed more milk quotas to be issued than the market could actually bear. This was also the reason why Germany, for instance, once again opposed the recent move to increase the milk quota, despite the fact that demand had not risen. A price drop was the logical consequence.

Secondly, I worry about how we can support entrepreneurship among our dairy farmers. This requires market monitoring, forward-looking market decisions and active interest groups. Although these are standard practice for pig farmers and cereal producers, there is a need for the dairy sector to catch up.

Thirdly, I would simply ask that milk production should be supported not just in disadvantaged areas and mountainous regions, but also in grassland areas: the second pillar does not fulfil the requirements here, as producers cannot possibly fulfil the extensivisation criterion, that is to say we cannot support milk producers from the second pillar because they have too many animals per hectare. Here too we need to make the necessary changes to the agricultural reform.

  Seán Kelly (PPE). - Mr President, I had not intended speaking in this debate, but just want to make three points:

First, looked at objectively, the fact that farmers in Europe have to pay a EUR 56 million super-levy, when Europe as a whole is under quota, makes absolutely no sense. What does it say about solidarity? What does it say about the single market? Certainly it does not say much for political decision-making.

Secondly, the decision has been made to abolish quotas post-2015. That should not be changed. We have the same carry-on with the sugar beet quota, trying to change that abolition as well. It takes a long time, particularly for dairy farmers, to plan for expansion into the future, and those already planning need the certainty that there will be no change in those decisions.

Thirdly, the world population is seven billion as of now, and expected to rise to nine billion over the next 20 or 30 years. With the same amount of land and more food needed, this is an opportunity for farmers to expand. As my colleague Mrs McGuinness said, are we going to leave it all to New Zealand and the US and disadvantage our own farmers? It makes no sense whatsoever.

  Mairead McGuinness (PPE). - Mr President, there are two points I did not get a chance to make: one referred to a comment from Ms de Lange and my colleague Mr Agnew on supermarkets and prices. This is an issue which we need to look at, not just as regards dairy products, but also as regards fairness in the food supply chain. We are looking forward to the Commission’s report on this matter because it will feed into how farmers survive, not just in mountain regions, but right across the European Union. I support your efforts in that regard, Commissioner.

On the point of regional and territorial balance, I think this House generally supports the idea of family farming in the European Union and farming on a territorial basis. The dairy farms which I refer to in Ireland are family farms and we too, in our country, want regional dairy production; we do not want concentration with any particular region. I repeat the point that quotas may have given certainty and volume, but they did not give dairy farmers certainty on price or income in the bad times.

  Albert Deß (PPE). – (DE) Mr President, thank you; I asked to speak because we still have some time left. I will be brief.

I would like everyone who talks about the absolute freedom of the milk market, whether from my own group or from other groups, to take the following to heart: from 2015 onwards we shall also have to discontinue the historical payments per hectare. We cannot have a situation where milk producers in Latvia receive EUR 100 per hectare, while producers in other countries receive over EUR 1 000 on the basis of historical premiums. This does not constitute fair competition. A milk producer who receives compensation payments of EUR 1 000 per hectare can sell his milk to the market at a lower price, thus distorting the market. That cannot be allowed to happen. Starting from 2015, we must pay the same hectare premiums for all milk producers in the first pillar. We can expect some interesting discussions.

My second comment relates to the market: we need to strengthen the position of producers and processors in relation to the retail sector. I fully support this. We cannot have a situation where milk producers and processors have to pay premiums and listing discounts and payments are delayed by periods of up to 100 days. Commissioner Dalli, we need to step in here to strengthen the position of producers and dairy farmers as a whole.

(The speaker agreed to take a blue-card question under Rule 149(8))

  José Bové (Verts/ALE), Blue-card question. – (FR) Mr President, Mr Deß, I understand what you are saying and I am entirely in agreement with you. I have a very specific question on this subject.

In the documents that I have managed to collect, I see that in Germany, while there are normally price negotiations between milk producers and buyers, industrialists, cooperatives and so on, Aldi – which is today a large-scale distribution group – has unilaterally decided to lower the price of a litre of milk by six cents. At the same time, all the other ‘hard discounters’ have just done the same thing.

How do you explain the fact that, in Germany, large-scale distributors can set prices while, normally, according to the mechanisms put in place by the European Union, there ought to be discussions between industrialists and producers?

We can clearly see that today there is a problem in the rules for setting milk prices.

How do you explain this?

  Albert Deß (PPE), Blue-card answer. – (DE) Thank you for your question, Mr Bové. I myself am the president of a large dairy cooperative that markets milk for 7 000 dairy farmers and only the dairy farmers themselves have a say in the business, in other words the directors and the members of the supervisory board are all farmers.

Unfortunately, we do not have enough leverage in the market to impose our prices on these wholesale chains. What we find particularly disturbing, and what causes prices to drop, are the unfair methods employed by others. There are no net-net prices. Discounts have to be given at the end of the year. Listing fees are demanded in the interim. In other words, it is impossible to compare the prices paid by the retailers because they are undermined by these systems. The Commission should look for clear-cut systems that would make the whole system more transparent and easier to understand. This would also allow us to protect our own interests more effectively.

(The speaker agreed to take a blue-card question under Rule 149(8))

  Astrid Lulling (PPE), Blue-card question. – (FR) Mr President, as the person who started this debate, I believe that it has been very useful and very good.

As I will not be able to take the floor after the Commissioner, I would now like to ask Mr Deß a question.

We talk a lot about growth at the moment. Does Mr Deß believe that we can promote growth in Europe by slowly but surely killing milk producers in many regions with surcharges, for example?

We have made proposals. I would also ask Mr Deß whether he agrees that Mr Cioloș is taking these proposals, among others, into consideration with regard to reducing surcharges.

Does he also agree that we should ask Mr Cioloș to take action? He has already wasted far too much time. He has the monopoly on legislative initiatives. Let us hope that he uses them!

  Albert Deß (PPE), Blue-card answer. – (DE) Mr President, I believe that the present problem is not that we do not have enough milk, but rather that we have too much. The problem is that some farmers are supplying much more than their quota permits. The aim of Ms Lulling and a number of other colleagues is to abolish or reduce the super levy. I disagree with them on this.

This provision lasts up to 2015 and a number of dairy producers have spent money in recent months in order to purchase quotas. These people would be penalised if we were now to do away with the entire system. We must provide contractual security. Contractual security means that the status quo must be maintained until 2015, in other words that any force the quota may still have should remain in place until then.

We need to consider what market measures we take after 2015. I must say that my dairy cooperative of 7 000 farmers is preparing well for 1 April 2015 and I have also advised dairy farmers to do likewise.

(End of catch-the-eye procedure)

  John Dalli, Member of the Commission. − Mr President, I will try. I would like to thank Members for their contributions to this debate. I have listened carefully and I assure you that I will pass your varied comments to my colleague, Dacian Cioloş, who by the way is not here because he is on official business in China.

It is clear that the milk sector is a very important part of our agricultural policy. That is why the Commission pays close attention to developments in this sector.

Concerning the quota, some of you want a ‘softer landing’. Let me add a few words to what I have already said. I am aware that in 2008 Parliament asked for a more flexible approach by ‘setting of quota’ at EU level. This was not adopted because it would have had an uncontrollable and unforeseeable impact on dairy production. Instead, a 1 % annual quota increase over the period 2009-2013 was retained.

Some others want to keep the quota system beyond 2015. I want to make three remarks concerning this point. Firstly, we have recently put in place the Milk Package, which is our first response to the concerns about the quota system being phased out. Secondly, the phasing out of quota will end a rigid milk production system which has hampered farmers from gaining experience in adjusting supply to demand. Thirdly, the Commission will come up with a report by the end of 2012 with an assessment of the market situation and the conditions for phasing out the quota.

As to the market situation, I would like to remind you that dairy product prices have been particularly high over the past two years. Over the past months, the trend has changed. This coincides with the seasonal pattern of milk production and prices and is reinforced by milk production in the Union and in the other main milk-producing regions.

Prices seem to have reached bottom and some are even trending higher already. In any case, safety-net mechanisms are available for operators who so far have only proposed butter for private storage. This is a good sign of confidence in a positive evolution of the market.

  President. − The debate is closed.

Written statements (Rule 149)

  Daciana Octavia Sârbu (S&D), in writing. – (RO) Belonging to a single market does not mean equal opportunities for EU farm producers. Milk quotas are due to be phased out after 2015. However, we have no idea as to what kind of instruments will be adopted to ensure the proper functioning of this market. I have seen that dairy producers are extremely vulnerable and, even though there have been intervention tools available, we have experienced crises in the sector. I am not sure that small farmers in Romania will have any chance of survival in a deregulated dairy market. This is why I call on the Commission to reconsider phasing out milk quotas in 2015 in order to guarantee stability and predictability in this sector.

(The sitting was suspended for a few moments)

IN THE CHAIR: MARTIN SCHULZ
President