November 28, 2016
European 'Milk Package' strengthens dairy producers' position in supply chain
The European Commission recently published the second report on the operation of the so-called Milk Package, a series of measures launched in 2012 to strengthen the position of European dairy producers in the supply chain.
The report shows that after three years of implementation, European farmers are increasingly using the tools provided by the Milk Package, such as collective negotiation of contract terms via producer organisations, or the use of written contracts. The measure allowing collective negotiation is designed to reinforce the bargaining power of milk producers, whilst written contracts offer better transparency and traceability to farmers.
The report was initially due to be delivered in 2018, but in light of the continuing difficulties in the dairy sector, EU Commissioner for Agriculture Phil Hogan decided to expedite the delivery of the report to the end of 2016. This commitment was part of the series of solidarity packages for the dairy sector announced and implemented during the past year.
Welcoming the report, Phil Hogan stated: "The report shows that there are measures that we can take at EU level to secure a better position for dairy farmers in the supply chain. Following on from the Agricultural Markets Task Force report, I see this report as further evidence for policy action, in the context of the 2017 Commission Work Programme."
The report also examines further possibilities for dairy farmers. For example, it highlights the potential of two key instruments of the Milk Package – Producer Organisations (POs) and collective negotiations - which are not yet fully exploited by Member States, producers' and farmers' organisations, and outlines various ways of making these more effective both at EU and Member State level.
Member States are, in particular, encouraged to take the necessary steps to foster the creation of producer organisations with collective actions that go beyond collective bargaining, thus enhancing producers' weight in the milk supply chain. In addition to these recommendations, consideration should be given to expand the role of Inter-Branch Organisations (IBOs).
For the full potential of the Milk Package's possibilities to materialise, the report concludes that an extension of its application beyond 2020 should be considered.
Adopted under co-decision in 2012, the Milk Package was aimed at strengthening the position of dairy producers in the dairy supply chain and preparing the sector for a more market-oriented and sustainable future, seeking in particular to learn lessons from the 2009 dairy market crisis. Member States have the option to make written contracts between farmers and processors compulsory in the milk sector, and it allows farmers to negotiate contract terms collectively within certain limits.
The package also sets out specific EU rules for inter-branch organisations, allowing actors in the milk supply chain to dialogue and carry out certain activities. Member States are permitted, under certain conditions, to apply rules to regulate the supply of PDO/PGI cheeses. The package also entails a series of measures enhancing transparency in the market.
The measures established by the Milk Package will apply until mid-2020. The Commission was mandated to report in 2014 and 2018 on the market situation and the implementation of the measures. These reports (to the European Parliament and the Council) should assess in particular effects on milk producers and milk production in disadvantaged regions, and cover potential incentives to encourage farmers to enter into joint production agreements. In the framework of the Solidarity Package launched by Commissioner Hogan in September 2015, the second report due in 2018 was brought forward to 2016 and published this month.
- European Commission