New rules to give farmers fairer prices for raw milk were agreed by MEPs and Council negotiators on Tuesday, but still need to be confirmed by the Parliament as a whole and the Council.

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New rules will allow producers' organisations to negotiate raw milk prices for the farmers they represent. MEPs also inserted a provision for supply management regimes for certain geographically protected quality cheeses.

"We have achieved the central aim of this package - to introduce measures, such as establishing producers' organisations, which will allow producers to organise themselves better and strengthen their position in the dairy supply chain", said Parliament's rapporteur James Nicholson (ECR, UK), the head of the Agriculture Committee negotiating team.

"I very much welcome the agreement as a result of good cooperation among the Parliament, the Polish Presidency of the Council and the Commission. This is the first important trialogue after the Lisbon Treaty and it sets a good example of how three institutions can work together in the future", said Agriculture Committee chair Paolo de Castro (S&D, IT).

More bargaining power

To ensure fair competition, the volume of raw milk covered by negotiations between producers' organisation and processors or collectors may not exceed 3.5% of total EU output. Nor may it exceed either 33% of overall national production or 45% in states where total production amounts to less than 500,000 tonnes.

Compulsory contracts must state prices

Member States may continue to decide whether or not to impose contracts covering milk delivery from farmers to collectors or processors for their territory.

However, where Member States do choose to impose compulsory contracts for milk supplies, these contracts must state the price. Member States may also stipulate a minimum duration for these contracts of at least six months, says the agreed text, and MEPs strongly recommend that they do so.

But if a dairy farmer refuses a proposed contract duration, the parties to a contract will be free to negotiate all parts of it.

Any compulsory contracts or written offers for such contracts will also have to be drawn up before delivery, and must include certain items such as the price to be paid for the raw milk (which must take market indicators into account), payment periods and arrangements for collecting and delivering the milk.

Milk from less-favoured areas

To ensure that dairy farmers in less-favoured areas also benefit from the new arrangements, MEPs asked the Commission to produce two reports assessing their situation, one by July 2014 and the other by the end of 2018. 

Quality cheese supply management 

To improve the working of the market for cheeses registered under a protected designation of origin (PDO) or protected geographical indication (PGI) and to improve their quality, MEPs inserted a provision for a supply management system, which Member States may establish provided that it in no way harms competition on the single market or leads to small cheese producers being adversely affected.

To ensure that it represents the wishes of enough dairy farmers, any proposal for a supply management system must be backed by at least two thirds of those delivering at least two thirds of the milk destined for the production of such quality cheeses.

EU misses golden opportunity on dairy contracts, says NFU

A golden opportunity has been missed to strengthen dairy contracts across the European Union, according to the NFU.

The European Commission, European Parliament and European Council have today agreed a final text on the EU’s dairy package which aims to create a more sustainable future for the EU’s dairy sector.

But NFU chief dairy advisor Rob Newbery said the text did little more than maintain the status quo.

“The European Commission’s dairy package proposals were meant to safeguard the long-term future of the dairy sector but, with the exception of new powers for producer organisations, today’s agreement does little more than maintain the status quo for our farmers,” said Mr Newbery.  

“We have been in intense discussions with the European Commission, the European Parliament and the European Council throughout the dairy package negotiations but disappointingly it seems farmers will not be protected by common contract rules across the European single market.

“We see this as a real missed opportunity by the European institutions to help increase the bargaining power of farmers. However, the package doesn’t close the door on individual Member States choosing to legislate for minimum contract terms and Defra Minister Jim Paice has committed to consult on this matter when the time comes. 

“We are also buoyed by the exciting potential for farmers to market their milk collectively through producer organisations which we intend to explore further. Meanwhile, we must re-double our efforts as a dairy industry by working with the dairy processors and Defra to draw up a voluntary code of practice that will give farmers better bargaining power and greater revenue from milk sales. Should this process fail to offer farmers the fairness and transparency in contracts they deserve, we will be pressing Defra to legislate.”

Today’s agreement must still be formally accepted by a vote in the Agriculture Council and European Parliament, with a likely adoption in the New Year.

Next Steps

The results of the "trialogue" negotiations will be presented to the Agriculture Committee MEPs on 20 December. Parliament's plenary vote is foreseen for February 2012.

The new regulation, which builds on a recommendation by the High Level Group on Milk after the 2009 dairy crisis, will enter into force in 2012, after it is endorsed by both Parliament and the Council. It will apply until the end of June 2020.

The rules on contracts, collective negotiations via producers' organisations and the supply management regime for quality cheeses will take effect six months after the regulation's entry into force. The rules on recognition of producers' organisations and "interbranch" organisations (representing producers, traders and processors) will apply as soon as the regulation is adopted.