How the EU Voluntary Milk Reduction scheme will work

Key details have emerged on the EU’s new Voluntary Milk Reduction scheme, which was announced by the European Commissioner for Agriculture Phil Hogan this week.

The Scheme has a budget of €150m and is based in the Milk Market Observatory Economic Board concluding that a correction on the support side of the dairy market is still necessary.

The precise detailed measures will be finalised in the coming weeks, in consultation with Member State experts.

It has yet to be confirmed whether the new Scheme will be made available to Irish farmers.

However, some of the key details have been revealed. It is understood the temporary measure will open to applications in September and come into force on October 1 and continue until the end of the year.

If farmers wish to apply for the scheme, their milk deliveries in October, November and December will be compared to the same three months last year (2015).

While the payment rate is yet to be confirmed, it is understood that it will be around 14c/kg.

As an example, a farmer produced 30,000L of milk in October, November and December 2015 and, due to their membership of the scheme, reduces production over the same three months in 2016 to 20,000L. Under the new Scheme, that farmer would receive a payment of €1,400 based on reduced production of 10,000L at a rate of 14c/L.

Other key details to be confirmed include when farmers will be paid, eligibility and application process.

However, it remains unknown whether Irish dairy farmers can apply for the scheme.

Commenting on the package, Minister Creed said Ireland’s views in relation to supply management are well known and we did not want today’s package to be focused exclusively on production discipline, although there were strong demands for that from some Member States.

“So the fact that 70% of the package has been directed to adjustment aid is very welcome. In relation use of these funds, I have argued strongly that the maximum possible flexibility needs to be given to Members States. While we still await full details, which we will examine closely, the flexibility indicated by the Commissioner to provide liquidity support to farmers is welcome.”

In March, the Commission activated, for a limited period of time, the possibility to enable producer organisations, interbranch organisations and cooperatives in the dairy sector to establish voluntary agreements on their production and supply.

This is the so-called Article 222 from the Common Market Organisation (CMO), which is specific to the agricultural sector and can be applied in case of severe imbalance in the market.

The Commission has concluded that the strict conditions for the application of this article to the dairy sector are fulfilled in the current circumstances.

This is an exceptional measure, which must also safeguard the EU internal market and was included by the legislators in the 2013 CAP reform but never used before.