ICOS says EU support measures welcome, but not enough

Against the backdrop of last month’s Russian announcement of a ban on imports of dairy and other products form the EU, the Commission’s actions in introducing a number of support measures must be welcomed according to a latest update from ICOS.

It says the decision to introduce Storage Aid for Butter, SMP and some Cheeses is a positive, and it may reassure the markets that product can be stored away for a number of months. In addition, it says the extension of the intervention buying-in period to the end of the year may help to give the signal that the Commission is ready and willing to act if markets fall excessively.

The problem, however, from ICOS point of view is that the measures lack real impact.

It was disappointed that no real consideration was given to targeted Export Refunds, to shift product, particularly those affected by the ban, out of the European market. Such a bold decisive move would have demonstrated the willingness and ability to react to the politically motivated ban.

In addition, it says the level at which the Commission can act, by Intervention buying, or initiating Export Refunds, are set by the Intervention Reference prices, of €2463.90 for butter (bought in at 90% of that rate, i.e. €2217) and €1746.90 for SMP. These prices, equivalent to about 20c per litre for milk are plainly inadequate as a support to put a floor on the market. Given that what is needed is a strong statement that would boost sentiment in the markets, ICOS calls on the Commission to initiate the process of increasing Intervention prices from their current level, back up to the level they were at a decade ago, equivalent to around 26c.

According to ICOS the Commission can initiate that process, although it would then be subject to co-decision by the Council and the European Parliament.
The Commissions say that they already considered the option, last year as part of the CAP reform, and decided against it. They state that they will not reopen the subject “unless things change very much in the next few weeks or months”.
ICOS says in reality, even if the Commission were persuaded to initiate the process, it would take up to two years to pass the legislative hurdles, and a successful outcome couldn’t be guarantees. However, making such an announcement may be the demonstration on intent needed to boost market sentiment.