Brussels, June 19 - European Union leaders will call on the European Commission on Friday to study how to stabilise the dairy market, according to a final draft of an EU summit declaration.
"The European Council ... invited the Commission to present an in-depth market analysis within the next two months, including possible options for stabilising the dairy market," the draft text read.
The draft did not specify what measures the EU might take to halt the fall in dairy prices, which have roughly halved in the last few months.
France, Austria and Germany say their producers are badly hit by the weaker market and want firm action to bolster farmer incomes. They have tabled a series of requests, mostly involving increases in EU aid to the dairy sector.
France said EU cheese exports fell 10 percent in the first quarter and butter exports by 3 percent. It called for cheese export subsidies to be raised "significantly."
EU milk production should total between 4 and 5 percent below the maximum quota quantities this marketing year, with the same undershoot in 2009/10, the Commission, the EU executive, said last month.
Analysts say that although markets may now be close to their lowest point, a significant rebound in demand is needed to regain an upward trend.
PROTECTIONISM
Brussels, which oversees farm policy in the 27-nation bloc has already taken a string of measures to shore up dairy markets such as reinstating export subsidies, much to the anger of some of its trading partners.
The EU has also increased private storage, raised ceilings on volumes of butter and skimmed milk powder that can be bought into public intervention stores, to remove supply from the market.
The United States, Australia and New Zealand have written to Brussels over the measures, saying they distort the world market and contradict the spirit of a commitment made by the Group of 20 industrialised and developing countries (G20) to avoid protectionist moves to combat the financial crisis.
Brussels says the measures comply with the rules of the World Trade Organisation -- the global trade watchdog, but said it would monitor the international market closely and make sure the EU did not disrupt it.
Thousands of dairy farmers have protested in several EU capitals recently about low milk prices, putting pressure on their governments to help. European Union farm ministers will meet in Luxembourg on Monday to discuss the matter.