Brussels, July 13 - European Union farm ministers agreed on Monday to extend public buying of butter and skimmed milk powder by six months to prop up dairy markets battered by oversupply and persistent poor demand, officials said.
EU public storage and buying of both products, known as intervention, is due to run out at the end of August.
The European Commission, the EU's executive arm, wants to extend the subsidised buying period until the end of February 2010. And if justified by poor market conditions, it also wants the right to grant a further extension until end-February 2011. "It (Commission proposal) had quite large support from member states, although countries like France and Spain wanted more. But some countries said it was too much, like Britain and Denmark, and were sceptical on principle," one EU diplomat said.
Given the upcoming Brussels' summer break, the Commission would now use its emergency legal powers to extend intervention from September, he said. EU ministers would aim to approve the proposal formally at their October meeting in Luxembourg.
EU dairy markets have deteriorated dramatically over the last 12 months. After a price spike in 2007, prices have dropped substantially, with serious effects on producers' incomes.
Looking further ahead, however, the Commission expects a moderate price recovery given that consumer buying power is likely to pick up as the worst of the economic crisis passes.
"In the medium and long term, we expect that demand will start increasing and prices will normalise once the economic and financial situation improves and buyers' behaviour returns to normal," EU Agriculture Commissioner Mariann Fischer Boel said.
Fischer Boel will issue a report on the state of EU dairy markets on July 22, possibly with proposals for more action.
EU countries, particularly France, Germany, Belgium and Luxembourg, have seen numerous protests in recent months by dairy farmers angry about low milk prices.
The latest came on Monday on the Franco-Belgian border where tractors blocked two highways in both directions. A third was blocked for traffic entering France, traffic associations said.
CHEESE EXPORTS
Separately, a number of countries demanded more and wider EU aid for the cheese sector, which uses some 45 percent of milk production as raw material for processing. France and Spain have made similar requests in the past.
Led by Lithuania, which has the EU's lowest milk purchase price, they suggested higher export subsidy rates; other demands included more cheese types to be eligible for export subsidies and more export destinations.
But Fischer Boel was unmoved, telling the farm ministers that the Commission would carry on monitoring the cheese market and "if needed, react to the circumstances".
"With regard to cheese, it is true that we have not adjusted the refund rates since they were re-introduced in January. However, our refund strategy must remain both prudent and operative," she said.
"Based on the export licences requested for cheese so far, we are not only close to the normal monthly volumes under the annual WTO limit but we also see signs of a steady trade flow."