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 hit by oversupply and 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 executive European Commission wants to extend the subsidised buying period until the end of February 2010. It also wants the right to grant a further extension until the end of February 2011 if this is justified by poor market conditions. "It (the 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.
He said that, as the summer lull was approaching, the Commission would use its emergency legal powers to extend intervention from September and EU ministers would aim to approve the proposal formally in October.
"In all probability, there will be a retroactive decision in October," Swedish Agriculture Minister Eskil Erlandsson, whose country holds the EU presidency for six months, told a news conference after the farm ministers met in Brussels.
"The overall view is that the milk market will be weakened if intervention is interrupted in August."
EU dairy markets have deteriorated sharply over the last 12 months. After a price rise in 2007, prices have dropped substantially, with serious effects on producers' incomes.
The Commission expects a moderate price recovery because 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 faced protests in recent months by dairy farmers angry about low milk prices.
The latest was 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, some 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.
Fischer Boel told the farm ministers the Commission would carry on monitoring the cheese market and "if needed, react to the circumstances".
"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."