Brussels, Sept 1 - European dairy prices are slowly starting to recover after their sharp deterioration over the last year, with income benefits likely to filter down to farmers soon, Europe's farm chief said on Tuesday.
"The market is coming back into balance and dairy prices have stabilised," European Agriculture Commissioner Mariann Fischer Boel told the agriculture committee of the European Parliament. "I do see some positive things at the moment."
"Recently, we have actually seen a slight improvement in prices and I hope -- I'm sure -- that this will now start to feed through to milk prices paid to farmers," she said.
Figures compiled by the European Commission showed spot milk prices had risen in national markets in Italy, Northern Ireland and the Netherlands over the last few months, for example.
Offers for subsidised intervention storage of butter and skimmed milk powders had slackened off considerably, with more applications filed for EU export licences -- all indicating that demand in the dairy market was generally picking up. Fischer Boel repeated her opposition to reviewing an EU decision taken last year for gradual rises in milk production quotas before the system's planned abolition in 2014/15, and rejected the idea of a special fund to aid market restructuring.
"We have asked them (farmers) to prepare for a dairy sector without quotas. If we make a U-turn now, there will be total confusion. Farmers need predictability," Fischer Boel said.
Many countries and dairy industry lobby groups have called for one-off suspensions of the annual quota increase, so as to restrict supply at a time of historically low prices.
Still, as Fischer Boel pointed out, the EU's subsidised milk production quota system was "not an obligation to produce" but merely gave farmers the possibility to do so.
MODERATE RECOVERY
Commission experts say they expect a moderate price recovery in EU dairy markets because consumer buying power is likely to pick up as the worst of the global economic crisis passes.
But they have also warned of the power of major retailers to hinder the "trickle-down" effect of price reductions to consumers. The Commission is now examining potential anti-competitive practices in the EU food supply chain, including the impact of supermarket buying power on farmers.
Whereas producer prices for dairy products have plunged below where they were before the price spike of 2007, consumer prices were still 14 per cent higher than they were at that time, Fischer Boel told the Parliament committee.
The Commission, the EU's executive arm, has taken a string of measures to shore up dairy markets, such as reinstating export subsidies -- much to the anger of some of the EU's major trading partners such as the United States.
"We have been very proactive about bringing market prices under control," Fischer Boel told the committee.
"But I think it would be a mistake to see the dairy market crisis only in terms of the action we have taken through the Common Agricultural Policy," she said. "The central problem is that the global economic crisis has hit demand very hard."