Brussels, Oct 15 - The European Union should focus on satisfying the needs of its domestic dairy market and ensure a fair standard of living for producers rather than deregulating the sector, the EU financial watchdog said on Thursday.
The European Court of Auditors, in a special report on the EU dairy sector, recommended the executive European Commission continue to monitor the development of the milk and milk product market so liberalisation does not lead again to overproduction.
"Failing this, the Commission's objective of keeping to a minimum level of regulation, of the safety net type, might rapidly prove impossible to fulfil," the court said in a statement.
Thousands of dairy farmers staged protests and embarked on a two-week milk supply boycott across Europe in September, blaming the Commission's liberalisation policies for falling milk prices.
The court said that in real terms, the milk producer price had fallen continuously since 1984 and recommended that price formation in the food industry be monitored regularly by the EU executive.
"The concentration of processing and retailing companies must not reduce milk producers to 'pricetakers', and must not restrict opportunities for final consumers to benefit fairly from decreases in prices," the court said.
It added that in-depth reflection should be given to strategies to tackle the special problems of regions where milk production is most vulnerable, as well as the environmental consequences of a concentration of milk production.
The 15 older member states of the EU lost half of their dairy farms between 1995 and 2007, with more than 500,000 producers giving up during this period.
The trend towards consolidation of production is expected to continue, and even accelerate, the court said.
More than 1 million producers supply 148 million tonnes of milk annually with an approximate value of 41 billion euros ($61.2 billion) at the farm gate.
The milk processing sector, making mainly cheese, butter and drinking milk, employs around 400,000 people and generates a turnover of 120 billion euros.