Ag Policy Blog

The European Commission is responding to farmer protests and calls for aid by activating what the commission called "exceptional measures" to help farmers.

European farmers are struggling in part because of a glut of dairy products and the trade battle going on with Russia, which has closed its borders to most EU agricultural products. One reason European agricultural sectors are under so much pressure is the ban on imports by Russia. EU officials noted "very little has happened" in recent months to resume trade.

Thus, EU officials rolled out plans to try to reduce dairy supplies, increase storage capacity for the pork sector and also boosting direct aid to farmers at the low end with higher direct subsidies. The announcement comes after farm groups turned up the heat with protests in some major European cities last week.

The overall package should raise questions in the U.S. about the viability of greater market access to Europe for American farmers in the ongoing negotiations on the Transatlantic Trade and Investment Partnership, or TTIP. The trade pact seems long on odds already, but any trade deal would struggle to gain agricultural support if U.S. access for dairy or pork products is stymied because of European aid measures. Specifically regarding TTIP, the commission's statement highlighted that the EU is determined to open up new markets while negotiating "differentiated treatment for sensitive markets."

The EU farm aid package was detailed Monday by Phil Hogan, the EU commissioner for agriculture and rural development, and Martijn van Dam, minister for Agriculture of the Netherlands and the President of the EU Agriculture and Fisheries Council.

Hogan told EU agricultural council that the union needs to "give some reassurance to our farmers and some confidence to the markets." He added, "Our farmers are under pressure and prices are low."

The package supplements a $500 million euro package that the EU put together for farmers last fall. Some of the changes announced Monday were meant to spur at least some of the 27 member countries to respond because many countries failed to activate last fall's aid.

Right now, the U.S. dollar is about 11% higher than the euro. All of the figures referenced in this article are in euros.

A key to the EU aid package involved reestablishing some form of supply management for Europe's dairy farmers. The call to regulate milk production comes just one year after the EU abolished 30 years of dairy production quotas. The lift of the quota, coupled with a lack of increased market access, translated into a glut of milk on the market now across Europe. The new aid package calls for reducing milk production on a voluntary basis for up to six months with a possibility of extending those voluntary measures later.

"Due to a number of factors, which I will not repeat, what we have seen since is a significant increase in production in a number of (member states) which, when taken with the global changes in supply and demand for milk has created a severe market imbalance which is weighing heavily on the market," Hogan said.

The plan also allows countries to temporarily raise the "de minimis" aid to farmers from $15,000 euros per farmer per year to $30,000 euros. One of the caveats, Hogan said, is that ideally that boost in direct farm subsidies would go to helping reduce dairy or pork production.

Another part of the plan calls for temporary doubling the levels for government intervention allowed for buying both milk powder and butter.

Regarding pork producers, the plan calls for the EU to help support a "new, private storage aid scheme" for pork. Few details were explained regarding how that would work or be introduced.

Further, the EU will boost promotion of EU agricultural products with a $110 million euro program to tout products both within the 27-country union and outside.

The commission also will step up its work with the European Investment Bank to provide more financial aid in the form of loans to farmers and food processors.

The agricultural group Copa-Cogeca, which represents farmers across Europe, said the plan announced Monday was a step forward, but EU farmers need to see how it will work in practice.

“Many farmers across Europe are facing the worst crisis since the early 1980s," Copa President Martin Merrild said. "The EU dairy and pigmeat sectors are bleeding. They were hit by the loss of our main export market Russia - worth $5.1 billion euros. The Russian market must be reopened as soon as possible."

Merrild also called on EU countries to step up and release payments of the $500 million euro package approved by the commission last fall as well.

EU news release on aid package: http://europa.eu/…

Follow me on Twitter @ChrisClaytonDTN

© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.