VZCZCXRO8019
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHPOD RUEHROV RUEHSL RUEHSR
DE RUEHBS #1319/01 2731109
ZNR UUUUU ZZH
P 301109Z SEP 09 ZDK
FM USEU BRUSSELS
TO RUEHRC/USDA FAS WASHDC PRIORITY
RUEHC/SECSTATE WASHDC
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE

UNCLAS SECTION 01 OF 02 BRUSSELS 001319 
 
SENSITIVE 
SIPDIS 
 
USDA/FAS FOR OFSO/DYOUNG,OGA/TROCKE 
 
STATE PASS USTR 
 
NOT FOR INTERNET DISTRIBUTION 
 
E.O. 12958:  N/A 
TAGS: EAGR ECON EUN
SUBJECT: EU DAIRY FARMERS SEEK TO REVERSE REFORMS 
 
¶1.  (SBU) SUMMARY. EU dairy farmer protests are rapidly escalating 
into a widening milk delivery strike. The crisis in the EU dairy 
industry is due to decreased demand as a consequence of the economic 
crisis.  Production of dairy products in the EU has been 
regulated/managed/protected since the mid 1980's and farmers 
economically hurt by the recent reduction in market prices. This has 
dramatically increased pressure on MS politicians and the EC to 
propose new aid measures.  On September 17, 2009, Commissioner 
Fischer-Boel presented a dairy sector road map to the European 
Parliament in Strasbourg that remained generally in line with the EC 
dairy market situation report from July 22.  New is a proposed 
change to the superlevy rules, effectively allowing the removal of 
dairy quota from the market through buy-back, as well as a proposal 
to give the EC emergency power for faster market interference. 
However, the proposal should not increase export subsidies, nor 
increase dairy intervention prices, nor reverse the "soft landing" 
of the dairy quota agreed in the 2008 Health Check. In response to a 
French proposal backed by Austria, Belgium, Ireland, Slovakia and 
Poland, an extraordinary informal meeting of Agriculture Ministers 
is scheduled for October 5, 2009 to discuss the dairy situation. 
Fischer-Boel is likely to present the road map to the informal 
meeting at which no formal proposal will be made. It is probable 
that she will make a formal proposal reflecting the road map at the 
Agriculture Council scheduled for October 19. 
 
Milk Strikes Encouraged By Milk Producer Organizations 
--------------------------------------------- --------- 
 
¶2.  (SBU) Walloon dairy farmers in Belgium especially have rapidly 
joined a milk strike, which has been called by the European Milk 
Board.  On September 16, 2009, this has culminated in farmers 
spraying 3 million liters (790,000 gallons) of milk on fields in 
southern Belgium.  In reality, the volume of milk sprayed out was 
closer to 6 million liters as farmers from Flanders/Belgium, The 
Netherlands, Germany and Luxembourg joined a crowd of 2000 
protestors.  It is estimated that the current number of participants 
in the milk producers strike is 40,000 and the number is rapidly 
increasing EU-wide. 
 
European Commission Taking Action 
--------------------------------- 
 
¶3.  (SBU) In January 2009, the Commission re-introduced export 
subsidies for dairy products.  On January 1, 2009, the Private 
Storage aid was made available for butter, in advance of the opening 
of intervention storage from March 1, 2009 on.  Steps to increase 
domestic consumption concentrated on relaxing the rules for the 
School Milk scheme, as well as widening its product scope. 
 
¶4.  (SBU) As a consequence of farmer protests, political pressure 
also is rapidly increasing on the EU institutions to respond.  The 
Commission [DG Agri] published  a dairy market situation report on 
July 22, 2009, which suggested new dairy support measures like 
additional dairy promotion, the use of superlevy money for funding 
early retirements, providing additional aid to dairy farmers at EU 
Member State (MS) level through a temporary increase in de minimis 
aid and under Article 68 for Rural Development aid, as well 
examining of potential anti-competitive practices in the food supply 
chain. 
¶5.  (SBU) At the September 7, 2009  EU Agricultural Council meeting 
to discuss the EC situation report, 16 MS (Belgium, Bulgaria, 
Germany, Estonia, Ireland, France, Latvia, Lithuania, Luxembourg, 
Hungary, Austria, Portugal, Romania, Slovenia, Slovakia and Finland) 
submitted a Franco-German initiated note to the Commission calling 
for  higher intervention prices and higher export subsidies among 
other demands.  At the September 13-15, 2009 Informal Meeting of 
Agriculture and Fisheries Ministers of the EU in Vdxj, Sweden, 
support for a new Franco-German 'declaration' on dairy increased to 
18 MS as Spain and the Czech Republic joined the support for the 
note.  French Farm Minister Bruno Lemaire told reporters that he 
also hoped to persuade Poland to support the motion on Monday, 
September 21. Poland has recently also expressed its support 
bringing the total back to 19. 
¶6.  (SBU) The new chairman of the European Parliament Ag Committee 
Paolo De Castro, in an interview on September 9, 2009, had also 
voiced support for helping EU dairy farmers without becoming more 
protectionist or hurting developing countries. 
 
¶7.  (SBU) Until now Agricultural Commissioner Marian Fischer-Boel 
has stuck to the view that any new support measures should be in 
line with the Health Check agreement on the "soft landing" of dairy 
quota in 2015, but this position is now coming under heavy attack 
from the widely backed Franco-German initiative. On September 17, 
2009, the Commission made a proposal, which Fischer-Boel presented 
 
BRUSSELS 00001319  002 OF 002 
 
 
to the European Parliament in Strasbourg.  It still sticks with the 
EC position from the July report.  The new main feature is still to 
temporarily increase de minimis aid to 15,000 from 7,500, but it 
offers a new mechanism for MS to contribute to a solution to bring 
supplies in line with demand by buying quota back into each nation's 
reserve, which would effectively increase the impact of superlevies 
[on individual farmers] for overshooting production quota.  New also 
is the proposal to bring the dairy sector under the coverage of 
Article 186 of the Single Common Market Organization (CMO), which 
gives the EC emergency power to take quick action to support the 
dairy market without having to go through the Council approval 
procedure. 
 
Next Steps To Address Dairy Farmer Unrest 
---------------------------------------- 
 
¶8.  (SBU) FAS/USEU prediction:  Rapidly escalating dairy farmer 
protests culminating in a widening milk delivery strike are forcing 
the European Commission and MS Ministers to take some action. 
However, the 19 MS support for the Franco-German note is not rock 
solid as many MS have expressed reservations with specific aspects 
in it, toning down the demands.  In particular, the focus of the EC 
on MS aid through increased de minimis or Article 68 Rural 
Development aid induces a fear among several MS of a 
'renationalization' of the dairy regime. 
 
¶9.  (SBU) The new EC proposal will be submitted to a Special 
Committee on Agriculture (SCA) for final approval by the Council in 
October 2009.  The increased superlevies collectable at individual 
farm level could then be used to fund retirement schemes.  These 
measures would be voluntary on a MS by MS basis.  However, it is 
significant that the proposal states that "Making a U-turn on 
decisions taken in the Health Check is not an option, and is 
something the European Council asked us explicitly not to do". 
Therefore, the proposal will not contain measures reversing the 
"soft landing" of the dairy quota system as agreed in the 2008 
Health Check agreement, nor should it provide for higher export 
subsidies breaching the EU's WTO commitments, nor increased 
intervention prices and other temporary aid, for which no extra 
budgetary provisions could be garnered from MS under the current 
economic slowdown. MURRAY