EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 22.7.2009 
SEC(2009) 1050 
  
COMMISSION STAFF WORKING DOCUMENT 
accompanying the 
 
Communication from the Commission to the Council 
 
Dairy market situation 2009 
{COM(2009) 385 final} 
 
EN 2   EN COMMISSION STAFF WORKING DOCUMENT 
accompanying the 
 
Communication from the Commission to the Council 
 
Dairy market situation 2009 
1. Additional info referring to point 3.1 – market situation to July 2009 ........................ 3 
1.1. EU milk supply ............................................................................................................ 3 
1.2. EU demand................................................................................................................. .. 4 
1.3. World milk supply........................................................................................................ 5  
1.4. World market demand.................................................................................................. 5 1.5. World market prices..................................................................................................... 6 2. Additional info referring to point 3.2 – prices in the EU............................................. 8 
3. Additional info referring to point 3.3 – pri ces paid by consumers versus prices paid 
to farmers ..................................................................................................................... 9 
4. Additional info referring to point 4.3 – othe r measures to support the outlet of milk 
production .................................................................................................................... 9  
4.1. Marketing standards milk products.............................................................................. 9 
4.2. School milk scheme ................................................................................................... 11 4.3. Aid for SMP in veal or SMP into casein.................................................................... 11 5. Additional info referring to point 5b – Promotion..................................................... 12 6. Additional info referring to point 7.2 – Q uota management on an individual producer 
level.......................................................................................................................... .. 12 
7. Additional info referring to point 7.3 – Cow retirement scheme............................... 14 8. Additional info referring to point 8.2 – redi stribution of direct aids – specific support
............................................................................................................................... ..... 15 
9. Additional info referring to point 8.3 – state aids ...................................................... 18 10. Additional info referring to point 9.1 – rural development........................................ 19 
 
EN 3   EN 1. A DDITIONAL INFO REFERRING TO POINT 3.1 – MARKET SITUATION TO JULY 2009 
1.1. EU milk supply 
EU milk production has not increased as a re sult of the various qu ota increases. Milk 
deliveries to dairies, adjusted for milk fat,  under the quota system  was 137.8 million t in 
2007/08 and is estimated at 136.4 million t for 2008/9. Despite the increase of the quotas by 
2-2.5 % in the 2008/09 quota year, milk producti on in the EU-27 fell by 0.9 %. At 31 March 
2009, total milk production was estimated to be 4.2%  below the overall deliveries quota. On 1 
April 2009, quotas were further increased by 1% and the fat correction reduced. Latest 
statistics indicate that EU-27 production increased by 0.5 % in Ma y 2009 (see table 1). As the 
figures only relate to May 2009 compared to May 2008, it may be too early to draw final 
conclusions. Weather conditions in north-west Eu rope were favourable fo r dairy production in 
May, with relatively high average temperatures. 
Table 1: Milk deliveries in May 2009 compared to May 2008  
% 1000 Tonnes % 1000 Tonnes
DE +8.5% +197.9 GR -0.5% -0.3
DK +4.5% +18.3 ES -1.8% -9.2
IT +3.8% +34.4 PT -1.4% -2.5
PL +3.1% +26.0 CZ -1.8% -3.8
LU +2.3% +0.6 UK -1.9% -24.6AT +2.0% +5.0 SI -2.6% -1.2
NL +1.6% +15.3 HU -3.2% -4.2
FI +1.3% +2.7 FR -4.3% -94.6
SE +1.2% +3.0 IE -5.2% -36.3
BE +0.9% +2.3 EE -5.2% -2.9
CY -7.8% -1.0
SK -8.3% -7.0
RO -8.5% -9.5
LV -10.4% -6.1
LT -12.8% -16.4
BG -25.9% -18.3
% 1000 Tonnes
Total EU + 0.5% + 67.5
Source : EUROSTAT (BE, GR and CY: other sources)Countries with higher production C ountries with lower production
 
For individual Member States, the situation as regards their quota use is mixed with some 
Member States producing close to or more than  their quota and others producing less and in 
some cases substantially less than  their quota, see graph below: 
 
EN 4   EN Estimated quota over- and under use in 2008/09 (%)
IT
+3.06%NL
+1.40%AT
+1.14%CY
+0.98%LU
+0.41%
DK
-0.4%DE
-0.9%PL
-1.3% BE
-2.6%IE
-2.9% PT
-3.9%ES
-4.3%FR
-5.0%SI
-5.5%CZ
-5.6%EE
-7.0%
FI
-9.4%LV
-9.4%UK
-9.8%EL
-11.4%HU
-12.1% SE
-13.1%LT
-14.6% RO
-15.7%
SK
-17.7%
BG
-23.1% -25.0%-20.0%-15.0%-10.0%-5.0%+0.0%+5.0%
National data for NL, DE and AT   
Costs of milk production are co llected via the Farm Accounta ncy Data Network. The most 
recent report, using 2006 figures, is available at:  
http://ec.europa.eu/agriculture/a nalysis/fadn/reports/sa207_milk.pdf  
1.2. EU demand 
Dairy products made of milk are used in four  main outlets: households, industry, food service 
and exports. For households there is some ad hoc information in member states available, but 
the use by industry and especially food serv ice is very limited, if any at all. 
A little over 40% of the EU milk is processed into cheese and 30 % into fresh dairy products. 
The rest is processed into powders, butter an d casein. In the cheese market about 7% is 
exported and it is estimated that  about 20 % is used in the i ndustry and food service and. This 
would mean that a little over 70 % of the EU cheese is consumed by households. 
However, while no overall consumption figu res exist for the EU in 2009, the production 
figures of fresh products give a direct indicati on of consumption developments. In January to 
April 2009 production for drinking milk decr eased by 2.5 %, fermented products by 1.3 % 
and cream by 0.8 %. For cheese the link between  production and consump tion is less clear as 
cheese can be stored longer. However the re duction in cheese productio n by 2.3 % in the first 
four months of the year may be a good i ndicator of reduction in  cheese consumption. 
It is clear that, dairy product consumption has suffered from the economic and financial crisis, 
in particular for the more expensive high qu ality products like cheese and fresh dairy 
products. This is a very noticeable development for cheese and fresh products as their consumption has been consistently increasing ev ery year. Since more than 470% of milk is 
used to manufacture cheese and fresh dairy pr oducts, the effect of lower consumption is 
 
EN 5   EN important. Further, the use of dairy products in industrial pro cessing is reported to have 
declined with buyers finding competitive substitution products. 
Consumption or disappearance figures can be de rived at the end of th e year, on the basis of 
annual production figures and exports/imports . Detailed information can be found on the 
internet address indicated below: 
http://ec.europa.eu/agriculture/ publi/caprep/prospects2008/index_en.htm  
1.3. World milk supply 
According to FAO statistics the total worl d milk production in 2007 was 671 million tonnes, 
of which 560 million tonnes co w's milk. Milk production in major southern hemisphere 
exporters, strongly increased in the season just ended: New Zealand +7 %, Australia +2 %, 
Argentina +5 %. US milk production, after se veral strong annual increases, seems to have 
stabilised in 2009 with in creases of 0.1 % in March/ April and 0.2 % in May.  
1.4. World market demand 
While production increased, there is less demand on the world market. Most notable is the 
decrease in world-wide chees e exports which went up until  2007 but decreased by 7.8 % in 
2008 and 12.3 % in the first three months of  2009. The EU is particularly hit by this 
development as the largest cheese exporter. 
Table 2: Total world exports of major dairy commodities 
 2005 2006 2007 2008 Difference 
2007-2008 
Butter (oil) 
SMP 
WMP 
Cheese Whey 777 856 
1079 589 
1710 683 
1475 022 823 395 790 718 
1094 527 
1776 703 
1512 794 917 897 752 203 
1058 562 
1641 817 
1586 459 1040 968 694 831 
1110 877 
1838 980 
1463 269 961 953 -7.6 % 
+4.9 % 
+12 % 
-7.8 % -7.6 % 
EU share (%) 
Butter (oil) 
SMP 
WMP Cheese 
Whey 40 % 
18 % 
29 % 37 % 
41 % 30 % 
8 % 
24 % 39 % 
38 % 27 % 
19 % 
22 % 38 % 
35 % 21 % 
16 % 
26 % 38 % 
37 %  
 
 
EN 6   EN  
 Jan-Mar 
2008 Jan-Mar 
2009 difference 
Butter (oil) 
SMP WMP 
Cheese 
Whey 185 078 
282 758 453 012 
376 434 
228 505 175 256 
267 350 448 487 
330 035 
222 809 -5.3 % 
-5.4 % -1,0 % 
-12.3 % 
-2.5 % 
Source: GTA 
EU exports take place mainly in the form of cheese, whole milk powder and whey powder. 
While there are also considerable exports of  skimmed milk powder,  butter and condensed 
milk. The EU world market share is decreasing for most commodities, while it remains stable 
for cheese. In order to give an overall estimati on of the size of the EU exports the total fat and 
protein content of the exports are compared to the total fat and protein of EU milk production. 
The share of EU milk exporte d is between 7.6 % for the fa t and 10.6 % for the proteins. 
Certain dairy products are s upported by refunds. Imports are smaller with only 1.4 % and 
1.1 % of EU milk fat and milk protein producti on. Imports are mainly in the form of butter 
and cheese within Tariff Rate Quotas or  products with low tariffs like casein. 
Table 3: Share of EU milk production exported and imported. 
million tonnes  2000/01(EU-15) 2008/09 (EU-27) 
Milk fat 4.6 million tonnes 5.5 million tonnes Production 
Milk protein 3.8 million tonnes 4.5 million tonnes 
Milk fat 9.7 %  7.6 % Share exported 
Milk protein 14.5 % 10.6 % 
Milk fat 2.7 % 1.4 % Share imported 
Milk protein 2.7 % 1.1 % 
1.5. World market prices 
The imbalance on a world market where trad e is marginal to total production and 
consumption resulted in a significant collapse of  prices compared to 2007, remaining at those 
levels after refunds were introduced. Refunds ha ve been set objectively to not undercut world 
market price, as indicated in the tables below. 
 
EN 7   EN Table 4: World market prices 
$/tonne Peak level 19 January 2009 2 July 2009 
Butter 
SMP WMP 
Cheese 4 200 (Nov 2007) 
5 200 (July 2007) 5 100 (Oct 2007) 
5 500 (Dec 2007) 1 950 
1 875 1 950 
2 750 1 900 
1 977 2 050 
2 600 
Table 5: EU compared to world market prices 
EUR/t 
2 July 2009 Intervention 
price/equivalent 
price  
(a) Current 
market 
price1 
(b) World 
market 
price2 
(c) Difference 
(c)- (b) Difference 
(a) – (c) Common 
Refund 
Butter SMP WMP Cheese(cheddar) 2 218 
1 698 2 066 2 484 2 236
1 6621 9662 2961 348
1 4021 4541 844- 888
- 260- 512- 452 -870 
-296 -612 -640 650
228350220
 
Table 6: demand for export licences 
 23.1.09-23.6.09 
Butter/oil 
SMP Cheese 
Others (incl. WMP) 97 500 t 
121 600 t 144 000 t 
518 300 t 
As of the month of June, dema nd for export licences  slowed down consid erably for powders 
and butter. 
                                                 
1 Weighted average price of 7 main exporting MS. 
2 Oceania quotations (S ource: USDA Agricultura l marketing service). 
 
EN 8   EN 2. A DDITIONAL INFO REFERRING TO POINT 3.2 – PRICES IN THE EU 
EU M ilk Prices
(May 09 compared to May 08) 
49,9
37,3
37,0
29,6
28,7
28,5
28,1
26,7
25,0
24,7
24,6
24,5
24,4
24,3
22,6
22,6
22,5
22,4
21,9
21,0
20,9
20,8
20,4
19,8
17,7
15,7
15,7
1418222630343842465054
CY EL FI IT PT ES AT FR LU SI SE DK EU
27BG UK NL IE DE CZ PL BE RO HU EE SK LV LT
in EUR/100 kMilk Price 2008 (real fat content)
Milk Price 2009 (real fat content)
 
 
EN 9   EN 3. A DDITIONAL INFO REFERRING TO POINT 3.3 – PRICES PAID BY CONSUMERS VERSUS 
PRICES PAID TO FARMERS  
Table 7: Change in the producer and consumer prices for dairy products in the EU (%, 
Q1 2009 compared to Q4 2007) 
Raw milk SMP Butter Cheese Food Milk/cheese/eggs
EU -28% -42% -37% -21% 6% 4%
Belgium -45% -48% -42% 6% 6%
Bulgaria -11% 9% 5%Czech Republic -38% -49% -46% -29% 3% -4%
Denmark -30% -47% -23% 5% 2%
Germany -39% -49% -43% -37% 3% -3%
Estonia -28% -14% 7% -1%
Ireland -43% -44% -41% 4% 9%
Greece -13% 6% 4%
Spain -28% -24% 3% 0%
France -12% -46% -44% 5% 7%
Italy -12% -45% 5% 5%Cyprus 20% 13% 5%
Latvia -34% -11% -41% -19% 15% 8%
Lithuania -43% -7% 14% -2%
Luxembourg -35% 4% 5%
Hungary -33% -46% -1% 8% 5%
Malta 13% 10%
Netherlands -39% -47% -46% -44% 7% 7%
Austria -20% 5% -2%
Poland -40% -54% -44% -44% 6% 0%Portugal -17% -39% 3% 1%
Romania 9% 14%
Slovenia -6% 1% 6% 10%
Slovakia -32% -20% -29% -33% 3% -2%
Finland 3% -30% 0% 14% 22%
Sweden -33% 9% 8%
United Kingdom -27% -57% -27% 13% 11%Producer prices (farmers, processors) Consumer prices
 
NB: Source: Agriview – Member State communication – Absolute raw milk pr ices ex-farm; ab solute ex-factory 
prices for SMP, butter, cheese (depen ding on the country, prices for the following cheese types have been taken 
into consideration: Edam, Emmental, Gouda, Chedda r); Eurostat: consumer pr ice indices for food and 
milk/cheese/eggs in retail 
4. A DDITIONAL INFO REFERRING TO POINT 4.3 – OTHER MEASURES TO SUPPORT THE 
OUTLET OF MILK PRODUCTION  
4.1. Marketing standards milk products 
The single CMO, Article 114  and Annexes XII and XIII lays  down provisions on protected 
designations for milk products. The original le gislation on the subjec t was adopted in 1987 
(Reg. 1898/87) at a time when some products, with no milk products, used references 
suggesting the use of milk products  or qualities of milk products. 
Some designations (whey, cream, butter, buttermil k, butter oil, caseins, anhydrous milk fat, 
cheese, yogurt, kephir, koumiss, villi/fil, smetana, fil) are limited for milk  products as referred 
by the Regulation (‘milk products’ means products  derived exclusively from milk, on the 
understanding that substances necessary for their manufacture may be added provided that those substances are not used for the purpose of  replacing, in whole or in part, any milk 
constituent.) 
 
EN 10   EN Decision 88/566 published a list of designati ons which were acceptable by derogation. 
Whereas the single CMO establishes the princi ple that the descriptions ‘milk’ and ‘milk 
products’ may not be used for milk products othe r than those described in Article 2 thereof; 
whereas, as an exception, this principle is not applicable to the descri ption of products the 
exact nature of which is known because of tr aditional use and/or when the designations are 
clearly used to describe a characterist ic quality of the product;), such as 
Coconut milk 
‘Cream …’ or ‘Milk …’ Used in the description of a spirituous beverage  not containing milk or other milk products or 
milk or milk product imitations (e.g. cream sherry, milk sherry) 
Cream soda Lait d'amande Lait de coco ‘Crème …’ used in the description of a soup  not containing milk or other m ilk products or milk or milk 
product imitations (e.g. crème de volailles, crème de légumes, crème de tomates, crème 
d'asperges, crème de bolets, etc.) 
‘Crème …’ 
used in the description of spirituous beverages not containing milk or other milk products or 
milk or milk product imitations (e.g. crème de cassis, crème de framboise, crème de banane, 
crème de cacao, crème de menthe, etc.) Pindakaas Hoofdkaas Cacaoboter Margarinost 
The example of "analogue cheese," when labelled  as cheese, is not in conformity with EU 
legislation. A complete labelling of all ingredients would not be satisfactory, as it would refer 
to a non-dairy product but using the positiv e image of cheese as a sales argument. 
Some designations, as "ice cream" were not cove red as there were alre ady national definitions 
for the product (exclusively with milk fat or not). The word "cream", relating to the texture of the product, is accepta ble under Decision 88/566. 
Modifying the current rules to include more prot ected designations woul d have to be done at 
Council level. One element to be taken into c onsideration is that the aim to simplify the 
legislation (Communication on the agricultural products quality policy) might be questioned 
There are also requests to exte nd the list of derogati ons, for example for soy drinks to be 
designated "soy milk". It is clear  that a designation presenting soy drinks as alternative to 
milk is meant to boost the sales, probably at the expense of 'real' m ilk, while the product is 
already widely available for consumers who pr efer or who need this alternative product. 
There is no reliable data on competing products market share but, with the exception of 
margarine, it is estimated not to exceed 1 – 2% of the milk market. Although the Commission 
has no concrete figures available, it is reported that the use of substitutes for cheese is increasing. 
Article 115  and Annex XV of Regulati on 1234/2007 refers to spreadab le fats, regulating the 
designations of a) milk fats, b) fats and c) fats  composed of plant and/or  animal fats, covering 
in particular the designations 'three-quarter butter", "half butter" and "dairy spread x%" 
 
EN 11   EN Member states are responsible for the applicatio n of the EU legislation and they shall control 
and restrict the use of designations whic h do not respect the protected designations. 
4.2. School milk scheme 
Commission Regulation (EC) No  657/2008 lays down detailed rules for applying Council 
Regulation (EC) No 1234/2007 as regards Community aid for suppl ying milk and certain milk 
products to pupils in educational establishments. 
Other dairy products are also available under the school milk scheme and are listed in Annex I 
of Commission Regulation (EC) No 657/2008. Th e amount of aid for these products is 
derived from the basic aid.  
The school milk regime has only recently been adapted, making it more simple by having the 
same aid amounts for all milk ( 18,15 cents /litre based on a 0,25 l/d ay portion), extending it to 
secondary schools and increasing the product c overage. The level of aid is fixed by the 
Council. The value of the EU aid in relation to the price varies from Member State to Member 
State, but on average is  in the order of 15%. 
As to the product coverage, this is Commissi on competence, where the discussion in the 
Management Committee is ongoing since April, ag ain with the purpose of making the scheme 
more attractive. The Commission proposed in the management committee of 9 July 2009 to 
reduce the minimum milk content to 75%, which allows adding 25% other products, like fruit, 
to milk (current eligible products must contain at least 80 % milk). 
4.3. Aid for SMP in veal or SMP into casein 
Council Regulation (EC) No 1234/2007 establishes in Article 99 an opti on to use a disposal 
aid for skimmed milk powder for use as feedingstuffs. 
Before the 2003 reform the EU had an interven tion price of 205 €/100g for SMP. In order not 
to lose a substantial outlet of SMP to the veal sector, the sector receiv ed an aid of 60 €/100kg. 
This brought their net price back to 145 €/100kg and kept the sector  a buyer of SMP to feed to 
their calves. Today the intervention price fo r food grade SMP is 169.8 €/100kg and the market 
price for feed grade SMP is around 140 €/100kg. Th is means that the v eal sector, which is 
suffering from the economic situation as well, is able to buy SMP at a lo wer price than before 
and without having to deal with a large admini strative burden of the disposal aid. However, 
despite the low SMP price the sector seems to  have turned away from SMP and buys more 
whey powder. While introducing the measure would be expensiv e in terms of subsidising 
existing use and administrative costs, the addi tional demand given the already very low price 
of SMP is estimated to be very limited. In that case the subsidy for the additional demand 
would exceed the price of SMP.  
Council Regulation (EC) No 1234/2007 establishes in  Article 100 an option to give an aid for 
skimmed milk processed into casein and caseinates.  
For the aid of skimmed milk processed into case in the same applies, as casein producers can 
buy very cheap skimmed milk today and there is no need for this kind of production aid. 
 
EN 12   EN 5. A DDITIONAL INFO REFERRING TO POINT 5B – PROMOTION  
On the basis of the Council Regulation (EC)  No 3/2008 of 17 December 2007 on information 
provision and promotion measures for agricultural products on the internal market and in third 
countries, the European Community can (co-)f inance measures that provide information on, 
or promote, EU agricultural products and food on  the Internal Market as well as in so called 
"third countries", i.e. out side the European Union.  
Currently, 19 programmes (among 135 still active  programmes) are exclusively promoting 
milk and milk products. Those 19 active progra mmes were adopted for a total amount of 
€ 66.5 million (EU participation: € 33.3 million). It corresponds to 18.3% of the total amount of the active promotion programmes.  
The Commission is expected to  adopt on 7 July 2009 a new decision approving 16 new 
information and promotion programmes on the internal market and among them 4 
programmes cover milk and milk products  for a total amount of € 19.4 million (EU 
participation : € 8.1 million). 
On the internal market, the implementing Regulation (CE) n° 501/ 2008 of the Commission 
currently stipulates that the trade organisati ons deposit their promotion programmes before 30 
November, that Member States forward the pr ogrammes selected to the Commission before 
15 February, and that th e Commission decides at the latest on 30 June.  
For third country programmes, the same Regula tion foresees that programmes are deposited 
by the trade organizations before 31 March, forw arded to the Commission before the 30 June, 
and adopted by the Commission before 30 November.  
Experience has shown that co-financed prom otion programmes initiated by the trade 
organisations of this sector and co-financed at national and EU levels provide a valuable 
incentive. 
6. A
DDITIONAL INFO REFERRING TO POINT 7.2 – QUOTA MANAGEMENT ON AN 
INDIVIDUAL PRODUCER LEVEL  
In the current Council Regulation, a super levy is  due when the national quota is exceeded in 
any given year. The Member Stat e concerned is liable to EAGF for the surplus levy but the 
super levy is subsequently claimed from all pr oducers who have contri buted to the national 
overrun. 
Milk purchasers (often the dairies) are respons ible for collecting the contributions from the 
milk producers and shall forward those amounts to  the competent body of  the Member State. 
The purchaser normally starts to deduct a part of the super levy from the milk price once the 
producer has exceeded his/her individual quota. The final account is made after the end of the 
quota year where underrun of individual quotas  are matched against overruns and after 
account is taken of the national re serve. Where, as a result, it appears that there is no national 
overrun, the money collected is  reimbursed to the producers concerned. Where on the other 
hand it appears that a surplus levy in fact is  due, the final amount of levy per overrunning 
producer is generally reduced in function of other producers' under delivery. It may happen 
 
EN 13   EN that contributions collected fr om producers are greater than th e levy. In such cases, Member 
States may: 
– use, partly or totally, the excess to finan ce voluntary retirement from milk production, 
and/or 
– redistribute, partly or totally, to priority groups of producers. 
Each Member State is managing a national reserv e as part of its natio nal quota. The national 
reserve is replenished by the yearly 1% incr ease (Health Check) and may furthermore be 
replenished by applying Article  72 of the single CMO where "Member States may decide 
whether and on what conditions all or part of the unused indivi dual quota shall revert to the 
national reserve" in cases where producers do not  market a quantity at least equal to 85 % of 
their quota ("inactivity rule"), up from 70 % as  part of the Health Check. The national quota 
may also be increased by retain ing part of quota transfers (M ember State option) or Member 
States may decide to make an across-the- board reduction in al l individual quotas. 
In any case, where at the end of the quota year the Member State has not redistributed all of 
the national reserve to producer s the residual quantity is st ill taken into account in 
determining whether the Member State is liable of a super levy or not. 
Milk producers may therefore take this flexib ility into account in exceeding their individual 
quota, estimating that the nati onal reserve and/or other producers' under delivery would 
protect them from paying a super levy  on at least some of their overrun. 
In that context, the following elements have be en identified to discourage milk production to a 
certain extent: (1) the 85% inactiv ity rule, (2) the rule providi ng for a temporary or permanent 
transfer of quotas, (3) allocation of the national reserve, like the 1% increase, to the direct 
sales quota and (4) the ne utralisation of under delive ry in the levy calculation. 
As to the "inactivity rule" , an invitation to Member Stat es not to confiscate the unused 
quantity may, if followed, lead to more "s leeping quotas" and ar guably less production.  
Temporary transfer  of quotas or permanent transfer  of quotas (without land) are also left to 
Member States' discretion i.e. the Member State may decide not to allo w such transfers. In 
this case, some quotas would remain inactive but the impact on tota l production would still 
depend on the willingness to take risk among the more progressive producers. 
Thirdly, Member States may at present allocate any additional  quota received to the direct 
sales part of the national reserve. By doing this the deliveries part of the national reserve is held constant and farmers cannot deliver more milk under the deliveries  quota. As the direct 
sales quota is rarely fully used in any Member St ates, there is less risk  of extra production to 
match the extra quota. However, allowing Member States the scope to subsequently reclassify 
any quota held in the reserve from one cate gory to another category would require an 
amendment to the Council Regul ation at a later stage. 
A fourth element/option for Member States imp acting the supply would be, in case a Member 
State is exceeding its quota and has to pa y super levy, to disr egard the unused part
 of the 
national quota allocated to deliveries when cal culating each producer's contribution to the 
payment of the super levy. In that case, the progressive producers can no longer bank on the 
under delivery of others and would need to  pay the full levy for his full excess quantity. 
Member States may then use the additional pa rt of the collected levy, not destined for 
 
EN 14   EN "Brussels", for restructuring pu rposes. The impact on supply is  likely to be more important 
than under the first two options, although again limited to the Me mber States paying levy or 
risking to do so. 
The overall effect of the above-mentioned po tential measures would be to encourage a 
reduction of the supply of milk and dairy produ cts, where the third option, may have more 
effect than the first three options, albeit limite d to the countries close to their quota levels. 
However, a number of points should be emphasised: 
– Production impacts, if any, will only be felt at  the end of the quota year (Feb/March) 
provided that changes can be taken in this market year without harming legitimate expectations; 
– Production impact from such measures, if take n, is highly dependent on each producer's 
perceived risk in terms of paying superlevy. Wh ere that risk is remote more progressive 
producers will still expect to benefit fully from the underrun of others and from the 
national reserve; 
– By restricting the leasing of quotas th e prices for permanent transfers go up; 
– By restricting all quota transfer s, the sector will be "frozen"; 
– Basically, the recommendations/proposals will pe nalise the most efficient/ progressive 
milk producers and increase the cost of quota transfer; 
– The production decisions will be based more on speculation and risk taking than to-day, in 
particular where the unused quotas a nd national reserves are increased. 
– In principle such measures should be of tem porary nature to meet the objective of solving 
the current imbalance of the market. 
7. A
DDITIONAL INFO REFERRING TO POINT 7.3 – COW SLAUGHTER SCHEME . 
US HERD RETIREMENT SCHEME  
The Coops Working Together (CWT)  Herd Retirement Scheme is used in the USA to reduce 
the number of dairy cows in certain circumst ances. It operates on a tender basis; producers 
offer to have their entire herd slaughtered if they receive a certain price per volume of milk 
production foregone. The CWT selects the most attr active bids and a payment is made when a 
selected producer proves his entire herd of milking animals has been slaughtered. The CWT 
payment is additional to the pr ice received by the producer for the culled cows. Producers do 
not make a long term commitment to stay out of production. 
The CWT operates a Herd Retirement Scheme onl y when certain criteria relating to milk 
margin and dairy cow numbers are observed. The Scheme was first put in place in 2003. 
275 000 cows have been subject of the scheme and this is estimated by the CWT to have reduced output by about 675 000 tonnes in 2008 (about 0.8% of US production). The latest 
round accepted bids for almost 103 000 cows to be retired. 
 
EN 15   EN  
Dairy cow herd 
1000 
head US herd # cows taken 
out Price accepted 
($/cwt)* Milk production 
(Million tonnes) 
2003 2004 2005 2006 2007 2008 2009 9 081 
9 010 9 050 9 137 9 189 9 315 
- 32.7 
50.5 64.1 
- 
52.8 75.2 
103 4.03 
5.24 6.75 
- 
5.50 
6.10 – 6.49 
n.a. 76.7 
76.9 79.7 81.8 83.5 85.4 
- 
* US intervention equivale nt price is $ 9.90/cwt  
However, as indicated above the number of dairy cows in the US was never reduced. It is 
noted that US milk production has risen by 1 1.3% in the period since the CWT was first 
launched in 2003. 
The CWT promotes claims that this measure has added almost 5% to the milk price (both of 
these claims are in comparison to what would ha ve occurred if those cows and their offspring 
had stayed in production). Furthe r analysis would be needed to assess th e validity of those 
claims. As the CWT scheme is a producer financ ed scheme, so even if the extravagant claims 
made for it are not fully confirmed, the producer s continued financing of the system suggests 
it does deliver benefits to those who pay for it. 
An EU scheme, even if fully complying with rules on animal welfare, may not be well 
accepted by European citizens in relation to the in trinsic value given to the animals as defined 
by the protocol on animal protection in the European Treaty3. 
8. A DDITIONAL INFO REFERRING TO POINT 8.2 – REDISTRIBUTION OF DIRECT AIDS – 
SPECIFIC SUPPORT  
The Health Check - Regulatio n (EC) No 73/2009 has introduced three main means to 
redistribute direct payments between farmers/sectors/region s within a Member State: 
– Article 68 measures, 
– options for further decoupling of rema ining coupled support  (Articles 63 to 
65), 
– and options for revising payment entitlements (Articles 46 to 49). 
These measures may be applied simultaneously, offering a large scope of options. They apply 
from 2010, Member States shall take their decisions for 2010 by 1 August 2009.  
                                                 
3 Treaty of Amsterdam amending the Treaty of the European Union, The Treaties establishing the 
European Communities and certain related acts – Protocol annexed to the Treaty of the European 
Community – Protocol on protection and welfare of animals (OJ C 340, 10.11.1997, p. 110). 
 
EN 16   EN Article 68 measures 
• financed from the national reserve and/or unused amounts and/or reduction of all the 
payments entitlements 
• Various coupled measures  
o 68(1)(a), i.e. those taken over fr om the previous Article 69 of 
1782/2003 (quality, marketing, environment) plus animal welfare and 
o 68(1)(b) which allows granting paym ents to dairy, beef and veal, 
sheepmeat and goatmeat and rice se ctors in "economic vulnerable or 
environmentally sensitive areas or for economically vulnerable types 
of farming" 
o limited to 3.5 % of the SPS national envelope 
• One decoupled measure 
o 68(1)(c ): increase the value of the payment entitlements, or allocate 
new payment entitlements, "in areas subject to restructuring and/or 
development programs in order to ensure against land being 
abandoned and/or to address specif ic disadvantages for farmers in 
those areas" – limited to 10 % of the SPS national envelope, minus the 
part of this envelope that is used for other Article 68 measures 
Example : Combination of Articles 68(1)(b) and 68( 1)(c) for dairy farmers in mountainous 
areas- potentially up to 10 % of the SPS national envelope. The coupled part could be linked 
to the number of dairy cows and/or the milk  quota and/or the milk production in 2010. The 
decoupled measure under Article 68(1)(c) could be linked to the milk quota in 2007, or any 
other historical reference, or to the criteria used for rest ructuring under the second pillar. 
Further decoupling 
• Support under a number of coupled support sche mes fully or partially excluded from SPS 
is to be integrated in the SPS as from 2010. Sc hemes and dates are listed in annex XI of 
Regulation 73/2009.  
• Hereby, Member States have a discretional marg in to allocate the additional amounts in the 
SPS. They can notably (Article 63) decide to allocate all or part of  the additional amounts 
to farmers in other sectors than the sector that is to be decoupled. In that case, the 
allocation between farmers is: 
o based on the agricultural activity during a reference period to be fixed 
by the MS which shall be one or more years in the period 2005-2008 
o in accordance with objective and non-di scriminatory criteria "such as 
the agricultural potential or  environmental criteria". 
 
EN 17   EN – To protect legitimate expectation the re distribution is limited: the overall 
support a farmer receives must  not fall below 75% of the total support (coupled 
and decoupled) received prio r to further decoupling.  
Examples: The amounts that could be used from 2010 fo r redistribution in relation to further 
decoupling vary a lot from between  MS: no more than 16 milli ons EUR in Germany, close to 
2 billions EUR in France. The reason is that where no partial recoupling option has been used 
in the first year of applica tion of the SPS (German case), few amounts remain to be decoupled 
from 2010.  
Revising payment entitlements 
• The basic principle consists of annual progre ssive modifications of payment entitlements 
with a view to a flatter rate  and based on objective and non-d iscriminatory criteria. Also 
based on objective and non- discriminatory criteria Member States can identify particular 
regions, where the value of the entitlements is to be increased, at the expense of the value 
of entitlements in the other regions. The nece ssary reduction of payment entitlements has 
to be done in various steps to  protect legitimate expectati ons of the owners of these 
entitlements.  
• One criterion for the regions to be identified can be the agricultural potential. This can be 
regions with predominant gr assland or dairy production. 
• The revision can start in 2010 (decisi on by 1.8.2009) or later (decision by 1.8.2010). 
Examples:  in addition to the articles 68 measures described in point 2, payment entitlements 
to dairy farmers in mountainous ar eas may be increased from 2010 via: 
- Article 45 for MS using an historical mode l, and Article 48(1) for MS switching to a 
regional/hybrid model from 2010, which allow approximating the value of the payment 
entitlements "at the appropriate geographical level"; the effect would be an increase of the value of the payment entitlements for regions where farmers practice extensive types of production; 
- Article 46, for MS that have used an hi storical approach for decoupling and allowing 
transfers between regions; th e transfer shall not induce a ny payment entitlement being 
reduced by more than 10 %; th is provision would for instance a llow moving up to 10 % of the 
amounts from favoured regions to less favoured ones; Article 46 may be combined with 
Article 45 or Article 47; 
- Article 47, allowing MS using an historical model to apply a regional model from 2010 (or 
at a later stage); depending on the way the regi ons are defined, and in  conjunction with the 
optional use of Article 46, moving to a regional model could al so induce some transfers in 
favour of dairy farmers, notably the one s using extensive production practises; 
- Article 48(2), allowing MS applying a re gional model from the first year of SPS 
implementation to revise the regions and/or th e regional amounts and/or , to approximate the 
value of the payment entitlements. 
The Health Check offers various options allowing  significant redistributi on of direct payments 
to farmers in the dairy sector. They can be combined and applied in addition to measures 
 
EN 18   EN under the second pillar and/or state aid measures. For instance, they can be applied together 
with second pillar measures funded via Articl e 136 of R.73/2009, i.e. th e transfer of the SPS 
"unused amounts" to the second pillar (am ounts fixed in Commissi on Regulation, no more 
than 4 % of the SPS national envelope). 
Apart from advancing the payments from 1 D ecember 2009 to 16 October, the direct payment 
legal framework does not provide for a means that would allow alleviating the financial 
situation of the dairy farmers in the short term. 
9. A DDITIONAL INFO REFERRING TO POINT 8.3 – STATE AIDS  
To improve farm income in the context of the current crisis a modifi cation of the Temporary 
Crisis Framework4could be envisaged. The Framework fore sees that a limited amount of aid 
of up to € 500 000 can be gran ted to undertakings but at the moment excludes primary 
agricultural producers from this possibility. A modification of the Framework could introduce 
a similar aid possibility to farmers, but at a substantially lower amount in order to avoid 
distortion of competition in the agricultural sector.  
Point 4.2.2 of the Temporary Framework foresees th at aid not exceeding a cash grant of € 500 
000 can be granted per unde rtaking until 31.12.2010. Any de-minimis  aid already received by 
individual undertakings sinc e the beginning of 2008 has to be  deducted from this amount. 
Undertakings active in the pr ocessing and marketing of agri cultural products are eligible 
unless the amount of aid is fixed on the basi s of the price or quantity of such products. 
Primary agricultural producers are ex cluded from this aid possibility. 
For farmers (primary producers) a separate li mited amount of aid could be introduced by 
modifying point 4.2.2 of the Temporary Fram ework. An amount of 15,000 EURO would be 
appropriate in order to avoid di stortions of competition. This ai d would not be limited to milk 
producers but all primary producers could benefit of it.  
An urgent procedure both for the adoption of the modification of the Temporary Framework 
and afterwards for the approval of the national aid schemes could be envisaged. 
Aid measures under the Temporary Framework ha ve to be notified as aid schemes to the 
Commission. They are approved on the basi s of Article 87 (3) (b) EC Treaty. 
Point 4.1 of the Temporary Framework requires Member States to demonstrate that the 
notified measure is necessary, appropriate and proportionate to remedy a serious disturbance 
in the economy of the respective Member Stat e. A scheme limited to primary agricultural 
production is therefore unlikely to  be approved as a stand-alone  measure. It could, however, 
be approved as complementary measure (as of  end of June 2009, the Commission has already 
approved for 18 Member States schemes with comp atible limited amount of aid), or could be 
notified as comprehensive measure open to all sectors (with different aid levels) where no 
such scheme is in place yet. 
                                                 
4 Consolidated version OJ C 83, 7.4.2009, p. 1. 
 
EN 19   EN 10. A DDITIONAL INFO REFERRING TO POINT 9.1 – RURAL DEVELOPMENT  
Rural Development policy is an integrated EU  policy and part of the Common Agricultural 
Policy. It is a modern, flexible and integrat ed policy that puts emphasis on innovation and the 
development of human and soci al capital. The policy has su ccessfully evolved over time to 
take on board the new priorities of European so ciety. The strategic appr oach ensures an added 
value at European level. Making additional f unds available for the new challenges in the 
context of the Health Check is  only one reflection of this.  
Rural development programmes in the Member  States are adapted to reflect changing 
circumstances. Following the Health Check and the Recovery Package one major revision is 
foreseen in 2009. This revision of the existi ng rural development programmes provides the 
opportunity to inject the additiona l funds and to direct them towards dairy restructuring and/or 
the other new challenges and broadband infrastructure.  
EU's rural development brings together economi c, environmental and social aspects in an 
integrated approach. The policy has a three-fo ld aim: fostering competitiveness of the 
agricultural and forestry sector (Axis I), impr oving the environment a nd the countryside (Axis 
II) and improving the quality of life in rural area s and encouraging diversification of the rural 
economy (Axis III). In addition, the LEADER approach (Axis 4) plays an important rule in 
improving governance and mobilising the endogenous  development potential of rural areas.  
EU's rural development has a well defined policy framework. It is based on a strategic 
approach involving four consecutive steps: 
• First, the Community strategic guidelines for rural development set the priorities at the 
Community level; 
• In a second step, each Member State submits a national strategy plan which translates the 
Community priorities in  the national context; 
• Thirdly, Member States and regions establis h their rural development programmes with 
specific measures; 
• Finally, both Member States and the Commission closely mon itor and evaluate the results. 
Based on this approach Member St ates should show what the recen t trends in the dairy sector 
imply in terms of strengths and weaknesses. Ba sed on this analysis Member States have to 
decide whether or not to provide additional support for dairy farmers. And, if yes, which 
support measures should be used. 
An additional change introduced with the Hea lth Check was to abolish the limitation of 
investment support for dairy farmers to the avai lability of dairy quotas. Now farmers may get 
investment support which exceeds the farm-speci fic quota rights. This should facilitate the 
provision of investment support to the more competitive farmers. Particularly those who 
intend to expand their production capacities in vi ew of grasping a higher share in the world 
market may benefit from the simp lification of this rule for inve stment support granted to dairy 
producers. Because the situation of rural areas is diverse across the 27 Me mber States, it is up to Member 
States to decide whether or not they will provi de in the rural development programmes for the 
possibility to use the additional funds under the second pillar for support of dairy farmers or 
not. The revised rural development programmes indicating the use and distribution of the 
 
EN 20   EN additional funds from Health Check and R ecovery package across the new challenges, 
including support for dairy restructuring and fo r support for broadband infrastructure, shall be 
submitted by Member States to  the Commission by 15 July 2009.