Proposal for a COUNCIL REGULATION (EC) amending Regulation (EEC) No 3950/92 establishing an additional levy in the milk and milk products sector
Date: 1994-03-02
Institutions: European Commission
Subjects: agricultural levy, milk, milk product, regulation of agricultural production

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

COM(94)  64  final 
Brussels,  02.03.1994 
94/0066(CNS) 
94/0067(CNS) 

REPORT 
on the situation on the market for milk  and milk  products 

Proposal  for a 
COUNCIL REGULATION (EC) 

94/0066(CNS) 

fixing  compensation  with  regard to the reduction  in individual 
reference  quantities in the milk  sector and compensation  for 
the definitive  discontinuation  of  milk  production 

Proposal  for a 
COUNCIL REGULATION  (EC) 

94/0067(CNS) 

amending Regulation  (EEC) No  3950/92  establishing an 
additional  levy  in the milk  and milk  products sector 

REPORT TO THE COUNCIL 
on the application  of  the milk  quota system  in Italy, 
in  Spain  and in Greece 

(presented by the  Commission) 

Report  on  the  situation  on 
the market  for milk  and 
mi Ik produc ts 

Introduct ion 

-  1 -

In  its  1991/92  price  proposals  presented  to  the  Council  in  March  1991( 1>, 

the  Commission  drew  attention  to  the  worsening  situation  on  the  market  for 

milk  and  milk  products,  where  intervention  stocks  were  building  up  fast 

despite  stable or  practically  stable milk  production. 

Given  the  signs  of  stabilization  in overall  Community  consumption  and  the 

lasting  reductions  in export  possibilities  on  account  of  the  political  and 

economic  changes  in  the  former  USSR  and  central  Europe  and  the  uncertainty 

following  the  Gulf  war  on  the  traditional,  important  markets  in  the  Middle 

East,  the  Commission  considered  that  a  5%  reduction  in  the  guaranteed  total 

quantities was  necessary  to establish  better  balance on  the market  for  dairy 

products.  Out  of  a  concern  to  lessen  the  impact  of  such  a  reduction  on  the 

market  for  beef  and  veal, the Commission  proposed,  and  the Council  approved, 

an  initial  reduction  not  exceeding  2%  in  quantities  not  subject  to  the 

additional  levy  for  1991/92. 

The  Commission  Communication  to  the  Council  and  the  European  Parliament 

entitled  "The  Development  and  Future  of  the  Common  Agricultural  P o l i c y "^ 

endorsed  this analysis of  the situation on  the market  for milk  products.  On 

that  basis  the  Commission  considered  a  further  reduction  in  the  guaranteed 

total  quantities  necessary  and  proposed  to  the  Council  that  the  additional 

levy  arrangements  be extended  (and  simplified) and  a  reduction  of  3% be  made 

in  the  quantities  in  steps  of  1%  over  three  twelve-month  periods  starting 

from  1  April  1992  at  the  same  time  as  the  staggered  reduction  in  the 

institutional  prices  for mi Ik.(3) 

(1)  COM  (91) 72  final  of  1 March  1991 
(2)  COM  (91) 258  final  of  22 July  1991. 

(3)  COM  (91) 409  final  of  31 October  1991 

-  2 -

On 21 May  1992, as part  of  the  reform of  the common  agricultural  policy,  the 
Council  adopted  the  Commission  proposals  on  milk  and  milk  products^3) 
subject  to  a  certain  number  of  amendments^4).  The  Council  decided  that 

there would  be no  1% reduction  in quantities  for  the 1992/93 period,  thereby 

confirming  the Member  States' guaranteed  total  quantities which  it had  fixed 
for  that  period  on  31  March  1992,  subject  to  a  final  decision^5).  It 

further  decided  that  before  the  1% reduction was  applied  in the  1993/94 and 

1994/95  periods of  the  additional  levy scheme,  the Commission  would  present 

reports  to  the  Council  on  the market  situation  together, where  appropriate, 

with  proposals  in order  to permit  the Council  to  review  the  decisions  taken 

for  those  two  periods.  This  report  has  been  drafted  in  response  to  that 

request. 

(4)  COUNCIL  DOCUMENT  No 6953/92 of  2 June 1992. 

(5)  Regulation  (EEC) No 816/92 published  in OJ  No L 86, 1.4.1992, p. 83. 

-  3 -

1• 

Trends  in the Community  market 

The  markets  were  relatively  stable  in  1993.  The  market  price  for 

butter  remained  more  or  less constant  during  the  year  despite  the  4.3% 

reduction  in  the  intervention  price,  while  the  market  price  for 

skimmed-milk  powder,  which  is more  irregular,  fell  back  slightly  only 

at  the  end  of  the  year.  Milk  collection  followed  a  similar  path, 

remaining  close  to  the  levels  of  the  previous  year  despite  conflicting 

trends  in the Member  States: the marked  reduction  in milk  production  in 

Spain  and  Italy  was  almost  exactly  compensated  for  by  the  increase  in 

deliveries  in the other  Member  States. 

This overall  stability  was mirrored  in the  trend  in  intervention  stocks 

which  remained  close  to  the  levels of  the previous  year. 

Table  1 -  Intervention  on  the Community  market  (tonnes) 

i 
| 
I 
|  BUTTER 
j  Stocks at 1 January 
j  Buying-In 
j  Sales 
j  Stocks at 31 December 
| 
I  SKIMyED-MILK  POWDER 
j  Stocks on 1 January 
|  Buying-in 
j  Sales 
j  Stocks on 31 December 

1 

1991 

1990 

1992 

1993 

1 
| 
i 
I 

1— 
| 
i 
I 

j  32.200 
j  163 900  j  136 400  j  44.100 

1 
1 
| 
| 
| 
1 
I 
I 
I 
I 
I 
j  250 800  j  260 800  j  172.400  j 
j  20 300 
j 
|  250 300  j  174 000  j  48 000 
|  19 800 
j 
j  250 800  j  260 800  j  172 400  j  160.500  j 
i 
{ 
j 
I 
I 
I 
j 
j 
j 
j  337 211  j  198 570  j 
j 
| 
j 
j  333 142  j  414 383  j  47 114 

4 811  j  333 142  j  414 383  j  47.114 
j  10.709 
8 880  j  117 330  j  367 269  j  20.873 
j  36.951 

i 
I 

j 
I 

While  the  trend  in  intervention  stocks  relects  the  relative  stability 

of  the  market  and  of  prices  in  general,  their  level  is  largely 

influenced  by  subsidized  consumption,  which  accounts  for  a  significant 

proportion of  Community  production: 

- 4 -

Table 2 - Subsidized  consumption on the Community  market  (tonnes) 

1991 

1992 

1993 

Percentage 
change 
1993/1992 

BUTTER (Milk fat  in butter equivalent) 

I 
I 
Buying-In (sales at reduced  | 
prices) 
Products on market 
(subsidized) 
TOTAL 

j  93 800 
| 
j  344 300 
j  438 100 

96 200 

44 000 

343 900 
440 100 

430 300 
474 300 

Production 

| 1 800 000 

1 660 000 

1 680 000 

Subsidized consumption as 
a percentage of production 

|  24,3 X 
| 

26,5 X 

28,2X 

+ 6,4 X 

SKIMMED-MILK POWDER (skimmed milk in skimmed-milk powder equivalent) 

Animal feed 
Casein 
TOTAL (SMP equivalent) 

|  955 000 
|  350 000 
j 1 305 000 

860 000 
458 000 
1 318 000 

697 000 
346 000 
1 043 000 

SMP production 
Casein (SMP equivalent) 
TOTAL (SMP equivalent) 

| 1 505 000 
I  350 000 
j 1 855 000 

1 162 000 
458 OOP 
1 620 000 

1 255 000 
346 000 
1 601 000 

-19 X 
-24 X 
-21 X 

+ 8 X 
-24 X 
-1.2 X 

Subsidized consumption as 
a percentage of production 

70 X 

81.4 X 

65 X 

-20 X 

Subsidized  consumption  of  skimmed  milk  fell  by  300 000 tonnes  in 

skimmed-milk  powder  equivalent  in 1993.  Despite  its scale,  this  change 

did not cause  significant  movements  in market  prices or  in the level of 

skimmed-milk  powder  stocks.  At the same  time, exports of  skimmed-milk 

powder  fell  back by about  90 000 tonnes. 

Table 3 - Community  exports  (tonnes) 

Exports 

1991 

Butter and butteroil 

|  322 000 

1992 

j 
J 
|  242 000 

j  1993 • 
1 
|  220 000 

| Variation 

H 

| 

-9 X 

* Estimate 

-  5  -

The  situation  on  the  Community  market  is directly  affected  by  the  level 

of  exports, which  in turn  depend  on  both  the  capacity  of  the  budget  to 

finance  them  and  the  situation  on  the world  market. 

2- 

Trends  on  the  world  market 

The  Community  has  a  commanding  position  on  the  world  market,  both  in 

terms  of  total  production  and  the main  products  and  in  terms  of  market 

share,  wich  is about  50% as  a  result  of  exports  amounting  in  both  1992 

and  1993  to more  than  13 million  tonnes  milk  equivalent  (see  tables  in 

Annex  II). 

Table  4 -  Community  share  of  the world  market 

Year 

1983 

1984 

1985 

1986 

1987 

1988 

1989 

1990 

1991 

1992 

1993* 

Mi Ik equivalent 
(mil I Ion tonnes) 

10 

12,8 

12,2 

11,4 

13,8 

16,5 

14,2 

12,4 

12,8 

13,8 

13,2 

% 

44 

48 

45 

41 

48 

53 

51 

47 

46 

48 

47 

*  Preliminary 

The  stability  in Community  exports  is  a  reflection  of  the  stability  on 

the world  market,  where  prices  changed  little  in  1993 

Table  5 -  International  prices  (US dollars  fob) 

Minimum 
GATT prices 

Butter 

1 350 

ButteroiI 

Cheese 

Sklmmed-miIk powder 

1 625 

1 500 

1 200 

1990 1st 6 months 
2nd 6 months 

1 350 - 1 550 
1 350 - 1 500 

1 600 - 1 900 
1 600 - 1 800 

1 700 - 2 000 
1 550 - 2 000 

1 200 - 1 700 
1 300 - 1 500 

1991 1st 6 months 
2nd 6 months 

1 350 - 1 400 
1 450 - 1 850 

1 600 - 1 800 
1 675 - 2 250 

1 600 - 1 900 
1 600 - 2 100 

1 200 - 1 400 
1 450 - 1 800 

1992 1st 6 months 
2nd 6 months 

1 350 - 1 600 
1 350 - 1 500 

1 625 - 1 950 
1 625 - 1 800 

1 750 - 2 100 
1 750 - 2 100 

1 550 - 1 900 
1 550 - 1 900 

1993 1st 6 months 
2nd 6 months 

1 350 - 1 500 
1 350 - 1 500 

1 625 - 1 800 
1 625 - 1 750 

1 750 - 2 100 
1 800 - 1 950 

1 550 - 2 000 
1 500 - 1 750 

(2) 

-  6  -

Since  the  final  quarter  of  last  year,  however,  prices  have  moved 

downwards  and  have  fallen  below  minimum  GATT  prices  in  the  case  of 

butter  and  butteroil. 

This  downward  movement  is  a  reflection  of  the 

drop  in  international  demand  which  is  itself  part  of  the  unfavourable 

trend  in consumption  brought  about  by  the economic  recession. 

Adverse  economic  conditions  aside,  the  world  market  in  milk  products 

continues  to  be  dominated  by  the  unfavourable  situation  in  eastern 

Europe  and  the Middle  East: 

eastern  Europe  : the  major  market  outlet  which  once  existed  in  the 

former  USSR  and  some  central  European  countries  has  not  only  been 

lost  but  the  fall  in consumption  and  the need  for  strong  currencies 

have even  resulted  in exports  from  these countries at  uncompetitive 

prices.  Should  these  countries  permanently  reappear  on  the  world 

market  after  the  current  economic  restructuring,  they  will  most 

likely be exporters, given  their  agricultural  potential; 

the  Middle  East:  leaving  aside  the  political  events  which  can 

always  affect  these  traditional  export  markets,  demand  in  these 

countries  is broadly  determined  by  the  price  of  oil,  which  remains 

low. 

In  addition  to  these  factors  influencing  the  world  market  in  general, 

factors  specific  to  the milk  sector  are  also  at  play  which  are  equally 

worrying  in terms of our  exports: 

world  consumption  of  butter  is  in continuous  decline  at  a  rate  of 

2% a year. The  downward  trend  in purchasing  power  in eastern  Europe 

is serving  to speed  up  the  decline; 

milk  production  and  the  supply  of  milk  products  from  Oceania  and 

New  Zealand  in  particular  are  increasing  year  by  year  (see  Annex 

II).  Even without  price-support  policies,  the  relentless move  away 

from  livestock  rearing  to milk  production  and  the  build-up  of  milk 

fats  in  particular  as  a  result  of  the  drop  in  consumption  are  a 

threat  to  the  stability  of  a  world  market  which  remains  very 

precarious given  the prospect  of  new surpluses  in the near  future; 

- 7 -

lastly,  the  effectiveness  of  the  market-penetration  programme 

financed  by  the  United  States,  the  DEIP  (i.e.  Dairy  Export 

Incentive  Programme)  which  is  specifically  targeted  at  the 

Community's  traditional  markets,  should  be  highlighted  (see 

Annex  II).  Between  1990  and  1993,  American  exports  in  milk 

equivalent  increased  from  1.2% to 6.7% of  the world  market. 

To  conclude,  even  if  the  world  market  situation  appears  stable,  the 

combined  effect  of  the drop  in demand,  particularly  in eastern  Europe, 

the  increase  in  supply  from  Oceania  and  the  increase  in  exports  from 

the United  States seriously  threatens  the world market  which  is already 

showing  signs  of  weakness,  the  most  obvious  manifestation  of  which  is 

the  significant  drop  in prices, below even minimium  GATT  prices  in the 

case of  butter  and butteroil. 

In  the  context  of  such  a  fragile  world  market,  the  measures  that  the 

Council  must  take  to control  milk  production  are  becoming  increasingly 

important. 

3.  Control  of  production and  balance on  the market 

Despite  the  difficulties  connected  with  any  quota  system,  the 

production  control  scheme  has  given  ample  proof  of  its  effectiveness. 

The  Court  of  Auditors  affirms  in the  conclusion  to  its  special  report 

No  4/93  that  "since  1984, milk  production  has  been  moving  towards  the 

desired  state  of  equilibrium  between  the production  and  consumption  of 

mi Ik products"*6). 

It  should  be  added  that  establishing  a  better  balance  has  not  been 

achieved  at  the  expense  of  our  exports.  Table  4  provides  the 

conf irmat ion. 

(6)  OJ  No C  12, 15. 1. 1994, paragraph 5.2 

Tools 6 - AppI Icot Ion of ths odditlonol  Isvy orronqsmsnts 

(tonnss) 

EC 

: Guoronttsd 
totol 
quantity 

Ouantlty 
•uspsndsd 

: 
: 

K\location from 
Community rsssrvs 

SL0M 

+ 1 X 

Ouantlty 
ova11ab1 s 

Ouantlty 
dsllvsrsd 

Cross 
dlffsrsncs 

Corrset Ion 
for mi Ik 
fat 

Intsrchangs 

dlrsct 
salss 

Not : 
dlffsrsncs : 

a 

b 

c 

d 

s 

f-o-b+c+d+s 

g 

h-g-f 

1 

J 

k-h+l+J : 

:  1984/89(1) 

99 924 000 

:  1989/86(1) 

98 078 974 

:  1966/87(2) 

103 988 974 

393 000 

393 000 

393 000 

:  1987/88(2) 

102 096 143 

3 778 103 

443 000 

:  1988/89(2) 

101 099 108 

9 3M  489 : 

443 000 

0 

0 

0 

0 

0 

0 

99 917 000 

99 293 261 

-623 739 

142 

99 119 

-968 482 : 

0 

98 471 974 

100 172 744 

1 701 170 

83 

-97 131 

1 644 122 : 

0 

104 381 974 

103 073 297 

691 723 

118 739 

-8 319 

801 939 : 

0 

98 761 040 

99 173 711 

412 671 

439 882 

-269 031 

983 922 : 

0 

96 109 623 

97 619 776 

1 914 193 

408 906 

-332 123 

1 990 936 : 

:  1989/90(2) 

100 209 222 

4 917 603 . 

443 000 

902 233 

1 039 886 

97 676 738 

97 947 296 

270 998 

776 102 

-372 628 

674 032 : 

:  1990/91(2) 

100 999 222 

4 679 486 : 

443 000 

902 233 

1 039 886 

97 864 899 

96 781 893 

-1 082 962 

1 372 861 

-402 808 

-112 909 : 

:  1991/92(3) . 

106 697 699 . 

4 »89 666 : 

443 000 

600 000 

1 039 886 

103 794 919 

109 209 994 

1 494 994 

2 029 708 

-388 219 

3  130 602 : 

:  1992/93(3) : 

101 672 029 

443 000 

600 000 

1 039 886 

103 794 919 

n.d. 

n.d. 

2 234 897 

-960 390 

n.d. 

oA 

(a) Art lets 5c(3) of Rsgulotlon  (EEC) No 804/68 
(b) Rsgulotlon  (EEC) No 779/87 
(c). (d). (s) Artiels 1 of Rsgulotlon (EEC) No  1946/88 
(g) Msmbsr Stotss* dsclorotlons  to ths Commission, sttlmatss or provisional  dsclarations  in ths cass of csrtoln Msmbsr Statss. 
(I) Artiels 12 of Rsgulotlon  (EEC) No 1946/88 
(j) Artiels 6o of Rsgulotlon  (EEC) No 897/84 
( 1)  10  Msmbsr  Stotss 
( 2)  11  Msmbsr  Stotss 
( 3)  12  Msmbsr  Statss 
n.a.  not  aval I obis 

-  9  -

While  the  scheme  has  definitely  enabled  deliveries  to  be  kept  down  in 

most  Member  States,  column  (i)  in  Table  6  also  points  to  the 

ever-rising  fat  content  of  the  milk  delivered  and  the  increasing 

corrections  that  have  to  be  made  to  the  quantities  delivered  as  a 

result.  This  constant  rise  in  the  fat  content  of  milk  delivered 

seriously  endangers  the  balance  of  the  market. 

While  the  trend  in consumption  is stable  in the  Community  and  generally 

in  all  developed  countries,  the  trends  by  product  show  significant 
variations'7^  :  demand  for  partly-skimmed  milk,  fresh  (reduced-fat) 

milk  products  and  certain  cheeses  is  rising  by  1%  to  2%  a  year  while 

that  for  whole  milk,  hard  cheese  and  particularly  butter  Is  falling 

constantly  by  2%  to  2.5%  a  year.  The  result  is  an  overall  decline  in 

milk  fat  consumption  that  is growing  steeper  every  year  and  persistent 

difficulties  on  the  market  for  butter,  clearly  reflected  in  the  market 

price,  which  has  stayed  between  90% and  94% of  the  intervention  price 

for  the  last  three  years. 

This  downward  trend  in  consumption  of  butter  and  milk  fat,  which  is 

almost  certainly  in  part  a  response  to  dietary  concerns,  is  also  the 

result  of  competition  from  butter  imitation  and  replacement  products. 

Products  competing  with  butter  are  now  in  a  dominant  position  on  the 
market  for  yellow  fats'7). 

Faced  with  a similar  situation,  Canada  has  repeatedly  reduced  its  quota 

of  milk  for  processing.  The  United  States,  which  does  not  have  a 

comparable  system,  reduced  the  support  price  for  butter  twice  in  1992 

and  again  on  7  July  1993,  thus  considerably  altering  the  processing 

ratio  for  milk,  which  is USD  1 469/tonne  or  ECU  1 096/tonne  for  butter 

and  USD  2 280/tonne  or  ECU  1 701/tonne  for  skimmed-milk  powder. 

(7)  Cf.  Report  on  development  on  the  market  in milk  and  milk  products  and 
competing  products  -  Fourth  report  from  the  Commission  to  the  Council 
COM  (93) 34  final  of  5  February  1993. 

-  10 -

Such  a  reduction  in  prices  for  butter,  which  may  help  effectively  to 

slow  down  the  development  of  imitation  and  replacement  products,  has 

the definite  advantage of  encouraging  consumption.  For  this  reason  the 

Commission  proposed  to  the Council  an  additional  reduction  of  3%  in the 

intervention  price  for  butter  as  part  of  the  1994/95  price  proposals. 

In  this  respect,  it  should  be  remembered  (to  emphasize  the  quantities 

involved)  that  approximately  one  third  of  milk  collected  in  the 

Community  is still  processed  into butter, only  60% of  which  is disposed 

of  at  the market  price. 

Conversely,  it  may  be  feared  that  the  devaluation  -  in  some  cases 

substantial  - of  the green  rates of  currencies which  have  recently  been 

readjusted  within  the  EMS may  result  in a marked  increase  in prices  for 

butter  and  that  this  may  be  damaging  to  consumption  in  those  Member 

States  while  the  strength  of  some  currencies  on  the  other  hand  may 

cause  butter  to  be  placed  in  intervention  because  no  outlet  can  be 

found  for  it  on  a  market  saturated  by  butter  from  Member  States  with 

weaker  currencies. 

4. 

CONCLUSIONS 

On  21  May  1992,  as  part  of  the  CAP  reform,  the  Council  decided  on  a 

reduction  of  5%  in  the  intervention  price  of  butter  over  two  years  and 

decided  in  principle  on  a  reduction  of  2%  in  the  guaranteed  total 

quantities.  Even  though  the market  appears  to be  in better  equilibrium 

than  was  feared,  it  remains  exposed  to  the  same  pressures  as  those 

identified  at  the  time. 

The  market  stability  in  1993  seems  to  be  broadly  the  result  of  the 

trend  in  milk  collection,  which  remained  close  to  the  level  of  the 

previous  year,  despite  the  0.6%  increase  in  the  guaranteed  total 

quantities decided  by  the Council  in May  1993.  The  suck 1er  cow  premium 

scheme  and  the  resulting  drop  in  the  dairy  herd  as  well  as  the  impact 

of  national  programmes  to  encourage  farmers  to  cease  milk  production 

all  contributed  to  this  unexpected  outcome.  In  this  regard,  in 

addition  to  the  results  achieved  by  Spain  and  Italy  in  reducing  their 

milk  deliveries  to  within  their  guaranteed  total  quantities,  mention 

-  11  -

should  also  be  made  of  the  situation  in  the  new  German  Lander  where 

milk  production  in  1993  is  some  30%  lower  than  the  guaranteed  total 

quantity  fixed  by  the  Council  for  this  region.  Given  the  growth  and 

renewal  of  the  dairy  herd  in  the  new  Lander  and  the  ongoing 

restructuring of  farms  in general, a better  adjustment  of  deliveries  to 

the available  quota  cannot  be excluded  in the short  term. 

Market  stability  thus  appears  very  precarious  given  the  worrying 

signals  that  have  begun  to  appear.  A  predictable  rise  in  milk 

collection  should  be  felt  in  the  first  six  months,  resulting  in  an 

increase  in  the  production  of  skimmed-milk  powder  and  butter. 

Given 

the  drop  in  international  demand,  the  difficulties  on  the  market  in 

caseins  and  the  significant  drop  in  subsidized  consumption,  it  seems 

inevitable  that  buying-in  of  skimmed-milk  powder  will  resume  at  a 

steady  rate. 

The  persistant  drop  in  butter  consumption  on  both  the  Community  and 

world  markets  and  the  unstoppable  increase  in  the  fat  content  of  the 

milk  collected  are  combining  to  cause  a  growing  imbalance  which  is 

being  further  aggravated  by  cheaper  competing  products. 

To  conclude,  the  Commission  believes  that  the  imbalances  already 

apparent  on  the market  are  likely  to worsen  in  the  short  term  and  will 

lead  to  a  significant  deterioration  in  the  situation.  The  butter 

market  remains  the  most  worrying,  however,  its  structural  imbalance 

continuing  to  worsen.  For  this  reason  the  Commission  has  proposed  to 

the  Council  in  the  price  proposals  for  1994/95  that  the  intervention 

price  for  butter  be  reduced  by  a  further  3%. 

In  view  of  the  extra 

reduction  in  the  butter  intervention  price  which  has  already  been 

proposed  to  rebalance  the  market,  it  would  now  seem  possible  to  tail 

back  the  2%  cut  in  total  guaranteed  quantities  agreed  in  principle  as 

part  of  the CAP  reform.  The  Commission  is therefore  proposing  that  the 

total  guaranteed  quantity  for  1994/95  be  reduced  by  1%,  accompanied  by 

a  compensation  scheme  and  an  aid  programme  to  encourage  cessation  of 

milk  production  in  line  with  decisions  already  taken,  and  It  invites 

the  Council  to  re-examine  the  need  for  a  further  1%  reduction  for  the 

1995/96  marketing  year  on  the  basis  of  the  next  report  on  the  market 

situât ion. 

-  12 -

ANNEX I 

Supply  balance for  butter'1) 

1990 

1991 

1992 

('000  t) 
1993 

Stocks at  1 January 
Pub Iic 
Private 
Production 
Import 

124 
104 
20 
1796 
88 

251 
84 
1800 
68 

302 
261 
41 
1680 
48 

240 
172 
68 
1682 
55 

Aval I able 

2008 

2203 

2030 

1977 

Consumot ion 
Normal  market  price 
Special  measures 

Export 
Stocks per 
Pub Ii c 
Pr ivate 

31  December 

1455 
1089 
366 

218 
335 
251 
84 

1602 
1163 
432 

321 
302 
261 
41 

1548 
1153 
437 

242 
240 
172 
68 

1566 
1082 
467 

220 
208 
161 
47 

The  trend  in  internal  disposal  measures  and  exports  and  a  comparison  with 
butter  production  is given below : 

1.  Internal  disposal  ('000  t) 

366 

432 

437 

467 

1990 

1991 

1992 

(mid  year) 
1993. 

of which 

-  Pastry  &  ice cream 
-  Non-profit  making 
organizat ions 

-  Cooking  butter 
-  Other 

2.  Exports  ('000 
of which 

t) 

-  Norma I 
-  Special  price 
-  Food aid 

292 
37 

16 
21 

218 

202 
5 
11 

352 
37 

19 
24 

364 
36 

19 
18 

392 
37 

22 
16 

321 

242 

220 

101 
107 
13 

205 
40 
5 

3.  Total 

584 

754 

691 

687 

as a percentage of 
product ion 

33 

43 

40 

41 

Subsidized  butter  for  the  internal  market  plus  total  exports  exceeded  40 % 
of  the  butter  production  both  in 1991, 1992 and  1993 while  it was only  33 % 
in 1990. 

(1)  Including  former  DDR  as from  1991. 

-  13 -

SUPPLY BALANCE  FOR  SKIMMED-MILK  POWDER  ('000  t) 

1990(*)  1991 

1992 

1993 

1.  Public  stocks at  1 January 

5 

333 

414 

47 

2.  Quantities  avallable 

1672 

1510 

1165 

1280 

of which 
-  production 
-  importation 

1665 
7 

1505 
5 

1162 
3 

1255 
25 

3.  EC consumption 

1067 

1186 

1140 

994 

of which 
-  at market  price 
-  feed  for  calves 

300 
767 

330 
856 

335 
805 

335 
659 

4.  Exports 

329 

253 

390 

300 

of which 
- exported  on market  terms 

-  food  aid 

5.  Balance -  (2)-(3)-(4) 

6.  Public stocks at  31 December 
7.  Skimmed  milk used  in the 
manufacture  of  casein 
(SMP equivalent) 

261 

192 

291 

250 

68 

276 

61 

89 

99(**) 

50 

326 

-14 

333 

414 

47 

37 

334 

350 

458 

346 

(*)  excluding  the  former  GDR 
(**)  of which  44 000 tonnes covers emergency  supplies  to eastern  Europe 

SUBSIDIZED  DISPOSAL OF SKIMMED MILK  ('000  t) 

1990 

1991 

1992 

1993 

1.  Community  market 

1166 

1288 

1317 

1043 

of which 
-  animal  feed 

-  casein 

832 

334 

939 

349 

859 

458 

697 

346 

2.  Exports 

329 

253 

390 

300 

3.  Total 
4.  As a percentage of production 

1495 
75 

1541 
83 

1706 
92 

1343 
84 

(powder  + casein) 

(3) 

-  14 

-

ANNEX 

I I 

, 
j  Milk  c o l l e c t i on 
| 

( m i l l i on  tonnes) 

j 
EC  (without  «x-OOR) 
j  CIS  +  B a l t ic  S t a t s s C) 
j  USA 
j  Now  Zealand 
A u s t r a l ia 
j 

1 
| 
I 

| 
j 
| 
j 
j 

1 9 9 0* 

100.7 
108.2 
66.3 
7.4 
6.4 

1 
| 
I 

j 
j 
j 
j 
j 
J» 

1991 

105.4 
101.4 
66.5 
7.4 
6.4 

1 
| 
I 

j 
j 
j 
j 
j 

1992 

103.5 
90.0 
67.5 
7.9 
6.7 

1 
|  1993  (p) 
I 

j 
j 
j 
j 
j 

102.9 
82.1 
67.3 
8.1 
7.2 

1 
| 
I 

j 
j 
j 
j 
j 

(x)  Estimated production  • «xcluding the former COR 
(p)  Provisional figures 

| Butter production 

(tonnes) | 

1990 

|  1991 

1992 

1993 (p)  | 

I 
EC 
|  CIS 
j  USA 
|  New Zealand 
|  Australia 

|  2 013 000 
j  1 740 000 
591 000 
j 
255 000 
j 
104 000 

|  1 800 000 
j  1 504 000 
606 000 
j 
228 000 
j 
112 000 

I 

|  1 680 000 
1 660 000 
j  1 362 000 
1 438 000  | 
580 000 
I 
610 000  j 
248 000 
243 000  | 
140 000 
135 000  j 

(p) Provisional figures 

| Production of skimmed-milk 
| powder (tonnes) 

EC 
I 
|  USA 
j  CIS 
|  New Zealand 
|  Australia 

(p) Provisional figures 

j 

1990 

j 

1991 

1992 

1993 (p) 

|  1 665 000 
399 000 
j 
300 000 
j 
184 000 
j 
j 
135 000 
J 

|  1 505 000 
398 000 
j 
274 000 
j 
158 000 
j 
143 000 

(P) 

+ 
|  1 162 000  | 1 222 000  | 
I 
340 000  | 
230 000  j 
131 000  j 
174 000  j 
I 

396 000  | 
263 000  j 
155 000  j 
153 000 

|Cheese production tonnes) 

1990 

1991 

1992 

1 
1 
|  1993 (p)  | 

I  EC 
|  USA 
I 
CIS 
|  Australia 
|  New Zealand 
I 

5 344 000 
2 749 000 
878 000 
175 000 
111 000 

5 341 000 
2 730 000 
773 000 
182 600 
125 000 

5 508 000 
2 943 000 
592 000 
205 500 
129 700 

5 511 000 
3 050 000 
580 000 
205 000 
144 000 

(p) Provisional figures 

I 
| 
| Share of market 
|  in milk equivalent 
I 

r 
| 
| 
|ml 11 Ion  j  X 
| tonnes  | 

1990 
j 

1 
| 
1 

1991 
j 
jml 11 Ion  j  % 

1 
| 
j 

1992 
( 

1 
| 
j 

1 

1993 (p)  | 
1 
j 

jmillion  j  X 

(million  )  X 

j 

| tonnes  | 

J tonnes  | 

| tonnes  | 

j 

I EC 
| New Zealand 
j Australia 
I USA 
I 
(p)  Provisional  figures 

j  12.8  j  46.2  |  13.8  j  47.6  j  13.2  j  47.1  j 
j  12.5  j  49 
j  4.3  j  17 
j  17.4  j  5.1  j  18.1  j 
j  5.2  j  18.7  j  5.1 
j  1.8  j  7.3  j  2.4  j  8.6  j  2.4  j  8.3  j  2.0  j  7.0  j 
|  0.3  j  1.2  |  0.9  |  3.4  j  1.6  j  5.5  j  1.9  j  6.7  j 
I 
1 

1 

1 

I 

I 

I 

I 

I 

20 -

Proposal for 

94/ 0066(CNS) 

COUNCIL REGULATION (EC) No 

/94 

Of 
fixing compensation with regard to the reduction  in individual 
reference quantities in the milk sector and 
compensation for the definitive discontinuation of milk production 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in 

particular Article 43 thereof, 

Having regard to the proposal  from the Commission,C) 

Having regard to the opinion of the European Par I lament, <2> 

Whereas developments  in the milk market  have made necessary a 1% reduction 

in the global  quantities  fixed  in Article 3(2) of Council  Regulation  (EEC) 

No 3950/92 of 28 December  1992 establishing an additional  levy  in the milk 
and  milk  products  sector*3*,  as  last  amended  by  Regulation  (EEC)  No 
.../..<4>,  from  1 April  1994; whereas, to offset  the  inevitable  reduction 

in individual  reference quantities which will result, it seems necessary to 

provide  for  compensation  of  ECU 5  per  100  kilograms  per  year  for  ten 

years,  commensurate  with  the  ajustment  effort  required  of  producers; 

whereas  provision  should  be  made  for  the  possibility  of  paying  such 

compensation  in the form of transferable guaranteed bonds negotiable on the 

market ; 

Whereas, however, it is important not to reduce the reference quantities of 

small  and medium-sized  holdings; whereas  to that  end,  in order  to release 

reference  quantities  for  allocation  to  the  said  holdings,  a  Community 

scheme  should  be  introduced  to  finance  the  definitive  discontinuation of 

milk  production  which  provides  for  the  grant  of  compensation  to  all 

(1)  0J No C 
(2)  OJ No C 
(3)  OJ No L 405, 31.12.1992, p. 1. 
(4)  cf p. 

'Ç 

-  21 -

producers who so request, subject  to certain eligibility conditions, payable 

after  they  have  fully  and  definitively  ceased  to  produce  milk;  whereas  the 

Member  States must  take account  of  the existence of agricultural  leases; 

Whereas Member  States should  also be permitted  to decide whether  or  in which 

region  to  implement  this programme,  for  reasons relating  to the necessity  to 

encourage  structural  trends  and  changes, or  to  the  requirements  of  regional 

development, or  to the possibility under  production  conditions  in the  region 

or  regions  concerned  to  free  significant  reference  quantities  or  to 

overriding administrative needs; 

Whereas  the compensation  for  discontinuing milk production  is,  in principle, 

granted  for  the  whole  of  the  reference  quantity;  whereas,  however,  this 

right  should  in certain  cases  be  limited  since  producers  who  have  benefited 

from  Article  3c  of  Regulation  (EEC)  No  857/84(5)  are  excluded  from  the 

compensât ion; 

Whereas,  in  the  light  of  experience,  the  maximum  compensation  for 

discontinuing  milk  production  may  be  fixed  at  ECU  17  per  100  kilograms  and 

per  year,  payable  for  three  years;  whereas  it may  be  necessary  to  increase 

the  level  of  compensation;  whereas,  therefore,  Member  States  should  be 

authorized  to  put  up  additional  financing,  the  amount  of  which  may  be 

adjusted  to  take  account  of  specific  regional  features;  whereas  provision 

should  also  be  made  for  the  compensation  to  be  paid  in  the  form  of 

transferable  guaranteed  bonds negotiable on  the market; 

Whereas  the reference  quantities  thus  freed must  be reallocated  to small  and 

medium-sized  holdings  in  order  to  prevent  a  reduction  in  their  reference 

quantity;  whereas  the  Community  contribution  to  the  compensation  for 

permanent  cessation  of  milk  production  must  be  restricted  to  these 

reallocation  requirements; 

Whereas,  over  and  above  this  objective,  provision  should  be  made  for  the 

following  periods  to  allow  Member  States  who  deem  it  necessary  to  continue 

restructuring  to  maintain  a  scheme  for  financing  discontinuation  of  milk 

(5)  OJ No L 90, 1.4.1984, p. 13. Regulation  repealed  by Regulation  (EEC) No 

3950/92. 

)L 

-  22 -

production  by  providing  for  a  Community  contribution  to  the  financing  of 
such  schemes  of  up  to 50% of  the  amount  of  compensation  fixed  by  the  Member 
State,  up  to  a  maximum  of  ECU  2.5  per  100  kilograms  and  per  year  for  ten 
years; whereas  the compensation  may  also be paid  in the  form of  transferable 
guaranteed  bonds  negotiable  on  the  market;  whereas,  if  necessary,  the 
reference  quantities  liberated  under  this  scheme  may  remain  unallocated  in 
order  to  facilitate  the  decline  in deliveries  and  direct  sales  implicit  in 
the  reduction  of  guaranteed  total  quantities; 

Whereas  the  aim  of  the  Community  compensation  is  to  restore  market  balance 
and  may,  therefore,  be  considered  as  intervention  within  the  meaning  of 
Article  3  of  Council  Regulation  (EEC)  No  792/70  of  21 April  1970  on  the 
financing  of  the  common  agricultural  policy*6*,  as  last  amended  by 
Regulation  (EEC) No  2048/88*7*, 

HAS ADOPTED  THIS REGULATION: 

Art icle 1 

1. 

Compensation  shall  be granted  to producers whose  reference  quantity  has 
been  reduced  in order  not  to exceed  the guaranteed  total  quantity  fixed 
in  Article  3(2)  of  Regulation  (EEC)  No  3950/92  for  the  period 
concerned. 

2. 

This compensation  shall  be: 

(a) 

fixed  at  ECU 5 per  100 kilograms per  year; 

(b) 

paid  for  such  part  of  the  individual  reference  quantity  as  has 
been  and  remains  actually  deducted  in  relation  to  the  reference 
quantity  available  on  31 March  1994,  where  applicable  corrected 
by  the  quantities  allocated  from  the  national  reserve  and 
transfers  of  reference  quantities  which  have  taken  place  since 
that  date.  The  part  so  defined  may  not  exceed  in  relative  value 
the  reduction  applied  to  the  quantities  fixed  in Article  3(2) of 
Regulation  (EEC)  No  3950/92  for  the  Member  State  and  the  period 
concerned; 

(6)  0J  No L 94, 28.4.1970, p. 13. 
(7)  0J  No L  185, 15.7.1988, p. 1. 

Ol 

-  23 -

(c) 

paid  in  ten  annual  instalments  from  1995,  between  1 April  and 

30 September  each  year. 

3. 

The  Member  State  may  pay  the  compensation  in  the  form  of  transferable 

guaranteed  bonds which  are  negotiable on  the market. 

Article  2 

1. 

At  the  request  of  the  party  concerned  and  subject  to  the  conditions 

laid  down  in  this  Article,  the  Member  States  shall  grant,  to  any 

producer 

who  undertakes 

to  discontinue  definitively  all 

milk 

production  before  a  date  to  be  determined,  compensation  payable  in 

three  annual  instalments  between  1 April  and  30 September  each  year. 

However,  each  Member  State  may,  on  the  basis  of  one  or  more  of  the 

fol lowing  cr iter ia: 

-  the need  to encourage  structural  trends and  changes, 

-  the  requirements  of  regional  development  in  order  to  avoid,  in 

particular,  the desertification of  certain  areas, 

-  the  possibility,  under  production  conditions  in  the  region  or 

regions  concerned,  that  such  a  scheme  will  not  free  significant 

reference  quantities, 

-  overriding  administrative  needs, 

decide  not  to  implement  the  scheme  referred  to  in  the  preceding 

subparagraph  in one, several  or  all  of  its regions. 

2. 

(a) 

Eligible  producers  are  those  who  have  a  reference  quantity  for 

deliveries  or  direct  sales,  excluding  producers  who  have 

benefited  from  quantities  pursuant  to  Article  3c  of  Regulation 

(EEC) No 857/84. 

However, Member  States: 

-  may  decide  not  to  grant  compensation  to  producers  possessing 

less  than  six  dairy  cows  or  whose  annual  individual  reference 

quantity  is  less than  25 000 kilograms, 

IS 

-  24 -

-  shall  be  authorized  to  make  the  necessary  provisions  to 

ensure  that,  in  the  event  that  the  amount  of  compensation 

corresponding  to  all  eligible  compensation  applications 

exceeds  the  amount  of  Community  financing  referred  to  in 

paragraph  3,  the  reductions  in  quantities  effected  under 

this  Regulation  are,  in  so  far  as  possible,  harmoniously 

apportioned  between  the  regions and  collection  areas. 

(b)  Compensation  shall  be  granted  for  the  reference  quantity 

available at  the end of  the  twelve-month  period  in question. 

(c) 

In  the  case  of  producers  who  have  two  reference  quantities,  one 

for  deliveries  and  one  for  direct  sales,  the  compensation  shall 

be granted  for  both  reference  quantities. 

(d) 

In  the  case  of  agricultural 

leases,  the  application  for 

compensation  shall  be submitted  by  the  lessee. 

Member  States  shall  determine  the  conditions  under  which  the 

lessee  may  submit  the  application  for  compensation  and  the 

conditions  under  which  the  compensation  is  granted,  taking 

account  of  the  legitimate  interests of  the parties  concerned. 

3. 

Community  financing  of  the  compensation  referred  to  in  paragraph 1 

shall  be  limited  to  the  reallocation  requirements  referred  to  in  the 

first  paragraph  of Article  3. 

Within  that  limit,  Member  States  shall  be  authorized  to  pay  maximum 

compensation  of  ECU  17 per  100 kilograms and per  year. 

Member  States  may: 

(a) 

pay  compensation  of  less  than  ECU  17  per  100  kilograms  and  per 

year  and use  the balance  to free additional  quantities; 

(b) 

contribute  to  Community  financing  by  increasing  the  amount  of 

compensât ion. 

/) 9 

-  25 -

The  level  of  the  increase  may  be  adjusted  by  each  Member  State 

within  its  territory  to  take  account  of  the  differing  local 

conditions  in respect  of: 

- milk production  trends, 

-  the average  level  of  deliveries per  producer, 

-  the  need  to  avoid  hampering  the  restructuring  of  milk 

product ion, 

-  the  existence  of  opportunities  for  converting  to  other 

productive activities, 

-  the siting of milk production  in one of  the areas as defined  in 

Article  3(3),  (4)  and  (5)  of  Council  Directive  75/268/EEC  of 

28 April  1975  on  mountain  and  hill  farming  and  farming  in 

certain  less-favoured  areas*8*,  as  last  amended  by  Regulation 

(EEC) No 797/85*9>. 

4.  The  Member  State  may  pay  the  compensation  in  the  form  of  transferable 

guaranteed  bonds which  are negotiable on  the market. 

Article 3 

The  reference  quantities  freed  pursuant  to Article  2  shall  be  reallocated, 

within  the  limits of  the  quantity  covered  by  the  compensation  provided  for 

in  Article  1,  to  producers  whose  reference  quantity  remains  less  than 

200 000  kilograms,  provided  that  in  cases  where  the  Member  State  has 

implemented  Article  1(3)  the  amount  of  compensation  still  payable 

corresponding  to the reallocated quantities  is repaid. 

The  additional  quantities  referred  to  in  the  second  subparagraph  of 

Article 2(3)(a)  shall  be  reallocated  in  the  following  order  of  priority: 

first  to extensive  holdings  in areas as defined  in Article  3(3), (4) and  (5) 

(8)  0J No L 128, 19.5.1975, p. 1. 
(9)  0J  No L 93, 30.3.1985, p. 1. 

2^ 

-  26 -

of  Directive  75/268/75,  then  to  those  in other  areas  and,  where  applicable, 
to  producers  determined  on  the  basis  of  objective  criteria  laid  down  in 
agreement  with  the  Commission,  and  particularly  to  small  producers  and 
producers situated  in the abovementioned areas. 

"Extensive  holdings"  means  holdings  on  which  the  maximum  stocking  density, 
converted  into LU  in accordance  with  Annex  I to Council  Regulation  (EEC) No 
2328/91*10*,  does  not  exceed  1.4  LU  per  hectare of  total  forage  area  on  the 
holding  calculated  in accordance  with  the second  indent  of  Article 4g(3) of 
Regulation  (EEC) No  805/68*11*. 

Article  4 

1. 

From  1 April  1995  until  the  end  of  the  additional  levy  scheme,  the 
Member  States may, at  the  request  of  the party  concerned  and  subject  to 
the conditions  laid down  in Article 2, grant  any producer  as defined  in 
that  Article  compensation  payable  in ten  annual  instalments  from  1996, 
between  1 Apr 11 and  30 September  each  year. 

2. 

The  Member  State  shall  fix  the  amount  of  the  compensation,  which  may 
vary  on  the  basis  of  one  or  more  of  the  criteria  referred  to  in  the 
second  subparagraph of Article 2(3). 

Community  financing  shall  be  limited  to  50%  of  the  compensation 
granted,  with  a maximum  contribution  of  ECU  2.5  per  100 kilograms  and 
per  year  for  ten years. 

3. 

The  reference  quantities  freed  pursuant  to  this  Article  shall  be 
reallocated  in  accordance  with  the  second  paragraph  of  Article  3  or, 
where  applicable, shall  not  be  reallocated. 

4. 

The  Member  State  may  pay  the  compensation  in  the  form  of  transferable 
guaranteed  bonds negotiable on  the market. 

(10) 0J  L 218, 6.8.1991,  p.1. 
(11) OJ  No L  148, 28.6.1968, p.24. 

(4) 

27 

-  27  -

Article  5 

Financing  of  the  Community  compensation  provided  for  in Articles  1,  2  and  4 

shall  be  considered  as  intervention  within  the  meaning  of  Article  3  of 

Regulation  (EEC) No 729/70. 

Article  6 

Member  States shall  forward  to  the Commission,  before  1 April  each  year, all 

the  information  needed  for  an  assessment  to be made  of  the  effectiveness  of 

the measures  provided  for  in this  Regulation. 

Article  7 

The  Commission  shall,  in  accordance  with  the  procedure  laid  down  in 

Article  30  of  Regulation  (EEC)  No  804/68,  adopt  the  measures  for  applying 

this  Regulation. 

Article  8 

This  Regulation  shall  enter  into  force  on  the  third  day  following  its 

publication  in the Official  Journal  of  the European  Communities. 

It shall  apply  from  1 April  1994. 

This  Regulation  shall  be  binding  in  its entirety  and  directly  applicable  in 

a 11 Member  States. 

Done  at  Brussels, 

For  the Council 

17-

- 15 -

Proposal for 

9 4/  0067(CNS) 

COUNCIL REGULATION (EEC) No 

/93 

Of 

amending Regulation (EEC) No 3950/92 establishing an additional 
levy in ths milk and milk products ssctor 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in 

particular Article 43 thereof, 

Having regard to the proposal from the Commission1, 

Having regard to the opinion of the European Parliament2, 

Whereas, in the context of the reform of the common agricultural policy, the 

Council  decided  upon  the  principle  of  a  2% additional  reduction  of  the 

guaranteed  total  quantities,  spread  over  1993/94  and  1994/95,  without 

prejudice to a possible review  in the light of the general market situation 

and particular situations existing in certain Member States; 

Whereas an analysis of the market  in March 1993 led the Council to postpone 

the 1% reduction of the guaranteed total quantities decided  in principle for 

1993/94 and  it was agreed to review its entry  into force at the same time as 

that  for  1994/95; whereas  an  analysis of  the market  situation shows that 

milk  and  milk  products  remain  exposed  to  the  same  dangers  as  those 

identified when  the Council  decided on the 2% reduction of  the guaranteed 

total quantities; whereas it is therefore necessary to reduce the guaranteed 

total  quantities;  whereas,  however,  in  view  of  the  proposed  additional 

reduction  in the  intervention  price of  butter  in order  to  restore market 

stability,  it appears feasible to  limit to 1% the reduction for the period 

1994/95  and  to  specify  accordingly  in  Article  3  of  Regulation  (EEC) 
No 3950/923,  as  last  amended  by  Regulation  (EEC)  No 1560/934,  the 

guaranteed total quantities; 

1 
2 
3 OJ No L 405, 31.12.1992, p. 1. 
4 OJ No L 154, 25.6.1993, p. 30. 

il 

-  16 -

Whereas  the  particular  situations  of  Italy,  Greece  and  Spain  respectively 

have  been  examined;  whereas,  in  the  case  of  the  latter  two  Member  States, 

the  conclusions  reached  permit  a  carry-over  of  the  increase  in  the 

guaranteed  total  quantity,  but  only  for  the  period  1994/95  in  the  case  of 

Greece;  whereas  a  review  will  be  carried  out  before  the  beginning  of  the 

period  1995/96  to  see  whether  all  the  conditions  to  which  the  definitive 

increase  in  the  guaranteed  total  quantity  for  Greece  is subject  have  been 

fui Iy complied  with; 

Whereas  the  situation  of  Italy,  following  the  examination  carried  out, 

assumes  a  new  perspective  which,  currently  and  for  the  period  1994/95, 

warrants  an  increase of  no more  than  550 000 tonnes  in the guaranteed  total 

quantity; whereas  the amount  of  this  increase and  its definitive  nature will 

be  reviewed  before  the  beginning  of  the  period  1995/96,  as  in  the  case  of 

Greece,  in  the  light  of  whether  the  sum  of  the  individual  quantities  has 

been  absorbed; 

Whereas, as far as required,  the components  upon which  the  "deliveries" part 

of  the  guaranteed  total  quantity  for  Greece,  Spain  and  Italy  is calculated 

for  the period  1994/95 should  be specified; whereas, for each of  these  three 

Member  States,  to  the  amounts  specified  hereafter  must  be  added  the 

quantities  from  the  former  Community  reserve;  whereas,  in  the  case  of 

Greece,  the  total  quantity  fixed  for  the  period  1992/93  is  increased  by 

100 000 tonnes;  whereas, 

in  the  case  of 

Spain,  the  figure  of 

4 550 000 tonnes  represents  the  basic  total  quantity  which  is  increased,  on 

the  one  hand,  by  500 000 tonnes  and,  on  the  other,  by  150 000  tonnes 

following  a  transfer  from  direct  sales  to  deliveries;  whereas,  in  the  case 

of  Italy,  the  total  quantity  fixed  for  the  period  1992/93  is  increased  by 

550 000 tonnes, 

HAS ADOPTED THIS REGULATION 

Article 1 

Article  3(2)  of  Regulation  (EEC)  No 3050/92  is  hereby  replaced  by  the 

fol lowing: 

?(r 

- 17 -

'2.  The  following  total  quantities  shall  be  fixed  without  prejudice  to 

possible  review  in  the  light  of  the  general  market  situation  and 

particular conditions existing  in certain Member States: 

(a) For the period 1.4.1993 to 31.3.1994 

Member State 

Deliveries 

Direct sales 

(tonnes) 

Belgium 
Denmark 
Germany (*) 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

2 937 238 
4 454 397 
27 764 778 
625 985 
5 200 000 
23 502 974 
5 230 554 
9 212 190 
268 098 
10 972 104 
1 804 881 
14 197 179 

373 193 
951 
100 038 
4 528 
366 950 
732 824 
15 210 
717 870 
951 
102 588 
67 580 
392 868 

(1)  Of  which  6 244 566  tonnes  covers  deliveries  to  purchasers 
established  in  the  territory  of  the  new  Lander  and  8  801  tonnes 
covers direct sales in the new Lander. 

The  increase  in  the  total  quantities  for  Belgium,  Denmark,  Germany, 

France,  Ireland,  Luxembourg,  the  Netherlands  and  the  United  Kingdom 

shall  be  granted  in  order  to  permit  the  allocation  of  additional 

reference quantities to: 

producers who, by virtue of the second  indent of Article 3a(1) of 

Regulation  (EEC) No 857/84(*), had been excluded  from allocation 

of a special  reference quantity, 

producers  situated  in  the  mountain  areas  as  defined  in 

Article 3(3)  of  Directive  75/268/EEC(**)  or  to  the  producers 

referred to in Article 5 of this Regulation. 

The  increase  in the total  quantity  for Portugal  shall  be granted  as a 

matter  of  priority  to contribute  towards  satisfying  the  requests  for 

additional  reference quantities from producers whose production during 

25" 

- 18 -

the  1990  reference  year  was  substantially  affected  by  exceptional 

events  which  took  place  during  the  period  1988  to  1990  or  to  the 

producers referred to in Article 5. 

The  increase  in the total quantities for Greece, Spain and  Italy shall 

be granted for the period 1993/94. 

(b)  For the period 1.4.1994 to 31.3.1995 and subsequent periods 

Member State 

Deliveries 

Direct sales 

(tonnes) 

Belgium 
Denmark 
Germanyd) 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 

2 907 866 
4 409 853 
27 487 130 
619 725 
5 148 000 
23 267 944 
5 178 248 
8 770 068 
265 417 
10 862 383 
1 786 832 
14 055 207 

369 461 
941 
99 038 
4 483 
363 281 
725 496 
15 058 
710 691 
941 
101 562 
66 904 
388 939 

(1)  Of  which  6 182 120  tonnes  covers  deliveries  to  purchasers 
established  in  the  territory  of  the  new  Lander  and  8 713  tonnes 
covers direct sales in the new Lander. 

The  increase  in  the  total  quantities  granted  for  the  period  1993/94 

shall  be  carried  over  in the  same  amount  in  the  case  of  Greece  and 

Spain for the period 1994/95 and  in an amount reduced by 350 000 tonnes 

in the case of  Italy. Before  the period  1995/96, the Commission will 

submit  a report  to the Council  accompanied  by proposals on whether the 

increase  in the case of  Greece and  the amount  of  the  increase  in the 

case of  Italy should be continued  in 1995/96 and subsequent years. 

(*) 0J No L 90, 1.4.1984, p. 13. 

(**) 0J No L 128, 19.5.1975, p. 1. 

Z£ 

-  19 -

Article  2 

This  Regulation  shall  enter  into  force  on  the  third  day  following  its 

publication  in the Official  Journal  of  the European Communities. 

It shall  apply  from  1 April  1994. 

This Regulation  shall  be binding  in  its entirety  and  directly  applicable  In 

a 11 Member States. 

Done at Brussels, 

For  the Council 

?> 

BUDGETARY ASPECTS 

A. 

QUOTA REDUCTIONS 

I. 

Impact on milk 

The quotas for 1994/95 and subsequent periods have been reduced from 
their 1993/94 levels as follows: 

(a) EC 12 

Deliveries quota 

Direct sales quota 

(b) Deliveries quota for Italy 

TOTAL 

Million tonnes 

1.062 

0.029 

0.350 

1.441 

The reduction in the direct sales quota should not have an effect on 
the quantity of milk marketed, since the volume of direct sales is 
already appreciably lower than the quota. 

The 1994 budget was based on quota reductions of 2% in 1994/95.  The 
1% reduction is thus generating more deliveries than the 1994 budget 
made provision for, with more skimmed-milk powder and butter being 
produced as a result. 

The estimated effect on the production of these products is as 
follows: 

1994 

1995 and 

beyond 

Milk deliveries (million tonnes) 

+ 0.425 

+ 1.062 

SMP production ('000 tonnes) 

Butter production ('000 tonnes) 

+ 35 

+ 20 

+ 80 

+ 50 

ig 

These increases may conceivably result in corresponding increases in the 
quantities of powder exported and the quantities of butter bought in. 

In view of these quantitative factors, the budgetary impact of the quota 
reduction is estimated as follows: 

1.  1994 

Million ECU (B) 

(a)  Additional exports of SMP (+ 35 000 tonnes) 

35 000 t  x  700(ECU)(A)x 1.207  (DR) = 

+ 29.6 

(b)  A d d i t i o n al  b u t t er  bought 

in 

(+  20  000  t o n n e s) 

Technical  costs  +  ECU  1.0  m i l l i o n ( A)  x  1.207  (DR)  =  + 
1.2 
Financial  costs  +  ECU  0.8  m i l l i o n ( A)  x  1.207  (DR)  =  + 
1.0 
2 .7 
+  ECU  2.2  m i l l i o n ( A)  x  1.207  (DR)  =  + 
Other  costs 
+  ECU  32.2  m i l l i o n ( A)  x  1.207  (DR)  =  +  3 9 .0 
Depreciation 

T o t al  p u b l ic  s t o r a ge  of  b u t t er 

( c)  T o t al 

impact 

2. 

1995  and  s u b s e q u e nt  y e a rs 

(a)  A d d i t i o n al  e x p o r ts  of  SMP 

(+  80  000 

t o n n e s) 

+  4 3 .9 

+  7 3 .5 

80  000  t  x  ECU  910(A)  x  1.207 

(DR)  = 

+  8 7 .9 

(b)  A d d i t i o n al  b u t t er  bought 

in 

(+  50  000 

t o n n e s) 

Technical  costs  +  ECU  2.3  m i l l i o n ( A)  x  1.207  (DR)  =  + 
Financial  costs  +  ECU  2.0  m i l l i o n ( A)  x  1.207  (DR) 
*  + 
+  ECU  5.8  m i l l i o n ( A)  x  1.207  (DR)  =  + 
Other  costs 
+  ECU  78.5  m i l l i o n ( A)  x  1.207  (DR) 
Depreciation 

2 .8 
2.4 
7.0 
*  +  9 4 .7 

T o t al  p u b l ic  s t o r a ge  of  b u t t er 

( c)  T o t al 

impact 

+  1 0 6 .9 

+  1 9 4 .8 

11• 

Impact on beef and veal 

A reduction in the delivery quotas should result in the  slaughter 
of a corresponding number of dairy cows and the production of an 
equivalent amount of beef and veal. 

Production in the event of a 1% reduction in delivery quotas is 
estimated as: 

1.06 million t/4 100 kg * 258 000 head x 290 kg • 75 000 t (rounded 
up) 
(4 100 kg = annual average delivery per cow, 290 kg » average weight 
of each) 

As the 1994 budget assumed a 2% reduction in the quotas, there has 
been a saving equivalent to a 75 000 tonne reduction in beef and 
veal production. 

It is thought that the impact on the market in beef and veal - in 
the form of a reduction in the quantity bought in - will not be felt 
until autumn 1994 (and will be limited to 1995): 

The estimated saving is: 

Technical costs  - ECU  14.5 million(A) x 1.207  (DR)  « -  17.5 
Financial costs  - ECU  1.9 million(A) x 1.207  (DR)  * -  2.3 
+ ECU  2.7 million(A) x 1.207  (DR)  • +  3.3 
Other costs 
- ECU 109.4 million(A) x 1.207  (DR)  • - 132.0 
Depreciation 

Million ECU (B) 

TOTAL 

- 148.5 

B. COMPENSATION FOR QUOTA REDUCTIONS 

The programme applies to quotas for both deliveries and direct sales. 
The quantity to be compensated is thus 1 090 million tonnes. 

Compensation will be granted: 

as part of a total cessation of production by producers who will 
receive a subsidy of ECU 170/tonne/year, payable for three years; 

- 

or for a linear reduction in the quotas and a subsidy of 
ECU 50/tonne/year, payable for ten years. 

In estimating the impact on the budget, it is assumed that 50% of the 
total quantity will be compensated at ECU 170/t and 50% at ECU 50/t. 

The first compensation payments will be made in the financial year 
following the quota reductions, i.e. from 1995 on. 

o 
*£> 

Compared  to  a  r e d u c t i on 
e x p e n d i t u re  by  t he  following  amounts: 

in  t he  quotas  of  2%,  t he  1%  r e d u c t i on  w i ll 

reduce 

1995 

1996 

1997 

1998 

-  0.545m  t  x  ECU  1 7 0 /t  x  1.207 

(DR)= 

-  111.8  -  111.8  -  111.8 

-  0.545m  t  X  ECU  5 0 /t  X  1.207 

(DR)= 

- 

3 2 .9  - 

3 2 .9  - 

3 2 .9  -  3 2 .9  (1) 

TOTAL 

(1)  U n t il  2004 

C.  Conclusion 

-  144.7  -  144.7  -  144.7  -  3 2 .9  (1) 

The  budgetary  impact  of  the  proposal  to  reduce  the  quotas  by  1%  can  be 
summarized  as  f o l l o w s: 

A.  Quota  reductions 

1994 

1995 

1996 

1997 

1998 

Impact on milk 
Impact on beef and veal  - 

+ 73.5  + 194.8  • 194.8  + 194.8  + 194.8 
-

- 148.5 

B. Compensation for the 
quota reductions 

- 

- 144.7  - 144.7  - 144.7  -  32.9 

TOTAL 

+ 73.5  -  98.4  +  50.1  +  50.1  + 161.9 

It  should  be  noted  that  the  budgetary  impact  has  been  calculated  assuming 
a  2%  reduction  in  the  quotas  from  1 April  1994. 

Had  this  assumption  not  been  used,  the  current  proposal  would  represent  a 
saving  of  ECU  73.5  million  (B)  in  1994,  expenditure  of  98.4  million  (B) 
in  1995,  a  saving  of  ECU  50.1  million  (B)  in  1996  and  1997  and  a  saving 
of  ECU  161.9  million  (B)  in  1998. 

The  proposal  does  not  take  account  of  the  prices  proposal  for  1994/95. 

REPORT 

TO THE COUNCIL 

on the application of the milk quota system in 
Italy, in Spain and in Greece 

Introduction 

1.  In the course of its approval  (May 1993) of the Commission's proposal for 

an  increase  in the global  guaranteed  quantities  for Italy,  Spain and 

Greece, the Council of Ministers made the following Declaration: 

"The  Council  notes  that  the  Commission  will  closely  monitor  the 
implementation of the milk scheme in Greece, Spain and Italy in order to 
verify compliance with the detailed  undertakings on which the agreement 
on quotas for these three countries was based.  The Commission will submit 
a report to the Council in March 1994 accompanied by proposals on whether 
the increased quotas should be continued in 1994/95 and subsequent years." 
This report, and the accompanying  proposals, is made in accordance with 
that  Declaration.  It reflects  the situation  following  the last  of a 
series of missions to the Member States which  ended on 4th February and 
includes also any significant developments notified to the Commission in 
the meantime. 

Requirements to be met 

2.  The increases  in milk  quotas  granted  for 1993/94  in the case of Italy 
(0.9mt),  Spain  (0.5 mt) and Greece  (0.1 mt) were  subject  to effective 
Certain  key requirements  were 
implementation  of the quota  system. 
identified, which, taken together, provide an appropriate framework within 
which  to consider  progress  made  in each  Member  State.  These  were as 
follows:-

U 

a)adoption  of  implementing  regulations 

b)calculation  of  individual  reference  quantities  on  the  basis  of 
deliveries  to  purchasers  in  1991/92.  together  with  individual  fat 
references 

c)notification  of  individual  reference  quantities  to  each  producer, j md 
to  purchasers 

d)establishment and equipping of a central agency to verify the production 

records  and collection  of  levies 

e)adequate records  of  production 

f)collection of  levies from  producers 

Besides,  certain  quantitative  undertakings  (details  at  Annex  I)  were 

specified  in  the  Council  agreement  in  connection  with  the  measures 

necessary  to  bring  production  within  quota.  In  the  case  of  Italy  and 

Spain, these measures  involve voluntary buying-up  programmes  financially 

supported  in  part  by  the  Community; 

the  suppression  of  some  quotas 

without  compensation  was also envisaged  in the case of  Italy. 

Production  in  Italy  was  to  be  brought  within  its  global  guaranteed 
quantity with effect from the 1995/96 milk year;  but the quota system was 
to be put  in place from  the current  (1993/94) year. 

Under  the  compensation  procedures  (offsetting  over-deliveries  of  milk 
against under-deliveries by individual  producers) to be decided  in Italy, 
this  should  mean  in practice  that  (i)  while  an  individual  producer  may 
have  levies retained due to exceeding his quota during  the course of any 
marketing year, his final  liability should only arise where deliveries or 
direct  sales exceed the total of the individual quotas allocated by  Italy 
and  (ii)  the  total  of  the quotas  allocated  by  Italy must  correspond  to 
the amounts fixed by the Council  at the latest from the 1995/96 marketing 
year. 

However, Italy will be accountable financially to the EAGGF for levies due 
in  respect  of  any  deliveries  or  direct  sales  in  excess  of  the  global 
guaranteed quantities. 

Commission  Monitoring 

3.  Following  the  Council's  agreement  in  May  the  Commission  services  have 
closely  monitored  the  situation  in the  three  Member  States.  This  has 
involved  regular  discussions  in  the  capitals  with  officials  from  the 
Ministries and controlling  bodies concerned, as well  as field  visits to 
the  main  milk  producing  regions.  The  visits  involved  examination  of 
records,  and  discussions  with  local  controlling  authorities,  milk 
purchasers and dairies;  in the case of Italy producer associations were 
visited also.  The regions and purchasers visited account for  some 75%, 
70% and 75% of milk  production  in Italy, Spain and Greece  respectively. 
Full cooperation was received  in the course of the visits. 

4.  The  principal  test  of  effective  implementation  of  the  system  will  be 
whether a)  quotas have been  allocated to individual producers, correctly 
and  objectively 
b)  the  approved  purchasers  have  accurately  recorded 
deliveries from producers  in 1993/94 so as to enable them to furnish  to 
the competent  authorities  the relevant  statements before  15th May  1994 
and  c)  levies  due  have  been  charged  to  the  producers  liable, and  paid 
before  1st September, as required  by the regulations.  The report deals 
with the preparatory measures in terms of legal provisions, administrative 
action and controls taken by the Member States to meet these requirements. 

Verification  of payment of  levies  in Italy,  in Spain and  in Greece will 
be carried out as part of the normal process of inspection and control by 
the  Commission  for  the  purpose  of  satisfying  itself  that  the  financial 
provisions have been respected. 

The  information  now  available  provides  a  clear  picture  of  progress  in 
implementing  the  quota  system. 
It  is  possible  also  to  draw  some 
conclusions  in  relation  to  the  quantitative  targets  indicated  in 
connection with the Council's agreement. 

?4 

Consistent with the structure of earlier reports from the Commission the 
approach  in this report  is to measure progress against the requirements 
that were identified in connection with the granting of increased quotas. 

(a)Adoption of implementing regulations 

5.  Italy and  Spain have now taken the principal  legal measures considered 

necessary  by  them  to  ensure  the  smooth  operation  of  the  quota  system, 

including  its  control.  Certain  supplementary  measures, covering  such 

matters as the national  compensation mechanism and the national  reserve 

are expected to be adopted by Italy over the coming weeks.  Italy intends 

also to adopt appropriate regulations on procedures for reducing its over 

production  to within  the  global  guaranteed  quantities;  the  plan  will 

include the first phase of reduction of B quota without compensation (see 

par  13).  These regulations have not been adopted up to now because of a 

significant  delay  in  completing  the  procedures  associated  with  the 

adoption of the detailed rules for the quota system and because of other 

procedural requirements. 

Measures are being taken  in Greece to permit 

the designated  controlling authority  (ELOG) to> become fully operational 

by the beginning of the 1994/95 marketing year. 

6.  The Commission has not taken a definitive position on the question of the 
compliance of the individual measures  with Community  law.  Some of the 
national  measures  pre-date  the  revised  Regulations11'  on  milk  quotas, 
adopted  by  the  Community  in  December  1992;  some  measures  have  been 
adopted only recently;  others remain to be adopted. 

7.  The Commission  is in the course of carrying out an overall review of the 
legislative measures adopted in all Member States, in order to comply with 

the revised Regulations on milk quotas;  the measures taken  in Italy, in 

Spain and  in Greece will form part of that review. 

CD 

Council Regulation  (EEC) No 3950/92, establishing an additional  levy 
in the milk  sector  (OJ  L405 of  31 December  1992 p  1).  Commission 
Regulation (EEC) No 536/93 of 9 March 1993 laying down detailed rules 
on the application of the additional  levy on milk  and milk  products 
(0J L57 of 10 March  1993 p 12). 

8. While the Commission  has not so far identified measures taken at national 
level  that  would,  a priori, prevent  the quota  system  from  achieving  its 
objective,  it  does  have  reservations  about  the  role  given  to  producer 
associations  in managing  certain aspects of the system  in Italy,  notably 
in relation to the compensation mechanism.  At best the involvement of the 
associations  is  an  added  administrative  burden  and  without  any 
identifiable  advantage  to  producers;  at  worst  it  could  be  a  serious 
impediment  to  finalising  the  compensation  procedures  and  determining 
levies payable after the end of the marketing  year. 

9.  The  Commission's  concern  about  the  role  of  producer  associations  is 
heightened  by the  provision  in the detailed  rules which  leaves  open  the 
possibility  that  the  National  Union  of  Milk  Producers  (UNALAT)  might 
assume  responsibility  for  managing  the  flow  of  information  on  milk 
deliveries, and  on other  aspects  of the quota  system.  This  concern  has 
led the Commission to ask the Italian authorities to ensure that the quota 
arrangements  can  if  necessary  be  managed  independently  of  producer 
organisations, and that  such associations will  not be  involved  in any of 
the control  aspects. 

10. The  arrangements  being  applied  to  implement  the  quota  system  reflect 
existing competences, structures and practices  in the Member States, some 
of  which  cannot  easily  be  adapted  and  do  not  always  facilitate  easy 
management  of  the  system. 
While  Member  States  need  to  have  some 
flexibility  in adopting  arrangements best  suited to their circumstances, 
including  involvement  of regional  authorities, the Commission  emphasises 
the overriding  responsibility of the central  authorities  to exercise  the 
controls necessary to ensure that the financial regulations are respected. 
Member  States  have  to  be  especially  vigilant  also  to  avoid  the 
introduction  of  regional  dimensions  to  the  system  which  may  be 
successfully  challenged  on grounds of  discrimination. 

11. There  is now widespread  awareness by producers and milk purchasers  in the 
Member  States of the  implications of introducing the quota system, and an 
acceptance  of the  inevitability of  its application.  Mindful  of the need 
to proceed rapidly with putting the quota system in place, the Commission, 

<IC 

in  the  course  of  its  contacts  with  the  Member  States,  has  sought  to 

encourage  progress  and  to  avoid  disrupting  the  momentum  towards  the 

application of the system. 

12. The Commission stresses that, while national  legislative measures are an 
important preliminary step, they do not in themselves constitute effective 
application  of  the  milk  quota  system.  Real  effectiveness  can  only  be 
achieved through observance of the rules, as confirmed by an  independent 
and efficient control process. 

bjcalculation of  individual  reference quantities on the basis of deliveries 

to purchasers  in 1991/92. together with  individual fat references 

13. Individual  reference  quantities  have been calculated  in the case of all 

three  Member  States:  in  Italy  they  are  fixed  partly  on  the  basis  of 
deliveries  in  1988/89  (so  called  A  quotas),  and  partly  on  deliveries 
between  1988/89  and  1991/92  (so  called  B  quotas  which  are  of  a 
transitional  nature  and  are  to  be  phased  out  by  1995/96).  Spain  has 
issued  quotas on the basis of provisional  allocations made  in 1987, but 
updated  to take account of deliveries and direct sales  in 1991/92. 

In November  1993 Greece altered  the basis for allocating  quotas  adopted 
in June 1993;  while maintaining a link with 1991/92, producer quotas are 
now determined mainly by deliveries  in 1992/93. 

14. There have been delays  in finalising the process of allocating quotas to 

producers. 

In Italy the need to carry out a full control on some 165.000  individual 
quotas  allocated  initially  to  producers  meant  that,  at  the  earliest, 
quotas for 1993/94 could not be confirmed  until December 1993 in the case 
of  some  30% of  Italian  producers;  the  process  of  fixing  quotas  for 
1993/94 which began in January 1993, has involved three revisions to date 
in the light of successive controls.  The remaining controls are expected 
to be finalised  in the course of March.  This should allow quotas for all 
producers for 1994/95 to be published at the end of the month.  The normal 

date  limit. (31  January)  prescribed  in  Italy's  national  law  for  fixing 

quotas for the following marketing year has been extended by  presidential 

decree  to 31 March. 

about  one  third 
In  Spain  quotas  were  allocated  in  December  1992; 
(43.000) of  producers  appealed  against  the quota  allocations; 
almost 
all appeals had been decided  by January  1994;  the small  number  (200) of 
outstanding  cases are expected  to be finalised  by the end of March. 

In Greece, the allocation  of quotas was not made by the authorities  until 

November  1993;  the time limit for deciding appeals by producers was fixed 

for  the end  of February  1994;  some 4.000 appeals  have been  received  so 

far. 

15.  Individual  fat reference  quantities  have been established  and  associated 
directly  with  the  quotas  issued  to  producers,  in  the  case  of  Spain  and 
Greece;  in Italy this requirement  is to be implemented  by milk purchasers 
when  measuring  deliveries  against  quota  for  the  purpose  of  preparing 
statements  to be sent  to the controlling  authorities  by  15th May. 

16. The  approach  taken  by  the  Member  States  as  regards  the  reference  year 

chosen as the basis for allocating quotas has been influenced by legal and 

practical  considerations. 

This  goes  some  way  to  explain  the  decision 

In Italy's case the reference years are 1988/89 for A  (permanent) quotas 
and  1991/92  for  B  (temporary  quotas).  Given  the  structural  changes  in 
agriculture,  it  was  to  be  expected  that  implementation  of  quotas  in 
1993/94 on the basis of the situation  some five years earlier, would  give 
rise  to  adjustments. 
actively  encouraged  by  the  Commission  -  to  carry  out  comprehensive 
controls  of  the  quotas  allocated  to  producers. 
This  has  been  a  time 
consuming  and  laborious  process but  justified  in the circumstances  since 
it  has  revealed  important  weaknesses  in the  initial  process  of  issuing 
quotas on the basis of  information  supplied  through  UNALAT  sources.  The 
extent  of  the  adjustments  that  have  already  taken  place  in  1993/94  is 
indicated  in par 27. 

*>>$ 

The high  level of appeals by producers against the quotas fixed  in Spain, 

which has required examination of over 40.000 cases, has absorbed also a 

high  level of human and material  resources.  The appeal process has not 

revealed weaknesses  in the allocations made initially;  nor has  it added 

significantly to the quantity of quota  issued. 

The  use  in  Greece  of  the  latest  year  for  which  delivery  figures  are 
available, that  is 1992/93, as the main basis for quotas  is explained by 
the  rapid  structural  changes  taking  place  in  Greece,  especially 
at 
producer  level.  Having regard to the recent deadline  (end February) for 
appeals against the quotas attributed, it is not possible to indicate the 
extent of any adjustments necessary  in Greece. 

c)notification  of  individual  reference  quantities  to  each  producer,  and  to 

purchasers 

17.  In Italy and in Spain individual notifications have been issued direct to 
producers by post.  In Greece the notifications have been made available 
to producers through regional offices of the Ministry of Agriculture.  In 
addition,  the  quotas  of  individual  producers  have  been  published 
officially  in Italy, and publicised  locally  in Greece. 

18. Purchasers of milk are informed also of the reference quantities of their 
suppliers.  In  Italy  the  information  has  been  made  available  through 
official  publications  setting  out  the  quotas  allocated  to  individual 
producers;  there  is also ongoing contact with official regional bodies, 
producer associations, and  individual  producers.  In Spain the relevant 
information was communicated  in March  1993.  In Greece  local offices of 
the  Ministry  of  Agriculture  have  certified  the  quota  of  individual 
producers on an  index card supplied direct to purchasers. 

19. While the channel of information used in each instance has varied with the 

circumstances of the Member States concerned, it appears to the Commission 

that  the  relevant  information  on  individual  producer  quotas  is  readily 

available to producers and to purchasers. 

In the course  of  visits  to  the Member  States  the Commission  found  that 
purchasers visited were aware of their suppliers' quotas;  many purchasers 
had  established  systems  for  keeping  individual  producers  informed 
regularly of how deliveries were progressing compared to quota. Purchasers 
had  a  sound  knowledge  of  their  responsibilities  under  the  milk  quota 
regulations, for example, as regards recording deliveries, including fat 
levels,  maintaining  stock registers, and  collecting  levies.  In  Italy 
levies have already been withheld  in cases where supplying producers have 
exceeded their quotas, for example four of the dairies visited in February 
had withheld  levies to a total amount of 250.000 ECU. 

20. On  the  other  hand, the  existence  of  a  large  number  of  milk  purchasers 
which  act  as 
(about  3000  in  Italy  and  1000  in  Spain),  many  of 
intermediate buyers of milk on a small scale, does not facilitate control, 
and  is likely to pose formidable  problems  in verifying  the  declarations 
by purchasers and  in determining any levies payable after the end of the 
marketing year.  While the process of registration of milk purchasers  is 
at  an  advanced  stage  in the  Member  States, there  is a  risk  that  small 
scale purchasers may emerge, possibly  in the context of trading  in milk 
from producers who have exceeded their quotas, and remain undetected  for 
a  time.  Measures  to  prevent  producers  switching  from  one  purchaser  to 
another  during  certain  sensitive  periods  of  the  year  would  facilitate 
stability and control. 

d)establishment  and  equipping  of  a central  agency to 
records and collection of  levies 

verify  the  production 

21. All  three  Member  States  have  designated  central  agencies. 

From  the 
operational  point of view AIMA  in Italy, and SENPA  in Spain, have taken 
an active part in the establishment and control of the quota system.  The 
situation  is  different  in  Greece.  While  the  powers,  functions,  and 
resources of the controlling body  (EL0G) were  prescribed  in law in June 
1993,  ELOG  has  not  been  properly  staffed  and  equipped  to  enable  it  to 
carry out any worthwhile work  in the management and control of the quota 
system. 

ks 

The Greek authorities have been informed of the gravity of this situation 

which  is contrary  to earlier  indications  that  ELOG  would  be made  fully 

operational  at  the  start  of  the  current  marketing  year. 

They  have 

explained  the  delay  as  being  due  to  bureaucratic  procedures  with 

unavoidable delays arising from the change of administration.  Greece has 

now given firm assurances that the deficiencies will be remedied  without 

delay. 

e)adequate records of production 

22. As  from  1993/94  the  new  systems  and  procedures  being  put  in  place  to 

control  dairies  and  other  milk  purchasers  should  guarantee  a 

comprehensive flow of accurate and timely data;  this will substitute for 

traditional  statistical  methods  whose  limitations  have  been  evident. 

Besides,  under  existing  rules  full  returns  have  to  be  made  to  the 

Commission by 1 September each year. 

Up  to  now  all  three  Member  States  appear  to  have  had  difficulties  in 
assembling  reliable  and  comprehensive  records ,of production  at  central 
level. 
This  has  meant  that  reliable  figures  of  milk  deliveries  and 
direct  sales  in 92/93, based, for  example, on  returns  by purchasers  of 
milk and by direct sales producers,  are not yet available  in all cases. 
Figures  for  deliveries  to  dairies  in  1992/93  have  been  supplied  only 
recently  by  Spain  and  are  available  also  for  Greece. 
As  long  as 
verifiable figures are outstanding for 1992/93 it is difficult to identify 
the excess of production  over quota, notably in Italy, and also to assess 
the  impact  of  recent  programmes  for  the  voluntary  abandonment  of  milk 
production. 

23.  In Italy there is an important  role for regional authorities in verifying 
production  records, controlling  milk  purchasers, and  in managing  other 
aspects  of  the  system, for  example  transfers  of  quota.  The major  milk 
The 
producing  regions  seem  capable  of  meeting  the  requirements. 
situation tends to be more difficult  in regions where milk production  is 
not  significant  and  where  structures,  in  terms  of  number  and  size  of 
producers and of purchasers, are underdeveloped. 

10 

24. There have been particular difficulties in identifying and measuring the 
quantity of milk  and milk  products  sold by direct  sellers,  especially 
where such operations are on a small scale.  This may explain, in the case 
of Spain, that direct sales of only 210.000 tonnes have been  the subject 
of applications for direct sales quotas;  about half of this quantity has 
been  allocated  definitively;  earlier  indications had suggested  direct 
sales at a higher level. Up to now the authorities in Italy, in Spain, and 
in Greece (where direct sales of milk are actively discouraged on public 
health  grounds)  have  tended  to accord  greater  priority  to systems to 
control deliveries to purchasers, which in all cases comprise by far the 
greater part of milk sales.  While this approach is understandable in the 
initial  stages, and while  structural  change  is  likely  to  lead  to a 
continual  reduction  in the importance  of direct  sales, the Commission 
considers that a particular effort should now be  undertaken to establish 
and monitor the real  level of direct sales.  In the meantime the existing 
data on direct sales has to be treated with caution. 

f)  Collection of levies frog producers 

In Italy the national legislation provides for the compulsory withholding 

of  levy once a producer's quota is exceeded during a marketing year.  In 

Spain and in Greece the milk  purchaser has discretion to withhold  levy, 

but  where  it fails  to do so and levies  cannot  be recovered  from the 

producers concerned, the purchaser is  responsible for any levies finally 

due.  Levies are currently  being  collected  in Italy (see par 19); the 

amounts retained in Spain and in Greece are negligible. 

Quantitative aspects 

25. While final data on current production in Italy, in Spain and in Greece, 
will only be available when the statements of deliveries and direct sales 
are analysed after the end of the 1993/94 marketing year, it would appear 
that in Italy's case the framework for the removal of surpluses no longer 
corresponds to the situation as envisaged by the Council  (Annex I). 

26. As regards the undertakings  in relation to the absorption of surpluses, 

in its communication to the Commission  (included in COM (93) 109 final of 
9 March 1993) Italy recalled the plan to reduce production by some 1.6 mt 

11 

42 

over a three year period  ie 300.000 t in 1992/93, 650.000 t in 1993/94 and 

650.000 t  in  1994/95.  The  plan  was  to  be  achieved  through  voluntary 

abandonment  programmes  or withdrawal  of  so called  B quotas  (see par  13) 

without  compensation. 

The  recent  Community-financed  abandonment  programme  in  Italy  this  year 

should  lead to the withdrawal  from production  of a maximum  of 202.000 t; 

its  impact will  be felt  in 1994/95.  The earlier restructuring  programme 

(Regulation 1637/91) effective from 1992/93, accounted for some 261.000 t 

which  has  not  been  redistributed,  and  which  Italy  considers  should  be 

taken  into  account  in  measuring  performance  as  regards  removal  of 

surpluses.  A  smaller  restructuring  programme  (Reg  3950/92)  now  being 

finalised  should  lead to the withdrawal  of a maximum  of 11.500 t.  Italy 

plans  to  suppress  quotas  without  compensation  to  an  amount  of  about 

0.5 mt  ie  30% of  the  total  B  quota,  during  1994/95  (see  par  13);  it 

intends  also  to  introduce  a  further  voluntary  abandonment  programme  in 

1994/95, to remove  any  remaining  surplus;  the expectation  is that  such 

a programme  could  lead to the withdrawal  of 250.000 t. 

to 

and 

the 

milk, 

remove 

surplus 

The  considerable  shortfall  to  date  (see  Annex  II)  in  meeting  the 
undertakings 
substantial 
quantity(650.000 t)  that  should  normally  be  removed  in  the  course  of 
1994/95, must  cast  serious doubt on whether the plan will  be brought  to 
fruition;  this raises the question as to whether the existing  framework 
for  the  removal  of  surpluses  can  still  be  regarded  as  realistic  and 
whether the constituent elements of the  Council agreement remain a valid 
basis for a balanced  settlement  of the milk  quota  problem  in Italy.  It 
appears to the Commission that, even in the most optimistic of hypotheses, 
the  quantity  likely  to  be  absorbed  will  fall  well  short  -  by  about 
350.000 t on the basis of current estimates - of the 1.57 mt specified  in 
the Council agreement  as the  level of surplus requiring to be removed. 

12 

27. The  total  of  the  individual  quotas  (deliveries)  allocated  initially  by 
Italy for  the  current  (1993/94) marketing  year was  11.39 mt;  following 
successive  controls  this  amount  has been  reduced  to  10.9 mt,  (9.3 mt  in 
A  quotas  and  1.6 mt  in  B  quotas)  compared  to  the  global 
guaranteed 
quantity of 9.2  mt.  In the case of direct sales, quotas issued  initially 
corresponded  to  the  global  guaranteed  quantity  of  0.7 mt; 
subsequent 
controls  have  reduced  the  total  to  0.6 mt,  (0.55 mt  in  A  quotas  and 
0.05 mt  in B quotas). 

The  Commission  has  been  informed  by  representatives  of  Italy  that  the 

total  of  quotas  to  be  fixed  for  the  1994/95  and  the  1995/96  marketing 

years will  be reduced  to within  10.55 mt  and 9.9  mt  respectively. 

The extent  of which the planned  reductions  in the overall  level  of quota 
issued  to prodcuers  can be considered  to have made a contribution  to the 
reduction  of real milk  surpluses will depend on  the  individual  elements 
involved.  On  the  one  hand,  there  should  be  a  real  contribution  from 
voluntary abandonment programmes with compensation, provided of course the 
producers  concerned  have  been  actively  engaged  in milk  production,  and 
their productive capacity  is not transferred  to other producers who  risk 
to exceed their quotas. 
A real  impact  on surpluses can be made also by 
the  withdrawal  of  B  quota  without  compensation,  provided  there  is  a 
corresponding  withdrawal  of  productive  resources  from  the  system,  and 
there is no corresponding reallocation of permanent quota to the producers 
affected,  for  example  from  the  national  reserve.  On  the  other  hand 
following  the pattern  of the reduction  in quotas that  has taken  place in 
1993/94,  corrections  following  verification  of  the  level  of  quota 
initially  issued to producers do not make any contribution to the removal 
of  surpluses. 
It  is  not  possible  to  accept  either  that  individual 
reference  quantities  allocated  to  the  national  reserve  should  count 
towards  the  permanent  absorption  of  surplus where  producers  have  ceased 
production over a specified period;  such producers may resume production 
in certain  circumstances  or  the quantities  concerned  may  be  reallocated 
to priority categories. 
It should be noted that  Italy's plan to absorb 
surpluses  (see  par  26)  involved  voluntary  abandonment  programmes  and 
reduction  of B quotas without  compensation. 

13 

lA 

28.  In the case of Spain  the outturn  is broadly  as expected.  657.000 t of 

milk  has been removed under a buy-up programme, including some 140.000 t 

attributed  by  Spain  to  the  Community  financed  restructuring  programme 

(Regulation  1637/91).  The  Community  financed  buy-up  programme  referred 

to  in  the  Council  Agreement  is  likely  to  lead  to  the  withdrawal  from 

production of some 250.000 t. 

Spain has allocated  individual producer quotas totalling 5.165 mt, out of 

its global reference quantity (deliveries) of 5.2 mt.  The indications are 

that  deliveries  to  dairies  in  Spain  would  normally  exceed  the 

corresponding  quota by about 4% in 1993/94.  But  since the producer milk 

price in Spain  is only about 80% of the levy to be charged, there must be 

a doubt whether  such excess deliveries will  take place. 

In the case of direct sales 100.000 t has been allocated definitively and 

applications still under consideration cover an additional 100.000 t.  The 

total direct  sales quota  is 366.950 t. 

29. In the case of Greece the quotas allocated amount to 618.000 t,  compared 

to a global reference quantity  (deliveries) of 625.000.  The  indications 

are that  deliveries are  likely to be close to the  level  of quota  fixed. 

In the case of direct  sales the amount of the global  quota  (4.000 t) has 

been  divided  among  the  regions  for  subsequent  redistribution  among  the 

producers  concerned. 

30. The  final  out-turn  for  milk  production  and  for  receipts  in  levies  in 
1993/94  is  likely  to  be  influenced  by  a  number  of  factors,  namely  the 
margin  under  quota  available  to  individual  producers  as  the  end  of  the 
marketing year approaches, the efficient application of the compensation 
mechanism,  and the producer price for milk.  The current  indications are 
that  levy is likely to be due  in Spain, little or no levy will be payable 
in Greece, and, after the compensation process has been completed,  levies 
collected from producers  in Italy will be  reimbursed. 

14 

^ 

The fact that the quota system  is now being introduced for the first time 
in a meaningful  way, and the related  campaigns  to  inform milk  producers 
and dairies of their potential  liabilities, should tend to act as a break 
on  deliveries  by  producers;  overall  production  in  the  Member  States 
concerned  is  likely  to  stabilise, or may decline  slightly,  in  1993/94 
compared to 1992/93. 

Conclusions on  implementation  of the system 

31. Significant progress has been made in the implementation of the system of 

milk quotas even though there have  been delays  in finalising  individual 

producer quotas,  and  in adopting  some  legislative measures, especially 

in Italy. 

In Italy solid groundwork is being laid through the comprehensive controls 

carried out on producer quotas, through the development  in the major milk 

producing  regions  of  computerised  control  systems  and  through  the 

preparatory work completed by many dairies.  Despite this, the volume and 

difficulty  of  the  work  involved  in  controlling  and  in managing  quotas 

issued to producers especially  in situations where producers act to sell 

or lease quota in anticipation of downward adjustments following controls, 

suggests that putting the system finally  in place will pose a formidable 

challenge.  The  need  to  ensure  compliance  by  numerous  purchasers  and 

producer associations with the rules and procedures  is likely to require 

not  only  the  full  attention  of  the  regions,  who  have  specific 

responsibilities  in this  regard, but also the assistance of the central 

controlling  agencies  which  up  to  now  have  played  an  important  role 

throughout  Italy  in verifying the quotas attributed  to producers. 

Full application of the system, based on the quotas fixed for 1993/94, is 
likely  to  take  place  in  Spain  this  year, though  controlling  the  large 
number of milk purchasers and managing changes in producer quotas will not 
be easy. 

15 

k£ 

In Greece the late revision of the basis for allocating quotas, together 

with  limited  administrative  resources  devoted  to  managing  the  quota 

system, may give rise to difficulties; on the other hand the capacity of 

many dairies to fulfil their obligations means that controls at purchaser 

level should not pose  insuperable problems. 

The  political  will  to  persevere, especially  in  situations  where  quotas 

have  to be  adjusted  downwards  and  levies  have to  be collected, will  be 

crucial. 

This  will  require  that  the  authorities  maintain  a  strong 

determination  to  apply  the  system  effectively  and  that  all  necessary 

legislative and administrative support be provided for this task.  In this 

regard  the  situation  of  the  designated  body  in  Greece  (ELOG)  is 

unsatisfactory. 

Until  such  time  as  ELOG  becomes  fully  operational, 

Greece  is  unlikely  to  be  able  to  manage  and  control  the  quota  system 

adequately.  It is essential also that in Italy management and control of 

the system be carried out independently of producer interests and that the 

national  legislation  should  underpin that objective. 

Proposal 

32. Having regard to progress so far, the Commission considers that  increased 

quotas for Italy, and for Greece  should be granted on a provisional basis 

for  1994/95. 

In  the  case  of  Spain  it  is  reasonable  to  conclude  that  irreversible 
progress  has  now  been  made  in  putting  the  system  in  place  and,  having 
regard to the satisfactory outcome on the quantitative undertakings, the 
Commission  proposes  that  the  increase  in  the  quota  given  to  Spain  for 
1993/94 be established  on a definitive basis. 

In the case of Italy the Commission considers that sufficient doubt exists 
as to the realisation of the plans for the absorption of  surpluses as to 
justify a revision of the  increased  quota which was agreed  for  1993/94 
on the assumption  that a higher  level of surplus would have been removed 
In the Commission's view an increase in 
from the market at this stage. 
the deliveries quota of 0.55  mt compared to the 0.9 mt increase agreed for 

16 

o 

1993/94  is  appropriate  to  take  account  of  the  new  perspective.  The 

Commission will review this quantity, which is provisional,  in the light 

of  the  results  of  the  measures  envisaged  in  par  26  in  relation  to  a 

further voluntary abandonment  programme  and the removal of temporary  (B) 

quotas. 

Account  will  be  taken  also of any tangible  evidence  supplied 

by  Italy  in relation  to  levels  of  surpluses.  The  Commission  considers 

that the continual  difficulty  in acquiring verifiable data of production 

and the emerging doubts about the level of surplus to be removed, require 

that  such  information  be  furnished.  In  the  light  of  this  review  the 

Commission  will make a further  proposal  in December  on the quotas  to be 

fixed  for  the  1995/96  marketing  year,  by  which  stage  Italy  could 

reasonably have been expected to have taken all the measures necessary to 

absorb the surplus. 

33.  In  the  case  of  Greece  the  likely  out-turn  is  broadly  in  line  with 

expectations when the agreement was concluded.  Accordingly  the level of 

increase  granted  for  1993/94  should  be  maintained  for  1994/95.  The 

proposal  is being made in the case of Greece 

on the basis of the solid 

assurances  that  have  now been  received  that  the controlling  body  (ELOG) 

will  be  fully  operational  from  the  beginning  of  the  1994/95  marketing 

year.  The report  in December will  indicate the situation  in this regard. 

17 

liT 

ANNEX I 

PROPOSALS FOR ABSORBING EXCESS PRODUCTION 

SPAIN 

Present quota 
- Deliveries 
- Direct sales 

Present estimated 
production 

Difference between 
quota/production 

National buy-up 
already decided 

SOLUTION 

Revision quota 

Direct sales 

transfer 

Buy-up financed 
by the Community 

SPAIN 
(tonnes) 

4 550 000 
527 000 

6  000 000 

1 450 000 

600 000 

500 000 

150 000 

200 000 

GREECE:  Quota  is increased by 100 000 tonnes 

ITALY 

Million tonnes 

I  Excess to be removed 
II  Of which to be removed without compensation 

in accordance with  Italian law 

III Net excess 
IV  Increase  in whole sale quota 
V  Amount to be bought up 
VI  Amount to be purchased with Community 

contribution  (25% of V) 

2.47 

0.84 
1.63 
0.9 
0.73 

0.2 

Iff 

A. 

ANNEX II 

1.  Surplus to be removed 

2.47 mt* 

2.  Increase  in quota accorded 

J 

0.9 mt 

3.  Net surplus 

1.57 mt 

B.  Italy's plan for reduction  in milk production  - recalled  in letter of 1 
February  1993 to Commission  and  included  in Commission's  report  to  the 
Council  - COM (93) 109 final of 9 March 1993 

1992/93 milk year 
1993/94 milk year 
1994/95 milk year 

300.000 t 
650.000 t 
650.000 t 

C.  Measures taken to date 

1992/93 milk year (1637/91) 
1993/94 milk year (EAGGF) 
1993/94 milk year (3950/92) 

261.000 t 
202.000 t (max) 
11.425 t (max) 

D.  Undertakings for 1994/95 miIk year 

Voluntary abandonment programme  250.000 t 
with national compensation 
Reduction  in B quotas without 
compensation 

±500.000 t* 

based  on  Italy's figures  for  production  in 1991/92  ie  11.5 mt  less  the 
total of its quotas 9.03 mt 

based on 1.6 mt for total of B quotas 

ISSN 0254-1475 

COM(94) 64 final 

DOCUMENTS 

EN 

03 

Catalogue number : CB-CO-94-074-EN-C 

ISBN 92-77-65822-3 

Office for Official Publications of tbe European Communities 

L-2985 Luxembourg