Proposal for a Council Regulation derogating from Regulation (EC) No 1234/2007 ("Single CMO" Regulation) as regards the 2009 and 2010 intervention periods for butter and skimmed milk powder
Date: 2009-07-07
Institutions: European Commission
Subjects: agricultural product, butter, common organisation of markets, farming sector, milk product, public contract, skimmed milk powder, trading operation

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.7.2009 
COM(2009) 354 final 

2009/0094 (CNS) 

Proposal for a 

COUNCIL REGULATION 

derogating from Regulation (EC) No 1234/2007 ("Single CMO" Regulation) as regards 
the 2009 and 2010 intervention periods for butter and skimmed milk powder  

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EXPLANATORY MEMORANDUM 

The  situation  on  the  dairy  market  has  deteriorated  dramatically  during  the  last  12  months. 
After a price spike in 2007 alongside the high food prices in the EU and on the world market, 
there has in the last six months of 2008 and in 2009 been a substantial drop in prices affecting 
dairy producers' income. Prices for milk delivered to the dairies have significantly decreased. 

The  collapse  in  the  world  market  prices  is  primarily  due  to  a  combination  of  increased 
production  at  world  level,  but  in  particular  due  to  the  drop  in  demand  world-wide  in 
connection with the financial and economic crisis. This drop in world market prices has had a 
direct  effect  on  market  prices  in  the  EU  with  prices  coming  down  from  the  range  of  30-40 
cents per litre of milk to around the EU safety net level of 21 cents per litre. At this price level 
variable costs of production might be covered, but not the fixed costs for many lesser efficient 
dairy  producers,  and  certainly  not  the  full  costs  including  own  land,  labour  and  capital. 
Although in reaction to soaring food prices, milk quota have been increased in 2008 by 2%, 
milk production in the EU has decreased by 0.6% in the quota year 2008/09, leading to a total 
milk production which was 4.2% below the over all quota level.  

The Commission  initiated in January 2009 an aid for private  storage of butter, reintroduced 
export refunds for dairy products and has continued to buy up into intervention butter beyond 
the  30.000  tons  ceiling  and  skimmed  milk  powder  beyond  the  109.000  tons  ceiling  under  a 
tendering system at prices very close to the fixed intervention buying-in prices.  

Export  refunds  have  been  fixed  in  a  very  prudent  and  cautious  manner  in  order  to  avoid 
undercutting world market prices. 

The  quantities,  which  have  been  bought  into  intervention  (until  25/6/09:  butter  81,000t; 
skimmed-milk powder  203,000t) show that  there continues to be a serious imbalance in the 
market,  which  to some extent is of seasonal nature  with  peak  production  in  the  first  half  of 
each  year.  Closing  intervention  on  31  August  2009,  as  provided  in  the  Single  CMO 
Regulation, is likely to cause prices to fall below intervention level and thus create a serious 
disturbance on the market with repercussions for the already very low farm gate prices. 

Because of the exceptional situation public intervention for butter and skimmed milk powder 
should be extended through a tendering procedure for the running intervention period until 28 
February 2010. Furthermore, given the uncertainty with regard to the timing of the expected 
recovery of the dairy market, the Commission should be authorised to extend the intervention 
period  for  the  2010/11  intervention  season  if  the market  situation  would  require  so,  equally 
through a tendering procedure. 

These  measures  will  signal  confidence  in  the  future  of  the  dairy  market.  Indeed,  on  the 
medium and long term it is expected that demand will pick up and prices would be expected 
to  normalise  once  the  economic  and  financial  situation  will  improve  and  buyers'  behaviour 
will return to normal. 

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2009/0094 (CNS) 

Proposal for a 

COUNCIL REGULATION 

derogating from Regulation (EC) No 1234/2007 ("Single CMO" Regulation) as regards 
the 2009 and 2010 intervention periods for butter and skimmed milk powder  

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 37 thereof, 

Having regard to the proposal from the Commission1, 

Having regard to the opinion of the European Parliament2, 

Whereas: 

(1)  World  market  prices  for  dairy  products  have  collapsed  notably  due  to  an  increased 
world  supply  and  a  drop  in  demand  in  connection  with  the  financial  and  economic 
crisis.  Community  market  prices  for  dairy  products  have  fallen  significantly.  As  a 
result  of  a  combination  of  market  measures  taken  since  the  beginning  of  this  year 
community prices have stabilized around support price levels. It is essential that these 
market  support  measures,  notably  public  intervention,  continue  to  apply  as  long  as 
necessary  in  order  to  avoid  further  deterioration  of  prices  and  disturbance  of  the 
community market.  

(2) 

(3) 

(4) 

Article  11(e)  of  Council  Regulation  (EC)  No  1234/2007  of  22  October  2007 
establishing a common organisation of agricultural markets and on specific provisions 
for  certain  agricultural  products3  provides  that  for  butter  and  skimmed  milk  powder 
public intervention is available from 1 March to 31 August. 

In view of the foreseeable market situation it is necessary to provide for a continuation 
of  the  public  intervention  for  butter  and  skimmed  milk  powder  beyond  31  August 
2009, if necessary until 28 February 2010. 

Furthermore, where market prices are likely to fall significantly thereby disturbing or 
threatening to disturb the market, the Commission should be authorised to extend the 
intervention period for butter and skimmed milk powder beyond 31 August 2010, until 
28 February 2011, if necessary, 

1 
2 
3 

OJ C […], […], p. […]. 
OJ C […], […], p. […]. 
OJ L 299, 16.11.2007, p. 1. 

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HAS ADOPTED THIS REGULATION: 

Article 1 

By way of derogation from Article 11(e) of Regulation (EC) No 1234/2007, the 2009 period 
during  which  intervention  for  butter  and  skimmed  milk  powder  is  available  shall  expire  on 
28 February 2010. 

Article 2 

By way of derogation from Article 11(e) of Regulation (EC) No 1234/2007, the Commission 
may decide, in accordance with the procedure referred to in Article 195(2) of that Regulation 
to  continue  public  intervention  through  a  tendering  procedure  beyond  31  August  2010,  if 
necessary  until  28  February  2011,  if  prices  in  the  sector  for  milk  and  milk  products  on  the 
Community market are likely to fall significantly thereby disturbing or threatening to disturb 
the market.  

The Commission shall take, in accordance with the procedure referred to in Article 195(2) of 
Regulation (EC) No 1234/2007, the necessary measures to implement this Regulation. 

Article 3 

This Regulation shall enter into force on the third day following that of its publication in the 
Official Journal of the European Union. 

Article 4 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the Council 
The President 

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FINANCIAL STATEMENT 

1. 

2. 

3. 

4. 

BUDGET HEADING: 
05 02 12 02  
05 02 12 04  
TITLE: 
Council Regulation derogation from Regulation n° 1234/2007 as regards the intervention period for 
butter and skimmed-milk 
LEGAL BASIS: 
Article 37 of the Treaty 
AIMS : 
To provide for a continuation of the public intervention for butter and skimmed milk powder beyond 31 
August 2009, if necessary until 28 February 2010 in view of the foreseeable market situation and falling 
market prices. 

Fichefin/09/MS/dz 
Ares 143713 rev1 
6.142.2009.1 
DATE: 11.06.2009 
APPROPRIATIONS: 
p.m. 
16.980.747 €

5. 

FINANCIAL IMPLICATIONS 

5.0 

CHARGED TO THE EC BUDGET 

EXPENDITURE 
- 
(REFUNDS/INTERVENTIONS) 
- 
- 

NATIONAL AUTHORITIES 
OTHER 

12 MONTH 
PERIOD 

(EUR million) 

CURRENT 
FINANCIAL 
YEAR 
2009 
(EUR million) 
- 

FOLLOWING 
FINANCIAL 
YEAR 
2010 
(EUR million) 
9,2 

5.1  REVENUE 

- 

- 

OWN RESOURCES OF THE EC  

- 
(LEVIES/CUSTOMS DUTIES) 
NATIONAL 
- 

5.0.1  ESTIMATED EXPENDITURE 
5.1.1  ESTIMATED REVENUE 
5.2  METHOD OF CALCULATION: 

2011 
13,5 
- 

2012 
4,2 
- 

2013 
- 
- 

2014 
- 
- 

The cost related to this extension of the period in which intervention buying-in can continue has been 
based on the following assumption: 
Based on the consumption pattern in spring 2009 and expected production pattern in September 2009 to 
January 2010, it has been estimated that 50.000 tonnes of Skim Milk Powder and 31.000 tonnes of butter 
will be bought into intervention during this extended period. Furthermore it has been assumed that this 
supplementary quantity will be stocked during 2 years and hereafter sold at the market at the intervention 
price level. For the technical costs the amounts applicable in budget 2009 have been used. 
Based on these assumptions and estimates the estimated expenditure for butter will be 12,5 mio € over 
the budget years 2010 to 2012. For SMP the total expenditure will be 14,4 mio € over the same years. 

6.0  CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE 

YES NO 

RELEVANT CHAPTER OF THE CURRENT BUDGET? 

6.1  CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF 

YES NO 

THE CURRENT BUDGET? 

6.2  WILL A SUPPLEMENTARY BUDGET BE NECESSARY? 
6.3  WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS? 
OBSERVATIONS: 

YES NO 
YES NO 

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