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The Warsaw Voice » Special Sections » May 31, 2012
Polska… tastes good!
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At the EU Level
May 31, 2012   
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By Marek Sawicki, PhD, Minister of Agriculture and Rural Development
In my previous column I discussed the 50th anniversary of the CAP. Today I want to continue my reflections on the Common Agricultural Policy and the current issues we are discussing within the EU.

First of all, I would like to draw your attention to the current situation on the milk market, which I find to be similar to that in 2008. Last year we observed rising prices for raw milk, which triggered an increase in milk production and purchases. This was true for both the EU (up 2.1 percent) and Poland (up 3.4 percent). However, from the start of this year global markets started seeing a perceptible tendency of decreasing demand for dairy products. This resulted in a substantially decreased interest in these products on the part of exporters. The situation on the milk market deteriorated.

Selling prices for basic dairy products dropped in the period from January to April 2012. Domestic demand for dairy goods is not able to absorb the emerging surplus. Stocks of dairy products are growing steadily in Poland. At the start of April they were estimated at far above the average for the period. Milk purchase prices began dropping as a result. This applies not just to Poland; prices of all basic dairy products have been decreasing on the EU market since January.

According to the European Commission, however, the present market situation gives no cause for concern because the price drops are the result of typical seasonal production growth at this time of the year and the rather substantial supply of dairy products on the global market. The European Commission believes that the market is looking for a new level of balance, and that the situation should start stabilizing in about two or three months once the production peak is over.

I do not share this view and, with an eye to stabilizing the situation on the EU market for milk and dairy products, at the April 26 session of the Agriculture and Fisheries Council I motioned for a discussion on the milk and dairy market and for measures for this market. I proposed that measures should be taken as soon as possible to re-establish subsidies for the export of dairy products (export refunds). Their temporary restoration would enable dairies to wait out the tough market situation, increase the competitive edge of EU products and consequently limit the threats related to the necessity to reduce milk purchase prices. In addition, over the longer term I proposed an increase in the reference and intervention prices for butter and skimmed milk powder, to reflect growing production prices and to guarantee the proper running of intervention mechanisms in a situation of market instability. The motion was supported by Spain, Hungary, Portugal, Lithuania and Latvia. The European Commission has announced it will monitor and analyze the milk market situation but has not agreed to undertake any measures at this stage. That the situation from 2008 could repeat itself is something I fear, because delayed intervention costs more and is less effective.

At the same session of the council the main item on the agenda was actually a discussion among the ministers on direct payments after 2013. Commissioner Dacian Ciolos presented the grounds for providing direct payments only to active farmers. He also defended the model of lump-sum support for small farms exempt from certain environmental obligations and highlighted the need to support young farmers in all the member states through increased direct payments. Generally speaking, these issues aroused little controversy during the discussion. The member states appealed for greater flexibility in implementing the direct payments. They proposed the optional and not obligatory introduction of payments for small farms and young farmers, whereas payments for areas with unfavorable conditions could come from the second pillar of the CAP.

The greatest controversy was caused by the issue of equalizing direct payments for farmers both inside a country (between regions) and between the member states. A few countries are strongly against equalizing direct payments between farmers, arguing that this will endanger production in certain regions and contribute to farmland being abandoned. Other countries, including us, believe that payments should be equalized as soon as possible because the current system of payments disrupts the conditions of competition on the EU single market.

Together with the new member states, we also want the current SAPS (Single Area Payment Scheme) to remain in place, without introducing eligibility for payments.

As we can see, the 50th anniversary of the CAP has also been a time of heated discussion on the policy’s reform. I have no doubts that this will continue until the very last moment. The new CAP comes into force in 2014, so decisions must be reached next year at the latest, and this will undoubtedly happen. I still see a chance for carrying out genuine and in-depth reform.
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