As a result, dairy processing companies will soon be required to conclude contracts in advance with dairy farmers about minimum purchase quantities and a fixed price per liter. Until now, many small dairy farmers have had to wait and see what price they get afterwards.
So far, the application of the market regulation has been voluntary. Germany and other agriculturally oriented countries have asked Brussels to impose this simultaneously everywhere, although countries with a smaller dairy sector, such as Austria, are opposed. They want a thorough impact assessment to be conducted first. Agriculture Commissioner Christophe Hansen said he thinks such a study would take too long.
The European Commission now wants to side with dairy farmers by strengthening their position in the supply chain through mandatory contracts. Hansen aims to improve the bargaining position of dairy farmers and protect them against price fluctuations.
Austria and several other EU countries are concerned about an increase in bureaucratic burdens for both farmers and dairy processors. These countries advocate a thorough evaluation of the possible consequences of a mandatory contract system. Commissioner Hansen said the European Commission will come forward this spring with proposals to actually reduce that administrative hassle.
The debate about mandatory dairy contracts is part of a broader discussion about the functioning of the Common Market Organisation (CMO) and the fight against unfair trading practices within the EU. Several other EU countries, including Spain, France, Italy, and Germany, have called in the Agriculture Council for a better market position for wine producers.
The coming months will be crucial not only for the dairy sector and the agricultural sector, but also for market functioning for the entire small and medium-sized enterprise sector. Not only will Agriculture Commissioner Hansen present his first outlines for a new common agricultural policy in two weeks, but the European Commission has also announced a new competition strategy for all businesses.
It is already known about the new common agricultural policy (after 2027) that Brussels wants to move away from fixed subsidies per hectare and instead make subsidies dependent on farmers’ annual income. The EU also wants to shift subsidies from large agri-concerns to smaller farms. Moreover, it is expected that new (additional) subsidies will be introduced when farmers have to adapt their production methods to environmental and climate regulations.