By allowing dairy farmers to club together through producer organisations, the Commission hopes to put them on a more equal footing with major dairies.
Size limits for collective negotiations of 3.5 per cent of EU production and 33 per cent of national production were proposed to safeguard competition in the raw milk supply.
These limits have come in for criticism from different sides of the industry.
Farmer perspective
The European Milk Board (EMB), which represents farmers, said the size limits were excessive and would therefore result in little real benefit.
Sieta van Keimpema, vice-president of the EMB, pointed out that Arla and Friesland Campina already have a 6.5 and 8.8 per cent share of the European market and can still carry on operating without hindrance. As for the national limit, the lobby group said that in Denmark and the Netherlands one single dairy has a larger market share than the 33 per cent limit for producer organisations.
Processor view
Meanwhile, the European Dairy Association (EDA), which represents processors, argues that the limits are far too high and risk disturbing local milk supply markets.
The EDA has emphasized that unlike processors, producer organisations do not take delivery of milk themselves. It therefore argues that they would potentially have significant influence on the market without market responsibility. For this reason, the trade association has suggested that permitting producer organisations flouts EU competition rules.
The EDA has put forward the idea that the milk sold to co-ops be excluded from the limits. Last week Joop Kleibeuker, EDA secretary general told DairyReporter.com that the proposals fail to consider that a lot of milk is already tied in via the co-op system. In countries where a lot of the milk is produced and sold through co-ops like the Netherlands, he said the limits would not prevent a situation where no milk could be free to move. The EDA fears that this situation could threaten the position of smaller processors.
Meanwhile, Dairy UK, which represents processors in the UK, put a more positive light on the Commission proposals regarding producer organisations.
Dairy UK director general, Jim Begg said: “Where we welcome the proposals is in the change in the final position that gives national competition authorities the right to intervene where a lack of competition would affect consumers and SMEs."
To read more about the other Commission proposals on contract relations please click here.