Consumers pay the price for milk lake, claim auditors

Date: 11/10/01

By David Cronin

Consumers within the EU are paying twice as much for milk as they would be in a more liberalised market, according to the European Court of Auditors.

In a new report, the Union's financial watchdog stated that no changes have been made to the milk production quotas set for individual EU states since 1993. The cost of dealing with the 'milk lake' - about €20 billion per year - has been passed on to consumers. Seventeen years after its introduction, the EU's milk quota regime - designed to reduce the imbalance between supply and demand in the dairy market - has still not been fully implemented. As a result, the "fundamental objective of holding each individual producer accountable for his overproduction has not been met," said the auditors.

Of nine countries examined by the auditors, the worst problems were found in Italy and Spain. In both countries, only a fraction of companies buying milk were fulfiling their obligation to collect levies from producers who had exceeded their quotas.

This was prompting the European Commission to make up for the shortfall by reducing the monthly advances given to the two countries under its main agricultural support programme, the European Agri-cultural Guidance and Guarantee Fund (EAGGF). The Commission's practice was sharply rebuked by the auditors: "In the absence of corrective action, this is equivalent to a national subsidy to the milk producers, which is in clear breach of Community policy and which gives an unfair advantage to Italian and Spanish producers."

Meanwhile, the auditors named three companies, (GIE Jura in France, Elm Dairies in the UK and Midwest Farmers in Ireland), which are being placed under the microscope in fraud investigations. Declarations on butter-fat content in the products which they manufactured had been manipulated, causing errors in calculating the amount of levies due for payment.

The auditors also contend that support for dairy farmers has been a significant factor in keeping their average incomes higher than those engaging in other types of agriculture.

Consumers within the EU are paying twice as much for their milk as they would be in a more liberalised market, according to the European Court of Auditors.