Consultation on the implementation of the CAP Health Check milk quota increases

Defra
Area 5B
9 Millbank
c/o Nobel House
17 Smith Square
London
SW1P 3JR

20 January 2009

Dear Consultee,

Consultation on the implementation of the CAP Health Check milk quota increases

1. I write to invite your views on the implementation of the five annual EU milk quota increases of 1% from April 2009; which are a result of the CAP Health Check. 

2. This consultation asks for views on the option we have put forward for allocating the additional quota. 

3. The following documents can be found at:

www.defra.gov.uk/corporate/consult/milk-quota09/index.htm

  • This letter to consultees
  • List of consultees

Background

4. As part of the 2003 CAP Reform it was agreed that a review of the CAP’s mechanisms be undertaken in 2008 (the CAP Health Check).  This has now been completed  and the agreement includes a number of changes to the milk quota regime:

  • There will be five annual quota increases of 1% between 2009 and 2013.  Member States need to consider how to implement these increases and this is covered in paragraph 9.
  • There is also a technical change in the butterfat co-efficient, which in effect, will grant a one off quota increase in some Member States.  (You will be aware that the butterfat co-efficient is used to adjust deliveries according to the fat content of milk). It has been estimated, based on last year’s butterfat adjusted deliveries, that this would mean an additional 1% quota increase in the UK (because overall the upward adjustments were more significant than the downward adjustments).  Starting from the 2009/2010 quota year, the levy will be calculated using the new 0.09 co-efficient for upward adjustments.  The co-efficient for downward adjustments will remain unchanged at 0.18.  Member States do not have a choice on how this is implemented.
  • Changes have also been made to the superlevy in quota years 2009/10 and 2010/2011 to curb excessive milk production.  If milk deliveries exceed the national quota held in 2008/09 by 6% or more, the superlevy will be charged at 150%.  This is highly unlikely to affect the UK as our milk production is significantly under quota. 
  • The Health Check has abolished the rule that the total butterfat adjusted deliveries in a Member State could not be less than the total of volume deliveries (negative scale-back). Therefore, all downward butterfat adjustments will be applied in full.  To date, the negative scale-back has never been triggered in the UK.

Expected Impacts

5. UK milk production is currently below quota (as it has been for several years), so UK producers will see little direct or immediate benefit in aggregate from this proposal.  If UK milk production were to increase and approach existing quota levels, producers would benefit from being able to expand production, beyond existing quota levels, with no financial penalty.

6. Some Member States may benefit more immediately as their current production is close to or over quota.  However, the Commission considers it unlikely that the annual 1% quota increase or the increases from the butterfat adjustment would be fully utilised across the EU as there are a significant number of Member States with production below quota and many Member States have restrictions on the transfer of quota, meaning that even within a Member State, some producers may not be able to fully expand production even though other producers may be under quota.

7. There could be an impact on UK farmgate prices if other Member States, particularly those currently constrained by quotas increase production.  However, this is dependent on market conditions.  Phasing the increases should help the sector adjust to the new pricing environment.

UK implementation

8. Stakeholders may recall that following the 2003 CAP Reform agreement and formal consultations, Agriculture Ministers throughout the UK agreed to allocate the additional milk quota on the basis of net quota held on 31 March preceding each increase.  This option, which was seen as a fair and an administratively straightforward method for allocation, received overwhelming support in consultations across the UK.  Following a further consultation in early 2008 it was agreed to use the same method to allocate the additional 2% quota granted in April 2008.

9. Having considered the previous consultations and the experience of allocating the additional quota, it is proposed to follow the same principles to allocate the five annual increases agreed under the CAP Healthcheck, namely:

  • The allocation will be made on the basis of net quota held on 31 March preceding each increase, taking account of any quota leased in / bought as clean and excluding any leased out / sold as clean.  This will include allocations to producers who acquired used quota which had not been leased.

The additional quota will be divided between wholesale and direct sales quota in accordance with the quota held by producers at the end of the year preceding the increase.

The butterfat base of the additional quota for wholesale producers will be the same as their permanent butterfat base.  Where producers have no permanent quota and thus no permanent butterfat base, the UK’s reference fat content of 3.97% will be allocated to their additional quota.

  • Quota holders who:
  • market no milk in the quota year preceding an allocation, or
  • cease production in the quota year preceding an allocation, or
  • cease production at the start of the year in which an allocation is made

will not be eligible for any additional quota.  Persons giving up milk production temporarily due to justified cases of force majeure will still be regarded as milk producers.  These cases will be identified by the Rural Payments Agency, wherever possible.

  • The method of allocation will ensure that the additional quota is allocated to active producers only and in line with current production levels.

10. The method outlined above is the fairest, most transparent and simplest to administer.

Responses

11. We would be grateful for any comments you may have on the proposed method of allocation.  Comments should be received by 27 February 2009. They should be sent to: dairy.consultation@defra.gsi.gov.uk or by post to the address at the top of this letter.

12. This is shorter than the usual 12 week consultation period, because the Rural Payments Agency (who administer milk quotas) must update their system for allocating quota before the start of the quota year on 1 April 2009.  To enable them to achieve this a shortened consultation period is needed.

13. This consultation is in line with the Code of practice on Consultations.  This can be found at: 

www.berr.gov.uk/bre/

14. When this consultation ends, we intend to put a copy of the responses in the Defra library at Ergon House, London.  This is so that the public can see them.  Also, members of the public may ask for a copy of responses under freedom of information legislation.

15. If you do not want your response - including your name, contact details and any other personal information – to be publicly available, please say so clearly in writing when you send your response to the consultation.  Please note, if your computer automatically includes a confidentiality disclaimer, that won’t count as a confidentiality request.

16. Please explain why you need to keep details confidential.  We will take your reasons into account if someone asks for this information under freedom of information legislation.  But, because of the law, we cannot promise that we will always be able to keep those details confidential.

We will summarise all responses and place this summary on our website at:

www.defra.gov.uk/resources/consultation/index.htm 

This summary will include a list of names of organisations that responded but not people’s personal names, addresses or other contact details. 

To see consultation responses and summaries, please contact the library at:

Defra
Information Resource Centre
Lower Ground Floor
Ergon House
17 Smith Square
London
SW1P 3JR

Telephone: 020-7238-6575
Email:  defra.library@defra.gsi.gov.uk

Please give the library 24 hours’ notice.  There is a charge for photocopying and postage.

17. If you have any comments or complaints about the consultation process, please address them to Marjorie Addo, Defra’s Consultation Co-ordinator, Area 7C Nobel House,17 Smith Square, London SW1P 3JR, or email consultation.coordinator@defra.gsi.gov.uk

Thank you for your help in this matter. If you have any queries please contact us as above.

Yours faithfully

 

Matthew Redrup
Department for Environment Food and Rural Affairs

Page published: 20 January 2009