The European Union and Common Agricultural Policy (CAP)
European Union and Common Agricultural Policy (CAP)
The Common Agricultural Policy (CAP) covers the dairy sector. The Rural Payments Agency (RPA) administers schemes under the CAP. Article 33 of the Treaty establishing the European Community sets out principles for the policy.
Common organisation of the market
The framework under which the market for milk and milk products is regulated is laid down in Council Regulation (EC) No 1234/2007 (known as the Single Common Market Organisation Regulation, as amended), which repealed Council Regulation (EC) No 1255/99 on 1 July 2008, and is made up of a number of elements. The schemes are administered by the RPA.
- Intervention (RPA website)
A system in which products are bought by the EU when prices are low (at or below the intervention price) and supplies high, and sold when prices have increased and supplies on the open market reduced. In the dairy sector, the intervention system applies to butter and skimmed milk powder (SMP).
- Private Storage Aid (RPA website)
Available for butter in the UK. Under PSA arrangements, traders receive a subsidy towards storage costs. As with intervention, the aim is to remove surplus products from the market at times of low prices and when supplies are high. The products are released back onto the market when prices are higher and supplies reduced.
Disposal subsidies
A number of schemes are available to subsidise the use of milk or milk products. These include subsidies for: skimmed milk used in the manufacture of casein, skimmed milk and skimmed milk powder for incorporation into animal feed; cream and butter used for the manufacture of pastry products, ice cream and other food products; and the provision of milk in schools. With the exception of the School Milk Scheme, all are currently dormant.
- disposal subsidies (RPA website)
Import controls
Fixed tariffs are imposed on imports of dairy products to limit the undercutting of EU prices
- import controls (RPA website)
Milk Quotas
Explanatory note: Amendments to Milk Quotas Legislation (PDF 20 KB)
Production quotas were introduced to curb steeply rising production. There are two types of quota - wholesale and direct sales. Under the system, if production of either or both types is above the national quota, those producers who have exceeded their individual quotas are liable to pay a punitive levy on their over-production after the end of the quota year.
- milk quotas (RPA website)
On 9 January 2008, Defra launched a consultation seeking views on the European Commission’s proposal to increase EU milk quotas by two per cent from 1 April 2008. It also seeks views on the proposed method of allocating the additional quota, should any such increase be agreed.
See also
Page last modified: 10 July 2008