Explanatory Memorandum to COM(2017)692 - Amendment of Regulation (EU) No 1370/2013, as regards the quantitative limitation for buying-in skimmed milk powder

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dossier COM(2017)692 - Amendment of Regulation (EU) No 1370/2013, as regards the quantitative limitation for buying-in skimmed milk powder.
source COM(2017)692 EN
date 24-11-2017


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

Close to 400 000 t skimmed milk powder (SMP) are currently held in public stocks. This volume is equivalent to one third of total world trade in SMP in the first half of 2017. The mere existence of these stocks is weighing on the market.

The fat-protein price gap is wider than ever, as reported by the Milk Market Observatory's Economic Board. The ratio butter/SMP price oscillated for ten years around an average of 1.4 (min 0.8 and max 1.7) and since May 2016 has grown to reach current levels close to 4/1. Against this unprecedented disconnection between butter and SMP prices, offers to public intervention tend to occur in a situation where there is no market justification for safety net instruments to be mobilised.

Public intervention at fixed price will resume in March 2018 until September 2018, as provided for in the Common Market Organisation Regulation, within a quantitative limit of 109 000 tonnes per year.

High demand for butterfat being assessed by market experts as a structural phenomenon, SMP will continue to be de facto a by-product with lower valorisation unless new outlets materialise. In this scenario, the risk of having to buy SMP into public intervention as from next March is real. Should this occur, while farm gate milk prices are at satisfactory levels, public intervention would clearly drift away from its objective of ensuring a fair standard of living for the agricultural community.

A solution is therefore needed to prevent buying-in of SMP at fixed price in 2018 without market justification to do so. To this end, the limit at which public intervention takes place at fixed price in 2018 should be set at zero. This would lead to opening a tendering procedure from 1st March 2018, when the public intervention period starts, where the Commission, with a vote at the Committee for the Common Organisation of the Agricultural Markets, would decide on a case by case basis what volumes should be bought-in and at what buying-in price.

In order to ensure that the measure provided for in this Regulation has an immediate impact on the market and to allow market operators to be informed in due time before the start of the next intervention campaign, this Regulation should enter into force on the day following that of its publication.

• Consistency with existing policy provisions in the policy area

This proposal is consistent with the spirit of the common organisation of the markets in agricultural products, aiming at stabilising markets and ensuring a fair standard of living for the agricultural community.

The proposal is consistent with Article 43 i of the TFEU by which the Council, on a proposal from the Commission, shall adopt measures on fixing prices, levies, aid and quantitative limitations and on the fixing and allocation of fishing opportunities.

• Consistency with other Union policies

N/A

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

Article 43 i of the Treaty on the Functioning of the European Union.

• Subsidiarity (for non-exclusive competence)

The proposal falls under shared competence between the EU and the Member States and complies with the subsidiarity principle.

• Proportionality

The proposal complies with the proportionality principle.

• Choice of the instrument

N/A

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

N/A

• Stakeholder consultations

N/A

• Collection and use of expertise

N/A

• Impact assessment

N/A

• Regulatory fitness and simplification

N/A

• Fundamental rights

N/A

4. BUDGETARY IMPLICATIONS

The financial impact depends on the quantities/prices of skimmed milk powder (SMP) offered and the quantities/prices accepted, between March and September 2018, which depends on the evolution of the SMP market.

 5.    OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

N/A

• Explanatory documents (for directives)

N/A

• Detailed explanation of the specific provisions of the proposal

N/A