More Milk, Less Money

European Union agricultural ministers struck a deal on Thursday, Nov. 20, marking Europe's most significant reform of farm support policy since 2003. Two of the central decisions dealt with cutting subsidies and systematically raising milk quotas for before production limits expire in 2015.

The 27 EU agriculture ministers began their meeting on Wednesday afternoon and emerged the next morning with a compromise. The revised measures will take effect in 2009 and run till 2013.

Europe's Common Agricultural Policy (CAP) has a budget of 53 billion euros ($66.2 billion), more than 40 percent of the EU budget. Launched in 1962 to reduce Europe's reliance on food imports, Europe's agricultural subsidy system soon led to surplus production, infamously known as beef, butter and grain mountains and lakes of excess wine.

Legacy of criticism

Milk quotas have been in place since 1984 to limit production, but increased foreign demand have since made them superfluous. The quotas are due to be scrapped in 2015 and after this most recent reform will be progressively raised until then.

Discontent has been stirred recently by revelations about wealthy landowners and large agri-businesses cashing in the handouts intended to keep struggling farmers afloat in the face of globalization.

Critics have demanded that the EU address inequalities within its farm subsidy program.

"We've known for a while now that roughly 80 percent of the CAP goes to the richest 20 percent of farmers," Jack Thurston, co-founder of farmsubsidy.org, told The Independent. "Those who benefit from subsidies the most have never been the poor struggling farmer."

The EU is now incrementally trying to address such problems while at the same time preparing farmers for a more subsidy-free, liberalized market.

"We want a soft landing before the expiry of the quota system," said EU Agriculture Commissioner Mariann Fischer Boel in an interview with the German dpa news agency ahead of the ministers' meeting. "If you sit on your hands and wait until 2015, then I think you would definitely put farmers in a very awkward and difficult situation, because then you would see that their quotas would be gone overnight and that they had no possibility to adjust to a new situation."

Compromise and concessions

While the issue of how to support dairy farmers proved to be the most difficult, after the talks Fischer Boel said she was confident the EU would be "fit for the future."

Germany and other countries had been against increased quotas because they would reduce the price of milk. Countries like Italy, on the other hand, wanted a quota increase because it needs more milk to produce its wide variety of cheeses and other dairy delicacies.

According to the ministers' agreement, the quotas will generally be raised by 1 percent for five years starting in 2009. In a one-time move, however, Italy will be allowed to raise its quota by 5 percent next year. If necessary, ministers agreed to revisit the issue in 2010 and 2011 "to take appropriate adjustment measures," said French Agriculture Minister Michel Barnier.

"Everyone had to deliver sacrifices….But every member state can go back and say they achieved something," said Fischer Boel. For example, Germany will be allowed to spend some of its rural development money to support its milk sector.

German Agriculture Minister Ilse Aigner welcomed Thursday's deal.

"For me, the health check was all in all a success, even if not all our wishes came true." Aigner said, adding that by reviewing the market situation in 2010 and 2012, quotas could be adjusted if there were any serious distortions.

Diverting aid to the environment

The EU ministers also agreed to shift subsidies from agricultural production to nature protection and rural revitalization schemes.

Brussels has already mandated that 5 percent of EU farm money be redirected to such countryside preservation measures and wanted to raise the amount to 13 percent by 2013. The farm ministers, however, agreed to limit the cut in farm subsidies for diversion to environmental preservation to a total of 10 percent.