Europe Letter: Milk prices pose challenge for Phil Hogan

It's almost a year since former minister for the environment Phil Hogan faced MEPs at a European Parliament hearing held to approve his appointment as the EU's agriculture commissioner.

Caught in the maelstrom of the Irish Water controversy, the man nominated for the country’s top EU job defied his critics by delivering an impressive performance. Ten months on from his appointment – the Juncker commission took office last November – Hogan has bedded down in his role.

On the corridors of the EU institutions, officials are quietly impressed with the Kilkenny man. Though he maintains a low media profile – no doubt a deliberate response to the continuing domestic controversy around Irish Water – he has garnered a reputation as a committed worker.

The fact that Hogan lives in Brussels full-time is seen as a sign of his commitment to the job. Much of his time is also spent travelling – he has visited most of the 28 member states , including a number of national parliaments.

But next week he could face one of his toughest political challenges yet as agriculture commissioner.

Extraordinary council

On Monday, agriculture ministers gather in Brussels for an extraordinary council convened by

Luxembourg

, which holds the EU’s six- month rotating presidency.

Simultaneously, thousands of farmers are expected to stage a protest, departing from Gare du Nord in the north of the Belgian capital and arriving at European Council headquarters to the east of the city centre just before lunchtime.

The Irish Farmers' Association and other farming groups in Ireland have been co-ordinating with farming representative groups from across Europe ahead of the demonstration.

The protest is the culmination of months of anxiety about falling milk prices. This week's demonstration outside the European Commission office in Dublin has been replicated in different forms across EU member states, amid growing concern about falling prices for milk and other products.

Last month’s high-profile campaign in Britain that saw farmers blockade distribution centres and bring animals into supermarkets led large retailers to increase the amount they pay farmers for milk. Belgian, German and French dairy farmers have also demonstrated over falling milk prices in the last number of months, with protests spilling over to the Baltic countries.

Milk price volatility has long been a feature of the dairy industry, but the last year has seen a steady drop in prices, from 39 cent per litre in April 2014 to 25.5 cent in July 2015, according to Teagasc figures.

Russian sanctions

The crisis is a result of a number of factors. Russian sanctions have badly affected producers in the Baltics and east European region in particular. About a third of the EU’s cheese exports traditionally went to

Russia

, and though the EU has successfully tapped other markets, the knock-on effect of extra milk coming on stream from east European countries has depressed prices.

Also of major concern is the economic slowdown in China, which has long been eyed as a key growth market for EU dairy products. If the start of a long-term trend, this could have major ramifications for European and global dairy markets.

Though the Irish farm lobby tends to play down the significance of the abolition of milk quotas earlier this year, for other countries the decision by the EU to end the quota system has exacerbated the problem.

In terms of solutions, one proposal suggested by Ireland is that the levies imposed on farmers for exceeding their milk quotas should be used to support the sector. Though these fines are traditionally subsumed into the general EU budget, proponents of the plan argue that this year’s levies will be much higher than expected due to the end of the quota system.

Commission sources stress the EU has already extended a number of emergency support measures to farmers, while each member state has some discretion about how to use Common Agricultural Policy funds (Ireland for example does not deploy the voluntary coupled support system used by 19 member states, which has distributed millions to dairy farmers this year).

Crucial

With the Spanish, French, Portuguese and Italian agriculture ministers due to meet tomorrow ahead of Monday’s crucial meeting, Phil Hogan has been in contact with various EU agriculture ministries over the last few weeks, including meetings with the French and German ministers in Brussels on Tuesday.

The agricultural community will be hoping that the commissioner’s well-known skill at backroom negotiations and internal politics will stand him in good stead when ministers gather next week.