The European Commission on Tuesday proposed expanding its programme to stockpile butter and skim milk powder in its latest bid to ease a dairy crisis that has sown unrest among farmers across Europe.

Under the proposal, the commission would be authorised to intervene in markets to buy and store such products year-round through August 2011. Traditionally, the annual intervention period has been

The EU has spent some €350m so far this year on such measures as well as providing subsidies to dairy exporters – a figure that is expected to swell to €600m by year end, according to commission officials.

Such largesse has led critics to blast Brussels for a return to the bad old days when EU agriculture subsidies underwrote mountains of butter and lakes of wine.

The re-introduction of export subsidies in February – after the EU had previously disavowed them – has proven particularly unpopular among Australia, the US and New Zealand, which have accused the bloc of protectionism.

However, the commission and member states are desperate to curtail a crisis that has seen dairy prices plummet from more than 40 cents per litre in late 2008 to less than 20 cents per litre in some member states today.

The situation has led to increasingly rowdy protests by aggrieved dairy farmers from Bavaria to Bulgaria. Just last month, they blocked traffic for miles around Luxembourg after thousands descended on a meeting of European environment ministers.

In an effort to boost prices, the commission has already far exceeded its typical limits for intervention buying, which amount to 30,000 tonnes of butter per year and 109,000 tonnes of skim milk powder. So far, the tally stands at 80,000 tonnes and 206,000 tonnes, respectively.

The commission is now considering a plan to apply export subsidies to a wider range of dairy products, according to a person familiar with its deliberations. A final recommendation is expected in a paper to be published later this month.

Still, Mariann Fischer Boel, the EU agriculture minister, has insisted that the commission would not bow to some farmers’ demands and reverse its decision to phase out milk production quotas. The repeal of quotas, which long dominated the market, has been one of the signature reforms of recent years intended to make Europe’s agriculture policy more market-driven.

“We think it’s a good step, but we also think more is required,” Simon Michel-Berger, a spokesperson for Copa-Cogeca, which represents European farmers and agriculture cooperatives, said of the plan to increase buying.

Mr Michel-Berger called for new EU support to encourage the of use butter for ice cream and milk powder for animal feed. Farmers are also demanding greater scrutiny of retailers, which have maintained prices for dairy products in spite of the collapse in wholesale prices.

Copyright The Financial Times Limited 2009

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