MercoPress. South Atlantic News Agency

Mercosur dairy industry celebrates EU exports zero subsidies

The European Union decided this week to lower export subsidies for all dairy produce to zero, a decision which has been hailed by Mercosur member countries since Argentina and Uruguay are two important exports of milk, cheese and by products.

"Although the subsidies reduction was picking up speed as the global dairy market became bullish, zero subsidies for EU exports is a really positive announcement", said Juan Jose Linari, Argentina's Coordinator of Dairy Policies, an office from the Ministry of Agriculture, Livestock, Fisheries and Food. Last year Argentina exported 370.000 tons of dairy produce netting over 800 million US dollars mainly from powder milk and cheese. Uruguay's exports reached over 400 million US dollars. "Currently demand is very strong and it's hard to for see what market lies ahead of us, but it certainly is promising", said Linari who added that global demand is now greater than supply boosted by Asian consumption. The EU based on the Common Agriculture Policy, CAP, has become one of the leading actors in the world dairy market with a 30% share. EU dairy production is protected domestically with high tariffs for competing produce from other countries; support prices to ensure farmers' profits and significant export subsidies to compensate low international prices, all of which helped create for decades a glut of dairy produce. The situation was so serious that in 2002 the level of subsidies almost equaled production price, which is nearly 1.000 US dollars per ton of powder milk. "But the market begun picking up and as long as that tendency subsists, the European farmer will be linked to the world market", said Linari. "The EU is an important player in the world dairy market and has decided to lower subsidies. It's something we never expected to see", admitted Jorge Seco president of the Argentine Milk Industry Center. "This is a historic event and although the decision could be reverted if the EU so wishes, it's the first time it happens since financial support for exports was begun decades ago", said Eduardo Fresco Leon, chairman of the Panamerican Milk Federation that has its headquarters in Montevideo, Uruguay.