Under pressure dairy sector

demand will be high and that the budget will be exhausted by December.

These higher prices will result in additional revenue to dairy farmers, on top of the budget injection itself.

I estimate that the total gain to dairy farmers is likely to be around €300m, but it could be more depending on whether Member States use their €350m share of the package to further incentivise supply reduction or not.

I am not a fan of supply management schemes. Paying farmers not to produce is not a good use of public money. But of the various options to implement supply management, including collective action by the dairy industry under Article 222, or the reintroduction of mandatory quotas, this voluntary scheme is certainly preferable.

In particular, introducing mandatory production limits would hurt a large number of dairy farmers and would have serious longterm negative effects on the industr y.

The voluntary scheme will be complex to administer and the details of how this will be done remain to be worked out over the summer. Paying agencies must put application forms in place.

There will need to be a system of checking applicants’ stated production levels last year, and farmers will only receive the money after the three months is over and their actual deliveries can be confirmed.

How farmers who overstate their intentions initially and then fail to comply must also be addressed.

This is the first time that the EU has introduced a temporary supply management scheme and its impact will be closely watched.

If it is deemed to be successful, this precedent will no doubt form part of the debate on the common market organisation regulation in the next CAP reform.

Alan Matthews is Professor Emeritus of European Agricultural Policy at Trinity College