In a statement released on April 22, the Commission says the EU's agri-food sector is showing resilience in these "unprecedented times", but some markets have still been hit hard by the consequences of COVID-19.

The EU executive therefore proposed the introduction of three additional support measures, namely private storage aid; more flexibility in market support programmes; and the authorisation of self-organisation market measures for the most affected sectors.

Agriculture Commissioner Janusz Wojciechowski said: "Today we are announcing a new and exceptional package of measures to support the most affected agri-food sectors by addressing already observed disturbances as well as future risks. I am confident that these measures will relieve markets, and show concrete results rapidly."

The Commission foresees the introduction of private storage aid (PSA) for dairy (skimmed milk powder, butter, and cheese) and livestock (beef, sheep and goat meat). This means that EU money would be used to pay companies to store these commodities so that they can be sold back at a later time.

The scheme would allow the temporary withdrawal of these products from the markets for a period of 2 to 6 months. The measure is aimed at reducing the supply of dairy and meat and thereby "rebalance the market on the long-term".

Meanwhile, the apiculture, fruits and vegetables, olive oil, and wine sectors would get more flexibility for the implementation of their market support programmes. The rules would also be eased for the EU's school schemes for milk, fruits and vegetables. The Commission says this would "allow the reorientation of funding priorities towards crisis management measures" for all these sectors.

Finally, producers of flowers, milk and potatoes will be granted an exceptional derogation from certain EU competition rules under Article 222 of the CAP's Common Market Organisation Regulation (CMO) to enable them to adopt "self-organisation market measures".

In practice, this means that these sectors will be allowed to take collective measures to stabilise the market, with the milk sector being able to jointly plan milk production and flower and potato growersbeing able to withdraw their products from the market. Storage of these products by private operators will also be allowed, but all of these measures would only be valid for a maximum of six months.

Commissioner Wojciechowski justified the new package by saying: "The measures proposed are, in the present state of market developments, intended to send a signal aimed at stabilising markets and are considered to be the most appropriate for providing stability to future prices and production and thus stable food supplies and food security."

The EU executive aims to have the package adopted by the end of April. However, the member states will first be consulted and vote on the measures, so the details of the actions could still change before they are adopted.

Pushed by EU policymakers and industry

The Commission had come under mounting pressure in recent weeks to launch some form of intervention on the agri-food markets. Last week (April 16), both EU agriculture ministers and MEPs formally asked Wojciechowski to activate some of the market management measures available under the CAP's CMO to help offset the COVID-19 pressure on the worst affected farming sectors.

Farming associations such as Copa-Cogeca and CEJA had launched similar requests for market support to the EU executive. The European Dairy Association had called for private storage aid for butter, skimmed milk and cheese on several occasions as a way to tackle the sharp fall in prices caused by the closure of restaurants and other food services triggered by COVID-19. At an early stage, Copa-Cogeca made a similar case to set up PSA for dairy and livestock products.

The Commission's announcement nevertheless came as somewhat a surprise, given that Wojciechowski still told the AGRI Committee on April 15 that there was simply not enough money left for such crisis instruments because the current EU budget period is nearing its end.

This reaction did not go down well with the AGRI MEPs, with vice-chair Mairead McGuiness saying that she was "underwhelmed" by Wojciechowski's comments and that his reaction was "simply not good enough" in these times of crisis.

However, it remains unclear whether the newly proposed measures will be sufficient to silence such criticisms. EU policy-makers also wanted to see the activation of other schemes such as public intervention and an unused 'crisis reserve' worth €400 million per year, while the dairy industry had been pushing the EU executive to launch a voluntary milk volume reduction programme.

Several other measures approved

The package announced today adds to a range of other CAP measures adopted earlier by the Commission to support the EU's agri-food sector in light of the COVID-19 disruptions.

On April 16, it approved higher advanced payments of CAP subsidies and agreed to reduce the number of physical on-the-farm controls, while it had allowed member states to extend the deadlines for applications one week earlier (April 6).

EU state aid rules have also been relaxed, allowing farmers to receive up to €100,000 per holding as long as this financing is not based on the price or quantity of products put on the market.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.