Contents

1. Abolition of Swiss Milk QuotasJacques ChavazDeputy Director General, Federal Office for Agriculture, Bern27 October 2013, Charmey

2. Contents • History of Swiss milk quotas • Swiss milk market 2005 and 2012 • Abolition of milk quotas • Milk policy instruments since 1 May 2009

3. History of Swiss milk quotas • 1 May 1977: Implementation of milk quotas • Goal: Stabilization of milk quanitity to maintain the milk price on a high level • «Agricultural policy 2002»: Introduction of quota trading (purchase / leasing) in 1999 • Flexibilisation, reduction of costs for the milk producers • «Agricultural policy 2007»: Swiss Parliament decided in 2003 to abolish the milk quotas by 1 May 1999 • 1 May 2006 until 30 April 2009: transition period with the possibility of voluntarily opting out of the milk quota system • 1 May 2009: Definitive abolition of milk quotas

4. Swiss milk market 2005 and 2012 Source: Milchstatistik der Schweiz, Marktbeobachtung BLW

5. Rationale for the abolition of quotas Rationale: • Increased production costs, benefits for sellers/lessors of quotas • Linear adjustment of quotas unusable for the real market segmentation (PDO-Products [GIs], innovative dairies) • Free trade in cheese with the EU requires competitive production • Export opportunities for milk products Goals: • Competitivityof Swiss dairyindustry • Costsforquotas • Development ofstructuresandspecialization • Abolition of EU quotasystem: enough time forpreparation

6. Legal provisions (AgA) Article 36a of the Federal Agriculture Act (AgA; SR 910.1) gave dairy farmers and organisations the possibility of voluntarily opting out of the milk quota system on 1 May 2006, 2007 or 2008. State-supervised transition period Volume management by organizations for producers without quota Milk quota system Free market, but with contract obligation Free market 100% 90% 82% milk producers without public milk quota 63% t 2005 06 07 08 09 10 … 15 2016

7. Legal provisions (Ordinance) • Producers who were members of a producers’ organisation (PO) or an organisation of producers and processors PPO) could opt out of the system. Decisions of opting out from the quota system had to be passed by at least a 2/3 majority. • On request, the FOAG would recognise the organisations that opted out (statutes and volume management rules). Responsibility of managing the volumes was then transferred from the state to such organisations. • Allowed volume for the organization equals sum of individual quotas of the preceding period. Role of FOAG was restrained to monitoring respect of global volume allowance of each organisation..

8. Producer Processor P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P Recognized organisations • The quota allocated to producers (including “rented” quotas) for the previous year would be withdrawn and allocated as a basic quantity of the organisations that opted out. • Applications for additional volumes could be submitted. This concerned almost exclusively export projects with expected additional demand. Additional allowances were valid for one year. 9 Organisationsofproducersandprocessors (PPO) 29 Producers‘ organisations (PO)

9. Conclusionsofthetransitionperiod1 May 2006 – 30 April 2009 + - Too many organisations (total 39) Weak negotiating position of the organisations Partly poor implementation of quantity management. Less flexibility to adapt to reducing than to increasing demand. Some organisations had to pay high charges because of non-respect of overall allowances. • Cooperation in the value-added chain could be improved • Better market orientation compared with „quota-period“ • Experience with supply/demand management • Mainly cheese export projects benefited from additional milk quantities • Costs for milk delivery rights decreased

10. Milk policy instruments (under public law) from 1 May 2009 on Borderprotection Market support Directpayments Market monitoring Milk quota Contractualobligation

11. The Federal Council can extend self-help measures of the inter-branch organisation to non-members of the organisation (e.g. standard contract or marketing levy), if • the organisation is representative: > 50% production and > 60% producers/enterprises • every branch in the inter-branch organisation accepts the self-help measure with a large majority (minimum 2/3 of the votes) • different regions of Switzerland are represented in the organisation

12. The Federal council can extend self-help measures of the inter-branch organisation to non-members of the organisation (e.g. intervention levy), if • it is an extraordinary situation (no structural problem; only: adjust supply to market needs) • the extension is limited in time (max. 2 years) The aims of the extension to non-members of the organisation • avoid “free riders” • support the effectiveness of the measure

13. Extension of BOM measures to non-members • Rejected • Levy to complement restitutions on exported processed products • Granted, for limited period only • Levy for intervention fund (10/2011 – 04/2013) • Granted, and renewable • Standard contract with segmentation scheme (10/2011 – 04/2013; 07/2013 – 06/2015)

14. Standard contract (Art. 37 AgA) Three-stage process as of 1 January 2014 : 1. Formulation of a standard contract by an inter-branch organisation of the milk sector (for example BO Milch):  minimal requirements for duration, price and quantity arrangements, payment arrangements 2. The Federal Council can, on request of the inter-branch organisation, declare the standard contract obligatory for all milk purchasers and sellers.  the civil courts are competent for litigation 3. If there is no standard contract, the Federal Council can temporarily enact regulations for the trade with raw milk

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