The European Commission has put forward on 9 December 2010 a proposal aimed to boost the position of the producers in the dairy supply chain and prepare the sector for a more market oriented and sustainable future. This proposal is a response to the the needs of this pressured sector and falls within the framework of the general challenges pointed out by the future Common Agricultural Policy after 2013.

The European Commission proposal on contractual relations in the milk sector provides for written contracts between milk producers and processors as well as the possibility to negotiate contract terms collectively via producer organisations in a way as to balance the bargaining power of milk producers relative to major processors.

Although these contracts would be optional, Member States can make the use of contracts compulsory in their territory. In any case, they must be written contracts between milk producers and processors and have to be drawn up in advance of deliveries, including details of price, timing and volume of deliveries, and duration.

In order to rebalance bargaining power in the supply chain, the proposal foresees allowing farmers to negotiate contracts collectively through producer organisations. Appropriate quantitative limits to the volume of this negotiation will put farmers on equal footing with the major dairies while maintaining an adequate competition in the raw milk supply.

The proposal provides also specific EU rules for inter-branch organisations covering all parts of the chain. These organisations can potentially play useful roles in research, improvement of quality, promotion and spreading of best practice in production and processing methods. They contribute to expand knowledge and transparency in the sector. Moreover, more regular information on volumes of raw milk delivered is provided so as to allow better knowledge of production and following market developments.

These measures are proposed to remain valid until 2020, with a review in 2014 and 2018; this timeframe should be sufficient for milk producers to adapt to the situation without milk quotas and to improve their organisation in view of a more market oriented environment. More clear and balanced relations and transparency in the supply chain should also lead to efficiency gains and allow for the EU sector to take advantage of new market opportunities inside and outside the EU.

The measures stem from the recommendations issued by the High Level Experts' Group on Milk (HLG) which were endorsed by the Council's Presidency conclusions of 27 September 2010. The HLG found important imbalances in the supply chain, an increasingly concentrated industry dealing with many and dispersed milk producers and an uneven distribution of the added-value. This situation has led to a lack of transparency, rigidities and problems of price transmission in the supply chain translated into a crisis in the milk sector whose last effects were visible in the drop of delivery quotas for the 2009/2010 period.