BRUSSELS, Nov 13 (Reuters) - The European Union agreed on Thursday to support butter producers by reinstating subsidies for private storage from next year as local butter prices in several EU countries have fallen sharply in recent months.
EU national experts voted to bring forward the subsidy scheme by two months, setting a flat-rate aid level of 15.62 euros ($19.51) a tonne, plus smaller extra daily payments to cover variable costs for cold storage and financing.
Subsidised storage is the EU's method of providing income to farmers, when internal prices for a specific commodity fall below a pre-determined trigger price, so they can avoid selling at a loss.
The commodity is "bought in" to stores, either private or public, until prices rise again to a level attractive enough for it to be sold into the EU internal market.
After the sharp price rises seen for EU dairy products last year, markets were undergoing a severe downward correction, the European Commission said in a statement.
Average EU butter prices fell from around 300 euros ($374.7) per 100 kg in July to 250 euros in October, officials said.
"In a falling market, buyers are reluctant to enter into major contractual commitments, thereby fuelling further the downward trend," the statement said.
"The general economic situation inside and outside the European Union, as well as financing problems, add to the fragility of the market situation," it said, adding that the market's supply/demand imbalance would probably be temporary.
The subsidy scheme will start on Jan. 1, with butter produced in December 2008 also being eligible for aid. (Reporting by Jeremy Smith, editing by Anthony Barker)