* Producers, processors agree 2009 price after 3-week row
* Ministry offers farmers early subsidies, tax relief
* French milk dispute reflects crisis in global, EU sector
(Recasts, adds details, quotes)
By Gus Trompiz
PARIS, June 4 (Reuters) - French dairy producers and processors hammered out a deal late on Wednesday on the price of milk for this year, following three weeks of protests by farmers furious at a near 30 percent slump in prices over the past year.
After the latest round of talks between milk producers, dairies and manufacturers, the parties agreed to an average price of 280 euros ($397.2) per 1,000 litres in 2009, France's farm ministry said.
Dairy producers had initially been seeking 305 euros per 1,000 litres, before cutting their proposal last week to 290 euros. Manufacturers had been seeking 267 euros.
France's main farm union, the FNSEA, called the agreement "unsatisfactory but essential."
"If a solution hadn't been found quickly, prices would have stayed at disastrous levels," it said in a statement on Thursday.
The farm ministry, which brokered the deal, said it welcomed "the opportunity to ensure the visibility and stability that the sector needs."
The price row erupted last month after farmers suffered a sharp fall in their prices for April, which were down 20 percent on the month and 29 percent year-on-year, according to figures from French statistics office Insee.
Farm unions claimed producers received 205 euros per 1,000 litres for April, which was below their cost of production, while manufacturers argued French prices should fall in line with lower levels in the rest of Europe and on the world market.
EU DAIRY REFORM
The dispute reflected a global slump in the dairy market, which has brought farmers on to the streets in several European countries.
In response to requests from France, the European Union's farm chief last week approved extra measures to help dairy producers, including the extension of a deadline for EU public intervention buying of butter and skimmed milk powder, and the possibility for early payment of the bulk of direct subsidies.
France will use this option of early payment of annual subsidies and will also offer 30 million euros in additional aid for dairy farmers this year through tax relief, the farm ministry said.
To avoid further depressing further the milk market, it also said France would not apply a 1 percent increase in production quotas this year that was previously agreed by the EU.
Producers and some governments have criticised the ongoing overhaul of the EU's milk regime that is due to lead to the ending of the current quota system in 2014/15. (For a Factbox on the EU's dairy quota system, click on
The price row in France was also triggered by tensions over changes to the system for determining milk prices in France.
A previous system under which the dairy sector set prices per quarter was ruled anticompetitive by the French authorities last year, and the industry was told to introduce a new system from April 1.
In the new agreement, the parties said they would put a pricing mechanism in place from 2010 based on market indicators, and define a framework for future negotiations between producers and processors. (Additional reporting by Laure Bretton, Editing by Peter Blackburn)