* EU executive to table legislative package in 2010
* Expert group backs changes to EU competition rules
* EU data shows dairy commodity prices stabilising
(Adds EU dairy market data, detail, quotes)
By Charlie Dunmore
BRUSSELS, March 26 (Reuters) - The European Union will propose new rules this year to counter price volatility in Europe's dairy sector, its farm commissioner, Dacian Ciolos, said on Friday.
There is no prospect of the 27-nation bloc going back on its decision to phase out dairy production quotas by 2015, he added, despite warnings from farming groups that quotas are needed to avoid a repeat of last year's crisis, when dairy farmers halted supplies in protest against low prices.
"We don't have to wait for the reform of the Common Agriculture Policy in 2013 before acting in the milk sector. I am willing to propose legislative initiatives by the end of the year," Ciolos told a conference in Brussels.
The executive European Commission will wait for the findings of a group of EU government experts set up to consider long-term measures to help the dairy sector before drafting its proposals, Ciolos said. The group is expected to report back in June.
The head of the group, Commission agriculture official Jean-Luc Demarty, said a majority view was emerging that EU competition rules should be relaxed to allow dairy farmers to set prices jointly for their produce.
Initial discussions are taking place within the EU executive to assess how this could be done in practice, Ciolos told journalists outside the event.
But talks between EU governments on relaxing competition rules for all agricultural producers have exposed opposition to the plan, led by Britain and Sweden. [ID:nLDE62N0MK]
On EU policy instruments to manage market volatility, Demarty said the group was exploring a combination of existing and new measures.
"A large majority of member state experts is in favour of keeping the intervention system more or less in its current form as a safety net, not as a permanent outlet," he said. A futures market for dairy products could be a useful additional tool to reduce extreme price risks, but there are doubts about its relevance for the liquid milk market, he added.
OUT OF CRISIS
Dairy commodity prices have now stabilised, with estimates for January showing an EU average milk price of 28.32 euro cents per litre, according to a Commission report, seen by Reuters, due to be presented to farm ministers on Monday.
As a result the EU has not needed to use its intervention scheme, which gives farmers a minimum price for selling their goods into public storage, or export subsidies for dairy products so far this year, the report says.
But Ciolos warned that despite these positive trends, the EU might have to turn again to market management tools, which had proved effective in managing last year's crisis, to deal with future fluctuations.
"We need to master price volatility," Ciolos said. "But we have to differentiate between normal market fluctuation and excessive volatility which may require us to intervene."
He would not be drawn on whether the EU would use such market management instruments as a first response in future crises.
"I must also stress the importance of direct payments, which have proved their worth in stabilising farmers' revenues," he said.
"That doesn't mean direct aid must remain unchanged from the present system however -- we can adapt it to new situations and challenges," he added. (Editing by Anthony Barker)