The European Commission has reintroduced export refunds to ease falling EU dairy commodity prices in a move welcomed by the UK dairy industry.

The EC suspended export refunds in June 2007 following a period of high prices for EU dairy produce on world markets. However, it reconsidered its position after commodity prices nosedived.

It will resume payments to EU exporters for butter, cheese and whole and skimmed milk powder from this week in a bid to stabilise prices and ensure EU exports remained competitive.

The move has come in response to concerns expressed by producers throughout Europe.

"I truly believe the measures I am proposing will go a long way to stabilising the dairy market," said European Commissioner Mariann Fischer Boel.

Fischer Boel's announcement, which received a positive response throughout the UK dairy supply chain, followed campaigning by industry support organisations and the Northern Irish government.

Although the changes will not directly affect the British industry, it will be significant for Northern Irish producers, who export significant volumes of milk to the Irish Republic for cheese. This cheese is then sold on to the UK market at a lower cost, bringing down shelf prices. Export refunds will allow Northern Irish producers, for example, to profitably export their dairy products to global markets.

"It will increase the pain for some of the EU's exporting competitors and help make milk production less attractive in some of them," said dairy consultant Michael Bessey.

The decision would also help boost confidence within the sector, said NFU dairy board chairman Gwyn Jones. "The indirect effects of a weak commodity market cannot be ignored, so the Commission's announcement is a prudent and welcome response," he added.

The EC invited exporters to submit tenders prior to setting refund rates, which was expected to be completed this week.