IN SPITE of the current high butter prices, European dairy farmers insist that their sector remains in a chronic poor state because the Common Agricultural Policy lacks a mechanism to prevent damaging market breakdowns.
By: Gordon Davidson
Source: The Scotish Farmer
According to the European Milk Board, the frequency of crises in the sector is alarming, driving many farms out of business in recent years, and severely destabilising the farms that continue to produce milk.
EMB vice president Sieta van Keimpema warned that forced cuts to farm businesses were usually made at the cost of animal welfare and farmers and their family’s living and working conditions: “Major distortions in competition on the dairy market have, for many years, led to prices that are significantly lower than inherent production costs,” she said. “It is an impossible situation for the last link in the milk production chain, which has received no consideration in policy to date.”
A newly published study by the Office for Agriculture and Agricultural Sociology has calculated milk production costs in five key milk-producing countries, and found a persistent deficit arising from the price received. Since 2012, the annual average deficit in France has been 21%, in the Netherlands 23%, in Germany 22%, in Belgium 24%, and in Denmark 17%. The study also noted that the so-called “better years” were not enough to compensate for this deficit.
Protesting in Brussels last week, the EMB stressed that farmers were not asking for subsidies to produce milk – what they want is a mechanism that will safeguard the sector from further crises arising from price volatility.
Such a mechanism had to be flexible enough to allow growth in the sector and cater to increasing demand. Crucially, the EMB want to see the mechanism legally anchored in the CAP.
Its specific proposal is to complement the Milk Market Observatory with a permanent Market Responsibility Programme that could temporarily limit or reduce milk production in the event of crises. To recognise a crisis developing, it is suggested that a Market Index be created, bringing together trends in product quotations, milk prices and production margins.
That index would indicate if prices are covering production costs – and if it falls below a set threshold, and if that shortfall is too big, the Market Responsibility Programme would start, progressing in three phases –
• If the Market Index falls by 7.5 %, the monitoring agency would issue an early warning, private storage would open, and incentive programmes for extra consumption, such as sucking-calf production, milk fattening of heifers etc would switch on;
• If the Market Index falls by 15 %, the core elements of the MRP would start, with a call for tenders regarding voluntary production cuts of at least 5 %, with a bonus for reducing production, and a market responsibility levy from the first kilo for farms increasing production;
• If the Market Index falls by 25%, the obligatory cutback phase would begin, with a universally applicable reduction in the supply of milk by 2–3 % for a defined period, e.g. 6 months, or until an improvement in the Market Index signals the end of the crisis.