Dairy farmers have insisted that their sector remains in a chronic poor state because the Common Agricultural Policy lacks a mechanism to prevent damaging market breakdowns.
In spite of the current high butter prices, dairy farmers across Europe took to the European Commission recently to show off a model skeleton cow which they say help symbolise the sector being “stripped to the bone”.
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.
As Sieta van Keimpema, vice president of the European Milk Board (EMB) reports, forced cuts are usually made at the cost of animal welfare.
“It is an impossible situation for the last link in the milk production chain, which has received no consideration in policy to date. Major distortions in competition on the dairy market have, for many years, led to prices that are significantly lower than inherent production costs,” said van Keimpema.
A study recently published has calculated milk production costs in five key milk-producing countries, documenting a persistent deficit.
Since 2012, the annual average deficit in France has been 21 per cent, in the Netherlands 23 per cent, in Germany 22 per cent, in Belgium 24 per cent, and in Denmark 17 per cent.
The study also highlighted that the so-called “better years” were not enough to compensate for this deficit.
The European Milk Board has said farmers are not looking for subsidies to produce milk, but rather mechanisms to deal with future “hard-hitting” crises.
It calls for a mechanism that is flexible enough to allow growth in the sector and could also cater to increasing demand.
The EMB has called for this mechanism to be legally anchored in the CAP. The absence of such provisions means that reactions come “too late and even then, often lead to nowhere,” the group explained.
The specific proposal is to complement the Milk Market Observatory with a permanent mechanism that could temporarily limit or reduce production in the event of crises, called the Market Responsibility Programme (MRP).
The MRP is a programme for the EU milk sector that is to be used when there is a risk of a milk market imbalance.
A combination of monitoring and response to the market enables impending crises to be recognised and reacted to in a three-phase programme.
Brexit and dairy
With Brexit drawing closer and the open-sided nature of many milk contracts skewed towards the processor, these are still uncertain times for the British dairy industry.
In terms of combatting the increasing volatility in the UK, the NFU’s new domestic agricultural policy highlights that the UK currently lacks the quality of market data, experience or institutional capacity required to deliver more targeted volatility mitigation measures for farmers.
In order to facilitate their development, the government has been urged by the NFU to improve the provisioning and reporting of such market data.
Improvement in market data will also support the development of market linked pricing mechanisms in the supply chain, which in turn can be used to drive greater productivity, the report suggests.
The UK currently has very limited experience of delivering market-orientated volatility mitigation schemes.
Therefore, the document explains that a range of pilot schemes would build the UK’s capacity to understand how such schemes could be best structured and delivered to support farmers and incentivise uptake.
The NFU has also renewed its call for new dairy Producer Organisations (DPOs) after the release of an EU Commission report into the impact of the 2009 Milk Package.
The focus of the European Commission report is the important role DPOs can play in increasing farmer bargaining power, it lines up with the NFU dairy board’s asks including its calls for fairer, more balanced milk contracts and stronger producer representation.
According to NFU dairy board chairman Michael Oakes, many British milk buyers see DPOs as a “threat”.
“This is something the NFU has always promoted and encouraged,” Mr Oakes said, “it’s a shame that many UK milk buyers, both large and small, see POs as a threat and have publically said that they will not work with farmers who are part of a PO.
“Today in the dairy farming sector, collaboration is the key and the NFU sees POs as a vital part of developing new relationships in the UK dairy sector. ”
In 2009 the NFU, NFU Scotland and DairyUK agreed a voluntary code of conduct on contractual relationships as a preferred route to the type of regulation Defra was contemplating at the time. The voluntary approach has led to some improvements, but not a wholesale change of behaviour from milk buyers.
The three organisations said many farmers continue to be treated unfairly, with contract terms changed with little or no notice, and verbal assurances offered by milk buyers but then withdrawn.