On 17 March, the Dutch Dairymen Board (DDB) organised a symposium entitled “Stronger together” in Eemnes, the Netherlands. The programme compiled for the event was extremely interesting and featured top speakers. The symposium gave the DDB members a rare opportunity for a cross-sectoral discussion with various lobby groups and decision-makers from the dairy sector such as the Presidents and Vice-Presidents of the three largest Dutch dairy co-operatives, dairy industry managers, representatives of the marketing board for dairy products, scientists and officials from the Dutch Ministry of Agriculture. The Board of the DDB is proud of this successful event, one that was much appreciated by a wide audience.

Positive market development

Both the Deputy President of the marketing board for dairy products, Mr Kees Wantenaar, and the General Secretary of the European Dairy Association (EDA), Mr Joop Kleibeuker, expressed positive opinions on the future prospects of the dairy sector. The main reason they both gave for this was the growing demand for milk exceeding supply due to a rise in the prosperity of the world population. Mr Kleibeuker stressed that the proverbial “cake” for sales of milk from the Netherlands and Europe had to grow. With restrictions this was, he said, more important than the proportional division of the “cake”.

The DDB does not dispute the assumption that the future prospects for the European dairy sector are good because of a growing world population. However, that is no guarantee that the producers will also receive their share of the “cake” because of this growth. Although the Dutch dairy industry has shown a strong increase in performance, production and size in the recent decades, the financial situation of the milk producers has deteriorated drastically in the same period. The farm-gate price paid to farmers has not been covering costs for the last ten years. The level of the Dutch milk producers’ debt to the Rabobank has more than doubled in that time, whilst return on equity has dropped to zero.  

Milk price and cost price 

Forecasts from a presentation by Mr Poppe of the Agricultural Institute of the University of Wageningen show that the full cost price of milk in the next few years can only rise. That is another reason to make sure that the milk producers are paid a fair price. In the view of Ms Greetje van Heezik, a specialist in competition law and the organisation of the European agricultural market who works for the Houthoff Buruma solicitors’ office, the chances of this aim being achieved have risen owing to the new proposals for the reform of the Common Agricultural Policy (CAP), with additional opportunities for producer organisations extending beyond the previous Milk Package.

Appeal 

In its presentation the DDB expressly called on every part of the supply chain to focus in talks with policy-makers in Brussels not just on their own concerns but invariably on the interests of the entire dairy sector. This can be crucial in helping create fair and transparent market rules, enabling every player in the market to have the same opportunities to compete and thus earn a decent living. Moreover, this approach is the basis for a sustainable and socially responsible system of production and management both in the Netherlands and in the EU.

Monitoring in the supply chain

A monitoring agency analysing and monitoring the development of prices and costs in milk production is absolutely essential for an assessment to be made whether the changes in the EU dairy policy result in an improvement in the milk producers’ economic situation. Mr Teunis Sterk, President of the Deltamilk cooperative, emphasised that members of co-operatives must also take responsibility themselves for improving their situation.

Discussion

During the lively discussion at the end of the symposium a participant voiced the opinion that the biggest enemies of the milk producers were sitting with them in the same room. This produced a reaction from another DDB member, who said that the biggest enemy of the milk producers was, in fact, the farmer who on the day of the event stayed at home and worked instead of attending the symposium. And he is right: only if we as milk producers feel responsible for our future and commit ourselves do we have a chance of prevailing with our interests.

Sieta van Keimpema (President of the DDB and Vice-President of the EMB) 

The European Milk Board (EMB) is sending a letter to the Ministers of Agriculture of the European Union, the Members of the European Parliament and the Members of the national Parliaments. In this letter it points out that the planned 1% increase in the milk quota on 1 April 2012 makes no sense*. The farm-gate prices for milk are already under pressure throughout Europe, and a further increase in the production volume would only exacerbate the situation in the markets.

To the Ministers of Agriculture of the European Union,

Members of the national parliaments and

Members of the European Parliament

Hamm, 22 March 2012

The Milk Package adopted is a first step in the right direction – now there have to be further steps!

Dear Ministers and Members of Parliament,

The Milk Package which has just been adopted is a first step towards a long-term reform of the EU dairy sector. For this we wish to thank you on behalf of the European milk producers.

This new regulation has initiated some forward-looking steps that now have to be systematically implemented and extended. Otherwise the measures will remain ineffective by and large.

Above all the step we regard as particularly positive is the possibility of pooling dairy farmers in producer organisations, of obligatory contracts between producers and processors which can help balance the asymmetrical relations between the market players in the dairy sector and the new Price Monitoring Tool to be created.

However, these measures will only be effective if they are ideally adapted to the real market situation. This means that the pooling options have to be extended to members of co-operatives. In addition, an EU-wide obligation to enter into contracts must be introduced, taking into account the milk producers’ production costs. Otherwise the provisions adopted cannot help improve the milk producers’ position in the market.

The planned Price Monitoring Tool should be introduced as soon as possible and both empowered to monitor the milk market (prices, supply, demand and production costs) and equipped with effective regulatory powers to prevent market-damaging surpluses being produced. Price monitoring alone is not enough. Moreover it is important to keep an eye on margins. For instance, from July 2010 to July 2011 the prices of supplies required for milk production rose by 10-15% in many European countries. This means that the average costs of producing milk are now well in excess of 40 cents.

It has been obvious in the last few weeks and months that the dairy sector is not self-regulatory throughout the EU. The markets are noticeably under pressure, which is evident in plummeting farm-gate prices. In Belgium alone the base price fell from 29.84 to 28.5 cents between December 2011 and March 2012. Some French dairies have already announced a decrease in the farm-gate price to 27.5 cents for April 2012. There are similar developments in the other member states. At the same time the producers have so far been unable to react appropriately to this conspicuous market signal. The volumes of milk supplied are still at peak levels.

That is why it is essential that the 1% increase in quotas scheduled for 1 April 2012 is abandoned for the time being to prevent the markets being burdened even further! This step is vital to stop prices plummeting again for now.

We call on you to take active steps in this direction. The market situation can be re-analysed in the middle of the milk year to evaluate the suspension of the increase in quotas.

*The current increase in the milk quota is based on a resolution passed by the EU Ministers of Agriculture on 19.11.2009, raising the milk quota by five per cent until 2013, i.e. by one per cent a year from 2009.

Open letter of the EMB

The French presidential elections are being held on 22 April this year. There may be a second ballot on 6 May. Given this scenario the Association des Producteurs de Lait Indépendants (APLI) is sending an open letter to French President Nicolas Sarkozy.

In its letter APLI highlights the pressing problems of obligatory contracts (contractualisation) to be signed between milk producers and dairies or co-operatives enshrined in a ministerial decree of December 2010. The dairy farmers demand that the resultant precarious economic situation in France be acknowledged and rectified. French dairy farmers and their families must be able to return to economically acceptable and decent living conditions.

The farmers’ criticism of the details of the contracts is that they stipulate a minimum term of five years, without specifying a minimum farm-gate price that would cover production costs and secure a livelihood. The farmers feel that this puts them in a position of economic buffer, to be used for cutting costs when times are hard.

Another fear the farmers have is that banks could even demand a minimum term of 15 years as a guarantee and only grant loans upon this condition. Agriculture as a whole as well as associated cultural assets such as French cuisine – which has acquired the status of UNESCO World Cultural Heritage – would be consigned to the history books.

In their letter the dairy farmers raise the question of what it will mean in the future to be a member of an agricultural co-operative: either free to determine his/her conditions or tied for years to a contract. The major co-operatives in France have agreed among themselves to offer only five-year memberships in future. There have never been any serious talks between producers and co-operatives or the private dairies on contractualisation.     

The farmers are also against compulsory producer groups in the way foreseen by the French government, as again they regard a compulsory five-year contract as excessive and have no intention of footing the bill for such a producer group’s administrative and staff costs.

Association des Producteurs de Lait Indépendants (APLI)