The fallout of the Coronavirus pandemic is severely affecting the milk market as well. Farms as well as dairies are confronted with an increasing number of problems and challenges with every passing week.

European and international market indicators have been showing a significant downward trend for a number of consecutive weeks now. Although the Global Dairy Trade Index recovered slightly by 1.2% at the last auction, it had already fallen sharply for four consecutive weeks since the beginning of February. Prices have dropped on the Italian spot milk market as well. The average spot price for April fell by 9.34% as compared to the previous month and is now at €30.75/100kg. This is a reduction of 21.28% as compared to April 2019.

Following the same trend, the rates for milk-product futures on the European Energy Exchange (EEX) have dropped significantly. As of 7 April, May contracts for butter fell by a whole 10.6% to €2,754/t as compared to the previous week.

As a consequence, EU prices for skimmed milk powder and butter also adjusted downwards. Over the last week, the price for skimmed milk powder dropped a further 4.4% to €218/100kg. This is in addition to the price decrease of 5.7% in the preceding week. Butter quotations are currently at €342/100kg. This is a further reduction of 2% as compared to the previous week.

Critical situation for dairy farmers

Dairy farmers are under increasing pressure as milk deliveries are on the rise. Some Member States have reported that smaller dairies are already discontinuing milk collection due to capacity issues. The milk price has collapsed in a number of countries. In Lithuania, the raw milk price as of 1 April has been reduced by 3-5 cents, which represents about 20% of the total price.

Many countries are actively calling for measures to control production volumes in order to counteract yet another milk market crisis.

Vanessa Langer and Regina Reiterer, EMB

Farmers' organisation Uniterre has taken note of the latest decision by the Swiss dairy inter-branch organisation to maintain the reference price for industrial milk in the next quarter. The organisation's dairy committee, which carefully observes and analyses developments on the dairy market, is outraged and speechless.

Firstly, we have to conclude, yet again, that the sacrosanct law of supply and demand only operates in one direction when it comes to milk. Even though milk production in 2019 has been at its lowest since 2007, buyers and processors continue to claim that there is no need to re-evaluate the price of milk as a raw material. As usual, milk producers have to fall in line and accept the status quo of 71 centimes per kilogram of A-segment milk. In this context, we would like to strongly emphasize that while this is merely a reference that is rarely paid in practice, an increase in reference price does, in fact, often lead to a higher farm-gate price for producers.

Secondly, the Swiss inter-branch organisation (BO Milch – IP Lait – IP Latte) welcomes the introduction of the "green carpet"* as a sustainability standard, hailing it as a success and a step forward. However, an increasing number of producers are reporting that their buyers have amended the quantities of A- and B-segment milk in their milk payments. As the 3-centime "green carpet" bonus is only paid for A-segment milk, producers are cheated out of it yet again when the amount of this segment is lowered to make way for more B-segment milk. One more trick to get out of paying family farms what is their due. The milk price monitoring by the Swiss Milk Producers association (SMP) clearly shows that the average milk price (segments A and B) has dropped since September 2019, although everything points to milk supplies being very close to or even lower than demand. In this context, it is also important to remember that consumer prices were increased because of the "green carpet". How can we trust the producer representatives in the inter-branch organisation if they refuse to assume their responsibility and are unable to find solutions for our legitimate concerns?

Long live butter imports!

The article in the "Agri" trade journal of 28 February entitled "Butter imports will be necessary to meet market needs", in which the Fribourg milk producers’ organisation FSFL analyses the current market situation, has left a very bitter aftertaste. Yes, it is true that with butter reserves practically empty at the beginning of the year and milk shortages foreseen by the end of 2020, everything seems to suggest that we are heading toward an opening of the white line. It is shocking to see that the need to increase the farm-gate milk price has not even been considered. Once again: what is the point of our associations if they do not protect our interests and do not advocate for fair, decent remuneration for producers? We are at a loss for words!

Uniterre's dairy committee calls on BOM and SMP to raise the price for A-segment milk, provide credible justification for the increase in the amount of B-segment milk, and to implement the "green carpet" correctly! If we want to stop bleeding our dairy farmers dry, maintain drinking milk production in Switzerland and prevent an opening of the white line, there is no way around a better milk price!

The fact that the Swiss Fair Milk cooperative is off to a flying start clearly and unequivocally shows that Swiss consumers are willing to pay more for dairy products when they know that they are supporting family farms and helping them earn a better living.

Excerpt from Uniterre press release of 10 March 2020

* The “Tapis vert” (literally "green carpet") is a new milk production standard and an instrument to clearly distinguish Swiss milk and dairy products from foreign ones. It came into force on 1 September 2019. Those who fulfil the necessary conditions can claim a bonus of 3 centimes per kilogram of A-segment milk.

As of October 2019, Fairebel's chocolate milk has been made using Fairtrade-certified cocoa that guarantees cocoa producers a fair price. Consumers clearly approve: 335,637 units were sold in just three months. This commercial success will make it possible for the Faircoop cooperative to support the Women's School of Leadership in the cocoa-producing regions of Ivory Coast.

Fairebel and Fairtrade share common values: fair prices, good working conditions and a sustainable future for farmers. Consumers and producers should be more closely connected, with today's consumers showing a much greater interest in the conditions under which products they use are being made. This shared vision led to a partnership agreement in late 2019.

"For a long time now, Fairebel has aspired to create a project underscored by solidarity with the cocoa producers of West Africa", explains Erwin Schöpges, President of Faircoop. The cooperative now only uses Fairtrade-certified cocoa for their chocolate whole milk, thus supporting fair prices as well as a training project for women in the production regions of Côte d'Ivoire.

Strong women as leaders in the cocoa trade

The Women's School of Leadership is part of the Fairtrade organisation's strategy that aims at strengthening the position of women and encouraging them to take on leadership roles and responsibility within their farming cooperatives.

Yadua Adingra is one of them. She participated in the training and is now at the helm of the women's association of CAYAT, a cocoa producers' cooperative. "Thanks to everything I learnt at the Women's School of Leadership, I was able to convince my cooperative that I was the right woman for the job", says Adingra.

A joint commercial success

Whole chocolate milk has always been Fairebel's top-selling product. In the last three months, 335,637 cartons were consumed at breakfast, during breaks or as a snack between meals.

For every unit sold, the cooperative contributes an additional eurocent. "We will be contributing a total € 3,356.37 to the Women's School of Leadership project", says Schöpges. "Our Belgian cooperative will definitely sell more than a million packs in 2020, which means that we will be able to invest more than € 10,000 in this wonderful project."

Excerpt from Fairebel press release of 5 March 2020