Dear dairy farmers, dear readers,

the European Commission has published its proposals concerning the reform of the EU dairy policy. At first glance one might think that a fresh wind is blowing in Brussels. There is talk of an imbalance of power within the food chain and the necessity to strengthen the position of producers. The EU Commission demands that producers are given the opportunity by the competition law to bundle themselves.  These are good approaches. Unfortunately these proposals are, however, not far-reaching enough. If these instruments were implemented as proposed, producers would still not have the strength to influence the produced milk volume. A demand-oriented supply is, however, a prerequisite for cost-covering producer prices and has more positive effects on agriculture in Europe than expensive measures funded with taxpayers’ money such as interventions, export subsidies or emergency payments. Even a massive extension of direct payments for disadvantages regions could never suffice to compensate the massive loss of dairy farms due to low producer prices. That is why we will continue to organise meetings in Brussels and at the national level, present the position of milk producers in different ways and increase our cooperation with other groups from civil society.

In Canada milk producers are able do without direct state payments. Due to their “supply management” system that is supported by the state Canadian farmers can obtain cost-covering prices on the market. Consumers can rely on fair and stable shelf prices. This is also highlighted by the letter from Marcel Groleau in this newsletter. The EU should by no means try to push European dairy products onto the Canadian market with the help of the planned trade agreement between the EU and Canada. It would be more useful to adapt the volume in Europe to the demand sold at cost-covering prices as well.

The year 2010 was quite turbulent. This is also reflected by a letter from a dairy farmer from Normandy. Milk producers were in Brussels, Strasbourg, Paris, and in many other places to show the public and in particular policy-makers what the situation on the farms is like and which kind of political framework is required. Milk producers in Denmark and Sweden have fallen on particular hard times. Many producers had to abandon their farm or are so heavily indebted, that there is hardly a way out.  In Switzerland we can follow the failure of the interbranch organisation, the increase of butter mountains, and the decrease of producer prices “live”. There is, however, also good news. For example from Austria where the Fair Milk gained market shares and more and more milk is bundled by farmers and marketed independently by the Freie Milch Austria. In Germany and Belgium the Fair Milk was launched successfully.

Contacts to policy-makers in Brussels and in the EMB countries were increased tremendously and the EMB and its member organisations have become in the meanwhile an important partner at many levels when milk is concerned.

All these activities and developments were only possible with the great support from dairy farmers of all EMB member organisations. The entire board of directors would like to express its gratitude and we would also like to thank our hard-working, highly motivated employees.

The positive approaches at the political level should encourage us to gain new momentum for the next year to lead the projects that we have begun to success.

On behalf of the EMB board of director

We wish you a merry Christmas and a Happy New Year.

Kind regards

Romuald Schaber and Sieta van Keimpema

Milk package of the EU Commission – a step into the right direction, but effective instruments are still lacking

On December 9th, 2010 the European Commission presented its milk package to the public. This package starts with a concise analysis of position of milk producers in the food chain. The report says, for instance: “(...), but often concentration of supply is much lower than concentration at processing level. This results in an imbalance in bargaining power between these levels. There are also rigidities in the market, with farmers having little choice of dairy (or even of transporters for raw milk).” (For the original text please visit the EMB website: www.europeanmilkboard.org/presse)

The EMB agrees with this analysis of the European Commission. Taking a look at the proposed solutions in detail they seem to be new and innovative as well. In most cases, however, the Commission unfortunately lacks the courage to shape and to substantiate the implied instruments so that they could provide producers effectively with a stronger bargaining position on the market. The interests of the dairy industry and dairies in particular continue to be in the focus. Romuald Schaber draws the conclusion that: “the approaches outlined in the communication of the Commission cannot, in their current form, put an end to the imbalance of influence of the different participants on the dairy market and thus render a cost-covering milk price possible.” In the following paragraph the different aspects of the milk package are briefly analysed:

Level of pooling for producer co-operatives at 3.5 per cent of the EU milk volume

The pooling of producer organisations would be limited in this case to about 4.7 billion kilos of milk. “That is much too little when you consider that dairies like Arla Foods or Friesland Campina with 8.7 billion kilos and 11.7 billion kilos of milk respectively already have a 6.5 and 8.8 per cent share of the European market and can still carry on growing without hindrance”, says Sieta van Keimpema, Vice-President of the EMB. The proposal to limit pooling per major producer country to 33% also ignores the situation in the dairy sector, where for instance in Denmark with 95% or the Netherlands with 85% one single dairy already has a larger market share.

Intensifying exchange in the added value chain

The European Commission further proposes initiating a more intensive exchange between the players in the milk value chain in the future on the EU level. The milk producers in Europe support this idea. In future the milk policy must consider the interests of society as a whole and also be compatible with the aims of the CAP. That is why the European Milk Board backs the establishment of a Monitoring Agency, which besides constantly and promptly charting price, cost, volume and market developments also pursues the aim of sustainable milk production in every region of Europe. The agency would stipulate a target price bracket based on production cost calculations, and in turn it would have to be taken as the yardstick for volumes to be produced. Such a monitoring agency would also correspond to the demand of the Commission for more transparency written in part 4 of the communication. 

Contracts that can be introduced as binding by member states

a) Experience shows that contracts between unequal negotiating partners put the weaker contracting party at a continued disadvantage rather than on an equal footing. As concentration is prevalent on the dairy side, the terms and conditions of contracts are also dictated by the dairies as the stronger market partner. That has already been established by the German Federal Cartel Office in a study of the sector. – 950,000 milk producers in the EU are up against some 5,400 dairies, with the ten largest dairies processing about 30 per cent of the milk produced.

b) The proposal of the EU Commission envisions that member states can make provisions for contracts and their rough form for the market participants. The EMB is of the opinion that contracts as proposed by the Commission are not suitable to strengthen the position of producers in a sustainable manner unless dairies are obliged to include coherent and effective criteria. The cost situation of producers has, for instance, to be taken into account by such a contract. One our website you will find a list ten criteria that show which minimum requirements should be included in a contract so that it strengthens the bargaining position of producers.

c) And the statement of exempting co-operatives from the obligation to sign contracts cannot be justified. The German Cartel Office has clearly shown that it is precisely in co-operatives that upside down pricing takes place, i.e. the producer is paid what is left over depending on turnover in the sales markets.

On January 12th, 2011 the European Commission will organise an event to discuss the reform of the Common Agricultural Policy, the quality initiative, and the milk package. On this occasion the EMB will presents its position and concepts such as the monitoring agency and the block exemption as major reform elements.

Extract from an EMB press release

Spain: New milk producer organisation represents 75% of the Spanish milk volume

On November 29^th, 2010 representatives of the three independent milk producer organisations Prolec, Feplac and Ganaderos Unidos decided to establish the Organización de Productores de Leche (OPL). The new association will start working on January 1^st, 2011 and its members represent 75% of the Spanish milk volume. This organisation was created with the aim of uniting as many dairy farms as possible in one organisation to have more clout to represent their interests. In the future this association wants to become a member of the sector’s professional body INLAC and other national institutions that represent Spanish milk producers. Prolec-Präsident José Ramón Arronte Diego, the president of Prolec, will continue to play a leading role within the executive board of OPL.

Esther Lopera, Prolec

Letter from milk producers from Canada:

Dear European milk producers,

we follow the situation of European milk producers closely from Québec. On behalf of all milk producers from Québec and from Canada I would like to express my solidarity with you given the difficulties that you have encountered over the last two years. I write to you from Québec, here as in the rest of Canada the economy is doing quite well. The Canadian banking sector has weathered the financial crisis without state support.  The regulations for the Canadian banking sector include a risk tolerance. The Canadian milk sector was not much affected and weathered the crisis without direct subsidies. We have efficient instruments to counter volatilities of farmgate prices. Legislation at the federal and provincial level enables us to manage our milk production jointly, to adapt it to the demand on the market and to negotiate sales conditions with the processing industry. This from of regulation is an efficient and cost-effective tool.

Milk production in Canada has increased slightly in 2010 and from February 1^st, 2011 farmgate prices will be increased by 2,2%. One has, however, to keep in mind that the prices were not increased on February 1^st, 2010. The prices for input have decreased in 2009. The agricultural sectors that cannot regulate their supply have to face volatilities of food prices on global markets. The problem of price volatilities on global market is enhanced by speculations on agricultural markets. On a normal market the prices change in correspondence with the demand. Usually market participants adjust their production so that the supply covers the demand. The contrary is the case in the agricultural sector. The demand does not or hardly change. The demand for milk worldwide for example varies by more or less 1% every year. The recession did hardly affect food consumption. The demand in the agricultural sector thus remained relatively stable. It is the supply that varies and that cannot be adapted quickly as millions of producers are involved who work on their own. We have to take the seasons into account and once the product is ripe we have to deliver it, no matter what price we obtain. Ours is a particular sector and needs specific solutions.

I am not of the opinion that negotiations with the World Trade Organisation (WTO) will solve the problem. The deregulation will even aggravate the problem, as it isolates producers even more. Governments have to reassess their approaches to agriculture and food. We have to stabilise farmgate prices and have to make sure that everyone, even the weakest, is provided with food. The political stability worldwide depends on it.

We wish you a happy new year that bears more fruits than the last years.

Marcel Groleau

President of the Fédération des Producteurs de Lait du Québec and Vice-president of Dairy Farmers of Canada

Trade negotiations between EU and Canada continue

In 2009 the EU and Canada officially launched the actual negotiations to reach the Canada-EU Comprehensive Economic Trade Agreement (CETA). Customs procedures, immigration, foreign investment and access policies related to agriculture are the main issues. The next round is scheduled to take place in Brussels from January 17^th – 21^st, 2011. Participants of the previous rounds of negotiations said: “The non-discriminating reciprocal access to milk and meat markets is important for us Europeans [...].” But is it really a good idea to ship meat and milk from one side of the world to the other? Will European people drink more milk or start drinking powder milk if it is imported from Canada? Or is it not more likely that removing tariffs triggers a price war between the two big markets and that producer prices consequently plummet even more? Given the relatively small Canadian market and the few sales prospects for European products in Canada, one has to assume, that this is not about taking over new markets, but the abolition of a system that works, a positive example of volume control. Or will milk have to serve as bargaining chip for other sectors.

The Dairy Farmers of Canada state concerning the CETA: „As for other trade negotiations, the Canadian Government’s position to protect supply management includes the maintenance of tariffs and tariff-rate quotas. Dairy farmers in Canada are not subsidized and should not have to compete against the treasury of the European Union.“ Import tariffs are a prerequisite for the successful Canadian supply management with its positive effects for many farmers and consumers in Canada. The EU should not endanger this system that works very well but think about sustainable solutions for its own dairy production and milk consumption.

Sonja Korspeter, EMB

Letter from an APLI dairy farmer to her European colleagues

Dear farmers,

we have certainly met or we have already demonstrated peacefully together in Strasbourg (20.10.2010), in Brussels (12.07.2010), in Berlin (20.01.2010) or in Paris (10.9.2009 and 10.03.2010). Two years ago I could not have imagined how many kilometres we would cover in a short period of time and how many great encounters we would have and how much solidarity and humanity we would experience.

Having decided to quit my old job as a self-employed beautician and to become a farmer, I became together with my partner and my mother-in-law a member of an agricultural cooperative (GAEC, groupement agricole en exploitation commun) in 1992.  From that day on we ran a farm with 70 hectares and a milk quota of 400.000 litres. The arrival of our three sons (Charlie was born in 1991 and twins Jason and Fabien in 1991) changed our daily routine slightly. Over the time we had different associates and spent many hours setting up our buildings on our own (we weathered three storms). At the end of the day we found ourselves on a farm with 150 hectares and a milk quota of 930.000 litres. Together with an associate we have founded a society of civil right and hired two employees. We thought that we had reached a balance that would allow us to have more time left for us (milking just once per day per milker; one out of three weeks on call).

And then came the year 2009. During this year we saw tremendous changes and became aware of our own future. Henceforth I have been committed together with André to the work of APLI Normandy. We entered the fray (work, assemblies, supplies). One of my sons summed up the situation quite neatly while we were sitting at our table. He said: “It seems as if I am having dinner with APLI and EMB.”

We decided to continue to employ our workers, even though we should have given them notice given our financial situation. We had, however, decided not to live merely for our farm. We want to find a solution. I think that it is my duty to participate in assemblies and demonstrations also to gain new courage to keep on going. I am proud to be part of the movement.

STAND UP FOR A NEW ATTITUDE TOWARDS OUR NEIGHBOURS NEAR AND FAR, FOR REASONABLE ECONOMIC, ECOLOGICAL AND HUMANE SOLUTIONS.

The exchange of German and French farmers on September 25^th that was organised on the occasion of the “White Flood” that took place in a beautiful region near the Mont St. Michel is the result of the meetings that were staged over the last two years. A big thank you to all participants who took the long trip to Normandy. I would also like to thank the many German women farmers who came and who were eager to meet and to talk to their French colleagues. Even though we have seen attempts to divide us, we are now at the beginning of an exchange of EMB members. Many detest the policies of financiers and industrialists. We are the first to think about the direction we would like to take. In eight days time we will start producing cream toffees at our farm to revaluate our milk and to take sales of our product in our own hands. This remains, however, only an option; the problems are still not solved yet.

LET’S MAINTAIN OUR SOLIDARITY. Our friends from Canada have already shown us that it is possible.

Sylvie Poulain, farmer from France

Commentary Switzerland: management of overproduction instead of demand-oriented milk production

The liberalisation of the market in Switzerland is extremely problematic. Since the end of the quota system in May 2009 surpluses are being produced and butter mountains have reached a record high. Imports of, for instance, cheese exceed exports by far. The planned conquest of the world market by Swiss products was not achieved but rather the contrary. Cheap products from the EU are flooding the Swiss market and producer prices are declining rapidly. Milk prices reflect the overproduction on the dairy market: in October milk producers obtained a basic price of an average of 60 Rappen/kg milk. Taking into account direct payments this means that farms situated in valleys would need an additional 25-30 Rappen to cover their production costs.  Excess production is sold for prices way below the production costs on the EU markets and the world market. Probably to enable dairies to work profitable the interprofessional organisation Milk (BOM) agreed at its annual meeting on a segmentation into A, B and C-prices. While farmers receive the target price for A-milk, they obtain far lower prices for B or C-milk. This model does not control the volume and yet this series of measures to stabilise the dairy market was also approved by the members of the BOM who represent the producers. The milk price will be stabilised at a very low level. Milk producers cannot decide whether they want to produce their milk for a fixed B-price. Only when they receive their statement of accounts, after having already delivered their milk, they know how much of their volume was used for a high-price domestic production and how much for cheap milk that is mainly exported. The milk producer himself has no possibility to control this.

This decision of the general assembly shows once more very clearly that an interprofessional organisation does not provide milk producers with more influence on the market. Instead, the pressure that dairies put on milk producers is channelled by official institutions. Creating the intervention funds that is supposed to cover the costs for exporting excess production on the world market, goes into the same direction. Producers cannot decide whether they want to produce poorly paid surpluses. Furthermore they pay for this fund, at least to 50%, which disposes of the surpluses.  The decisions of the BOM have very little to do with market orientation.

We in the European Union should draw lessons from the situation in Switzerland. The proposals of the European Commission concerning an interprofessional organisation and contracts between milk producers and dairies as well as the very low, maximum limits of bundling are not suitable to provide a better future for a sustainable milk production in Europe. That is why the proposals of the Commission have to be criticised in a constructive, but clear manner. Even though Switzerland is only one country it shows what will certainly not work in the EU with its 27 member states.

Sonja Korspeter, EMB.

Denmark: Three major problems at the same time: financial difficulties, a low milk price and increasing feed costs.

Modern Danish milk farms rely to a high degree on loans. Up until 2008 banks and financial institutions were more than willing to give loans to farmers. Given the increase in prices for farm land, this land often served as security for banks and their money. Prices for farm land are now plummeting by up to 40 to 50% which means that this security for banks and financial institutions is vanishing. Over the last two years many farmers have thus had tremendous difficulties to borrow money to invest in their farms. All in all agricultural borrowing in Denmark amounts up to 47 billion Euros. That is equivalent to an average loan of 19.000€ per hectare. The situation is quite tense, because according to calculations based on normal prices and interest rates, Danish farmers will only be able to pay back thirds or even only half of their loans. Nobody knows what is going to happen.

In 2010 the milk price in Denmark is below the average milk price in Europe. In addition Arla Foods, the big Danish-Swedish dairy, has decided to reduce milk prices by 1,5 Cents over the next six years to fund new business activities in countries other than Denmark. It is assumed that Arla wants to extend its business in Germany. Prices on feed stuff are currently increasing as well. Milk production (as well as pig production) is therefore not so profitable. This is cause for concern for farmers and farmers’ organisations in Denmark.

Christen Sievertsen & Kjartan Poulsen, LDM 

Sweden: More and more producers give up – government supports interprofessional cooperation to solve problems

In 2010 the newly established Swedish organisation Sveriges Mjölkbönder (formerly LDM Sveriges Mjölkbönder) has been committed to setting up a so-called “dairy sector group” with representatives of the agriculture ministry, dairies, farmers organisations, the Swedish Dairy Association, the food stores association, and consumers organisations. So far the members of this group have met twice and the next meeting is scheduled for January 2011. The aim of the group is to create a better understanding for questions regarding the dairy farmers and their position in the entire food chain from producers to consumers. The members of this group discuss political issues and address the question of how to receive a sustainable milk production in Sweden. This is very important since the production is declining and many dairy producers in Sweden go out of production these days. The Swedish minister of agriculture was involved when the group started and supports its work.

At the moment the situation in the dairy sector in Sweden is a quite turbulent. Milko, one of the bigger dairies, has fallen on financially hard times. At the same time Arla Foods, the largest dairy in Sweden, is trying to get more dairy farmers to deliver milk to them. Many dairy farmers who delivered their milk to Milko have therefore left their dairy association and now deliver their milk to Arla. The milk price has been increased many times over the past months. The milk price is about 32 cents but varies depending on which dairy you deliver your milk to, the milk quality etc.

Maria Mehlqvist, Sveriges Mjölkbönder

Austria: IG-Milch is in full swing and pooling of dairies

At the general assembly of IG-Milch that took place on November 20^th, 2010 a new board of directors including a new president was elected. The new president is called Erna Feldhofer and runs a dairy farm in Styria with her family. Her deputies are Thomas Schmidthaler (board member of the EMB, Upper Austria) and Franz Handler (Lower Austria).

The mood was despite the moving farewell of long-time president Ewald Grünzweil lively and focused on the future. IG-Milch is currently working on several vibrant projects:  The brand A faire Milch (A Fair Milk) was very successful in a comparative test carried out by the Verein für Konsumenteninformation (Association for consumer information). 29 milk brands were tested and A faire Milch ranked first. The unanimous opinion of IG-Milch is: “This result is great and encouraging”. With the company Freie Milch Austria (Free Milk Austria) the bundling of Austrian raw milk, independent of cooperative dairies, is also making progress. Information events for interested supplier are organised all the time.

In the dairy sector another merger of cooperatives is currently being prepared. Stainzer Milch is looking for a business partner. According to media reports Berglandmilch is the frontrunner. Berglandmilch is the biggest processing company in Austria and after the recent take-over of Tirolmilch it will in the future control around 50% of the Austrian milk volume. What will the competition authorities, which allow producer organisations only 33% of the national milk volume, say to this?

The average milk price in Austria from April till October ranged from 27,976 to 31,986 cents. In October the milk price ranged from 29,685 cents to 33,895 cents. (Basis for comparison: 4,20% fat, 3,40% protein, 100000kg annual delivery, all prices excl. VAT, Class S < 50000 bacterial count und < 250000 cell count)

Walter Stadlober, IG-Milch

Action of women farmers: Poems for dairy owner Theo Müller

Under the motto „Theo Müller, you do make a living on supermarket shelves, you make a living on us, the farmers“ around 300 women farmers of the BDM went to see Theo Müller,  who runs the dairy Weihenstephan, on December 14^th, 2010. They followed an ancient Bavarian custom called “Klöpfeln” that is used to ask for good prospects in the future. First of all the farmers met in the cathedral of Freising to say the rosary.  Afterwards they organised a candlelight procession and marched 3 kilometres to the dairy Weihenstephan that belongs to the Müllermilch group. The farmers organised this event as they cannot understand why Theo Müller has taken legal actions against farmers who took part in a demonstration in front of the dairy Sachsenmilch during the delivery strike, even though he profited. They do not understand that damages were awarded to a dairy company that profited from protests of dairy farmers in 2008 and the subsequent price increases that were imposed in the retail sector. They wanted to hear what Theo Müller has to say to this and to talk to him to clear up the situation. As expected this meeting did not come about. The dairy farmers showed their solidarity for the accused dairy farmers with prayers, songs and poems and announced that they would organise other events at a later date.

Jutta Weiss, BDM Aktuell

Six entire days of strike in Belgium in 2009

The figures on milk delivery in September 2009 and September 2010 that were published by the Belgium ministry of Agriculture reflect last years’ milk strike:

Belgium has an annual quota of 3,3 billion litres, this is equivalent to a milk volume of 9 million litres per day. In September 2010 milk production increased by 13% (29,5 million litres) compared to September 2009. A total of 256,3 million litres was produced.  This additional volume is equivalent to the quantity of milk that is delivered during three entire days in Belgium. In September 2009 strikes were only held in Wallonia. Wallonia’s share of the national quota is lower than the share of Flanders. This means that this volume (29,5 million litres) is equivalent to the milk volume produced in Wallonia over seven days. If we take into account that we saw an increase in production in 2010 (first half of  the dairy year 2010: 101,66% of the quotas we used, compared to 96,80% in 2009), we can nevertheless say that the produce of six entire days was spilled during the milk strike in Wallonia. This is a realistic evaluation and this is the participation in the strike that we had hoped for last year.

Erwin Schöpges, MIG

EDF analysis of production costs shows: full costs of production are not covered

The annual analysis of production costs, that were presented at the annual congress of the European Dairy Farmers (EDF), shows very clearly that the average full costs of participating farms were 41,8 Cents/kg ECM for the dairy year 2008/2009 while the average overall revenue was 33,9 Cents /kg ECM.  The European farms that were studied suffer, on the average, entrepreneurial losses. The average wage was only 0,20 EUR per working hour. However, there was a huge range of operating results. A thorough analysis of input and output shows that EDF farms that fare better do not only work with lower input per cow, but obtain a higher milk yield with the same input compared to other less successful farms. The 280 farms in Germany that were assessed for this study had an average of 201 milk cows and consider themselves to be future-oriented farms.

Sonja Korspeter, EMB

Recommended reading: French

Dairy Europe: Revaluation of all regions to shape the future

Europe laitière: Valoriser tous les territoires pour construire l’avenir

What kind of milk system do we want for the future?

Dairy farming remains an important sector when it comes to employment and the social cohesion in rural areas in nearly half of the European regions. One third of agricultural area, especially in disadvantaged zones, is revaluated by dairy farming and at the same time the production of important public goods is promoted: water, air, soil, biodiversity and landscape.    And yet the milk production in Europe finds itself in a double dead-end:

The socio-economic dead-end:  even though the majority of countries supply the single market, Europe has decided to abandon the external protection and the milk quotas. Europe adjusts itself to the rules of the WTO hoping to strengthen its position on the world market for butter and milk powder. These markets are, however, in terms of their volume and their volume rather negligible. Europe thus enhances the volatilities of the milk price and imposes a ruinous competition for most producers.

The ecological and subsequent territorial dead-end: With the model Holstein-maize-soya the CAP gives preference to the specialisation and expansion of livestock as well as its concentration on arable land at the expense of pastures and robust breeds. This promotes not only the rural exodus and climate change, but also the loss of biodiversity and cultural heritage, in particular in the new member states.

To exit this double dead-end and to preserve a Europe and a planet worth living in for our children we have to make a stand for food sovereignty in Europe with its 500 million inhabitants and in developing countries. Furthermore cattle farming based on pastures and local resources has to be promoted. It is not too late, to opt, supported by the new European parliament and the mobilisation of civil society, for a new dairy policy and a new policy for rural areas that complies with the Treaty of Lisbon.

André Pflimlin worked as an agronomist for the Institut de l’élevage (Institute for Animal Husbandry) from 1970 to 2009; since 2001 he has been working as a project coordinator in the field of research and development in Europe.   L'Europe laitière, Valoriser tous les territoires pour construire l’avenir ISBN: 978-2-85557-178-2, 314 pages, was published on December 1^st, 2010 by  France Agricole.