The EU Parliament, Council and Commission are currently negotiating the future of the EU’s Common Agricultural Policy (CAP) in trilogues. On 23 October 2020, the European Parliament adopted its position on the reform of the Common Market Organisation (CMO) within the CAP. It includes a number of good proposals that will help make farming, in general, and the dairy sector, in particular, more crisis-resilient.

Position of the European Parliament

Voluntary volume reduction (in the form of Article 219a*) during severe crises is part of the Parliament’s position. As per this provision, producers are given the opportunity to reduce their production compared to the same period in the previous year by a few percentage points during a specific period, when faced with imminent, significant price reductions at EU level. Those who take up this offer receive compensation for every litre of milk not produced.

The fact that we dairy farmers have been hit by three major crises over the last ten years – in 2009, 2012 and 2015-17 – highlights the need for such an instrument. It was only in the third crisis, in June 2016, when the EU average price was a paltry 25.7 cents per kg, that the EU activated a voluntary volume reduction scheme after much hesitation. As soon as this instrument was operational, prices began to recover very quickly. In just a few months, they climbed from well below 30 to 33.4 cents per kg (January 2017).

For the dairy sector, it is safe to say: voluntary volume reduction works! Even relatively small reductions can have a significant positive effect on the price, as also demonstrated in 2016/17. When dealing with a particularly severe crisis where a voluntary volume reduction scheme alone would not be enough, the European Parliament recommends further strengthening the instrument: for a short period, all farmers would be asked to cap their production, so that the reductions undertaken by their counterparts across the EU can have their full effect (Article 219b).*

Council and Commission still to sign off on volume reduction

We are very glad to see that MEPs analysed the previous crises and came to some very important conclusions for our sector. This means that an important player in the ongoing trilogue negotiations is already defending a future-oriented position. However, neither Council nor Commission have foreseen such an instrument in their positions. It is absolutely essential for the reluctant Member States as well as the European Commission to recognise the need for this instrument and the sound reasoning behind it, thus paving the way during the ongoing trilogue negotiations for it to become part of the Common Market Organisation.

It is important for this instrument to be anchored in legislation because past crises have shown that without legal enforceability, there is a great risk that the instrument is not used (as in the first and second crisis) or is activated too late (as in the third crisis).

To ensure that the instrument is deployed in a timely manner, however, it is important to clearly define when it would be triggered. It is great to see that the European Parliament has also included an early warning mechanism in its proposal. However, it must be improved with the addition of an appropriate definition of crises and must be linked with the activation of a voluntary volume reduction scheme in order to make it a warning system with teeth.

The effectiveness of the instrument cannot be questioned. In fact, in 2016/17, when the voluntary volume reduction scheme was launched, interested EU farmers receiving compensation for the milk they did not produce were able to successfully coordinate with their colleagues and thus find a way to quickly come out of the crisis together. Over 48,000 producers – more than expected – took on their collective responsibility for the dairy sector, in order to stabilise the market and make it functional again.

Why does the instrument work for severe crises?

The big advantage of the instrument is that it prevents the production of milk surpluses that are then transformed into products like cheap milk powder.

• Towering stocks of milk powder exert very strong downward pressure on prices. This pressure continues to exist when the powder is taken off the market in the form of intervention. It prevents prices from recovering even as it sits in storage.

• In addition to price pressure, overproduction also wastes precious resources and threatens the livelihoods of our fellow farmers in the global south in the form of cheap exports of surplus products.

We can fully circumvent all these issues during crises if a voluntary volume reduction scheme is activated across the EU. After all, it acts at the level of raw milk production, that is, where the overproduction actually takes place. This instrument breaks and ends the problematic chain of overproduction at the first link and brings the real relief needed by those affected by the crisis at hand. It is us producers who incur major loss, not processors!

Therefore, we sincerely hope that this crisis instrument will find its way into the final Common Market Organisation Regulation. In addition to the European Commission and the Council of the European Union, we also call on other farmers’ organisations to encourage their members to support this instrument and to refrain from bad-mouthing or campaigning against voluntary volume reduction.

Sieta van Keimpema, EMB President from the Netherlands

Kjartan Poulsen, EMB Vice-President from Denmark

Elmar Hannen, EMB Executive Committee member from Germany

Boris Gondouin, EMB Executive Committee member from France

Roberto Cavaliere, EMB Executive Committee member from Italy

Guy Francq, EMB Executive Committee member from Belgium

* European Parliament's position: P9_TA(2020)0289 “Common agricultural policy – amendment of the CMO and other Regulations”

EMB press release of 14 December 2020

Who would have thought! After a year of major farmer protests about nitrate use, farmer bashing and insect protection, as well as the “agricultural turnaround” and the CAP reform, we are finally talking about the one key issue underpinning the continued existence of family farms and the very livelihood of the vast majority of farms: producer prices for foodstuffs.

Things began in early November with demonstrations in front of the central warehouses of some large food retailers in the north-west by frustrated farmers, furious about yet another discount battle. This was followed by coordinated actions by the associations collaborating within the Milk Dialogue, targeted at processors like dairies and abattoirs. Participation in these actions was already way beyond the usual numbers. And lastly, the protests returned back to the food retailers’ warehouses, this time with hundreds of participants, some of them bringing heavy machinery and manning lengthy blockades over days and nights. The largely young protesters braved the cold, bad weather, police pressure and calls for moderation from association leaders. Shelves and freezers in shops in the north-west remained empty and the protests spread to other regions as well.

The significant numbers and determination of the protesters clearly showed how the situation on many farms has reached a tipping point. The Milk Dialogue, with its very clear demands for price increases like 15 cents per litre of milk or 50 cents per kilo of pig meat, has managed to effectively showcase how much producers are missing to cover their costs. And this has struck a chord with farmers!

Food retailers, with their Christmas turnover on the line, gave in and outdid one another with their proposed measures in support of livestock farmers that had great media impact. They also held a number of meetings and negotiating rounds in different constellations. The German farmers’ union remained remarkably quiet through all of this and that’s how it should stay, considering they gave up any sort of commitment to fair producer prices many years ago. Others are now doing the farmers' union's job as well as what should actually be done by processors. The processors are obliged to ensure that any concessions achieved by the protesting farmers are put into practice and to pass on any extra profits directly to their suppliers. In addition to a quick price recovery, a significant, lasting improvement in the market position of farmers in the long term is an absolute must, so that they can participate in negotiations on an equal footing and ensure that production costs and remuneration for their work are covered by those purchasing their output. In this regard, policy-makers are, once again, called on to not simply limit themselves to moderating discussion rounds, but to also create the necessary framework conditions for agriculture.

Our advantage is the new close alliance between seasoned veterans with their experience and good ideas for solutions and the young rebels with their creativity and fighting spirit. If we manage to keep the farmers and associations that are truly committed to preserving family farms united, then we can send a clear message: we will no longer allow our ‘partners’ in the production chain, old interest groups and policy-makers to send us down dead-end paths and give us the run around. Whoever dares to refuse playing their part in ensuring a quick and fundamental improvement in the situation on farms, be ready to face the music at the next protest! Our unity is our strength!

Extract from an article by Ottmar Ilchmann, dairy farmer and President of AbL Lower Saxony, published in the January issue of the "Unabhängige Bauernstimme" newsletter