According to an article in the Danish newspaper Jyllands-Posten, 86 percent of milk producers have severe cash-flow problems. The situation has slightly improved since the publication of the article (29.7.) due to an increase in organic milk prices, but the overall situation stays the same - dramatic.

The money is pouring out of Danish dairy farms. The situation is so serious that for the first time the industry’s own economists warn that Denmark's total milk production may decline. After several price reductions the milk price has reached a level that leaves 86 percent of milk producers with a cash shortage. This means that the already heavily indebted farmers have to borrow even more money from the bank to pay their current bills.

Of the 3,257 dairy farms, 2,811 now have cash-flow problems. Half of the farms show a deficit of at least 5 cent per litre of milk produced. 20% of the farms show a deficit of at least 9 cents per litre. After many hard years, a large number of dairy farms are on the point of collapse, all financial reserves are exhausted. The current deficit means that debt continues to grow on many farms. This increases interest costs, making it more difficult to generate profits.

According to experts, there is a significant risk that Danish milk production will decline if prices stay at the current very low level for some time. Right now many dairy farmers are under enormous pressure. “Production must decrease for prices to rise, and there is a great risk that dairy farms in Denmark will close. Our equities are depleted, and it is difficult to finance the current deficit. At the same time, we can see that some milk producers in other EU countries are helped through the crisis with government subsidies. It pushes us even closer to the edge”, says Kjartan Poulsen, Chairman of the National Association of Danish Dairy Farmers.

Christen Sievertsen, LDM Denmark

Article “86% of dairy farms show deficit” (in Danish)

Swiss dairy farmers are still waiting for better times. The reference price for the protected domestic segment still stands at 68 centimes (approx. 62.20 euro cents); however, the milk prices actually paid are much lower. Dairy sector organisations are satisfied as the reference price has not been lowered.

Wholesalers might have accepted this benchmark and therefore not changed the price of milk in stores, but they are still making hefty profits: They regularly launch calls for supply tenders and take their pick from contesting dairies because it is clear that some or the other processor is willing to give in. While dairy products are made using cheap Grade B milk, prices are calculated on the basis of that of Grade A 2 milk¹ , much to the delight of wholesalers.

On the Swiss dairy market, prices swing up and down like in a bazaar. There is a clear milk shortage - the hot summer and many farms giving up milk production have both left their mark. Very high spot prices are currently being paid for "free" milk - every litre of milk is needed. However, farmers are experiencing no gains because of the reason behind these high prices: Dairy traders risk hefty fines for defaulting on their supply contracts. Since the expected volume of milk is not available, the shortfall has to be made up on the spot market. Price is of no concern, as it is still preferable to meet contractual obligations with very expensive milk rather than to cough up contractual penalties. As farmers only get what dairy traders have left for them, they end up paying twice - if they have too much milk, the price plummets; if they have too little, they too must shoulder the burden of contractual penalties.

Farmers are ready to pull out their hair. Supply volumes are dropping - production in Switzerland is currently 5% below the previous year. There is a dearth of milk and still prices remain at impossibly low levels for farmers. In fact, Hochdorf Nutritec AG, one of the four largest dairies, has petitioned the Federal Government to import 800 million litres of milk for the production of milk powder. This inevitably leads to questions: Production costs in Switzerland are three times those in Germany. How can Hochdorf then hope to sell this milk powder abroad without federal subsidies? Could it be that Hochdorf's Swiss milk suppliers are cross-financing this processing activity?

The dairy market is anything but transparent. One of the main reasons for this is surely the fact that farmers sell their milk through more than 30 different dairy trading organisations. These structures have already been around for 10 years and are securely anchored. However, it is currently of utmost importance that all milk be sold through one single entity.

This could finally bring an end to the ridiculous situation where vans from three different dairy traders visit individual villages to collect milk.

¹ Even if an A-price is officially decided, many different prices are still paid for A-milk. For me the official A-price is the A1-price. But there is also an A2-, A3-price etc., which are a bit lower. Because everyone tries to get rid of their cheap B-milk in the A-segment.

Werner Locher, Secretary BIG-M

EU proposes new arbitration system in dispute over TTIP

EU Trade Commissioner Malmström is looking to replace the controversial ISDS, a private arbitration mechanism for disputes between companies and countries, with a more transparent system, where EU Member States and USA will together appoint independent judges to a new investment court. For the first time, a court of second instance that would deal with appeals has also been envisaged.

The Investor-State Dispute Settlement (ISDS) is one of the main reasons behind the massive resistance in Europe to the TTIP. The main concerns are that it could award damages to corporations at the expense of tax payers, circumvent national legislation or push through lower consumer protection and environmental standards. The next round of negotiations between the EU and the US is scheduled for October 19-23 in Miami.

International action days: October 10-17, 2015

Civil society organisations, trade unions, farmers and grassroots movements on both sides of the Atlantic reject the TTIP, CETA, TiSA and TPP. On the international action days, they want to send a clear signal against four trade and investment partnerships that threaten democratic rights, non-dependent food production, jobs and the environment - TTIP (Transatlantic Trade and Investment Partnership between USA and the EU), TPP (Transpacific Partnership between USA, Canada and a number of Asian countries), TiSA (Trade in Services Agreement) and CETA (Comprehensive Economic and Trade Agreement between the EU and Canada).

Overview of the action days:

• 6 Oct: Signature campaign of the independent European Citizens' Initiative against TTIP and CETA has ended.  3,263,920 signatures have been collected.
• 10 Oct: Main action day - decentralised events and protests in different countries. Mass rallies will be held in a number of EU Member States like Germany and the Netherlands.
• Oct 13-17: No TTIP Camp, Brussels, Belgium.
• Oct 14: US Climate Action Day
• Oct 15-17: Protests in Brussels against the EU Summit and arrival of marches across Europe.

9th meeting of the EU Milk Market Observatory (September 23, 2015)

Representatives from DG Agri, the dairy industry, traders as also milk producers have presented the latest figures for the dairy market. Milk production in Europe has increased 1.1% in the first 7 months as compared to 2014. In the 4 months since the end of milk quotas, production has increased by 2.8% as compared to the previous year. Experts predict a moderate increase of 0.9% for 2016.

Private storage has been petitioned for over 150,000 tonnes butter and almost 50,000 tonnes skimmed milk powder. The volume of SMP offered in terms of intervention has reached close to 20,000 tonnes. Majority of these stocks have come from Belgium (7,625t), Lithuania (4,608t), Poland (2,572t) and Ireland (1,633t). France contributed a further 169 tonnes 3 weeks ago.

Prices for skimmed and whole milk powder, butter and cheese are showing a slight upward trend. Industry is being cautiously optimistic, though "there is too much milk on the world market and it will be a while before supply and demand align once again." The European Commission welcomes the rise in international milk price on Fonterra's Global Dairy Trade auction platform in New Zealand. However, the rise is price is attributed to the clearly reduced volume, the lower than expected production (-2 to -3%) for 2015/2016 and the exceptionally high number of cows slaughtered in recent months.

Presentations from MMO meeting on September 23

Regina Reiterer, EMB