Dairy farmers’ offspring ‘driven from the industry’ as quotas end

MANY European dairy farmers believe their sons and daughters will be driven out of the industry by downward price pressure when the quota era ends in 2015.

Members of the European Milk Board (EMB) at an ICMSA-hosted seminar in Dublin called for EU Commission backing for a central monitoring agency that would give producers a fairer share of the retail milk price. The representatives from 14 European states also said they want protection against cheaper non-EU milk imports.

Swiss EMB representative Martin Haab said dairy farmers in Switzerland have been severely hit by their Government’s decision to exit the quota regime in May 2009. The plan was originally unveiled in 2002, with promises of a soft landing, with supports for the 2003-2006 transition period.

“The changeover to a free market economy meant that there would be no restriction on imports and exports of cheese. We were told that the millions of EU citizens would welcome Swiss cheese, and that that sector would expand by 20%.

“In fact, cheese production only increased by 2.3%, while cheap imports of inferior quality are increasing by the day. Imports are up 25% as a result of the free trade regime. Now the industry and the retailer can freely exploit the farmer. My production costs are 65c a litre, and I’m getting 45c.”

The switch to free market has also led to greater volumes of domestic Swiss dairy product going into intervention, replaced on the shelves by cheaper imports.

From October 2008 to October 2010, the average Swiss milk price decreased by 25%, and the amount of butter in storage, as at mid-February 2011, was 7,311 tons, a figure which is 75.5% more than the same period in 2008.

EMB vice-president, Dutch-based Sieta van Keimpema added: “The farmer’s income is only half that of other EU citizens. If you continue to have that low pay, higher production costs and low retail price, people simply will not continue to be dairy farmers.

“Increasing production levels is not the answer. It is all very short-term thinking. If you don’t give people an income, they will leave farming. We now have 4.5 million less farmers in Europe than when we started.”

One proposal agreed upon by the 14 EU states represented in Dublin was to create a central monitoring agency to protect dairy farmers from being undercut by non-EU imports and give them a stronger platform for their negotiations.

EMB president Romuald Schaber welcomed some recent EU Commission dairy initiatives, but criticised the low limits of overall milk production that it is proposing on co-op-style “producer bundling” by farmer groups pooling their milk for sale. He said the limits of 3.5% at European level and 33% at national level ignored the real situation of the dairy sector.

He noted several individual dairies have a bigger market share than the proposed “bundling” limits and cited the example of ARLA Foods, that holds 95% of the Danish market, and Friesland Campina, which holds no less than 8.8% of the total European market.

German-based Mr Schaber said: “We are told, again and again, that cooperatives plan to unite more at a European level and that trend is already identifiable.

European and national politicians need to have this reality in mind if they want to strengthen the position of farmers in the food chain — as they have expressed on numerous occasions.”

Jackie Cahill, president of the Irish Creamery Milk Suppliers Association (ICMSA), the Irish constituent of EMB, added: “We see a relentless consolidation of already huge companies at processor and retail level without any concern being expressed by the commission, while the food producers and farmers receive no support for their efforts to consolidate.

“The commission seems happy to watch the power to get decent prices continue to flow away from the people producing the food and towards the massive and dominant intermediaries in the food chain.”

The monitoring agency proposed by the EMB would operate at European level. It would need to be empowered to supervise production costs and prices, as well as supply and demand.

This agency would determine whether producer prices are cost-covering and ensure this objective through fixing “price bands” which will determine the volumes to be produced.

“Given the completely unequal positions of the dairy market chain and the significance of dairy production for European society, such an agency becomes absolutely vital.”

Jackie Cahill noted a similar Irish experience regarding the long-term decline in farmer share of final retail price.

“In 1995 in Ireland, the milk producer’s share of the retail milk price was 43%. By 2005 that had fallen to 36% and by 2009 that, in turn, had fallen to 26%. The trend is unmistakable and unless it is addressed in a way that fixes a fair portion of the final retail price for the milk producer then the long-term future of Europe’s family farm must be considered very doubtful.

“Consumers want cheap food and under the guise of giving them cheap milk, the giant multiple retailers have simply wiped out the margins of the dairy farmers.

“It’s a real European problem that will require a real European solution.”