THE European Union wants national competition authorities to investigate why huge drops in the prices paid to farmers for milk, butter and cheese are not being passed on to consumers.
Nobody is sure who is taking the profit, but farmers are definitely not benefiting as they are now getting less for a litre of milk than it costs them to produce it, a report from the European Commission says.
They have launched an investigation to find out exactly where the money goes as milk leaves the farm, goes through processing factories and into the supermarkets.
So far, they have found that farmers are getting 39% less for butter, 18% less for cheese and 3% less for milk. At the peak in 2007-08, prices increased an average of 14% on supermarket shelves but despite the drop in the price to farmers, prices to the consumer has been cut by only 2% on average.
The EU’s competition officials are investigating to see if there are anti-competitive practices, such as a cartel or price-fixing, operating in the food chain.
“If they find there is, they will not hesitate to act,” they warned.
Agriculture commissioner Marian Fischer Boel said that national authorities must get involved and gather more data to help discover just where the money is going.
“We need a much more transparent system to track where the money is going from the primary producers to the supermarket shelves,” she said.
In the meantime, farmers are suffering as prices have dropped from a high of 40c a litre two years ago to 20c a litre in some parts of the EU, including Ireland — less than the cost of producing the milk, Ms Fischer Boel said.
She ruled out cutting back on quotas — the amount of milk farmers could produce — and said quotas should not be made the scapegoat of the crisis.
Farmers are producing 4.2% less than they are allowed under existing quotas, she said, and it was important to remain on course to phase out the quota system over the next few years.
The problem has been created by consumers cutting back on the amount of dairy products they consume because of the price increases last year, and this has been exacerbated by the economic crisis now.
“I don’t understand why consumers cut back on milk, but not on soft drinks like Coca Cola for which they are paying more,” she said.
In Dublin, a litre of milk costs about €1.14, compared to Coke at €1.35 in some supermarkets.
She ruled out paying farmers to kill their dairy cows saying it would be like “feeding a dog with its own tail” as it would upset the meat market.
Instead, they will try to extend the school milk scheme, extend intervention to the end of February, allow member states to pay up to 70% of direct payments to farmers early, allow countries to double to €15,000 the amount of state aid to farmers on top of the export refunds, and €5 billion included in the single payment scheme linked to the milk production.
IFA National Dairy Committee chairman, Richard Kennedy, said that while some of the measures would help support markets, the commission needed to go further and implement demand-boosting provisions to rebalance markets and speed up a lift in dairy product prices.
Mr Kennedy also welcomed the EU’s commitment to monitor and tackle the power of retailers in the food chain. “We need regulation of the retail food chain, to ensure farmers receive a fair share.”
Mr Kennedy added that state aids being used to provide some farmer supports was a retrograde step which would discriminate between dairy farmers in different member states and would undermine the foundation of the Common Agriculture Policy.