Fixed prices can combat CAP reform, says Lactalis

By Chris Mercer

- Last updated on GMT

Related tags: Skimmed milk powder, Milk

France's largest dairy processor, Lactalis, wants the industry to
introduce fixed prices for dairy products in order to cope with
unstable markets and insulate against cuts to EU export subsidies.

Lactalis, which owns France's well-known President and Société brands, said that price differences between regions and individual processors left the French dairy industry more exposed to recent EU subsidy cuts for commodity products.

The firm, faced with this challenge, now wants the industry to unite in drawing up new regulations that would include a fixed pricing system.

"We want to have all companies charging the same,"​ said Lactalis spokesperson Luc Morelon, indicating that some French dairy companies were acting irresponsibly by cutting the price they paid to producers too much.

Even so, Morelon said further cuts to farmgate prices were inevitable. "We want a national agreement but this has to take into consideration that the price has to reduce even more."

French producers have staged numerous protests outside Lactalis factories in recent weeks after the firm told them it would have to drop prices in light of further EU subsidy cuts across the commodity dairy sector on 1 July.

"It will take a long time but we want a new system, which respects the state of the market,"​ said Morelon.

Lactalis said in a statement that France's dairy industry had proved itself capable of fixing milk prices in the past.

If achieved, the 'united industry' approach would be markedly different from the current climate in the UK, where liberalist, free-competition policies allow individual processors to set their own farmgate prices.

Lactalis recently increased its UK operations after buying cheese producer McLelland. Morelon said the firm had not encountered too many difficulties working in the British system.

At the start of June, the European Commission's Milk Management Committee voted to slash refunds on whole milk powder by 16.8 per cent, from €65 to €54 per 100kg, and skimmed milk powder by around 46 per cent, from €28 to €15 per 100kg. The committee also voted to cut intervention support prices for butter by 7.5 per cent from 1 July.

The EU's CAP reforms, agreed in 2003, pledged to cut the intervention, or guaranteed minimum, price for butter exports outside the bloc by 25 per cent over four years. The reforms also pledged to chop skimmed milk powder prices by 15 per cent.

The move has affected dairy processors across the EU. Scandinavian dairy firm Arla Foods said last autumn that many European producers were reducing skimmed milk powder output by as much as 20 per cent in the peak season because of the impending EU price cuts.

Related topics: Markets, Pricing Pressures, Lactalis

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