Cost pressures knocking EU milk prices

By Chris Mercer

- Last updated on GMT

Related tags: European union

Farmgate milk prices have continued to fall across the European
Union and most rapidly in France over the last year, new figures
show, increasing tension between producers and processors.

The average price paid to producers for their milk fell below €26 per 100kg in May this year, continuing a steady drop in prices across the European Union, said the UK's Milk Development Council (MDC).

Cost pressures on dairy processors, including greater market competition, retailer pressure and soaring plastic prices, have increased pressure on farmgate milk prices in recent years.

Dairy firms Arla Foods UK and Glanbia were among the biggest price-cutters, though it was the French market that has seen the biggest drop overall.

Tension between producers and processors has risen sharply in France over the last year. The shock has hit harder in France because it had the highest farmgate milk prices across the EU in 2004.

A series of protests led to an industry-wide agreement in January in which dairy firms pledged to respect a recommended national milk price.

Rows have continued, however, with France's largest dairy group, Lactalis, and its rival Sodiaal, proposing to go beyond the recommended price cut this spring.

Lactalis pulled back last week, saying it would respect recommendations. The group then joined the fierce criticism directed against Sodiaal for ignoring Januray's pricing deal.

MDC figures show Sodiaal paid producers €23.7 for 100kg of their milk in May, compared to €25 at the same time last year. Lactalis and Danone paid producers €26 and €25 respectively this May.

Milk prices in France are still above several other countries, however.

Britain, for example, has been languishing at the bottom of the milk price league table in Western Europe for some years. Producers were receiving an average 18 pence per litre of milk, according to the MDC, although some with better contracts got more.

Several protests, and even a three-day strike, have erupted in Britain over the past year, and the UK National Farmers' Union has warned current prices are simply unsustainable for producers in the long-term.

Average prices from other parts of the world, however, suggest EU milk producers are still better-off than some in terms of basic prices paid.

The MDC said farmgate milk prices in the US fell from nearly €27 per 100kg in May 2005 to €21 in May 2006. Prices in New Zealand fell from €19 to €15 in the same period.

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