IDF optimistic long-term despite cost crunch

By Neil Merrett

- Last updated on GMT

Related tags World dairy summit European union European dairy association

Despite ‘see-sawing’ commodity prices during a year of supply chain uncertainty, a leading dairy industry representative foresees an optimistic future ahead.

Jim Begg, president of the International Dairy Federation (IDF), told delegates gathered in Mexico for this week’s World Dairy Summit that all areas of dairy production were being put under financial pressure, but must remain committed to nutrition and safety aims.

As a result of the current downturn, the dairy chief claimed that a long-term focus was required in to ensure profitability for the entire industry worldwide.

Euro reforms

Since July 2007, record high payouts from dairy and food manufacturers for milk and other-based commodities have fallen to a level that has driven suppliers across the European Union to protest for additional financial support.

The European commission is currently pursuing a move away from subsidised production to encourage competitiveness on the global market.

Industry wide difficulties

Begg, who also serves as the director general for the British trade association Dairy UK, said that, like farmers, all stakeholders in the dairy production chain were being affected by economic uncertainty.

“High oil prices have driven up feed and fertiliser costs, as well those for packaging and logistics,”​ he stated.

Begg told delegates that the significant recent volatility in milk markets was masking overall positively in the dairy industry. A position he attributed to the current focus for product and nutrition innovation adopted by some manufacturers.

“We must ensure that industry sees through short term pressures because we undoubtedly have a very bright future in the longer term,”​ stated Begg. “The key to realising that future is to continue producing safe, healthy products that our customers want to buy.”

CAP considerations

On a European level, the head of the European Dairy Association (EDA) told earlier this month that politicians and manufacturers may have to consider some changes to milk pricing in the bloc.

EDA secretary general Joop Kleibeuker said that ongoing discussions between farmers, dairy manufacturers and politicians needed to establish clear guidelines to ensure a more sustainable milk supply.

Kleibeuker said that while ongoing reforms to the EU’s Common Agricultural Policy (CAP), which are designed to cut government intervention in commodity production, could not be stopped, there may be room for some manoeuvre.

He therefore called for ongoing discussions over the CAP reform health check between industry and agricultural ministers to find the best way forward for a softer landing ahead of the schemes 2015 deadline to cut subsidies.

“After the high prices of last year for milk and commodities, we are reaching fairly low price levels in the supply chain,” ​stated Kleibeuker. “We are coming close to intervention levels.

In attempts for a solution to address these cost concerns, Kleibeuker suggested that all stakeholders needed to assess whether to reconsider market management instruments such as Private Storage.

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