Dairy farmers call for better risk management tools

By Guy Montague-Jones

- Last updated on GMT

Related tags: European union

European farmers have called for better risk management tools and the maintenance of EU market management measures at a hearing on the long-term future of the EU dairy supply chain.

Speaking at a meeting of the newly created EU High Level Group on milk, Padraig Walshe, the president of European farming association Copa-Cogeca, said EU farmers experienced a 12.2 per cent drop in incomes last year. Dairy farmers were particularly badly hit as milk producer prices hit record lows in 2009.

To help prevent price volatility resulting in unacceptable income volatility, Walshe said: “The development of appropriate market risk management tools is an absolute necessity for dairy farming as well as the maintenance of CAP direct income support payments.”

Market intervention

Copa-Cogeca argues that the current intervention system for milk and dairy products must continue to be recognised as “one of the cornerstones of EU market management.”

In particular, Juha Marttila, vice chairman of the Copa-Cogeca dairy working party said: “Intervention should set a floor price to prevent a complete market collapse.”

On the question of how the dairy supply chain should be redefined to ensure a fair relationship between producers and processers, Walshe recommended closer ties.

He said: “Market risks could also be better managed if there are incentives for developing collective strategies and enhancing cooperation between dairy chain operators.

“This would go hand in hand with strengthening producers’ bargaining power in the food chain and guidance on contractual relations and market transparency.”

Processor perspective

Last week, Joop Kleibeuker, the general secretary of the European Dairy Association (EDA), which represents the interests of dairy processors, gave his views on dairy supply chain reform to DairyReporter.com.

Kleibeuker warned against the use of standardised contracts to correct supply chain imbalances. He said policy makers must appreciate the complexity of the current supply chain and the resulting need for a flexible approach.

The EDA general secretary also argued against the introduction of intermediaries saying that all negotiating partners in the supply chain should have economic responsibility for the goods in question.

Regarding the volatility of farmer incomes, Kleibeuker said that in a more liberalised dairy market there is a need for risk management tools like forward contracting and insurance.

Related topics: Markets

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