Dairy players speak out on impact of volatility and deregulation

By Guy Montague-Jones

- Last updated on GMT

Related tags: Dairy supply chain, Price, Milk, Eu

A European Dairy Association (EDA) seminar has illustrated how different actors in the dairy supply chain are being affected by price volatility and deregulation.

Kicking off the “The Dairy Supply Chain Revisited”​ seminar in Brussels on 3 February, Estonian farmer Hillar Pulk told delegates how the milk price, which once accounted for 70 per cent of his income, now only accounts for 20 per cent.

Diversification has helped Pulk survive reduction in milk prices and state support but the farmer said he was not sure that other Estonian farmers would be able to survive for much longer under current conditions.

Competitiveness

Giving the view of an ingredients supplier, Daniel Morrissey from US-based Abbott Global Nutrition, said EU dairy ingredients are in general more expensive that US or Oceanic ingredients.

Morrissey said the removal of quotas and the reform of the EU price support models must be supported to improve competitiveness. The director of global procurement also said US pricing is much more transparent than it is in the EU and that this lack of information in Europe can disadvantage all parties.

Paul Campbell from Fonterra told delegates that a new market infrastructure should be put in place along with robust risk management tools to ensure that dairy products remain competitive with other food sources.

Pricing systems

Campbell said components of this new market infrastructure are being installed, such as the independent auctioning system, ‘Global Dairy Trade’. He said this is an independent and transparent auctioning body that provides credible product prices based on real transactions.

But Ake Hantoft, vice chairman of the board at Arla Foods, said the cooperative system gives more certainty to farmers than the auctioning system. Hantoft said the co-op method, which is governed on the “one person, one vote” principle, takes into account situations where more or less milk is produced, deals with competition, and is simple, open, and extremely fair to all parties.

Summing up, EDA president Werner Buck said the new market reality brings opportunities and challenges that all partners in the supply chain will have to adapt to. To ensure the long-term survival of the EU dairy sector, he said the industry must keep adding value to milk.

Related topics: Markets

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