Processors attack fixed price amendment to EU dairy package

By Guy Montague-Jones

- Last updated on GMT

Related tags European union Dairy Eu

An amendment to EU dairy rule proposals requiring that prices be fixed for no less than a year will weaken the EU dairy industry, claims the European Dairy Association (EDA).

MEPs of the Agriculture Committee voted this week to back the change put forward by the Rappporteur Jim Nicholson, a Northern Irish MEP.

The Committee claimed that the current situation, whereby milk prices may be set only on delivery, means farmers must sell milk without knowing how much they will earn.

Global market

But the European Dairy Association (EDA) claims that giving farmers a year of price visibility is not in the interests of processors, or even farmers themselves.

“A fixed price fails to recognise the global dimension of the EU dairy industry in which pricing is impacted by worldwide supply and demand fluctuations,”​ said EDA secretary general Joop Kleibeuker. “This approach will lead to a weakened position of the EU dairy industry on the world markets.”

Kleibeuker claimed that if prices are fixed then the EU industry will struggle to adapt to changes on the world market. For example, if global demand falls, he said the EU could be left with surpluses that it is unable to export because prices cannot be reduced.

The representative of the EU dairy processing industry added that fixing prices would be bad news for farmers as well.

When processors are under an obligation to fix prices for an entire year, he claimed they will set them at conservative, low levels to minimise risk.

If the market then remains strong, they may offer farmers a cash payment to compensate them for the relatively low prices they have received over the year. But in the meantime, farmers could face cash flow problems.

Narrow focus

The EDA is also concerned that the legislative package being considered at the EU only relates to one aspect of the recommendations made by the High Level Group on Milk in 2009. Designed to improve the functioning of the EU dairy industry, the proposals included recommendations that industry be given support for R&D and marketing work.

But Kleibeuker said: “The EU is not looking at strengthening the whole dairy sector, which is the only way to ensure the long term health of everyone in the chain.”

He said dairy once had a monopoly of the protein market but now competition from vegetable sources is intensifying and unless action is taken the industry could lose market share and see prices drop.

In the meantime, the dairy package, which focuses largely on contracts between farmers and processors, still has some way to go down the EU legislative path.

The Commission drew up the draft package in December and now that the Agriculture Committee has voted in amendments, the next step is a vote by Parliament as a whole. This is due to take place by the end of the year. Before then, the Parliament will also engage with the Commission and the Council to try and reach a first-reading agreement so that the legislative process can be concluded after the Parliament vote.

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