EMB says drought spells trouble for sector in crisis

By Jim Cornall contact

- Last updated on GMT

The EMB said financial aid is useful in addressing the direct effects of the drought
The EMB said financial aid is useful in addressing the direct effects of the drought

Related tags: Milk, Dairy

Due to the consequences of the ongoing drought, farmers all across Europe are facing major difficulties.

In the dairy sector, developments in recent years have only led to the situation becoming even more acute, according to the European Milk Board (EMB).  In the throes of the dairy crisis, reserves were completely decimated and, in many places, debts piled up, the organization said.

Decreases in yield and failed harvests are hitting producers hard, and the EMB added rising feed costs lead to increased pressure and are leading to growing financial deficits.

The EMB said financial aid is useful in addressing the direct effects of the drought, and milk powder from EU intervention stocks should currently be kept off the market because this would put further pressure on the already low milk prices, which are currently averaging around 33 cents/liter in the EU.

Looking for solutions

President of the EMB Erwin Schöpges said it is important to work on short- and long-term solutions.

"A mechanism that would bring the long series of crises in the sector to an end is an indispensable element in this regard. It should contribute to producers being paid prices that actually cover production costs – including a decent income – and thus allow farms to operate sustainably and to survive,"​ Schöpges said.

Boris Gondouin, EMB executive committee member and French dairy farmer, believes progressive crisis management is the only way to ensure farms stay alive and extreme situations like the current drought can be dealt with better.

"Since the 2000s, droughts have become more severe and much more frequent both in France and beyond. It shows that it is important for us to earn enough in the so-called normal years without digging into our savings, so that we can fall back on them during such more difficult years,"​ Gondouin said.

"But this would only be possible if instruments such as the Market Responsibility Programme (MRP) were integrated into the EU Common Agricultural Policy (CAP)."

MRP benefits

The EMB-developed MRP promotes temporary adjustment of production volumes so collapsing milk prices can recover. Flexibly adapted to the market situation, different phases of the MRP can be activated – voluntary production cuts is one such example.

The MRP prevents value creation losses that massively weaken producers, the EMB said. To meet the many challenges of sustainable, environment-, animal- and climate-friendly dairy farming, crisis-proof markets and cost-covering prices for producers are needed.

EMB vice-president Sieta van Keimpema said the MRP is an important step toward a common agricultural policy, reducing what she said is an inequality as different European countries deal with the situation differently.

"Some countries are currently supporting their producers during the drought, while others are very reluctant to do so. The MRP adopts a different approach. As it would apply in the same way to all countries in the European Union and would also predict and avoid crises at EU level, it would help stabilize the dairy market as a whole, which, in the end, would benefit all EU producers," ​van Keimpema said.

Increased payment

In the UK, dairy company Dairy Crest announced last month that due to the extreme weather conditions, it was making a supplementary payment of 0.5ppl from September 1, 2018 for its Davidstow farmers.

Chris Thomson, group procurement director at Dairy Crest, said, “We are acutely aware of the challenges our farmers are facing at the moment due to the extremely hot and dry weather and we are pleased that we can support them during this difficult period​.”

Related topics: Markets, Pricing Pressures, Fresh Milk

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