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Read our decryption: the milk crisis four questions
the action , expected to last several days, is to force the dairy group to set a purchase price of milk to producers higher. This rate continues indeed declined since the end of milk quotas in April 2015. With this measure put in place in 1984, the European Union (EU) gave previously to each member country a maximum volume of milk production . The aim was to regulate the market. And if a country exceeded the quota, he was entitled to a fine. But facing a global demand exploding, the EU decided to end these quotas to allow its farmers to produce more.
Gerard You , and agricultural economist responsible pole dairy Situation and economic studies at the Institute of livestock is this European decision is the cause of falling prices. According to him, this crisis affects almost all European producers.
The end of milk quotas in the European Union, took place in April 2015, she is the main reason for the crisis in this sector?
There is currently a double crisis. One linked to the offer too dynamic since the end of milk quotas. And the other, related to a drop in demand, especially for two years with the Russian embargo and the lower Chinese demand. So, mechanically, prices fall
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The EU is the main exporter in the world with New Zealand, the US, Australia and Argentina. But for eighteen months, the bulk of production growth is in the EU. This is the only pool to experience strong growth. Most observers had not planned large increase in production after the end of quotas. This was particularly the case in Northern Ireland, the Netherlands, Belgium or the UK.
European producers were they all well prepared the end of milk quotas?
Some countries in northern Europe were prepared for it before the end of quotas. They have invested in their production capacity, in their livestock … As of 2014, production increased in these countries, even exceeding the quotas and pay fines. Although they have somewhat slowed early 2015, the potential was already there. Furthermore, in Northern Europe, processors are exclusively cooperatives. They made a choice by transforming all the milk they receive, the market is good or not. The farmer therefore has less stress.
France had also prepared, but it is in a particular situation. In France, where the collection is managed 55% by cooperatives, the other part is collected by private companies. These companies (Lactalis, Danone …) replaced the quotas by contracts with farmers who define in advance the volume to be produced. This allows them to adjust the collection closer to their needs, and to limit price volatility. So when the market pulls down, Lactalis lowers prices.
This framework is one of the reasons for not growing in France after the end of milk quotas. This explains in particular the complicated relationship between farmers and processors.
are European breeders all affected by this crisis?
the conjecture is difficult for all farmers, especially for those who have invested. Today in France, the average price is 270 euros per 1 000 liters, while the price of milk needed to cover expenses is around 300-310 euros. In Northern Europe, farmers are paid around 220 to 230 euros. They lose money too
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but the challenge in France is the distribution of the value of milk production between the various links in the chain. Here, farmers are less consolidated and therefore weigh less in the negotiations face a big company like Lactalis. Unlike in northern Europe, for example, where large cooperatives are the masters of the game.
The protests in France are often turned against public power. There it is against Lactalis, which is a global operator that makes profits but which apparently pays less than other operators. Since the end of quotas, no more public regulation. Breeders are abandoned to the volatility of the market.
Will we then headed to a rebalancing and a decline in milk production in the EU in the coming months
Since spring 2016, there has been a slowdown in production. But short-term, farmers, individually, have no interest to raise the foot. They have large overheads. Lower production would not solve their own situation.
So, collectively, a production that does not slow drives prices down. But growth begins to lean. Breeders are forced to stop with the cessation of activity, bankruptcy, some have cash flow problems. They are forced to slow down.
There will be a downturn. I hope it will participate in the market recovery. It will find the right prices in some time, but not before six months
Read our report. They produce from father to son milk: “It pushes us to go into debt, is anything “
the European Union announced it a month ago the establishment of a new emergency plan of 500 million euros support the dairy market and encourage producers to reduce their volumes. Does this help good news?
This is going in the right direction but it is done on a voluntary basis [Only producers who decide to produce less will be entitled to financial compensation] . It comes a little late and it will not have much effect. Production is already less dynamic
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This assistance may however benefit producers who are not in a investment logic. Those who have invested have no choice but to continue to produce. It should have been blocking the growth at some point. And return to quotas, why not, but the North does not want it. But with this deregulation, the dairy sector discovers that saw the pig sector for thirty years
Read also:. 5 misconceptions about milk quotas
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