A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
A look at the news

From Quebec to Wellington, the dairy crisis becomes global

September 14, 2015

With a new drastic fall in prices in August, the European and global dairy markets are in a state of feeding frenzy. As a result, the FAO index of dairy prices plummeted by 9.1 percent that same month.

The causes of such tension in dairy markets? They are mainly based on a milk surplus (supply exceeding demand) linked to falling oil prices, the Russian embargo extended to August 2016, the drop in demand from Chinese consumers and China’s massive investments to develop its own domestic and foreign milk facilities––for instance the Sino-Russian project under construction in China’s Northeastern region and the “Chinese” Isigny plant in France.

Among the most representative examples of the current situation we note the position of New Zealand––the benchmark dairy market––that has felt the full force of falling global prices. As a result, the cooperative firm Fonterra posted price cuts of 50 percent compared to 2013, with an average price of €200/ton. The situation is all the more anxiety provoking since dairy products account for 12 percent of the country’s total exports. As it faces the crisis, Fonterra has eliminated over 500 jobs in July.

As far as the United States is concerned, dairy farmers were up to now relatively protected from falling milk prices in global markets, but it is no longer the case today. According to USDA, the milk global price paid to farmers was $16.60 in July 2015, a $6.70 drop compared to July 2014. The situation cannot be compared to that of New Zealand’s, and if a sharp decline were to occur––similarly to the 2009 and 2012 events––many American analysts feel that the Margin Protection Program (MPP) implemented by the new Farm Bill would protect the margins of producers.

In Canada’s Quebec Province, in July 2015 milk farmers were paid $9/hectoliter less than in July 2014, leading to a deficit of about $4,500 for an average dairy farm. Yet, “Without minimizing the impact on dairy farms, managing the supply fortunately ensures that only a tiny fraction of milk sales is governed by global prices,” says the spokesman of the Quebec Milk Producers (PLQ) association. About 13 percent of the milk volumes produced in Quebec are included in the special categories subjected to global market fluctuations.

Lastly, from Europe to New Zealand, the structurally unstable nature of dairy markets is an undeniable factor. And because these markets are intrinsically volatile, it is currently impossible to forecast future price trends. Yet while the dairy crisis has become global, should hyper-volatility further weaken the farms concerned, the impact varies according to the solutions presented by the public authorities in power.

Above all, the current crisis should persuade the national and international authorities to consider renewing the global agricultural governance system around two key issues: How do we regulate without disturbing market operations? How do we implement a uniform system at the global level?

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Paris, 19 June 2019