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

Getting the dairy sector closer to markets,
yes but at what price?

December 8, 2014

The elimination of the milk quotas in Europe on April 1, 2015 also marks the Euronext launch of three futures contracts for European dairy products. Yet, in a context of tensions in global milk markets, talks about a collapse of the European milk market seem to indicate that this structurally unstable market is far from ready to take the step, and is not the only one.

Four months before the end of the quotas, the situation is particularly alarming and anxiety provoking by the lack of preparedness of national and European decision makers, and this in spite of the numerous warnings made by René Souchon, Michel Dantin, the European Milk Board (EMB), the Young Farmers (JAs) and our own think tank.

In fact, milk prices are falling (€0.33 a liter paid in Germany, €0.25 to €0.28 in Belgium, €0.22 in Latvia, €0.18 to €0.20 in Lithuania and €0.30 announced for early 2015 in France), while the output of member states––first and foremost of Germany––might sharply increase by 2020.

Dairy areas throughout the world are already posting too steep production increases that are heightened by the Russian embargo and faced with rising demand from emerging nations and China, which nevertheless do not meet supply, thus confirming the disconnection between supply and demand. According to the French Association of Independent Dairy Farmers (APLI), the overproduction will reach 10 million tons in 2014, with the Russian embargo accounting for a two million-ton loss of sales.

In addition, one of the major challenges remains the upward or downward hyper-volatility of agricultural prices. This is a particularly difficult challenge for the dairy sector, which has been in a constant state of crisis since 2007, since price volatility instantly undermines agricultural incomes and the survival of farms. Yet this challenge is not the only one: The sector must also confront––especially in France––the growing disparity between production costs and prices, and the strained trade relations between farmers, processors and retailers.

Uncertainty about the future has turned the dairy sector into a complex anticipation market for which price signals are increasingly coming close to self-fulfilling prophecies. The dairy crisis that threatens France has already affected the Baltic nations, Poland, Germany, Ireland and Denmark, and is pressing agricultural organizations to take action, following the example of the European Milk Board, which urgently calls for a crisis management system and for market accountability.

For without any public intervention mechanism, there is a danger that the structural volatility of prices leads to an untenable situation and fierce competition that might destroy European livestock farmers. A 2013 study from the French Livestock Institute foresaw that there would only be between 20,000 and 35,000 dairy farmers in 2035, against 68,000 in late 2013.

Yet there are concrete solutions. Ever since the September 2013 Milk Conference in Brussels, momagri has highlighted the economic and budgetary relevance of implementing counter-cyclical subsidies coupled to specific market management mechanisms. These will lastingly stabilize sales, take effective action in fighting volatility and the crises it generates, as well as provide a better use of budget resources and a long-term beneficial strategy for agronomics.

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Paris, 17 June 2019