In January 2008, the price paid to producers for milk will have increased almost 40 percent over the previous year. This increase will have a direct effect on the downstream industries as well as consumers, affecting the “dairy budget” of French households.
According to Olivier Picot, President of ATLA, France’s association of milk processors, French consumers will pay an additional five to ten percent for milk, yogurt, cheese and cream. Given that French households allocate an average of 1.8% of their spending to this type of product, a ten percent increase in price translates into six additional euros per month!
The French milk producers’ association (Fédération nationale des producteurs de lait) points to “unusual market pressures” in explanation of the trend, with supply adjusting very slowly to demand – one of the characteristics that differentiates agriculture from traditional economic sectors. In light of the situation, Michel Barnier, French Minister of Agriculture, recently encouraged dairy producers to increase their production by 10 to 15 percent before the end of the 2007/2008 season, in an effort to curb the price increase.
Should we conclude, then, that this “stop-and-go”1 strategy, like the one implemented under Margaret Thatcher in the United Kingdom, is the solution to the structural instability of the agricultural raw materials markets?
On the contrary, it is likely that such a policy will lead to a sudden reversal of the situation, without sufficient time to allow national and international production to adapt accordingly, especially with the uncertainty that prevails on the agricultural markets and the difficulty in forecasting what tomorrow will bring. 2 .
That is why maintaining market regulation tools suitable for all market players – producers, downstream industries and end consumers alike – has never been more essential.