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| | End of the Deadlock for the Dairy Industry ? |
During the recent bitter open conflict opposing milk producers and dairy processors, two incidents occurred in early December that altered the situation and represent good omens for an end to the crisis that paralyzed the industry. Nevertheless, the true effectiveness of the measures relies on their future implementation.
On December 1, 2008, milk supplier farmers, cooperative groups and dairy products manufacturers reached an agreement on milk prices in the framework of a government’s temporary authorization that will remain valid until March 31, 2009. According to an industry’s press release, the agreement includes “fine-tuning a decline of prices paid to producers that nevertheless takes into account soaring milk production costs and sets the requisite for a better handling of large dairy retailing markets.” Hence, the accord dictates a decline of €25/1,000 liters for November and December, of €45 for January and February, followed by a drop of €55 for Mach. On December 12, the same Entremont-Alliance Company that had stated his intention not to implement the agreement before January finally agreed to abide by the measures of the December 1, agreement.
Concurrently, the French Senate voted, during the night of December 3 to 4, an additional article to the draft of the 2009 finance bill that restores the permanent right to set production prices to the Centre National Interprofessionnel de l’Economie Laitière (CNIEL)––the French Dairy Industry Inter-Professional Organization. The French National Assembly took similar steps a few weeks ago. This legislation takes away from the Direction de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF)––the French Directorate for Fair Trading, Consumer Affairs and Fraud Control––the precise basis of the letter it had sent to the CNIEL. In fact, the terms of that very letter were the catalyst for the blockade situation experienced by the dairy industry for the past several months. The bill even stipulates: “These practices will not be controlled by Articles L420-1 and L420-2 of the trade code”, i.e. regulations that usually apply in term of fair-trading.
These two rulings are unquestionably very positive symbols for the dairy industry. Indeed, they testify not only to the willpower of the parties involved, but also to the good sense of public authorities, who accepted to step backwards and annul a decision driven by motives that were more political than economic or strategic 2. However, the true effectiveness of these rulings will be contingent upon the evolution of the situation regarding two key issues, on which it is, at this time, too early to give a verdict.
First, if the bill voted upon by the French Parliament restores a regulating role to the CNIEL, the directive must be endorsed not only by the Conseil Consitutionnel––the Constitutional Council of the French Republic––but also by European institutions that are notably fastidious on issues of fair-trading. On this matter, one could study the creation of an independent organization in charge of price fixing 2, so that such stabilizing mechanism is compatible with fair-trading directives enacted by Brussels.
Then, the inter-professional agreement ratifies a price decline that is far from permanently resolving the crisis situation experienced by milk suppliers. If the agreement deserves the credit to provide a reference point in the current dispute, one should keep in mind that the enhanced value of milk has never been so low, a situation that threatens the livelihood of dairy farming in France as well as in Europe. The European Milk Board––a federation of milk suppliers from 14 European nations––indicated its willingness to stage a European milk strike to achieve fair and unbiased prices covering production costs (a minimum of €400/milk ton, according to the federation).
If recent events can alleviate the dispute affecting the dairy industry in the coming weeks, an exit to the crisis remains undecided. Indeed, the mechanism of inter-professional negotiations approved by the French public authorities’ special dispensation is only a means to an end. It is not a substitute for the necessary regulating price policy of agricultural––and particularly dairy––markets, a course of action that will stabilize supplier’s income and provide secure production conditions.
We should hope that we would not wait for the end of milk production capacities on French soil to witness the enactment of a regulating policy. This is the goal of momagri’s strategy, which calls for a future CAP focused on a strategic course aiming to maximize agricultural markets through food security and economic effectiveness.
by momagri’s editorial board
1 Indeed, we cannot dissociate the DGCCRF’s decision from the French Government’s will to link agriculture with market mechanisms––as aspired by the European Commission––and with the French President’s often stated willingness to increase the purchasing power of French households.
2 Please visit www.momagri.org for our November 24, 2008 article “The Dairy Industry Crisis: A Case Study”. | |
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