New milk woes
SOS Faim, Défis Sud review, n° 128, december 2015-january 2016
The milk crisis in Europe and throughout the world continues to generate debate. In 2009, this sector experienced one of the darkest periods in its history and for a little over a year it is once again is facing the worst difficulties.
The latest issue of Défis Sud1 by the NGO SOS Faim (SOS Hunger), has devoted a full report on this highly worrying crisis. In an article entitled “new milk woes” (extract below), the author discusses the factors that led to the current situation: overproduction linked in particular to the Russian embargo and a slackening in Chinese demand, as well as falling prices and incomes. In Europe, this sector has also suffered from structural deficits and from a lack of political courage in a Europe in search of a strategy.
In the north, but also in the south, milk has become a particularly sensitive subject in agricultural news, and a source of major and permanent economic and social conflict in several countries. In Tunisia the milk crisis is at its worst, while the issue of the independence of the African continent for its milk production is still being raised.
The solutions currently put forward to stem the milk crisis seem necessary but insufficient for a permanent remedy. We must get to the root of the problem in order to address the structural instability of markets to limit the harmful effects of uncontrolled price volatility. When will there be a global awareness for the necessity of regulating agricultural markets?
momagri Editorial Board
How is the dairy sector doing? In Europe, it is not at its first crisis. In the South, it is suffering the consequences of overproduction and massive exports. A recent history.
Wednesday, 9th September, Jean-Claude Juncker, President of the European Commission in his speech to the European Parliament on the state of the Union in 2015, evoked European farmers protesting in Brussels that week:
"I agree with them, there is something that is not working properly in the market if a litre of milk costs a third of the price of a litre of water. Yet I do not think we can or that we should have to micro-manage the milk market from Brussels. We need to compensate farmers who are suffering the effects of sanctions against Russia. This is why the Commission has put a solidarity package of 500 million Euros on the table for farmers. The authorities for European and national competition need to closely study market structure. Something happened in the milk market. My impression is that we need to break down a few oligopolies in the distribution sector”.
2015 was not the year for solutions
Yet, the Commission's 500 million in aid, a lifeline in the midst of yet another milk crisis that erupted last summer, will not solve a fundamental problem: the drop in milk prices is the direct result of European overproduction. The emergency aid package settled on 7th September 2015 by the European Agriculture Commissioner, Phil Hogan, is delaying the implementation of necessary structural measures, in particular combating agricultural price volatility, measures that necessitate the involvement of the retail sector. Last November, exasperated representatives of the European trade union European Milk Board (EMB), which represents milk producers from 15 countries, including Belgium, in an open letter demanded the resignation of Commissioner Hogan, who according to them is unable to resolve the sector’s crisis.
At the same time, many organizations for farmers in the south (Network of organizations, farmers and herders in Africa, the national federation of agricultural organizations from Senegal, Benin, Togo, Mali, Niger and Burkina Faso) responded to the call from Belgian NGOs to create an international solidarity movement around the claims of European dairy farmers. Because destabilized African markets are clearly calling for the regulation of European milk production.
Agricultural policies and trade agreements such as the Economic Partnership Agreements (EPAs) between the EU and African countries, the Caribbean and the Pacific, favour cheap exports, thereby preventing the domestic dairy sectors from reinforcing their autonomy and food security. “We agree to combat the disappearance of small, family dairy farms in Europe. Solidarity with small farmers and the preservation of family farming are the driving force for food security and sustainable development”, explained Abdou Fall, representative of the Network of organizations, farmers and herders in Africa Billital Maroobe (RBM).
Regulation through the ages
The current dairy crisis in Europe is not new. In Belgium, it is viewed as the third major crisis in less than 10 years, it affects thousands of farmers and some believe that this situation is similar to that experienced in 2009, if not worse. If we remember, at the time many farmers expressed their anger or even despair by spilling three million litres of milk in September 2009 in a field near Ciney”. “For me, the situation is much worse than in 2009, especially as at the time, our expenses were lower than today”2, explained Gérard Rixhon, dairy farmer and president of the “milk” commission within the FWA (Walloon Federation of Agriculture).
Up to the early 2000s, the European Union (EU) guaranteed a minimum milk price paid to farmers. This mechanism was central to the Common Agricultural Policy (CAP), one of the oldest and most important EU authorities. When milk prices (but also other foods) reached floor levels, the EU bought back stocks in the form of powder or butter. Stocks were either used for export or held whilst awaiting better prices. Prices were stabilized by a public body. Different CAP reforms have removed these dairy market management mechanisms until achieving the pure and simple end of European quotas last April after 30 years of regulation.
The consequences of deregulation
Certainly the (progressive) removal of quotas has enabled several northern European countries, including Belgium, to significantly increase their production to meet an increasing global demand. But the Russian ban on food produce, imposed in August 2014, contributed to clogging the European market3, while Chinese demand for milk powder, which has been growing since 2010, was abruptly halved4. A European support mechanism activated in case of price collapse exists, but it is only currently triggered when the price drops to 22 cents per litre (in France) and to 18 cents (in Belgium). France, among others, is also calling for a re-evaluation of the intervention price for milk5.
The proposals made by EMB dairy farmers call for a change of direction by refusing to continue current policy, in a context of fierce international competition, from “always more” to the lowest cost within ever larger farms. This course destroys family farming and agricultural jobs and threatens the environment in Europe and in southern countries. And only the regulation of production will allow producers to make a living from their profession, as we are tirelessly reminded by several NGOs who defend the interests of the North and South.
1 See full document by following this link :
2 Crisis in the milk sector, levif.be, 23rd July 2015
3 A third of cheese exports from the European Union were sent to Russia, as well as a quarter for butter exports. According to CBL, the end of access to Russian markets “represents a surplus of 2.6 billion litres of milk in Europe”. Cf. levif.be, 23rd July 2015
4 "The Chinese crisis risks aggravating the milk crisis for French producers", france24.com, 25th August 2014
5 The breeders’ crisis : is the European agricultural policy to blame ?, TV5monde.com, 21st July 2015