'Ignorant' EU Council blocks vital dairy reforms, EMB

11-Oct-2011 - Last updated on 13-Oct-2011 at 13:29 GMT

An ‘irresponsible and ignorant’ EU Council is ignoring the plight of milk producers by watering-down proposed measures aimed at ensuring their contracts with dairies reflect production costs, according to the European Milk Board (EMB).

The EU Parliament, Commission and Council are currently negotiating the so-called 'milk package', the Commission’s proposals to stabilise the EU dairy sector, which are due to be introduced in 2012.

Measures proposed include balancing supply and demand by improving contracts between farmers and dairies and stabilising farmers‘ incomes by strengthening their bargaining power with dairies, as well as ending associated "unfair commercial practices".

But in an outspoken attack on the Council, EMB president Romauld Schaber condemned the Council’s "obstinate attitude" in opposing reform measures to the current Regulation, EC 1234/2007, proposed by Parliament.

The Council was ignoring parliamentary proposals in its first working draft that "could at least bring about some minor progress towards overcoming the crisis", Schaber said.

One such measure proposed is an EU-wide obligation for producers and dairies to have written contracts guided by production costs, also including timing, volume and duration of agreement, negotiated by all producer organisations with dairies.

Compulsory contracts

The EMB said this measure would give producers the chance to obtain a fair price for their milk, but it warned: This will not be achieved if – as the Council evidently intends – each individual member state is to decide whether it introduces compulsory contracts or not."

An EMB spokeswoman told DairyReporter.com: "The problem is that if each member state decides where to introduce contracts, individual member states see the effect on the national market situation."

States that didn't introduce compulsory contracts would have a competitive advantage, she added, while farmers in those countries would suffer unfairly by comparison with their other EU peers. "If it's not mandatory then it won't be effective," she said. "It's a toothless tiger."

Schaber added that the Council’s working document on the milk package showed that a 'monitoring agency' – proposed by Parliament after consultation with the EMB – would not be included in the final dairy market regulation.

Parliament’s proposals for the monitoring agency included functions such as collecting market data on price, volume and costs, and Schaber said the such a market observer "would be a beginning at least".

He added: “Once the state quota system comes to an end, it is only through a monitoring agency that we can prevent damaging surplus volumes being produced and the market plunging deeper into crisis.”

Severe limits on the size of producer organisations negotiating contracts with dairies, proposed by the Council, would also be harmful, the EMB said.

These size limits involved national producer organisations controlling no more than 33 per cent of the national milk production and 3.5 per cent of EU production.

"This is not enough to give producer organisations the requisite bargaining power," the EMB said, given that dairies achieved up to 95 per cent shares of national markets within the EU.

"This enables them to simply dictate contractual terms and conditions – and with it inordinately low prices – to a producer organisation that is never allowed to achieve such numbers, it added.

Restricted bargaining power?

With this in mind, the EMB spokeswoman pointed to the Danish market, where Arla controls 95 per cent of dairy production.

However, Council proposals meant that at least 3 producers could control no more than 33 per cent of volumes, she said, which would unfairly restrict their national bargaining power.

Despite Parliament’s inclusion in decisions regarding dairy market reform, rather than just the Council and Commission working out everything amongst themselves, the EMD suggested that 'democracy' wasn't working.

Schaber said: “Unfortunately ... the old double act of Council and Commission look as though they still do not want to take Parliament’s opinion on board”.

But the EMD said it was vital to solve the crisis, given that inactivity would lead to a repeat of the Swiss situation in 2009, when quotas were abolished and no associated market regulation was introduced, as a result of which farm gate prices fell dramatically.

"The problems in [EU] milk production are not being taken seriously, and the protesting dairy farmers are simply being ignored," the trade body said.

Farmers have sufficient power

The secretary general of dairy trade body EUCOLAIT - which represents wholesalers, importers and exporters within the EU dairy trade - Bart Van Belleghem, agreed that farmers deserved a fair deal.

He said: "Although this [reform] does not impact upon our members directly, we want to make sure the farmers get a fair price for their milk, in the belief that the EU will play a vital role as a supply region for the growing global demand for dairy products."

"But that said, we're a little wary of the necessity to create new legislation for that. We already see that in the EU, a majority of the milk is being processed by co-operatives, a large majority of farmers are active in these, so there's some vertical integration there."

Moving on to milk processed by private companies, he added: "We believe that farmers already have opportunities to act together to improve their bargaining position, and we don't really think new legislation is necessary."

Van Belleghem said that, irrespective of what changes took place, they should respect competition rules applying to all industries. "We don't think that exceptions should be made for the dairy industry," he added.