EU to investigate dairy sector profits

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The EU has limited scope to help struggling dairy farmers over the next two years, but is investigating whether big supermarkets are using their buying power unfairly against them, a European Commission report on the dairy market situation shows.

The Commission “is examining potential anti-competitive practices in the food supply chain, especially the dairy sector,” said the report, released yesterday (22 July). 

“If the Commission finds competition is not functioning, it will not hesitate to act using all its powers,” it added. 

Need for market transparency

Measures to improve transparency on food prices could also help the markets function better and identify problems.

“A permanent Europe-wide system for monitoring food prices could be set up, with comparable price and quality information at producer, processor and retail levels,” said the report.

It also suggested that farmers could work together to counter the bargaining power of the big processors and retailers. 

Sieta van Keimpema, president of the Dutch Dairymen Board, said supermarkets should have been investigated a long time ago. 

“If you look at the margins, you can see that a margin for a milk producer is zero while the margin for a supermarket can be around 40-60% for dairy products,” she said.

“The European Union could make rules so that every part of the chain gets an equal part of the profit,” she added.

French milk producers welcomed the decision to keep a closer eye on supermarkets but were not very optimistic on the outcome.

“Everyone deserves to earn a living,” said Florence Loyer, chief economist at French milk producers’ group FNPL. “But we are not naive on the results of such work. It’s always very complicated to obtain the real numbers.”

No extra EU money for 2010, no to reduced milk quotas

As to more EU help for the dairy sector in general, “the possibility to finance new measures in the dairy sector in budget year 2010 […] seems quite limited,” the report added. “In budget year 2011, the margin of manoeuvre is similarly limited.”

The Commission said that although EU funds were limited, EU countries would be allowed to extend state aid to dairy farmers in crisis and that €15,000 per farm would be an appropriate level. 

The Commission also refuses to revisit the agreement reached late last year on the abolition of milk quotas by 2015. The EU executive said quotas should not be made the scapegoat for the difficult situation on which the dairy sector market situation finds itself (EURACTIV 20/11/09). 

(EURACTIV with Reuters.)

The European Parliament's agriculture committee MEPs judged the measures taken or envisaged by the European Commission to resolve the current crisis "inadequate". A majority of committee members called for readjusting milk quotas decided as part of the common agricultural policy (CAP) health check last year.

Meanwhile, the Commission's commitment to phase out milk quotas was welcomed by a British Conservative agriculture spokesman, MEP Richard Ashworth. He also called for a radical rethink of the whole organisation of the milk food chain and more focus on "innovative marketing of milk products".

Agriculture Committee Chair Paolo De Castro MEP (S&D, IT) said the situation in the dairy sector could soon be addressed in a parliamentary own-initiative report. 

Copa-Cogeca, the European farmers and agri-cooperatives association, stressed that the crisis will not have gone away by 31 December 2009 and called on the EU-27 to put forward a specific budget for 2010 to "ensure the dairy sector's survival". 

The EU dairy market situation has significantly deteriorated over the past 12 months. A considerable fall in milk prices is severely affecting dairy producers' income, triggering social unrest and repeated demonstrations amongst dairy farmers, particularly in France, Germany, Belgium and Luxembourg. Yesterday (22 July), angry farmers again invaded the EU capital and blocked traffic in Brussels with their tractors for most of the day. 

According to the European Commission, producer milk prices have come down from 30-40 cents per litre to an EU-27 average of 24 cents per litre, and in some cases less than 20 cents.

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