A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Editorial

Milk farmers' frustration has reached breaking point



by Paul-Florent Montfort,
Analyst, momagri

After stoking the fire for a long time, the frustration of European milk farmers has now reached the breaking point, while European and national public authorities alike are struggling without reaching a solution. This is perhaps because the crisis currently affecting the dairy industry is not a temporary one: following an 18-month long instability, it might now be time to recognize that the repeated crises disturbing the industry are in fact the epiphenomena of a deep and permanent predicament. We are presenting below some elements to adopt a global approach and take stock of an industry that epitomizes the hurdles faced by players in agriculture.

There is one and only cause at the root of the crisis: the structural price instability on international agricultural exchanges––and milk is not an exception––and the plunging prices paid to farmers. Yet, the cyclical price drop for milk powder and butter in 2008 would not have borne a serious impact for the industry if the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes, or DGCCRF (the French General Directorate for Trading, Consumer Affairs and Fraud Control) had not decided, in September 2009, to end the collective inter-professional negotiations on milk prices that was specifically implemented to reduce the price instability’s spikes and crashes.

Making the situation worse, the surge in production costs (a 20 percent increase between October 2007 and October 2008) put farmers between a rock and a hard place, while the progressive deregulation anticipated by the CAP’s Health Check (phasing out milk quotas by 2015) translated into an even more uncertain market.

Since then, holding back milk supply or “milk strikes”, blocking deliveries to dairies and product delisting in distribution sites followed one after the other and, far from finding a resolution, the conflict slowly turned ugly and reached processers, retailers and the public arena.

Indeed, the interim agreements and measures were not enough to return the dairy industry situation to normal. The collapse of the December 1, 2008 agreement, which was reached catch-as-catch-can after several hours of negotiations between manufacturers, producers as well as cooperative organizations, and which made provision for revising down prices paid to producers by taking into account the significant surge of their operating costs, proved on the contrary that the crisis was far from being a temporary one. Acknowledging the gravity of the crisis, the European Commission even yielded to its sacrosanct principles by reinstating export subsidies and regularly increasing public milk purchases to impact demand. But one cannot solve a permanent crisis with temporary means.

Moreover, neither manufacturers nor producers are fooled: the latest crisis meeting this past May 5, held under the CNIEL1 authority and expected to find a new temporary agreement between the various players in the industry, ended in less than an hour with the parties’ total disagreement.

Today, all sides unanimously concur on one word to define the dairy industry situation––a disaster––as illustrated by thousands of liters of milk spilled in fields (particularly in France and Belgium), a string of suicides among milk farmers in the Manche département and desperate measures. The turmoil in the dairy industry is provoking the involvement of politicians, and even the input of Breton bishops condemning farmers’ inadequate income, albeit triggering any noticeable progress.

The European Commission, whose reaction is eagerly awaited, seems to have run out of ammunitions. Its latest report on the issue did not offer any solid exit strategy to the industry’s downturn and returned the matter to member States. Through easing terms for the payment of direct incentives and a proposal that would consist in favoring shutting down some farmers’ operations by buying out their quotas, the Commission leaves to each State the task to restructure the industry by assisting some farmers to ride out the bad times and/or by assisting others to cease their activity. In other words, there is no structural program to reenergize the industry and reorganize production in view.

Yet, the successive crises now experienced by the French and European dairy industry during the past several months are only warning signs of deeper trouble. And as long as in-depth measures are not taken to deal with the root of the problem––i.e. that related to the regulation of agricultural markets––crises will occur in rapid succession.

Because there really lies the issue at hand: the crisis currently affecting the dairy industry is first and foremost a global regulation crisis. The progressive abandonment of the CAP tools, in the name of “bridge-building between agriculture and free market economy”, mostly resulted in subjecting agriculture to the hyper-volatility, which characterizes the free market economy. Farming operations cannot endure such fits and starts, since they regularly lead farmers to sell their products below production cost, as is currently the case in the dairy industry. Consequently, the way out of the crisis is not through an increase of economic incentives but in the implementation of a genuine structural reorganization. Let’s hope that we will not have to wait until the current dairy industry predicament spreads to the rest of agriculture for imposing the inevitable adoption of a structural strategy.


1 Centre National Interprofessionnel de l’Economie Laitière, the French national dairy council.
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Paris, 11 December 2018