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.
Focus on issues

The European dairy sector: 2014 or the challenge of the future

momagri Editorial Board

2014 represents a pivotal year for the European––and especially French––agricultural sector. It is a year of transformation during which agriculture must prepare for radical changes in 2015. The end of the current CAP, the impending––and already controversial––French legislation on the future of agriculture, the European elections next May and the upcoming elimination of dairy quotas are the many challenges facing all involved in European agricultural and agribusiness activities, in a context of the structural instability of agricultural markets.

Accordingly, one of the key challenges in 2014 will remain the upward and downward hyper-volatility of agricultural prices. This is a particularly sensitive challenge for the dairy sector, which has been in a constant state of crisis since 2007 since price volatility directly undermines agricultural revenues and the survival of farming. But this challenge is not the only one. The sector must also tackle, especially in France, the growing imbalance between production costs and prices, as well as the strained trade relations between producers, processors and retailers. Dairy farming is declining in France: Between 2000 and 2010, over a third of dairy farms vanished into thin air. To make matters worse, the latest report issued by the Commission for Prices and Margins in 2013 indicates that higher milk prices do not offset higher production costs for cattle farmers, and thus milk prices are far from providing farmers with the same revenues they earned in 2006.

How then can we defend the ability to preserve the French and European dairy industry while controlling its scope? How can we prevent the risk of a milk production breakdown against the demand in a context of increasing uncertainty, and ultimately redesign new regulatory procedures after the elimination of milk quotas in 2015?

Can the solution be found in Brussels?

During a Council of EU Agriculture Ministers chaired by Dacian Ciolos on December 16, 2013, the 28 member states officially adopted the regulations for the reformed CAP that will take effect on January 1, 2015, and the transition rules for 2014.

The meeting also provided an opportunity for Dacian Ciolos to present the results of the September 24, 2013 Conference on the EU Dairy Sector that was attended by momagri, and to address a crucial issue: How and under which conditions will the trade management tools in the new CAP––safety nets, trade organizations and emergency measures––be effective in the event of a crisis? The Commissioner asked the Council and the Parliament to hold discussions that will enhance the Commission’s report on the topic to be issued before June 2014.

Several countries, such as France, already welcomed the Commissioner’s proposal to shortly set up an entity to monitor trade and, together with other member stare––such as Poland, Portugal, Finland, Austria and Spain––are calling for an actual groundwork for the post-quota years in the form of safety nets in the event of a crisis. But disagreements between member states are already surfacing. A group of nations including Luxembourg, Germany, Denmark, Ireland and the Netherlands are calling for more flexibility, and are planning to significantly increase their dairy production following the elimination of quotas.

Yet debates do not serve as decrees. While some local initiatives are popping up with a view to the post2015 years, such as the “flexi-security” project carried out in 2011 and 2013 by French dairy areas to adapt farms to the price volatility of milk and production inputs, there is a lack of global and forward-looking strategic vision for the European dairy sector.

The year 2014 should see a renewed commitment to pursue the legislative work regarding the upcoming CAP, or the concrete implementation of the trade monitoring commission advocated by Dacian Ciolos. Yet the European dairy sector is subject to structural market volatility in a context of latent economic crisis. The risk of price reversals increased by budgetary constraints dictated by the new CAP will only further weaken the sector.

However, the European Commissioner is questioning the effectiveness of the current tools in a long-term crisis, and thus the relevance of an additional counter-cyclical management system in the event of a crisis.

For the time being, there is no credible alternative to the current system based on the decoupling of subsidies. Yet, the recent studies conducted by momagri are showing the economic and budgetary relevance of counter-cyclical aid coupled with specific and non-automatic mechanisms to manage markets: Sustained stabilization of sales, effective efforts to fight volatility and the crises they generate, as well as better use of budget resources and a long-term strategy that benefits agricultural economics.

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Paris, 21 June 2019