Multi-industry agreement resolves milk crisis

The sharp decrease in the price paid to milk producers in April 2009 triggered three weeks of conflict between the producers, on the one hand, and the distributors and processors, on the other. A multi-industry agreement was signed in June, following pressure from the French government. The margins on milk and milk by-products will be subject to greater monitoring. However, milk producers remain unhappy with the prices agreed and are continuing to strike.

Low prices for producers leads to conflict

A conflict began in the French milk industry in mid May 2009 when the cooperatives informed milk producers of the price for April’s production: €210–€220 per 1,000 litres, representing a 30% decrease in the milk price in the space of a year. Industrial action mounted with blockades of dairies, supermarket supply depots and supermarkets, as well as the deliberate spillage of milk and slurry. For example, 81 dairies were blockaded in France on 25 May. Moreover, demonstrations by European milk producers took place in Brussels on 25 May, and 18 and 19 June, while a protest in Luxembourg was organised on 22 June.

The price paid to milk producers is at its lowest level since 1981 and is lower than the cost price, which amounts to about 30 cent a litre. Producers are blaming increasing quotas for the decline in the milk price.

Moreover, in May 2008, a French government body, the Competition, Consumer Affairs and Trading Standards Department (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes, DGCCRF), deemed multi-industry milk price-setting agreements to be uncompetitive. The economy modernisation law, which was passed in August 2008 and implemented in December of that year, abolished protective measures for margins and increased the negotiating power of processors.

Difficult agreement

Negotiations got underway at the end of May 2009 between the National Federation of Milk Producers (Fédération nationale des producteurs de lait, FNPL), which is a member of the National Farmers’ Union (Fédération nationale des syndicats d’exploitants agricoles, FNSEA), and the processors and cooperatives. At the outset, the producers were demanding €305 – then €290 – a tonne while the processors were offering €267. Two government-appointed mediators were involved in the talks.

A settlement was finally reached on 4 June following pressure from the government. The three branches of the industry – producers, cooperatives and private sector processors – came to an agreement on three average milk prices for 2009 based on the product share (butter and powder) in the company’s product mix that the producer delivers. For every 1,000 litres, the prices are as follows:

  • €280 for 20% of the company’s butter-powdered products share;
  • €272 for 30% of this share;
  • €262 for 34% of this share.

The three groups undertook to ‘negotiate an agreement by the end of the year to set a framework for future contractual relations between milk producers and processors’.

Government support

The Ministry of Food, Agriculture and Fishing (Ministère de l’Alimentation, de l’Agriculture et de la Pêche) is providing funding for the agreement. Some €30 million of support for hard-hit farms will help to reduce financial and social security costs and ‘boost the modernisation of stockbreeding facilities’.

In mid June 2009, the government announced the reinforcement of controls on retail margins and the creation of six working groups on ‘setting food prices and loyal commercial relations’.

Finally, on 15 July, the new Minister of Food, Agriculture and Fishing, Bruno Le Maire, held a roundtable with all of the milk industry stakeholders. The government announced the following measures:

  • a report by the price and margins research unit on the milk industry on 29 July 2009;
  • the implementation of contracts between producers and processors;
  • the establishment of an agreement ‘monitoring group’, which will publish its conclusions on 30 September. It will propose an industry support plan ‘to increase the competitiveness’ of all the links of the chain of production.

Reactions of farming bodies

FNSEA, the main farming trade union, considered the agreement to be ‘unsatisfactory but vital’.

The Small Farmers’ Confederation (Confédération paysanne) reiterated that ‘these prices in no way cover farmers’ production costs’. The trade union is calling for the:

freezing of a part of milk quantities over 150,000 litres per producer, stocks of milk powder to be eliminated by incorporating them into animal feed, milk price-setting mechanisms taking into account farmers’ production costs and remuneration for their work, and freezing of European quota increases.

The Organisation of Milk Producers (Organisation des producteurs de lait, OPL), a member of the Rural Coalition (Coordination rurale), has also criticised the government’s attitude, stating that:

the Prime Minister and the Minister of Agriculture have constantly reiterated that they would not accept farmers selling their milk at below cost price. However, they have ratified an agreement at €0.28 a litre, meaning that producers are not just working without receiving a wage but even worse are losing €0.03 a litre produced.

OPL believes that the price should be set at €0.40 a litre. It blames the milk crisis on market deregulation and is calling for ‘flexible and regulated management of quotas’. The organisation is also calling for milk strike action.

The National Confederation of Family Farmers’ Unions (Mouvement de défense des exploitants familiaux, MODEF), has denounced the attitude of the government, FNSEA and FNPL, arguing that ‘producers’ representatives at these negotiations kept a low profile, accepting a price which did not meet producers’ demands’. MODEF believes that a price below €380 per 1,000 litres jeopardises thousands of farms, and the confederation is calling for a minimum guaranteed price and control of retail margins.

Commentary

The agreement does not solve the problems experienced by milk producers, and the issue of retail and processors’ margins still needs to be addressed. If prices remain so low, the conflict is likely to restart when negotiating the next agreement. Indeed, on 10 September 2009, several hundred milk producers across France took strike action, without the support of FNSEA; most of these protests are currently ongoing.

Annie Jolivet, Institute for Economic and Social Research (IRES)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Yeni yorum ekle