In a special hearing organised by the European Parliament's Agriculture Committee MEPs discussed the challenges facing the dairy sector and the implementation of the "Milk Package", which includes the opportunity for mandatory written contracts with milk collectors, and the encouragement of producer organisations to bargain collectively for a better price.
Alyn Smith MEP, Scotland's only voice on the Agriculture Committee, insists that a more active encouragement of Producer Organisations to improve the bargaining power of Scotland's dairy farmers is the right way forward, as well as greater investment in encouraging local markets instead of a reliance on exports.
Speaking after the hearing, Alyn said:
“It's clear that overproduction causing an imbalance between supply and demand is the main cause of milk price volatility. This is not a one-off phenomenon, as this is the third price drop in six years. What's not clear is whether this imbalance in the market will continue.
“The Commission appears to be pinning its hopes on increased demand in East Asia but when global demand is only rising at 2% a year while supply is increasing by 5%, this just isn't going to cut it. Meanwhile the UK authorities, who could intervene to ensure the imbalances in the supply chain are tackled, are point scoring amongst themselves while food businesses go to the wall.
“This is not a new problem, and our continued collective failure to tackle it reflects badly on us all. We need both short term relief and long term structural measures to fix a broken market.
“EU member states have the right to make written contracts between farmers and processors compulsory, of minimum duration, and with prices fixed. The UK Government has instead gone for a Voluntary Code of Practice and the Groceries Code Adjudicator, which are riddled with loopholes and neither focuses on price formation nor the unfair balance of power in the supply chain.
“Scottish farmers can't afford to cross their fingers and hope for the best. We need to look at measures in the Milk Package, such as the formation of Producer Organisations, which will allow farmers to negotiate collectively for contract terms, including price.
“The Milk Package introduces legal obligation to recognise Producer Organisations, who will plan production and coordinate supply. Only four countries have taken this up so far, but that includes France, where almost 90% of the annual marketable volume of recognised POs is negotiated collectively.
“It’s not acceptable for our farmers to be paid less than the cost of production, and collective action might be our best option.”