Smith Welcomes EU Proposals To Help Dairy Farmers

09 December 2010
Alyn Smith MEP, Scottish full member of the European Parliament's powerful Agriculture and Rural Development Committee, has broadly welcomed today's European Commission proposals on regulation of the milk market, as an important first step towards re-balancing bargaining power in the supply chain, and for securing milk farmers a fair share of margins generated in the chain.

The proposals, which amend a previous regulation on contractual relations in the milk sector, allow Member States the option of mandating written contracts between producers and processors or collectors, which must specify the price, volume of sale, timing of deliveries and the duration of the contract.  Farmers will also be able to collectively negotiate these contracts through producer organisations, as long as the producer organisation does not cover more than 33% of a national milk market, or more than 3.5% of the total milk produced in the EU, to prevent restriction of competition.

Smith said:

"We've all known for some time that there is a severe structural imbalance in the dairy supply chain, with milk farmers, and their weak bargaining power, continuously squeezed by higher input costs while at the same time receiving a smaller share of the margins from the processors and retailers. With many farmers not even receiving enough to cover their production costs, we are putting the long term future of dairy farming at risk.

"During the recent milk crisis we've seen sticking-plaster solutions from a Commission seemingly unwilling to accept that there's a problem, such as intervention buying, and a restructuring fund which gets rolled over year after year in lieu of permanent solutions.  I'm glad, therefore, that the Commission have finally recognised that systemic reform is required to ensure that the market can deliver for our farmers.  In particular, they've grasped the reality of the unfair bargaining power of the processors, and the new rules allowing producer organisations to bargain collectively for farmers should help them secure a better price.

"However, I'm concerned that last minute pressure has resulted in the weakening of these proposals: the upper limit for share of the market has fallen from 75% to just 33% and even that threshold can be challenged in individual cases.  We need to make sure that this provision gives real extra power to producers, and is not a mere fig leaf.

"Greater transparency of prices and margins in the milk market is all very well and good, and should put farmers in a better position to negotiate, but we need action as well as information.  In particular, we need to examine the case for taking on the practice of selling milk products at prices below the production cost.  Short-sided milk price wars merely undermine our future potential to produce milk and maintain our food security.  

"I look forward to scrutinising and amending these proposals over the next few months, so we can secure a properly functioning dairy market and a prosperous future for our farmers."