March 31, 2014

Due to a surge of French milk on the Spanish market, Spain's milk producers' narrow margins are set to tighten further.

An insatiable demand for cheap milk among Spain's leading supermarkets could mean a US$0.03 per litre milk reduction from April 1, Spanish newspapers warn.

According to the news agency, Spanish supermarkets are capitalising on a French production surge which sees excess milk shipped to Spain at a cost of US$0.40 per litre, which will result in lower farm gate prices come April contracts.

Market tensions follow the National Commission of Markets and Competition (CNMC) ruling that supermarkets were guilty of 'bad industry practices' when pricing milk at a loss in 2011.

Producer organisations welcomed the result of the CNMC's procedure, although showed dismay at the time taken to process the hearing, describing the trial results as 'untimely'.

Several dairy processors were levied fines but not distributors or retailers, much to the annoyance of Spain's professional farmers' organisation UPA livestock secretary Roman Santalla.

Reacting to the CNMC's findings, UPA livestock secretary, Roman Santalla said the CNMC proved farmers were right and there was malpractice going on. However, a financial penalty at this point does not solve anything.

Going forward, Santalla urged agriculture minister Arias Cañete to face the issue of dairy chain 'destruction' head on.

Commentators are blaming processors and supply chain regulators in failing to pass higher costs onto the retailers in recent months.  This is despite the latest dairy season yielding a farm level price rise of 19%.