July 18, 2006

EU dairy firms baulking at low milk prices
 

Farmgate milk prices have continued to fall across the EU continuing a steady drop in prices across the European Union, most rapidly in France over the last year, said the UK's Milk Development Council (MDC).

The average price paid to producers for their milk fell below EUR26 per 100kg in May this year, as cost pressures on dairy processors, caused by greater market competition, retailer pressure and soaring plastic prices, brought pressure on farmgate prices, the council said.

Dairy firms Arla Foods UK and Glanbia were among the biggest price-cutters.

Tension between producers and processors rose sharply in France last year as the country had the highest farmgate milk prices in the EU in 2004 and therefore suffered the steepest drop. 

Despite an industry-wide agreement in January to respect a recommended national milk price , rows have continued, with France's largest dairy group, Lactalis, and its rival Sodiaal, threatening to go beyond the recommended price cut.

Lactalis retracted last week, leaving Sodiaal to face public criticism for breaching the agreement.

Figures show Sodiaal paid producers EUR23.7 for 100kg of their milk in May, while Lactalis and Danone paid producers EUR26 and EUR 25 respectively this May.

Milk prices in France are still above several countries like Britain however.

Milk prices in Britain have been the lowest in Western Europe for some years. Milk processors in Britain are the top skinflints when it comes to milk prices. Low prices have prompted strikes over the past year and the UK National Farmers' Union has warned current prices are unsustainable for the industry.

Still, milk producers in the EU may have fared better than those in the US and New Zealand, where milk prices have undergone even deeper cuts.