December 10, 2010

EU acts to give dairy processors extra bargaining power

The EU's executive arm adopted proposals on Thursday (Dec 9) to give dairy producers additional bargaining power in the supply chain.

Under the regulations, farmers will have the option to negotiate delivery contracts collectively through producer organisations specifying details such as the milk price and contract length. The measures will not be obligatory, although member states can choose to make them compulsory in their territory.

Improving regulation of the EU's dairy sector has been on the cards since the dairy market crisis last year, when farmers took to the streets in protest.

"Our intention from these proposals is to learn some of the lessons from last year's dairy market crisis. These changes are important to help the sector prepare for a 'soft landing' when quotas come to an end in 2015," said EU Commissioner for Agriculture & Rural Development Dacian Ciolos.

The proposals also provide rules to promote more transparency in the supply chain, including more monitoring of deliveries.

Chief dairy adviser to the UK's National Farmers Union, Hayley Campbell-Gibbons, welcomed the "robust" moves by the Commission and said the government must now act to ensure the measured become obligatory.

"The proposals mean that the UK government now has a unique and powerful opportunity to help address the dysfunctions in the dairy supply chain," she said.

Research by the UK's dairy association found farmers' share in the supply chain has been squeezed in recent years. Over the 2009-10 milk year, the farmgate price dropped two pence to 23.8 pence a litre, compared with the previous year, while retail gross margins increased from 29-34% over the same period, the survey found.

"Now is the time for milk buyers to embrace the benefits these measures could bring to them and their farmer suppliers," said Campbell-Gibbons.

The measures are proposed to be valid until 2020 with two intermediate reviews.