August 23, 2010

France to raise 2010 milk price

French dairy farmers and processors have agreed to a 10% increase in the price of milk for 2010 and have signed a pact to keep prices closer in line with competitor countries.

The price increase for 2010 had been the subject of drawn out negotiations between producers and processors. According to reports, Bel and Lactalis had previously accepted the proposal but others including Bongrain and Sodiaal had rejected it.

"It was indispensible for farmers following the 2009 crisis and the strong level of charges that they face today," said French dairy farmers representative FNPL.

In addition to the pricing agreement, producers and processors agreed to introduce a mechanism for monitoring the difference in the cost of a litre of milk between France and Germany. The aim is to ensure that French prices remain competitive.

Pricing differences between the two countries will be integrated into future negotiations, so as to help prevent damage to competitiveness. Currently Germany is more price competitive although the difference between the countries has narrowed significantly since the sharp global fall in dairy prices last year.

Olivier Picot, president of the processing association ATLA, said that the French industry must accept that it has to change its methods of production. He warned that the latest agreement will only last if deep and structural problems are tackled.

"The average size of French farms is a lot smaller than in Germany, a fact that creates gaps in productivity and profitability," he added.